uni/inf2810/hw3.a/wsj.txt

Pierre Vinken, 61 years old, will join the board as a nonexecutive director Nov. 29.
Mr. Vinken is chairman of Elsevier N.V., the Dutch publishing group.
Rudolph Agnew, 55 years old and former chairman of Consolidated Gold Fields PLC, was named a nonexecutive director of this British industrial conglomerate.
A form of asbestos once used to make Kent cigarette filters has caused a high percentage of cancer deaths among a group of workers exposed to it more than 30 years ago, researchers reported.
The asbestos fiber, crocidolite, is unusually resilient once it enters the lungs, with even brief exposures to it causing symptoms that show up decades later, researchers said.
Lorillard Inc., the unit of New York-based Loews Corp. that makes Kent cigarettes, stopped using crocidolite in its Micronite cigarette filters in 1956.
Although preliminary findings were reported more than a year ago, the latest results appear in today's New England Journal of Medicine, a forum likely to bring new attention to the problem.
A Lorillard spokewoman said, "This is an old story.
We're talking about years ago before anyone heard of asbestos having any questionable properties.
There is no asbestos in our products now."
Neither Lorillard nor the researchers who studied the workers were aware of any research on smokers of the Kent cigarettes.
"We have no useful information on whether users are at risk," said James A. Talcott of Boston's Dana-Farber Cancer Institute.
Dr. Talcott led a team of researchers from the National Cancer Institute and the medical schools of Harvard University and Boston University.
The Lorillard spokeswoman said asbestos was used in "very modest amounts" in making paper for the filters in the early 1950s and replaced with a different type of filter in 1956.
From 1953 to 1955, 9.8 billion Kent cigarettes with the filters were sold, the company said.
Among 33 men who worked closely with the substance, 28 have died -- more than three times the expected number.
Four of the five surviving workers have asbestos-related diseases, including three with recently diagnosed cancer.
The total of 18 deaths from malignant mesothelioma, lung cancer and asbestosis was far higher than expected, the researchers said.
"The morbidity rate is a striking finding among those of us who study asbestos-related diseases," said Dr. Talcott.
The percentage of lung cancer deaths among the workers at the West Groton, Mass., paper factory appears to be the highest for any asbestos workers studied in Western industrialized countries, he said.
The plant, which is owned by Hollingsworth & Vose Co., was under contract with Lorillard to make the cigarette filters.
The finding probably will support those who argue that the U.S. should regulate the class of asbestos including crocidolite more stringently than the common kind of asbestos, chrysotile, found in most schools and other buildings, Dr. Talcott said.
The U.S. is one of the few industrialized nations that doesn't have a higher standard of regulation for the smooth, needle-like fibers such as crocidolite that are classified as amphobiles, according to Brooke T. Mossman, a professor of pathlogy at the University of Vermont College of Medicine.
More common chrysotile fibers are curly and are more easily rejected by the body, Dr. Mossman explained.
In July, the Environmental Protection Agency imposed a gradual ban on virtually all uses of asbestos.
By 1997, almost all remaining uses of cancer-causing asbestos will be outlawed.
About 160 workers at a factory that made paper for the Kent filters were exposed to asbestos in the 1950s.
Areas of the factory were particularly dusty where the crocidolite was used.
Workers dumped large burlap sacks of the imported material into a huge bin, poured in cotton and acetate fibers and mechanically mixed the dry fibers in a process used to make filters.
Workers described "clouds of blue dust" that hung over parts of the factory, even though exhaust fans ventilated the area.
"There's no question that some of those workers and managers contracted asbestos-related diseases," said Darrell Phillips, vice president of human resources for Hollingsworth & Vose.
"But you have to recognize that these events took place 35 years ago.
It has no bearing on our work force today.
Yields on money-market mutual funds continued to slide, amid signs that portfolio managers expect further declines in interest rates.
The average seven-day compound yield of the 400 taxable funds tracked by IBC's Money Fund Report eased a fraction of a percentage point to 8.45% from 8.47% for the week ended Tuesday.
Compound yields assume reinvestment of dividends and that the current yield continues for a year.
Average maturity of the funds' investments lengthened by a day to 41 days, the longest since early August, according to Donoghue's.
Longer maturities are thought to indicate declining interest rates because they permit portfolio managers to retain relatively higher rates for a longer period.
Shorter maturities are considered a sign of rising rates because portfolio managers can capture higher rates sooner.
The average maturity for funds open only to institutions, considered by some to be a stronger indicator because those managers watch the market closely, reached a high point for the year -- 33 days.
Nevertheless, said Brenda Malizia Negus, editor of Money Fund Report, yields "may blip up again before they blip down" because of recent rises in short-term interest rates.
The yield on six-month Treasury bills sold at Monday's auction, for example, rose to 8.04% from 7.90%.
Despite recent declines in yields, investors continue to pour cash into money funds.
Assets of the 400 taxable funds grew by $1.5 billion during the latest week, to $352.7 billion.
Typically, money-fund yields beat comparable short-term investments because portfolio managers can vary maturities and go after the highest rates.
The top money funds are currently yielding well over 9%.
Dreyfus World-Wide Dollar, the top-yielding fund, had a seven-day compound yield of 9.37% during the latest week, down from 9.45% a week earlier.
It invests heavily in dollar-denominated securities overseas and is currently waiving management fees, which boosts its yield.
The average seven-day simple yield of the 400 funds was 8.12%, down from 8.14%.
The 30-day simple yield fell to an average 8.19% from 8.22%; the 30-day compound yield slid to an average 8.53% from 8.56%.
J.P. Bolduc, vice chairman of W.R. Grace & Co., which holds a 83.4% interest in this energy-services company, was elected a director.
He succeeds Terrence D. Daniels, formerly a W.R. Grace vice chairman, who resigned.
W.R. Grace holds three of Grace Energy's seven board seats.
Pacific First Financial Corp. said shareholders approved its acquisition by Royal Trustco Ltd. of Toronto for $27 a share, or $212 million.
The thrift holding company said it expects to obtain regulatory approval and complete the transaction by year-end.
McDermott International Inc. said its Babcock & Wilcox unit completed the sale of its Bailey Controls Operations to Finmeccanica S.p.A. for $295 million.
Finmeccanica is an Italian state-owned holding company with interests in the mechanical engineering industry.
Bailey Controls, based in Wickliffe, Ohio, makes computerized industrial controls systems.
It employs 2,700 people and has annual revenue of about $370 million.
The federal government suspended sales of U.S. savings bonds because Congress hasn't lifted the ceiling on government debt.
Until Congress acts, the government hasn't any authority to issue new debt obligations of any kind, the Treasury said.
The government's borrowing authority dropped at midnight Tuesday to $2.80 trillion from $2.87 trillion.
Legislation to lift the debt ceiling is ensnarled in the fight over cutting capital-gains taxes.
The House has voted to raise the ceiling to $3.1 trillion, but the Senate isn't expected to act until next week at the earliest.
The Treasury said the U.S. will default on Nov. 9 if Congress doesn't act by then.
Clark J. Vitulli was named senior vice president and general manager of this U.S. sales and marketing arm of Japanese auto maker Mazda Motor Corp.
In the new position he will oversee Mazda's U.S. sales, service, parts and marketing operations.
Previously, Mr. Vitulli, 43 years old, was general marketing manager of Chrysler Corp.'s Chrysler division.
He had been a sales and marketing executive with Chrysler for 20 years.
When it's time for their biannual powwow, the nation's manufacturing titans typically jet off to the sunny confines of resort towns like Boca Raton and Hot Springs.
Not this year.
The National Association of Manufacturers settled on the Hoosier capital of Indianapolis for its fall board meeting.
And the city decided to treat its guests more like royalty or rock stars than factory owners.
The idea, of course: to prove to 125 corporate decision makers that the buckle on the Rust Belt isn't so rusty after all, that it's a good place for a company to expand.
On the receiving end of the message were officials from giants like Du Pont and Maytag, along with lesser knowns like Trojan Steel and the Valley Queen Cheese Factory.
For starters, the executives joined Mayor William H. Hudnut III for an evening of the Indianapolis Symphony Orchestra and a guest pianist-comedian Victor Borge.
Champagne and dessert followed.
The next morning, with a police escort, busloads of executives and their wives raced to the Indianapolis Motor Speedway, unimpeded by traffic or red lights.
The governor couldn't make it, so the lieutenant governor welcomed the special guests.
A buffet breakfast was held in the museum, where food and drinks are banned to everyday visitors.
Then, in the guests' honor, the speedway hauled out four drivers, crews and even the official Indianapolis 500 announcer for a 10-lap exhibition race.
After the race, Fortune 500 executives drooled like schoolboys over the cars and drivers.
No dummies, the drivers pointed out they still had space on their machines for another sponsor's name or two.
Back downtown, the execs squeezed in a few meetings at the hotel before boarding the buses again.
This time, it was for dinner and dancing -- a block away.
Under the stars and moons of the renovated Indiana Roof ballroom, nine of the hottest chefs in town fed them Indiana duckling mousseline, lobster consomme, veal mignon and chocolate terrine with a raspberry sauce.
Knowing a tasty -- and free -- meal when they eat one, the executives gave the chefs a standing ovation.
More than a few CEOs say the red-carpet treatment tempts them to return to a heartland city for future meetings.
But for now, they're looking forward to their winter meeting -- Boca in February.
South Korea registered a trade deficit of $101 million in October, reflecting the country's economic sluggishness, according to government figures released Wednesday.
Preliminary tallies by the Trade and Industry Ministry showed another trade deficit in October, the fifth monthly setback this year, casting a cloud on South Korea's export-oriented economy.
Exports in October stood at $5.29 billion, a mere 0.7% increase from a year earlier, while imports increased sharply to $5.39 billion, up 20% from last October.
South Korea's economic boom, which began in 1986, stopped this year because of prolonged labor disputes, trade conflicts and sluggish exports.
Government officials said exports at the end of the year would remain under a government target of $68 billion.
Despite the gloomy forecast, South Korea has recorded a trade surplus of $71 million so far this year.
From January to October, the nation's accumulated exports increased 4% from the same period last year to $50.45 billion.
Imports were at $50.38 billion, up 19%.
Newsweek, trying to keep pace with rival Time magazine, announced new advertising rates for 1990 and said it will introduce a new incentive plan for advertisers.
The new ad plan from Newsweek, a unit of the Washington Post Co., is the second incentive plan the magazine has offered advertisers in three years.
Plans that give advertisers discounts for maintaining or increasing ad spending have become permanent fixtures at the news weeklies and underscore the fierce competition between Newsweek, Time Warner Inc.'s Time magazine, and Mortimer B. Zuckerman's U.S. News & World Report.
Alan Spoon, recently named Newsweek president, said Newsweek's ad rates would increase 5% in January.
A full, four-color page in Newsweek will cost $100,980.
In mid-October, Time magazine lowered its guaranteed circulation rate base for 1990 while not increasing ad page rates; with a lower circulation base, Time's ad rate will be effectively 7.5% higher per subscriber; a full page in Time costs about $120,000.
U.S. News has yet to announce its 1990 ad rates.
Newsweek said it will introduce the Circulation Credit Plan, which awards space credits to advertisers on "renewal advertising."
The magazine will reward with "page bonuses" advertisers who in 1990 meet or exceed their 1989 spending, as long as they spent $325,000 in 1989 and $340,000 in 1990.
Mr. Spoon said the plan is not an attempt to shore up a decline in ad pages in the first nine months of 1989; Newsweek's ad pages totaled 1,620, a drop of 3.2% from last year, according to Publishers Information Bureau.
"What matters is what advertisers are paying per page, and in that department we are doing fine this fall," said Mr. Spoon.
Both Newsweek and U.S. News have been gaining circulation in recent years without heavy use of electronic giveaways to subscribers, such as telephones or watches.
However, none of the big three weeklies recorded circulation gains recently.
According to Audit Bureau of Circulations, Time, the largest newsweekly, had average circulation of 4,393,237, a decrease of 7.3%.
Newsweek's circulation for the first six months of 1989 was 3,288,453, flat from the same period last year.
U.S. News' circulation in the same time was 2,303,328, down 2.6%.
New England Electric System bowed out of the bidding for Public Service Co. of New Hampshire, saying that the risks were too high and the potential payoff too far in the future to justify a higher offer.
The move leaves United Illuminating Co. and Northeast Utilities as the remaining outside bidders for PS of New Hampshire, which also has proposed an internal reorganization plan in Chapter 11 bankruptcy proceedings under which it would remain an independent company.
New England Electric, based in Westborough, Mass., had offered $2 billion to acquire PS of New Hampshire, well below the $2.29 billion value United Illuminating places on its bid and the $2.25 billion Northeast says its bid is worth.
United Illuminating is based in New Haven, Conn., and Northeast is based in Hartford, Conn.
PS of New Hampshire, Manchester, N.H., values its internal reorganization plan at about $2.2 billion.
John Rowe, president and chief executive officer of New England Electric, said the company's return on equity could suffer if it made a higher bid and its forecasts related to PS of New Hampshire -- such as growth in electricity demand and improved operating efficiencies -- didn't come true.
"When we evaluated raising our bid, the risks seemed substantial and persistent over the next five years, and the rewards seemed a long way out.
That got hard to take," he added.
Mr. Rowe also noted that political concerns also worried New England Electric.
No matter who owns PS of New Hampshire, after it emerges from bankruptcy proceedings its rates will be among the highest in the nation, he said.
"That attracts attention . . .
it was just another one of the risk factors" that led to the company's decision to withdraw from the bidding, he added.
Wilbur Ross Jr. of Rothschild Inc., the financial adviser to the troubled company's equity holders, said the withdrawal of New England Electric might speed up the reorganization process.
The fact that New England proposed lower rate increases -- 4.8% over seven years against around 5.5% boosts proposed by the other two outside bidders -- complicated negotiations with state officials, Mr. Ross asserted.
"Now the field is less cluttered," he added.
Separately, the Federal Energy Regulatory Commission turned down for now a request by Northeast seeking approval of its possible purchase of PS of New Hampshire.
Northeast said it would refile its request and still hopes for an expedited review by the FERC so that it could complete the purchase by next summer if its bid is the one approved by the bankruptcy court.
PS of New Hampshire shares closed yesterday at $3.75, off 25 cents, in New York Stock Exchange composite trading.
Norman Ricken, 52 years old and former president and chief operating officer of Toys "R" Us Inc., and Frederick Deane Jr., 63, chairman of Signet Banking Corp., were elected directors of this consumer electronics and appliances retailing chain.
They succeed Daniel M. Rexinger, retired Circuit City executive vice president, and Robert R. Glauber, U.S. Treasury undersecretary, on the 12-member board.
Commonwealth Edison Co. was ordered to refund about $250 million to its current and former ratepayers for illegal rates collected for cost overruns on a nuclear power plant.
The refund was about $55 million more than previously ordered by the Illinois Commerce Commission and trade groups said it may be the largest ever required of a state or local utility.
State court Judge Richard Curry ordered Edison to make average refunds of about $45 to $50 each to Edison customers who have received electric service since April 1986, including about two million customers who have moved during that period.
Judge Curry ordered the refunds to begin Feb. 1 and said that he wouldn't entertain any appeals or other attempts to block his order by Commonwealth Edison.
"The refund pool . . . may not be held hostage through another round of appeals," Judge Curry said.
Commonwealth Edison said it is already appealing the underlying commission order and is considering appealing Judge Curry's order.
The exact amount of the refund will be determined next year based on actual collections made until Dec. 31 of this year.
Commonwealth Edison said the ruling could force it to slash its 1989 earnings by $1.55 a share.
For 1988, Commonwealth Edison reported earnings of $737.5 million, or $3.01 a share.
A Commonwealth Edison spokesman said that tracking down the two million customers whose addresses have changed during the past 3 1/2 years would be "an administrative nightmare."
In New York Stock Exchange composite trading yesterday, Commonwealth Edison closed at $38.375, down 12.5 cents.
The $2.5 billion Byron 1 plant near Rockford, Ill., was completed in 1985.
In a disputed 1985 ruling, the Commerce Commission said Commonwealth Edison could raise its electricity rates by $49 million to pay for the plant.
But state courts upheld a challenge by consumer groups to the commission's rate increase and found the rates illegal.
The Illinois Supreme Court ordered the commission to audit Commonwealth Edison's construction expenses and refund any unreasonable expenses.
The utility has been collecting for the plant's construction cost from its 3.1 million customers subject to a refund since 1986.
In August, the commission ruled that between $190 million and $195 million of the plant's construction cost was unreasonable and should be refunded, plus interest.
In his ruling, Judge Curry added an additional $55 million to the commission's calculations.
Last month, Judge Curry set the interest rate on the refund at 9%.
Commonwealth Edison now faces an additional court-ordered refund on its summer/winter rate differential collections that the Illinois Appellate Court has estimated at $140 million.
And consumer groups hope that Judge Curry's Byron 1 order may set a precedent for a second nuclear rate case involving Commonwealth Edison's Braidwood 2 plant.
Commonwealth Edison is seeking about $245 million in rate increases to pay for Braidwood 2.
The commission is expected to rule on the Braidwood 2 case by year end.
Last year Commonwealth Edison had to refund $72.7 million for poor performance of its LaSalle I nuclear plant.
Japan's domestic sales of cars, trucks and buses in October rose 18% from a year earlier to 500,004 units, a record for the month, the Japan Automobile Dealers' Association said.
The strong growth followed year-to-year increases of 21% in August and 12% in September.
The monthly sales have been setting records every month since March.
October sales, compared with the previous month, inched down 0.4%.
Sales of passenger cars grew 22% from a year earlier to 361,376 units.
Sales of medium-sized cars, which benefited from price reductions arising from introduction of the consumption tax, more than doubled to 30,841 units from 13,056 in October 1988.
Texas Instruments Japan Ltd., a unit of Texas Instruments Inc., said it opened a plant in South Korea to manufacture control devices.
The new plant, located in Chinchon about 60 miles from Seoul, will help meet increasing and diversifying demand for control products in South Korea, the company said.
The plant will produce control devices used in motor vehicles and household appliances.
The survival of spinoff Cray Computer Corp. as a fledgling in the supercomputer business appears to depend heavily on the creativity -- and longevity -- of its chairman and chief designer, Seymour Cray.
Not only is development of the new company's initial machine tied directly to Mr. Cray, so is its balance sheet.
Documents filed with the Securities and Exchange Commission on the pending spinoff disclosed that Cray Research Inc. will withdraw the almost $100 million in financing it is providing the new firm if Mr. Cray leaves or if the product-design project he heads is scrapped.
The documents also said that although the 64-year-old Mr. Cray has been working on the project for more than six years, the Cray-3 machine is at least another year away from a fully operational prototype.
Moreover, there have been no orders for the Cray-3 so far, though the company says it is talking with several prospects.
While many of the risks were anticipated when Minneapolis-based Cray Research first announced the spinoff in May, the strings it attached to the financing hadn't been made public until yesterday.
"We didn't have much of a choice," Cray Computer's chief financial officer, Gregory Barnum, said in an interview.
"The theory is that Seymour is the chief designer of the Cray-3, and without him it could not be completed.
Cray Research did not want to fund a project that did not include Seymour."
The documents also said that Cray Computer anticipates needing perhaps another $120 million in financing beginning next September.
But Mr. Barnum called that "a worst-case" scenario.
The filing on the details of the spinoff caused Cray Research stock to jump $2.875 yesterday to close at $38 in New York Stock Exchange composite trading.
Analysts noted yesterday that Cray Research's decision to link its $98.3 million promissory note to Mr. Cray's presence will complicate a valuation of the new company.
"It has to be considered as an additional risk for the investor," said Gary P. Smaby of Smaby Group Inc., Minneapolis.
"Cray Computer will be a concept stock," he said.
"You either believe Seymour can do it again or you don't."
Besides the designer's age, other risk factors for Mr. Cray's new company include the Cray-3's tricky, unproven chip technology.
The SEC documents describe those chips, which are made of gallium arsenide, as being so fragile and minute they will require special robotic handling equipment.
In addition, the Cray-3 will contain 16 processors -- twice as many as the largest current supercomputer.
Cray Computer also will face intense competition, not only from Cray Research, which has about 60% of the world-wide supercomputer market and which is expected to roll out the C-90 machine, a direct competitor with the Cray-3, in 1991.
The spinoff also will compete with International Business Machines Corp. and Japan's Big Three -- Hitachi Ltd., NEC Corp. and Fujitsu Ltd.
The new company said it believes there are fewer than 100 potential customers for supercomputers priced between $15 million and $30 million -- presumably the Cray-3 price range.
Under terms of the spinoff, Cray Research stockholders are to receive one Cray Computer share for every two Cray Research shares they own in a distribution expected to occur in about two weeks.
No price for the new shares has been set.
Instead, the companies will leave it up to the marketplace to decide.
Cray Computer has applied to trade on Nasdaq.
Analysts calculate Cray Computer's initial book value at about $4.75 a share.
Along with the note, Cray Research is transferring about $53 million in assets, primarily those related to the Cray-3 development, which has been a drain on Cray Research's earnings.
Pro-forma balance sheets clearly show why Cray Research favored the spinoff.
Without the Cray-3 research and development expenses, the company would have been able to report a profit of $19.3 million for the first half of 1989 rather than the $5.9 million it posted.
On the other hand, had it existed then, Cray Computer would have incurred a $20.5 million loss.
Mr. Cray, who couldn't be reached for comment, will work for the new Colorado Springs, Colo., company as an independent contractor -- the arrangement he had with Cray Research.
Regarded as the father of the supercomputer, Mr. Cray was paid $600,000 at Cray Research last year.
At Cray Computer, he will be paid $240,000.
Besides Messrs. Cray and Barnum, other senior management at the company includes Neil Davenport, 47, president and chief executive officer; Joseph M. Blanchard, 37, vice president, engineering; Malcolm A. Hammerton, 40, vice president, software; and Douglas R. Wheeland, 45, vice president, hardware.
All came from Cray Research.
Cray Computer, which currently employs 241 people, said it expects a work force of 450 by the end of 1990.
John R. Stevens, 49 years old, was named senior executive vice president and chief operating officer, both new positions.
He will continue to report to Donald Pardus, president and chief executive officer.
Mr. Stevens was executive vice president of this electric-utility holding company.
Arthur A. Hatch, 59, was named executive vice president of the company.
He was previously president of the company's Eastern Edison Co. unit.
John D. Carney, 45, was named to succeed Mr. Hatch as president of Eastern Edison.
Previously he was vice president of Eastern Edison.
Robert P. Tassinari, 63, was named senior vice president of Eastern Utilities.
He was previously vice president.
The U.S., claiming some success in its trade diplomacy, removed South Korea, Taiwan and Saudi Arabia from a list of countries it is closely watching for allegedly failing to honor U.S. patents, copyrights and other intellectual-property rights.
However, five other countries -- China, Thailand, India, Brazil and Mexico -- will remain on that so-called priority watch list as a result of an interim review, U.S. Trade Representative Carla Hills announced.
Under the new U.S. trade law, those countries could face accelerated unfair-trade investigations and stiff trade sanctions if they don't improve their protection of intellectual property by next spring.
Mrs. Hills said many of the 25 countries that she placed under varying degrees of scrutiny have made "genuine progress" on this touchy issue.
She said there is "growing realization" around the world that denial of intellectual-property rights harms all trading nations, and particularly the "creativity and inventiveness of an {offending} country's own citizens."
U.S. trade negotiators argue that countries with inadequate protections for intellectual-property rights could be hurting themselves by discouraging their own scientists and authors and by deterring U.S. high-technology firms from investing or marketing their best products there.
Mrs. Hills lauded South Korea for creating an intellectual-property task force and special enforcement teams of police officers and prosecutors trained to pursue movie and book pirates.
Seoul also has instituted effective search-and-seizure procedures to aid these teams, she said.
Taiwan has improved its standing with the U.S. by initialing a bilateral copyright agreement, amending its trademark law and introducing legislation to protect foreign movie producers from unauthorized showings of their films.
That measure could compel Taipei's growing number of small video-viewing parlors to pay movie producers for showing their films.
Saudi Arabia, for its part, has vowed to enact a copyright law compatible with international standards and to apply the law to computer software as well as to literary works, Mrs. Hills said.
These three countries aren't completely off the hook, though.
They will remain on a lower-priority list that includes 17 other countries.
Those countries -- including Japan, Italy, Canada, Greece and Spain -- are still of some concern to the U.S. but are deemed to pose less-serious problems for American patent and copyright owners than those on the "priority" list.
Gary Hoffman, a Washington lawyer specializing in intellectual-property cases, said the threat of U.S. retaliation, combined with a growing recognition that protecting intellectual property is in a country's own interest, prompted the improvements made by South Korea, Taiwan and Saudi Arabia.
"What this tells us is that U.S. trade law is working," he said.
He said Mexico could be one of the next countries to be removed from the priority list because of its efforts to craft a new patent law.
Mrs. Hills said that the U.S. is still concerned about "disturbing developments in Turkey and continuing slow progress in Malaysia."
She didn't elaborate, although earlier U.S. trade reports have complained of videocassette piracy in Malaysia and disregard for U.S. pharmaceutical patents in Turkey.
The 1988 trade act requires Mrs. Hills to issue another review of the performance of these countries by April 30.
So far, Mrs. Hills hasn't deemed any cases bad enough to merit an accelerated investigation under the so-called special 301 provision of the act.
Argentina said it will ask creditor banks to halve its foreign debt of $64 billion -- the third-highest in the developing world.
The declaration by Economy Minister Nestor Rapanelli is believed to be the first time such an action has been called for by an Argentine official of such stature.
The Latin American nation has paid very little on its debt since early last year.
"Argentina aspires to reach a reduction of 50% in the value of its external debt," Mr. Rapanelli said through his spokesman, Miguel Alurralde.
Mr. Rapanelli met in August with U.S. Assistant Treasury Secretary David Mulford.
Argentine negotiator Carlos Carballo was in Washington and New York this week to meet with banks.
Mr. Rapanelli recently has said the government of President Carlos Menem, who took office July 8, feels a significant reduction of principal and interest is the only way the debt problem may be solved.
But he has not said before that the country wants half the debt forgiven.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
THREE COMPUTERS THAT CHANGED the face of personal computing were launched in 1977.
That year the Apple II, Commodore Pet and Tandy TRS-80 came to market.
The computers were crude by today's standards.
Apple II owners, for example, had to use their television sets as screens and stored data on audiocassettes.
But Apple II was a major advance from Apple I, which was built in a garage by Stephen Wozniak and Steven Jobs for hobbyists such as the Homebrew Computer Club.
In addition, the Apple II was an affordable $1,298.
Crude as they were, these early PCs triggered explosive product development in desktop models for the home and office.
Big mainframe computers for business had been around for years.
But the new 1977 PCs -- unlike earlier built-from-kit types such as the Altair, Sol and IMSAI -- had keyboards and could store about two pages of data in their memories.
Current PCs are more than 50 times faster and have memory capacity 500 times greater than their 1977 counterparts.
There were many pioneer PC contributors.
William Gates and Paul Allen in 1975 developed an early language-housekeeper system for PCs, and Gates became an industry billionaire six years after IBM adapted one of these versions in 1981.
Alan F. Shugart, currently chairman of Seagate Technology, led the team that developed the disk drives for PCs.
Dennis Hayes and Dale Heatherington, two Atlanta engineers, were co-developers of the internal modems that allow PCs to share data via the telephone.
IBM, the world leader in computers, didn't offer its first PC until August 1981 as many other companies entered the market.
Today, PC shipments annually total some $38.3 billion world-wide.
F.H. Faulding & Co., an Australian pharmaceuticals company, said its Moleculon Inc. affiliate acquired Kalipharma Inc. for $23 million.
Kalipharma is a New Jersey-based pharmaceuticals concern that sells products under the Purepac label.
Faulding said it owns 33% of Moleculon's voting stock and has an agreement to acquire an additional 19%.
That stake, together with its convertible preferred stock holdings, gives Faulding the right to increase its interest to 70% of Moleculon's voting stock.
Oil production from Australia's Bass Strait fields will be raised by 11,000 barrels a day to about 321,000 barrels with the launch of the Whiting field, the first of five small fields scheduled to be brought into production before the end of 1990.
Esso Australia Ltd., a unit of New York-based Exxon Corp., and Broken Hill Pty. operate the fields in a joint venture.
Esso said the Whiting field started production Tuesday.
Output will be gradually increased until it reaches about 11,000 barrels a day.
The field has reserves of 21 million barrels.
Reserves for the five new fields total 50 million barrels.
The Perch and Dolphin fields are expected to start producing early next year, and the Seahorse and Tarwhine fields later next year.
Esso said the fields were developed after the Australian government decided in 1987 to make the first 30 million barrels from new fields free of excise tax.
R.P. Scherer Corp. said it completed the $10.2 million sale of its Southern Optical subsidiary to a group led by the unit's president, Thomas R. Sloan, and other managers.
Following the acquisition of R.P. Scherer by a buy-out group led by Shearson Lehman Hutton earlier this year, the maker of gelatin capsules decided to divest itself of certain of its non-encapsulating businesses.
The sale of Southern Optical is a part of the program.
The White House said President Bush has approved duty-free treatment for imports of certain types of watches that aren't produced in "significant quantities" in the U.S., the Virgin Islands and other U.S. possessions.
The action came in response to a petition filed by Timex Inc. for changes in the U.S. Generalized System of Preferences for imports from developing nations.
Previously, watch imports were denied such duty-free treatment.
Timex had requested duty-free treatment for many types of watches, covered by 58 different U.S. tariff classifications.
The White House said Mr. Bush decided to grant duty-free status for 18 categories, but turned down such treatment for other types of watches "because of the potential for material injury to watch producers located in the U.S. and the Virgin Islands."
Timex is a major U.S. producer and seller of watches, including low-priced battery-operated watches assembled in the Philippines and other developing nations covered by the U.S. tariff preferences.
U.S. trade officials said the Philippines and Thailand would be the main beneficiaries of the president's action.
Imports of the types of watches that now will be eligible for duty-free treatment totaled about $37.3 million in 1988, a relatively small share of the $1.5 billion in U.S. watch imports that year, according to an aide to U.S. Trade Representative Carla Hills.
Magna International Inc.'s chief financial officer, James McAlpine, resigned and its chairman, Frank Stronach, is stepping in to help turn the automotive-parts manufacturer around, the company said.
Mr. Stronach will direct an effort to reduce overhead and curb capital spending "until a more satisfactory level of profit is achieved and maintained," Magna said.
Stephen Akerfeldt, currently vice president finance, will succeed Mr. McAlpine.
An ambitious expansion has left Magna with excess capacity and a heavy debt load as the automotive industry enters a downturn.
The company has reported declines in operating profit in each of the past three years, despite steady sales growth.
Magna recently cut its quarterly dividend in half and the company's Class A shares are wallowing far below their 52-week high of 16.125 Canadian dollars (US$13.73).
On the Toronto Stock Exchange yesterday, Magna shares closed up 37.5 Canadian cents to C$9.625.
Mr. Stronach, founder and controlling shareholder of Magna, resigned as chief executive officer last year to seek, unsuccessfully, a seat in Canada's Parliament.
Analysts said Mr. Stronach wants to resume a more influential role in running the company.
They expect him to cut costs throughout the organization.
The company said Mr. Stronach will personally direct the restructuring, assisted by Manfred Gingl, president and chief executive.
Neither they nor Mr. McAlpine could be reached for comment.
Magna said Mr. McAlpine resigned to pursue a consulting career, with Magna as one of his clients.
Lord Chilver, 63-year-old chairman of English China Clays PLC, was named a nonexecutive director of this British chemical company.
Japanese investors nearly single-handedly bought up two new mortgage securities-based mutual funds totaling $701 million, the U.S. Federal National Mortgage Association said.
The purchases show the strong interest of Japanese investors in U.S. mortgage-based instruments, Fannie Mae's chairman, David O. Maxwell, said at a news conference.
He said more than 90% of the funds were placed with Japanese institutional investors.
The rest went to investors from France and Hong Kong.
Earlier this year, Japanese investors snapped up a similar, $570 million mortgage-backed securities mutual fund.
That fund was put together by Blackstone Group, a New York investment bank.
The latest two funds were assembled jointly by Goldman, Sachs & Co. of the U.S. and Japan's Daiwa Securities Co.
The new, seven-year funds -- one offering a fixed-rate return and the other with a floating-rate return linked to the London interbank offered rate -- offer two key advantages to Japanese investors.
First, they are designed to eliminate the risk of prepayment -- mortgage-backed securities can be retired early if interest rates decline, and such prepayment forces investors to redeploy their money at lower rates.
Second, they channel monthly mortgage payments into semiannual payments, reducing the administrative burden on investors.
By addressing those problems, Mr. Maxwell said, the new funds have become "extremely attractive to Japanese and other investors outside the U.S."
Such devices have boosted Japanese investment in mortgage-backed securities to more than 1% of the $900 billion in such instruments outstanding, and their purchases are growing at a rapid rate.
They also have become large purchasers of Fannie Mae's corporate debt, buying $2.4 billion in Fannie Mae bonds during the first nine months of the year, or almost a tenth of the total amount issued.
James L. Pate, 54-year-old executive vice president, was named a director of this oil concern, expanding the board to 14 members.
LTV Corp. said a federal bankruptcy court judge agreed to extend until March 8, 1990, the period in which the steel, aerospace and energy products company has the exclusive right to file a reorganization plan.
The company is operating under Chapter 11 of the federal Bankruptcy Code, giving it court protection from creditors' lawsuits while it attempts to work out a plan to pay its debts.
Italian chemical giant Montedison S.p.A., through its Montedison Acquisition N.V. indirect unit, began its $37-a-share tender offer for all the common shares outstanding of Erbamont N.V., a maker of pharmaceuticals incorporated in the Netherlands.
The offer, advertised in today's editions of The Wall Street Journal, is scheduled to expire at the end of November.
Montedison currently owns about 72% of Erbamont's common shares outstanding.
The offer is being launched pursuant to a previously announced agreement between the companies.
Japan's reserves of gold, convertible foreign currencies, and special drawing rights fell by a hefty $1.82 billion in October to $84.29 billion, the Finance Ministry said.
The total marks the sixth consecutive monthly decline.
The protracted downturn reflects the intensity of Bank of Japan yen-support intervention since June, when the U.S. currency temporarily surged above the 150.00 yen level.
The announcement follows a sharper $2.2 billion decline in the country's foreign reserves in September to $86.12 billion.
Pick a country, any country.
It's the latest investment craze sweeping Wall Street: a rash of new closed-end country funds, those publicly traded portfolios that invest in stocks of a single foreign country.
No fewer than 24 country funds have been launched or registered with regulators this year, triple the level of all of 1988, according to Charles E. Simon & Co., a Washington-based research firm.
The turf recently has ranged from Chile to Austria to Portugal.
Next week, the Philippine Fund's launch will be capped by a visit by Philippine President Corazon Aquino -- the first time a head of state has kicked off an issue at the Big Board here.
The next province?
"Anything's possible -- how about the New Guinea Fund?" quips George Foot, a managing partner at Newgate Management Associates of Northampton, Mass.
The recent explosion of country funds mirrors the "closed-end fund mania" of the 1920s, Mr. Foot says, when narrowly focused funds grew wildly popular.
They fell into oblivion after the 1929 crash.
Unlike traditional open-end mutual funds, most of these one-country portfolios are the "closed-end" type, issuing a fixed number of shares that trade publicly.
The surge brings to nearly 50 the number of country funds that are or soon will be listed in New York or London.
These funds now account for several billions of dollars in assets.
"People are looking to stake their claims" now before the number of available nations runs out, says Michael Porter, an analyst at Smith Barney, Harris Upham & Co., New York.
Behind all the hoopla is some heavy-duty competition.
As individual investors have turned away from the stock market over the years, securities firms have scrambled to find new products that brokers find easy to sell.
And the firms are stretching their nets far and wide to do it.
Financial planners often urge investors to diversify and to hold a smattering of international securities.
And many emerging markets have outpaced more mature markets, such as the U.S. and Japan.
Country funds offer an easy way to get a taste of foreign stocks without the hard research of seeking out individual companies.
But it doesn't take much to get burned.
Political and currency gyrations can whipsaw the funds.
Another concern: The funds' share prices tend to swing more than the broader market.
When the stock market dropped nearly 7% Oct. 13, for instance, the Mexico Fund plunged about 18% and the Spain Fund fell 16%.
And most country funds were clobbered more than most stocks after the 1987 crash.
What's so wild about the funds' frenzy right now is that many are trading at historically fat premiums to the value of their underlying portfolios.
After trading at an average discount of more than 20% in late 1987 and part of last year, country funds currently trade at an average premium of 6%.
The reason: Share prices of many of these funds this year have climbed much more sharply than the foreign stocks they hold.
It's probably worth paying a premium for funds that invest in markets that are partially closed to foreign investors, such as South Korea, some specialists say.
But some European funds recently have skyrocketed; Spain Fund has surged to a startling 120% premium.
It has been targeted by Japanese investors as a good long-term play tied to 1992's European economic integration.
And several new funds that aren't even fully invested yet have jumped to trade at big premiums.
"I'm very alarmed to see these rich valuations," says Smith Barney's Mr. Porter.
The newly fattened premiums reflect the increasingly global marketing of some country funds, Mr. Porter suggests.
Unlike many U.S. investors, those in Asia or Europe seeking foreign-stock exposure may be less resistant to paying higher prices for country funds.
"There may be an international viewpoint cast on the funds listed here," Mr. Porter says.
Nonetheless, plenty of U.S. analysts and money managers are aghast at the lofty trading levels of some country funds.
They argue that U.S. investors often can buy American depositary receipts on the big stocks in many funds; these so-called ADRs represent shares of foreign companies traded in the U.S.
That way investors can essentially buy the funds without paying the premium.
For people who insist on jumping in now to buy the funds, Newgate's Mr. Foot says: "The only advice I have for these folks is that those who come to the party late had better be ready to leave quickly.
The U.S. and Soviet Union are holding technical talks about possible repayment by Moscow of $188 million in pre-Communist Russian debts owed to the U.S. government, the State Department said.
If the debts are repaid, it could clear the way for Soviet bonds to be sold in the U.S.
However, after two meetings with the Soviets, a State Department spokesman said that it's "too early to say" whether that will happen.
Coincident with the talks, the State Department said it has permitted a Soviet bank to open a New York branch.
The branch of the Bank for Foreign Economic Affairs was approved last spring and opened in July.
But a Soviet bank here would be crippled unless Moscow found a way to settle the $188 million debt, which was lent to the country's short-lived democratic Kerensky government before the Communists seized power in 1917.
Under a 1934 law, the Johnson Debt Default Act, as amended, it's illegal for Americans to extend credit to countries in default to the U.S. government, unless they are members of the World Bank and International Monetary Fund.
The U.S.S.R. belongs to neither organization.
Moscow has settled pre-1917 debts with other countries in recent years at less than face value.
The State Department stressed the pre-1933 debts as the key to satisfying the Johnson Act.
But the Soviets might still face legal obstacles to raising money in the U.S. until they settle hundreds of millions of dollars in additional debt still outstanding from the World War II lend-lease program.
In another reflection that the growth of the economy is leveling off, the government said that orders for manufactured goods and spending on construction failed to rise in September.
Meanwhile, the National Association of Purchasing Management said its latest survey indicated that the manufacturing economy contracted in October for the sixth consecutive month.
Its index inched up to 47.6% in October from 46% in September.
Any reading below 50% suggests the manufacturing sector is generally declining.
The purchasing managers, however, also said that orders turned up in October after four months of decline.
Factories booked $236.74 billion in orders in September, nearly the same as the $236.79 billion in August, the Commerce Department said.
If not for a 59.6% surge in orders for capital goods by defense contractors, factory orders would have fallen 2.1%.
In a separate report, the department said construction spending ran at an annual rate of $415.6 billion, not significantly different from the $415.8 billion reported for August.
Private construction spending was down, but government building activity was up.
The figures in both reports were adjusted to remove the effects of usual seasonal patterns, but weren't adjusted for inflation.
Kenneth Mayland, economist for Society Corp., a Cleveland bank, said demand for exports of factory goods is beginning to taper off.
At the same time, the drop in interest rates since the spring has failed to revive the residential construction industry.
"What sector is stepping forward to pick up the slack?" he asked.
"I draw a blank."
By most measures, the nation's industrial sector is now growing very slowly -- if at all.
Factory payrolls fell in September.
So did the Federal Reserve Board's industrial-production index.
Yet many economists aren't predicting that the economy is about to slip into recession.
They cite a lack of "imbalances" that provide early warning signals of a downturn.
Inventories are closely watched for such clues, for instance.
Economists say a buildup in inventories can provoke cutbacks in production that can lead to a recession.
But yesterday's factory orders report had good news on that front: it said factory inventories fell 0.1% in September, the first decline since February 1987.
"This conforms to the `soft landing' scenario," said Elliott Platt, an economist at Donaldson, Lufkin & Jenrette Securities Corp.
"I don't see any signs that inventories are excessive."
A soft landing is an economic slowdown that eases inflation without leading to a recession.
The department said orders for nondurable goods -- those intended to last fewer than three years -- fell 0.3% in September to $109.73 billion after climbing 0.9% the month before.
Orders for durable goods were up 0.2% to $127.03 billion after rising 3.9% the month before.
The department previously estimated that durable-goods orders fell 0.1% in September.
Factory shipments fell 1.6% to $234.4 billion after rising 5.4% in August.
Shipments have been relatively level since January, the Commerce Department noted.
Manufacturers' backlogs of unfilled orders rose 0.5% in September to $497.34 billion, helped by strength in the defense capital goods sector.
Excluding these orders, backlogs declined 0.3%.
In its construction spending report, the Commerce Department said residential construction, which accounts for nearly half of all construction spending, was off 0.9% in September to an annual rate of $191.9 billion.
David Berson, economist for the Mortgage Bankers Association, predicted the drop in interest rates eventually will boost spending on single-family homes, but probably not until early next year.
Spending on private, nonresidential construction was off 2.6% to an annual rate of $99.1 billion with no sector showing strength.
Government construction spending rose 4.3% to $88 billion.
After adjusting for inflation, the Commerce Department said construction spending didn't change in September.
For the first nine months of the year, total construction spending ran about 2% above last year's level.
The government's construction spending figures contrast with a report issued earlier in the week by McGraw-Hill Inc.'s F.W. Dodge Group.
Dodge reported an 8% increase in construction contracts awarded in September.
The goverment counts money as it is spent; Dodge counts contracts when they are awarded.
The government includes money spent on residential renovation; Dodge doesn't.
Although the purchasing managers' index continues to indicate a slowing economy, it isn't signaling an imminent recession, said Robert Bretz, chairman of the association's survey committee and director of materials management at Pitney Bowes Inc., Stamford, Conn.
He said the index would have to be in the low 40% range for several months to be considered a forecast of recession.
The report offered new evidence that the nation's export growth, though still continuing, may be slowing.
Only 19% of the purchasing managers reported better export orders in October, down from 27% in September.
And 8% said export orders were down last month, compared with 6% the month before.
The purhasing managers' report also added evidence that inflation is under control.
For the fifth consecutive month, purchasing managers said prices for the goods they purchased fell.
The decline was even steeper than in September.
They also said that vendors were delivering goods more quickly in October than they had for each of the five previous months.
Economists consider that a sign that inflationary pressures are abating.
When demand is stronger than suppliers can handle and delivery times lengthen, prices tend to rise.
The purchasing managers' report is based on data provided by more than 250 purchasing executives.
Each of the survey's indicators gauges the difference between the number of purchasers reporting improvement in a particular area and the number reporting a worsening.
For the first time, the October survey polled members on imports.
It found that of the 73% who import, 10% said they imported more in October and 12% said they imported less than the previous month.
While acknowledging one month's figures don't prove a trend, Mr. Bretz said, "It does lead you to suspect imports are going down, or at least not increasing that much."
Items listed as being in short supply numbered only about a dozen, but they included one newcomer: milk and milk powder.
"It's an odd thing to put on the list," Mr. Bretz noted.
He said that for the second month in a row, food processors reported a shortage of nonfat dry milk.
They blamed increased demand for dairy products at a time of exceptionally high U.S. exports of dry milk, coupled with very low import quotas.
Pamela Sebastian in New York contributed to this article.
Here are the Commerce Department's figures for construction spending in billions of dollars at seasonally adjusted annual rates.
Here are the Commerce Department's latest figures for manufacturers in billions of dollars, seasonally adjusted.
Judging from the Americana in Haruki Murakami's "A Wild Sheep Chase" (Kodansha, 320 pages, $18.95), baby boomers on both sides of the Pacific have a lot in common.
Although set in Japan, the novel's texture is almost entirely Western, especially American.
Characters drink Salty Dogs, whistle "Johnny B. Goode" and watch Bugs Bunny reruns.
They read Mickey Spillane and talk about Groucho and Harpo.
They worry about their careers, drink too much and suffer through broken marriages and desultory affairs.
This is Japan?
For an American reader, part of the charm of this engaging novel should come in recognizing that Japan isn't the buttoned-down society of contemporary American lore.
It's also refreshing to read a Japanese author who clearly doesn't belong to the self-aggrandizing "we-Japanese" school of writers who perpetuate the notion of the unique Japanese, unfathomable by outsiders.
If "A Wild Sheep Chase" carries an implicit message for international relations, it's that the Japanese are more like us than most of us think.
That's not to say that the nutty plot of "A Wild Sheep Chase" is rooted in reality.
It's imaginative and often funny.
A disaffected, hard-drinking, nearly-30 hero sets off for snow country in search of an elusive sheep with a star on its back at the behest of a sinister, erudite mobster with a Stanford degree.
He has in tow his prescient girlfriend, whose sassy retorts mark her as anything but a docile butterfly.
Along the way, he meets a solicitous Christian chauffeur who offers the hero God's phone number; and the Sheep Man, a sweet, roughhewn figure who wears -- what else -- a sheepskin.
The 40-year-old Mr. Murakami is a publishing sensation in Japan.
A more recent novel, "Norwegian Wood" (every Japanese under 40 seems to be fluent in Beatles lyrics), has sold more than four million copies since Kodansha published it in 1987.
But he is just one of several youthful writers -- Tokyo's brat pack -- who are dominating the best-seller charts in Japan.
Their books are written in idiomatic, contemporary language and usually carry hefty dashes of Americana.
In Robert Whiting's "You Gotta Have Wa" (Macmillan, 339 pages, $17.95), the Beatles give way to baseball, in the Nipponese version we would be hard put to call a "game."
As Mr. Whiting describes it, Nipponese baseball is a "mirror of Japan's fabled virtues of hard work and harmony."
"Wa" is Japanese for "team spirit" and Japanese ballplayers have miles and miles of it.
A player's commitment to practice and team image is as important as his batting average.
Polls once named Tokyo Giants star Tatsunori Hara, a "humble, uncomplaining, obedient soul," as the male symbol of Japan.
But other than the fact that besuboru is played with a ball and a bat, it's unrecognizable: Fans politely return foul balls to stadium ushers; the strike zone expands depending on the size of the hitter; ties are permitted -- even welcomed -- since they honorably sidestep the shame of defeat; players must abide by strict rules of conduct even in their personal lives -- players for the Tokyo Giants, for example, must always wear ties when on the road.
"You Gotta Have Wa" is the often amusing chronicle of how American ballplayers, rationed to two per team, fare in Japan.
Despite the enormous sums of money they're paid to stand up at a Japanese plate, a good number decide it's not worth it and run for home.
"Funny Business" (Soho, 228 pages, $17.95) by Gary Katzenstein is anything but.
It's the petulant complaint of an impudent American whom Sony hosted for a year while he was on a Luce Fellowship in Tokyo -- to the regret of both parties.
In sometimes amusing, more often supercilious, even vicious passages, Mr. Katzenstein describes how Sony invades even the most mundane aspects of its workers' lives -- at the regimented office, where employees are assigned lunch partners -- and at "home" in the austere company dormitory run by a prying caretaker.
Some of his observations about Japanese management style are on the mark.
It's probably true that many salarymen put in unproductive overtime just for the sake of solidarity, that the system is so hierarchical that only the assistant manager can talk to the manager and the manager to the general manager, and that Sony was chary of letting a young, short-term American employee take on any responsibility.
All of this must have been enormously frustrating to Mr. Katzenstein, who went to Sony with degrees in business and computer science and was raring to invent another Walkman.
But Sony ultimately took a lesson from the American management books and fired Mr. Katzenstein, after he committed the social crime of making an appointment to see the venerable Akio Morita, founder of Sony.
It's a shame their meeting never took place.
Mr. Katzenstein certainly would have learned something, and it's even possible Mr. Morita would have too.
Ms. Kirkpatrick, the Journal's deputy editorial features editor, worked in Tokyo for three years.
More and more corners of the globe are becoming free of tobacco smoke.
In Singapore, a new law requires smokers to put out their cigarettes before entering restaurants, department stores and sports centers or face a $250 fine.
Discos and private clubs are exempt from the ban, and smoking will be permitted in bars except during meal hours, an official said.
Singapore already bans smoking in all theaters, buses, public elevators, hospitals and fast-food restaurants.
In Malaysia, Siti Zaharah Sulaiman, a deputy minister in the prime minister's office, launched a "No-Smoking Week" at the Mara Institute of Technology near Kuala Lumpur and urged other schools to ban on-campus smoking.
South Korea has different concerns.
In Seoul, officials began visiting about 26,000 cigarette stalls to remove illegal posters and signboards advertising imported cigarettes.
South Korea has opened its market to foreign cigarettes but restricts advertising to designated places.
A marketing study indicates that Hong Kong consumers are the most materialistic in the 14 major markets where the survey was carried out.
The study by the Backer Spielvogel Bates ad agency also found that the colony's consumers feel more pressured than those in any of the other surveyed markets, which include the U.S. and Japan.
The survey found that nearly half of Hong Kong consumers espouse what it identified as materialistic values, compared with about one-third in Japan and the U.S.
More than three in five said they are under a great deal of stress most of the time, compared with less than one in two U.S. consumers and one in four in Japan.
The Thai cabinet endorsed Finance Minister Pramual Sabhavasu's proposal to build a $19 million conference center for a joint meeting of the World Bank and International Monetary Fund two years from now.
The meeting, which is expected to draw 20,000 to Bangkok, was going to be held at the Central Plaza Hotel, but the government balked at the hotel's conditions for undertaking necessary expansion.
A major concern about the current plan is whether the new center can be built in such a short time.
Yasser Arafat has written to the chairman of the International Olympic Committee asking him to back a Palestinian bid to join the committee, the Palestine Liberation Organization news agency WAFA said.
An official of the Palestinian Olympic Committee said the committee first applied for membership in 1979 and renewed its application in August of this year.
The PLO in recent months has been trying to join international organizations but failed earlier this year to win membership in the World Health Organization and the World Tourism Organization.
A Beijing food-shop assistant has become the first mainland Chinese to get AIDS through sex, the People's Daily said.
It said the man, whom it did not name, had been found to have the disease after hospital tests.
Once the disease was confirmed, all the man's associates and family were tested, but none have so far been found to have AIDS, the newspaper said.
The man had for a long time had "a chaotic sex life," including relations with foreign men, the newspaper said.
The Polish government increased home electricity charges by 150% and doubled gas prices.
The official news agency PAP said the increases were intended to bring unrealistically low energy charges into line with production costs and compensate for a rise in coal prices.
In happier news, South Korea, in establishing diplomatic ties with Poland yesterday, announced $450 million in loans to the financially strapped Warsaw government.
In a victory for environmentalists, Hungary's parliament terminated a multibillion-dollar River Danube dam being built by Austrian firms.
The Nagymaros dam was designed to be twinned with another dam, now nearly complete, 100 miles upstream in Czechoslovakia.
In ending Hungary's part of the project, Parliament authorized Prime Minister Miklos Nemeth to modify a 1977 agreement with Czechoslovakia, which still wants the dam to be built.
Mr. Nemeth said in parliament that Czechoslovakia and Hungary would suffer environmental damage if the twin dams were built as planned.
Czechoslovakia said in May it could seek $2 billion from Hungary if the twindam contract were broken.
The Czech dam can't be operated solely at peak periods without the Nagymaros project.
A painting by August Strindberg set a Scandinavian price record when it sold at auction in Stockholm for $2.44 million.
"Lighthouse II" was painted in oils by the playwright in 1901 . . .
After years of decline, weddings in France showed a 2.2% upturn last year, with 6,000 more couples exchanging rings in 1988 than in the previous year, the national statistics office said.
But the number of weddings last year -- 271,124 -- was still well below the 400,000 registered in 1972, the last year of increasing marriages.
BRAMALEA Ltd. said it agreed to issue 100 million Canadian dollars (US$85.1 million) of 10.5% senior debentures due Nov. 30, 1999, together with 100,000 bond purchase warrants.
The Toronto-based real estate concern said each bond warrant entitles the holder to buy C$1,000 principal amount of debentures at par plus accrued interest to the date of purchase.
The warrants expire Nov. 30, 1990.
The issue will be swapped into fixed-rate U.S. dollars at a rate the company said is less than 9%; a spokesman declined to elaborate.
Lead underwriters for the issue are Scotia McLeod Inc. and RBC Dominion Securities Inc., both Toronto-based investment dealers.
Bramalea said it expects to complete the issue by the end of the month.
As an actor, Charles Lane isn't the inheritor of Charlie Chaplin's spirit.
Steve Martin has already laid his claim to that.
But it is Mr. Lane, as movie director, producer and writer, who has been obsessed with refitting Chaplin's Little Tramp in a contemporary way.
In 1976, as a film student at the Purchase campus of the State University of New York, Mr. Lane shot "A Place in Time," a 36-minute black-and-white film about a sketch artist, a man of the streets.
Now, 13 years later, Mr. Lane has revived his Artist in a full-length movie called "Sidewalk Stories," a poignant piece of work about a modern-day tramp.
Of course, if the film contained dialogue, Mr. Lane's Artist would be called a homeless person.
So would the Little Tramp, for that matter.
I say "contained dialogue" because "Sidewalk Stories" isn't really silent at all.
Composer Marc Marder, a college friend of Mr. Lane's who earns his living playing the double bass in classical music ensembles, has prepared an exciting, eclectic score that tells you what the characters are thinking and feeling far more precisely than intertitles, or even words, would.
Much of Mr. Lane's film takes a highly romanticized view of life on the streets (though probably no more romanticized than Mr. Chaplin's notion of the Tramp as the good-hearted free spirit).
Filmed in lovely black and white by Bill Dill, the New York streets of "Sidewalk Stories" seem benign.
On Wall Street men and women walk with great purpose, noticing one another only when they jostle for cabs.
The Artist hangs out in Greenwich Village, on a strip of Sixth Avenue populated by jugglers, magicians and other good-natured hustlers.
(This clearly is not real life: no crack dealers, no dead-eyed men selling four-year-old copies of Cosmopolitan, no one curled up in a cardboard box.)
The Artist has his routine.
He spends his days sketching passers-by, or trying to.
At night he returns to the condemned building he calls home.
His life, including his skirmishes with a competing sketch artist, seems carefree.
He is his own man.
Then, just as the Tramp is given a blind girl to cure in "City Lights," the Artist is put in charge of returning a two-year-old waif (Nicole Alysia), whose father has been murdered by thugs, to her mother.
This cute child turns out to be a blessing and a curse.
She gives the Artist a sense of purpose, but also alerts him to the serious inadequacy of his vagrant life.
The beds at the Bowery Mission seem far drearier when he has to tuck a little girl into one of them at night.
To further load the stakes, Mr. Lane dreamed up a highly improbable romance for the Artist, with a young woman who owns her own children's shop and who lives in an expensive high-rise apartment building.
This story line might resonate more strongly if Mr. Lane had as strong a presence in front of the camera as he does behind it.
Mr. Lane's final purpose isn't to glamorize the Artist's vagabond existence.
He has a point he wants to make, and he makes it, with a great deal of force.
The movie ends with sound, the sound of street people talking, and there isn't anything whimsical or enviable in those rough, beaten voices.
The French film maker Claude Chabrol has managed another kind of weird achievement with his "Story of Women."
He has made a harsh, brilliant picture -- one that's captivating -- about a character who, viewed from the most sympathetic angle, would seem disagreeable.
Yet this woman, Marie-Louise Giraud, carries historical significance, both as one of the last women to be executed in France and as a symbol of the Vichy government's hypocrisy.
While Vichy collaborated with the Germans during World War II in the deaths of thousands of Resistance fighters and Jews, its officials needed a diversionary symbolic traitor.
Marie-Louise, a small-time abortionist, was their woman.
She became an abortionist accidentally, and continued because it enabled her to buy jam, cocoa and other war-rationed goodies.
She was untrained and, in one botched job killed a client.
Her remorse was shallow and brief.
Although she was kind and playful to her children, she was dreadful to her war-damaged husband; she openly brought her lover into their home.
As presented by Mr. Chabrol, and played with thin-lipped intensity by Isabelle Huppert, Marie-Louise (called Marie Latour in the film) was not a nice person.
But she didn't deserve to have her head chopped off.
There is very little to recommend "Old Gringo," a confused rendering of the Carlos Fuentes novel of the Mexican Revolution.
Most of the picture is taken up with endless scenes of many people either fighting or eating and drinking to celebrate victory.
I mention the picture only because many bad movies have a bright spot, and this one has Gregory Peck, in a marvelously loose and energetic portrayal of an old man who wants to die the way he wants to die.
Video Tip: Before seeing "Sidewalk Stories," take a look at "City Lights," Chaplin's Tramp at his finest.
Boeing Co. said it is discussing plans with three of its regular Japanese suppliers to possibly help build a larger version of its popular 767 twin-jet.
The discussions are still in preliminary stages, and the specific details haven't been worked out between the Seattle aerospace company and Kawasaki Heavy Industries Ltd., Mitsubishi Heavy Industries Ltd. and Fuji Heavy Industries Ltd.
The three Japanese companies build the body sections of the 767, accounting for a combined 15% of the aircraft.
Japanese press reports have speculated that the Japanese contribution could rise to between 20% and 25% under the new program.
If Boeing goes ahead with the larger 767, the plane could hit the market in the mid-1990s.
This is the year the negative ad, for years a secondary presence in most political campaigns, became the main event.
The irony is that the attack commercial, after getting a boost in last year's presidential campaign, has come of age in an off-off election year with only a few contests scattered across the country.
But in the three leading political contests of 1989, the negative ads have reached new levels of hostility, raising fears that this kind of mudslinging, empty of significant issues, is ushering in a new era of campaigns without content.
"Now," says Joseph Napolitan, a pioneer in political television, "the idea is to attack first, last and always."
A trend that started with the first stirrings of politics, accelerated with the dawn of the television age and became a sometimes-tawdry art form in 1988, has reached an entirely new stage.
"To get people's attention these days," says Douglas Bailey, a political consultant, "your TV ad needs to be bold and entertaining, and, more often than not, that means confrontational.
And, unlike a few years ago, you don't even have to worry whether the ad is truthful."
In 1989, as often as not, the principal fights in the major campaigns are prompted by the ads themselves.
Take a look, then, at the main attack commercials that set the tone for Tuesday's elections in New York City, New Jersey and Virginia:
New York City:
The screen fills with a small, tight facial shot of David Dinkins, Democratic candidate for mayor of New York City.
"David Dinkins failed to file his income taxes for four straight years," says a disembodied male voice.
And then this television commercial, paid for by Republican Rudolph Giuliani's campaign and produced by Roger Ailes, the master of negative TV ads, really gets down to business.
Mr. Dinkins, the ad charges, also failed to report his campaign contributions accurately, hid his links to a failing insurance company and paid a convicted kidnapper "through a phony organization with no members, no receipts and no office."
"David Dinkins," says the kicker, "Why does he always wait until he's caught?"
"Nasty innuendoes," says John Siegal, Mr. Dinkins's issues director, "designed to prosecute a case of political corruption that simply doesn't exist."
Stung by the Giuliani ads, Mr. Dinkins's TV consultants, Robert Shrum and David Doak, finally unleashed a negative ad of their own.
The screen shows two distorted, unrecognizable photos, presumably of two politicians.
"Compare two candidates for mayor," says the announcer.
"One says he's for banning cop-killer bullets.
The other has opposed a ban on cop-killer bullets.
One claims he's pro-choice.
The other has opposed a woman's right to choose."
"Funny thing," says the kicker, "both these candidates are named Rudolph Giuliani."
Who's telling the truth?
Everybody -- and nobody.
It's a classic situation of ads that are true but not always fully accurate.
Mr. Dinkins did fail to file his income taxes for four years, but he insists he voluntarily admitted the "oversight" when he was being considered for a city job.
He was on the board of an insurance company with financial problems, but he insists he made no secret of it.
The city's Campaign Finance Board has refused to pay Mr. Dinkins $95,142 in matching funds because his campaign records are incomplete.
The campaign has blamed these reporting problems on computer errors.
And, says Mr. Dinkins, he didn't know the man his campaign paid for a get-out-the-vote effort had been convicted of kidnapping.
But, say Mr. Dinkins's managers, he did have an office and his organization did have members.
Mr. Giuliani's campaign chairman, Peter Powers, says the Dinkins ad is "deceptive."
The other side, he argues, "knows Giuliani has always been pro-choice, even though he has personal reservations.
They know he is generally opposed to cop-killer bullets, but that he had some reservations about the language in the legislation."
Virginia:
Democratic Lt. Gov. Douglas Wilder opened his gubernatorial battle with Republican Marshall Coleman with an abortion commercial produced by Frank Greer that analysts of every political persuasion agree was a tour de force.
Against a shot of Monticello superimposed on an American flag, an announcer talks about the "strong tradition of freedom and individual liberty" that Virginians have nurtured for generations.
Then, just as an image of the statue of Thomas Jefferson dissolves from the screen, the announcer continues: "On the issue of abortion, Marshall Coleman wants to take away your right to choose and give it to the politicians."
That commercial -- which said Mr. Coleman wanted to take away the right of abortion "even in cases of rape and incest," a charge Mr. Coleman denies -- changed the dynamics of the campaign, transforming it, at least in part, into a referendum on abortion.
The ad prompted Mr. Coleman, the former Virginia attorney general, to launch a series of advertisements created by Bob Goodman and designed to shake Mr. Wilder's support among the very women who were attracted by the abortion ad.
The Coleman counterattack featured a close-up of a young woman in shadows and the ad suggested that she was recalling an unpleasant courtroom ordeal.
A voice says, "C'mon, now, don't you have boyfriends?"
Then an announcer interjects: "It was Douglas Wilder who introduced a bill to force rape victims age 13 and younger to be interrogated about their private lives by lawyers for accused rapists.
So the next time Mr. Wilder talks about the rights of women, ask him about this law he tried to pass."
Mr. Wilder did introduce such legislation 17 years ago, but he did so at the request of a constituent, a common legislative technique used by lawmakers.
The legislation itself noted that it was introduced "by request," and in 1983 Mr. Wilder introduced a bill to protect rape victims from unfounded interrogation.
"People have grown tired of these ads and Coleman has gotten the stigma of being a negative campaigner," says Mark Rozell, a political scientist at Mary Washington College.
"Wilder has managed to get across the idea that Coleman will say anything to get elected governor and -- more important -- has been able to put the onus for all the negative campaigning on Coleman."
Mr. Coleman said this week that he would devote the remainder of the political season to positive campaigning, but the truce lasted only hours.
By Tuesday night, television stations were carrying new ads featuring Mr. Coleman himself raising questions about Mr. Wilder's sensitivity to rape victims.
New Jersey:
The attacks began when Democratic Rep. James Florio aired an ad featuring a drawing of Pinocchio and a photograph of Mr. Florio's rival, Republican Rep. Jim Courter.
"Remember Pinocchio?" says a female voice.
"Consider Jim Courter."
And then this commercial, produced by Bob Squier, gets down to its own mean and dirty business.
Pictures of rusted oil drums swim into focus, and the female voice purrs, "That hazardous waste on his {Mr. Courter's} property -- the neighbors are suing for consumer fraud."
And the nose on Mr. Courter's face grows.
The only fraud involved, cry Mr. Courter's partisans, is the Florio commercial itself, and so the Courter campaign has responded with its own Pinocchio commercial, produced by Mr. Ailes.
In this one, the screen fills with photographs of both candidates.
"Who's really lying?" asks a female voice.
"Florio's lying," the voice goes on, because "the barrel on Courter's land . . . contained heating oil, was cleaned up and caused no pollution."
Mr. Courter's long nose shrinks while Mr. Florio's grows.
Who's telling the truth?
Stephen Salmore, a political scientist at New Jersey's Eagleton Institute, says it's another example of an ad that's true but not fully accurate.
Barrels were dumped on the Courter property, a complaint was made, but there is no evidence the barrels were a serious threat to the environment.
Even so, according to Mr. Salmore, the ad was "devastating" because it raised questions about Mr. Courter's credibility.
But it's building on a long tradition.
In 1966, on route to a re-election rout of Democrat Frank O'Connor, GOP Gov. Nelson Rockefeller of New York appeared in person saying, "If you want to keep the crime rates high, O'Connor is your man."
A seat on the Chicago Board of Trade was sold for $350,000, down $16,000 from the previous sale last Friday.
Seats currently are quoted at $331,000, bid, and $350,000, asked.
The record price for a full membership on the exchange is $550,000, set Aug. 31, 1987.
Japanese investment in Southeast Asia is propelling the region toward economic integration.
Interviews with analysts and business people in the U.S. suggest that Japanese capital may produce the economic cooperation that Southeast Asian politicians have pursued in fits and starts for decades.
But Japan's power in the region also is sparking fears of domination and posing fresh policy questions.
The flow of Japanese funds has set in motion "a process whereby these economies will be knitted together by the great Japanese investment machine," says Robert Hormats, vice chairman of Goldman Sachs International Corp.
In the past five years, Japanese companies have tripled their commitments in Asia to $5.57 billion.
In Thailand, for example, the government's Board of Investment approved $705.6 million of Japanese investment in 1988, 10 times the U.S. investment figure for the year.
Japan's commitment in Southeast Asia also includes steep increases in foreign assistance and trade.
Asia's other cash-rich countries are following Japan's lead and pumping capital into the region.
In Taiwan and South Korea, rising wages are forcing manufacturers to seek other overseas sites for labor-intensive production.
These nations, known as Asia's "little tigers," also are contributing to Southeast Asia's integration, but their influence will remain subordinate to Japan's.
For recipient countries such as Thailand and Malaysia, the investment will provide needed jobs and spur growth.
But Asian nations' harsh memories of their military domination by Japan in the early part of this century make them fearful of falling under Japanese economic hegemony now.
Because of budget constraints in Washington, the U.S. encourages Japan to share economic burdens in the region.
But it resists yielding political ground.
In the coming decade, analysts say, U.S.-Japanese relations will be tested as Tokyo comes to terms with its new status as the region's economic behemoth.
Japan's swelling investment in Southeast Asia is part of its economic evolution.
In the past decade, Japanese manufacturers concentrated on domestic production for export.
In the 1990s, spurred by rising labor costs and the strong yen, these companies will increasingly turn themselves into multinationals with plants around the world.
To capture the investment, Southeast Asian nations will move to accommodate Japanese business.
These nations' internal decisions "will be made in a way not to offend their largest aid donor, largest private investor and largest lender," says Richard Drobnick, director of the international business and research program at the University of Southern California's Graduate School of Business.
Japanese money will help turn Southeast Asia into a more cohesive economic region.
But, analysts say, Asian cooperation isn't likely to parallel the European Common Market approach.
Rather, Japanese investment will spur integration of certain sectors, says Kent Calder, a specialist in East Asian economies at the Woodrow Wilson School for Public and Internatonal Affairs at Princeton University.
In electronics, for example, a Japanese company might make television picture tubes in Japan, assemble the sets in Malaysia and export them to Indonesia.
"The effect will be to pull Asia together not as a common market but as an integrated production zone," says Goldman Sachs's Mr. Hormats.
Countries in the region also are beginning to consider a framework for closer economic and political ties.
The economic and foreign ministers of 12 Asian and Pacific nations will meet in Australia next week to discuss global trade issues as well as regional matters such as transportation and telecommunications.
Participants will include the U.S., Australia, Canada, Japan, South Korea and New Zealand as well as the six members of the Association of Southeast Asian Nations -- Thailand, Malaysia, Singapore, Indonesia, the Philippines and Brunei.
In addition, the U.S. this year offered its own plan for cooperation around the Pacific rim in a major speech by Secretary of State James Baker, following up a proposal made in January by Australian Prime Minister Bob Hawke.
The Baker proposal reasserts Washington's intention to continue playing a leading political role in the region.
"In Asia, as in Europe, a new order is taking shape," Mr. Baker said.
"The U.S., with its regional friends, must play a crucial role in designing its architecture."
But maintaining U.S. influence will be difficult in the face of Japanese dominance in the region.
Japan not only outstrips the U.S. in investment flows but also outranks it in trade with most Southeast Asian countries (although the U.S. remains the leading trade partner for all of Asia).
Moreover, the Japanese government, now the world's largest aid donor, is pumping far more assistance into the region than the U.S. is.
While U.S. officials voice optimism about Japan's enlarged role in Asia, they also convey an undertone of caution.
"There's an understanding on the part of the U.S. that Japan has to expand its functions" in Asia, says J. Michael Farren, undersecretary of commerce for trade.
"If they approach it with a benevolent, altruistic attitude, there will be a net gain for everyone."
Some Asian nations are apprehensive about Washington's demand that Tokyo step up its military spending to ease the U.S. security burden in the region.
The issue is further complicated by uncertainty over the future of the U.S.'s leases on military bases in the Philippines and by a possible U.S. troop reduction in South Korea.
Many Asians regard a U.S. presence as a desirable counterweight to Japanese influence.
"No one wants the U.S. to pick up its marbles and go home," Mr. Hormats says.
For their part, Taiwan and South Korea are expected to step up their own investments in the next decade to try to slow the Japanese juggernaut.
"They don't want Japan to monopolize the region and sew it up," says Chong-sik Lee, professor of East Asian politics at the University of Pennsylvania.
Cathryn Rice could hardly believe her eyes.
While giving the Comprehensive Test of Basic Skills to ninth graders at Greenville High School last March 16, she spotted a student looking at crib sheets.
She had seen cheating before, but these notes were uncanny.
"A stockbroker is an example of a profession in trade and finance. . . .
At the end of World War II, Germany surrendered before Japan. . . .
The Senate-House conference committee is used when a bill is passed by the House and Senate in different forms."
Virtually word for word, the notes matched questions and answers on the social-studies section of the test the student was taking.
In fact, the student had the answers to almost all of the 40 questions in that section.
The student surrendered the notes, but not without a protest.
"My teacher said it was OK for me to use the notes on the test," he said.
The teacher in question was Nancy Yeargin -- considered by many students and parents to be one of the best at the school.
Confronted, Mrs. Yeargin admitted she had given the questions and answers two days before the examination to two low-ability geography classes.
She had gone so far as to display the questions on an overhead projector and underline the answers.
Mrs. Yeargin was fired and prosecuted under an unusual South Carolina law that makes it a crime to breach test security.
In September, she pleaded guilty and paid a $500 fine.
Her alternative was 90 days in jail.
Her story is partly one of personal downfall.
She was an unstinting teacher who won laurels and inspired students, but she will probably never teach again.
In her wake she left the bitterness and anger of a principal who was her friend and now calls her a betrayer; of colleagues who say she brought them shame; of students and parents who defended her and insist she was treated harshly; and of school-district officials stunned that despite the bald-faced nature of her actions, she became something of a local martyr.
Mrs. Yeargin's case also casts some light on the dark side of school reform, where pressures on teachers are growing and where high-stakes testing has enhanced the temptation to cheat.
The 1987 statute Mrs. Yeargin violated was designed to enforce provisions of South Carolina's school-improvement laws.
Prosecutors alleged that she was trying to bolster students' scores to win a bonus under the state's 1984 Education Improvement Act.
The bonus depended on her ability to produce higher student-test scores.
"There is incredible pressure on school systems and teachers to raise test scores," says Walt Haney, an education professor and testing specialist at Boston College.
"So efforts to beat the tests are also on the rise."
And most disturbing, it is educators, not students, who are blamed for much of the wrongdoing.
A 50-state study released in September by Friends for Education, an Albuquerque, N.M., school-research group, concluded that "outright cheating by American educators" is "common."
The group says standardized achievement test scores are greatly inflated because teachers often "teach the test" as Mrs. Yeargin did, although most are never caught.
Evidence of widespread cheating has surfaced in several states in the last year or so.
California's education department suspects adult responsibility for erasures at 40 schools that changed wrong answers to right ones on a statewide test.
After numerous occurrences of questionable teacher help to students, Texas is revising its security practices.
And sales of test-coaching booklets for classroom instruction are booming.
These materials, including Macmillan/McGraw-Hill School Publishing Co.'s Scoring High and Learning Materials -- are nothing short of sophisticated crib sheets, according to some recent academic research.
By using them, teachers -- with administrative blessing -- telegraph to students beforehand the precise areas on which a test will concentrate, and sometimes give away a few exact questions and answers.
Use of Scoring High is widespread in South Carolina and common in Greenville County, Mrs. Yeargin's school district.
Experts say there isn't another state in the country where tests mean as much as they do in South Carolina.
Under the state's Education Improvement Act, low test scores can block students' promotions or force entire districts into wrenching, state-supervised "interventions" that can mean firings.
High test scores, on the other hand, bring recognition and extra money -- a new computer lab for a school, grants for special projects, a bonus for the superintendent.
And South Carolina says it is getting results.
Since the reforms went in place, for example, no state has posted a higher rate of improvement on the Scholastic Aptitude Test than South Carolina, although the state still posts the lowest average score of the about 21 states who use the SAT as the primary college entrance examination.
Critics say South Carolina is paying a price by stressing improved test scores so much.
Friends of Education rates South Carolina one of the worst seven states in its study on academic cheating.
Says the organization's founder, John Cannell, prosecuting Mrs. Yeargin is "a way for administrators to protect themselves and look like they take cheating seriously, when in fact they don't take it seriously at all."
Paul Sandifer, director of testing for the South Carolina department of education, says Mr. Cannell's allegations of cheating "are purely without foundation," and based on unfair inferences.
Partly because of worries about potential abuse, however, he says the state will begin keeping closer track of achievement-test preparation booklets next spring.
South Carolina's reforms were designed for schools like Greenville High School.
Standing on a shaded hill in a run-down area of this old textile city, the school has educated many of South Carolina's best and brightest, including the state's last two governors, Nobel Prize winning physicist Charles Townes and actress Joanne Woodward.
But by the early 1980s, its glory had faded like the yellow bricks of its broad facade.
"It was full of violence and gangs and kids cutting class," says Linda Ward, the school's principal.
"Crime was awful, test scores were low, and there was no enrollment in honors programs."
Mrs. Ward took over in 1986, becoming the school's seventh principal in 15 years.
Her immediate predecessor suffered a nervous breakdown.
Prior to his term, a teacher bled to death in the halls, stabbed by a student.
Academically, Mrs. Ward says, the school was having trouble serving in harmony its two disparate, and evenly split, student groups: a privileged white elite from old monied neighborhoods and blacks, many of them poor, from run-down, inner city neighborhoods.
Mrs. Ward resolved to clean out "deadwood" in the school's faculty and restore safety, and she also had some new factors working in her behalf.
One was statewide school reform, which raised overall educational funding and ushered in a new public spirit for school betterment.
Another was Nancy Yeargin, who came to Greenville in 1985, full of the energy and ambitions that reformers wanted to reward.
"Being a teacher just became my life," says the 37-year-old Mrs. Yeargin, a teacher for 12 years before her dismissal. "
I loved the school, its history.
I even dreamt about school and new things to do with my students."
While Mrs. Ward fired and restructured staff and struggled to improve curriculum, Mrs. Yeargin worked 14-hour days and fast became a student favorite.
In 1986-87 and 1987-88, she applied for and won bonus pay under the reform law.
Encouraged by Mrs. Ward, Mrs. Yeargin taught honor students in the state "teacher cadet" program, a reform creation designed to encourage good students to consider teaching as a career.
She won grant money for the school, advised cheerleaders, ran the pep club, proposed and taught a new "Cultural Literacy" class in Western Civilization and was chosen by the school PTA as "Teacher of the Year."
"She was an inspirational lady; she had it all together," says Laura Dobson, a freshman at the University of South Carolina who had Mrs. Yeargin in the teacher-cadet class last year.
She says that because of Mrs. Yeargin she gave up ambitions in architecture and is studying to become a teacher.
Mary Beth Marchand, a Greenville 11th grader, also says Mrs. Yeargin inspired her to go into education.
"She taught us more in Western Civilization than I've ever learned in other classes," says Kelli Green, a Greenville senior.
In the classroom, students say, Mrs. Yeargin distinguished herself by varying teaching approaches -- forcing kids to pair up to complete classroom work or using college-bowl type competitions.
On weekends, she came to work to prepare study plans or sometimes, even to polish the furniture in her classroom.
"She just never gave it up," says Mary Marchand, Mary Beth's mother.
"You'd see her correcting homework in the stands at a football game."
Some fellow teachers, however, viewed Mrs. Yeargin as cocky and too yielding to students.
Mrs. Ward says she often defended her to colleagues who called her a grandstander.
Pressures began to build.
Friends told her she was pushing too hard.
Because of deteriorating hearing, she told colleagues she feared she might not be able to teach much longer.
Mrs. Yeargin's extra work was also helping her earn points in the state's incentive-bonus program.
But the most important source of points was student improvement on tests.
Huge gains by her students in 1987 and 1988 meant a total of $5,000 in bonuses over two years -- a meaningful addition to her annual salary of $23,000.
Winning a bonus for a third year wasn't that important to her, Mrs. Yeargin insists.
But others at Greenville High say she was eager to win -- if not for money, then for pride and recognition.
Mary Elizabeth Ariail, another social-studies teacher, says she believed Mrs. Yeargin wanted to keep her standing high so she could get a new job that wouldn't demand good hearing.
Indeed, Mrs. Yeargin was interested in a possible job with the state teacher cadet program.
Last March, after attending a teaching seminar in Washington, Mrs. Yeargin says she returned to Greenville two days before annual testing feeling that she hadn't prepared her low-ability geography students adequately.
When test booklets were passed out 48 hours ahead of time, she says she copied questions in the social studies section and gave the answers to students.
Mrs. Yeargin admits she made a big mistake but insists her motives were correct.
"I was trying to help kids in an unfair testing situation," she says.
"Only five of the 40 questions were geography questions.
The rest were history, sociology, finance -- subjects they never had."
Mrs. Yeargin says that she also wanted to help lift Greenville High School's overall test scores, usually near the bottom of 14 district high schools in rankings carried annually by local newspapers.
Mostly, she says, she wanted to prevent the damage to self-esteem that her low-ability students would suffer from doing badly on the test.
"These kids broke my heart," she says.
"A whole day goes by and no one even knows they're alive.
They desperately needed somebody who showed they cared for them, who loved them.
The last thing they needed was another drag-down blow."
School officials and prosecutors say Mrs. Yeargin is lying.
They found students in an advanced class a year earlier who said she gave them similar help, although because the case wasn't tried in court, this evidence was never presented publicly.
"That pretty much defeats any inkling that she was out to help the poor underprivileged child," says Joe Watson, the prosecutor in the case, who is also president of Greenville High School's alumni association.
Mrs. Yeargin concedes that she went over the questions in the earlier class, adding: "I wanted to help all" students.
Mr. Watson says Mrs. Yeargin never complained to school officials that the standardized test was unfair.
"Do I have much sympathy for her?" Mr. Watson asks.
"Not really.
I believe in the system.
I believe you have to use the system to change it.
What she did was like taking the law into your own hands."
Mrs. Ward says that when the cheating was discovered, she wanted to avoid the morale-damaging public disclosure that a trial would bring.
She says she offered Mrs. Yeargin a quiet resignation and thought she could help save her teaching certificate.
Mrs. Yeargin declined.
"She said something like `You just want to make it easy for the school.'
I was dumbfounded," Mrs. Ward recalls.
"It was like someone had turned a knife in me."
To the astonishment and dismay of her superiors and legal authorities -- and perhaps as a measure of the unpopularity of standardized tests -- Mrs. Yeargin won widespread local support.
The school-board hearing at which she was dismissed was crowded with students, teachers and parents who came to testify on her behalf.
Supportive callers decried unfair testing, not Mrs. Yeargin, on a local radio talk show on which she appeared.
The show didn't give the particulars of Mrs. Yeargin's offense, saying only that she helped students do better on the test.
"The message to the board of education out of all this is we've got to take a serious look at how we're doing our curriculum and our testing policies in this state," said the talk-show host.
Editorials in the Greenville newspaper allowed that Mrs. Yeargin was wrong, but also said the case showed how testing was being overused.
The radio show "enraged us," says Mrs. Ward.
Partly because of the show, Mr. Watson says, the district decided not to recommend Mrs. Yeargin for a first-time offenders program that could have expunged the charges and the conviction from her record.
And legal authorities cranked up an investigation worthy of a murder case.
Over 50 witnesses, mostly students, were interviewed.
At Greenville High School, meanwhile, some students -- especially on the cheerleading squad -- were crushed.
"It's hard to explain to a 17-year-old why someone they like had to go," says Mrs. Ward.
Soon, T-shirts appeared in the corridors that carried the school's familiar red-and-white GHS logo on the front.
On the back, the shirts read, "We have all the answers."
Many colleagues are angry at Mrs. Yeargin.
"She did a lot of harm," says Cathryn Rice, who had discovered the crib notes.
"We work damn hard at what we do for damn little pay, and what she did cast unfair aspersions on all of us."
But several teachers also say the incident casts doubt on the wisdom of evaluating teachers or schools by using standardized test scores.
Says Gayle Key, a mathematics teacher, "The incentive pay thing has opened up a can of worms.
There may be others doing what she did."
Mrs. Yeargin says she pleaded guilty because she realized it would no longer be possible to win reinstatement, and because she was afraid of further charges.
Mrs. Ward, for one, was relieved.
Despite the strong evidence against Mrs. Yeargin, popular sentiment was so strong in her favor, Mrs. Ward says, that "I'm afraid a jury wouldn't have convicted her.
Since chalk first touched slate, schoolchildren have wanted to know: What's on the test?
These days, students can often find the answer in test-coaching workbooks and worksheets their teachers give them in the weeks prior to taking standardized achievement tests.
The mathematics section of the widely used California Achievement Test asks fifth graders: "What is another name for the Roman numeral IX?"
It also asks them to add two-sevenths and three-sevenths.
Worksheets in a test-practice kit called Learning Materials, sold to schools across the country by Macmillan/McGraw-Hill School Publishing Co., contain the same questions.
In many other instances, there is almost no difference between the real test and Learning Materials.
What's more, the test and Learning Materials are both produced by the same company, Macmillan/McGraw-Hill, a joint venture of McGraw-Hill Inc. and Macmillan's parent, Britain's Maxwell Communication Corp.
Close parallels between tests and practice tests are common, some educators and researchers say.
Test-preparation booklets, software and worksheets are a booming publishing subindustry.
But some practice products are so similar to the tests themselves that critics say they represent a form of school-sponsored cheating.
"If I took {these preparation booklets} into my classroom, I'd have a hard time justifying to my students and parents that it wasn't cheating," says John Kaminski, a Traverse City, Mich., teacher who has studied test coaching.
He and other critics say such coaching aids can defeat the purpose of standardized tests, which is to gauge learning progress.
"It's as if France decided to give only French history questions to students in a European history class, and when everybody aces the test, they say their kids are good in European history," says John Cannell, an Albuquerque, N.M., psychiatrist and founder of an educational research organization, Friends for Education, which has studied standardized testing.
Standardized achievement tests are given about 10 million times a year across the country to students generally from kindergarten through eighth grade.
The most widely used of these tests are Macmillan/McGraw's CAT and Comprehensive Test of Basic Skills; the Iowa Test of Basic Skills, by Houghton Mifflin Co.; and Harcourt Brace Jovanovich Inc.'s Metropolitan Achievement Test and Stanford Achievement Test.
Sales figures of the test-prep materials aren't known, but their reach into schools is significant.
In Arizona, California, Florida, Louisiana, Maryland, New Jersey, South Carolina and Texas, educators say they are common classroom tools.
Macmillan/McGraw says "well over 10 million" of its Scoring High test-preparation books have been sold since their introduction 10 years ago, with most sales in the last five years.
About 20,000 sets of Learning Materials teachers' binders have also been sold in the past four years.
The materials in each set reach about 90 students.
Scoring High and Learning Materials are the best-selling preparation tests.
Michael Kean, director of marketing for CTB Macmillan/McGraw, the Macmillan/McGraw division that publishes Learning Materials, says it isn't aimed at improving test scores.
He also asserted that exact questions weren't replicated.
When referred to the questions that matched, he said it was coincidental.
Mr. Kaminski, the schoolteacher, and William Mehrens, a Michigan State University education professor, concluded in a study last June that CAT test versions of Scoring High and Learning Materials shouldn't be used in the classroom because of their similarity to the actual test.
They devised a 69-point scale -- awarding one point for each subskill measured on the CAT test -- to rate the closeness of test preparatives to the fifth-grade CAT.
Because many of these subskills -- the symmetry of geometrical figures, metric measurement of volume, or pie and bar graphs, for example -- are only a small part of the total fifth-grade curriculum, Mr. Kaminski says, the preparation kits wouldn't replicate too many, if their real intent was general instruction or even general familiarization with test procedures.
But Learning Materials matched on 66.5 of 69 subskills.
Scoring High matched on 64.5.
In CAT sections where students' knowledge of two-letter consonant sounds is tested, the authors noted that Scoring High concentrated on the same sounds that the test does -- to the exclusion of other sounds that fifth graders should know.
Learning Materials for the fifth-grade contains at least a dozen examples of exact matches or close parallels to test items.
Rick Brownell, senior editor of Scoring High, says that Messrs. Kaminski and Mehrens are ignoring "the need students have for becoming familiar with tests and testing format."
He said authors of Scoring High "scrupulously avoid" replicating exact questions, but he doesn't deny that some items are similar.
When Scoring High first came out in 1979, it was a publication of Random House.
McGraw-Hill was outraged.
In a 1985 advisory to educators, McGraw-Hill said Scoring High shouldn't be used because it represented a "parallel form" of the CAT and CTBS tests.
But in 1988, McGraw-Hill purchased the Random House unit that publishes Scoring High, which later became part of Macmillan/McGraw.
Messrs. Brownell and Kean say they are unaware of any efforts by McGraw-Hill to modify or discontinue Scoring High.
Alleghany Corp. said it completed the acquisition of Sacramento Savings & Loan Association from the H.N. & Frances C. Berger Foundation for $150 million.
The Sacramento-based S&L, which has 44 branch offices in north central California, had assets of $2.4 billion at the end of September.
New York-based Alleghany is an insurance and financial services concern.
The purchase price includes two ancillary companies.
The Department of Health and Human Services plans to extend its moratorium on federal funding of research involving fetal-tissue transplants.
Medical researchers believe the transplantation of small amounts of fetal tissue into humans could help treat juvenile diabetes and such degenerative diseases as Alzheimer's, Parkinson's and Huntington's.
But anti-abortionists oppose such research because they worry that the development of therapies using fetal-tissue transplants could lead to an increase in abortions.
James Mason, assistant secretary for health, said the ban on federal funding of fetal-tissue transplant research "should be continued indefinitely."
He said the ban won't stop privately funded tissue-transplant research or federally funded fetal-tissue research that doesn't involve transplants.
Department officials say that HHS Secretary Louis Sullivan will support Dr. Mason's ruling, which will be issued soon in the form of a letter to the acting director of the National Institutes of Health.
Both Dr. Mason and Dr. Sullivan oppose federal funding for abortion, as does President Bush, except in cases where a woman's life is threatened.
The controversy began in 1987 when the National Institutes of Health, aware of the policy implications of its research, asked for an HHS review of its plan to implant fetal tissue into the brain of a patient suffering from Parkinson's disease.
The department placed a moratorium on the research, pending a review of scientific, legal and ethical issues.
A majority of an NIH-appointed panel recommended late last year that the research continue under carefully controlled conditions, but the issue became embroiled in politics as anti-abortion groups continued to oppose federal funding.
The dispute has hampered the administration's efforts to recruit prominent doctors to fill prestigious posts at the helm of the NIH and the Centers for Disease Control.
Several candidates have withdrawn their names from consideration after administration officials asked them for their views on abortion and fetal-tissue transplants.
Antonio Novello, whom Mr. Bush nominated to serve as surgeon general, reportedly has assured the administration that she opposes abortion.
Dr. Novello is deputy director of the National Institute of Child Health and Human Development.
Some researchers have charged that the administration is imposing new ideological tests for top scientific posts.
Earlier this week, Dr. Sullivan tried to defuse these charges by stressing that candidates to head the NIH and the CDC will be judged by "standards of scientific and administrative excellence," not politics.
But the administration's handling of the fetal-tissue transplant issue disturbs many scientists.
"When scientific progress moves into uncharted ground, there has to be a role for society to make judgments about its applications," says Myron Genel, associate dean of the Yale Medical School.
"The disturbing thing about this abortion issue is that the debate has become polarized, so that no mechanism exists" for finding a middle ground.
Yale is one of the few medical institutions conducting privately funded research on fetal-tissue transplants.
But Dr. Genel warns that Dr. Mason's ruling may discourage private funding.
"The unavailability of federal funds, and the climate in which the decision was made, certainly don't provide any incentive for one of the more visible foundations to provide support," he said.
Despite the flap over transplants, federal funding of research involving fetal tissues will continue on a number of fronts.
"Such research may ultimately result in the ability to regenerate damaged tissues or to turn off genes that cause cancer" or to regulate genes that cause Down's syndrome, the leading cause of mental retardation, according to an NIH summary.
The NIH currently spends about $8 million annually on fetal-tissue research out of a total research budget of $8 billion.
Rekindled hope that two New England states will allow broader interstate banking boosted Nasdaq's bank stocks, but the over-the-counter market was up only slightly in lackluster trading.
The Nasdaq composite index added 1.01 to 456.64 on paltry volume of 118.6 million shares.
In terms of volume, it was an inauspicious beginning for November.
Yesterday's share turnover was well below the year's daily average of 133.8 million.
In October, the busiest month of the year so far, daily volume averaged roughly 145 million shares.
The Nasdaq 100 index of the biggest nonfinancial stocks gained 1.39 to 446.62.
The index of the 100 largest Nasdaq financial stocks rose modestly as well, gaining 1.28 to 449.04.
But the broader Nasdaq bank index, which tracks thrift issues, jumped 3.23 to 436.01.
The bank stocks got a boost when Connecticut Bank & Trust and Bank of New England said they no longer oppose pending legislation that would permit banks from other regions to merge with Connecticut and Massachusetts banks.
The two banks merged in 1985.
Bank of New England's shares are traded on the New York Stock Exchange.
The stocks of banking concerns based in Massachusetts weren't helped much by the announcement, traders said, because many of those concerns have financial problems tied to their real-estate loan portfolios, making them unattractive takeover targets.
But speculators, anticipating that Connecticut will approve a law permitting such interstate banking soon, immediately bid up shares of Connecticut banks on the news.
"A lot of the stocks that have been under water finally saw a reason to uptick," said George Jennison, head trader of banking issues in Shearson Lehman Hutton's OTC department.
The biggest beneficiary was Northeast Bancorp, which surged 7 3/4 to 69.
The Stamford, Conn., concern has agreed to a buy-out by Bank of New York in a transaction with an indicated value of about $100 a share that expires next August.
Ed Macheski, a Wilton, Conn., money manager who follows bank stocks, said the announcement effectively gives the deal "the green light."
Mr. Jennison said Northeast Bancorp also fared well because takeover stocks have returned to favor among investors.
Another OTC bank stock involved in a buy-out deal, First Constitution Financial, was higher.
It rose 7/8 to 18 1/4.
First Constitution has signed a merger agreement with WFRR L.P. and GHKM Corp., under which all of its common shares will be acquired for $25 each, or $273.5 million.
Among other Connecticut banks whose shares trade in the OTC market, Society for Savings Bancorp, based in Hartford, saw its stock rise 1 3/4 to 18 1/4.
Centerbank added 5/8 to 8 3/4; shares of NESB, a New London-based bank holding company, rose 5/8 to 5 7/8.
Among other banking issues, Pennview Savings Association leapt more than 44% with a gain of 6 5/8 to 21 5/8.
The Pennsylvania bank agreed to be acquired in a merger with Univest Corp. of Pennsylvania for $25.50 a share.
Valley Federal Savings & Loan, a California thrift issue, gained 1 to 4 1/4 after reporting a third-quarter loss of $70.7 million after an $89.9 million pretax charge mostly related to its mobile home financing unit.
Dan E. Nelms, Valley Federal's president and chief executive officer, said the one-time charge substantially eliminates future losses associated with the unit.
He said the company's core business remains strong.
He also said that after the charges, and "assuming no dramatic fluctuation in interest rates, the company expects to achieve near-record earnings in 1990."
Weisfield's surged 6 3/4 to 55 1/2 and Ratners Group's American depositary receipts, or ADRs, gained 5/8 to 12 1/4.
The two concerns said they entered into a definitive merger agreement under which Ratners will begin a tender offer for all of Weisfield's common shares for $57.50 each.
Also on the takeover front, Jaguar's ADRs rose 1/4 to 13 7/8 on turnover of 4.4 million.
Since the British auto maker became a takeover target last month, its ADRs have jumped about 78%.
After troubled Heritage Media proposed acquiring POP Radio in a stock swap, POP Radio's shares tumbled 4 to 14 3/4.
Heritage Media, which already owns about 51% of POP Radio, proposed paying POP Radio shareholders with shares of a new class of Heritage Media preferred stock that would be convertible into four shares of Heritage Media's common.
Rally's lost 1 3/4 to 21 3/4.
The restaurant operator said it has redeemed its rights issued Monday under its shareholder rights plan.
The fast-food company said its decision was based on discussions with a shareholder group, Giant Group Ltd., "in an effort to resolve certain disputes with the company."
Giant Group is led by three Rally's directors, Burt Sugarman, James M. Trotter III and William E. Trotter II, who earlier this month indicated they had a 42.5% stake in Rally's and planned to seek a majority of seats on Rally's nine-member board.
SCI Systems slipped 7/8 to 10 on volume of 858,000 shares.
The Huntsville, Ala., electronic products maker said it expects to post a "significant" loss for its fiscal first quarter ended Sept. 30.
In the year-earlier period, SCI had net income of $4.8 million, or 23 cents a share, on revenue of $225.6 million.
The Internal Revenue Service has threatened criminal sanctions against lawyers who fail to report detailed information about clients who pay them more than $10,000 in cash.
The warnings, issued to at least 100 criminal defense attorneys in several major cities in the last week, have led to an outcry by members of the organized bar, who claim the information is protected by attorney-client privilege.
The IRS warnings stem from a 1984 law that requires anyone who receives more than $10,000 in cash from a client or customer in one or more related transactions "in the course of trade or business" to report the payment on a document known as Form 8300.
The form asks for such details as the client's name, Social Security number, passport number and details about the services provided for the payment.
Failure to complete the form had been punishable as a misdemeanor until last November, when Congress determined that the crime was a felony punishable by up to 10 years in prison.
Attorneys have argued since 1985, when the law took effect, that they cannot provide information about clients who don't wish their identities to be known.
Many attorneys have returned incomplete forms to the IRS in recent years, citing attorney-client privilege.
Until last week, the IRS rarely acted on the incomplete forms.
"This form forces a lawyer to become, in effect, a witness against his client," said Neal R. Sonnett, president of the National Association of Criminal Defense Lawyers.
"The IRS is asking lawyers to red-flag a criminal problem to the government," added Mr. Sonnett, a Miami lawyer who has heard from dozens of attorneys who received letters in recent days and has himself received the computer-generated IRS forms sent by certified mail.
Mr. Sonnett said that clients who pay cash may include alleged drug dealers who don't have domestic bank accounts.
These individuals may not necessarily be under investigation when they hire lawyers.
Mr. Sonnett said there also may be other circumstances under which individuals wouldn't want the government to know they had retained criminal defense lawyers.
Filling out detailed forms about these individuals would tip the IRS off and spark action against the clients, he said.
The defense lawyers' group formed a task force this week, chaired by New York attorney Gerald Lefcourt, to deal with the matter.
The American Bar Association's House of Delegates passed a resolution in 1985 condemning the IRS reporting requirement.
Michael Ross, a New York lawyer who heads the ABA's grand jury committee, said that lawyers are prohibited by the ABA's code of ethics from disclosing information about a client except where a court orders it or to prevent the client from committing a criminal act that could result in death.
Mr. Ross said he met with officials of the IRS and the Justice Department, which would bring any enforcement actions against taxpayers, to discuss the issue last May.
At that meeting, he said, the Justice Department assured him that enforcement procedures wouldn't be threatened against attorneys without further review and advance notice.
Mr. Ross said IRS officials opposed the Justice Department's moderate stance on the matter.
But in the letters sent in recent days, Christopher J. Lezovich of the IRS computing center in Detroit, told attorneys that "failing to voluntarily submit the requested information could result in summons enforcement action being initiated."
In some cases, the IRS asked for information dating back to forms it received in 1985.
A spokesman for the IRS confirmed that "there has been correspondence mailed about incomplete 8300s," but he declined to say why the letters were sent to lawyers now.
Individuals familiar with the Justice Department's policy said that Justice officials hadn't any knowledge of the IRS's actions in the last week.
Lawyers worry that if they provide information about clients, that data could quickly end up in the hands of prosecutors.
Prosecutors need court permission to obtain the tax returns of an individual or a business.
But they have obtained 8300 forms without court permission and used the information to help develop criminal cases.
Some criminal lawyers speculated that the IRS was sending the letters to test the issue.
In a number of recent cases, federal courts have refused to recognize attorneys' assertions that information relating to fees from clients should be confidential.
THE WAR OVER FEDERAL JUDICIAL SALARIES takes a victim.
Often, judges ease into more lucrative private practice with little fanfare, but not federal Judge Raul A. Ramirez in Sacramento, Calif.
On Tuesday, the judge called a news conference to say he was quitting effective Dec. 31 to join a San Francisco law firm.
The reason: the refusal of Congress to give federal judges a raise.
"A couple of my law clerks were going to pass me in three or four years, and I was afraid I was going to have to ask them for a loan," the judge quipped in an interview.
Federal judges make $89,500 annually; in February, Congress rejected a bill that would have increased their pay by 50%.
Judge Ramirez, 44, said it is unjust for judges to make what they do.
"Judges are not getting what they deserve.
You look around at professional ballplayers or accountants . . . and nobody blinks an eye.
When you become a federal judge, all of a sudden you are relegated to a paltry sum."
At his new job, as partner in charge of federal litigation in the Sacramento office of Orrick, Herrington & Sutcliffe, he will make out much better.
The judge declined to discuss his salary in detail, but said: "I'm going to be a high-priced lawyer."
DOONESBURY CREATOR'S UNION TROUBLES are no laughing matter.
Cartoonist Garry Trudeau is suing the Writers Guild of America East for $11 million, alleging it mounted a "campaign to harass and punish" him for crossing a screenwriters' picket line.
The dispute involves Darkhorse Productions Inc., a TV production company in which Mr. Trudeau is a co-owner.
Mr. Trudeau, a Writers Guild member, also was employed as a writer for Darkhorse, which was covered by a guild collective-bargaining agreement.
The guild began a strike against the TV and movie industry in March 1988.
In his lawsuit, Mr. Trudeau says the strike illegally included Darkhorse, and the cartoonist refused to honor the strike against the company.
A spokesman for the guild said the union's lawyers are reviewing the suit.
He said disciplinary proceedings are confidential and declined to comment on whether any are being held against Mr. Trudeau.
Mr. Trudeau's attorney, Norman K. Samnick, said the harassment consists mainly of the guild's year-long threats of disciplinary action.
Mr. Samnick said a guild disciplinary hearing is scheduled next Monday in New York.
Mr. Samnick, who will go before the disciplinary panel, said the proceedings are unfair and that any punishment from the guild would be unjustified.
In addition to the damages, the suit seeks a court order preventing the guild from punishing or retaliating against Mr. Trudeau.
ABORTION RULING UPHELD:
A federal appeals court upheld a lower court ruling that the U.S. can bar the use of federal funds for family-planning programs that include abortion-related services.
A Department of Health and Human Services rule adopted in 1988 prohibits the use of so-called Title X funds for programs that assist a woman in obtaining an abortion, such as abortion counseling and referrals.
The rule also prohibits funding for activities that "encourage, promote or advocate abortion."
Title X funds are the single largest source of federal funding for family-planning services, according to the opinion by the Second U.S. Circuit Court of Appeals in New York.
The panel ruled that the restrictions don't violate the freedom of speech of health care providers and that the limits on counseling services don't violate the rights of pregnant women.
INQUIRY CLEARS TEXAS JUDGE of bias in comments on homosexual murder victims.
Dallas District Judge Jack Hampton had sparked calls for a judicial inquiry with his remarks to the press last December, two weeks after sentencing an 18-year-old defendant to 30 years in state prison for killing two homosexual men in a city park.
The judge was quoted as referring to the victims as "queers" and saying they wouldn't have been killed "if they hadn't been cruising the streets picking up teenage boys."
But Robert R. Murray, a special master appointed by the Texas Supreme Court, said Judge Hampton didn't breach any judicial standards of fairness, although he did violate the state's judicial code by commenting publicly on a pending case.
Observing that the judge "has never exhibited any bias or prejudice," Mr. Murray concluded that he "would be impartial in any case involving a homosexual or prostitute" as a victim.
Mr. Murray also said Judge Hampton's comments didn't discredit the judiciary or the administration of justice.
The report is subject to review by the State Commission on Judicial Conduct, which is empowered to impose sanctions.
GAF TRIAL goes to round three.
Attorneys in the third stock-manipulation trial of GAF Corp. began opening arguments yesterday in the Manhattan courtroom of U.S. District Judge Mary Johnson Lowe.
In an eight-count indictment, the government has charged GAF, a Wayne, N.J., specialty chemical maker, and its Vice Chairman James T. Sherwin with attempting to manipulate the common stock of Union Carbide Corp. in advance of GAF's planned sale of a large block of the stock in November 1986.
The first two GAF trials ended in mistrials earlier this year.
This trial is expected to last five weeks.
SWITCHING TO THE DEFENSE:
A former member of the prosecution team in the Iran/Contra affair joined the Chicago firm of Mayer, Brown & Platt.
Michael R. Bromwich, a member since January 1987 of the three-lawyer trial team in the prosecution of Oliver North, became a partner in the Washington, D.C., office of the 520-lawyer firm.
He will specialize in white-collar criminal defense work.
Mr. Bromwich, 35, also has served as deputy chief and chief of the narcotics unit for the U.S. attorney's office for the Southern District of New York, based in Manhattan.
Cooper Tire & Rubber Co. said it has reached an agreement in principle to buy buildings and related property in Albany, Ga., from Bridgestone/Firestone Inc.
Terms weren't disclosed.
The tire maker said the buildings consist of 1.8 million square feet of office, manufacturing and warehousing space on 353 acres of land.
Fujitsu Ltd.'s top executive took the unusual step of publicly apologizing for his company's making bids of just one yen for several local government projects, while computer rival NEC Corp. made a written apology for indulging in the same practice.
Meanwhile, business and government leaders rebuked the computer makers, and fretted about the broader statement the companies' actions make about Japanese cutthroat pricing.
Fujitsu said it bid the equivalent of less than a U.S. penny on three separate municipal contracts during the past two years.
The company also disclosed that during that period it offered 10,000 yen, or about $70, for another contract.
But Fujitsu, Japan's No. 1 computer maker, isn't alone.
NEC, one of its largest domestic competitors, said it bid one yen in two separate public auctions since 1987.
In both cases, NEC lost the contract to Fujitsu, which made the same bid and won a tie-breaking lottery.
All the contracts were for computer-system-design contracts and involved no hardware or software.
The Ministry of International Trade and Industry summoned executives from the companies to "make sure they understood" the concern about such practices, according to a government spokesman.
"These cases lead to the loss of the firms' social and international credibility," a ministry statement said.
Japan's Fair Trade Commission has said it is considering investigating the bids for possible antitrust-law violations.
"We would like to apologize for having caused huge trouble," Fujitsu President Takuma Yamamoto, read from a prepared statement as he stood before a packed news conference at his company's downtown headquarters.
The bids, he added, were "contrary to common sense."
NEC released a statement saying, "We feel sorry for having caused trouble to society," a form of apology common in Japan for companies caught in embarrassing situations.
Japanese companies have long had a reputation for sacrificing short-term profits to make a sale that may have long-term benefits.
But the growing controversy comes as many practices historically accepted as normal here -- such as politicians accepting substantial gifts from businessmen or having extramarital affairs -- are coming under close ethical scrutiny.
The fire is also fueled by growing international interest in Japanese behavior.
So far there have been no public overseas complaints about the issue.
But in one of the auctions in question, International Business Machines Corp. made a bid substantially higher than the Fujitsu offer, according to the municipality.
The low-ball bids touch on issues central to the increasingly tense trade debate.
Foreigners complain that they have limited access to government procurement in Japan, in part because Japanese companies unfairly undercut them.
The U.S. government in recent years has accused Japanese companies of excessively slashing prices on semiconductors and supercomputers -- products Fujitsu and NEC make.
Asked whether the bidding flap would hurt U.S.-Japan relations, Mr. Yamamoto said, "this will be a minus factor."
The "one-yen" controversy first came to a head last week when the city of Hiroshima announced that Fujitsu won a contract to design a computer system to map its waterworks.
The city had expected to pay about 11 million yen ($77,000), but Fujitsu essentially offered to do it for free.
Then Wednesday, Fujitsu said it made a similar bid to win a library contract in Nagano prefecture two weeks earlier.
It also said that in July, it bid 10,000 yen to design a system for the Saitama prefectural library, and two years ago, it bid one yen to plan the telecommunications system for Wakayama prefecture.
The company said it has offered to withdraw its bids in Hiroshima and Nagano.
The municipalities said they haven't decided whether to try to force the company to go through with the contracts.
Fujitsu and NEC said they were still investigating, and that knowledge of more such bids could emerge.
Mr. Yamamoto insisted that headquarters hadn't approved the bids, and that he didn't know about most of the cases until Wednesday.
Other major Japanese computer companies contacted yesterday said they have never made such bids.
"One yen is not ethical," Michio Sasaki, an official at Keidanren, the Japan Federation of Economic Organizations, said.
"Profit may be low, but at least costs should be covered.
PAPERS:
Backe Group Inc. agreed to acquire Atlantic Publications Inc., which has 30 community papers and annual sales of $7 million.
Terms weren't disclosed.
Backe is a closely held media firm run by former CBS Inc. President John Backe.
TV:
Price Communications Corp. completed the sale of four of its TV stations to NTG Inc. for $120 million in cash and notes, retaining a 10% equity stake in the new concern.
NTG was formed by Osborn Communications Corp. and Desai Capital.
Michaels Stores Inc., which owns and operates a chain of specialty retail stores, said October sales rose 14.6% to $32.8 million from $28.6 million a year earlier.
Sales in stores open more than one year rose 3% to $29.3 million from $28.4 million.
Furukawa Co. of Japan said it will acquire two construction machinery plants and a sales unit in France formerly belonging to Dresser Industries Inc. of the U.S.
The company said it made the purchase in order to locally produce hydraulically operated shovels.
Last October, the company also bought a wheel-loader manufacturing plant in Heidelberg, West Germany, from Dresser.
Furukawa said the purchase of the French and German plants together will total about 40 billion yen ($280 million).
Structural Dynamics Research Corp., which makes computer-aided engineering software, said it introduced new technology in mechanical design automation that will improve mechanical engineering productivity.
@
Money Market Deposits-a 6.21%
a-Average rate paid yesterday by 100 large banks and thrifts in the 10 largest metropolitan areas as compiled by Bank Rate Monitor.
b-Current annual yield.
Guaranteed minimum 6%.
LSI Logic Corp. reported a surprise $35.7 million third-quarter net loss, including a special restructuring charge that reflects a continuing industry-wide slowdown in semiconductor demand.
In September, the custom-chip maker said excess capacity and lagging billings would result in an estimated $2 million to $3 million net loss for the third quarter.
But company officials said yesterday that they decided to take a $43 million pretax charge for the period to cover a restructuring of world-wide manufacturing operations, citing extended weakness in the market as well as a decision to switch to more economical production techniques.
"Over the summer months, there has been a slowing in the rate of new orders from the computer sector, our primary market," said Wilfred J. Corrigan, chairman and chief executive officer.
"In addition, recent industry forecasts for 1990 indicate a slow environment, at least until midyear."
As a result, the company said it decided to phase out its oldest capacity and "make appropriate reductions" in operating expenses.
The $35.7 million net loss equals 86 cents a share.
Not counting the extraordinary charge, the company said it would have had a net loss of $3.1 million, or seven cents a share.
A year earlier, it had profit of $7.5 million, or 18 cents a share.
Revenue rose 42% to $133.7 million from $94 million.
The charge partly reflects a switch from older five-inch to more-efficient six-inch silicon wafers with which to fabricate chips.
Related to that decision, the company said it was converting its Santa Clara, Calif., factory to a research and development facility.
A spokesman declined to speculate about possible reductions in force.
"This is a company that has invested in capacity additions more aggressively than any other company in the industry and now the industry is growing more slowly and they are suddenly poorly positioned," said Michael Stark, chip analyst at Robertson, Stephens & Co.
"I think the stock is dead money for a while."
Yesterday's announcement was made after markets closed.
U.S. chip makers are facing continued slack demand following a traditionally slow summer.
Part of the problem is that chip buyers are keeping inventories low because of jitters about the course of the U.S. economy.
INGERSOLL-RAND Co. (Woodcliff Lake, N.J.) --
William G. Kuhns, former chairman and chief executive officer of General Public Utilities Corp., was elected a director of this maker of industrial and construction equipment, increasing board membership to 10.
The dollar posted gains against all major currencies yesterday, buoyed by persistent Japanese demand for U.S. bond issues.
While market sentiment remains cautiously bearish on the dollar based on sluggish U.S. economic indicators, dealers note that Japanese demand has helped underpin the dollar against the yen and has kept the U.S. currency from plunging below key levels against the mark.
At the same time, dealers said the U.S. unit has been locked into a relatively narrow range in recent weeks, in part because the hefty Japanese demand for dollars has been offset by the mark's strength, resulting in a stalemate.
Jay Goldinger, with Capital Insight Inc., reasons that while the mark has posted significant gains against the yen as well -- the mark climbed to 77.70 yen from 77.56 yen late Tuesday in New York -- the strength of the U.S. bond market compared to its foreign counterparts has helped lure investors to dollar-denominated bonds, rather than mark bonds.
"Dollar-yen {trade} is the driving force in the market," said Tom Trettien, a vice president with Banque Paribas in New York, "but I'm not convinced it will continue.
Who knows what will happen down the road, in three to six months, if foreign investment starts to erode?"
In late New York trading yesterday, the dollar was quoted at 1.8500 marks, up from 1.8415 marks late Tuesday, and at 143.80 yen, up from 142.85 yen late Tuesday.
Sterling was quoted at $1.5755, down from $1.5805 late Tuesday.
In Tokyo Thursday, the U.S. currency opened for trading at 143.93 yen, up from Wednesday's Tokyo close of 143.08 yen.
Douglas Madison, a corporate trader with Bank of America in Los Angeles, traced the dollar's recent solid performance against the yen to purchases of securities by Japanese insurance companies and trust banks and the sense that another wave of investment is waiting in the wings.
He contends that the perception in Japan of a vitriolic U.S. response to Sony Corp.'s announcement of its purchase of Columbia Pictures Entertainment Inc. has been temporarily mollified.
He cites the recent deal between the Mitsubishi Estate Co. and the Rockefeller Group, as well as the possible white knight role of an undisclosed Japanese company in the Georgia-Pacific Corp. takeover bid for Great Northern Nekoosa Corp. as evidence.
The forthcoming maturity in November of a 10-year Japanese government yen-denominated bond issue valued at about $16 billion has prompted speculation in the market that investors redeeming the bonds will diversify into dollar-denominated instruments, according to Mr. Madison.
It remains unclear whether the bond issue will be rolled over.
Meanwhile, traders in Tokyo say that the prospect of lower U.S. interest rates has spurred dollar buying by Japanese institutions.
They point out that these institutions want to lock in returns on high-yield U.S. Treasury debt and suggest demand for the U.S. unit will continue unabated until rates in the U.S. recede.
The market again showed little interest in further evidence of a slowing U.S. economy, and traders note that the market in recent weeks has taken its cues more from Wall Street than U.S. economic indicators.
Dealers said the dollar merely drifted lower following the release Wednesday of the U.S. purchasing managers' report.
The managers' index, which measures the health of the manufacturing sector, stood at 47.6% in October, above September's 46%, and also above average forecasts for the index of 45.3%.
Some dealers said the dollar was pressured slightly because a number of market participants had boosted their expectations in the past day and were looking for an index above 50, which indicates an expanding manufacturing economy.
But most said the index had no more than a minimal effect on trade.
On the Commodity Exchange in New York, gold for current delivery settled at $374.20 an ounce, down 50 cents.
Estimated volume was a moderate 3.5 million ounces.
In early trading in Hong Kong Thursday, gold was quoted at $374.19 an ounce.
"The Cosby Show" may have single-handedly turned around ratings at NBC since its debut in 1984, and the Huxtable family still keeps millions of viewers laughing Thursday night on the network.
But some of the TV stations that bought "Cosby" reruns for record prices two years ago aren't laughing much these days.
The reruns have helped ratings at many of the 187 network affiliates and independent TV stations that air the shows.
But the ratings are considerably below expectations, and some stations say they may not buy new episodes when their current contracts expire.
Meanwhile, stations are fuming because, many of them say, the show's distributor, Viacom Inc., is giving an ultimatum: Either sign new long-term commitments to buy future episodes or risk losing "Cosby" to a competitor.
At the same time, Viacom is trying to persuade stations to make commitments to "A Different World," a spin-off of "Cosby" whose reruns will become available in 1991.
Viacom denies it's using pressure tactics.
"We're willing to negotiate," says Dennis Gillespie, executive vice president of marketing.
"We're offering this plan now because we feel it's the right time."
But, says the general manager of a network affiliate in the Midwest, "I think if I tell them I need more time, they'll take `Cosby' across the street,"
Viacom's move comes as the syndication market is being flooded with situation comedies that are still running on the networks.
One station manager says he believes Viacom's move is a "pre-emptive strike" because the company is worried that "Cosby" ratings will continue to drop in syndication over the next few years.
"Cosby" is down a full ratings point in the week of Oct. 2-8 over the same week a year ago, according to A.C. Nielsen Co.
Mr. Gillespie at Viacom says the ratings are rising.
And executives at stations in such major markets as Washington; Providence, R.I.; Cleveland; Raleigh, N.C.; Minneapolis, and Louisville, Ky., say they may very well not renew "Cosby."
Dick Lobo, the general manager of WTVJ, the NBC-owned station in Miami, for example, says the show has "been a major disappointment to us."
"At the prices we were charged, there should have been some return for the dollar.
There wasn't."
Neil Kuvin, the general manager of WHAS, the CBS affiliate in Louisville, says "Cosby" gets the station's highest ratings and he's "pleased."
But he adds, "I feel pressured, disappointed, uncomfortable and, frankly, quite angry with Viacom.
The Life Insurance Co. of Georgia has officially opened an office in Taipei.
David Wu, the company's representative in Taiwan, said Atlanta-based Life of Georgia will sell conventional life-insurance products.
Life of Georgia is part of the Nationale Nederlanden Group, based in the Netherlands.
In this era of frantic competition for ad dollars, a lot of revenue-desperate magazines are getting pretty cozy with advertisers -- fawning over them in articles and offering pages of advertorial space.
So can a magazine survive by downright thumbing its nose at major advertisers?
Garbage magazine, billed as "The Practical Journal for the Environment," is about to find out.
Founded by Brooklyn, N.Y., publishing entrepreneur Patricia Poore, Garbage made its debut this fall with the promise to give consumers the straight scoop on the U.S. waste crisis.
The magazine combines how-to pieces on topics like backyard composting, explanatory essays on such things as what happens after you flush your toilet, and hard-hitting pieces on alleged environmental offenders.
Garbage editors have dumped considerable energy into a whirling rampage through supermarket aisles in a bid to identify corporate America's good guys and bad boys.
In one feature, called "In the Dumpster," editors point out a product they deem to be a particularly bad offender.
From an advertising standpoint, the problem is these offenders are likely to be some of the same folks that are major magazine advertisers these days.
With only two issues under its belt, Garbage has alienated some would-be advertisers and raised the ire of others.
Campbell Soup, for one, is furious its Souper Combo microwave product was chastised in the premiere "In the Dumpster" column.
The magazine's editors ran a giant diagram of the product with arrows pointing to the packaging's polystyrene foam, polyproplene and polyester film -- all plastic items they say are non-biodegradable.
"It's precisely the kind of product that's created the municipal landfill monster," the editors wrote.
"I think that this magazine is not only called Garbage, but it is practicing journalistic garbage," fumes a spokesman for Campbell Soup.
He says Campbell wasn't even contacted by the magazine for the opportunity to comment.
Modifications had been made to the Souper Combo product at the time the issue was printed, he says, making it less an offender than was portrayed.
He admits, though, it isn't one of Campbell Soup's better products in terms of recyclability.
Campbell Soup, not surprisingly, doesn't have any plans to advertise in the magazine, according to its spokesman.
Some media experts question whether a young magazine can risk turning off Madison Avenue's big spenders.
"You really need the Campbell Soups of the world to be interested in your magazine if you're going to make a run of it," says Mike White, senior vice president and media director at DDB Needham, Chicago.
"The economics of magazine publishing pretty much require that you have a pretty solid base" of big-time ad spenders, he adds.
The first two issues featured ads from only a handful of big advertisers, including General Electric and Adolph Coors, but the majority were from companies like Waste Management Inc. and Bumkins International, firms that don't spend much money advertising and can't be relied on to support a magazine over the long haul.
A Waste Management spokeswoman says its ad in the premiere issue was a one-time purchase, and it doesn't have any plans to advertise in future issues.
"We don't spend much on print advertising," she says.
But Ms. Poore, the magazine's editor and publisher, contends Garbage can survive, at least initially, on subscription revenues.
Individual copies of the magazine sell for $2.95 and yearly subscriptions cost $21.
(It is, of course, printed on recycled paper.)
According to Ms. Poore, Old-House Journal Corp., her publishing company, printed and sold all 126,000 copies of the premiere issue.
The first and second issues sold out on newsstands, she says, and the magazine has orders for 93,000 subscriptions.
Asked whether potential advertisers will be scared away by the magazine's direct policy, Ms. Poore replies: "I don't know and I don't care.
I'm not saying advertising revenue isn't important," she says, "but I couldn't sleep at night" if the magazine bowed to a company because they once took out an ad.
Ad Notes. . . .
INTERPUBLIC ON TV:
Interpublic Group said its television programming operations -- which it expanded earlier this year -- agreed to supply more than 4,000 hours of original programming across Europe in 1990.
It said the programs, largely game shows, will be provided by its E.C. Television unit along with Fremantle International, a producer and distributor of game shows of which it recently bought 49%.
It said that volume makes it the largest supplier of original TV programming in Europe.
Interpublic is providing the programming in return for advertising time, which it said will be valued at more than $75 million in 1990 and $150 million in 1991.
It plans to sell the ad time to its clients at a discount.
NEW ACCOUNT:
CoreStates Financial Corp., Philadelphia, named Earle Palmer Brown & Spiro, Philadelphia, as agency of record for its $5 million account.
The business had been handled by VanSant Dugdale, Baltimore.
AT&T FAX:
American Telephone & Telegraph's General Business Systems division, New York, awarded the ad account for its Fax product line to Ogilvy & Mather, New York, a WPP Group agency.
Billings weren't disclosed for the small account, which had been serviced at Young & Rubicam, New York.
FIRST CAMPAIGN:
Enterprise Rent-A-Car Inc. breaks its first national ad campaign this week.
The St. Louis firm specializes in replacement-car rentals, those provided by insurance companies for cars damaged in accidents.
Developed by Avrett, Free & Ginsberg, New York, the $6 million campaign pitches Enterprise's consumer-driven service and its free pick-up and drop-off service.
LANDOR ASSOCIATES:
Young & Rubicam said it completed its acquisition of Landor Associates, a San Francisco identity-management firm.
ACQUISITION:
Ketchum Communications, Pittsburgh, acquired Braun & Co., a Los Angeles investor-relations and marketing-communications firm.
Terms weren't disclosed.
Sea Containers Ltd. said it might increase the price of its $70-a-share buy-back plan if pressed by Temple Holdings Ltd., which made an earlier tender offer for Sea Containers.
Sea Containers, a Hamilton, Bermuda-based shipping concern, said Tuesday that it would sell $1.1 billion of assets and use some of the proceeds to buy about 50% of its common shares for $70 apiece.
The move is designed to ward off a hostile takeover attempt by two European shipping concerns, Stena Holding AG and Tiphook PLC.
In May, the two companies, through their jointly owned holding company, Temple, offered $50 a share, or $777 million, for Sea Containers.
In August, Temple sweetened the offer to $63 a share, or $963 million.
Yesterday, Sea Containers' chief executive officer, James Sherwood, said in an interview that, under the asset-sale plan, Sea Containers would end up with a cash surplus of approximately $620 million.
About $490 million of that would be allocated to the buy-back, leaving about $130 million, he said.
That $130 million, Mr. Sherwood said, "gives us some flexibility in case Temple raises its bid.
We are able to increase our price above the $70 level if necessary.
" He declined to say, however, how much Sea Containers might raise its price.
Mr. Sherwood speculated that the leeway that Sea Containers has means that Temple would have to "substantially increase their bid if they're going to top us."
Temple, however, harshly criticized Sea Containers' plan yesterday, characterizing it as a "highly conditional device designed to entrench management, confuse shareholders and prevent them from accepting our superior cash offer."
A spokesman for Temple estimated that Sea Containers' plan -- if all the asset sales materialize -- would result in shareholders receiving only $36 to $45 a share in cash.
The lower figures, the spokesman said, would stem from preferred shares being converted to common stock and the possibility that Sea Containers' subsidiaries might be required to place their shares in the open market.
Temple added that Sea Containers is still mired in legal problems in Bermuda, where the Supreme Court has temporarily barred Sea Containers from buying back its own stock in a case brought by Stena and Tiphook.
{The court has indicated it will rule on the case by the end of the month.}
Temple also said Sea Containers' plan raises "numerous legal, regulatory, financial and fairness issues," but didn't elaborate.
Mr. Sherwood said reaction to Sea Containers' proposal has been "very positive."
In New York Stock Exchange composite trading yesterday, Sea Containers closed at $62.625, up 62.5 cents.
The Transportation Department, responding to pressure from safety advocates, took further steps to impose on light trucks and vans the safety requirements used for automobiles.
The department proposed requiring stronger roofs for light trucks and minivans, beginning with 1992 models.
It also issued a final rule requiring auto makers to equip light trucks and minivans with lap-shoulder belts for rear seats beginning in the 1992 model year.
Such belts already are required for the vehicles' front seats.
"Today's action," Transportation Secretary Samuel Skinner said, "represents another milestone in the ongoing program to promote vehicle occupant safety in light trucks and minivans through its extension of passenger car standards."
In September, the department had said it will require trucks and minivans to be equipped with the same front-seat headrests that have long been required on passenger cars.
The Big Three auto makers said the rule changes weren't surprising because Bush administration officials have long said they planned to impose car safety standards on light trucks and vans.
Safety advocates, including some members of Congress, have been urging the department for years to extend car-safety requirements to light trucks and vans, which now account for almost one-third of all vehicle sales in the U.S.
They say that many vehicles classed as commercial light trucks actually carry more people than cargo and therefore should have the same safety features as cars.
They didn't have much luck during the Reagan administration.
"But now, there seems to be a fairly systematic effort to address the problem," said Chuck Hurley, vice president of communications for the Insurance Institute for Highway Safety.
"We're in a very different regulatory environment."
Sen. John Danforth (R., Mo.) praised the department's actions, noting that rollover crashes account for almost half of all light-truck deaths.
"We could prevent many of these fatalities with minimum roof-crush standards," he said.
Sen. Danforth and others also want the department to require additional safety equipment in light trucks and minivans, including air bags or automatic seat belts in front seats and improved side-crash protection.
The department's roof-crush proposal would apply to vehicles weighing 10,000 pounds or less.
The roofs would be required to withstand a force of 1.5 times the unloaded weight of the vehicle.
During the test, the roof couldn't be depressed more than five inches.
In Detroit, a Chrysler Corp. official said the company currently has no rear-seat lap and shoulder belts in its light trucks, but plans to begin phasing them in by the end of the 1990 model year.
He said Chrysler fully expects to have them installed across its light-truck line by the Sept. 1, 1991, deadline.
Chrysler said its trucks and vans already meet the roof-crush resistance standard for cars.
John Leinonen, executive engineer of Ford Motor Co.'s auto-safety office, said Ford trucks have met car standards for roof-crush resistance since 1982.
Ford began installing the rear-seat belts in trucks with its F-series Crew Cab pickups in the 1989 model year.
The new Explorer sport-utility vehicle, set for introduction next spring, will also have the rear-seat belts.
Mr. Leinonen said he expects Ford to meet the deadline easily.
Consolidated Rail Corp. said it would spend more than $30 million on 1,000 enclosed railcars for transporting autos.
The multilevel railcars, scheduled for delivery in 1990, will be made by Thrall Manufacturing Co., a Chicago Heights, Ill., division of closely held Duchossois Industries Inc., Elmhurst, Ill.
This year, the railroad holding company acquired 850 such railcars.
Sir Peter Walters, 58-year-old chairman of British Petroleum Co. until next March, joins the board of this cement products company on Dec. 1.
Sir Peter will succeed Sir John Milne, 65, who retires as Blue Circle nonexecutive chairman on June 1.
Bank of New England Corp. said it has held talks with potential merger partners outside New England, although it added that nothing is imminent and it hasn't received any formal offers.
The discussions were disclosed as the bank holding company said that it has dropped its longstanding opposition to full interstate banking bills in Connecticut and in Massachusetts.
Later yesterday, a Massachusetts senate committee approved a bill to allow national interstate banking by banks in the state beginning in 1991.
Currently, both Massachusetts and Connecticut, where most of Bank of New England's operations are, allow interstate banking only within New England.
Richard Driscoll, vice chairman of Bank of New England, told the Dow Jones Professional Investor Report, "Certainly, there are those outside the region who think of us prospectively as a good partner.
We have, and I'm sure others have, considered what our options are, and we've had conversations with people who in the future might prove to be interesting partners."
He added, "There's nothing very hot."
Mr. Driscoll didn't elaborate about who the potential partners were or when the talks were held.
A bank spokeswoman also declined to comment on any merger-related matters, but said the company decided to drop its opposition to the interstate banking legislation because "prevailing sentiment is in favor of passage."
Bank of New England has been hit hard by the region's real-estate slump, with its net income declining 42% to $121.6 million, or 61 cents a share, in the first nine months of 1989 from the year-earlier period.
The company recently said it would sell some operations and lay off 4% of its work force, altogether reducing employment to less than 16,000 from about 18,000.
It recently signed a preliminary agreement to negotiate exclusively with the Bank of Tokyo Ltd. for the sale of part of its leasing business to the Japanese bank.
GOODY PRODUCTS Inc. cut its quarterly dividend to five cents a share from 11.5 cents a share.
The reduced dividend is payable Jan. 2 to stock of record Dec. 15.
The Kearny, N.J.-based maker of hair accessories and other cosmetic products said it cut the dividend due to its third-quarter loss of $992,000, or 15 cents a share.
In the year-ago quarter, the company reported net income of $1.9 million, or 29 cents a share.
The company also adopted an anti-takeover plan.
Michael Henderson, 51-year-old group chief executive of this U.K. metals and industrial materials maker, will become chairman in May, succeeding Ian Butler, 64, who is retiring.
Mr. Butler will remain on the board as a nonexecutive director.
Rally's Inc. said it has redeemed its rights outstanding issued Monday in its shareholder rights plan.
The company said holders of stock of record Nov. 10 will receive 1/10th of one cent a share as the redemption payment.
The fast-food company said its decision was based upon discussions with a shareholder group, Giant Group Ltd., "in an effort to resolve certain disputes with the company."
Giant Group is led by three Rally's directors, Burt Sugarman, James M. Trotter III and William E. Trotter II, who last month indicated they hold a 42.5% stake in Rally's and plan to seek a majority of seats on Rally's nine-member board.
When Warren Winiarski, proprietor of Stag's Leap Wine Cellars in Napa Valley, announced a $75 price tag for his 1985 Cask 23 Cabernet this fall, few wine shops and restaurants around the country balked.
"This is the peak of my wine-making experience," Mr. Winiarski declared when he introduced the wine at a dinner in New York, "and I wanted to single it out as such."
It is in my estimation the best wine Stag's Leap has produced, and with fewer than 700 cases available, it is sure to sell quickly.
The price is a new high for California Cabernet Sauvignon, but it is not the highest.
Diamond Creek 1985 Lake Vineyard Cabernet weighed in this fall with a sticker price of $100 a bottle.
One of the fastest growing segments of the wine market is the category of superpremiums -- wines limited in production, of exceptional quality (or so perceived, at any rate), and with exceedingly high prices.
For years, this group included a stable of classics -- Bordeaux first growths (Lafite-Rothschild, Latour, Haut-Brion, Petrus), Grand Cru Burgundies (Romanee-Conti and La Tache) deluxe Champagnes (Dom Perignon or Roederer Cristal), rarefied sweet wines (Chateau Yquem or Trockenbeerenauslesen Rieslings from Germany, and Biondi-Santi Brunello Riserva from Tuscany).
These first magnitude wines ranged in price from $40 to $125 a bottle.
In the last year or so, however, this exclusive club has taken in a host of flashy new members.
The classics have zoomed in price to meet the competition, and it almost seems that there's a race on to come up with the priciest single bottle, among current releases from every major wine region on the globe.
France can boast the lion's share of high-priced bottles.
Bordeaux's first growths from 1985 and 1986 are $60 to $80 each (except for the smallest in terms of production, Chateau Petrus, which costs around $250!).
These prices seem rather modest, however, in light of other French wines from current vintages.
Chateau Yquem, the leading Sauternes, now goes for well over $100 a bottle for a lighter vintage like 1984; the spectacularly rich 1983 runs $179.
In Champagne, some of the prestige cuvees are inching toward $100 a bottle.
The first Champagne to crack that price barrier was the 1979 Salon de Mesnil Blanc de Blancs.
The '82 Salon is $115.
Roederer Cristal at $90 a bottle sells out around the country and Taittinger's Comtes de Champagne Blanc de Blancs is encroaching upon that level.
The great reds of the Rhone Valley have soared in price as well.
E. Guigal's 1982 Cote Rotie La Landonne, for example, is $120.
None of France's wine regions can steal a march on Burgundy, however.
The six wines of the Domaine de la Romanee-Conti, 72 of the most precious acres of vineyard anywhere in the world, have commanded three-digit price tags for several years now.
With the 1985 vintage, they soared higher: La Tache, $195; Richebourg, $180; Romanee-Conti, $225.
Another small Burgundy estate, Coche-Dury, has just offered its 1987 Corton-Charlemagne for $155.
From Italy there is Angelo Gaja Barbaresco at $125 a bottle, Piero Antinori's La Solaia, a $90 Cabernet from Tuscany, and Biondi-Santi Brunello at $98.
Spain's Vega Secilia Unico 1979 (released only in its 10th year) is $70, as is Australia's Grange Hermitage 1982.
"There are certain cult wines that can command these higher prices," says Larry Shapiro of Marty's, one of the largest wine shops in Dallas.
"What's different is that it is happening with young wines just coming out.
We're seeing it partly because older vintages are growing more scarce."
Wine auctions have almost exhausted the limited supply of those wines, Mr. Shapiro continued: "We've seen a dramatic decrease in demand for wines from the '40s and '50s, which go for $300 to $400 a bottle.
Some of the newer wines, even at $90 to $100 a bottle or so, almost offer a bargain."
Take Lake Vineyard Cabernet from Diamond Creek.
It's made only in years when the grapes ripen perfectly (the last was 1979) and comes from a single acre of grapes that yielded a mere 75 cases in 1987.
Owner Al Brownstein originally planned to sell it for $60 a bottle, but when a retailer in Southern California asked, "Is that wholesale or retail?" he re-thought the matter.
Offering the wine at roughly $65 a bottle wholesale ($100 retail), he sent merchants around the country a form asking them to check one of three answers: 1) no, the wine is too high (2 responses); 2) yes, it's high but I'll take it (2 responses); 3) I'll take all I can get (58 responses).
The wine was shipped in six-bottle cases instead of the usual 12, but even at that it was spread thin, going to 62 retailers in 28 states.
"We thought it was awfully expensive," said Sterling Pratt, wine director at Schaefer's in Skokie, Ill., one of the top stores in suburban Chicago, "but there are people out there with very different opinions of value.
We got our two six-packs -- and they're gone."
Mr. Pratt remarked that he thinks steeper prices have come about because producers don't like to see a hit wine dramatically increase in price later on.
Even if there is consumer resistance at first, a wine that wins high ratings from the critics will eventually move.
"There may be sticker-shock reaction initially," said Mr. Pratt, "but as the wine is talked about and starts to sell, they eventually get excited and decide it's worth the astronomical price to add it to their collection."
"It's just sort of a one-upsmanship thing with some people," added Larry Shapiro.
"They like to talk about having the new Red Rock Terrace {one of Diamond Creek's Cabernets} or the Dunn 1985 Cabernet, or the Petrus.
Producers have seen this market opening up and they're now creating wines that appeal to these people."
That explains why the number of these wines is expanding so rapidly.
But consumers who buy at this level are also more knowledgeable than they were a few years ago.
"They won't buy if the quality is not there," said Cedric Martin of Martin Wine Cellar in New Orleans.
"Or if they feel the wine is overpriced and they can get something equally good for less."
Mr. Martin has increased prices on some wines (like Grgich Hills Chardonnay, now $32) just to slow down movement, but he is beginning to see some resistance to high-priced red Burgundies and Cabernets and Chardonnays in the $30 to $40 range.
Image has, of course, a great deal to do with what sells and what doesn't, and it can't be forced.
Wine merchants can't keep Roederer Cristal in stock, but they have to push Salon le Mesnil, even lowering the price from $115 to $90.
It's hardly a question of quality -- the 1982 Salon is a beautiful wine, but, as Mr. Pratt noted, people have their own ideas about value.
It's interesting to find that a lot of the expensive wines aren't always walking out the door.
In every major market in the U.S., for instance, you can buy '86 La Tache or Richebourg, virtually all of the first growth Bordeaux (except Petrus), as well as Opus One and Dominus from California and, at the moment, the Stag's Leap 1985 Cask 23.
With the biggest wine-buying period of the year looming as the holidays approach, it will be interesting to see how the superpremiums fare.
By January it should be fairly clear what's hot -- and what's not.
Ms. Ensrud is a free-lance wine writer in New York.
Signs of a slowing economy are increasing pressure on the Federal Reserve to cut short-term interest rates, but it isn't clear whether the central bank will do so.
A survey by the Fed's 12 district banks shows economic growth has been sluggish in recent weeks, while upward pressures on prices have moderated.
"The economy is clearly slowing," says Robert Black, president of the Richmond Federal Reserve Bank.
"If you look at the third quarter as posting roughly 2.5% growth, I do see some slowing in the fourth quarter," agrees Kansas City Fed President Roger Guffey.
Nevertheless, both Mr. Guffey and Mr. Black say the slowdown so far is no cause for concern.
"We're coming closer to achieving the stated objective of slowing the economy to a point where hopefully some downward trend in prices will occur," said Mr. Guffey.
Bush administration officials are looking to the Fed to bring down rates, and financial markets seem to be expecting easier credit as well.
"I think the market had been expecting the Fed to ease sooner and a little more than it has to date," said Robert Johnson, vice president of global markets for Bankers Trust Co.
The Fed cut the key federal funds interest rate by about 0.25 percentage point to 8.75% after the Oct. 13 stock market plunge, but has shown no sign of movement since.
The report from the Fed found that manufacturing, in particular, has been weak in recent weeks.
The Philadelphia Fed, for instance, reported that manufacturing activity "continues to decline" for the fourth month in a row.
And in the Chicago district, the report said, "a manufacturer of capital goods noted slower orders for some types, including defense equipment, petroleum equipment, food packaging machinery and material handling equipment."
Retail sales also were reported slow in most districts, particularly "for discretionary, big-ticket items such as furniture, home appliances and consumer electronics."
And construction also was described as slow in most areas.
Despite the economic slowdown, there are few clear signs that growth is coming to a halt.
As a result, Fed officials may be divided over whether to ease credit.
Several Fed governors in Washington have been pushing for easier credit; but many of the regional Fed presidents have been resisting such a move.
Mr. Black said he is "pleased" with the economy's recent performance, and doesn't see "a lot of excesses out there that would tilt us into recession."
"There is always a chance of recession," added Mr. Guffey, "but if you ask me to put a percentage on it, I would think it's well below a 50% chance.
Integra-A Hotel & Restaurant Co. said its planned rights offering to raise about $9 million was declared effective and the company will begin mailing materials to shareholders at the end of this week.
Under the offer, shareholders will receive one right for each 105 common shares owned.
Each right entitles the shareholder to buy $100 face amount of 13.5% bonds due 1993 and warrants to buy 23.5 common shares at 30 cents a share.
The rights, which expire Nov. 21, can be exercised for $100 each.
Integra, which owns and operates hotels, said that Hallwood Group Inc. has agreed to exercise any rights that aren't exercised by other shareholders.
Hallwood, a Cleveland merchant bank, owns about 11% of Integra.
Copperweld Corp., a specialty steelmaker, said 445 workers at a plant in Shelby, Ohio, began a strike after the United Steelworkers Local 3057 rejected a new contract on Tuesday.
The previous contract between Copperweld's Ohio Steel Tube division and the union expired at midnight Tuesday.
The union vote to reject the proposed pact was 230-215.
Copperweld said it doesn't expect a protracted strike.
It said it has taken measures to continue shipments during the work stoppage.
The Treasury said it plans to sell $30 billion in notes and bonds next week, but said the auctions will be postponed unless Congress acts quickly to lift the federal debt ceiling.
Michael Basham, deputy assistant secretary for federal finance, said the Treasury may wait until late Monday or even early Tuesday to announce whether the autions are to be rescheduled.
Unless it can raise money in financial markets, Mr. Basham said, the federal government won't have the cash to pay off $13.8 billion in Treasury bills that mature on Thursday.
Without congressional action, the Treasury can't sell any new securities -- even savings bonds.
But despite partisan bickering over the debt ceiling, which has become entangled in the fight over cutting capital-gains taxes, Congress is almost certain to act in time to avoid default.
"Each day that Congress fails to act . . . will cause additional disruption in our borrowing schedule, possibly resulting in higher interest costs to the taxpayer," Treasury Secretary Nicholas Brady said in a speech prepared for delivery last night to a group of bankers.
"To avoid these costs, and a possible default, immediate action is imperative."
The securities to be sold next week will raise about $10 billion in cash and redeem $20 billion in maturing notes.
The new securities, part of the federal government's regular quarterly refunding, will consist of:
-- $10 billion of three-year notes, to be auctioned Tuesday and to mature Nov. 15, 1992.
-- $10 billion of 10-year notes, to be auctioned Wednesday and to mature Nov. 15, 1999.
-- $10 billion of 30-year bonds, to be auctioned Thursday and to mature Aug. 15, 2019.
The Treasury also said it plans to sell $10 billion in 36-day cash management bills on Thursday.
They will mature Dec. 21.
None of the securities will be eligible for when-issued trading until Congress approves an increase in the debt ceiling, clearing the way for a formal offering, Mr. Basham said.
The Treasury said it needs to raise $47.5 billion in the current quarter in order to end December with a $20 billion cash balance.
Auctions held in October and those scheduled for next week will raise a total of $25.6 billion.
The remaining $21.9 billion could be raised through the sale of short-term Treasury bills, two-year notes in November and five-year notes in early December, the Treasury said.
In the first three months of 1990, the Treasury estimates that it will have to raise between $45 billion and $50 billion, assuming that it decides to aim for a $10 billion cash balance at the end of March.
Lancaster Colony Corp. said it acquired Reames Foods Inc. in a cash transaction.
Terms weren't disclosed.
Reames, a maker and marketer of frozen noodles and pre-cooked pasta based in Clive, Iowa, has annual sales of about $11 million, Lancaster said.
Investors took advantage of Tuesday's stock rally to book some profits yesterday, leaving stocks up fractionally.
Bond prices and the dollar both gained modestly.
The Dow Jones Industrial Average finished less than a point higher to close at 2645.90 in moderate trading.
But advancing issues on the New York Stock Exchange were tidily ahead of declining stocks, 847 to 644.
Long-term bond prices rose despite prospects of a huge new supply of Treasury debt this month.
Continuing demand for dollars from Japanese investors boosted the U.S. currency.
Analysts were disappointed that the enthusiasm investors showed for stocks in the wake of Georgia-Pacific's $3.18 billion bid for Great Northern Nekoosa evaporated so quickly.
The industrial average jumped more than 41 points Tuesday as speculators rushed to buy shares of potential takeover targets.
But with the end of the year in sight, money managers are eager to take profits and cut their risks of losing what for many have been exceptionally good returns in
Economic news had little effect on financial markets.
As expected, a national purchasing managers' report indicated the nation's manufacturing sector continues to contract modestly.
The Federal Reserve's Beige Book, a summary of economic conditions across the country, indicated that the overall economy remains in a pattern of sluggish growth.
In major market activity:
Stock prices rose fractionally in moderate trading.
Big Board volume totaled 154.2 million shares.
Bond prices were up.
The Treasury's benchmark 30-year bond gained about a quarter of a point, or $2.50 for each $1,000 of face amount.
The yield fell to 7.88%.
The dollar rose.
In late afternoon New York trading the currency was at 1.8500 marks and 143.80 yen compared with 1.8415 marks and 142.85 yen.
Mitsui Mining & Smelting Co. posted a 62% rise in pretax profit to 5.276 billion yen ($36.9 million) in its fiscal first half ended Sept. 30 compared with 3.253 billion yen a year earlier.
Net income more than tripled to 4.898 billion yen from 1.457 billion yen a year earlier.
Eaton Corp. said it sold its Pacific Sierra Research Corp. unit to a company formed by employees of that unit.
Terms weren't disclosed.
Pacific Sierra, based in Los Angeles, has about 200 employees and supplies professional services and advanced products to industry.
Eaton is an automotive parts, controls and aerospace electronics concern.
Investor Harold Simmons and NL Industries Inc. offered to acquire Georgia Gulf Corp. for $50 a share, or about $1.1 billion, stepping up the pressure on the commodity chemicals concern.
The offer follows an earlier proposal by NL and Mr. Simmons to help Georgia Gulf restructure or go private in a transaction that would pay shareholders $55 a share.
Georgia Gulf rebuffed that offer in September and said it would study other alternatives.
However, it hasn't yet made any proposals to shareholders.
Late yesterday, Georgia Gulf said it reviewed the NL proposal as well as interests from "third parties" regarding business combinations.
Georgia Gulf said it hasn't eliminated any alternatives and that "discussions are being held with interested parties, and work is also continuing on other various transactions."
It didn't elaborate.
Analysts saw the latest offer as proof that Mr. Simmons, an aggressive and persistent investor, won't leave Georgia Gulf alone until some kind of transaction is completed.
"He has clamped on their ankle like a pit bull," says Paul Leming, a vice president with Morgan Stanley & Co.
"He appears to be in it for the long haul."
Mr. Simmons and NL already own a 9.9% stake in Georgia Gulf.
Mr. Simmons owns 88% of Valhi Inc., which in turn owns two-thirds of NL.
NL is officially making the offer.
Mr. Leming wasn't surprised by the lower price cited by NL, saying he believes that $55 a share is "the most you can pay for Georgia Gulf before it becomes a bad acquisition."
Georgia Gulf stock rose $1.75 a share yesterday to close at $51.25 a share, while NL shares closed unchanged at $22.75 and Valhi rose 62.5 cents to $15, all in New York Stock Exchange composite trading.
J. Landis Martin, NL president and chief executive officer, said NL and Mr. Simmons cut the price they were proposing for Georgia Gulf because they initially planned a transaction that included about $250 million in equity and a substantial amount of high-yield subordinated debt.
However, the junk-bond market has collapsed in recent weeks, lessening the likelihood that such a transaction would succeed.
Now, he said, the group plans to put in "several hundred million" dollars in equity and finance the remainder with bank debt.
He also said that the group reduced its offer because it wasn't allowed to see Georgia Gulf's confidential financial information without agreeing that it wouldn't make an offer unless it had Georgia Gulf's consent.
In a letter to Georgia Gulf President Jerry R. Satrum, Mr. Martin asked Georgia Gulf to answer its offer by Tuesday.
It wasn't clear how NL and Mr. Simmons would respond if Georgia Gulf spurns them again.
Mr. Martin said they haven't yet decided what their next move would be, but he didn't rule out the possibility of a consent solicitation aimed at replacing Georgia Gulf's board.
In other transactions, Mr. Simmons has followed friendly offers with a hostile tender offer.
Although Georgia Gulf hasn't been eager to negotiate with Mr. Simmons and NL, a specialty chemicals concern, the group apparently believes the company's management is interested in some kind of transaction.
The management group owns about 18% of the stock, most purchased at nominal prices, and would stand to gain millions of dollars if the company were sold.
In the third quarter, Georgia Gulf earned $46.1 million, or $1.85 a share, down from $53 million, or $1.85 a share on fewer shares outstanding.
Sales fell to $251.2 million from $278.7 million.
A licensing company representing the University of Pennsylvania added Johnson & Johnson to its lawsuit challenging a university faculty member over rights to Retin-A acne medicine.
University Patents Inc., based in Westport, Conn., said it seeks Johnson & Johnson's profits from sales of Retin-A, estimated at $50 million, a similar amount of punitive damages and the right to license Retin-A elsewhere.
In May, University Patents filed a suit in federal court in Philadelphia against Albert M. Kligman, a researcher and professor at the University of Pennsylvania School of Medicine who developed Retin-A in the 1960s to combat acne.
Dr. Kligman patented the medicine while employed by the University, but later licensed the Retin-A to a division of Johnson & Johnson.
In New Brunswick, N.J., a Johnson & Johnson spokesman declined comment.
Criticism in the U.S. over recent Japanese acquisitions is looming ever larger in the two countries' relations.
Officials from both nations say the U.S. public's skittishness about Japanese investment could color a second round of bilateral economic talks scheduled for next week in Washington.
Not that Washington and Tokyo disagree on the Japanese acquisitions; indeed, each has come out in favor of unfettered investment in the U.S.
Where they disagree is on the subject of U.S. direct investment in Japan.
The U.S. wants the removal of what it perceives as barriers to investment; Japan denies there are real barriers.
The heated talk stirred up by recent Japanese investments in the U.S. is focusing attention on the differences in investment climate, even though it's only one of many subjects to be covered in the bilateral talks, known as the Structural Impediments Initiative.
The Japanese "should see this rhetoric as a signal of the need for a change in their own economy," says Charles Dallara, U.S. assistant Treasury secretary, who has been in Tokyo this week informally discussing the impending negotiations with government and business leaders.
"We have a long history of maintaining an open direct-investment policy," Mr. Dallara says.
"U.S. investors should have a greater opportunity at direct investment" in Japan.
The Japanese fret openly about the U.S. public's rancor.
One clear sign of Japan's nervousness came this week, when a spokesman for Japan's Foreign Ministry devoted nearly all of a regular, half-hour briefing for foreign journalists to the subject of recent Japanese investments in the U.S.
"We believe that it is vitally important for those Japanese business interests {in the U.S.} to be more aware of the emotions and concerns of the American people," said the spokesman, Taizo Watanabe.
At the same time, though, he chastised the media for paying such close attention to Japanese investment when other foreign countries, notably Britain, are acquiring more American assets.
Fears that Japanese investors are buying up America have escalated sharply in the past several weeks, with Sony Corp.'s purchase of Columbia Pictures Entertainment Inc. from Coca-Cola Co. and Mitsubishi Estate Co.'s acquisition of a 51% holding in Rockefeller Group, the owner of some of midtown Manhattan's most exclusive real estate.
Even before those moves added fuel, the fires of discontent had been well stoked by the highly publicized experience in Japan of one U.S. investor, T. Boone Pickens Jr.
The Texas oilman has acquired a 26.2% stake valued at more than $1.2 billion in an automotive-lighting company, Koito Manufacturing Co.
But he has failed to gain any influence at the company.
Koito has refused to grant Mr. Pickens seats on its board, asserting he is a greenmailer trying to pressure Koito's other shareholders into buying him out at a profit.
Mr. Pickens made considerable political hay with his troubles in Japan.
The Senate Finance Committee, chaired by a fellow Texan, Democratic Sen. Lloyd Bentsen, last month urged U.S. Trade Representative Carla Hills to use Mr. Pickens's experience in talks with Tokyo "to highlight this problem facing Americans who seek access to the Japanese capital markets."
While Mr. Dallara and Japanese officials say the question of investors' access to the U.S. and Japanese markets may get a disproportionate share of the public's attention, a number of other important economic issues will be on the table at next week's talks.
Among them are differences in savings and investment rates, corporate structures and management, and government spending.
Each side has a litany of recommendations for the other.
The U.S. says it is anxious for results.
"We feel very strongly that we really need action across the full range of issues we've identified, and we need it by next spring," Mr. Dallara says.
Both sides have agreed that the talks will be most successful if negotiators start by focusing on the areas that can be most easily changed.
But they haven't clarified what those might be.
After the first set of meetings two months ago, some U.S. officials complained that Japan hadn't come up with specific changes it was prepared to make.
The Japanese retort that the first round was too early to make concessions.
"Just to say the distribution system is wrong doesn't mean anything," says a Ministry of International Trade and Industry official.
"We need to clarify what exactly is wrong with it."
That process of sorting out specifics is likely to take time, the Japanese say, no matter how badly the U.S. wants quick results.
For instance, at the first meeting the two sides couldn't even agree on basic data used in price discussions.
Since then, a team of about 15 MITI and U.S. Commerce Department officials have crossed the globe gauging consumer prices.
By Monday, they hope to have a sheaf of documents both sides can trust.
"Little by little, there is progress," says the MITI official.
"Both sides are taking action."
Elisabeth Rubinfien contributed to this article.
While worry grows about big Japanese investments in the U.S., Japan's big trading companies are rapidly increasing their stake in America's smaller business.
For Japan, the controversial trend improves access to American markets and technology.
But for small American companies, it also provides a growing source of capital and even marketing help.
Take the deal with Candela Laser Corp., a Wayland, Mass., manufacturer of high-tech medical devices, which three years ago set its sights on Japan as an export market.
Partly to help clear the myriad obstacles facing any overseas company trying to penetrate Japan, tiny Candela turned to Mitsui & Co., one of Japan's largest trading companies, for investment.
In a joint-venture deal, Mitsui guided Candela through Tokyo's bureaucratic maze.
It eventually secured Ministry of Health import approval for two Candela laser products -- one that breaks up kidney stones and another that treats skin lesions.
At last count, Candela had sold $4 million of its medical devices in Japan.
The deal also gave Mitsui access to a high-tech medical product.
"They view this as a growth area so they went about it with a systematic approach," says Richard Olsen, a Candela vice president.
Indeed, for many Japanese trading companies, the favorite U.S. small business is one whose research and development can be milked for future Japanese use.
The Japanese companies bankroll many small U.S. companies with promising products or ideas, frequently putting their money behind projects that commercial banks won't touch.
Japanese companies have financed small and medium-sized U.S. firms for years, but in recent months, the pace has taken off.
In the first half of 1989 alone, Japanese corporations invested $214 million in minority positions in U.S. companies, a 61% rise from the figure for all of 1987, reports Venture Economics Inc.
The Needham, Mass., concern tracks investments in new businesses.
In addition, of course, some of the Japanese investments involved outright purchase of small U.S. firms.
Heightened Japanese interest in American small business parallels an acceleration of investments giving Japanese companies control of large, highly visible U.S. corporations, such as Columbia Pictures Entertainment Inc.
Only this week, it was announced that Mitsubishi Estate Co. had acquired a 51% stake in Rockefeller Group, which owns New York's prestigious Rockefeller Center.
While the small deals are far less conspicuous, they add to Japanese penetration of the U.S. market.
As the deals also improve Japanese access to American technology and market knowledge, they feed American anxieties in this area, too.
Even a low-tech product like plate glass can catch a trading company's fancy if there's a strategic fit.
Free State Glass Industries of Warrenton, Va., a small fabricator of architectural glass, was foundering under its original management.
Last year, Mitsubishi International Corp., the New York-based arm of Mitsubishi Corp., bought controlling interest in the glass company in a joint venture with Ronald Bodner, a glass industry executive and Mitsubishi consultant.
The deal is chiefly designed to give Mitsubishi a window on the U.S. glass industry, says Ichiro Wakui, an executive in Mitsubishi's general merchandise department in New York.
"It's not just a simple investment in a small company," Mr. Wakui says.
"We want to see the glass market from the inside, not the outside."
Mitsubishi's investment in Free State is "very small . . . less than $4 million," Mr. Wakui says.
Mr. Bodner declines to comment on the arrangement.
Trading companies such as Mitsubishi, Mitsui, C. Itoh & Co. and Nissho-Iwai Corp., which make many of the Japanese investments in small U.S. concerns, have no U.S. counterpart.
These vertically integrated combines, some of which got their start in Japan's feudal period, deal globally in commodities, construction and manufacturing.
They operate ships and banks.
"All the "sogo-shosha" are looking for new business," says Arthur Klauser, adviser to the president of Mitsui, U.S.A., using the Japanese term for the largest of the global trading houses.
Adds Takeshi Kondo, senior vice president of C. Itoh America Inc.: "We have a great interest in making investments, particularly in new ventures."
A host of electronics firms in California's Silicon Valley were financed with trading-company venture capital.
Profit, at least in the short term, is usually a secondary goal.
"Strategic objectives, not financial return, drive many of the deals," says a Venture Economics spokesman.
In investing on the basis of future transactions, a role often performed by merchant banks, trading companies can cut through the logjam that small-company owners often face with their local commercial banks.
"It's the classic problem of the small businessman," says Malcolm Davies, managing director of Trading Alliance Corp. of New York.
"People are queuing at the door to take his product but he doesn't have the working capital to make the thing and commercial banks are very unsympathetic.
They want assets, they want a balance sheet, which has no relation to the business a company can generate."
Adds Mitsui's Mr. Klauser: "Unlike corporations in this country, trading companies aren't so much interested in a high return on investment as they are on increasing trade flows.
To the extent they can do this, they're quite content to get a return on investment of 1% to 2%."
Mr. Klauser says Mitsui has 75 U.S. subsidiaries in which it holds 35% interest or more and the trading company hopes to double the number of its U.S. affiliates in 1990.
Sales by these subsidiaries in the fiscal year ending last March were more than $17 billion.
A 1% to 2% return on $17 billion "ain't hay," Mr. Klauser says.
Hudson General Corp.'s president and chief executive officer, Alan J. Stearn, resigned.
Mr. Stearn, 46 years old, couldn't be reached for comment.
A company spokesman declined to elaborate on the departure.
Hudson General, which provides maintenance, fueling and other services to airlines and airports, reported a loss for its most recent fiscal year and last month omitted the semiannual dividend on its common shares.
Mr. Stearn, who had been with the company more than 20 years and had been president since 1984, will act as a consultant to Hudson General.
His duties as chief executive will be assumed by Chairman Jay B. Langner.
For 10 years, Genie Driskill went to her neighborhood bank because it was convenient.
A high-balance customer that banks pine for, she didn't give much thought to the rates she was receiving, nor to the fees she was paying.
But in August, First Atlanta National Bank introduced its Crown Account, a package designed to lure customers such as Ms. Driskill.
Among other things, it included checking, safe deposit box and credit card -- all for free -- plus a good deal on installment loans.
All she had to do was put $15,000 in a certificate of deposit, or qualify for a $10,000 personal line of credit.
"I deserve something for my loyalty," she says.
She took her business to First Atlanta.
So it goes in the competitive world of consumer banking these days.
For nearly a decade, banks have competed for customers primarily with the interest rates they pay on their deposits and charge on their loans.
The competitive rates were generally offset by hefty fees on various services.
But many banks are turning away from strict price competition.
Instead, they are trying to build customer loyalty by bundling their services into packages and targeting them to small segments of the population.
"You're dead in the water if you aren't segmenting the market," says Anne Moore, president of Synergistics Research Corp., a bank consulting firm in Atlanta.
NCNB Corp. of Charlotte, N.C., recently introduced its Financial Connections Program aimed at young adults just starting careers.
The program not only offers a pre-approved car loan up to $18,000, but throws in a special cash-flow statement to help in saving money.
In September, Union Planters Corp. of Memphis, Tenn., launched The Edge account, a package designed for the "thirtysomething" crowd with services that include a credit card and line of credit with no annual fees, and a full percentage point off on installment loans.
The theory: Such individuals, many with young children, are in their prime borrowing years -- and, having borrowed from the bank, they may continue to use it for other services in later years.
For some time, banks have been aiming packages at the elderly, the demographic segment with the highest savings.
Those efforts are being stepped up.
Judie MacDonald, vice president of retail sales at Barnett Banks Inc. of Jacksonville, Fla., says the company now targets sub-segments within the market by tailoring its popular Seniors Partners Program to various life styles.
"Varying age, geography and life-style differences create numerous sub-markets," Ms. MacDonald says.
She says individual Barnett branches can add different benefits to their Seniors Partners package -- such as athletic activities or travel clubs -- to appeal to local market interests.
"An active 55-year-old in Boca Raton may care more about Senior Olympic games, while a 75-year-old in Panama City may care more about a seminar on health," she says.
Banks have tried packaging before.
In 1973, Wells Fargo & Co. of San Francisco launched the Gold Account, which included free checking, a credit card, safe-deposit box and travelers checks for a $3 monthly fee.
The concept begot a slew of copycats, but the banks stopped promoting the packages.
One big reason: thin margins.
Many banks, particularly smaller ones, were slow to computerize and couldn't target market niches that would have made the programs more profitable.
As banks' earnings were squeezed in the mid-1970s, the emphasis switched to finding ways to cut costs.
But now computers are enabling more banks to analyze their customers by age, income and geography.
They are better able to get to those segments in the wake of the deregulation that began in the late 1970s.
Deregulation has effectively removed all restrictions on what banks can pay for deposits, as well as opened up the field for new products such as high-rate CDs.
Where a bank once offered a standard passbook savings account, it began offering money-market accounts, certificates of deposit and interest-bearing checking, and staggering rates based on the size of deposits.
The competition has grown more intense as bigger banks such as Norwest Corp. of Minneapolis and Chemical Banking Corp. of New York extend their market-share battles into small towns across the nation.
"Today, a banker is worrying about local, regional and money-center {banks}, as well as thrifts and credit unions," says Ms. Moore at Synergistics Research.
"So people who weren't even thinking about targeting 10 years ago are scrambling to define their customer base."
The competition has cultivated a much savvier consumer.
"The average household will spread 19 accounts over a dozen financial institutions," says Michael P. Sullivan, who runs his own bank consulting firm in Charlotte, N.C.
"This much fragmentation makes attracting and keeping today's rate-sensitive customers costly."
Packages encourage loyalty by rewarding customers for doing the bulk of their banking in one place.
For their troubles, the banks get a larger captive audience that is less likely to move at the drop of a rate.
The more accounts customers have, Mr. Sullivan says, the more likely they are to be attracted to a package -- and to be loyal to the bank that offers it.
That can pay off down the road as customers, especially the younger ones, change from borrowers to savers/investors.
Packaging has some drawbacks.
The additional technology, personnel training and promotional effort can be expensive.
Chemical Bank spent more than $50 million to introduce its ChemPlus line, several packages aimed at different segments, in 1986, according to Thomas Jacob, senior vice president of marketing.
"It's not easy to roll out something that comprehensive, and make it pay," Mr. Jacob says.
Still, bankers expect packaging to flourish, primarily because more customers are demanding that financial services be tailored to their needs.
"These days, banking customers walk in the door expecting you to have a package especially for them," Ms. Moore says.
Some banks are already moving in that direction, according to Alvin T. Sale, marketing director at First Union Corp. in Charlotte.
First Union, he says, now has packages for seven customer groups.
Soon, it will split those into 30.
Says Mr. Sale: "I think more banks are starting to realize that we have to be more like the department store, not the boutique."
IRAs.
SHAREDATA Inc. said it will amend a registration statement filed with the Securities and Exchange Commission to delete a plan to sell 500,000 newly issued common shares.
The Chandler, Ariz., company said it will resubmit the registration to cover only the 2.3 million warrants, each exercisable for the purchase of one common share.
Currently, ShareData has about 4.1 million common shares outstanding.
ShareData develops and markets low-cost software, peripheral equipment and accessories for computers.
Five things you can do for $15,000 or less:
1. Buy a new Chevrolet.
2. Take a Hawaiian vacation.
3. Send your child to a university.
4. Buy a diamond necklace.
5. Make a lasting difference in the regulatory life of an American savings-and-loan association through the Foster Corporate Parents Plan.
Americans today spend $15,000 like pocket change -- they don't think much about it.
But for an ailing savings-and-loan association -- teetering on insolvency -- it can lead to safety from imminent demise and to a future full of promise.
Your $15,000 will help keep a needy savings and loan solvent -- and out of the federal budget deficit.
As a Foster Corporate Parent, you'll be helping a neighborhood S&L in areas crucial to its survival.
Like healthy regulatory capital.
A steady deposit base.
Performing loans.
At the same time, you'll give your Foster Savings Institution the gift of hope and freedom from the federal regulators who want to close its doors -- for good.
As a Foster Corporate Parent, you will experience the same joy felt by Robert Bass, Lewis Ranieri, William Simon and others, who find ways to help troubled savings institutions and their employees help themselves.
That builds confidence, self sufficiency, not to mention critical regulatory net worth.
Don't wait -- a savings institution needs your help now!
Every day you delay, a savings institution's health -- and the federal budget deficit -- grows worse.
Think about the good you can do for just $15,000 a month, about the cost of a mid-size Chevrolet or two semesters at a state university.
Then send your support to a savings institution that has taken a bad rap in the press and on its bottom line.
Every $15,000 you send will go a long way to boost sagging net worth and employee morale -- and keep your Foster Savings Institution off the federal budget deficit!
Mr. Baris is a lawyer in New York.
The Chicago Mercantile Exchange said it plans to institute an additional "circuit breaker" aimed at stemming market slides.
Separately, John Phelan told a closed House subcommittee meeting in Washington that he would support Securities and Exchange Commission halts of program trading during market emergencies.
But the New York Stock Exchange chairman said he doesn't support reinstating a "collar" on program trading, arguing that firms could get around such a limit.
The Chicago Merc said a new one-hour price limit would take effect in its Standard & Poor's 500 stock-index futures pit once S&P 500 futures fell 20 index points -- the equivalent of about a 150-point drop in the Dow Jones Industrial Average.
If the 20-point limit is triggered after 1:30 p.m. Chicago time, it would remain in effect until the normal close of trading at 3:15 p.m.
With the limit in effect, members would be able to execute trades at the limit price or at higher prices, but not below it.
The exchange said it decided a new circuit breaker was needed following a review of the tumultuous trading in stocks and stock-index futures on Friday Oct. 13, when the Dow Jones industrials plunged 190 points and stock-index futures prices skidded as well.
Late that afternoon the S&P 500 stock-index futures contract fell a total of 30 index points, hitting a Merc circuit breaker limit that remained in effect for the rest of the trading session.
The Merc said that its existing 30-minute, 12-point limit on S&P 500 stock-index futures trading (equal to about 100 points on the Dow Jones industrials), which was triggered Oct. 13, will remain in effect.
Leo Melamed, Merc executive committee chairman, said that the 12-point limit appeared to lessen the selling panic Oct. 13.
But when the contract reopened, the subsequent flood of sell orders that quickly knocked the contract down to the 30-point limit indicated that the intermediate limit of 20 points was needed to help keep stock and stock-index futures prices synchronized.
Several traders maintained that the Merc's 12-point circuit-breaker aggravated the market slide Oct. 13 by directing additional selling pressure to the floor of the New York Stock Exchange.
All of the changes require regulatory approval, which is expected shortly.
The exchange also said that the 30-point circuit breaker, which currently provides only a one-hour respite during market sell-offs, will become the maximum one-day limit for the S&P 500 stock-index futures contract; the one-day limit now is 50 index points.
A final modification was made to the five-point opening limit for the contract.
The Merc said that five-point limit will remain in effect for the first 10 minutes of trading.
The limit lapses under current exchange rules if contracts trade above the limit price during the opening 10 minutes of trading.
In Washington, House aides said Mr. Phelan told congressmen that the collar, which banned program trades through the Big Board's computer when the Dow Jones Industrial Average moved 50 points, didn't work well.
He said that firms could get around the collar by executing trades manually.
In a post-hearing news conference, Mr. Phelan, who has publicly expressed concern about market volatility, said he told the House finance and telecommunications subcommittee that he would support the program-trading halt proposal "providing the SEC would be comfortable with the language" in a bill.
The program-trading issue is heating up on Capitol Hill as it is on Wall Street, and several legislators want to grant the SEC the power to shut off the programs when trading becomes too volatile.
SEC Chairman Richard Breeden has said he would be willing to consider circuit breakers that have preset trigger points, but he doesn't want discretionary power to stop programs.
A House aide suggested that Mr. Phelan was so "vague and mushy" that it was the kind of meeting where people of all viewpoints could "come out feeling good."
At one point, Mr. Phelan angered the subcommittee's chairman, Rep. Edward Markey (D., Mass.), by not going much beyond what already had been reported in the morning newspapers.
"Markey said we could have done this in public" because so little sensitive information was disclosed, the aide said.
Mr. Phelan then responded that he would have been happy just writing a report to the panel, the aide added.
At another point during the hearing, Rep. Markey asked Mr. Phelan what would be discussed at a New York exchange board meeting today.
Mr. Phelan said the Big Board is likely to study the program-trading issue.
That response annoyed Rep. Markey, House aides said, and the congressman snapped back that there had been enough studies of the issue and that it was time for action on the matter.
Fifteen of the 26 subcommittee members attended the hearing, most notably Rep. John Dingell (D., Mich.), the full House Energy and Commerce Committee chairman, who has been willing to let Mr. Markey carry the legislation in recent months.
Mr. Dingell expressed concern, sources said, about jurisdictional problems in regulating program trading, which uses futures to offset stock trades.
The futures industry is regulated by the Commodity Futures Trading Commission, which reports to the Agriculture committees in both houses.
The art of change-ringing is peculiar to the English, and, like most English peculiarities, unintelligible to the rest of the world.
-- Dorothy L. Sayers, "The Nine Tailors"
ASLACTON, England
-- Of all scenes that evoke rural England, this is one of the loveliest: An ancient stone church stands amid the fields, the sound of bells cascading from its tower, calling the faithful to evensong.
The parishioners of St. Michael and All Angels stop to chat at the church door, as members here always have.
In the tower, five men and women pull rhythmically on ropes attached to the same five bells that first sounded here in 1614.
But there is also a discordant, modern note in Aslacton, though it can't be heard by the church-goers enjoying the peal of bells this cool autumn evening.
Like most of the other 6,000 churches in Britain with sets of bells, St. Michael once had its own "band" of ringers, who would herald every Sunday morning and evening service.
Now, only one local ringer remains: 64-year-old Derek Hammond.
The others here today live elsewhere.
They belong to a group of 15 ringers -- including two octogenarians and four youngsters in training -- who drive every Sunday from church to church in a sometimes-exhausting effort to keep the bells sounding in the many belfries of East Anglia.
"To ring for even one service at this tower, we have to scrape," says Mr. Hammond, a retired water-authority worker.
"We've tried to train the youngsters, but they have their discos and their dances, and they just drift away."
Mr. Hammond worries that old age and the flightiness of youth will diminish the ranks of the East Anglian group that keeps the Aslacton bells pealing.
History, after all, is not on his side.
According to a nationwide survey taken a year ago, nearly a third of England's church bells are no longer rung on Sundays because there is no one to ring them.
It is easy to see why the ancient art is on the ropes.
The less complicated version of playing tunes on bells, as do the carillons of continental Europe, is considered by the English to be childish, fit only for foreigners.
Change-ringing, a mind-boggling exercise the English invented 380 years ago, requires physical dexterity -- some bells weigh more than a ton -- combined with intense mental concentration.
Proper English bells are started off in "rounds," from the highest-pitched bell to the lowest -- a simple descending scale using, in larger churches, as many as 12 bells.
Then, at a signal, the ringers begin varying the order in which the bells sound without altering the steady rhythm of the striking.
Each variation, or change, can occur only once, the rules state.
Ringers memorize patterns of changes, known as "methods," which have odd-sounding names like Kent Treble Bob Major or Grandsire Caters.
A series of 5,000 or so changes is a "peal" and takes about three hours.
A look at a Thursday night practice at St. Mary Abbot church in the Kensington district of London gives an idea of the work involved.
Ten shirt-sleeved ringers stand in a circle, one foot ahead of the other in a prize-fighter's stance, each pulling a rope that disappears through a small hole in the high ceiling of the ringing chamber.
No one speaks, and the snaking of the ropes seems to make as much sound as the bells themselves, muffled by the ceiling.
Totally absorbed, the ringers stare straight ahead, using peripheral vision (they call it "rope-sight") to watch the other ropes and thus time their pulls.
Far above in the belfry, the huge bronze bells, mounted on wheels, swing madly through a full 360 degrees, starting and ending, surprisingly, in the inverted, or mouth-up position.
Skilled ringers use their wrists to advance or retard the next swing, so that one bell can swap places with another in the following change.
In a well-known detective-story involving church bells, English novelist Dorothy L. Sayers described ringing as a "passion {that} finds its satisfaction in mathematical completeness and mechanical perfection."
Ringers, she added, are "filled with the solemn intoxication that comes of intricate ritual faultlessly performed."
"Ringing does become a bit of an obsession," admits Stephanie Pattenden, master of the band at St. Mary Abbot and one of England's best female ringers.
It is a passion that usually stays in the tower, however.
More often than not, ringers think of the church as something stuck on the bottom of the belfry.
When their changes are completed, and after they have worked up a sweat, ringers often skip off to the local pub, leaving worship for others below.
This does not sit well with some clerics.
With membership of the Church of England steadily dwindling, strong-willed vicars are pressing equally strong-willed and often non-religious ringers to attend services.
Two years ago, the Rev. Jeremy Hummerstone, vicar of Great Torrington, Devon, got so fed up with ringers who didn't attend service he sacked the entire band; the ringers promptly set up a picket line in protest.
"They were a self-perpetuating club that treated the tower as sort of a separate premises," the Vicar Hummerstone says.
An entirely new band rings today at Great Torrington, several of whom are members of the congregation.
But there still aren't enough ringers to ring more than six of the eight bells.
At St. Mary's Church in Ilminster, Somerset, the bells have fallen silent following a dust-up over church attendance.
The vicar, W.D. Jones, refuses to talk about it, saying it would "reopen the wound."
But C.J.B. Marshall, vicar of a nearby church, feels the fault is in the stairs from the bell tower that are located next to the altar.
"So crunch, crunch, crunch, bang, bang, bang -- here come the ringers from above, making a very obvious exit while the congregation is at prayer," he says.
Vicar Marshall admits to mixed feelings about this issue, since he is both a vicar and an active bell-ringer himself.
"The sound of bells is a net to draw people into the church," he says.
"I live in hopes that the ringers themselves will be drawn into that fuller life."
The Central Council of Church Bell Ringers, a sort of parliament of ringing groups, aims to improve relations with vicars, says John C. Baldwin, president.
It hopes to speak to students at theological colleges about the joys of bell ringing and will shortly publish a booklet for every vicar in the country entitled, "The Bells in Your Care."
Says Mr. Baldwin, "We recognize that we may no longer have as high a priority in church life and experience."
Mr. Baldwin is also attacking the greater problem: lack of ringers.
One survey says that of the 100,000 trained bellringers in England today, only 40,000 of them still ring.
Also, ringers don't always live where the bells need to be rung -- like in small, rural parishes and inner-city churches.
But the council's program to attract and train ringers is only partly successful, says Mr. Baldwin.
"Right now, we're lucky if after five years we keep one new ringer out of 10," he adds.
One bright sign is that a growing number of women have entered the once male-dominated field; more than a third of the ringers today are women.
They aren't accepted everywhere, however.
The oldest bell-ringing group in the country, the Ancient Society of College Youths, founded in 1637, remains male-only, a fact that's particularly galling to women because the group is the sole source of ringers for Britain's most prestigious churches, St. Paul's Cathedral and Westminster Abbey.
This being Britain, no woman has filed an equal-opportunity suit, but the extent of the problem surfaced this summer in a series of letters to "The Ringing World," a weekly newspaper for ringers.
One writer, signing his letter as "Red-blooded, balanced male," remarked on the "frequency of women fainting in peals," and suggested that they "settle back into their traditional role of making tea at meetings."
In the torrent of replies that followed, one woman ringer from Solihull observed that "the average male ringer leaves quite a lot to be desired: badly dressed, decorated with acne and a large beer-belly, frequently unwashed and unbearably flatulent in peals."
Another women wrote from Sheffield to say that in her 60 years of ringing, "I have never known a lady to faint in the belfry.
I have seen one or two men die, bless them.
Investors unsettled by the stock market's gyrations can take some comfort in the predictable arrival of quarterly dividend checks.
That has been particularly true this year with many companies raising their payouts more than 10%.
But don't breathe too easy: Those dividend increases may signal trouble ahead for stock prices, some analysts warn.
In the past, they say, the strongest dividend growth has often come at times when the stock-market party was almost over.
That can be a trap for unwary investors, says Richard Bernstein, senior quantitative analyst at Merrill Lynch & Co.
Strong dividend growth, he says, is "the black widow of valuation" -- a reference to the female spiders that attract males and then kill them after mating.
Stephen Boesel, president of T. Rowe Price Growth and Income Fund, explains that companies raise their payouts most robustly only after the economy and corporate profits have been growing for some time.
"Invariably, those strong periods in the economy give way to recessionary environments," he says.
"And recessionary environments aren't hospitable to the stock market."
Indeed, analysts say that payouts have sometimes risen most sharply when prices were already on their way down from cyclical peaks.
In 1976, for example, dividends on the stocks in Standard & Poor's 500-stock index soared 10%, following much slower growth the year before.
The S&P index started sliding in price in September 1976, and fell 12% in 1977 -- despite a 15% expansion in dividends that year.
That pattern hasn't always held, but recent strong growth in dividends makes some market watchers anxious.
Payouts on the S&P 500 stocks rose 10% in 1988, according to Standard & Poor's Corp., and Wall Street estimates for 1989 growth are generally between 9% and 14%.
Many people believe the growth in dividends will slow next year, although a minority see double-digit gains continuing.
Meanwhile, many market watchers say recent dividend trends raise another warning flag: While dividends have risen smartly, their expansion hasn't kept pace with even stronger advances in stock prices.
As a result, the market's dividend yield -- dividends as a percentage of price -- has slid to a level that is fairly low and unenticing by historical standards.
Put another way, the decline in the yield suggests stocks have gotten pretty rich in price relative to the dividends they pay, some market analysts say.
They are keeping a close watch on the yield on the S&P 500.
The figure is currently about 3.3%, up from 3.2% before the recent market slide.
Some analysts say investors should run for the exits if a sustained market rebound pushes the yield below 3%.
A drop below that 3% benchmark "has always been a strong warning sign that stocks are fully valued," says Mr. Boesel of T. Rowe Price.
In fact, "the market has always tanked.
Always.
There's never been an exception," says Gerald W. Perritt, a Chicago investment adviser and money manager, based on a review of six decades of stock-market data.
The last time the S&P 500 yield dropped below 3% was in the summer of 1987.
Stockholders who took the hint and sold shares escaped the October debacle.
There have been only seven other times -- in 1929, 1933, 1961, 1965, 1968, 1971 and 1972 -- when the yield on the S&P 500 dropped below 3% for at least two consecutive months, Mr. Perritt found.
And in each case, he says, a sharp drop in stock prices began within a year.
Still, some market analysts say the current 3.3% reading isn't as troublesome as it might have been in years past.
"It's not a very meaningful indicator currently because corporations are not behaving in a traditional manner," says James H. Coxon, head of stock investments for Cigna Corp., the Philadelphia-based insurer.
In particular, Mr. Coxon says, businesses are paying out a smaller percentage of their profits and cash flow in the form of dividends than they have historically.
So, while stock prices may look fairly high relative to dividends, they are not excessive relative to the underlying corporate strength.
Rather than increasing dividends, some companies have used cash to buy back some of their shares, notes Steven G. Einhorn, co-chairman of the investment policy committee at Goldman, Sachs & Co.
He factors that into the market yield to get an adjusted yield of about 3.6%.
That is just a tad below the average of the past 40 years or so, he says.
What will happen to dividend growth next year?
Common wisdom suggests a single-digit rate of growth, reflecting a weakening in the economy and corporate profits.
PaineWebber Inc., for instance, is forecasting growth in S&P 500 dividends of just under 5% in 1990, down from an estimated 11% this year.
In other years in which there have been moderate economic slowdowns -- the environment the firm expects in 1990 -- the change in dividends ranged from a gain of 4% to a decline of 1% , according to PaineWebber analyst Thomas Doerflinger.
The minority argument, meanwhile, is that businesses have the financial wherewithal this time around to declare sharply higher dividends even if their earnings weaken.
Dividend growth on the order of 12% is expected by both Mr. Coxon of Cigna and Mr. Einhorn of Goldman Sachs.
Those dividend bulls argue that corporations are in the unusual position of having plenty of cash left over after paying dividends and making capital expenditures.
One indicator investors might want to watch is the monthly tally from Standard & Poor's of the number of public companies adjusting their dividends.
A total of 139 companies raised dividends in October, basically unchanged from 138 a year ago, S&P said Wednesday.
That followed four straight months in which the number of increases trailed the year-earlier pace.
While the S&P tally doesn't measure the magnitude of dividend changes, a further slippage in the number of dividend increases could be a harbinger of slower dividend growth next year.
In any case, opinion is mixed on how much of a boost the overall stock market would get even if dividend growth continues at double-digit levels.
Mr. Einhorn of Goldman Sachs estimates the stock market will deliver a 12% to 15% total return from appreciation and dividends over the next 12 months -- vs. a "cash rate of return" of perhaps 7% or 8% if dividend growth is weak.
But Mr. Boesel of T. Rowe Price, who also expects 12% growth in dividends next year, doesn't think it will help the overall market all that much.
"Having the dividend increases is a supportive element in the market outlook, but I don't think it's a main consideration," he says.
With slower economic growth and flat corporate earnings likely next year, "I wouldn't look for the market to have much upside from current levels.
Your Oct. 13 page-one story on the renewed plight of Western Union says that Western Union had lost its chance to be in the telephone business by turning down Alexander Graham Bell's offer to it of his invention, because it supposedly felt that voice communication would never replace the telegraph.
Such is hardly the case.
Bell's father-in-law, Gardner G. Hubbard, wealthy and well-connected, obtained financing to start the American Bell Telephone Co. in Boston, which even had a subsidiary in New York called the Telephone Co. of New York.
This is where Bell's patents went.
Western Union indeed wanted to get into the telephone business.
It acquired Thomas Edison's microphone patent and then immediately sued the Bell Co. claiming that the microphone invented by my grandfather, Emile Berliner, which had been sold to Bell for a princely $50,000, infringed upon Western Union's Edison patent.
When Bell established that the Berliner patent caveat was registered 10 days before Edison's application, Western Union dropped the lawsuit and agreed never to enter the telephone business -- the basis for the company's current plight.
Oliver Berliner Beverly Hills, Calif.
Troubled NBI Inc. said it fired more than half its work force and is discontinuing its hardware business to focus on its software and service operations.
The ailing company, which has reported net losses for 16 consecutive quarters, said it won't manufacture network computer systems any more and will greatly reduce its costly direct sales force.
Altogether, NBI said it will eliminate 266 jobs at its Boulder headquarters, 176 field sales jobs and 50 jobs at its Canadian and United Kingdom headquarters.
The company's work force will fall to about 400 people.
Stephen G. Jerritts, president and chief executive officer, said customers weren't willing to commit to an expensive NBI hardware systems because of the company's financial troubles.
Further, he said, the company doesn't have the capital needed to build the business over the next year or two.
"We flat ran out of financing resources," Mr. Jerritts said.
"We had to do something structurally and radically different."
As a result, he said NBI will focus on servicing its installed base of systems, trying to provide maintenance for other manufacturers and expanding its software business, using some of the applications it developed for its hardware.
The company currently offers a word-processing package for personal computers called Legend.
The company, which recently said it lacked the profits and capital to pay dividends on its Series A convertible preferred stock, said it has hired an investment banker to help it raise additional cash.
In New York Stock Exchange composite trading yesterday, NBI common closed at 93 cents a share, up 31 cents.
It was Richard Nixon's first visit to China in 1972 that set in motion the historic rapprochement between Beijing and Washington.
But the former U.S. president's sixth visit to China, during which he spoke at length with Chinese leaders, was nowhere near as successful at easing strains that have recently afflicted the Sino-U.S. relationship.
Mr. Nixon, the most prominent American to come to China since Beijing's bloody suppression of pro-democracy demonstrators in June, harped on international outrage over the massacre.
The Chinese, in turn, took aim at American "interference" in China's domestic affairs.
One official newspaper, Legal Daily, even directly criticized Mr. Nixon, who is normally referred to here as an "old friend."
The paper accused him of being a leading proponent of "peaceful evolution," a catch phrase to describe what China believes is the policy of Western countries to seduce socialist nations into the capitalist sphere.
The tension was evident on Wednesday evening during Mr. Nixon's final banquet toast, normally an opportunity for reciting platitudes about eternal friendship.
Instead, Mr. Nixon reminded his host, Chinese President Yang Shangkun, that Americans haven't forgiven China's leaders for the military assault of June 3-4 that killed hundreds, and perhaps thousands, of demonstrators.
"Many in the United States, including many friends of China, believe the crackdown was excessive and unjustified," Mr. Nixon told Mr. Yang, who was directly involved in ordering the attack.
"The events of April through June damaged the respect and confidence which most Americans previously had for the leaders of China."
The Chinese responded in an equally undiplomatic fashion.
In talks with Mr. Nixon, Chinese leaders expressed no regret for the killings, and even suggested that the U.S. was prominently involved in the demonstrations this spring.
In a meeting Tuesday, supreme leader, Deng Xiaoping, told Mr. Nixon, "Frankly speaking, the U.S. was involved too deeply in the turmoil and counterrevolutionary rebellion which occurred in Beijing not long ago.
China was the real victim and it is unjust to reprove China for it."
Despite the harsh exchanges, the U.S. and China still seem to be looking for a way to mend relations, which have deteriorated into what Mr. Nixon referred to as "the greatest crisis in Chinese-American relations" since his initial visit to China 17 years ago.
In his return toast to Mr. Nixon, Mr. Yang said the relationship had reached a "stalemate."
Relations between China and the U.S. have been tense since June 7, when Chinese dissident Fang Lizhi and his wife, Li Shuxian, took refuge in the U.S. Embassy in Beijing.
Shortly afterwards, Mr. Bush imposed a series of anti-China sanctions, including suspension of most high-level talks, which could be codified in U.S. congressional legislation in the coming weeks.
Mr. Nixon is traveling in China as a private citizen, but he has made clear that he is an unofficial envoy for the Bush administration.
Mr. Nixon met Mr. Bush and his national security adviser, Brent Scowcroft, before coming to China on Saturday.
And he plans to brief the president at the end of the week, U.S. sources said.
Mr. Nixon was to leave China today.
According to an American member of the Nixon party, the former president raised a number of controversial issues in his 20 hours of talks with top-level Chinese officials.
These included China's economic policies, human rights and the question of Mr. Fang.
Mr. Nixon also proposed that China restore its participation in the Fulbright Program, a U.S. government-funded academic exchange.
China pulled out of the program in July.
In his talks, the former president urged China's leaders to acknowledge that their nation is part of the world community and welcome the infusion of outside contacts and ideas.
"Ideas are going over borders, and there's no SDI ideological weapon that can shoot them down," he told a group of Americans at the U.S. Embassy on Wednesday.
There are no signs, however, of China's yielding on key issues.
But in one minor matter, Mr. Nixon appears to have gained a concession.
In a meeting with Premier Li Peng on Monday, Mr. Nixon said that he hoped he wouldn't encounter guards with machine guns during his visit to the U.S. Embassy.
Sure enough, when he arrived at the embassy two days later, the machine-gun-toting guards were gone -- for the first time in five months.
A few blocks away, at the U.S. ambassador's residence, the guards encircling the compound also had discarded their Uzi-model arms for the first time since early June.
But the guards there retained their pistols, and a large contingent of plainclothes police remained nearby in unmarked cars.
Moreover, police and soldiers continue to harass Americans, who have filed several protests with the Foreign Ministry in the past week.
Several times, Chinese guards have pointed their automatic rifles at young children of U.S. diplomats and clicked the trigger.
The rifles weren't loaded.
Your Oct. 6 article "Japan's Financial Firms Lure Science Graduates" states, "Industrial companies are accusing financial institutions of jeopardizing Japan's economy by raising the salary stakes for new employees."
The Japanese industrial companies should know better.
They are barking up the wrong tree, because it is basically their fault they can't attract new employees.
Takuma Yamamoto, president of Fujitsu Ltd., believes "the `money worship' among young people . . . caused the problem."
He is just passing the buck to young people.
What's wrong with asking for more money?
Money is not everything, but it is necessary, and business is not volunteer work.
It is not unethical to choose a higher-salaried job.
Unfortunately, Japanese manufacturers have neither good working conditions nor good compensation packages.
I get the impression that some Japanese managers believe working harder for less money is beautiful.
I visited a lot of major Japanese manufacturers, but I never felt I would want to be employed by any of them.
Many of them recently have been spending a lot of money on public relations and advertising to improve their images, but they should realize that the most important thing is real change, not changing people's perceptions.
If the Japanese companies are seriously considering their survival, they could do at least three things to improve the situation: raise salaries higher than those of financial institutions; improve working conditions (better offices and more vacations, for example); accept and hire more labor from outside Japan.
Hiroshi Asada
In reference to your Oct. 9 page-one article "Barbara Bush Earns Even Higher Ratings Than the President," it is regrettable that you must continually define blacks by our negatives: "Among liberals, 60% have positive views of her, while 50% approve of the president's job performance.
In part, this may reflect the fact that `she speaks a more progressive language' than her husband, as Columbia's Prof. {Ethel} Klein puts it.
Among professionals, 76% have a favorable opinion of her, compared to 62% who approve of her husband's performance.
While a quarter of black voters disapprove of Mr. Bush's handling of his job, only 15% have a negative view of his spouse."
The statistics imply that three-quarters of blacks approve of Mr. Bush's job performance and 85% of blacks approve of Mrs. Bush.
If the assumption is that it is surprising that so few blacks find Mr. and Mrs. Bush distasteful, the positive view is even more newsworthy.
Such an editorial point of view perpetuates an insidious, stereotyped perspective.
Why are we blacks continually defined by our minority and the lowest common denominator.
Preston G. Foster Birmingham, Ala.
The National Association of Securities Dealers, the self-regulatory organization for the over-the-counter securities markets, disciplined a number of firms and individuals for alleged violations of industry rules.
Two firms were expelled from the NASD, three were suspended or barred and nine were fined.
First Securities Group of California and a principal of the firm, Louis Fernando Vargas of Marina del Rey, Calif., were jointly fined $15,000 and expelled for alleged violations of reporting requirements on securities sales.
Also, Mr. Vargas was barred from association with any NASD member.
Neither First Securities, of Beverly Hills, nor Mr. Vargas could be reached for comment.
A telephone-information operator had no listing for either party.
J.L. Henry & Co., Miami, and a principal of the firm, Henry I. Otero of Miami, were jointly fined $30,000 and expelled, for alleged improper use of a customer's funds, among other things.
Also, Mr. Otero was barred from association with any NASD member.
J.L. Henry hasn't any Miami telephone listing, an operator said.
Mr. Otero, who apparently has an unpublished number, also couldn't be reached.
Biscayne Securities Corp., of Lauderhill, Fla., and a principal of the firm, Alvin Rosenblum of Plantation, Fla., were jointly fined $20,000 and given 10-day suspensions for allegedly selling securities at unfair prices.
Biscayne hasn't any telephone listing, an operator said.
Mr. Rosenblum, who apparently has an unpublished phone number, also couldn't be reached.
Triton Securities, of Danville, Calif., and a principal of the firm, Delwin George Chase, also of Danville, were jointly fined $10,000 and given 30-day suspensions as part of a settlement.
While neither admitting nor denying wrongdoing, Triton and Mr. Chase consented to findings of violations in connection with limited-partnership sales.
Officials of Triton couldn't be reached for comment.
Mr. Chase didn't return a telephone call to his office.
Crane & Co. Securities Inc., of Mount Clemens, Mich., and its president, Glenn R. Crane, of Sterling Heights, Mich., consented to a joint fine of $10,000.
Without admitting or denying wrongdoing, they consented to findings of violations of escrow and record-keeping rules.
Mr. Crane didn't return a call seeking comment.
First Commonwealth Securities Corp., of New Orleans, and its president, Kenneth J. Canepa, also of New Orleans, consented to a $10,000 fine.
Also, Mr. Canepa received a two-week suspension "in a principal capacity."
Without admitting or denying wrongdoing, they consented to findings that they had inaccurately represented the firm's net capital, maintained inaccurate books and records, and made other violations.
Mr. Canepa confirmed he had consented to the sanctions but declined to comment further.
Weatherly Securities Corp., New York, and three of its principals -- Dell Eugene Keehn and William Northy Prater Jr., both of Mercer Island, Wash., and Thomas Albert McFall, of Red Bank, N.J. -- consented to a fine of $20,000.
Without admitting or denying wrongdoing, they consented to findings that they failed to return funds owed to customers in connection with a limited-partnership offering.
Reached at his office, Mr. McFall, currently chairman, said, "An implication that we failed to return investor funds is inappropriate and inaccurate."
He described the situation as "an escrow problem, a timing issue," which he said was rapidly rectified, with no losses to customers.
W.N. Whelen & Co., of Georgetown, Del., and its president, William N. Whelen Jr., also of Georgetown, were barred from transacting principal trades for 90 days and were jointly fined $15,000.
The firm and Mr. Whelen allegedly sold securities to the public at unfair prices, among other alleged violations.
Mr. Whelen denied the firm had sold securities at unfair prices and suggested that the examination practices of the NASD need improvement.
The firm and the NASD differ over the meaning of markup and markdown, he added.
Shearson Lehman Hutton Inc., New York, which is 62%-owned by American Express Co., consented to a $10,000 fine.
Without admitting or denying wrongdoing, the firm consented to findings that it failed to respond "in a timely manner" to the NASD's requests for information in connection with a customer complaint.
A Shearson spokesman had no comment.
The following individuals were fined as indicated and barred from association with NASD members, or, where noted, suspended.
Except where noted, none of these people could be reached for comment or had any comment.
Andrew Derel Adams, Killeen, Texas, fined $15,000; John Francis Angier Jr., Reddington Shores, Fla., $15,000; Mark Anthony, Arlington Heights, Ill., $10,000 and 30-day suspension; William Stirlen, Arlington Heights, Ill., $7,500 and 30-day suspension; Fred W. Bonnell, Boulder, Colo., $2,500 and six-month suspension; Michael J. Boorse, Horsham, Pa.; David Chiodo, Dallas, $5,000, barred as a principal; Camille Chafic Cotran, London, $25,000; John William Curry, fined $5,000, ordered to disgorge $30,000, one-year suspension.
John William Davis, Colonsville, Miss., fined $200,000; Jeffrey Gerard Dompierre, Valrico, Fla., $5,000 and 10-day suspension; Eugene Michael Felten, La Canada, Calif., fined $25,000, ordered to disgorge $16,072 and suspended one year; Marion Stewart Spitler, La Canada, fined $15,000, ordered to disgorge $18,444 and suspended six months.
Mr. Felten said, "We got what amounted to a parking ticket, and by complaining about it, we ended up with a sizable fine and suspension."
The matter "didn't involve anybody's securities transactions," he added.
Victor Stanley Fishman, Longwood, Fla., fined $25,000; William Harold Floyd, Houston, $100,000; Michael Anthony Houston, Bronx, N.Y., $15,000; Amin Jalaalwalikraam, Glenham, N.Y., $60,000; Richard F. Knapp, London, $10,000 and 30-day suspension; Deborah Renee Martin, St. Louis, $15,000; Joseph Francis Muscolina Jr., Palisades Park, N.J., $15,000; Robert C. Najarian, Brooklyn Park, Minn., $15,000; Edward Robert Norwick, Nesconset, N.Y., $30,000.
Charles D. Phipps Sr., Hermitage, Pa., fined $10,000; David Scott Rankin, Lake St. Louis, Mo., $15,000; Leigh A. Sanderoff, Gaithersburg, Md., fined $45,000, ordered to disgorge $12,252; Sandra Ann Smith, Ridgefield, N.J., $15,000; James G. Spence, Aloha, Ore., $5,000 and six-month suspension; Mona Sun, Jamaica Estates, N.Y., $60,000; William Swearingen, Minneapolis, $15,000 and six-month suspension; John Bew Wong, San Francisco, $25,000; Rabia M. Zayed, San Francisco, $50,000.
The following were neither barred nor suspended: Stephanie Veselich Enright, Rolling Hills, Calif., fined $2,500 and ordered to disgorge $11,762; Stuart Lane Russel, Glendale, Calif., fined $2,500 and ordered to disgorge $14,821; Devon Nilson Dahl, Fountain Valley, Calif., fined $82,389.
Mr. Dahl, a registered representative in the insurance business, said he "screwed up" because he didn't realize he was breaking securities laws.
"Insurance agents have been forced by their companies into becoming registered reps," he said, "but they are not providing compliance and security-type training so that we can avoid stupid mistakes."
The following were barred or, where noted, suspended and consented to findings without admitting or denying wrongdoing: Edward L. Cole, Jackson, Miss., $10,000 fine; Rita Rae Cross, Denver, $2,500 fine and 30-day suspension; Thomas Richard Meinders, Colorado Springs, Colo., $2,000 fine, five-day suspension and eight-month suspension as a principal; Ronald A. Cutrer, Baton Rouge, La., $15,000 fine and one-month suspension; Karl Grant Hale, Midvale, Utah, $15,000 fine; Clinton P. Hayne, New Orleans, $7,500 fine and one-week suspension; Richard M. Kane, Coconut Creek, Fla., $250,000 fine; John B. Merrick, Aurora, Colo., $1,000 fine and 10-day suspension; John P. Miller, Baton Rouge, $2,000 fine and two-week suspension; Randolph K. Pace, New York, $10,000 fine and 90-day suspension; Brian D. Pitcher, New Providence, N.J., $30,000 fine; Wayne A. Russo, Bridgeville, Pa., $4,000 fine and 15-day suspension; Orville Leroy Sandberg, Aurora, Colo., $3,500 fine and 10-day suspension; Richard T. Marchese, Las Vegas, Nev., $5,000 and one-year suspension; Eric G. Monchecourt, Las Vegas, $5,000 and one-year suspension; and Robert Gerhard Smith, Carson City, Nev., two-year suspension.
"I wasn't ever actively engaged in any securities activities," said Mr. Cutrer.
"I never had any clients at all.
It was just a stupid mistake to get the license," he said, adding, "I'd just as soon not get into" details of the settlement.
Program traders are fond of predicting that if they are blocked in the U.S., they will simply emigrate to foreign stock markets.
But in London and Tokyo, where computer-driven trading now plays a small but growing role, traders say a number of hurdles loom.
Government officials, especially in Japan, probably would resist any onslaught of program trading by players trying to shrug off the U.S. furor over their activities and marching abroad with their business.
Japan is "very concerned" about the possible effects of program trading, a senior Japanese official said after the Oct. 13 stock plunge in New York.
U.S. stock-index futures aren't even traded in Japan now.
And because of the time difference, the Japanese and the U.S. markets' trading hours don't overlap.
It all adds up to a barrier to American-style index arbitrage, the most popular form of U.S. program trading that seeks to exploit brief differences between prices of stocks in New York and the price of a futures contract in Chicago based on those stocks.
About 11.6% of all program trading by New York Stock Exchange firms in September took place in foreign markets, according to Big Board data.
Yet it is difficult to imagine Japan racing to introduce Chicago-style stock-index futures.
Japan's Finance Ministry already is scrutinizing institutional investors' activity to see whether policy changes are needed to cope with the current level of program trading, said Makato Utsumi, vice minister for international finance.
Program trading has taken off in Japan since last year's introduction of home-market stock-index futures trading on the Tokyo and Osaka stock exchanges.
But regulators are wary.
They haven't forgotten the leap in share prices last Dec. 7, when the first bout of foreign-led index arbitrage drove stocks skyward in the last half-hour of trading, startling regulators who thought they had written enough rules to prevent such a swing.
Japan's Finance Ministry had set up mechanisms to limit how far futures prices could fall in a single session and to give market operators the authority to suspend trading in futures at any time.
"Maybe it wasn't enough," a Finance Ministry official noted after the Dec. 7 surge.
Japan's regulators have since tightened controls on index-related stock purchases.
Tokyo's leading program traders are the big U.S. securities houses, though the Japanese are playing catch-up.
Some U.S. firms, notably Salomon Inc. and Morgan Stanley Group Inc., have reaped a hefty chunk of their Japanese earnings from index arbitrage, both for customers and for their own accounts.
(Morgan Stanley last week joined a growing list of U.S. securities firms that have stopped doing index arbitrage for their own accounts.)
Both Deryck C. Maughan, who heads Salomon in Tokyo, and John S. Wadsworth, who heads Morgan Stanley there, ascribe a good part of their firms' success in Tokyo to their ability to offer sophisticated, futures-related investment strategies to big institutional clients.
They don't have plans to cut back.
"It has not been disruptive in the markets here," Mr. Maughan said.
"The real difference seems to be that the cash market here . . . is big enough and liquid enough that the futures market isn't having the same impact it does in America."
The British also are scrutinizing program trades.
Index-arbitrage trading is "something we want to watch closely," an official at London's Stock Exchange said.
"We don't think there is cause for concern at the moment."
London serves increasingly as a conduit for program trading of U.S. stocks.
Market professionals said London has several attractions.
First, the trading is done over the counter and isn't reported on either the U.S. or London stock trading tapes.
Second, it can be used to unwind positions before U.S. trading begins, but at prices pegged to the previous session's Big Board close.
In addition to the extra privacy of these trades, the transactions can often be less expensive to execute, because the parties don't have to pay a floor brokerage fee or a specialist's fee.
Still, "Much less {index-arbitrage activity} is done over here than in the U.S." said Richard Barfield, chief investment manager at Standard Life Assurance Co., which manages about #15 billion ($23.72 billion) in United Kingdom institutional funds.
Britain has two main index-arbitrage instruments.
A Financial Times-Stock Exchange 100-share index option contract is traded on the London Stock Exchange's Traded Options Market.
And an FT-SE futures contract is traded on the London International Financial Futures Exchange.
Both contracts have gained a following since the 1987 global market crash.
The average number of FT-SE option contracts traded on the London exchange has surged nearly tenfold since the contract's launch in 1984.
This year, the average of daily contracts traded totaled 9,118, up from 4,645 a year earlier and from 917 in 1984.
But a survey early this summer indicated that the volume of index-options trading was only 15% of the size of the underlying equity market, exchange officials said.
This compares with estimates that the U.S. "derivatives" market is perhaps four times as large as the underlying domestic market.
The House voted to boost the federal minimum wage for the first time since early 1981, casting a solid 382-37 vote for a compromise measure backed by President Bush.
The vote came after a debate replete with complaints from both proponents and critics of a substantial increase in the wage floor.
Advocates said the 90-cent-an-hour rise, to $4.25 an hour by April 1991, is too small for the working poor, while opponents argued that the increase will still hurt small business and cost many thousands of jobs.
But the legislation reflected a compromise agreed to on Tuesday by President Bush and Democratic leaders in Congress, after congressional Republicans urged the White House to bend a bit from its previous resistance to compromise.
So both sides accepted the compromise, which would lead to the first lifting of the minimum wage since a four-year law was enacted in 1977, raising the wage to $3.35 an hour from $2.65.
Under the measure passed yesterday, the minimum wage would rise to $3.80 next April.
The Senate plans to take up the measure quickly and is expected to pass it.
"There are no smiles about this bill," Rep. Pat Williams (D., Mont.) said during House floor debate yesterday.
But "because it's all we've got, I'm going to vote for it."
While the minimum wage had traditionally been pegged at half the average U.S. manufacturing wage, the level of $4.25 an hour in 1991 will still be less than 35% of average factory pay, Mr. Williams said.
But Rep. Marge Roukema (R., N.J.) instead praised the House's acceptance of a new youth "training" wage, a subminimum that GOP administrations have sought for many years.
Adopting a training-wage policy means "getting beyond the nickel and diming of the minimum wage," Mrs. Roukema said.
Policy makers regard the youth wage as helping to limit the loss of jobs from an increase in the minimum wage, but they have lately touted it as necessary to help impart job skills to entrants into the work force.
Labor unions and Democrats long fought the idea, but recently acceded to it in the face of Bush administration insistence.
The compromise sets the training wage at $3.35 an hour next April, and at $3.61 an hour, or 85% of the minimum wage, in April 1991.
Employers can pay the subminimum for 90 days, without restriction, to workers with less than six months of job experience, and for another 90 days if the company uses a government-certified training program for the young workers.
The training wage covers only workers who are 16 to 19 years old.
The White House previously insisted on an unrestricted six-month training wage that could be paid any time a worker of any age took a new job.
The U.S. Chamber of Commerce, still opposed to any mininum-wage increase, said the compromise plan to lift the wage floor 27% in two stages between April 1990 and April 1991 "will be impossible for many employers to accommodate and will result in the elimination of jobs for American workers and higher prices for American consumers.
Zenith Data Systems Corp., a subsidiary of Zenith Electronics Corp., received a $534 million Navy contract for software and services of microcomputers over an 84-month period.
Rockwell International Corp. won a $130.7 million Air Force contract for AC-130U gunship replacement aircraft.
Martin Marietta Corp. was given a $29.9 million Air Force contract for low-altitude navigation and targeting equipment.
Federal Data Corp. got a $29.4 million Air Force contract for intelligence data handling.
For six years, T. Marshall Hahn Jr. has made corporate acquisitions in the George Bush mode: kind and gentle.
The question now: Can he act more like hard-charging Teddy Roosevelt?
Mr. Hahn, the 62-year-old chairman and chief executive officer of Georgia-Pacific Corp. is leading the forest-product concern's unsolicited $3.19 billion bid for Great Northern Nekoosa Corp.
Nekoosa has given the offer a public cold shoulder, a reaction Mr. Hahn hasn't faced in his 18 earlier acquisitions, all of which were negotiated behind the scenes.
So far, Mr. Hahn is trying to entice Nekoosa into negotiating a friendly surrender while talking tough.
"We are prepared to pursue aggressively completion of this transaction," he says.
But a takeover battle opens up the possibility of a bidding war, with all that implies.
If a competitor enters the game, for example, Mr. Hahn could face the dilemma of paying a premium for Nekoosa or seeing the company fall into the arms of a rival.
Given that choice, associates of Mr. Hahn and industry observers say the former university president -- who has developed a reputation for not overpaying for anything -- would fold.
"There's a price above which I'm positive Marshall has the courage not to pay," says A.D. Correll, Georgia-Pacific's executive vice president for pulp and paper.
Says long-time associate Jerry Griffin, vice president, corporate development, at WTD Industries Inc.: "He isn't of the old school of winning at any cost."
He also is a consensus manager, insiders say.
The decision to make the bid for Nekoosa, for example, was made only after all six members of Georgia-Pacific's management committee signed onto the deal -- even though Mr. Hahn knew he wanted to go after the company early on, says Mr. Correll.
Associates say Mr. Hahn picked up that careful approach to management as president of Virginia Polytechnic Institute.
Assuming that post at the age of 35, he managed by consensus, as is the rule in universities, says Warren H. Strother, a university official who is researching a book on Mr. Hahn.
But he also showed a willingness to take a strong stand.
In 1970, Mr. Hahn called in state police to arrest student protesters who were occupying a university building.
That impressed Robert B. Pamplin, Georgia-Pacific's chief executive at the time, whom Mr. Hahn had met while fundraising for the institute.
In 1975, Mr. Pamplin enticed Mr. Hahn into joining the company as executive vice president in charge of chemicals; the move befuddled many in Georgia-Pacific who didn't believe a university administrator could make the transition to the corporate world.
But Mr. Hahn rose swiftly through the ranks, demonstrating a raw intelligence that he says he knew he possessed early on.
The son of a physicist, Mr. Hahn skipped first grade because his reading ability was so far above his classmates.
Moving rapidly through school, he graduated Phi Beta Kappa from the University of Kentucky at age 18, after spending only 2 1/2 years in college.
He earned his doctorate in nuclear physics from the Massachusetts Institute of Technology.
Mr. Hahn agrees that he has a "retentive" memory, but friends say that's an understatement.
They call it "photographic".
Mr. Hahn also has engineered a surprising turnaround of Georgia-Pacific.
Taking over as chief executive officer in 1983, he inherited a company that was mired in debt and hurt by a recession-inspired slide in its building-products business.
Mr. Hahn began selling non-core businesses, such as oil and gas and chemicals.
He even sold one unit that made vinyl checkbook covers.
At the same time, he began building up the pulp and paper segment of the company while refocusing building products on home repair and remodeling, rather than materials for new-home construction.
The idea was to buffet building products from cycles in new-home construction.
The formula has paid off, so far.
Georgia-Pacific's sales climbed to $9.5 billion last year, compared with $6 billion in 1983, when Mr. Hahn took the reins.
Profit from continuing operations has soared to $467 million from $75 million.
Mr. Hahn attributes the gains to the philosophy of concentrating on what a company knows best.
"The record of companies that have diversified isn't all that impressive," he says.
Nekoosa wouldn't be a diversification.
It would be a good match, Mr. Hahn and many analysts say, of two healthy companies with high-quality assets and strong cash flows.
The resulting company would be the largest forest-products concern in the world with combined sales of more than $13 billion.
But can Mr. Hahn carry it off?
In this instance, industry observers say, he is entering uncharted waters.
Says Kathryn McAuley, an analyst at First Manhattan Co.: "This is the greatest acquisition challenge he has faced.
A House-Senate conference approved major portions of a package for more than $500 million in economic aid for Poland that relies heavily on $240 million in credit and loan guarantees in fiscal 1990 in hopes of stimulating future trade and investment.
For the Agency for International Development, appropriators approved $200 million in secondary loan guarantees under an expanded trade credit insurance program, and total loan guarantees for the Overseas Private Investment Corp. are increased by $40 million over fiscal 1989 as part of the same Poland package.
The conference approved at least $55 million in direct cash and development assistance as well, and though no decision was made, both sides are committed to adding more than $200 million in economic support funds and environmental initiatives sought by the Bush administration.
The agreement on Poland contrasts with the major differences remaining over the underlying foreign aid bill, which has already provoked veto threats by the White House and is sharply confined under this year's budget.
These fiscal pressures are also a factor in shaping the Poland package, and while more ambitious authorizing legislation is still pending, the appropriations bill in conference will be more decisive on U.S. aid to Eastern Europe.
To accommodate the additional cash assistance, the House Appropriations Committee last week was required to reallocate an estimated $140 million from the Pentagon.
And though the size of the loan guarantees approved yesterday is significant, recent experience with a similar program in Central America indicates that it could take several years before the new Polish government can fully use the aid effectively.
The action on Poland came as the conference separately approved $220 million for international population planning activities, an 11% increase over fiscal 1989.
The House and Senate are divided over whether the United Nations Population Fund will receive any portion of these appropriations, but the size of the increase is itself significant.
In a second area of common concern, the world environment, an additional $15 million will be provided in development assistance to fund a series of initiatives, related both to global warming and the plight of the African elephant.
The sweeping nature of the bill draws a variety of special interest amendments, running from an import exemption for a California airplane museum to a small but intriguing struggle among sugar producing nations over the fate of Panama's quota of exports to the profitable U.S. market.
Panama was stripped of this right because of U.S. differences with the Noriega regime, but the Central American country would have received a quota of 30,537 metric tons over a 21-month period ending Sept. 30, 1990.
About a quarter of this share has already been reallocated, according to the industry, but the remaining 23,403 tons are still a lucrative target for growers because the current U.S. price of 18 cents a pound runs as much as a nickel a pound above the world rate.
The potential sales are nearly $9.3 million, and House Majority Whip William Gray (D., Pa.) began the bidding this year by proposing language that the quota be allocated to English-speaking countries of the Caribbean, such as Jamaica and Barbados.
Rep. Jerry Lewis, a conservative Californian, added a provision of his own intended to assist Bolivia, and the Senate then broadened the list further by including all countries in the U.S. Caribbean Basin initiate as well as the Philippines-backed by the powerful Hawaii Democrat Sen. Daniel Inouye.
Jamaica, wary of upsetting its Caribbean Basin allies, has apparently instructed its lobbyist to abandon the provision initially drafted by Mr. Gray, but the greater question is whether Mr. Inouye, who has strong ties to the sugar industry, is able to insert a claim by the Philippines.
In separate floor action, the House waived budget restrictions and gave quick approval to $3.18 billion in supplemental appropriations for law enforcement and anti-drug programs in fiscal 1990.
The funding is attached to an estimated $27.1 billion transportation bill that goes next to the Senate and carries with it a proposed permanent smoking ban on virtually all U.S. domestic airline flights.
The leadership hopes to move the compromise measure promptly to the White House, but in recent days, the Senate has been as likely to bounce bills back to the House.
The most recent example was a nearly $17.3 billion fiscal 1990 bill funding the State, Justice and Commerce departments.
And after losing a battle Tuesday night with the Senate Foreign Relations Committee, appropriators from both houses are expected to be forced back to conference.
Beauty Takes Backseat To Safety on Bridges
EVERYONE AGREES that most of the nation's old bridges need to be repaired or replaced.
But there's disagreement over how to do it.
Highway officials insist the ornamental railings on older bridges aren't strong enough to prevent vehicles from crashing through.
But other people don't want to lose the bridges' beautiful, sometimes historic, features.
"The primary purpose of a railing is to contain a vehicle and not to provide a scenic view," says Jack White, a planner with the Indiana Highway Department.
He and others prefer to install railings such as the "type F safety shape," a four-foot-high concrete slab with no openings.
In Richmond, Ind., the type F railing is being used to replace arched openings on the G Street Bridge.
Garret Boone, who teaches art at Earlham College, calls the new structure "just an ugly bridge" and one that blocks the view of a new park below.
In Hartford, Conn., the Charter Oak Bridge will soon be replaced, the cast-iron medallions from its railings relegated to a park.
Compromises are possible.
Citizens in Peninsula, Ohio, upset over changes to a bridge, negotiated a deal: The bottom half of the railing will be type F, while the top half will have the old bridge's floral pattern.
Similarly, highway engineers agreed to keep the old railings on the Key Bridge in Washington, D.C., as long as they could install a crash barrier between the sidewalk and the road.
Tray Bon?
Drink Carrier Competes With Cartons
PORTING POTABLES just got easier, or so claims Scypher Corp., the maker of the Cup-Tote.
The Chicago company's beverage carrier, meant to replace cardboard trays at concession stands and fast-food outlets, resembles the plastic loops used on six-packs of beer, only the loops hang from a web of strings.
The new carrier can tote as many as four cups at once.
Inventor Claire Marvin says his design virtually eliminates spilling.
Lids aren't even needed.
He also claims the carrier costs less and takes up less space than most paper carriers.
A few fast-food outlets are giving it a try.
The company acknowledges some problems.
A driver has to find something to hang the carrier on, so the company supplies a window hook.
While it breaks down in prolonged sunlight, it isn't recyclable.
And unlike some trays, there's no place for food.
Spirit of Perestroika Touches Design World
AN EXCHANGE of U.S. and Soviet designers promises change on both sides.
An exhibition of American design and architecture opened in September in Moscow and will travel to eight other Soviet cities.
The show runs the gamut, from a blender to chairs to a model of the Citicorp building.
The event continues into next year and includes an exchange program to swap design teachers at Carnegie-Mellon and Leningrad's Mutchin Institute.
Dan Droz, leader of the Carnegie-Mellon group, sees benefits all around.
The Soviets, who normally have few clients other than the state, will get "exposure to a market system," he says.
Americans will learn more about making products for the Soviets.
Mr. Droz says the Soviets could even help U.S. designers renew their sense of purpose.
"In Moscow, they kept asking us things like, `Why do you make 15 different corkscrews, when all you need is one good one?'" he says.
"They got us thinking maybe we should be helping U.S. companies improve existing products rather than always developing new ones."
Seed for Jail Solution Fails to Take Root
IT'S A TWO BIRDS with one stone deal: Eggers Group architects propose using grain elevators to house prisoners.
It would ease jail overcrowding while preserving historic structures, the company says.
But New York state, which is seeking solutions to its prison cell shortage, says "no."
Grain elevators built in the 1920s and '30s have six-inch concrete walls and a tubular shape that would easily contain semicircular cells with a control point in the middle, the New York firm says.
Many are far enough from residential areas to pass public muster, yet close enough to permit family visits.
Besides, Eggers says, grain elevators are worth preserving for aesthetic reasons -- one famed architect compared them to the pyramids of Egypt.
A number of cities -- including Minneapolis, Philadelphia and Houston -- have vacant grain elevators, Eggers says.
A medium-sized one in Brooklyn, it says, could be altered to house up to 1,000 inmates at a lower cost than building a new prison in upstate New York.
A spokesman for the state, however, calls the idea "not effective or cost efficient.
The Labor Department cited USX Corp. for numerous health and safety violations at two Pennsylvania plants, and proposed $7.3 million in fines, the largest penalty ever proposed for alleged workplace violations by an employer.
The department's Occupational Safety and Health Administration proposed fines of $6.1 million for alleged violations at the company's Fairless Hills, Pa., steel mill; that was a record for proposed penalties at any single facility.
OSHA cited nearly 1,500 alleged violations of federal electrical, crane-safety, record-keeping and other requirements.
A second citation covering the company's Clairton, Pa., coke works involved more than 200 alleged violations of electrical-safety and other requirements, for which OSHA proposed $1.2 million in fines.
Labor Secretary Elizabeth Dole said, "The magnitude of these penalties and citations is matched only by the magnitude of the hazards to workers which resulted from corporate indifference to worker safety and health, and severe cutbacks in the maintenance and repair programs needed to remove those hazards."
OSHA said there have been three worker fatalities at the two plants in the past two years and 17 deaths since 1972.
Gerard Scannell, the head of OSHA, said USX managers have known about many of the safety and health deficiencies at the plants for years, "yet have failed to take necessary action to counteract the hazards."
"Particularly flagrant," Mrs. Dole said, "are the company's numerous failures to properly record injuries at its Fairless works, in spite of the firm promise it had made in an earlier corporate-wide settlement agreement to correct such discrepancies."
That settlement was in April 1987.
A USX spokesman said the company hadn't yet received any documents from OSHA regarding the penalty or fine.
"Once we do, they will receive very serious evaluation," the spokesman said.
"No consideration is more important than the health and safety of our employees."
USX said it has been cooperating with OSHA since the agency began investigating the Clairton and Fairless works.
He said that, if and when safety problems were identified, they were corrected.
The USX citations represented the first sizable enforcement action taken by OSHA under Mr. Scannell.
He has promised stiffer fines, though the size of penalties sought by OSHA have been rising in recent years even before he took office this year.
"The big problem is that USX management has proved unwilling to devote the necessary resources and manpower to removing hazards and to safeguarding safety and health in the plants," said Linda Anku, OSHA regional administrator in Philadelphia.
USX has 15 working days to contest the citations and proposed penalties, before the independent Occupational Safety and Health Review Commission.
Before the USX case, OSHA's largest proposed fine for one employer was $4.3 million for alleged safety violations at John Morrell & Co., a meatpacking subsidiary of United Brands Co., Cincinnati.
The company is contesting the fine.
Due to an editing error, a letter to the editor in yesterday's edition from Frederick H. Hallett mistakenly identified the NRDC.
It should be the Natural Resources Defense Council.
Your Oct. 6 editorial "The Ill Homeless" referred to research by us and six of our colleagues that was reported in the Sept. 8 issue of the Journal of the American Medical Association.
Your comments implied we had discovered that the "principal cause" of homelessness is to be found in the large numbers of mentally ill and substance-abusing people in the homeless population.
We have made no such statement.
It is clear that most mentally ill people and most alcoholics do not become homeless.
The "causes" of homelessness are poorly understood and complex in any individual case.
In quoting from our research you emphasized the high prevalance of mental illness and alcoholism.
You did not note that the homeless people we examined had a multitude of physical disorders in addition to their psychiatric problems and substance abuse.
They suffered from malnutrition, chest diseases, cardiovascular disorders, skin problems, infectious diseases and the aftereffects of assaults and rape.
Homeless people not only lack safety, privacy and shelter, they also lack the elementary necessities of nutrition, cleanliness and basic health care.
In a recent report, the Institute of Medicine pointed out that certain health problems may predispose a person to homelessness, others may be a consequence of it, and a third category is composed of disorders whose treatment is difficult or impossible if a person lacks adequate shelter.
The interactions between health and homelessness are complex, defying sweeping generalizations as to "cause" or "effect."
If we look to the future, preventing homelessness is an important objective.
This will require us to develop a much more sophisticated understanding of the dynamics of homelessness than we currently possess, an understanding that can be developed only through careful study and research.
William R. Breakey M.D. Pamela J. Fischer M.D. Department of Psychiatry Johns Hopkins University School of Medicine Baltimore
A study by Tulane Prof. James Wright says homelessness is due to a complex array of problems, with the common thread of poverty.
The study shows that nearly 40% of the homeless population is made up of women and children and that only 25% of the homeless exhibits some combination of drug, alcohol and mental problems.
According to Dr. Wright, homelessness is "simultaneously a housing problem, an employment problem, a demographic problem, a problem of social disaffiliation, a mental health problem, a family violence problem, a problem created by the cutbacks in social welfare spending, a problem resulting from the decay of the traditional nuclear family, and a problem intimately connected to the recent increase in the number of persons living below the poverty level."
Leighton E. Cluff M.D. President Robert Wood Johnson Foundation Princeton, N.J.
To quote the highly regarded director of a privately funded drop-in center for the homeless in New York: "If you're homeless, you don't sleep for fear of being robbed or murdered.
After your first three weeks of sleep deprivation, you're scarcely in touch with reality any more; without psychiatric treatment, you may well be unable to fend for yourself ever again."
Some of the homeless, obviously, had pre-existing mental illness or addiction.
But many others have fallen through cracks in the economy into the grim, brutal world of our city streets.
Once there, what ways of escape are open to them other than drink, drugs or insanity?
Maxwell R.D. Vos Brooklyn, N.Y.
You dismiss as "sentimental" the view that the reduction of federal housing-assistance programs by 77% might have played a significant role in the increased number of men and women sleeping on our city streets during the Reagan-Bush years.
There is no sign that you bothered to consider the inverse of your logic: namely, that mental illness and substance abuse might be to some degree consequences rather than causes of homelessness.
Your research stopped when a convenient assertion could be made.
Robert S. Jenkins Cambridge, Mass.
Of the approximately 200 sponsors of the recent march in Washington for the homeless, you chose to cite such groups as the National Association of Home Builders and the International Union of Bricklayers and Allied Craftsmen, insinuating that the march got its major support from self-serving groups that "know a good thing when they see it," and that the crusade was based on greed or the profit motive.
But isn't the desire for profit the driving force behind those who subscribe to, and advertise in, your paper?
Why didn't you mention the YMCA or the YWCA or Catholic Charities USA or a hundred other nonprofit organizations that participated in the march?
As for the findings on the 203 Baltimore homeless who underwent psychiatric examinations, I suggest you conduct your own survey.
Choose 203 business executives, including, perhaps, someone from your own staff, and put them out on the streets, to be deprived for one month of their homes, families and income.
I would predict that within a short time most of them would find Thunderbird a satisfactory substitute for Chivas Regal and that their "normal" phobias, anxieties, depressions and substance abuse would increase dramatically.
Ruth K. Nelson Cullowhee, N.C.
ROGERS COMMUNICATIONS Inc. said it plans to raise 175 million to 180 million Canadian dollars (US$148.9 million to $153.3 million) through a private placement of perpetual preferred shares.
Perpetual preferred shares aren't retractable by the holders, the company said.
Rogers said the shares will be convertible into Class B shares, but that the company has the option to redeem the shares before a conversion takes place.
A spokesman for the Toronto cable television and telecommunications concern said the coupon rate hasn't yet been fixed, but will probably be set at around 8%.
He declined to discuss other terms of the issue.
The House passed legislation designed to make it easier for the Transportation Department to block airline leveraged buy-outs.
The final vote came after the House rejected Republican efforts to weaken the bill and approved two amendments sought by organized labor.
The Bush administration has threatened to veto such a bill because of what it views as an undesirable intrusion into the affairs of industry, but the 300-113 vote suggests that supporters have the potential to override a veto.
The broader question is where the Senate stands on the issue.
While the Senate Commerce Committee has approved legislation similar to the House bill on airline leveraged buy-outs, the measure hasn't yet come to the full floor.
Although the legislation would apply to acquisitions involving any major airline, it is aimed at giving the Transportation Department the chance to review in advance transactions financed by large amounts of debt.
"The purpose of the bill is to put the brakes on airline acquisitions that would so load a carrier up with debt that it would impede safety or a carrier's ability to compete," Rep. John Paul Hammerschmidt, (R., Ark.) said.
The bill, as it was approved by the House Public Works and Transportation Committee, would give the Transportation Department up to 50 days to review any purchase of 15% or more of the stock in an airline.
The department would be required to block the buy-out if the acquisition is likely to financially weaken a carrier so that safety would be impaired; its ability to compete would be sharply diminished; it would be put into foreign control; or if the transaction would result in the sale of airline-related assets -- unless selling such assets had an overriding public benefit.
The House approved an amendment offered by Rep. Peter DeFazio (D., Ore.) that would, in addition to the previous criteria, also require the department to block the acquisition of an airline if the added debt incurred were likely to result in a reduction in the number of the carrier's employees, or their wages or benefits.
Rep. James Traficant (D., Ohio), said the amendment, which passed 271-147, would "let the American worker know that we consider them occasionally."
But Rep. Hammerschmidt said that the provision, which he dubbed a "special interest" amendment, was likely to make the bill even more controversial.
On Tuesday, the House approved a labor-backed amendment that would require the Transportation Department to reject airline acquisitions if the person seeking to purchase a carrier had run two or more airlines previously that have filed for protection from creditors under Chapter 11 of the federal Bankruptcy Code.
The provision, called the "two-time-losers" amendment by its supporters, apparently was aimed at preventing Texas Air Corp. Chairman Frank Lorenzo from attempting to take over another airline.
Follow-up report:
You now may drop by the Voice of America offices in Washington and read the text of what the Voice is broadcasting to those 130 million people around the world who tune in to it each week.
You can even take notes -- extensive notes, for the Voice folks won't look over your shoulder -- about what you read.
You can do all this even if you're not a reporter or a researcher or a scholar or a member of Congress.
And my newspaper can print the text of those broadcasts.
Until the other day, you as an ordinary citizen of this democracy had no right to see what your government was telling your cousins around the world.
That was the law.
And I apparently had no right to print hither what the Voice was booming to yon.
It was censorship.
It was outrageous.
And it was stupid.
The theory was that the Voice is a propaganda agency and this government shouldn't propagandize its own people.
That sounds neat, but this government -- any government -- propagandizes its own people every day.
Government press releases, speeches, briefings, tours of military facilities, publications are all propaganda of sorts.
Propaganda is just information to support a viewpoint, and the beauty of a democracy is that it enables you to hear or read every viewpoint and then make up your own mind on an issue.
The restrictions on viewing and dissemination of Voice material were especially absurd: An agency in the information business was not being allowed to inform.
In June 1988, I wrote in this space about this issue.
Assuming it wasn't one of those columns that you clipped and put on the refrigerator door, I'll review the facts.
The Voice of America is a government agency that broadcasts news and views -- some might say propaganda -- in 43 languages to 130 million listeners around the world.
It does a first-rate job.
Its budget$184 million -- is paid for by you.
But a 1948 law barred the "dissemination" of that material in the U.S.
The law let scholars, reporters and researchers read texts of VOA material, only at VOA headquarters in Washington, but it barred them from copying texts.
And, of course, there's that word "dissemination."
How's that again?
"You may come by the agency to read but not copy either manually or by photocopying," a Voice official explained when I asked.
What if I tune in my short-wave radio, transcribe an editorial or program, and print it in my newspaper?
"Nor are you free to reprint such material," I was advised.
That sounded a lot like censorship, so after years of letters and conversations that went nowhere, I sued.
A couple of weeks ago, I lost the case in federal district court in Des Moines.
At least, that's the way it was reported.
And, indeed, the lawsuit was dismissed.
But I -- I like to think of it in terms of we, all of us -- won the point.
For a funny thing happened on the way to the ruling: The United States Information Agency, which runs the Voice, changed its position on three key points.
-- The USIA said that, on reflection, of course I could print anything I could get my hands on.
The word dissemination, it decided, referred only to itself.
"The USIA officially and publicly declared the absolute right of everyone except the USIA to disseminate agency program materials in the United States," my lawyer, the scholarly Mark McCormick of Des Moines, said in a memo pointing out the facts and trying to make me feel good after the press reported that I had lost.
The court noted the new USIA position but, just in case, officially found "that Congress did not intend to preclude plaintiffs from disseminating USIA information domestically."
-- The USIA said that, on reflection, anyone could view the VOA materials, not just the reporters, scholars, researchers and congressmen who are mentioned in the statute.
"The USIA publicly and officially stated in the litigation that all persons are allowed access to the materials, notwithstanding the statutory designations, because the USIA has determined that it will not check the credentials of any person appearing and requesting to see the materials," Mr. McCormick noted.
-- And the USIA said that all of us could take extensive notes.
"The agency publicly and officially declared in the lawsuit that persons who examine the materials may make notes and, while the agency position is that persons may not take verbatim notes, no one will check to determine what notes a person has taken," Mr. McCormick reported.
I had sought, in my suit, the right to print Voice material, which had been denied me, and I had sought a right to receive the information, arguing in effect that a right to print government information isn't very helpful if I have no right to get the information.
But the court disagreed.
"The First Amendment proscribes the government from passing laws abridging the right to free speech," Judge Donald O'Brien ruled.
"The First Amendment does not prescribe a duty upon the government to assure easy access to information for members of the press."
So now the situation is this:
You have a right to read Voice of America scripts if you don't mind traveling to Washington every week or so and visiting the Voice office during business hours.
I have a right to print those scripts if I go there and laboriously -- but no longer surreptitiously -- copy them out in long hand.
But neither of us can copy the material on a Xerox machine or have it sent to us.
In an era when every government agency has a public-relations machine that sends you stuff whether you want it or not, this does seem odd.
Indeed, Judge O'Brien ruled that "it would be easy to conclude that the USIA's position is `inappropriate or even stupid,'" but it's the law.
So the next step, I suspect, is to try to get the law changed.
We (I assume you're in this with me at this point) need to get three words -- "for examination only" -- eliminated from the law.
Section 501 of the United States Information and Educational Exchange Act of 1948 says Voice material shall be available to certain of us (but now, thanks to the USIA's new position, all of us) "for examination only."
If those words weren't there, the nice people at the Voice would be able to send you the information or, at the very least, let you photocopy it.
This is not a trivial issue.
"You have . . . raised important questions which ought to be answered: What does USIA say about America abroad; how do we say it; and how can American taxpayers get the answers to these questions?" a man wrote me a couple of years ago.
The man was Charles Z. Wick.
At the time, he was director of the
He had no answers then.
Now there are some.
This democracy is suddenly a little more democratic.
I feel pretty good about it.
Mr. Gartner is editor and co-owner of the Daily Tribune in Ames, Iowa, and president of NBC News in New York.
R. Gordon McGovern was forced out as Campbell Soup Co.'s president and chief executive officer, the strongest evidence yet of the power that Dorrance family members intend to wield in reshaping the troubled food company.
Herbert M. Baum, the 53-year-old president of the company's Campbell U.S.A. unit, and Edwin L. Harper, 47, the chief financial officer, will run Campbell as a team, dividing responsibilities rather evenly until a successor is named.
The board already has been searching for strong outside candidates, including food-industry executives with considerable international experience.
Wall Street reacted favorably to Mr. McGovern's departure and its implications.
In heavy trading on the New York Stock Exchange, Campbell's shares rose $3.375 to close at $47.125.
"The profit motive of the major shareholders has clearly changed for the better," said John McMillin, a food industry analyst for Prudential-Bache in New York.
Mr. McGovern was widely seen as sales, and not profit, oriented.
"New managers would think a little more like Wall Street," Mr. McMillin added.
Some of the surge in the stock's price appeared to be linked to revived takeover speculation, which has contributed to volatility of Campbell shares in recent months.
Campbell's international businesses, particularly in the U.K. and Italy, appear to be at the heart of its problems.
Growth has fallen short of targets and operating earnings are far below results in U.S. units.
For example, Campbell is a distant third in the U.K. frozen foods market, where it recently paid 24 times earnings for Freshbake Foods PLC and wound up with far more capacity than it could use.
Similarly, Campbell's Italian biscuit operation, D. Lazzaroni & Co., has been hurt by overproduction and distribution problems.
Such problems will require considerable skill to resolve.
However, neither Mr. Baum nor Mr. Harper has much international experience.
Mr. Baum, a seasoned marketer who is said to have a good rapport with Campbell employees, will have responsibility for all domestic operations except the Pepperidge Farm unit.
Mr. Harper, a veteran of several manufacturing companies who joined Campbell in 1986, will take charge of all overseas operations as well as Pepperidge.
In an joint interview yesterday, both men said they would like to be the company's next chief executive.
Mr. McGovern, 63, had been under intense pressure from the board to boost Campbell's mediocre performance to the level of other food companies.
The board is dominated by the heirs of the late John T. Dorrance Jr., who controlled about 58% of Campbell's stock when he died in April.
In recent months, Mr. Dorrance's children and other family members have pushed for improved profitability and higher returns on their equity.
In August, the company took a $343 million pretax charge against fiscal 1989 earnings when it announced a world-wide restructuring plan.
The plan calls for closing at least nine plants and eliminating about 3,600 jobs.
But analysts said early results from the reorganization have been disappointing, especially in Europe, and there were signs that the board became impatient.
Campbell officials said Mr. McGovern wasn't available yesterday to discuss the circumstances of his departure.
The company's prepared statement quoted him as saying, "The CEO succession is well along and I've decided for personal reasons to take early retirement."
But people familiar with the agenda of the board's meeting last week in London said Mr. McGovern was fired.
Mr. McGovern himself had said repeatedly that he intended to stay on until he reached the conventional retirement age of 65 in October 1991, "unless I get fired."
Campbell said Mr. McGovern had withdrawn his name as a candidate for re-election as a director at the annual shareholder meeting, scheduled for Nov. 17.
For fiscal 1989, Mr. McGovern received a salary of $877,663.
He owns about 45,000 shares of Campbell stock and has options to buy more than 100,000 additional shares.
He will be eligible for an annual pension of more than $244,000 with certain other fringe benefits.
During Mr. McGovern's nine-year term as president, the company's sales rose to $5.7 billion from $2.8 billion and net income increased to $274 million from $130 million, the statement said.
Mr. Baum said he and Mr. Harper both advocated closing some plants as long ago as early 1988.
"You've got to make the restructuring work," said Mr. Baum.
"You've got to make those savings now."
Mr. Harper expressed confidence that he and Mr. Baum can convince the board of their worthiness to run the company.
"We look upon this as a great opportunity to prove the fact that we have a tremendous management team," he said.
He predicted that the board would give the current duo until early next year before naming a new chief executive.
Mr. Baum said the two have orders to "focus on bottom-line profits" and to "take a hard look at our businesses -- what is good, what is not so good."
Analysts generally applaud the performance of Campbell U.S.A., the company's largest division, which posted 6% unit sales growth and a 15% improvement in operating profit for fiscal 1989.
"The way that we've been managing Campbell U.S.A. can hopefully spread to other areas of the company," Mr. Baum said.
In the interview at headquarters yesterday afternoon, both men exuded confidence and seemed to work well together.
"You've got two champions sitting right before you," said Mr. Baum.
"We play to win.
Wednesday, November 1, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 9 1/2% high, 8 3/4% low, 8 3/4% near closing bid, 9% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.55% 30 to 44 days; 8.25% 45 to 59 days; 8.45% 60 to 89 days; 8% 90 to 119 days; 7.90% 120 to 149 days; 7.80% 150 to 179 days; 7.55% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.65% 30 days; 8.575% 60 days; 8.50% 90 days.
CERTIFICATES OF DEPOSIT: 8.07% one month; 8.06% two months; 8.04% three months; 7.95% six months; 7.88% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market: 8.60% one month; 8.55% three months; 8.35% six months.
BANKERS ACCEPTANCES: 8.50% 30 days; 8.48% 60 days; 8.30% 90 days; 8.15% 120 days; 8.07% 150 days; 7.95% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 3/4% to 8 5/8% one month; 8 13/16% to 8 11/16% two months; 8 3/4% to 8 5/8% three months; 8 5/8% to 8 1/2% four months; 8 1/2% to 8 7/16% five months; 8 1/2% to 8 3/8% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 3/4% one month; 8 3/4% three months; 8 1/2% six months; 8 7/16% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS: Results of the Monday, October 30, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.78% 13 weeks; 7.62% 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days.
9.82%, standard conventional fixed-rate mortgages; 8.25%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.75%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.64%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Robert L. Bernstein, chairman and president of Random House Inc., announced his resignation from the publishing house he has run for 23 years.
A successor wasn't named, which fueled speculation that Mr. Bernstein may have clashed with S.I. Newhouse Jr., whose family company, Advance Publications Inc., owns Random House.
Abrupt departures aren't unheard of within the Newhouse empire.
In an interview, Mr. Bernstein said his departure "evolved out of discussions with Si Newhouse and that's the decision I reached."
He declined to elaborate, other than to say, "It just seemed the right thing to do at this minute.
Sometimes you just go with your gut."
Mr. Bernstein said he will stay until Dec. 31 and work with his successor, who is to be named soon.
Mr. Newhouse, meanwhile, insisted that he isn't unhappy with Mr. Bernstein or the performance of Random House, the largest trade publishing house in the U.S.
The company said the publisher's annual sales volume increased to $800 million from $40 million during Mr. Bernstein's tenure.
"Bob has handled the extraordinary growth of the company quite brilliantly," said Mr. Newhouse.
"The company is doing well, it's stable, it's got good people.
Bob has an agenda and this seemed like the natural time."
Publishing officials believe that while Random House has enjoyed spectacular growth and has smoothly integrated many acquisitions in recent years, some of the bigger ones haven't been absorbed so easily.
Crown Publishing Group, acquired last year, is said to be turning in disappointing results.
As a private company, Random House doesn't report its earnings.
Mr. Bernstein, who succeeded Bennett Cerf, has been only the second president of Random House since it was founded in 1925.
Speculation on his successor centers on a number of division heads at the house.
Possible candidates include Susan Petersen, president of Ballantine/Del Rey/Fawcett, Random House's huge and successful paperback division.
Some say Anthony Cheetham, head of a recently acquired British company, Century Hutchinson, could be chosen.
There is also speculation that Mr. Newhouse could bring in a powerhouse businessman or another Newhouse family member to run the business side, in combination with a publishing executive like Robert Gottlieb, who left Random House's Alfred A. Knopf to run the New Yorker, also owned by the Newhouse family.
Not included on the most-likely-successor list are Joni Evans, recruited two years ago to be publisher of adult trade books for Random House, and Sonny Mehta, president of the prestigious Alfred A. Knopf unit.
When Ms. Evans took her job, several important divisions that had reported to her predecessor weren't included partly because she didn't wish to be a full-time administrator.
Mr. Mehta is widely viewed as a brilliant editor but a less-than-brilliant administrator and his own departure was rumored recently.
Mr. Bernstein, a tall, energetic man who is widely respected as a publishing executive, has spent much of his time in recent years on human rights issues.
Congress learned during the Reagan administration that it could intimidate the executive branch by uttering again and again the same seven words: "Provided, that no funds shall be spent. . . ."
This phrase once again is found throughout the many appropriations bills now moving through Congress.
It signals Congress's attempt, under the pretext of guarding the public purse, to deny the president the funding necessary to execute certain of his duties and prerogatives specified in Article II of the Constitution.
This species of congressional action is predicated on an interpretation of the appropriations clause that is erroneous and unconstitutional.
The appropriations clause states that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law. . . ."
The prevailing interpretation of the clause on Capitol Hill is that it gives Congress an omnipresent veto over every conceivable action of the president through the ability to withhold funding.
This interpretation was officially endorsed by Congress in 1987 in the Iran-Contra Report.
As partisans of congressional power understand, a "power of the purse" so broadly construed would emasculate the presidency and swallow the principle of separation of powers.
It is not supported by the text or history of the Constitution.
The framers hardly discussed the appropriations clause at the Constitutional Convention of 1787, according to Madison's notes.
To the extent they did, their concern was to ensure fiscal accountability.
Moreover, the framers believed that the nation needed a unitary executive with the independence and resources to perform the executive functions that the Confederation Congress had performed poorly under the Articles of Confederation.
It would contradict that objective if the appropriations clause (technically a limitation on legislative power) could be read as placing the president on Congress's short leash, making the executive consist of the president and every member of Congress.
As it went to the conference panel now deliberating, the appropriations bill for the executive office of the president for fiscal 1990 contained some breathtaking attempts by Congress to rewrite the Constitution under the pretext of protecting the public's money.
During the coming weeks, President Bush must decide whether to veto the bills containing them -- or, alternatively, to sign these bills into law with a statement declaring their intrusions on executive power to be in violation of Article II, and thus void and severable.
The 1990 appropriations legislation attempts to strip the president of his powers to make certain appointments as provided by Article II.
Article II places on the president the duty to nominate, "and by and with the Advice and Consent of the Senate" appoint, ambassadors, judges, and other officers of the U.S.
It also empowers the president to make recess appointments, without Senate approval: "The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session."
Yet Section 605 of the appropriations bill for the executive office provides: "No part of any appropriation for the current fiscal year contained in this or any other Act shall be paid to any person for the filling of any position for which he or she has been nominated after the Senate has voted not to approve the nomination of said person."
Thus, with one brief passage in an appropriations bill, Congress repeals the president's power to make recess appointments under Article II.
Section 605 also imposes unconstitutional conditions on the president's ability to nominate candidates of his choosing.
The language of the appropriations rider implies that any nomination to any position of a rejected nominee will result in the president being denied funding to pay that person's salary.
The president could probably not avoid this restriction by choosing people willing to serve without pay, because the Anti-Deficiency Act prohibits voluntary service to the government.
The 1990 appropriations bills also contain a number of "muzzling" provisions that violate the recommendation clause in Article II of the Constitution.
Muzzling provisions, which might be called "blindfold laws" as well, prevent the executive branch from even looking at certain policy options, let alone from recommending them to Congress.
Such laws violate the provision in Article II that requires the president to make recommendations to Congress, but which gives the president the discretion to select the subject matter of those recommendations.
Typically, these laws seek to prevent executive branch officials from inquiring into whether certain federal programs make any economic sense or proposing more market-oriented alternatives to regulations.
Probably the most egregious example is a proviso in the appropriations bill for the executive office that prevents the president's Office of Management and Budget from subjecting agricultural marketing orders to any cost-benefit scrutiny.
There is something inherently suspect about Congress's prohibiting the executive from even studying whether public funds are being wasted in some favored program or other.
Perhaps none of the unconstitutional conditions contained in the appropriations bills for fiscal 1990 better illustrates Congress's attempt to usurp executive power than Section 609 of the executive-office bill: "None of the funds made available pursuant to the provisions of this Act shall be used to implement, administer, or enforce any regulation which has been disapproved pursuant to a resolution of disapproval duly adopted in accordance with the applicable law of the United States."
This provision amounts to a legislative veto over the president's execution of the law, since a one-house resolution could be said to be "duly adopted" even though it would require neither bicameral action in Congress nor presentation to the president for his signature or veto.
The Supreme Court's decision in INS v. Chadha held that legislative vetoes are unconstitutional.
President Bush should veto appropriations acts that contain these kinds of unconstitutional conditions on the president's ability to discharge his duties and exercise his prerogatives.
If President Bush fails to do so in his first year, he will invite Congress, for the remainder of his presidency, to rewrite Article II of the Constitution to suit its purposes.
What becomes custom in the Bush administration will only become more difficult for future presidents, including Democrats, to undo.
President Reagan learned that lesson.
By 1987, then-Speaker Jim Wright was discussing arms control in Moscow with Mikhail Gorbachev and then attempting to direct the president, through an appropriations rider, to treat the Soviets as though the Senate had ratified SALT II.
If a veto is unworkable because it would leave part of the executive branch unfunded, the president could sign the appropriations bills into law and assert a power of excision, declaring the rider restricting his Article II powers to be unconstitutional and severable.
The Constitution does not expressly give the president such power.
However, the president does have a duty not to violate the Constitution.
The question is whether his only means of defense is the veto.
Excision of appropriations riders that trespass on the president's duties and prerogative under Article II would be different from the line-item veto.
As discussed in the context of controlling federal spending, the line-item veto is characterized as a way for the president to excise perfectly constitutional provisions in a spending bill that are objectionable merely because they conflict with his policy objectives.
The excision of unconstitutional conditions in an appropriations bill would be a power of far more limited applicability.
One could argue that it is not an assertion of a item veto at all for the president, by exerting a power of excision, to resist unconstitutional conditions in legislation that violate the separation of powers.
There is no downside if the president asserts a right of excision over unconstitutional conditions in the fiscal 1990 appropriations bills.
If Congress does nothing, President Bush will have won.
If Congress takes the dispute to the Supreme Court (assuming it can establish standing to sue), President Bush might win.
In that case, he might receive an opinion from the court that is a vindication of the president's right to perform the duties and exercise the prerogatives the framers thought should be entrusted to the executive.
If President Bush loses at the court, it might be disappointing, as Morrison v. Olson was for the Reagan administration.
But the presidency would be no worse off than it is now.
Moreover, the electorate would have received a valuable civics lesson in how the separation of powers works in practice.
As it stands now, Congress presumes after the Reagan administration that the White House will take unconstitutional provisions in appropriations bills lying down.
President Bush should set things straight.
If he does not, he will help realize Madison's fear in The Federalist No. 48 of a legislature "everywhere extending the sphere of its activity and drawing all powers into its impetuous vortex."
Mr. Sidak served as an attorney in the Reagan administration.
His longer analysis of executive power and the appropriations clause is to appear in the Duke Law Journal later this year.
Despite one of the most devastating droughts on record, net cash income in the Farm Belt rose to a new high of $59.9 billion last year.
The previous record was $57.7 billion in 1987, according to the Agriculture Department.
Net cash income -- the amount left in farmers' pockets after deducting expenses from gross cash income -- increased in 33 states in 1988, as the drought cut into crop yields and drove up commodity prices, the department's Economic Research Service reported yesterday.
Most of those states set farm income records.
The worst crop damage occurred in the Midwestern Corn Belt and the northern Great Plains.
What saved many farmers from a bad year was the opportunity to reclaim large quantities of grain and other crops that they had "mortgaged" to the government under price-support loan programs.
With prices soaring, they were able to sell the reclaimed commodities at "considerable profit," the agency's 240-page report said.
In less parched areas, meanwhile, farmers who had little or no loss of production profited greatly from the higher prices.
To the surprise of some analysts, net cash income rose in some of the hardest-hit states, including Indiana, Illinois, Nebraska and the Dakotas.
Analysts attributed the increases partly to the $4 billion disaster-assistance package enacted by Congress.
Last year's record net cash income confirms the farm sector's rebound from the agricultural depression of the early 1980s.
It also helps explain the reluctance of the major farm lobbies and many lawmakers to make any significant changes in the 1985 farm program next year.
Commodity prices have been rising in recent years, with the farm price index hitting record peaks earlier this year, as the government curtailed production with land-idling programs to reduce price-depressing surpluses.
At the same time, export demand for U.S. wheat, corn and other commodities strengthened, said Keith Collins, a department analyst.
Farmers also benefited from strong livestock prices, as the nation's cattle inventory dropped close to a 30-year low.
"All of these forces came together in 1988 to benefit agriculture," Mr. Collins said.
California led the nation with $6.5 billion in net cash income last year, followed by Texas, $3.9 billion; Iowa, $3.4 billion; Florida, $3.1 billion; and Minnesota, $2.7 billion.
Iowa and Minnesota were among the few major farm states to log a decline in net cash income.
Despite federal disaster relief, the drought of 1988 was a severe financial setback for an estimated 10,000 to 15,000 farmers, according to the department.
Many lost their farms.
Department economists don't expect 1989 to be as good a year as 1988 was.
Indeed, net cash income is likely to fall this year as farm expenses rise and government payments to farmers decline.
At the same time, an increase of land under cultivation after the drought has boosted production of corn, soybeans and other commodities, causing a fall in prices that has been only partly cushioned by heavy grain buying by the Soviets.
Last year, government payments to farmers slipped to less than $14.5 billion from a record $16.7 billion in 1987.
Payments are expected to range between $9 billion and $12 billion this year.
After years of struggling, the Los Angeles Herald Examiner will publish its last edition today, shut down by its parent, Hearst Corp., following unsuccessful efforts to sell the venerable newspaper.
The demise of the 238,000-circulation Herald, once the nation's largest afternoon newspaper with circulation exceeding 700,000, turns the country's second-largest city into a one-newspaper town, at least in some senses.
The Los Angeles Times, with a circulation of more than 1.1 million, dominates the region.
But it faces stiff competition in Orange County from the Orange County Register, which sells more than 300,000 copies a day, and in the San Fernando Valley from the Los Angeles Daily News, which sells more than 170,000.
Nearby cities such as Pasadena and Long Beach also have large dailies.
In July, closely held Hearst, based in New York, put the paper on the block.
Speculation had it that the company was asking $100 million for an operation said to be losing about $20 million a year, but others said Hearst might have virtually given the paper away.
An attempted buy-out led by John J. McCabe, chief operating officer, never materialized, and a stream of what one staff member dismissed as "tire-kickers and lookee-loos" had filed through since.
The prospective buyers included investor Marvin Davis and the Toronto Sun.
The death of the Herald, a newsstand paper in a freeway town, was perhaps inevitable.
Los Angeles is a sprawling, balkanized newspaper market, and advertisers seemed to feel they could buy space in the mammoth Times, then target a particular area with one of the regional dailies.
The Herald was left in limbo.
Further, the Herald seemed torn editorially between keeping its old-time Hearst readership -- blue-collar and sports-oriented -- and trying to provide a sprightly, upscale alternative to the sometimes staid Times.
Hearst had flirted with a conversion to tabloid format for years but never executed the plan.
The Herald joins the Baltimore News-American, which folded, and the Boston Herald-American, which was sold, as cornerstones of the old Hearst newspaper empire abandoned by the company in the 1980s.
Many felt Hearst kept the paper alive as long as it did, if marginally, because of its place in family history.
Its fanciful offices were designed by architect Julia Morgan, who built the Hearst castle at San Simeon.
William Randolph Hearst had kept an apartment in the Spanish Renaissance-style building.
Analysts said the Herald's demise doesn't necessarily represent the overall condition of the newspaper industry.
"The Herald was a survivor from a bygone age," said J. Kendrick Noble, a media analyst with PaineWebber Inc.
"Actually, the long deterioration in daily newspapers shows signs of coming to an end, and the industry looks pretty healthy."
Founded as the Examiner in 1903 by Mr. Hearst, the Herald was crippled by a bitter, decade-long strike that began in 1967 and cut circulation in half.
Financially, it never recovered; editorially, it had its moments.
In 1979, Hearst hired editor James Bellows, who brightened the editorial product considerably.
He and his successor, Mary Anne Dolan, restored respect for the editorial product, and though in recent years the paper had been limping along on limited resources, its accomplishments were notable.
For example, the Herald consistently beat its much-larger rival on disclosures about Los Angeles Mayor Tom Bradley's financial dealings.
The Herald's sports coverage and arts criticism were also highly regarded.
Robert J. Danzig, vice president and general manager of Hearst Newspapers, stood up in the paper's newsroom yesterday and announced that no buyers had stepped forward and that the paper would fold, putting more than 730 full-time employees out of work.
Hearst said it would provide employees with a placement service and pay them for 60 days.
Some long-tenured employees will receive additional benefits, the company said.
Hours after the announcement, representatives of the Orange County Register were in a bar across the street recruiting.
The reaction in the newsroom was emotional.
"I've never seen so many people crying in one place at one time," said Bill Johnson, an assistant city editor.
"So Long, L.A." was chosen as the paper's final headline.
"I'm doing the main story, and I'm already two beers drunk," said reporter Andy Furillo, whom the Times hired away several years ago but who returned to the Herald out of preference.
His wife also works for the paper, as did his father.
Outside, a young pressman filling a news box with an extra edition headlined "Herald Examiner Closes" refused to take a reader's quarter.
"Forget it," he said as he handed her a paper.
"It doesn't make any difference now.
Olympia Broadcasting Corp. said it didn't make a $1.64 million semiannual interest payment due yesterday on $23.4 million of senior subordinated debentures.
The radio-station owner and programmer said it was trying to obtain additional working capital from its senior secured lenders and other financial institutions.
It said it needs to make the payment by Dec. 1 to avoid a default that could lead to an acceleration of the debt.
In September, the company said it was seeking offers for its five radio stations in order to concentrate on its programming business.
If you'd really rather have a Buick, don't leave home without the American Express card.
Or so the slogan might go.
American Express Co. and General Motors Corp.'s beleaguered Buick division are joining forces in a promotion aimed at boosting Buick's sales while encouraging broader use of the American Express card.
The companies are giving four-day vacations for two to Buick buyers who charge all or part of their down payments on the American Express green card.
They have begun sending letters explaining the program, which began Oct. 18 and will end Dec. 18, to about five million card holders.
Neither company would disclose the program's cost.
Buick approached American Express about a joint promotion because its card holders generally have a "good credit history" and are "good at making payments," says a spokeswoman for the division.
American Express also represents the upscale image "we're trying to project," she adds.
Buick has been seeking for the past few years to restore its reputation as "the doctor's car" -- a product for upscale professionals.
Sales were roughly flat in the 1989 model year compared with a year earlier, though industry sales fell.
But since the 1990 model year began Oct. 1, Buick sales have plunged 33%.
For American Express, the promotion is part of an effort to broaden the use of its card for retail sales, where the company expects to get much of the future growth in its card business.
Traditionally, the card has been used mainly for travel and entertainment expenses.
Phillip Riese, an American Express executive vice president, says the promotion with Buick is his company's first with an auto maker, but "hopefully {will be} the first of many" in the company's effort to promote its green card as "the total car-care card."
To that end, American Express has been signing up gasoline companies, car repair shops, tire companies and car dealers to accept the card.
Many auto dealers now let car buyers charge part or all of their purchase on the American Express card, but few card holders realize this, Mr. Riese says.
Until now, however, buyers who wanted to finance part of a car purchase through General Motors Acceptance Corp. couldn't put their down payment on a charge card because of possible conflicts with truth-in-lending and state disclosure laws over finance rates, says a spokesman for the GM finance arm.
But GMAC approved the Buick program, he says, because the American Express green card requires payment in full upon billing, and so doesn't carry any finance rates.
Mr. Riese says American Express considers GM and Buick "very sophisticated direct-mail marketers," so "by joining forces with them we have managed to maximize our direct-mail capability."
In addition, Buick is a relatively respected nameplate among American Express card holders, says an American Express spokeswoman.
When the company asked members in a mailing which cars they would like to get information about for possible future purchases, Buick came in fourth among U.S. cars and in the top 10 of all cars, the spokeswoman says.
American Express has more than 24 million card holders in the U.S., and over half have the green card.
GMAC screened the card-member list for holders more than 30 years old with household incomes over $45,000 who hadn't "missed any payments," the Buick spokeswoman says.
Some 3.8 million of the five million who will get letters were preapproved for credit with GMAC.
These 3.8 million people also are eligible to get one percentage point off GMAC's advertised finance rates, which start at 6.9% for two-year loan contracts.
A spokesman for Visa International's U.S. subsidiary says his company is using promotions to increase use of its cards, but doesn't have plans for a tie-in similar to the American Express-Buick link.
Three divisions at American Express are working with Buick on the promotion: the establishment services division, which is responsible for all merchants and companies that accept the card; the travel division; and the merchandise sales division.
The vacation packages include hotel accommodations and, in some cases, tours or tickets to local attractions, but not meals.
Destinations are Chicago; Honolulu; Las Vegas, Nev.; Los Angeles; Miami Beach, Fla.; New Orleans; New York; Orlando, Fla.; San Francisco; and Washington, D.C.
A buyer who chooses to fly to his destination must pay for his own ticket but gets a companion's ticket free if they fly on United Airlines.
In lieu of the vacation, buyers can choose among several prizes, including a grandfather clock or a stereo videocassette recorder.
Card holders who receive the letter also are eligible for a sweepstakes with Buick cars or a Hawaii vacation as prizes.
If they test-drive a Buick, they get an American Express calculator.
This isn't Buick's first travel-related promotion.
A few years ago, the company offered two round-trip tickets on Trans World Airlines to buyers of its Riviera luxury car.
The promotion helped Riviera sales exceed the division's forecast by more than 10%, Buick said at the time.
The United Kingdom High Court declared illegal a variety of interest-rate swap transactions and options deals between a London borough council and commercial banks.
The ruling could lead to the cancellation of huge bank debts the London Borough of Hammersmith and Fulham ran up after losing heavily on swap transactions.
As many as 70 U.K. and international banks stand to lose several hundred million pounds should the decision be upheld and set a precedent for other municipalities.
An appeal is expected.
In response to the ruling, gilt futures swiftly plunged more than a point yesterday before recovering much of the loss by the end of the session.
Gilts, or British government bonds, which also fell sharply initially, retraced some of the losses to end about 3/8 point lower.
The council, which is alleged to have engaged in over 600 deals valued at over #6 billion ($9.5 billion), lost millions of pounds from soured swap deals.
At one point, Hammersmith is reported to have accounted for as much as 10% of the sterling market in interest-rate swap dealings.
When two parties engage in an interest-rate swap, they are betting against each other on future rates.
Thus, an institution obligated to make fixed-rate interest payments on debt swaps the payments with another making floating-rate payments.
In most of the British transactions, the municipalities agreed to make floating-rate payments to banks, which would make fixed-rate payments.
As interest rates rose, municipalities owed the banks more than the banks were paying them.
The court hearing began in early October at the request of Anthony Hazell, district auditor for Hammersmith, who argued that local councils aren't vested with constitutional authority to engage in such capital-markets activities.
The council backed the audit commission's stand that the swap transactions are illegal.
Although the Hammersmith and Fulham council was by far the most active local authority engaging in such capital-markets transactions, the court decision could set a precedent for similar transactions by 77 other local councils.
"While this court ruling was only on Hammersmith, it will obviously be very persuasive in other cases of a similar nature," a solicitor representing one of the banks said.
Already, 10 local councils have refused to honor fees and payments to banks incurred during various swaps dealings.
Other financial institutions involved include Barclays Bank PLC, Midland Bank PLC, Security Pacific Corp., Chemical Banking Corp.'s Chemical Bank, Citicorp's Citibank and Mitsubishi Finance International.
If the banks exhaust all avenues of appeal, it is possible that they would seek to have the illegality ruling work both ways, some market sources said.
Banks could seek to recover payments to local authorities in instances where the banks made net payments to councils.
Officials from the various banks involved are expected to meet during the next few days to consider other arrangements with local authorities that could be questionable.
The banks have 28 days to file an appeal against the ruling and are expected to do so shortly.
In the aftermath of the stock market's gut-wrenching 190-point drop on Oct. 13, Kidder, Peabody & Co.'s 1,400 stockbrokers across the country began a telephone and letter-writing campaign aimed at quashing the country's second-largest program trader.
The target of their wrath?
Their own employer, Kidder Peabody.
Since October's minicrash, Wall Street has been shaken by an explosion of resentment against program trading, the computer-driven, lightning-fast trades of huge baskets of stocks and futures that can send stock prices reeling in minutes.
But the heated fight over program trading is about much more than a volatile stock market.
The real battle is over who will control that market and reap its huge rewards.
Program trading itself, according to many academics who have studied it, is merely caught in the middle of this battle, unfairly labeled as the evil driving force of the marketplace.
The evidence indicates that program trading didn't, in fact, cause the market's sharp fall on Oct. 13, though it may have exacerbated it.
On one side of this power struggle stand the forces in ascendency on Wall Street -- the New Guard -- consisting of high-tech computer wizards at the major brokerage firms, their pension fund clients with immense pools of money, and the traders at the fast-growing Chicago futures exchanges.
These are the main proponents of program trading.
Defending their ramparts are Wall Street's Old Guard -- the traditional, stock-picking money managers, tens of thousands of stock brokers, the New York Stock Exchange's listed companies and the clannish floor traders, known as specialists, who make markets in their stocks.
So far, Wall Street's Old Guard seems to be winning the program-trading battle, successfully mobilizing public and congressional opinion to bludgeon their tormentors.
The Chicago Mercantile Exchange, a major futures marketplace, yesterday announced the addition of another layer of trading halts designed to slow program traders during a rapidly falling stock market, and the Big Board is expected today to approve some additional restrictions on program trading.
Stung by charges that their greed is turning the stock market into a gigantic crapshoot, almost all the big investment banking houses have abandoned index arbitrage, a common form of program trading, for their own accounts in the past few days.
A few, such as giant Merrill Lynch & Co., now refuse even to do index arbitrage trades for clients.
The Old Guard's assault on program trading and its practitioners has been fierce and broad-based, in part because some Old Guard members feel their very livelihood is at stake.
Some, such as traditional money manager Neuberger & Berman, have taken out national newspaper advertisements demanding that market regulators "stop the numbers racket on Wall Street."
Big Board stock specialists, in a bold palace revolt, began shortly after Oct. 13 to telephone the corporate executives of the companies whose stock is listed on the Big Board to have them pressure the exchange to ban program trading.
Charles Wohlstetter, the chairman of Contel Corp. who is rallying other CEOs to the anti-program trading cause, says he has received "countless" letters offering support.
"They said universally, without a single exception: Don't even compromise.
Kill it," he says.
Wall Street's New Guard isn't likely to take all this lying down for long, however.
Its new products and trading techniques have been highly profitable.
Program trading money managers have gained control over a big chunk of the invested funds in this country, and the pressures on such money managers to produce consistent profits has wedded them to the ability to move rapidly in and out the market that program trading gives them.
What's more, the last time major Wall Street firms said they were getting out of program trading -- in the aftermath of the 1987 crash -- they waited a few months and then sneaked back into it.
Even some members of the Old Guard, despite their current advantage, seem to be conceding that the future belongs with the New Guard.
Last week, Robert M. Bradley, one of the Big Board's most respected floor traders and head of a major traders' organization, surrendered.
He sold his exchange seat and wrote a bitter letter to Big Board Chairman John J. Phelan Jr. in which he said the Big Board is too focused on machines, rather than people.
He said the exchange is "headed for a real crisis" if program trading isn't curbed.
"I do not want my money invested in what I consider as nothing more than a casino," Mr. Bradley wrote.
The battle has turned into a civil war at some firms and organizations, causing internal contradictions and pitting employee against employee.
At Kidder, a unit of General Electric Co., and other big brokerage firms, stockbrokers battle their own firm's program traders a few floors away.
Corporations like Contel denounce program trading, yet Contel has in the past hired pension fund managers like Bankers Trust Co. that are also big program traders.
The Big Board -- the nation's premier stock exchange -- is sharply divided between its floor traders and its top executives.
Its entrenched 49 stock specialists firms are fighting tooth and nail against programs.
But the Big Board's leadership -- over the specialists' protests -- two weeks ago began trading a new stock "basket" product designed to facilitate program trading.
"A lot of people would like to go back to 1970," before program trading, Mr. Phelan said this week.
"I would like to go back to 1970.
But we are not going back to 1970."
Again and again, program-trading's critics raise the "casino" theme.
They say greedy market manipulators have made a shambles of the nation's free-enterprise system, turning the stock market into a big gambling den, with the odds heavily stacked against the small investor.
"The public didn't come to the market to play a game; they can go to Off-Track Betting for that," says A. Brean Murray, chairman of Brean Murray, Foster Securities, a traditional money management firm.
The program traders, on the other hand, portray old-fashioned stock pickers as the Neanderthals of the industry.
Critics like Mr. Murray "are looking for witches, and people who use computers to trade are a convenient boogieman," says J. Thomas Allen, president of Advanced Investment Management Inc., a Pittsburgh firm that runs a $200 million fund that uses index arbitrage.
"Just a blind fear of the unknown is causing them to beg the regulators for protection."
For all the furor, there is nothing particularly complex about the concept of stock-index arbitrage, the most controversial type of computer-assisted program trading.
Like other forms of arbitrage, it merely seeks to take advantage of momentary discrepancies in the price of a single product -- in this case, a basket of stocks -- in different markets -- in this case the New York Stock Exchange and the Chicago futures markets.
That divergence is what stock index traders seek.
When it occurs, the traders place orders via computers to buy the basket of stocks (such as the 500 stocks that constitute the Standard & Poor's 500 stock index) in whichever market is cheaper and sell them in the more expensive market; they lock in the difference in price as profit.
Such program trades, which can involve the purchase or sale of millions of dollars of stock, occur in a matter of seconds.
A program trade of $5 million of stock typically earns a razor-thin profit of $25,000.
To keep program-trading units profitable in the eyes of senior brokerage executives, traders must seize every opportunity their computers find.
The speed with which such program trades take place and the volatile price movements they can cause are what program trading critics profess to despise.
"If you continue to do this, the investor becomes frightened -- any investor: the odd lotter, mutual funds and pension funds," says Larry Zicklin, managing partner at Neuberger & Berman.
But many experts and traders say that program trading isn't the main reason for stock-market gyrations.
"I have not seen one iota of evidence" to support restrictions on program trading, says a Vanderbilt University finance professor, Hans Stoll, an authority on the subject.
Says the Big Board's Mr. Phelan, "Volatility is greater than program trading."
The Oct. 13 plunge was triggered not by program traders, but by news of the unraveling of the $6.79 billion buy-out of UAL Corp.
Unable to unload UAL and other airline shares, takeover-stock speculators, or risk arbitragers, dumped every blue-chip stock they had.
While program trades swiftly kicked in, a "circuit breaker" that halted trading in stock futures in Chicago made some program trading impossible.
Susan Del Signore, head trader at Travelers Investment Management Co., says critics are ignoring "the role the {takeover stock} speculator is taking in the market as a source of volatility."
Many arbs are "overleveraged," she says, and they "have to sell when things look like they fall apart."
Like virtually everything on Wall Street, the program-trading battle is over money, and the traditionalists have been losing out on bundles of it to the New Guard in recent years.
Take the traditional money managers, or "stock pickers," as they are derisively known among the computer jockeys.
Traditional stock managers like to charge 50 cents to 75 cents for every $100 they manage for big institutional investors, and higher fees for smaller investors.
Yet many such managers consistently fail to even keep up with, much less beat, the returns of standard benchmarks like the S&P
Not surprisingly, old-style money managers have been losing clients to giant stock-index funds that use computers to juggle portfolios so they mirror the S&P 500.
The indexers charge only a few pennies per $100 managed.
Today, about $200 billion, or 20% of all pension-fund stock investments, is held by index funds.
The new Wall Street of computers and automated trading threatens to make dinosaurs of the 49 Big Board stock-specialist firms.
These small but influential floor brokers long have earned fat returns of 30% to 40% a year on their capital, by virtue of their monopoly in making markets in individual stocks.
The specialists see any step to electronic trading as a death knell.
And they believe the Big Board, under Mr. Phelan, has abandoned their interest.
The son of a specialist and once one himself, Mr. Phelan has nonetheless been striving -- with products like the new stock basket that his former colleagues dislike so much -- to keep index funds and other program traders from taking their business to overseas markets.
Meanwhile, specialists' trading risks have skyrocketed as a result of stock-market volatility.
"When the sell programs hit, you can hear the order printers start to go" on the Big Board trading floor, says one specialist there.
"The buyers walk away, and the specialist is left alone" as the buyer of last resort for his stable of stocks, he contends.
No one is more unhappy with program trading than the nation's stockbrokers.
They are still trying to lure back small investors spooked by the 1987 stock-market crash and the market's swings since then.
"Small investors are absolutely dismayed that Wall Street is stacking the deck against them, and these wide swings are scaring them to death," says Raymond A. Mason, chairman of regional broker Legg Mason Inc. in Baltimore.
Stockbrokers' business and pay has been falling.
Last year, the average broker earned $71,309, 24% lower than in 1987.
Corporate executives resent that their company's stock has been transformed into a nameless piece of a stock-index basket.
Index traders who buy all 500 stocks in the S&P 500 often don't even know what the companies they own actually do, complains Andrew Sigler, chairman of Champion International Corp.
"Do you make sweatshirts or sparkplugs?
Oh, you're in the paper business," is one reaction Mr. Sigler says he's gotten from his big institutional shareholders.
By this September, program traders were doing a record 13.8% of the Big Board's average daily trading volume.
Among the top practitioners were Wall Street blue bloods: Morgan Stanley & Co., Kidder Peabody, Merrill Lynch, Salomon Brothers Inc. and PaineWebber Group Inc.
But then came Oct. 13 and the negative publicity orchestrated by the Old Guard, particularly against index arbitrage.
The indexers' strategy for the moment is to hunker down and let the furor die.
"There's a lynch-mob psychology right now," says the top program-trading official at a Wall Street firm.
"Wall Street's cash cow has been gored, but I don't think anyone has proven that index arbitrage is the problem."
Too much money is at stake for program traders to give up.
For example, stock-index futures began trading in Chicago in 1982, and within two years they were the fastest-growing futures contract ever launched.
Stock futures trading has minted dozens of millionaires in their 20s and 30s.
Now, on a good day, Chicago's stock-index traders trade more dollars worth of stock futures than the Big Board trades in stock.
Now the stage is set for the battle to play out.
The anti-programmers are getting some helpful thunder from Congress.
Program traders' "power to create total panic is so great that they can't be allowed to have their way," says Rep. Edward Markey, a Massachusetts Democrat.
"We have to have a system that says to those largest investors:
`Sit down!
You will not panic,
you will not put the financial system in jeopardy.'"
But the prospects for legislation that targets program trading is unlikely anytime soon.
Many people, including the Big Board, think that it's too late to put the genie back in the bottle.
The Big Board's directors meet today to approve some program-trading restrictions, but a total ban isn't being considered, Big Board officials say.
"You're not going to stop the idea of trading a basket of stocks," says Vanderbilt's Prof. Stoll. "
Program trading is here to stay, and computers are here to stay, and we just need to understand it."
Short of a total ban, some anti-programmers have proposed several middle-ground reforms, which they say would take away certain advantages program traders currently enjoy in the marketplace that other investors don't.
One such proposal regarding stock-index futures is an increase in the margin requirement -- or the "good-faith" payment of cash needed to trade them -- to about the same level as the margin requirement for stocks.
Currently, margins on stock futures purchases are much lower -- roughly 7% compared with 50% for stocks -- making the futures market much faster and potentially more speculative.
Program trading critics also want the Federal Reserve Board, rather than the futures industry, to set such margins.
Futures traders respond that low margins help keep their markets active.
Higher margins would chase away dozens of smaller traders who help larger traders buy and sell, they say.
Another proposed reform is to have program traders answer to an "uptick rule"a reform instituted after the Great Crash of 1929 that protects against stocks being relentlessly beaten downward by those seeking to profit from lower prices, namely short sellers.
The Big Board's uptick rule prevents the short sale of a stock when the stock is falling in price.
But in 1986, program traders received what amounted to an exemption from the uptick rule in certain situations, to make it easier to link the stock and futures markets.
A reinstatement of the uptick rule for program traders would slow their activity considerably.
Program traders argue that a reinstatement of the rule would destroy the "pricing efficiency" of the futures and stock markets.
James A. White contributed to this article.
Fundamentalists Jihad
Big Board Chairman John Phelan said yesterday that he could support letting federal regulators suspend program trading during wild stock-price swings.
Thus the band-wagon psychology of recent days picks up new impetus.
Index arbitrage is a common form of program trading.
As usually practiced it takes advantage of a rather basic concept: Two separate markets in different locations, trading basically the same widgets, can't trade them for long at prices that are widely different.
In index arbitrage, the widget is the S&P 500, and its price is constantly compared between the futures market in Chicago and the stock markets largely in New York.
To profit from an index-arbitrage opportunity, someone who owns the S&P 500 widget in New York must sell it and replace it with a cheaper S&P 500 widget in Chicago.
If the money manager performing this service is being paid by his clients to match or beat the return of the S&P 500 index, he is likely to remain fully invested at all times.
(Few, if any, index-fund managers will risk leveraging performance by owning more than 100% exposure to stocks, and equally few will want to own less than a 100% position should stocks rise.)
By constantly seeking to own the cheapest widget, index-arbitrage traders hope to add between 1% and 3% to the annual return of the S&P 500.
That represents a very thin "excess" return, certainly far less than what most fundamental stock pickers claim to seek as their performance objective.
The fact that a vast majority of fundamentalist money managers fail to beat the S&P 500 may contribute to the hysteria surrounding the issue.
As more managers pursue the index-arbitrage strategy, these small opportunities between markets will be reduced and, eventually, eliminated.
The current opportunities arise because the process for executing a buy or sell order in the actual stocks that make up the S&P 500 is more cumbersome than transacting in the futures market.
The New York Stock Exchange's attempt to introduce a new portfolio basket is evidence of investors' desires to make fast and easy transactions of large numbers of shares.
So if index arbitrage is simply taking advantage of thin inefficiencies between two markets for the same widget, how did "program trading" evolve into the evil creature that is evoking the curses of so many observers?
All arguments against program trading, even those pressed without fact, conclude with three expected results after "reforms" are implemented: 1) reduced volatility, 2) a long-term investment focus, and 3) a level playing field for the small investor.
But many of these reforms are unneeded, even harmful.
Reducing volatility.
An index-arbitrage trade is never executed unless there is sufficient difference between the markets in New York and Chicago to cover all transaction costs.
Arbitrage doesn't cause volatility; it responds to it.
Think about what causes the difference in prices between the two markets for S&P 500 stocks -- usually it is large investors initiating a buy or sell in Chicago.
A large investor will likely cause the futures market to decline when he sells his futures.
Arbitrage simply transfers his selling pressure from Chicago to New York, while functioning as a buyer in Chicago.
The start of the whole process is the key-someone must fundamentally increase or decrease his ownership in widgets to make widget prices move.
Why does this large hypothetical seller trade in Chicago instead of New York?
Perhaps he is willing to sacrifice to the arbitrage trader some small profit in order to get quick and certain execution of his large trade.
In a competitive market, this investor has many ways to execute his transactions, and he will have more alternatives (both foreign and domestic) if his volume is profitable for an exchange to handle.
If not Chicago, then in New York; if not the U.S., then overseas.
Volatility surrounding his trades occurs not because of index arbitrage, but because his is a large addition or subtraction to a widget market with finite liquidity.
Eliminate arbitrage and liquidity will decline instead of rising, creating more volatility instead of less.
The speed of his transaction isn't to be feared either, because faster and cleaner execution is desirable, not loathsome.
If slowing things down could reduce volatility, stone tablets should become the trade ticket of the future.
Encouraging long-term investing.
We must be very cautious about labeling investors as "long-term" or "short-term."
Policies designed to encourage one type of investor over another are akin to placing a sign over the Big Board's door saying: "Buyers welcome, sellers please go away!"
The ultimate goal of any investor is a profit motive, and regulators should not concern themselves with whether investors are sufficiently focused on the long term.
A free market with a profit motive will attract each investor to the liquidity and risks he can tolerate.
In point of fact, volatility as measured by the annualized standard deviation of daily stock price movements has frequently been much higher than it is today.
Periods before the advent of futures or program trading were often more volatile, usually when fundamental market conditions were undergoing change (1973-75, 1937-40, and 1928-33 for example).
It is interesting to see the fundamental stock pickers scream "foul" on program trading when the markets decline, while hailing the great values still abounding as the markets rise.
Could rising volatility possibly be related to uncertainty about the economics of stocks, instead of the evil deeds of program-trading goblins?
Some of the proposed fixes for what is labeled "program-trading volatility" could be far worse than the perceived problem.
In using program trading as a whipping boy, fundamentalist investors stand to gain the high ground in wooing small investors for their existing stock-selection products.
They may, however, risk bringing some damaging interference from outside the markets themselves.
How does a nice new tax, say 5%, on any financial transaction sound?
That ought to make sure we're all thinking for the long term.
Getting a level playing field.
This argument is perhaps the most interesting one for abolishing program trading -- not because of its merits, but because of the firms championing the cause.
The loudest of these reformers are money managers who cater to smaller investors.
They continually advise their clients on which individual stocks to buy or sell, while their clients continue to hope for superior performance.
Even with mutual funds, the little investor continues to tolerate high fees, high commissions and poor performance, while index-fund managers slowly amass a better record with lower fees, lower commissions and less risk.
Yet our efforts are somehow less noble than those of an investment expert studiously devouring press clippings on each company he follows.
Almost all new regulation is introduced in the interests of protecting the little guy, and he invariably is the one least able to cope with its consequences.
If spreads available from index arbitrage are so enormous, surely any sizable mutual-fund company could profit from offering it to small investors.
The sad reality is that the retail investor continues to pursue stellar performers first, while leaving institutions to grapple with basis points of performance on large sums of money quarter by quarter.
Cost-effective index funds just aren't sexy enough to justify the high fees and commissions that retail customers frequently pay, and that institutional customers refuse to pay.
Each new trading roadblock is likely to be beaten by institutions seeking better ways to serve their high-volume clients, here or overseas.
Legislating new trading inefficiencies will only make things harder on the least sophisticated investors.
So what is next for program trading?
Left to its own devices, index arbitrage will become more and more efficient, making it harder and harder to do profitably.
Spreads will become so tight that it won't matter which market an investor chooses -- arbitrage will prevent him from gaining any temporary profit.
If government or private watchdogs insist, however, on introducing greater friction between the markets (limits on price moves, two-tiered execution, higher margin requirements, taxation, etc.), the end loser will be the markets themselves.
Instead, we ought to be inviting more liquidity with cheaper ways to trade and transfer capital among all participants.
Mr. Allen's Pittsburgh firm, Advanced Investment Management Inc., executes program trades for institutions.
Some Democrats in Congress are warning that a complicated new funding device for the two federal antitrust agencies could result in further cutbacks in a regulatory area already reduced sharply in recent years.
The funding mechanism, which has received congressional approval and is expected to be signed by President Bush, would affect the antitrust operations of the Justice Department and the Federal Trade Commission.
As a part of overall efforts to reduce spending, Congress cut by $30 million the Bush administration's request for antitrust enforcement for fiscal 1990, which began Oct. 1.
To offset the reduction, Congress approved a $20,000 fee that investors and companies will have to pay each time they make required filings to antitrust regulators about mergers, acquisitions and certain other transactions.
Some Democrats, led by Rep. Jack Brooks (D., Texas), unsuccessfully opposed the measure because they fear that the fees may not fully make up for the budget cuts.
But Justice Department and FTC officials said they expect the filing fees to make up for the budget reductions and possibly exceed them.
"It could operate to augment our budget," James Rill, the Justice Department's antitrust chief, said in an interview.
Under measures approved by both houses of Congress, the administration's request for $47 million for the Antitrust Division would be cut $15 million.
The FTC budget request of $70 million, about $34 million of which would go for antitrust enforcement, would also be cut by $15 million.
The administration had requested roughly the same amount for antitrust enforcement for fiscal 1990 as was appropriated in fiscal 1989.
The offsetting fees would apply to filings made under the Hart-Scott-Rodino Act.
Under that law, parties proposing mergers or acquisitions valued at $15 million or more must notify FTC and Justice Department antitrust regulators before completing the transactions.
Currently, the government charges nothing for such filings.
Proponents of the funding arrangement predict that, based on recent filing levels of more than 2,000 a year, the fees will yield at least $40 million this fiscal year, or $10 million more than the budget cuts.
"When you do that, there is not a cut, but there is in fact a program increase of $5 million" each for the FTC and the Justice Department, Rep. Neal Smith (D., Iowa) said during House debate.
But Rep. Don Edwards (D., Calif.) responded that a recession could stifle merger activity, reducing the amount of fees collected.
The antitrust staffs of both the FTC and Justice Department were cut more than 40% in the Reagan administration, and enforcement of major merger cases fell off drastically during that period.
"Today is not the time to signal that Congress in any way sanctions the dismal state into which antitrust enforcement has fallen," Mr. Edwards argued.
Any money in excess of $40 million collected from the fees in fiscal 1990 would go to the Treasury at large.
Corporate lawyers said the new fees wouldn't inhibit many mergers or other transactions.
Though some lawyers reported that prospective acquirers were scrambling to make filings before the fees take effect, government officials said they hadn't noticed any surge in filings.
FALL BALLOT ISSUES set a record for off-year elections.
Odd-year elections attract relatively few ballot issues.
But the 1989 fall total of 80, while well below 1988 activity, shows "a steady ratcheting up in citizen referenda and initiatives," says Patrick McGuigan, editor of Family, Law and Democracy Report.
He says the 10 citizen-sparked issues on state ballots this fall represent the most in any odd-year this decade.
Ballot questions range from a Maine initiative on banning Cruise missiles to a referendum on increasing the North Dakota income tax.
Ballot watchers say attention already is focused on the 1990 elections.
In California, two petition drives for next year's election are "essentially finished," says David Schmidt, author of "Citizen Lawmakers."
Mr. McGuigan cites three completed efforts in Oklahoma.
Hot ballot topics are expected to be abortion, the environment and insurance reform.
Taking a cue from California, more politicians will launch their campaigns by backing initiatives, says David Magleby of Brigham Young University.
PHOTOGRAPH COLLECTING gains new stature as prices rise.
Price records are being set at auctions this week.
At Christie's, a folio of 21 prints from Alfred Stieglitz's "Equivalents" series sold for $396,000, a single-lot record.
Other works also have been exceeding price estimates.
In part, prices reflect development of a market structure based on such variables as the number of prints.
This information used to be poorly documented and largely anecdotal, says Beth Gates-Warren of Sotheby's.
"There is finally some sort of sense in the market," she says.
Corporations and museums are among the serious buyers, giving greater market stability, says Robert Persky of the Photograph Collector.
"When I see prints going into the hands of institutions, I know they aren't going to come back on the market."
Most in demand: classic photographs by masters such as Stieglitz and Man Ray.
But much contemporary work is also fetching "a great deal of money," says Miles Barth of the International Center of Photography.
DIALING 900 brings callers a growing number of services.
Currently a $300 million-a-year business, 900 telephone service is expected to hit $500 million next year and near $2 billion by 1992 as uses for the service continue to expand, says Joel Gross of Donaldson, Lufkin & Jenrette Inc.
The service -- which costs the caller from 30 cents to $25 a minute -- currently is dominated by celebrity chatter, horoscopes and romance lines.
But more serious applications are in the wings, and that is where the future growth is expected.
"I'm starting to see more business transactions," says Andrea West of American Telephone & Telegraph Co., noting growing interest in use of 900 service for stock sales, software tutorials and even service contracts.
Colleges, she says, are eyeing registration through 900 service.
Charities test the waters, but they face legal barriers to electronic fund raising.
"The thing that will really break this market right open is merchandising," Ms. West says.
Much of the 800 service will "migrate to 900," predicts Jack Lawless, general manager of US Sprint's 900 product.
FAMILY PETS are improving recovery rates of patients at Columbia Hospital, Milwaukee.
Patients who receive canine or feline visitors are found to have lower blood pressure and improved appetite and be more receptive to therapy, says Mary Ann O'Loughlin, program coordinator.
TIRED OF TRIMMING?
Hammacher Schlemmer & Co. offers a fiber-optic Christmas tree that eliminates the need to string lights.
The $6,500 tree is designed to send continuously changing colored light to dozens of fiber-end bunches.
MEDICINE TRANSPLANT: Growth of Japanese trade and travel prompts Beth Israel Medical Center, New York, to set up a bilingual medical practice.
Funded by a $1 million gift from Tokio Marine & Fire Insurance, the service will follow Japanese medical protocols, including emphasis on preventative medicine.
DIAPER SERVICES make a comeback amid growing environmental concerns.
Concerned about shrinking landfills and the safety of chemicals used in super-absorbent disposables, parents are returning to the cloth diaper.
Tiny Tots Inc., Campbell, Calif., says business is up 35% in the past year.
"We're gaining 1,200 new customers each week," says Jack Mogavero of General Health Care Corp., Piscataway, N.J.
In Syracuse, N.Y., DyDee Service's new marketing push stresses environmental awareness.
Among its new customers: day-care centers that previously spurned the service.
The National Association of Diaper Services, Philadelphia, says that since January it has gotten more than 672 inquiries from people interested in starting diaper services.
Elisa Hollis launched a diaper service last year because State College, Pa., where she lives, didn't have one.
Diaper shortages this summer limited growth at Stork Diaper Services, Springfield, Mass., where business is up 25% in
Also spurring the move to cloth: diaper covers with Velcro fasteners that eliminate the need for safety pins.
BRIEFS:
Only 57.6% of New Yorkers watch the local news, the lowest viewership in the country, says a new study by Impact Resources Inc., Columbus, Ohio. . . .
FreudToy, a pillow bearing the likeness of Sigmund Freud, is marketed as a $24.95 tool for do-it-yourself analysis.
Program trading is "a racket," complains Edward Egnuss, a White Plains, N.Y., investor and electronics sales executive, "and it's not to the benefit of the small investor, that's for sure."
But although he thinks that it is hurting him, he doubts it could be stopped.
Mr. Egnuss's dislike of program trading is echoed by many small investors interviewed by Wall Street Journal reporters across the country.
But like Mr. Egnuss, few expect it to be halted entirely, and a surprising number doubt it should be.
"I think program trading is basically unfair to the individual investor," says Leo Fields, a Dallas investor.
He notes that program traders have a commission cost advantage because of the quantity of their trades, that they have a smaller margin requirement than individual investors do and that they often can figure out earlier where the market is heading.
But he blames program trading for only some of the market's volatility.
He also considers the market overvalued and cites the troubles in junk bonds.
He adds: "The market may be giving us another message, that a recession is looming."
Or, as Dorothy Arighi, an interior decorator in Arnold, Calif., puts it: "All kinds of funny things spook the market these days."
But she believes that "program trading creates deviant swings.
It's not a sound thing; there's no inherent virtue in it."
She adds that legislation curbing it would be "a darned good idea."
At the Charles Schwab & Co. office in Atlanta's Buckhead district, a group of investors voices skepticism that federal officials would curb program trading.
Citing the October 1987 crash, Glenn Miller says, "It's like the last crash -- they threatened, but no one did anything."
A. Donald Anderson, a 59-year-old Los Angeles investor who says the stock market's "fluctuations and gyrations give me the heebie-jeebies," doesn't see much point in outlawing program trading.
Those who still want to do it "will just find some way to get around" any attempt to curb it.
Similarly, Rick Wamre, a 31-year-old asset manager for a Dallas real-estate firm, would like to see program trading disappear because "I can't see that it does anything for the market or the country."
Yet he isn't in favor of new legislation.
"I think we've got enough securities laws," he says.
"I'd much rather see them dealing with interest rates and the deficit."
Peter Anthony, who runs an employment agency in New York, decries program trading as "limiting the game to a few," but he also isn't sure it should be more strictly regulated.
"I don't want to denounce it because denouncing it would be like denouncing capitalism," he explains.
And surprising numbers of small investors seem to be adapting to greater stock market volatility and say they can live with program trading.
Glenn Britta, a 25-year-old New York financial analyst who plays options for his personal account, says he is "factoring" the market's volatility "into investment decisions."
He adds that program trading "increases liquidity in the market.
You can't hold back technology."
And the practice shouldn't be stopped, he says, because "even big players aren't immune to the rigors of program trading."
Also in New York, Israel Silverman, an insurance-company lawyer, comments that program trading "increases volatility, but I don't think it should be banned.
There's no culprit here.
The market is just becoming more efficient."
Arbitraging on differences between spot and futures prices is an important part of many financial markets, he says.
He adds that his shares in a company savings plan are invested in a mutual fund, and volatility, on a given day, may hurt the fund.
But "I'm a long-term investor," he says.
"If you were a short-term investor, you might be more leery about program trading."
Jim Enzor of Atlanta defends program trading because he believes that it can bring the market back up after a plunge.
"If we have a real bad day, the program would say, `Buy,'" he explains.
"If you could get the rhythm of the program trading, you could take advantage of it."
What else can a small investor do?
Scott Taccetta, a Chicago accountant, is going into money-market funds.
Mr. Taccetta says he had just recouped the $5,000 he lost in the 1987 crash when he lost more money last Oct. 13.
Now, he plans to sell all his stocks by the first quarter of 1990.
In October, before the market dropped, Mrs. Arighi of Arnold, Calif., moved to sell the "speculative stocks" in her family trust "so we will be able to withstand all this flim-flammery" caused by program trading.
She believes that the only answer for individuals is to "buy stocks that'll weather any storm."
Lucille Gorman, an 84-year-old Chicago housewife, has become amazingly immune to stock-market jolts.
Mrs. Gorman took advantage of low prices after the 1987 crash to buy stocks and has hunted for other bargains since the Oct. 13 plunge.
"My stocks are all blue chips," she says.
"If the market goes down, I figure it's paper profits I'm losing.
On the other hand, if it goes way sky high, I always sell.
You don't want to get yourself too upset about these things.
Young's Market Co., a wholesaler of spirits, wines and other goods, said it will merge with a new corporation formed by the Underwood family, which controls Young's.
Under terms of the agreement, shareholders other than the Underwoods will receive $3,500 a share at closing, which is expected in December.
The Underwood family said that holders of more than a majority of the stock of the company have approved the transaction by written consent.
Researchers at American Telephone & Telegraph Co.'s Bell Laboratories reported they raised the electrical current-carrying capacity of new superconductor crystals by a factor of 100, moving the materials closer to commercial use.
The scientists said they created small changes in the crystal-lattice structures of the superconductors to raise the amount of current that single crystals could carry to 600,000 amps per square centimeter in a moderately strong magnetic field.
The scientists said they made the advance with yttrium-containing superconductors cooled to liquid-nitrogen temperature, or minus 321 degrees Fahrenheit.
Their report appears in today's issue of the journal Nature.
The finding marks a significant step in research on "bulk" superconductors, which are aimed at use in wires for motors, magnets, generators and other applications.
Scientists had obtained even higher current-carrying capacity in thin films of the new superconductors, but have had problems increasing the amount of current that bulk crystals could carry.
Superconductors conduct electricity without resistance when cooled.
A family of ceramic superconductors discovered during the past three years promise new technologies such as cheaper electrical generation -- but only if their current-carrying capacity can be raised.
The AT&T advance shows how one aspect of the current-carrying problem can be overcome.
But "it won't lead to imminent use" of new superconductors, cautioned Robert B. van Dover, one of the AT&T researchers.
He added that the current-carrying capacity of multi-crystal samples of superconductors remains too low for most practical uses because of so-called weak links between crystals.
Such multi-crystal materials will probably be needed for commercial applications.
Mr. van Dover said the AT&T team created the desired crystal changes by bombarding superconductor samples with neutrons, a process that creates some radioactivity in the samples and may not be feasible for large-scale commercial use.
Still, scientists breathed a collective sigh of relief about the finding, because it demonstrates how to overcome the "flux pinning" problem that earlier this year was widely publicized as undercutting new superconductors' potential.
The problem involves the motion of small magnetic fields within superconductor crystals, limiting their current-carrying capacity.
Mr. van Dover said the crystal changes his team introduced apparently pins the magnetic fields in place, preventing them from lowering current-carrying capacity.
Mr. van Dover added that researchers are trying to determine precisely what crystal changes solved the problem.
Determining that may enable them to develop better ways to introduce the needed crystal-lattice patterns.
The AT&T team also is trying to combine their latest superconductor process with "melt-textured growth," a process discovered earlier at Bell Laboratories.
The combined processes may significantly raise the current-carrying capacity of multi-crystal samples.
William C. Walbrecher Jr., an executive at San Francisco-based 1st Nationwide Bank, was named president and chief executive officer of Citadel Holding Corp. and its principal operating unit, Fidelity Federal Bank.
The appointment takes effect Nov. 13.
He succeeds James A. Taylor, who stepped down as chairman, president and chief executive in March for health reasons.
Edward L. Kane succeeded Mr. Taylor as chairman.
Separately, Citadel posted a third-quarter net loss of $2.3 million, or 68 cents a share, versus net income of $5.3 million, or $1.61 a share, a year earlier.
The latest results include some unusual write-downs, which had an after-tax impact of $4.9 million.
Those included costs associated with the potential Valley Federal Savings and Loan Association acquisition, which was terminated on Sept. 27, 1989.
In addition, operating results were hit by an increase in loan and real estate loss reserves.
In American Stock Exchange composite trading, Citadel shares closed yesterday at $45.75, down 25 cents.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
International Business Machines Corp. --
$750 million of 8 3/8% debentures due Nov. 1, 2019, priced at 99 to yield 8.467%.
The 30-year non-callable issue was priced at a spread of 57 basis points above the Treasury's 8 1/8% bellwether long bond.
Rated triple-A by both Moody's Investors Service Inc. and Standard & Poor's Corp., the issue will be sold through underwriters led by Salomon Brothers Inc.
The size of the issue was increased from an originally planned $500 million.
Detroit --
$130 million of general obligation distributable state aid bonds due 1991-2000 and 2009, tentatively priced by a Chemical Securities Inc. group to yield from 6.20% in 1991 to 7.272% in 2009.
There is $81.8 million of 7.20% term bonds due 2009 priced at 99 1/4 to yield 7.272%.
Serial bonds are priced to yield from 6.20% in 1991 to 7% in 2000.
The bonds are insured and triple-A-rated.
Santa Ana Community Redevelopment Agency, Calif. --
$107 million of tax allocation bonds, 1989 Series A-D, due 1991-1999, 2009 and 2019, tentatively priced by a Donaldson Lufkin & Jenrette Securities Corp. group to yield from 6.40% in 1991 to 7.458% in 2019.
The 7 3/8% term bonds due 2009 are priced at 99 1/2 to yield 7.422%, and 7 3/8% term bonds due 2019 are priced at 99 to yield 7.458%.
Serial bonds are priced at par to yield from 6.40% in 1991 to 7.15% in 1999.
The bonds are rated single-A by S&P, according to the lead underwriter.
Maryland Community Development Administration, Department of Housing and Community Development --
$80.8 million of single-family program bonds, 1989 fourth and fifth series, tentatively priced by a Merrill Lynch Capital Markets group to yield from 6.25% in 1992 for fourth series bonds to 7.74% in 2029 for fifth series bonds.
There is $30.9 million of fourth series bonds, the interest on which is not subject to the federal alternative minimum tax.
They mature 1992-1999, 2009 and 2017.
Fourth series serial bonds are priced at par to yield from 6.25% in 1992 to 7% in 1999.
The 7.40% term bonds due 2009 are priced to yield 7.45%, and 7.40% term bonds due 2017 are priced to yield 7.50%.
There is $49.9 million of fifth series bonds, which are subject to the federal alternative minimum tax.
They mature in 2005, 2009 and 2029.
Bonds due in 2005 have a 7 1/2% coupon and are priced at par.
The 7 5/8% bonds due 2009 are priced to yield 7.65%, and 7 5/8% bonds due 2029 are priced at 98 1/2 to yield 7.74%.
The underwriters expect a double-A rating from Moody's.
Heiwado Co. (Japan) --
$100 million of Eurobonds due Nov. 16, 1993, with equity-purchase warrants, indicating a 3 7/8% coupon at par, via Daiwa Europe Ltd.
Each $5,000 bond carries one warrant, exercisable from Nov. 30, 1989, through Nov. 2, 1993, to buy shares at an expected premium of 2 1/2% to the closing price when terms are fixed Tuesday.
Fees 2 1/4.
Svenska Intecknings Garanti Aktiebolaget (Sweden) --
20 billion yen of 6% Eurobonds due Nov. 21, 1994, priced at 101 3/4 to yield 6.03% less full fees, via Mitsui Finance International.
Guaranteed by Svenska Handelsbanken.
Fees 1 7/8.
Takashima & Co. (Japan) --
50 million Swiss francs of privately placed convertible notes due March 31, 1994, with a fixed 0.25% coupon at par via Yamaichi Bank (Switzerland).
Put option March 31, 1992, at a fixed 107 7/8 to yield 3.43%.
Each 50,000 Swiss franc note is convertible from Nov. 30, 1989, to March 16, 1994 at a 5% premium over the closing share price Monday, when terms are scheduled to be fixed.
Fees 1 3/4.
Mitsubishi Pencil Co. (Japan) --
60 million Swiss francs of privately placed convertible notes due Dec. 31, 1993, with a fixed 0.25% coupon at par via Union Bank of Switzerland.
Put option on Dec. 31, 1991, at a fixed 106 7/8 to yield 3.42%.
Each 50,000 Swiss franc note is convertible from Dec. 5, 1989, to Dec. 31, 1993, at a 5% premium over the closing share price Tuesday, when terms are scheduled to be fixed.
Fees 1 5/8.
Koizumi Sangyo Corp. (Japan) --
20 million Swiss francs of 6 1/2% privately placed notes due Nov. 29, 1996, priced at 99 1/2 via Dai-Ichi Kangyo Bank (Schweiz).
Guarantee by Dai-Ichi Kangyo Bank Ltd.
Fees 1 3/4.
Although his team lost the World Series, San Francisco Giants owner Bob Lurie hopes to have a new home for them.
He is an avid fan of a proposition on next week's ballot to help build a replacement for Candlestick Park.
Small wonder, since he's asking San Francisco taxpayers to sink up to $100 million into the new stadium.
As San Francisco digs out from The Pretty Big One, opponents say the last thing the city can afford is an expensive new stadium.
A stadium craze is sweeping the country.
It's fueled by the increasing profitability of major-league teams.
Something like one-third of the nation's 60 largest cities are thinking about new stadiums, ranging from Cleveland to San Antonio and St. Petersburg.
Most boosters claim the new sports complexes will be moneymakers for their city.
Pepperdine University economist Dean Baim scoffs at that.
He has looked at 14 baseball and football stadiums and found that only one -- private Dodger Stadium -- brought more money into a city than it took out.
Stadiums tend to redistribute existing wealth within a community, not create more of it.
Voters generally agree when they are given a chance to decide if they want to sink their own tax dollars into a new mega-stadium.
San Francisco voters rejected a new ballpark two years ago.
Last month, Phoenix voters turned thumbs down on a $100 million stadium bond and tax proposition.
Its backers fielded every important interest on their team -- a popular mayor, the Chamber of Commerce, the major media -- and spent $100,000 on promotion.
But voters decided that if the stadium was such a good idea someone would build it himself, and rejected it 59% to 41%.
In San Francisco, its backers concede the ballpark is at best running even in the polls.
George Christopher, the former San Francisco mayor who built Candlestick Park for the Giants in the 1960s, won't endorse the new ballpark.
He says he had Candlestick built because the Giants claimed they needed 10,000 parking spaces.
Since the new park will have only 1,500 spaces, Mr. Christopher thinks backers are playing some fiscal "games" of their own with the voters.
Stadium boosters claim that without public money they would never be built.
Miami Dolphins owner Joe Robbie disagrees, and he can prove it.
Several years ago he gave up trying to persuade Miami to improve its city-owned Orange Bowl, and instead built his own $100 million coliseum with private funds.
He didn't see why the taxpayers should help build something he would then use to turn a healthy profit.
"This stadium shows that anything government can do, we can do better," Mr. Robbie says.
But to Moon Landrieu, the former New Orleans mayor who helped build that city's cavernous, money-losing Superdome, questions of who benefits or the bottom line are of little relevance.
"The Superdome is an exercise in optimism, a statement of faith," he has said.
"It is the very building of it that is important, not how much of it is used or its economics."
An Egyptian Pharaoh couldn't have justified his pyramids any better.
But civilization has moved forward since then.
Today taxpayers get to vote, most of the time, on whether they want to finance the building schemes of our modern political pharaohs, or let private money erect these playgrounds for public passions.
Reed International PLC said that net income for the six months ended Oct. 1 slipped 5% to #89.7 million ($141.9 million), or 16 pence a share, from #94.8 million ($149.9 million), or 17.3 pence a share.
The British paper, packaging and publishing concern, said profit from continuing lines fell 10% to #118 million from #130.6 million.
While there were no one-time gains or losses in the latest period, there was a one-time gain of #18 million in the 1988 period.
And while there was no profit this year from discontinued operations, last year they contributed #34 million, before tax.
Pretax profit fell 3.7% to #128 million from #133 million and was below analysts' expectations of #130 million to #135 million, but shares rose 6 pence to 388 pence in early trading yesterday in London.
Reed is paying an interim dividend of 4.6 pence, up 15% from 4 pence a year earlier.
Sales fell 20% to #722 million.
Earnings were hurt by disposal of operations in its restructuring, Reed said.
Wall Street's big securities firms face the prospect of having their credit ratings lowered.
The reason: Risks from the firms' new "merchant banking" activities are rising as revenue from the industry's traditional business erodes.
The downgrading of debt issued by CS First Boston Inc., parent of First Boston Corp., by Moody's Investors Service Inc., coupled with a Moody's announcement that Shearson Lehman Hutton Holdings Inc. is under review for a possible downgrade, sent shivers through the brokerage community this week.
With the shudders came the realization that some of Wall Street's biggest players are struggling to maintain the stellar credit standing required to finance their activities profitably.
Securities firms are among the biggest issuers of commercial paper, or short-term corporate IOUs, which they sell to finance their daily operations.
The biggest firms still retain the highest ratings on their commercial paper.
But Moody's warned that Shearson's commercial paper rating could be lowered soon, a move that would reduce Shearson's profit margins on its borrowings and signal trouble ahead for other firms.
Shearson is 62%-owned by American Express Co.
"Just as the 1980s bull market transformed the U.S. securities business, so too will the more difficult environment of the 1990s," says Christopher T. Mahoney, a Moody's vice president.
"A sweeping restructuring of the industry is possible."
Standard & Poor's Corp. says First Boston, Shearson and Drexel Burnham Lambert Inc., in particular, are likely to have difficulty shoring up their credit standing in months ahead.
What worries credit-rating concerns the most is that Wall Street firms are taking long-term risks with their own capital via leveraged buy-out and junk bond financings.
That's a departure from their traditional practice of transferring almost all financing risks to investors.
Whereas conventional securities financings are structured to be sold quickly, Wall Street's new penchant for leveraged buy-outs and junk bonds is resulting in long-term lending commitments that stretch out for months or years.
"The recent disarray in the junk bond market suggests that brokers may become longer-term creditors than they anticipated and may face long delays" in getting their money back, says Jeffrey Bowman, a vice president at S&P, which raised a warning flag for the industry in April when it downgraded CS First Boston.
"Wall Street is facing a Catch-22 situation," says Mr. Mahoney of Moody's.
Merchant banking, where firms commit their own money, "is getting riskier, and there's less of it to go around."
In addition, he says, the buy-out business is under pressure "because of the junk bond collapse," meaning that returns are likely to decline as the volume of junk-bond financings shrinks.
In a leveraged buy-out, a small group of investors acquires a company in a transaction financed largely by borrowing, with the expectation that the debt will be paid with funds generated by the acquired company's operations or sales of its assets.
In a recent report, Moody's said it "expects intense competition to occur through the rest of the century in the securities industry, which, combined with overcapacity, will create poor prospects for profitability."
It said that the "temptation for managements to ease this profit pressure by taking greater risks is an additional rating factor."
Both Moody's and S&P cited First Boston's reliance in recent years on merchant banking, which has been responsible for a significant portion of the closely held firm's profit.
The recent cash squeeze at Campeau Corp., First Boston's most lucrative client of the decade, is proving costly to First Boston because it arranged more than $3 billion of high-yield, high-risk junk financings for Campeau units.
In addition, a big loan that First Boston made to Ohio Mattress Co. wasn't repaid on time when its $450 million junk financing for a buy-out of the bedding company was withdrawn.
"These two exposures alone represent a very substantial portion of CS First Boston's equity," Moody's said.
"Total merchant banking exposures are in excess of the firm's equity."
CS First Boston, however, benefits from the backing of its largest shareholder, Credit Suisse, Switzerland's third largest bank.
Shearson also has been an aggressive participant in the leveraged buy-out business.
But its earnings became a major disappointment as its traditional retail, or individual investor, business showed no signs of rebounding from the slump that followed the October 1987 stock market crash.
In addition, Shearson's listed $2 billion of capital is overstated, according to the rating concerns, because it includes $1.7 billion of goodwill.
Shearson "really only has $300 million of capital," says Mr. Bowman of S&P.
A Shearson spokesman said the firm isn't worried.
"A year ago, Moody's also had Shearson under review for possible downgrade," he said.
"After two months of talks, our rating was maintained."
Drexel, meanwhile, already competes at a disadvantage to its big Wall Street rivals because it has a slightly lower commercial paper rating.
The collapse of junk bond prices and the cancellation of many junk bond financings apparently have taken their toll on closely held Drexel, the leading underwriter in that market.
The firm also has been hit with big financial settlements with the government stemming from its guilty plea to six felonies related to a big insider-trading scandal.
Drexel this year eliminated its retail or individual customer business, cutting the firm's workforce almost in half to just over 5,000.
Recently, Drexel circulated a private financial statement among several securities firms showing that its earnings performance has diminished this year from previous years.
The firm's capital, moreover, hasn't grown at the same rate as in the past, officials at these firms say.
Drexel remains confident of its future creditworthiness.
"We're well positioned with $1.7 billion of capital," a Drexel spokesman said.
"And as a leading investment and merchant banking firm, the fact that we are no longer subject to the uncertainties and vicissitudes of the retail business is a major plus in our view.
Moreover, we've probably been the most aggressive firm on the Street in reducing costs, which are down around 40% over the last six months.
Lewis C. Veraldi, the father of the team that created the highly successful Ford Taurus and Mercury Sable cars, retired early after experiencing recent heart problems.
Most recently, Mr. Veraldi, 59 years old, has been vice president of product and manufacturing engineering at Ford Motor Co.
But he is best known in the auto industry as the creator of a team car-development approach that produced the two midsized cars that were instrumental in helping the No. 2 auto maker record profits in recent years and in enabling the company's Ford division to eclipse General Motors Corp.'s Chevrolet division as the top-selling nameplate in the U.S.
Under the so-called Team Taurus approach, Mr. Veraldi and other Ford product planners sought the involvement of parts suppliers, assembly-line workers, auto designers and financial staff members from the initial stages of the development cycle.
The concept's goal was to eliminate bureaucracy and make Ford's product development more responsive to consumer demands.
It was later applied to other new-car programs, including those that produced the Ford Thunderbird and Mercury Cougar.
Ford Chairman Donald E. Petersen said yesterday that Mr. Veraldi has "helped to change the world's perception of American-made cars."
Mr. Veraldi worked at Ford for 40 years, holding a variety of car and parts-engineering positions.
The limits to legal absurdity stretched another notch this week when the Supreme Court refused to hear an appeal from a case that says corporate defendants must pay damages even after proving that they could not possibly have caused the harm.
We can understand and share the compassion that makes judges sometimes wish to offer a kind of Solomonic aid to those who've been hurt.
But this case is a stark lesson in how the failures of the traditional policy-making process have left the courts as the only forum this country has to debate risk, technology and innovation.
Too often now, a single court decision becomes the precedent for other, less compelling cases.
From the 1940s until 1971, some two million women took the synthetic hormone diethylstilbestrol (DES) to prevent miscarriages and morning sickness.
The drug was approved by the Food and Drug Administration and marketed by some 300 pharmaceutical companies, often under generic labels.
In the 1970s, scientists reported cancer cases among the daughters of DES users.
The cases quickly went to court, but the mothers of several thousand DES plaintiffs couldn't recall whose brand they used.
Beginning in 1980, courts in several states including California and New York decided to suspend the common-law rule that plaintiffs must prove that the defendants are the ones who are liable.
Courts made the assumption that all DES pills were essentially the same, and created a market-share test so that damages would be assessed against drug makers in the proportion of their share of the original sales.
This has some logic.
Drug makers shouldn't be able to duck liability because people couldn't identify precisely which identical drug was used.
But courts quickly tumbled down a slippery slope.
Just as all plaintiffs are not alike, it turns out that DES defendants marketed the drugs differently and may have offered different warranties.
The ultimate result came in Hymowitz v. Lilly, where the highest New York court expanded the market-share approach for the first time to say that drug makers that could prove Mindy Hymowitz's mother didn't use their pill must still pay their share of any damages.
But as Duke University law professor William Van Alstyne notes, by this reasoning a defendant could be held liable in New York for a bad apple even if he sold all his apples in California.
Despite the Supreme Court's refusal to hear the case, there are serious constitutional issues of due process and uncompensated takings from the defendants.
The big problem, however, is that there's no guarantee that this reasoning will be limited to DES or to drugs.
The problem here goes well beyond twisting legal doctrine.
The California Supreme Court last year reversed direction to make it much harder to win DES cases because the justices saw how all the pharmaceutical litigation has chilled the introduction of new drugs.
The court rejected strict liability for prescription drugs, citing the huge, hidden social costs.
"Public policy favors the development and marketing of beneficial new drugs, even though some risks, perhaps serious ones, might accompany their introduction because drugs can save lives and reduce pain and suffering," the unanimous court said.
The California justices noted that the fear of litigation already forced the only remaining anti-morning-sickness drug, Bendectin, off the U.S. market.
This raises the key issue: What to do about people who suffer serious injuries from beneficial drugs?
We now know that holding drug makers liable where there's no evidence that they or anyone else knew of any risks only means the drugs won't be available to anyone.
As liability expert Peter Huber tells us, after the Hymowitz case, if any drug maker introduces an anti-miscarriage drug "it's time to sell that company's stock short."
We also know that the tort system is a lousy way to compensate victims anyway; some win the legal lottery, others get much less and contingency-fee lawyers take a big cut either way.
DES daughters and other victims of drugs would be better off if their cases were taken out of the courts.
Congress could create a compensation program to help such victims while protecting the national interest in encouraging new drugs.
But a 1986 law that supposedly replaced lawsuits over children's vaccines with a compensation fund has predictably led to even more litigation.
Everyone by now understands that Congress is utterly incapable of writing legislation to help deserving people without its becoming some billion-dollar morass.
We have no doubt this is one reason judges in New York and justices on the Supreme Court are willing to trash the law in the DES cases.
They must figure that justice has to get done by somebody, but know it won't be done by Congress.
Odyssey Partners Limited Partnership, an investment firm, completed the purchase of May Department Stores Co.'s Caldor discount chain for $500 million plus the assumption of $52 million in debt.
Caldor, based in Norwalk, Conn., operates 118 stores in the Northeast; it reported revenue of $1.6 billion last year.
May Stores, St. Louis, runs such well-known department stores as Lord & Taylor.
N.V. DSM said net income in the third quarter jumped 63% as the company had substantially lower extraordinary charges to account for a restructuring program.
The Dutch chemical group said net income gained to 235 million guilders ($113.2 million), or 6.70 guilders a share, from 144 million guilders, or 4.10 guilders a share, a year ago.
The 32% state-owned DSM had eight million guilders of extraordinary charges in the latest quarter, mainly to reflect one-time losses in connection with the disposal of some operations.
The charges were offset in part by a gain from the sale of the company's construction division.
Last year, DSM had 71 million guilders of extraordinary charges for the restructuring program and other transactions.
The earnings growth also was fueled by the company's ability to cut net financing spending by half to around 15 million guilders.
Also, substantially lower Dutch corporate tax rates helped the company keep its tax outlay flat relative to earnings growth, the company added.
Sales, however, were little changed at 2.46 billion guilders, compared with 2.42 billion guilders.
Allergan Inc. said it received Food and Drug Administration approval to sell the PhacoFlex intraocular lens, the first foldable silicone lens available for cataract surgery.
The len's foldability enables it to be inserted in smaller incisions than are now possible for cataract surgery, the eye care and skin care concern said.
Cataracts refer to a clouding of the eye's natural lens.
A man from the Bush administration came before the House Agriculture Committee yesterday to talk about the U.S.'s intention to send some $100 million in food aid to Poland, with more to come from the EC.
The committee's members are worried what all this free food might do to the economic prospects of Poland's own farmers.
Rep. Gary Ackerman noted that past food aid had harmed farmers in El Salvador and Egypt.
However well intentioned, food transfers have the habit of growing larger and wrecking the market incentives for the recipient country's own farmers.
The First World has for some time had the bad habit of smothering other people's economies with this kind of unfocused kindness.
It should be constantly stressed that Poland's farmers mostly need a real market for their products.
Elco Industries Inc. said it expects net income in the year ending June 30, 1990, to fall below a recent analyst's estimate of $1.65 a share.
The Rockford, Ill., maker of fasteners also said it expects to post sales in the current fiscal year that are "slightly above" fiscal 1989 sales of $155 million.
The company said its industrial unit continues to face margin pressures and lower demand.
In fiscal 1989, Elco earned $7.8 million, or $1.65 a share.
The company's stock fell $1.125 to $13.625 in over-the-counter trading yesterday.
Oshkosh Truck Corp., Oshkosh, Wis., estimated earnings for its fourth quarter ended Sept. 30 fell 50% to 75% below the year-earlier $4.5 million, or 51 cents a share.
The truck maker said the significant drop in net income will result in lower earnings for the fiscal year.
In fiscal 1988, the company earned $17.3 million, or $1.92 a share, on revenue of $352.9 million.
Oshkosh Truck attributed the downturn in its earnings to higher start-up costs of its new chassis division, a softer motor-home market and higher administrative costs of compliance with government contractor regulations.
The company said it is in the process of phasing out John Deere, its current source of production for midsized motor home chassis.
In anticipation of the start-up of its new factory, the company said a larger-than-normal chassis supply has been built to carry it through the transition period.
Tokyo stocks edged up Wednesday in relatively active but unfocused trading.
London shares finished moderately higher.
At Tokyo, the Nikkei index of 225 selected issues, which gained 132 points Tuesday, added 14.99 points to 35564.43.
In early trading in Tokyo Thursday, the Nikkei index fell 63.79 points to 35500.64.
Wednesday's volume on the First Section was estimated at 900 million shares, in line with Tuesday's 909 million.
Declining issues slightly outnumbered advancing issues, 454 to 451.
Investors switched trading focus quickly as they did Tuesday, reflecting uncertainty about long-term commitments to any issue or sector, traders said.
Speculation, on the other hand, sparked buying in certain incentive-backed issues, though rumors underlying such shares eventually proved untrue.
The development, traders said, showed that there is more than ample liquidity available for investment despite the market's recent directionless trend.
Dealers led the market Wednesday by actively trading for their own accounts, observers said.
Institutions mostly remained on the sidelines because of uncertainty regarding interest rates and the dollar.
The Tokyo Stock Price Index (Topix) of all issues listed in the First Section, which gained 16.05 points Tuesday, was down 1.46 points, or 0.05%, at 2691.19.
The Second Section index, which added 6.84 points Tuesday, was up 5.92 points, or 0.16%, to close at 3648.82.
Volume in the second section was estimated at 18 million shares, up from 14 million Tuesday.
Akio Yamamoto, managing director of Nomura Investment Trust Management, said that if the U.S. federal funds rate declines to around 8.5%, institutions would acquire a clearer idea regarding the direction of the market and thus more comfortably participate in active buying.
Tokyu Group, Mitsubishi Estate and Bridgestone/Firestone, which advanced Tuesday, declined on profit-taking.
Wednesday's dominant issue was Yasuda Fire & Marine Insurance, which continued to surge on rumors of speculative buying.
It ended the day up 80 yen (56 cents) to 1,880 yen ($13.15).
Due to continuingly high gold prices tied to uncertainty about the U.S. currency, investor interest was directed toward oil and mining shares, which traders called a "defensive" action frequently taken when the dollar is expected to fall or during times of inflation.
Teikoku Oil, also stimulated by rumors of speculative buying, advanced 100 yen to 1,460.
Showa Shell gained 20 to 1,570 and Mitsubishi Oil rose 50 to 1,500.
Sumitomo Metal Mining fell five yen to 692 and Nippon Mining added 15 to 960.
Among other winners Wednesday was Nippon Shokubai, which was up 80 at 2,410.
Marubeni advanced 11 to 890.
London share prices were bolstered largely by continued gains on Wall Street and technical factors affecting demand for London's blue-chip stocks.
The Financial Times-Stock Exchange 100-share index closed 17.5 points higher at 2160.1.
It rose largely throughout the session after posting an intraday low of 2141.7 in the first 40 minutes of trading.
The index ended the day near its session high of 2163.2, which was posted within the last half-hour of trading.
Dealers said most investor interest was focused on defensive blue-chip stocks, particularly those with limited U.K. exposure.
Also, several key blue chips were pushed higher in thin volume because of a technical squeeze among market makers.
Sterling's firm tone, combined with a steady opening on Wall Street, also tempted some investors to come back to the market, dealers said.
There were concerns early in the day that Wall Street's sharp gains on Tuesday were overdone and due for a reversal.
The FT 30-share index settled 16.7 points higher at 1738.1.
Volume was 372.9 million shares, up from 334.5 million on Tuesday.
Dealers said institutions were still largely hugging the sidelines on fears that the market's recent technical rally might prove fragile.
They cited Wall Street's recent volatility and the lack of a clear indication over the market's short-term direction as factors in the institutional caution.
Jaguar, a U.K. luxury auto maker being pursued by Ford Motor and General Motors, gained 10 pence (16 cents) a share to close at 879 pence ($13.90).
It shed about 7 pence, however, after dealers said the market was disappointed that Ford didn't move to tender a bid for control of the company.
Dealers said the U.K. government's decision Tuesday to waive its protective "golden share" in the auto maker raised prospects of a bidding war between the two U.S. auto giants.
But the waiver also was seen as a signal that Ford, a major U.K. auto industry employer, was able to gain government acceptance of its bid for control of Jaguar.
Dealers said that interpretation sparked expectations of an imminent bid by Ford.
B.A.T Industries, which is being pursued by Sir James Goldsmith's Hoylake Investments, rose 9 to 753 on speculation that Hoylake will sweeten its bid, dealers said.
Like Jaguar, B.A.T also eased off its highs in afternoon dealings.
Reed International, a U.K. publishing group, gained 15 to 397 despite reporting a 3.7% drop in interim pretax profit.
Analysts said the fall in pretax profit was due to the group's recent restructuring and sale of peripheral units, and that its remaining businesses are performing well.
Dealers said the market agreed.
Stocks boosted by market-makers shopping to cover book requirements in FT-SE 100 shares included Carlton Communications, which climbed 32 to 778.
Drug companies in the key index also notched gains as market-makers searched for stock in anticipation of demand due to the sector's defensive qualities.
Wellcome gained 18 to 666 on a modest 1.1 million shares.
Glaxo, the U.K.'s largest pharmaceutical concern, advanced 23 to #14.13.
Stock prices closed higher in Stockholm, Amsterdam and Frankfurt and lower in Zurich.
Paris, Brussels, and Milan were closed for a holiday.
South African gold stocks closed marginally lower.
Elsewhere, share prices closed higher in Singapore, Taipei and Wellington, were mixed in Hong Kong, lower in Seoul and little changed in Sydney.
Manila markets were closed for a holiday.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
The following issues were recently filed with the Securities and Exchange Commission:
Intermec Corp., offering of 1,050,000 common shares, via Goldman, Sachs & Co. and Piper, Jaffray & Hopwood Inc.
Middlesex Water Co., offering of 150,000 shares of common stock, via Legg Mason Wood Walker Inc. and Howard, Weil, Labouisse, Friedrichs Inc.
Midwesco Filter Resources Inc., initial offering of 830,000 common shares, to be offered by the company, via Chicago Corp.
Nylev Municipal Fund Inc., offering of five million common shares.
Occidental Petroleum Corp., shelf offering of $1.5 billion in senior debt securities.
Prime Motor Inns Inc., offering of up to $300 million zero coupon convertible debentures, via Drexel Burnham Lambert Inc. and Montgomery Securities.
Service Fracturing Co., proposed offering of 1.2 million shares of common stock, via Lovett Mitchell Webb & Garrison, Inc., and Blunt Ellis & Loewi Inc.
Western Gas Resources Inc., initial offering of 3,250,000 shares of common stock, of which 3,040,000 shares will be sold by the company and 210,000 shares by a holder, via Prudential-Bache Capital Funding, Smith Barney, Harris Upham & Co., and Hanifen, Imhoff Inc.
Hold the Putty!
With lipsticks, liners, lotions and creams, There are still beauty plans left to tackle: But as the years go by, it seems That before I paint, I should spackle.
-- Pat D'Amico.
Criminal charges were filed against Diceon Electronics Inc. and two company officials alleging waste disposal violations in its Chatsworth, Calif., facility.
The Los Angeles County district attorney's office filed seven felony and five misdemeanor counts charging that late last year and early this year the Irvine, Calif.-based circuit-board manufacturer illegally disposed of acid, caustic and heavy metals into the sewer system, and stored hazardous materials in leaky, unlabeled or open-top containers.
Named as defendants were Roland Matthews, president, and Peter Jonas, executive vice president and chief financial officer, as well as a former plant manager.
The company said local authorities held hearings on the allegations last spring and had returned the plant to "routine inspection" in August.
"The company does not feel that it or any of the individuals violated any criminal statute and the company expects full vindication in court."
Arraignments are scheduled for Nov. 14.
Consumer confidence stayed strong in October, despite the unsettling gyrations of the stock market.
"The sharp stock market decline in late October appears to have had little or no effect on consumers," said Fabian Linden, executive director of the Conference Board's consumer research center.
"Survey returns received after the drop in the Dow Jones average were about the same as the views expressed prior to that event."
The nonprofit, industry-supported group said its Consumer Confidence Index was 116.4 in October, barely changed from a revised 116.3 in September.
The index was 116.9 in October 1988 and in the past year has ranged from a low of 112.9 to a high of 120.7.
It uses a base of 100 in 1985.
In October, more people said that present business conditions were "good" than in September.
An equal number in each month said that employment conditions were good.
And 19.6% of consumers contacted believed business conditions will improve in the coming six months, compared with 18.3% in September.
Also, more people said conditions will worsen in the period.
(Fewer said conditions won't change.)
In October 1988, 21.1% said business conditions would improve.
In October 1989, 16.9% said more jobs will be created in the coming six months, compared with 17.4% in September and 18.6% in October 1988.
Only 26.8% in October, compared with 28.5% in September and 26.8% in October 1988, said income would increase.
"The sustained level of confidence can be attributed to the continued favorable circumstances which affect the consumer's day-to-day economic life," said Mr. Linden.
"Unemployment continues at a relatively low level, providing a sense of job security, and a low inflation rate has kept the purchasing power of the weekly paycheck reasonably strong."
The consumer confidence survey, covering 5,000 U.S. households, is conducted in the first two weeks of each month for the Conference Board by National Family Opinion Inc., a Toledo, Ohio, market researcher.
Buying plans were mixed in October, with fewer households indicating plans to buy cars and more saying they will buy homes and appliances in the coming six months.
In October, 6.7% of respondents said they will buy a car, easing from September when 8.1% anticipated a purchase.
In October 1988, 7.3% said they would buy a car.
Home purchase plans increased to 3.3% from 3.1% in the two recent months.
In October 1988, 3.7% said they would buy a house.
In 1989, home purchase plans have ranged monthly from 2.9% to 3.7% of respondents.
In October, 30.6% said they will buy appliances in the coming six months, compared with 27.4% in September and 26.5% in October 1988.
Despite a deluge of economic news, the Treasury market remained quiet but the corporate market was abuzz over International Business Machines Corp.'s huge debt offering.
"There were so many economic reports but the market didn't care about any of them," said Kathleen Camilli, a money market economist at Drexel Burnham Lambert Inc.
"So the focus turned to other fixed-income markets, corporate and mortgages in particular," she said.
IBM, the giant computer maker, offered $750 million of non-callable 30-year debentures priced to yield 8.47%, or about 1/2 percentage point higher than the yield on 30-year Treasury bonds.
The size of IBM's issue was increased from an originally planned $500 million as money managers and investors scrambled to buy the bonds.
In the investment-grade corporate market, "it's rare that you get an opportunity to buy a name that has such broad appeal and has such attractive call features," said James Ednie, a Drexel industrial bond trader.
Money managers ranked IBM's offering as the most significant investment-grade sale of the year because large issues of long-term debt by companies with triple-A credit are infrequent.
Syndicate officials at lead underwriter Salomon Brothers Inc. said the debentures were snapped by up pension funds, banks, insurance companies and other institutional investors.
In the Treasury market, investors paid scant attention to the day's economic reports, which for the most part provided a mixed view of the economy.
"Whether you thought the economy was growing weak or holding steady, yesterday's economic indicators didn't change your opinion," said Charles Lieberman, a managing director at Manufacturers Hanover Securities Corp.
The government reported that orders for manufactured goods were essentially unchanged in September while construction spending was slightly lower.
Both indicators were viewed as signs that the nation's industrial sector is growing very slowly, if at all.
A survey by the Federal Reserve's 12 district banks and the latest report by the National Association of Purchasing Management blurred that picture of the economy.
In a monthly report prepared for use at the Fed's next Federal Open Market Committee meeting on Nov. 14., the nation's central bank found that price increases have moderated and economic activity has grown at a sluggish pace in recent weeks.
Among other things, the survey found that manufacturing activity varied considerably across districts and among industries.
The Philadelphia and Cleveland districts, for example, reported declines in manufacturing activity while the Boston, Dallas and San Francisco banks noted that business expanded.
The purchasing managers index of economic activity rose in October, although it remains below 50%.
A reading below 50% indicates that the manufacturing sector is slowing while a reading above 50% suggests that the industry is expanding.
Mr. Lieberman said the diverse showing in yesterday's reports "only enhances the importance of the employment data."
The employment report, which at times has caused wide swings in bond prices, is due out tomorrow.
The average estimate of 22 economists polled by Dow Jones Capital Markets Report was that non-farm payrolls expanded by 152,000 in October.
The economists forecast a 0.1% rise in the unemployment rate to 5.4%.
Treasury Securities
In a surprise announcement, the Treasury said it will reopen the outstanding benchmark 30-year bond rather than create a new one for next week's quarterly refunding of the federal debt.
The Treasury will raise $10 billion in fresh cash by selling $30 billion of securities, including $10 billion of new three-year notes and $10 billion of new 10-year notes.
But rather than sell new 30-year bonds, the Treasury will issue $10 billion of 29year, nine-month bonds -- essentially increasing the size of the current benchmark 30-year bond that was sold at the previous refunding in August.
Credit market analysts said the decision to reopen the current benchmark, the 8 1/8% bond due August 2019, is unusual because the issue trades at a premium to its face amount.
Some dealers said the Treasury's intent is to help government bond dealers gauge investor demand for the securities, given uncertainties about when the auction will occur.
The Treasury said the refunding is contingent upon congressional and presidential passage of an increase in the federal debt ceiling.
Until such action takes places, the Treasury has no ability to issue new debt of any kind.
Meanwhile, Treasury bonds ended modestly higher in quiet trading.
The benchmark 30-year bond about 1/4 point, or $2.50 for each $1,000 face amount.
The benchmark was priced at 102 22/32 to yield 7.88% compared with 102 12/32 to yield 7.90% Tuesday.
The latest 10-year notes were quoted at 100 22/32 to yield 7.88% compared with 100 16/32 to yield 7.90%.
The discount rate on three-month Treasury bills was essentially unchanged at 7.79%, while the rate on six-month bills was slightly lower at 7.52% compared with 7.60% Tuesday.
Corporate Issues
IBM's $750 million debenture offering dominated activity in the corporate debt market.
Meanwhile, most investment-grade bonds ended unchanged to as much as 1/8 point higher.
In its latest compilation of performance statistics, Moody's Investors Service found that investment-grade bonds posted a total return of 2.7% in October while junk bonds showed a negative return of 1.5%.
Moody's said those returns compare with a 3.8% total return for longer-term Treasury notes and bonds.
Total return measures price changes and interest income.
For the year to date, Moody's said total returns were topped by the 16.5% of longer-term Treasury issues, closely followed by 15% for investment-grade bonds.
Junk bonds trailed the group again.
"Even the 7.2% return from the risk-free three-month Treasury bill has easily outdistanced the 4.1% return from junk bonds," wrote Moody's economist John Lonski in yesterday's market report.
"Little wonder that buyers for junk have been found wanting," he said.
Moody's said the average net asset value of 24 junk-bond mutual funds fell by 4.2% in October.
Mortgage-Backed Issues
Mortgage securities ended slightly higher but trailed gains in the Treasury market.
Ginnie Mae's 9% issue for November delivery finished at 98 5/8, up 2/32, and its 9 1/2% issue at 100 22/32, also up 2/32.
The Ginnie Mae 9% securities were yielding 9.32% to a 12-year average life.
Activity was light in derivative markets, with no new issues priced.
Municipal Issues
Municipal bonds were mostly unchanged to up 1/8 point in light, cautious trading prior to tomorrow's unemployment report.
A $114 million issue of health facility revenue bonds from the California Health Facilities Financing Authority was temporarily withdrawn after being tentatively priced by a First Boston Corp. group.
An official for the lead underwriter declined to comment on the reason for the delay, but market participants speculated that a number of factors, including a lack of investor interest, were responsible.
The issue could be relaunched, possibly in a restructured form, as early as next week, according to the lead underwriter.
A $107.03 million offering of Santa Ana Community Redevelopment Agency, Calif., tax allocation bonds got off to a slow start and may be repriced at lower levels today, according to an official with lead underwriter Donaldson Lufkin & Jenrette Securities Corp.
The Santa Ana bonds were tentatively priced to yield from 6.40% in 1991 to 7.458% in
Bucking the market trend, an issue of $130 million general obligation distributable state aid bonds from Detroit, Mich., apparently drew solid investor interest.
They were tentatively priced to yield from 6.20% in 1991 to 7.272% in
Foreign Bond
West German dealers said there was little interest in Treasury bonds ahead of Thursday's new government bond issue.
So far, they said, investors appear unenthusiastic about the new issue which might force the government to raise the coupon to more than 7%.
It is generally expected to be the usual 10-year, four billion mark issue.
Rumors to the contrary have been that it would be a six billion mark issue, or that the last Bund, a 7% issue due October 1999, would be increased by two billion marks.
Elsewhere:
-- In Japan, the benchmark No. 111 4.6% issue due 1998 ended on brokers screens unchanged at 95.09 to yield 5.435%.
-- In Britain, the benchmark 11 3/4% bond due 2003/2007 fell 14/32 to 111 2/32 to yield 10.19%.
The 12% notes due 1995 fell 9/32 to 103 3/8 to yield 11.10%.
Standard & Poor's Corp. lowered to double-C from triple-C the rating on about $130 million of debt.
The rating concern said the textile and clothing company's interest expense exceeds operating profit "by a wide margin" and it noted United's estimated after-tax loss of $24 million for the year ended June 30.
Travelers Corp.'s third-quarter net income rose 11%, even though claims stemming from Hurricane Hugo reduced results $40 million.
Net advanced to $94.2 million, or 89 cents a share, from $85 million, or 83 cents a share, including net realized investment gains of $31 million, up from $10 million a year ago.
But revenue declined to $3 billion from $3.2 billion.
Travelers estimated that the California earthquake last month will result in a fourth-quarter pre-tax charge of less than $10 million.
The insurer's earnings from commercial property/casualty lines fell 59% in the latest quarter, while it lost $7.2 million in its personal property/casualty business, compared with earnings of $6.1 million a year ago.
Travelers's employee benefits group, which includes its group health insurance operations, posted earnings of $24 million, compared with a loss of $3 million last year.
In the first nine months, net was $306 million, compared with a loss of $195 million in the 1988 period.
The year-ago results included a $415 million charge in the 1988 second quarter for underperforming real estate and mortgage loans.
The British Department of Trade and Industry ordered an investigation of the competitive impact of Michelin Tyre PLC's planned acquisition of National Tyre Service Ltd.
The department said it referred the takeover to the Monopolies and Mergers Commission because of the purchase's possible effects on the U.K. market for distribution of replacement tires.
BTR PLC, a U.K. industrial conglomerate, said in June it had sold its National Tyre Service business to Michelin Investment Ltd., a U.K. unit of the tire maker, for #140 million ($221.4 million).
Michelin Tyre is a unit of France's Michelin S.A.
Michelin officials couldn't immediately comment on the referral, but they noted the purchase from BTR has already been concluded.
National Tyre, which has 420 branches throughout the U.K., had 1988 pretax profit of #8.5 million.
Rep. John Dingell, an important sponsor of President Bush's clean-air bill, plans to unveil a surprise proposal that would break with the White House on a centerpiece issue: acid rain.
The Michigan Democrat's proposal, which is expected today, is described by government sources and lobbyists as significantly weaker than the Bush administration's plan to cut utility emissions that lead to acid rain.
The administration's plan could cost utilities, mainly those that use coal, up to $4 billion a year.
The proposal comes as a surprise even to administration officials and temporarily throws into chaos the House's work on clean-air legislation.
As chairman of the House Energy and Commerce Committee, Mr. Dingell has almost single-handed control over clean-air legislation.
People close to the utility industry said Mr. Dingell's proposal appears to guarantee only an estimated seven-million-ton cut in annual sulfur-dioxide emissions that lead to acid rain, though additional cuts could be ordered later.
Mr. Bush's legislative package promises to cut emissions by 10 million tons -- basically in half -- by the year 2000.
Although final details weren't available, sources said the Dingell plan would abandon the president's proposal for a cap on utilities' sulfur-dioxide emissions.
That proposal had been hailed by environmentalists but despised by utilities because they feared it would limit their growth.
It also would junk an innovative market-based system for trading emissions credits among polluters.
In addition, it is believed to offer a cost-sharing mechanism that would help subsidize the clean-up costs for the dirtiest coal-fired utilities in the country, sparing their customers from exorbitant jumps in their electric bills.
The administration, sticking to its vow of avoiding tax increases, has staunchly opposed cost-sharing.
Mr. Dingell's staff was expected to present its acid-rain alternative to other committee members, apparently in an attempt to appease Midwestern lawmakers from high-polluting states who insist on cost-sharing.
It isn't clear, however, whether support for the proposal will be broad enough to pose a serious challenge to the White House's acid-rain plan.
While the new proposal might appeal to the dirtiest utilities, it might not win the support of utilities, many in the West, that already have added expensive cleanup equipment or burn cleaner-burning fuels.
Lawmakers representing some of the cleaner utilities have been quietly working with the White House to devise ways to tinker with the administration bill to address their acid-rain concerns.
American City Business Journals Inc. said its president, Michael K. Russell, will resign rather than relocate to new headquarters in Charlotte, N.C.
Mr. Russell, who co-founded the Kansas City, Mo.-based local business publications concern here, said he would have a five-year consulting agreement with the company, which recently underwent an ownership change.
Earlier this year Shaw Publishing Inc., Charlotte, acquired 30% of American City and has an agreement to acquire a further 25% from E.W. Scripps Co. next year.
Ray Shaw, chairman of American City, said he would assume Mr. Russell's responsibilities if a successor isn't found this month.
A nickname for measures to stop the market from plunging too far too fast.
Several moves were taken following the October 1987 crash to coordinate -- and sometimes deliberately disconnect -- the stock and futures markets in times of heightened volatility.
On the Big Board, a "side car" is put into effect when the S&P futures rise or fall 12 points.
The side car routes program trades into a special computer file that scans for imbalances of buy and sell orders.
On the Chicago Mercantile Exchange, S&P 500 futures are not allowed to fall further than 12 points from the previous day's close for half an hour.
If, when trading resumes, the S&P futures fall 30 points from the previous day's close, a one-hour trading halt takes effect.
Also, the reforms allow the Big Board to halt trading for one hour if the Dow Jones Industrial Average falls 250 points, and for two more hours if the Dow slides an additional 150 points on the same day.
DOT System -- The "Designated Order Turnaround" System was launched by the New York Stock Exchange in March 1976, to offer automatic, high-speed order processing.
A faster version, the SuperDot, was launched in 1984.
Used by program traders and others to zip orders into the exchange, SuperDot handles about 80% of all orders entered at the exchange.
Futures Contracts -- Obligations to buy (for those who have purchased a contract) or deliver (for those who sold one) a quantity of the underlying commodity or financial instrument at the agreed-upon price by a certain date.
Most contracts are simply nullified by an opposite trade before they come due.
Indexing -- Many investors, mainly institutions, follow an investment strategy of buying and holding a mix of stocks to match the performance of a broad stock-market barometer such as the S&P 500.
Many institutional index funds are active program traders, swapping their stocks for futures when profitable to do so.
Program trading -- A wide range of computer-assisted portfolio trading strategies involving the simultaneous purchase or sale of 15 or more stocks.
Quant -- Generally, any Wall Street analyst who employs quantitive research techniques.
The newest breed, also called "rocket scientists" because of their backgrounds in physics and mathematics, devise the complex hedging and trading strategies that are popularly known as program trading.
Stock-index arbitrage -- Buying or selling baskets of stocks while at the same time executing offsetting trades in stock-index futures or options.
Traders profit by trying to capture fleeting price discrepancies between stocks and the index futures or options.
If stocks are temporarily "cheaper" than futures, for example, an arbitrager will buy stocks and sell futures.
Stock-index futures -- Contracts to buy or sell the cash value of a stock index by a certain date.
The cash value is determined by multiplying the index number by a specified amount.
The most common program-trading vehicles are futures contracts on Standard & poor's 500-stock index (traded on the Chicago Mercantile Exchange); the Major Market Index, a 20-stock index that mimics the Dow Jones Industrial Average (traded on the chicago Board of Trade); and the S&P 100 options (traded on the Chicago Board Options Exchange, and based on 100 stocks selected from the S&P 500).
Stock-index options -- Options give holders the right, but not the obligation, to buy (a call) or sell (a put) a specified amount of an underlying investment by a certin date at a preset price, known as the strike price.
For stock indexes, the underlying investment may be a stock-index futures contract or the cash value of a stock index.
For example, there are options on the S&P 500 futures contract and on the S&P 100 index.
Uptick -- An expression signifying that a transaction in a listed security occurred at a higher price than the previous transaction in that security.
New York financier Saul Steinberg sought federal permission to buy more than 15% of United Airlines' parent, UAL Corp., saying he might seek control of the nation's second-largest airline.
Although takeover experts said they doubted Mr. Steinberg will make a bid by himself, the application by his Reliance Group Holdings Inc. could signal his interest in helping revive a failed labor-management bid.
Such an application for federal antitrust clearance is necessary for any investor that might seek control.
But some investors have used such filings to boost the value of their stock holdings, which -- without buying more stock -- they then sold.
Takeover stock traders were puzzled by the Reliance filing and cautioned that it doesn't mean Mr. Steinberg will definitely seek control.
"Maybe he just wants to make something happen," said one takeover expert.
One investment banker said Mr. Steinberg may be trying to position himself as a friendly investor who could help UAL Chairman Stephen Wolf revive a failed labor-management bid.
Mr. Steinberg, he suggested, could replace British Airways PLC, which has withdrawn from the buy-out group.
Reliance had already bought and sold UAL stock at a big profit without making an antitrust filing before the collapse Oct. 13 of the $6.79 billion, $300-a-share labor-management buy-out.
Reliance acquired a 7% UAL stake early this year at an average cost of $110 a share, and reduced its stake to 4.7% after UAL accepted the bid at prices higher than $282 a share.
Market sources said Reliance has already sold its entire UAL stake, and thus wouldn't have any reason to file the application simply to boost the value of its stock.
But the exact amount of Reliance's current holding hasn't been formally disclosed.
The filing adds a new twist to market speculation that Coniston Partners, a New York money manager, has bought more than 5% of UAL stock and may challenge the UAL board's decision last week to remain independent.
Speculation about Coniston has caused the stock to rebound from a low of $145.
UAL's announcement came after the market closed yesterday.
In composite New York Stock Exchange trading, the shares closed at $177, up $1.50.
UAL wouldn't elaborate on a statement that it had been notified of the filing by Reliance.
Reliance confirmed the filing but wouldn't elaborate.
Some takeover experts were skeptical, saying it was possible that Mr. Steinberg made the filing only to help boost the value of any remaining Reliance stake in UAL.
Mr. Steinberg is thought to be on friendly terms with UAL's Mr. Wolf.
The investor was instrumental in tapping Mr. Wolf to run the air cargo unit of Tiger International Inc.
Mr. Wolf's success in that job helped him land the top job with UAL in December 1987.
But any potential acquirer must attempt to reach some kind of accord with the company's employees, primarily its pilots and the powerful machinists' union, which has opposed a takeover.
A.L. Williams Corp. was merged into Primerica Corp., New York, after a special meeting of Williams shareholders cleared the transaction, the companies said.
Primerica, which had owned nearly 70% of Williams, will pay about 16.7 million shares, currently valued at almost $472 million, for the rest of Williams.
The financial-services company will pay 0.82 share for each Williams share.
Williams shares, which were to be delisted from the New York Stock Exchange after the close of composite trading yesterday, closed at $23.25, off 12.5 cents.
Primerica closed at $28.25, down 50 cents.
Williams, Duluth, Ga., is an insurance and financial-services holding company.
Its subsidiaries' services are marketed by closely held A.L. Williams & Associates.
Primerica, as expected, also acquired certain assets of the agency and assumed certain of its liabilities.
Terms weren't disclosed.
Intelogic Trace Inc., San Antonio, Texas, said it bought 2.7 million shares, or about 18%, of its common stock from an unaffiliated shareholder for $3.625 a share, or $9.9 million.
The move boosts Intelogic Chairman Asher Edelman's stake to 20% from 16.2% and may help prevent Martin Ackerman from making a run at the computer-services concern.
Mr. Ackerman already is seeking to oust Mr. Edelman as chairman of Datapoint Corp., an Intelogic affiliate.
The action followed by one day an Intelogic announcement that it will retain an investment banker to explore alternatives "to maximize shareholder value," including the possible sale of the company.
In New York Stock Exchange composite trading yesterday, Intelogic shares rose 37.5 cents to close at $2.75.
Mr. Edelman declined to specify what prompted the recent moves, saying they are meant only to benefit shareholders when "the company is on a roll."
He added, "This has nothing to do with Marty Ackerman and it is not designed, particularly, to take the company private."
But Mr. Ackerman said the buy-back, and the above-market price paid, prove that Mr. Edelman is running scared.
Dow Jones & Co. said it extended its $18-a-share offer for Telerate Inc. common stock until 5 p.m. EST Nov. 9.
The offer, valued at about $576 million for the 33% of Telerate that Dow Jones doesn't already own, had been set to expire Nov. 6.
Dow Jones, which owns about 64 million of Telerate's 95 million common shares outstanding, said that about 24,000 shares have been tendered under its offer.
Telerate's two independent directors have rejected the offer as inadequate.
In composite trading on the New York Stock Exchange, Telerate shares closed at $19.50, up 12.5 cents.
Telerate provides an electronic financial information network.
Dow Jones publishes The Wall Street Journal, Barron's magazine, and community newspapers and operates financial news services and computer data bases.
Rockwell International Corp. reported flat operating earnings for the fourth quarter ended Sept. 30.
The aerospace, automotive supply, electronics and printing-press concern also indicated that the first half of fiscal 1990 could be rough.
In an interview, Donald Beall, chairman, said first-half profit certainly would trail the past year's, primarily because of weakness in the heavy-truck and passenger-car markets.
Still, he added, if the industrial sector remains relatively stable, Rockwell should be able to recover in the second half and about equal fiscal 1989's operating profit of $630.9 million.
For fiscal 1989's fourth quarter, Rockwell's net income totaled $126.1 million, or 50 cents a share.
That compares with operating earnings of $132.9 million, or 49 cents a share, the year earlier.
The prior-year period includes a one-time favorable tax adjustment on the B-1B bomber program and another gain from sale of the industrial sewing-machine business, which made net $185.9 million, or 70 cents a share.
Sales rose 4% to $3.28 billion from $3.16 billion.
Mr. Beall said that he was generally pleased with the latest numbers and cited a particularly strong showing by the company's electronics segment.
Overall, pretax electronics earnings soared 12% to $107.9 million from $96.4 million.
All four areas had higher revenue for the three months ended Sept. 30.
For the year, electronics emerged as Rockwell's largest sector in terms of sales and earnings, muscling out aerospace for the first time.
The graphics business, which also was singled out by the chairman as a positive, saw its operating earnings for the quarter jump 79% to $42.1 million from $23.5 million.
For the year, bolstered by the introduction of the Colorliner newspaper-printing press, graphics earnings almost doubled.
Aerospace earnings sagged 37% for the quarter and 15% for the year, largely due to lower B-1B program profit; the last of the bombers rolled out in April 1988.
That was partially offset by the resumption of space shuttle flights and increased demand for expendable launch-vehicle engines.
The company also took hits in the fourth quarters of 1989 and 1988 on a fixed-price weapons-modernization development program -- probably the C-130 gunship, according to analysts.
For fiscal 1989, the company posted net of $734.9 million, or $2.87 a share, down from $811.9 million, or $3.04 a share, in fiscal 1988.
Excluding one-time additions to profit in each year, earnings per share were $2.47, up 7.4% from $2.30 in fiscal 1988.
Sales for the year rose 5% to $12.52 billion from $11.95 billion in fiscal 1988.
Dell Computer Corp. said it cut prices on several of its personal computer lines by 5% to 17%.
The Austin, Texas-based company, which specializes in the direct sale of personal computers and accessories, said its price cuts include a $100 reduction on its System 210 computer with 512 kilobytes of memory, a 40-megabyte hard disk and a color monitor.
That package now sells for about $2,099.
A computer using the more-advanced Intel Corp. 386 microprocessor, with four megabytes of memory and a 100-megabyte hard disk now sells for $5,699, down from $6,799.
Personal computer prices for models using the Intel 286 and 386 microprocessors, which the Dell models use, generally have been coming down as chip prices have fallen.
World sugar futures prices soared on rumors that Brazil, a major grower and exporter, might not ship sugar this crop year and next.
Prices also were boosted by another rumor that Mexico, usually a large producer and exporter, might have to buy a large quantity of sugar.
Although traders rushed to buy futures contracts, many remained skeptical about the Brazilian development, which couldn't be confirmed, analysts said.
The March and May contracts rose to fresh life-of-contract highs of 14.54 cents and 14.28 cents at their best levels of the day.
The March delivery, which has no limits, settled at 14.53 cents, up 0.56 cent a pound.
The May contract, which also is without restraints, ended with a gain of 0.54 cent to 14.26 cents.
The July delivery rose its daily permissible limit of 0.50 cent a pound to 14.00 cents, while other contract months showed near-limit advances.
According to reports carried by various news services, the Brazilian government told its sugar producers that they won't be allowed to export sugar during the current 1989-90 season, which began May 1, and the 1990-91 season so that it can be used to produce alcohol for automobile fuel.
One analyst, Arthur Stevenson, of Prudential-Bache Securities, New York, estimated that 65% or more of Brazil's newly made automobiles run on alcohol and can't use gasoline.
"This is a demand that must be met, regardless of the price of oil," said Mr. Stevenson.
Brazil is the third-largest producer and the fifth-largest exporter of sugar in the world.
A shift to producing more alcohol and less sugar had been expected, but the latest news, if true, indicates a more drastic shift than had been anticipated.
During the current crop year, Brazil was expected to produce 6.9 million tons of sugar, a drop from 8.1 million tons in 1988-89.
Its 1989-90 exports were expected to total 645,000 tons in contrast to shipments of 1.5 million tons in
"It is these 645,000 tons that are in question for this crop year," explained Judith Ganes, analyst for Shearson Lehman Hutton, New York.
"Producers were granted the right earlier this year to ship sugar and the export licenses were expected to have begun to be issued" yesterday.
As a result, Ms. Ganes said, it is believed that little or no sugar from the 1989-90 crop has been shipped yet, even though the crop year is six months old.
More than a half of all sugar produced in Brazil goes for alcohol production, according to Ms. Ganes.
Also, there has been a switch in the past decade to planting of orange trees in areas that were previously used for cane, and this change is being felt now, she said.
Most important, Ms. Ganes noted, "Brazilian officials said that no decision has as yet been made on the suspension of exports."
Thomas Oxnard, sugar analyst for PaineWebber in Hackensack, N.J., said: "I am highly skeptical that Brazil will curtail sugar exports, particularly with the price of sugar at over 14 cents a pound."
Above all, Mr. Oxnard noted, the situation is extremely confused.
"Professional sugar people here who have strong contacts with the Brazilian sugar industry have been unable to confirm the reports or get enough information to clarify the situation," he said.
"It's the type of nervous atmosphere in which a report can be put out, such as the one saying exports will be suspended, and no one can confirm it."
Mr. Oxnard observed that the situation in Brazil is also very complicated.
On the one hand, Brazil started an ethanol program about 15 years ago to fuel a huge portion of its national fleet of cars and is now committed to this program.
"It has to weigh, on the other hand, the relatively high price of sugar it can earn on the export market in making decisions as to whether to produce sugar or alcohol," Mr. Oxnard said.
Mexico, which is normally a sugar exporter, has had production problems in the past two years, analysts said.
Last year, it had to buy sugar on the world market to meet export commitments, they noted.
This year it is expected to be a net importer and is said to be seeking to buy about 200,000 tons of sugar to meet internal needs, analysts said.
In other commodity markets yesterday:
ENERGY:
Petroleum futures were generally higher with heating oil leading the way.
On the New York Mercantile Exchange, heating oil for December delivery increased 1.25 cents to settle at 60.36 cents a gallon.
Gasoline futures were mixed to unchanged.
But the strength in heating oil helped push up crude oil.
West Texas Intermediate crude for December delivery rose 13 cents a barrel to settle at $20.07.
The firmness in heating oil was attributed to colder weather in parts of the U.S. and to the latest weekly report by the American Petroleum Institute, which showed a decline in inventories of the fuel.
GRAINS AND SOYBEANS:
Prices closed mostly higher in relatively light trading as farmers continued to withhold their crops from the marketplace in the hope of higher prices to come.
Trading was muted in part because of the observance of All Saints' Day across much of Europe.
Continued export demand also supported prices.
As an indicator of the tight grain supply situation in the U.S., market analysts said that late Tuesday the Chinese government, which often buys U.S. grains in quantity, turned instead to Britain to buy 500,000 metric tons of wheat.
Traders said prices also were supported by widespread rumors that the Soviet Union is on the verge of receiving most favored nation status from the U.S.
That designation would, among other things, provide more generous credit terms under which the Soviets could purchase grain.
The Soviets are widely believed to need additional supplies, despite running up record one-month purchases of 310 million bushels of corn in October.
COPPER:
Futures prices rose, extending Tuesday's gains.
The December contract advanced 2.50 cents a pound to $1.1650.
Buying for the most part carried over from the previous session, and traders apparently ignored reports that a Chilean mine strike may have ended almost before it began, an analyst said.
According to news service reports, most workers at the Disputado mines owned by Exxon Corp. agreed to a new two-year wage contract that includes a 5% increase and other benefits.
However, some workers haven't yet accepted the new contract and are continuing negotiations, the analyst said.
Separately, Reuter reported that the Papua-New Guinea government urged its Parliament to extend a state of emergency in copper-rich Bougainville Island for two months.
The Bougainville copper mine has been inoperative since May 15 because of attacks by native landowners who want Bougainville to secede from Papua-New Guinea.
The parent of Younkers, after failing to find a buyer for the chain of Midwestern department stores, said it will sell a stake in the chain to management and take other steps to reduce its investment in retailing.
Equitable of Iowa Cos., Des Moines, had been seeking a buyer for the 36-store Younkers chain since June, when it announced its intention to free up capital to expand its insurance business.
But Equitable said it was unable to find a buyer willing to pay what it considers "fair value" for Younkers because of recent turmoil in the bond and stock markets and in retailing.
Younkers rang up sales in 1988 of $313 million.
It operates stores mostly in Iowa and Nebraska.
Younkers management is likely to buy a 10% to 20% interest in the chain in January, said Fred S. Hubbell, Equitable's president and chief executive officer.
He said Equitable hopes to eventually reduce its stake in Younkers to less than 50%.
Tony Lama Co. said that Equus Investment II Limited Partnership has proposed changing the offer for the company to $13.65 in cash and stock from an all-cash transaction.
Under terms of the new proposal, Equus, managed by Equus Capital Corp., Houston, would pay $12 cash and one new preferred share with a liquidation preference of $1.65 a share for each of Tony Lama's 2.1 million shares outstanding.
Previously, it offered $13.65 a share in cash, or $29 million.
The El Paso, Texas, maker of Western boots and leather accessories said the preferred stock would accrue dividends at a 12% rate, but wouldn't be paid for the first two years.
The stock would be redeemed in five years, subject to terms of the surviving company's debt.
Neither Equus nor Tony Lama gave a reason for the changed offer and Tony Lama couldn't be reached for comment.
However, Tony Lama said it would promptly submit the offer to a special committee of the company's board.
Reuters Holdings PLC said Michael Reupke resigned as general manager to pursue unspecified interests, a move the news organization termed an "amicable separation."
Mr. Reupke, 52 years old and a 27-year Reuters veteran, had been the information-services company's general manager for only six months.
His appointment to that post, which has senior administrative, staff and policy responsibilities, followed a several-year tenure as Reuters's editor in chief.
No successor was named, and Mr. Reupke's duties will be split among three other senior Reuters executives, the company said.
In a telephone interview, Mr. Reupke said his departure was for "personal reasons," which he declined to specify.
"There is no business reason for my departure," nor any disagreement over policy, he added.
He also rejected reports that his departure stemmed from disappointment the general manager's post hadn't also led to a board directorship at the London-based news organization.
Mr. Reupke was one of three executives on Reuters's eight-person executive committee who didn't also serve on the company's board of directors.
"If I were choosing the people of tomorrow, I would have chosen the people who are now on the board," he said.
A Reuters spokesman said the departure reflects "no change in strategy or profits."
Mark Shepperd, an analyst at UBS Phillips & Drew in London, said, "I suspect (the departure) will be fairly irrelevant for the company.
I would be very surprised if his departure signals any change in strategy or change in profit expectations."
On London's Stock Exchange, Reuters shares rose five pence to 913 pence ($14.43).
In the U.S. over-the-counter market, American depositary shares for Reuters, each representing three shares in the London market, closed unchanged at $43.875.
The senior of the three executives who will assume Mr. Reupke's duties is Nigel Judah, 58, finance director and a Reuters board director.
Peter Holland, 45, deputy general manager, becomes director of corporate affairs.
And Patrick Mannix, 46, international technical manager, becomes director of group quality programs.
DD Acquisition Corp., a partnership of Unicorp Canada Corp.'s Kingsbridge Capital Group and Cara Operations Ltd., extended to Nov. 20 its $45-a-share offer for all Dunkin' Donuts Inc. shares outstanding.
The offer, which was due to expire yesterday, is conditional on 50.1% of Dunkin' common shares, on a fully diluted basis, being tendered and on the withdrawal of the company's poison pill rights plan.
DD Acquisition has launched a suit in a Delaware court seeking the withdrawal of Dunkin's poison pill rights and employee stock ownership plans, which it claims were put in place to deter bidders.
DD Acquisition said 2.2 million shares, or about 38.5% of the shares outstanding, have been tendered under its offer.
The partners said they already hold 15% of all shares outstanding.
Dunkin' has set Nov. 10 as the deadline for the receipt of any competing bids.
DD Acquisition said the extension is to allow this process to be completed.
Dunkin' is based in Randolph, Mass.
Cara, a food services chain operator and Unicorp, a holding company, are based in Toronto.
Savin Corp. reported a third-quarter net loss of $35.2 million, or 31 cents a share, compared with year-earlier profit of $3.8 million, or one cent a share.
A spokesman for the Stamford, Conn.based company said operations had a loss of $5.5 million for the quarter; in addition, the loss was magnified by nonrecurring charges totaling $23.5 million and $8.2 million in asset-valuation adjustments that he described as "unusual."
The charges were partly offset by a $2 million gain on the sale of investments of two joint ventures, he said.
Revenue declined 8% to $85.7 million, from $93.3 million a year earlier.
Savin cited "a general softening in the demand for office products in the market segments in which Savin competes.
Hadson Corp. said it expects to report a third-quarter net loss of $17 million to $19 million because of special reserves and continued low natural-gas prices.
The Oklahoma City energy and defense concern said it will record a $7.5 million reserve for its defense group, including a $4.7 million charge related to problems under a fixed-price development contract and $2.8 million in overhead costs that won't be reimbursed.
In addition, Hadson said it will write off about $3.5 million in costs related to international exploration leases where exploration efforts have been unsuccessful.
The company also cited interest costs and amortization of goodwill as factors in the loss.
A year earlier, net income was $2.1 million, or six cents a share, on revenue of $169.9 million.
A lack of enthusiasm with the latest economic data hampered the stock market's bid to extend Tuesday's sharp gains, as prices closed slightly higher in sluggish trading.
While renewed optimism about the outlook for takeover activity boosted several so-called deal stocks, traders said profit-taking weighed on the market, with blue-chips bearing the brunt of the selling.
The Dow Jones Industrial Average, which had jumped 41.60 points on Tuesday, drifted on either side of its previous close and finished with a gain of just 0.82 at 2645.90.
Standard & Poor's 500-Stock Index added 0.84 to 341.20; the rise was equivalent to a gain of about six points in the industrial average.
The Dow Jones Equity Market Index gained 0.99 to 319.75 and the New York Stock Exchange Composite Index went up 0.60 to 188.84.
Advancing stocks led decliners on the New York Stock Exchange by 847 to 644.
Big Board volume amounted to 154,240,000 shares, down from 176.1 million Tuesday.
The October survey of corporate purchasing managers, as expected, provided evidence that economic growth remains subdued.
An index of economic activity drawn from the survey stood last month at 47.6%; a reading above 50% would have indicated that the manufacturing sector was improving.
But with the index proving somewhat better than expected and the widely anticipated report on October employment scheduled to arrive tomorrow, stock prices firmed only modestly in response to the report and then faltered.
"This market's still going through its pains," said Philip Puccio, head of equity trading at Prudential-Bache Securities.
"The psychology is still: `We want (stocks) up, but if they don't carry we're going to sell them.'"
Uncertainty about the prospects for further action to curtail stock-index arbitrage, a form of program trading blamed for recent volatility in the market, also contributed to its lack of direction, Mr. Puccio said.
Arbitrage-related trading during the session was confined largely to a round of buy programs near the close, which helped offset the impact of profit-taking among blue chips.
Trading is expected to remain subdued as the market awaits tomorrow's release of the jobs data with the hope that it will point toward a decline in interest rates.
"I sense that some people are reluctant to stick their necks out in any aggressive way until after the figures come out," said Richard Eakle, president of Eakle Associates, Fair Haven,
Campbell Soup jumped 3 3/8 to 47 1/8 as the resignation of R. Gordon McGovern as president and chief executive officer sparked a revival of rumors that the company could become a takeover target.
Prudential-Bache Securities boosted the stock's short-term investment rating in response to the departure; analyst John McMillin said he believes the company will turn to new management "that's more financially oriented."
Other rumored takeover and restructuring candidates to attract buyers included Woolworth, which went up 1 3/4 to 59 1/2; Avon Products, up 1 3/4 to 29 1/4; Paramount Communications, up 2 to 57 7/8, and Ferro, up 2 5/8 to 28 3/4.
Upjohn, a rumored target within the drug industry, advanced 7/8 to 38 7/8.
The company said it plans a fourth-quarter charge, which it didn't specify, for an early-retirement program.
AMR climbed 1 3/4 to 73 1/8 amid rumors that New York developer Donald Trump was seeking financing to mount a new, lower offer for the parent company of American Airlines.
Mr. Trump withdrew a $120-a-share bid last month.
UAL rose 1 1/2 to 177.
Drexel Burnham Lambert analyst Michael Derchin said he sees a 70% chance that the parent of United Airlines, the target of a failed $300-a-share offer from a labor-management group, will be acquired or restructured within six months.
Georgia Gulf added 1 3/4 to 51 1/4 after NL Industries, controlled by Dallas investor Harold Simmons, offered to acquire the stock it doesn't already own for $50 a share.
NL, which closed unchanged at 22 3/4, has a stake of just under 10%.
Great Northern Nekoosa, which surged 20 1/8 Tuesday after Georgia-Pacific launched a $3.18 billion offer for the company, dropped 1 3/8 to 61 1/2 in Big Board composite trading of 5.1 million shares.
Georgia-Pacific, which went down 2 1/2 Tuesday, lost another 1/2 to 50 3/8.
Other paper and forest-products stocks closed mixed.
Mead rose 3/4 to 39 1/2, Federal Paper Board added 1/2 to 24 3/8 and Scott Paper gained 1/2 to 48 3/8, while International Paper fell 7/8 to 48 7/8, Champion International lost 3/8 to 31 1/2 and Louisiana-Pacific dropped 1/8 to 40 1/4.
Texaco rose 3/4 to 53 3/8 as 4.4 million shares changed hands.
Most of the volume came from trades designed to capture the stock's next dividend; Texaco has a yield of 5.6% and goes ex-dividend today.
Santa Fe Pacific dropped 1 1/8 to 17 3/4.
The company's proposal to sell a 20% stake in its real-estate unit for around $400 million has caused analysts to consider whether to cut their estimates of Santa Fe's asset value.
GenCorp tumbled 2 to 14.
The company forecast that fourth-quarter income from continuing operations would be "significantly" lower than a year earlier.
Allergan went up 1/2 to 19 3/8.
The Food and Drug Administration allowed the company to begin marketing a new lens for use in cataract patients.
The American Stock Exchange Market Value Index gained 1.56 to 372.14.
Volume totaled 11,390,000 shares.
Old Spaghetti Warehouse rose 1 to 16 1/8.
Its net income for the September quarter rose about 41% from a year ago.
Freeport-McMoRan Inc. said it will convert its Freeport-McMoRan Energy Partners Ltd. partnership into a publicly traded company through the exchange of units of the partnership for common shares.
The company said the restructuring isn't expected to have any impact, adverse or otherwise, on its financial results.
Freeport-McMoRan, a New Orleans-based diversified energy conglomerate, said the partnership will exchange its assets for common shares of a yet-to-be-formed entity.
Freeport-McMoRan Energy Partners will be liquidated and shares of the new company distributed to the partnership's unitholders.
Unitholders will receive two additional 55 cents-a-unit distribution payments before the trust is liquidated in early 1990, the company said.
It is expected that common shares equal to the number of units outstanding -- about 108 million on Sept. 30 -- will be issued during the first quarter of 1990.
Freeport-McMoRan, the parent company, holds roughly 80% of the units outstanding.
Nissan Motor Co., Japan's second-largest car maker, announced Wednesday that the parent concern's pretax earnings in the first half ended last Sept. 30 rose 14% to 88.32 billion yen ($618.1 million) from 77.6 billion yen a year earlier.
Nissan cited strong domestic sales against the backdrop of continuous economic expansion.
Profit surged 42% to 40.21 billion yen, or 16.09 yen a share, from 28.36 billion yen, or 11.72 yen a share.
Sales totaled 1.916 trillion yen, climbing 17% from 1.637 trillion yen in the year-earlier period.
Nissan scheduled a seven-yen interim dividend payment, unchanged.
Atsushi Muramatsu, executive vice president and chief financial officer of Nissan, said, "The company has experienced a remarkable turnaround in terms of profitability since the fiscal year ending March 1987, when the sharp and rapid appreciation of the yen caused many difficulties.
"It can be said that the trend of financial improvement has been firmly set," he added.
Heritage Media Corp., New York, said it offered to buy the shares of POP Radio Corp. it doesn't already own in a stock swap.
Heritage, which owns 51% of POP's 3.6 million shares outstanding, said it will exchange one share of a new preferred stock for each POP common share it doesn't already own.
Depending upon how many warrants and options are exercised prior to completion of the transaction, Heritage would issue between 1.8 million and 2.35 million preferred shares, a Heritage spokesman estimated.
In national over-the-counter trading yesterday, POP plunged $4 to $14.75.
The preferred stock, which would have a dividend rate of $1.76 a year, would be convertible into Heritage common at a rate of four common shares for each preferred.
New York-based POP Radio provides, through a national, in-store network, a customized music, information and advertising service which simulates live radio.
Heritage owns and operates television and radio stations and in-store advertising and promotion programs.
GenCorp Inc., hurt by a plant accident and other unexpected costs, said it expects to report that fiscal fourth-quarter profit from continuing operations will be significantly below last year's $25 million.
The Fairlawn, Ohio-based company also said that full-year profit from continuing operations will be far below last year's $148 million.
Last year's figures include a one-time loss of $12 million for restructuring and unusual items.
But the automotive parts and aerospace concern expects that net for the year ending Nov. 30 will exceed last fiscal year's net of $70 million, or $2.19 a share, primarily because of $200 million in gains from sales of discontinued operations.
Harry Millis, an analyst at McDonald & Co. in Cleveland, said GenCorp's unanticipated losses come largely from an accident at a government-owned assembly plant in Kansas, run by a private subcontractor, that makes cluster bombs for GenCorp's Aerojet Ordnance business.
Transamerica Corp., San Francisco, said third-quarter profit was essentially flat despite a large one-time gain a year earlier.
The insurance and financial services concern said profit for the quarter rose 1.1% to $93.9 million, or $1.19 a share, compared with $92.9 million, or $1.18 a share, the year earlier.
The results reflected a 24% gain in income from its finance businesses, and a 15% slide in income from insurance operations.
Transamerica said third-quarter investment gains were $10.2 million, compared with $6.4 million the year earlier.
It said insurance profit reflected a $6 million loss from Hurricane Hugo.
It also estimated that losses from the Oct. 17 earthquake in California would be no more than $6 million, and would be included in fourth-quarter results.
RMS International Inc., Hasbrouk Heights, N.J., facing a cash-flow squeeze, said it is seeking other financing sources and waivers from debenture holders.
The company said that because of softening sales it isn't in compliance with requirements that it maintain $3 million in working capital.
RMS distributes electronic devices and produces power supplies and plastic literature displays.
RMS said it had a loss of $158,666, or 10 cents a share, in the third quarter, compared with a year-earlier loss of $26,956, or two cents a share.
Sales rose to $3 million from $2.9 million.
For the nine months, the company reported a net loss of $608,413, or 39 cents a share, compared with year-earlier net income of $967,809, or 62 cents a share.
Sales rose to $9.8 million from $8.9 million.
Meridian National Corp. said it sold 750,000 shares of its common stock to the McAlpine family interests, for $1 million, or $1.35 a share.
The sale represents 10.2% of Meridian's shares outstanding.
The McAlpine family, which operates a number of multinational companies, including a London-based engineering and construction company, also lent to Meridian National $500,000.
That amount is convertible into shares of Meridian common stock at $2 a share during its one-year term.
The loan may be extended by the McAlpine group for an additional year with an increase in the conversion price to $2.50 a share.
The sale of shares to the McAlpine family along with the recent sale of 750,000 shares of Meridian stock to Haden MacLellan Holding PLC of Surrey, England and a recent public offering have increased Meridian's net worth to $8.5 million, said William Feniger, chief executive officer of Toledo, Ohio-based Meridian.
Ratners Group PLC, a fast-growing, acquisition-minded London-based jeweler, raised its price for Seattle-based specialty jeweler Weisfield's Inc. to $57.50 a share, or $62.1 million, from $50 a share, or $55 million, after another concern said it would be prepared to outbid Ratners's initial offer.
The other concern wasn't identified.
Ratners's chairman, Gerald Ratner, said the deal remains of "substantial benefit to Ratners."
In London at mid-afternoon yesterday, Ratners's shares were up 2 pence (1.26 cents), at 260 pence ($1.64).
The sweetened offer has acceptances from more than 50% of Weisfield's shareholders, and it is scheduled for completion by Dec. 10.
The acquisition of 87-store Weisfield's raises Ratners's U.S. presence to 450 stores.
About 30% of Ratners's profit already is derived from the U.S.
Carnival Cruise Lines Inc. said potential problems with the construction of two big cruise ships from Finland have been averted.
Last week, Miami-based Carnival disclosed that Waertsilae Marine Industries, the Finnish shipyard that is building Carnival's new cruise ships, planned to file for bankruptcy.
Yesterday, Carnival said a new company has been formed in Finland that will carry on Waertsilae's shipbuilding operations.
Carnival said it will be an 11% shareholder in the new company.
Carnival said the Fantasy, a 2,050-passenger ship that was slated to be delivered this month, will be delivered in January.
A second ship is now expected to be delivered late next year or early in 1991.
Carnival had expected that ship to be delivered next fall.
A planned third ship still may be built in the Finnish shipyard, or may be built elsewhere, Carnival said.
Valley Federal Savings & Loan Association took an $89.9 million charge as it reported a third-quarter loss of $70.7 million, or $12.09 a share.
The Van Nuys, Calif., thrift had net income of $132,000, or three cents a share, a year ago.
The bulk of the pretax charge is a $62 million write-off of capitalized servicing at the mobile home financing subsidiary, which the company said had been a big drain on earnings.
The company said the one-time provision would substantially eliminate all future losses at the unit.
Valley Federal also added $18 million to realestate loan reserves and eliminated $9.9 million of good will.
The thrift said that "after these charges and assuming no dramatic fluctuation in interest rates, the association expects to achieve near record earnings in 1990."
Valley Federal is currently being examined by regulators.
New loans continue to slow; they were $6.6 million in the quarter compared with $361.8 million a year ago.
The thrift has assets of $3.2 billion.
First of America Bank Corp. said it completed its acquisition of Midwest Financial Group Inc. for about $250 million.
First of America, which now has 45 banks and $12.5 billion in assets, announced an agreement to acquire the Peoria, Ill., bank holding company in January.
Midwest Financial has $2.3 billion in assets and eight banks.
The Midwest Financial subsidiary banks will continue to operate under their current names until early 1990, when each will adopt the First of America name.
Kalamazoo, Mich.-based First of America said it will eliminate the 13 management positions of the former Midwest Financial parent company.
First of America said some of the managers will take other jobs with First of America.
But it said that severance payments to those executives not staying with the company will reduce First of America's operating results for 1989 by $3 million to $4 million, or 15 cents to 20 cents a share.
Coleco Industries Inc., a once high-flying toy maker whose stock peaked at $65 a share in the early 1980s, filed a Chapter 11 reorganization plan that provides just 1.125 cents a share for common stockholders.
Under the plan, unsecured creditors, who are owed about $430 million, would receive about $92 million, or 21 cents for each dollar they are owed.
In addition, they will receive stock in the reorganized company, which will be named Ranger Industries Inc.
After these payments, about $225,000 will be available for the 20 million common shares outstanding.
The Avon, Conn., company's stock hit a high in 1983 after it unveiled its Adam home computer, but the product was plagued with glitches and the company's fortunes plunged.
But Coleco bounced back with the introduction of the Cabbage Patch dolls, whose sales hit $600 million in 1985.
But as the craze died, Coleco failed to come up with another winner and filed for bankruptcy-law protection in July 1988.
The plan was filed jointly with unsecured creditors in federal bankruptcy court in New York and must be approved by the court.
ORTEGA ENDED a truce with the Contras and said elections were threatened.
The Nicaraguan president, citing attacks by the U.S.-backed rebels, suspended a 19-month-old cease-fire and accused Bush of "promoting death."
While he reaffirmed support for the country's Feb. 25 elections, Ortega indicated that renewed U.S. military aid to the Contras could thwart the balloting.
He said U.S. assistance should be used to demobilize the rebels.
A White House spokesman condemned the truce suspension as "deplorable" but brushed off talk of renewing military funding for the insurgents.
The Contra military command, in a statement from Honduras, said Sandinista troops had launched a major offensive against the rebel forces.
East German leader Krenz called the protests in his country a "good sign," saying that many of those marching for democratic freedoms were showing support for "the renovation for socialism."
The Communist Party chief, in Moscow for talks with Soviet officials, also said East Germany would follow Gorbachev's restructuring plans.
Thousands of East Germans fled to Czechoslovakia after the East Berlin government lifted travel restrictions.
The ban on cross-border movement was imposed last month after a massive exodus of emigres to West Germany.
Also, a Communist official for the first time said the future of the Berlin Wall could be open to discussion.
Health officials plan to extend a moratorium on federal funding of research involving fetal-tissue transplants.
The assistant HHS secretary said the ban "should be continued indefinitely."
While researchers believe such transplants could help treat diseases like Alzheimer's, anti-abortionists oppose the research.
Rep. Dingell of Michigan plans to unveil today a proposal that would break with Bush's clean-air bill on the issue of emissions that lead to acid rain.
The Democrat's proposal is described by government sources and lobbyists as significantly weaker than the president's plan to cut utility emissions.
House-Senate conferees approved major portions of a package for more than $500 million in economic aid for Poland.
The plan relies heavily on $240 million in credit and loan guarantees in fiscal 1990 in hopes of stimulating future trade and investment.
South Africa accused armed Namibian nationalist guerrillas of crossing from bases in neighboring Angola, violating U.N.-supervised peace plans for the territory's independence from Pretoria.
South African troops were placed on alert.
Guerrilla leaders said Pretoria was attempting to sabotage next week's elections in Namibia.
Gunmen in Lebanon assassinated a Saudi Arabian Embassy employee, and the pro-Iranian Islamic Jihad took responsibility for the slaying to avenge the beheading of 16 terrorists by Riyadh's government in September.
Also in Beirut, a Moslem group vowed to kill Americans if the U.S. implements a policy to seize suspects abroad.
Nixon concluded five days of private talks with Chinese leaders in Beijing, but apparently failed to ease strains in Sino-U.S. ties caused by China's crackdown against pro-democracy protesters in June.
Beijing's rulers complained to the former president about U.S. "interference" in China's domestic affairs.
Mexico's President Salinas said the country's recession had ended and the economy was growing again.
In his first state of the nation address, Salinas pledged to continue his program of modernization and warned opposition politicians that impeding progress could cost them popular support.
Pakistan's Bhutto defeated the first no-confidence motion in the nation's 42-year history, surviving the vote that could have brought down her 11-month-old government.
The prime minister's opponents claimed the balloting, 12 votes short of a majority in Islamabad's 237-seat assembly, was rigged.
The White House said the shipboard meetings next month between Bush and Soviet leader Gorbachev will take place in the waters off Malta.
The location was disclosed as the U.S. began planning the issues to be discussed at the Dec. 2-3 tete-a-tete.
Bush unveiled a package of trade initiatives to help establish "economic alternatives to drug trafficking" in the Andean nations of South America.
The president's plan includes a commitment to help negotiate a new international coffee agreement.
Pan Am has subpoenaed several government agencies, including the CIA and FBI, to determine whether they were warned that a bomb had been planted aboard a jet that exploded over Scotland last December, killing 270 people.
The airline is attempting to show that Israel and West Germany warned the U.S. about the impending attack.
Died: James A. Attwood, 62, retired chairman and president of Mutual Life Insurance Co. of New York, Tuesday, in New York City, of an acute anemic condition.
Sony Corp. completed its tender offer for Columbia Pictures Entertainment Inc., with Columbia shareholders tendering 99.3% of all common shares outstanding by the Tuesday deadline.
Sony Columbia Acquisition Corp., formed for the Columbia deal, will formally take ownership of the movie studio later this month, a spokesman said.
Sony is paying $27 a share, or $3.55 billion, cash and is assuming $1.4 billion of long-term debt.
Still unresolved is Sony's effort to hire producers Jon Peters and Peter Guber to run the studio.
Sony's planned acquisition of Guber/Peters Entertainment Co. for $200 million is scheduled to close Monday.
Guber/Peters has been locked in litigation with Warner Communications Inc. in an attempt to get out of an exclusive production contract with Warner.
Both sides are in talks to settle the dispute.
Xerox Corp. has told employees in its Crum & Forster personal insurance operations that it is laying off about 300 people, or 25% of the staff.
A spokeswoman for Crum & Forster said employees were told early this week that numerous staff functions for the personal insurance lines were going to be centralized as a cost-cutting move.
She said the move would result in a after-tax charge of less than $4 million to be spread over the next three quarters.
By comparison, for the first nine months, Xerox earned $492 million, or $4.55 a share, on revenue of $12.97 billion.
Earnings at Xerox's financial-services operations actually rose slightly, but that was largely because capital gains at Crum & Forster offset Hurricane Hugo payments and the reserves set up to cover future payments.
Property/casualty insurance has been a tough business in recent quarters, as pricing has been cutthroat and natural disasters such as Hurricane Hugo and the California earthquake have resulted in huge payments.
Komatsu Ltd., a large integrated maker of construction machinery, posted a 32% unconsolidated gain in first-half pretax profit.
For the period ended Sept.30, it earned 16.68 billion yen, (US$116.7 million) up from 12.68 billion yen the year before.
Sales rose 11% to 292.32 billion yen from 263.07 billion yen.
Net income surged 31% to 7.63 billion yen from 5.82 billion yen.
Per-share net rose to 7.84 yen from 6.53 yen.
Brisk domestic demand due to increasing capital investment pushed up sales sharply in construction and industrial machinery divisions.
Domestic sales of construction machinery, such as power shovels and bulldozers rose to 142.84 billion yen from 126.15 billion yen.
Demand from Europe and Southeast Asia also grew, but due to increasing production at local plants, overseas sales edged down 2.8%.
Komatsu predicted that for the fiscal year ending March 31 sales will climb to 600 billion yen from 566.54 billion yen; pretax profit was forecast at 35 billion yen, up from 28.53 billion yen in fiscal 1989.
Net is expected to rise to 17 billion yen from 12.82 billion yen a year earlier.
ECONOMIC GROWTH APPEARS to be leveling off, latest reports suggest.
Factory orders and construction outlays were largely flat in September, while purchasing agents said manufacturing shrank further in October.
Still, many economists aren't predicting a recession anytime soon.
The Fed is coming under pressure to cut short-term interest rates due to the apparent slowing of the economy.
But it isn't clear yet whether the central bank will make such a move.
Campbell Soup forced out its president and chief executive, R. Gordon McGovern, the strongest indication yet that the Dorrance family plans to take charge of reshaping the troubled food company.
Campbell's stock rose $3.375, to $47.125, in reaction.
The Chicago Merc plans an additional "circuit breaker" to stem sharp drops in the market.
Also, Big Board Chairman Phelan said he would support SEC halts of program trading during market crises but not any revival of a "collar" on trading.
Georgia Gulf received a new takeover bid from investor Harold Simmons and NL Industries of $50 a share, or about $1.1 billion.
The offer, which follows a $55-a-share bid that was rejected in September, steps up pressure on the chemicals concern.
The minimum-wage bill worked out by Congress and Bush won easy approval in the House.
The compromise plan, which boosts the minimum wage for the first time since 1981, is expected to clear the Senate soon.
Steinberg sought clearance to buy more than 15% of United Air's parent, saying he may seek control.
Takeover experts said they doubted the financier would make a bid by himself.
An airline buy-out bill was approved by the House.
The measure would make it easier for the Transportation Department to block leveraged buy-outs in the industry.
USX was cited by OSHA for several health and safety violations at two Pennsylvania plants and may face a record fine of $7.3 million.
Random House Chairman Robert Bernstein said he is resigning from the publishing house he has run for 23 years.
A successor wasn't named.
Cray Research indicated that the survival of a spinoff company, which is developing a new supercomputer, depends heavily on its chairman and chief designer, Seymour Cray.
Light trucks and vans will face the same safety requirements as automobiles under new proposals by the Transportation Department.
The Treasury plans to sell $30 billion in notes and bonds next week but will delay the auction unless Congress quickly raises the debt ceiling.
U.S. farmers' net income rose to a record $59.9 billion last year despite one of the worst droughts ever.
Two antitrust agencies may face further cutbacks because of a complicated new funding device, some Democrats in Congress are warning.
Markets --
Stocks: Volume 154,240,000 shares.
Dow Jones industrials 2645.90, up 0.82; transportation 1206.26, up 1.25; utilities 220.45, up 1.26.
Bonds: Shearson Lehman Hutton Treasury index 3436.58, up
Commodities: Dow Jones futures index 129.91, up 0.28; spot index 131.01, up 1.17.
Dollar: 143.80 yen, up 0.95; 1.8500 marks, up 0.0085.
Junk-bond markdowns, an ongoing Securities and Exchange Commission investigation, a Drexel Burnham Lambert connection, a fizzled buy-out rumor.
All this has cast a pall over Columbia Savings & Loan Association and its high-rolling 43-year-old chairman, Thomas Spiegel, who built the $12.7 billion Beverly Hills, Calif., thrift with high-yield junk bonds.
Bears have targeted Columbia's stock because of the thrift's exposure to the shaky junk market.
And some investors fault Mr. Spiegel's life style; he earns millions of dollars a year and flies around in Columbia's jet planes.
Columbia stock recently hit 4 1/8, after reaching 11 3/4 earlier this year on rumors that Mr. Spiegel would take the thrift private.
Moreover, junk professionals think Columbia's huge third-quarter markdown of its junk portfolio to $4.4 billion wasn't enough, meaning another markdown could be coming.
But in recent days, Columbia has edged up, closing at 5 1/4, up 3/8, yesterday on revived speculation that the thrift might restructure.
Mr. Spiegel's fans say Columbia's Southern California branches are highly salable, and the thrift has $458 million of shareholders equity underlying its assets.
That's almost $10 of equity for each Columbia share, including convertible preferred shares, though more junk markdowns would reduce the cushion.
Columbia has only about 10 million common shares in public hands.
The Spiegel family has 25% of the common and 75% of the votes.
Other big common holders are Carl Lindner's American Financial, investor Irwin Jacobs and Pacific Financial Research, though the latter cut its stake this summer.
While many problems would attend a restructuring of Columbia, investors say Mr. Spiegel is mulling such a plan to mitigate Columbia's junk problems.
Indeed, Columbia executives recently told reporters they were interested in creating a separate unit to hold Columbia's junk bonds and perhaps do merchant banking.
Columbia won't comment on all the speculation.
But like other thrifts, it's expected to seek regulators' consent to create a distinct junk-bond entity.
Plans to do this are due to be filed in a week or so.
New rules force thrifts to write down their junk to market value, then sell the bonds over five years.
That's why Columbia just wrote off $130 million of its junk and reserved $227 million for future junk losses.
But if Columbia could keep its junk bonds separate from the thrift till they mature -- at full value, unless the issuer goes bust or restructures -- the junk portfolio might do all right.
Columbia, a longtime Drexel client, won't provide current data on its junk.
But its 17 big junk holdings at year end showed only a few bonds that have been really battered.
These were Allied Stores, Western Union Telegraph, Gillett Holdings, SCI Television and Texas Air, though many other bonds in Columbia's portfolio also have lost value.
Possibly offsetting that, Columbia recently estimated it has unrealized gains on publicly traded equity investments of more than $70 million.
It also hopes for ultimate gains of as much as $300 million on equity investments in buy-outs and restructurings.
One trial balloon Mr. Spiegel is said to have floated to investors: Columbia might be broken up, as Mellon Bank was split into a good bank and a bad bank.
But Columbia's good bank would be a regulated thrift, while the bad bank would be a private investment company, holding some of Columbia's junk bonds, real estate and equity investments.
Some think Columbia's thrift, which now is seeking a new chief operating officer, might be capitalized at, say $300 million, and shopped to a commercial bank that wants a California presence.
The thrift surely could be sold for more than the value of its equity, financial industry executives say.
Meanwhile, the bad bank with the junk bonds -- and some capital -- might be spun off to Columbia shareholders, including Mr. Spiegel, who might then have a new career, investors say.
It isn't clear how much a restructuring would help Columbia stockholders.
But "the concept is workable.
You sell the good bank as an ongoing operation and use some of the proceeds to capitalize the bad bank," says thrift specialist Lewis Ranieri of Ranieri Associates in New York.
Mr. Spiegel's next career move is a subject of speculation on Wall Street.
Few people think Mr. Spiegel wants to run a bread-and-butter thrift, which current rules would force Columbia to become.
"They aren't really a thrift," says Jonathan Gray, a Sanford C. Bernstein analyst.
Of course, regulators would have to approve Columbia's reorganization.
And some investment bankers say a restructuring isn't feasible while the SEC still is scrutinizing Mr. Spiegel's past junk-bond trades.
Pauline Yoshihashi in Los Angeles contributed to this article.
Columbia Savings & Loan (NYSE; Symbol: CSV)
Business: Savings and loan
Year ended Dec. 31, 1988: Net income: $65 million; or $1.49 a share
Third quarter, Sept. 30, 1989: Net loss: $11.57 a share vs. net income: 37 cents a share
Average daily trading volume: 83,206 shares
Common shares outstanding: 19.6 million
Note: All per-share figures are fully diluted.
Genetics Institute Inc., Cambridge, Mass., said it was awarded U.S. patents for Interleukin-3 and bone morphogenetic protein.
The patent for Interleukin-3 covers materials and methods used to make the human blood cell growth factor via recombinant DNA technology.
Sandoz Ltd. has licensed certain manufacturing and marketing rights for Interleukin-3 from Genetics Institute and is conducting preclinical studies with it.
Interleukin-3 may help in treating blood cell deficiencies associated with cancer treatment, bone marrow transplants and other blood-cell disorders, Genetics Institute said.
The second patent describes bone morphogenetic protein-1, a substance that can induce formation of new cartilage.
The patent covers BMP-1 type proteins and pharmaceutical compositions and methods for treating bone or cartilage defects, Genetics Institute said.
The company added that it has filed patent applications "on a large number of different BMP proteins" and the patent on BMP-1 is the first it has received.
BMP products may be useful in fracture healing and in treating bone loss associated with periodontal disease and certain cancers, the company said.
The Bush administration's nomination of Clarence Thomas to a seat on the federal appeals court here received a blow this week when the American Bar Association gave Mr. Thomas only a "qualified" rating, rather than "well qualified."
People familiar with the Senate Judiciary Committee, which will vote on the nomination, said some liberal members of the panel are likely to question the ABA rating in hearings on the matter.
Mr. Thomas, currently chairman of the Equal Employment Opportunity Commission, would add another conservative voice to the closely divided court.
Groups have accused him of advocating policies that narrowed rights of older workers and of ignoring discrimination by large companies.
Fourteen members of the House with jurisdiction over the EEOC have said they oppose Mr. Thomas's nomination because of "serious questions about his judgment {and} respect for the law."
A senior Justice Department official, however, said the administration isn't worried about the ABA rating.
"We're pleased the ABA rated him qualified," David Runkel, the department's chief spokesman, said in an interview.
The ABA gives a "qualified" rating to nominees it believes would perform "satisfactorily" on the bench.
In contrast, the lawyers' association gives a "well qualified" rating to those "regarded as one of the best available for the vacancy.
Metallgesellschaft AG said it agreed to acquire 51% of Lentjes AG from the Ferdinand Lentjes Foundation.
Terms weren't disclosed.
Metallgesellschaft, a diversified Frankfurt, West Germany-based metals group, said it is buying the stake in the specialized engineering company to expand its production of environmental supplies for power plants.
Lentjes' product mix of specialized boilers and pipes provides a good fit with its own Lurgi G.m.b.H. plant engineering unit, the company said.
The move is part of a strategy to focus on its core metals trading, processing and plant engineering activities while shedding peripheral units, the company said.
Lentjes had 1988 sales of 800 million marks ($434.4 million) and has a current order backlog of 2.5 billion marks.
The sale comes in place of a planned initial public offering of Lentjes stock.
A plan to bring the stock to market before year end apparently was upset by the recent weakness of Frankfurt share prices.
The U.S. International Trade Commission issued preliminary rulings under the U.S. anti-dumping act that imports of sweaters from Hong Kong, Taiwan and South Korea may be injuring a domestic industry.
Because of the rulings, the Commerce Department will continue to investigate complaints by U.S. sweater makers that the imports are reaching the U.S. at unfairly low prices in violation of the U.S. anti-dumping act.
The law defines unfairly low prices as ones below the cost of production or below prices in an exporter's home market.
ITC officials said final Commerce Department and ITC rulings won't come until next March or later.
If both agencies find violations of the U.S. trade law, the U.S. would assess penalty duties on the imports, which already are subject to import quotas under bilateral textile and apparel trade agreements.
Imports of manmade-fiber sweaters in 1988 totaled about $405 million from Taiwan, $400 million from South Korea and $125 million from Hong Kong, according to the ITC.
In another action, the ITC dismissed anti-dumping act complaints filed by Du Pont Co. of Wilmington, Del., against imports of neoprene, a type of synthetic rubber, from France and West Germany.
These imports totaled about $17 million last year.
Upjohn Co. said it will offer an early retirement package to as many as 1,100 employees in a cost-cutting move expected to result in a fourth-quarter charge.
Upjohn officials said they couldn't estimate the size of the charge until they determine which employees, and how many, will participate in the retirement plan.
But the pharmaceutical company said it "anticipates the long-term savings resulting from the plan's implementation will more than offset short-term costs."
The program, available to Upjohn employees 55 years old or older, could increase an individual's retirement benefits 10% to 20%.
In addition, Upjohn is offering a one-time retirement bonus equal to six months of base pay.
Chairman Theodore Cooper called the program part of the company's two-year strategy to implement budget constraints and "an effective headcount-control program."
But some analysts questioned how much of an impact the retirement package will have, because few jobs will end up being eliminated.
"It's a cosmetic move," said Jonathan S. Gelles of Wertheim Schroder & Co.
According to Upjohn's estimates, only 50% to 60% of the 1,100 eligible employees will take advantage of the plan.
Upjohn further estimated that about 50% of the employees who leave for early retirement may be replaced.
As a result, Upjohn will likely trim only about 275 to 350 of its more than 21,000 jobs world-wide.
In composite trading on the New York Stock Exchange yesterday, Upjohn shares rose 87.5 cents to $38.875 apiece.
An Upjohn spokesman said he had "heard nothing" to suggest the early retirement package was spurred by shareholder pressure or a potential bidder for the company, which occasionally has been the target of takeover speculation.
The company earlier this year adopted a shareholder-rights plan to ward off unwanted suitors.
The spokesman said it is the first early retirement plan offered under its two-year cost-control strategy.
Earlier staff-reduction moves have trimmed about 300 jobs, the spokesman said.
INTER-TEL Inc. (Chandler, Ariz.) --
Jerry Chapman, managing director of WayMar Associates, was elected a director of this business telecommunications software and systems concern.
He increases the board to seven.
"Feeding Frenzy" (Henry Holt, 326 pages, $19.95), a highly detailed account of the Wedtech scandal, begins on a reassuring note.
Right up front in the preface, co-author William Sternberg gives us an example of his own integrity.
When offered a free trip from the Bronx, Wedtech's home, to Washington, D.C., by one of Wedtech's principals, he tells the reader, "mindful of accepting anything of value from those I was writing about, I declined."
Any question as to why an author would believe this plaintive, high-minded note of assurance is necessary is answered by reading this book about sticky fingers and sweaty scammers.
Bribe by bribe, Mr. Sternberg and his co-author, Matthew C. Harrison Jr., lead us along the path Wedtech traveled, from its inception as a small manufacturing company to the status of full-fledged defense contractor, entrusted with the task of producing vital equipment for the Army and Navy.
The book revolves around John Mariotta, the founder of the company, and Fred Neuberger, who became his partner soon after Wedtech's creation.
Although started in 1965, Wedtech didn't really get rolling until 1975, when Mr. Neuberger discovered the federal government's Section 8(A) minority business program.
This is a Johnson-era, Great Society creation that mandates certain government contracts be awarded noncompetitively to minority businesses.
Mr. Neuberger realized that, although of Italian ancestry, Mr. Mariotta still could qualify as a minority person since he was born in Puerto Rico.
The two partners merely had to falsify the true ownership of the corporation.
Instead of 50/50 it became, on paper only, two-thirds Mariotta, one-third Neuberger, and they were in the program and off to the races.
Besides being a "minority-owned company" Wedtech was located in the South Bronx, a blighted area, made famous by Jimmy Carter in his 1976 presidential campaign.
The company plugged itself right into Carter campaign rhetoric about rebuilding the South Bronx and kept using the minority -- South Bronx angle through the Reagan '80s.
Starting with Congressman Mario Biaggi (now serving a jail sentence), the company began a career of bribing federal, state and local public officials and those close to public officials, right up to and including E. Robert Wallach, close friend and adviser to former Attorney General Ed Meese.
Wedtech didn't just use old fashioned bribery.
It made ample use of the modern techniques of influence peddling, retaining politically connected "respectable" law firms, investment bankers and political consultants, including Reagan confidant Lyn Nofzinger.
When necessary, it sought and received assistance from organized crime.
Sometimes the bribed became partners in the company.
Wedtech management used the merit system.
If you were especially helpful in a corrupt scheme you received not just cash in a bag, but equity.
If you were not an effective crook, you found yourself out in the cold, a fate that eventually befell Mr. Mariotta, the firm's semiliterate "minority" person.
But despite the sensational nature of the revelations and the breezy, easy-to-read tabloid writing style, "Feeding Frenzy" often falls short of gripping reading.
None of the scams show much ingenuity: Auditors found crookery the first day on the job.
Wedtech's scammers simply bribed them to shut up.
The scammers themselves were garden-variety low lifes, conspicuous consumers who wanted big houses, Mercedes cars, beautiful women, expensive clothes.
Among the lot of them, not one is wrestling with good and evil, or especially intelligent or even temporarily insane.
The one character at least somewhat interesting was Irving Louis Lobsenz, a pediatrician who changed his name to Rusty Kent London and became a master gambler and author of a book on blackjack.
He enters the story toward the end, just in time to get arrested.
Absorbed in doling out "Feeding Frenzy's" tidbits, the authors gloss over the root causes of Wedtech, namely the Section 8(A) federal program under whose auspices the scandal took place.
They do at least come around to saying that the courts might want to end "rigid affirmative action programs."
Programs like Section 8(A) are a little like leaving gold in the street and then expressing surprise when thieves walk by to scoop it up.
Numerous other scandals, among them the ones at HUD, have the same characteristics as Wedtech.
They take place in government programs that seem tailor-made for corruption.
Why are programs like this not eliminated?
"Feeding Frenzy" does provide a few clues.
In and around all levels of government in the U.S. are groups of people who can best be described as belonging to a political insider commercial party.
They know that whenever government is redistributing wealth, regulating commerce or maintaining a large defense establishment, there is big money to be made in influencing, brokering or selling the processes and decisions of government.
They are our version of the East bloc's Nomenklatura and they have absolutely no wish to see anything change.
How many government programs and policies exist because they line the pockets of political insiders?
This is the real issue raised by the Wedtech scandal.
Mr. Stern was chairman and chief executive officer of the New York State Urban Development Corp., 1983-85.
The Finnish government and major creditors of bankrupt shipyard Waertsilae Marine Industries Oy agreed in principle to form a new company to complete most of the troubled shipyard's backlog of 15 ships.
The new company will attempt to limit the shipyard's losses, participants said.
"The situation is that the bankruptcy court will get out of the shipbuilding business.
Everything will be taken over by the new company," said Christian Andersson, executive vice president of Oy Waertsilae, former parent of Waertsilae Marine.
Once its ownership is finalized, the new company will open talks with state-appointed receivers to buy or lease Waertsilae Marine's shipyard facilities.
Subcontractors will be offered a settlement and a swift transition to new management is expected to avert an exodus of skilled workers from Waertsilae Marine's two big shipyards, government officials said.
Under an accord signed yesterday, the government and Union Bank of Finland would become major shareholders in the new company, each injecting 100 million Finnish markkaa ($23.5 million).
Oy Waertsilae is to contribute 200 million markkaa, most of it as subordinated debt, and take a minority stake in the new company.
Customers holding contracts for Waertsilae Marine's undelivered ships are expected to subscribe most of the remaining 170 million markkaa in share capital, government officials said.
Waertsilae Marine's biggest creditor is Miami-based Carnival Cruise Lines Inc.
Carnival, which has three ships on order from Waertsilae Marine, presented claims for $1.5 billion damages in the bankruptcy court this week.
Waertsilae Marine's bankruptcy proceedings began Tuesday in a Helsinki court.
Its plans to be acquired dashed, Comprehensive Care Corp. said it plans to sell most of its psychiatric and drug abuse facilities in California and some other assets to pay its debt and provide working capital.
In all, the company hopes to repay $45 million in debt through the sales, which will completely discharge its secured debt, the company said.
In addition, the company has replaced its president and chief executive, naming W. James Nichol, head of the company's contract health services, to succeed B. Lee Karns.
Mr. Nichol said he was "extremely disappointed in the continuing deterioration of the company's operations while it attempted to conclude the reorganization during the past four months."
Concurrent with Mr. Nichol's appointment, Comprehensive Care moved its corporate headquarters from Irvine, Calif., to St. Louis, where the company maintained its contract services offices.
Mr. Karns continues as chairman.
Comprehensive Care had agreed to be acquired by closely held First Hospital Corp. of Norfolk, Va., but the sale sputtered almost from the beginning and finally collapsed last week.
In composite trading on the New York Stock Exchange yesterday, Comprehensive Care closed at $3.75 a share, up 12.5 cents.
Ralston Purina Co. reported a 47% decline in fourth-quarter earnings, reflecting restructuring costs as well as a more difficult pet food market.
The St. Louis company earned $45.2 million, or 65 cents a share, compared with $84.9 million, or $1.24 a share, a year earlier.
Sales in the latest period were $1.76 billion, a 13% increase from last year's $1.55 billion.
For the year ended Sept. 30, Ralston earned $422.5 million, or $6.44 a share, up 8.9% from $387.8 million, or $5.63 a share.
This year's results included a gain of $70.2 million on the disposal of seafood operations.
Sales for the full year were $6.6 billion, up 13% from $5.8 billion.
Ralston said its restructuring costs include the phase-out of a battery facility in Greenville, N.C., the recent closing of a Hostess cake bakery in Cincinnati and a reduction in staff throughout the company.
The battery plant, which makes rechargeable nickel cadmium and carbon zinc products, will be closed over the next year or so, a spokesman said.
Ralston attributed its fourth-quarter slump partly to higher costs of ingredients in the pet food business as well as competitive pressures, which required higher advertising spending.
For the year, pet food volume was flat, the company said.
Its cereal division realized higher operating profit on volume increases, but also spent more on promotion.
The Continental Baking business benefited from higher margins on bread and on increased cake sales, it added.
Ralston said its Eveready battery unit was hurt by continuing economic problems in South America.
Ralston shares closed yesterday at $80.50, off $1, in New York Stock Exchange composite trading.
Companies listed below reported quarterly profit substantially different from the average of analysts' estimates.
The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share.
Estimated and actual results involving losses are omitted.
The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days.
Otherwise, actual profit is compared with the 300-day estimate.
First Chicago Corp. said it completed its $55.1 million cash-and-stock acquisition of closely held Ravenswood Financial Corp., another Chicago bank holding company.
The record corn-buying binge by the Soviet Union is causing serious bottlenecks in the U.S. grain pipeline.
The Soviet purchases are so massive that exporters are struggling to find enough river barges and trains to move the recently harvested Midwest crop to ports for loading onto Soviet ships.
River barge rates have soared 40% this fall from a year earlier.
Railroad companies and some ports are reaping a sudden windfall of business.
And some grain analysts are predicting that corn prices might gyrate this month as exporters scrounge to find enough of the crop to meet their obligations to the Soviets.
The Soviet Union bought roughly 310 million bushels of U.S. corn in October, which is the most ever sold to the Soviet Union in one month from the U.S.
The Soviet Union wants much of it delivered by January, which would be a strain in most years.
But it is particularly difficult this autumn because of low water levels on the Mississippi River, on which flows much of the U.S. corn that is shipped overseas.
"We are shipping the most corn in that short of time period to one customer on record," said William Dunton, a U.S. Agriculture Department transportation expert.
"It is going to be real tight."
Because of persistent dry weather in the northern Plains, the water level on the upper section of the Mississippi River is so low that many river operators are already trimming the number of barges their tows push at one time.
In a few weeks, many barges probably won't be able to operate fully loaded south of St. Louis because the U.S. Army Corps of Engineers is beginning to reduce the flow of the Missouri River, which feeds into the Mississippi River.
The Army Corps is cutting the flow of the Missouri River about two weeks earlier than normal because of low water levels in the reservoirs that feed it.
Barge rates on the Mississippi River sank yesterday on speculation that widespread rain this week in the Midwest might temporarily alleviate the situation.
But the Army Corps of Engineers expects the river level to continue falling this month.
At St. Louis, the water level of the Mississippi River is already 6.5 feet below normal and it could drop an additional 2.5 feet when the flow of the Missouri River is slowed, an Army Corps spokesman said.
Similar levels hamstrung barge shipments last year in the wake of the worst drought in 50 years.
So far, the grain industry's budding logistical problems haven't been a major factor in the trading of corn contracts at the Chicago Board of Trade.
Many grain processors and exporters use the price of the corn futures contracts traded there to calculate the price they offer to buy corn from farmers.
At the Board of Trade yesterday the price of the corn contract for December delivery slipped 3.5 cents a bushel to settle at $2.375 a bushel.
Corn prices have been sluggish this fall despite the huge Soviet orders because the harvest has allowed farmers to rebuild the stockpiles depleted by the 1988 drought.
With the harvest winding down, however, some analysts are speculating that prices might jump in some regions as U.S. exporters try to gather the corn they are obligated to deliver.
Farmers are in the best position of many years to push up corn prices.
Because the drought reduced U.S. stockpiles, they have more than enough storage space for their new crop, and that permits them to wait for prices to rise.
In parts of Iowa, for example, some grain elevators are offering farmers $2.15 a bushel for corn.
Many farmers probably wouldn't sell until prices rose at least 20 cents a bushel, said Lyle Reed, president of Chicago Central & Pacific Railroad Co. of Waterloo, Iowa.
It isn't clear, however, who would win a waiting game.
Although U.S. corn stockpiles shrank by roughly half in the wake of the drought, the Agriculture Department projects that nearly one-fifth of the harvest will still be in storage before the 1990 corn harvest begins.
Some analysts are worried that reports of the grain industry's problems might spark investors to begin buying corn futures contracts -- only to see little appreciation.
"The public is buying the market when in reality there is plenty of grain to be shipped," said Bill Biedermann, Allendale Inc. research director.
Although much of this country's export corn goes to New Orleans by barge, it is possible for exporters to sidestep the Mississippi River by shipping a larger-than-normal amount of corn by train to the port.
Ports in the Great Lakes and Atlantic Coast can also relieve pressure on New Orleans.
One railroad, for example, is already increasing its grain hauling service from Indiana to Baltimore.
And it isn't clear that the Soviet Union will stay on its record buying pace.
The Soviet orders were compressed into the month of October because of delays.
The Soviet Union usually begins buying U.S. crops earlier in the fall.
But its purchases apparently were delayed by a reorganization of its agricultural bureaucracy as well as budget problems.
In other commodity markets yesterday:
ENERGY: Crude oil futures prices increased in moderate trading, but much of the action was in heating oil.
Prices rose on the news that a sizable West German refinery was damaged in a fire, tightening an already tight European market.
Heating oil for November delivery ended at 58.64 cents a gallon, up one cent on the New York Mercantile Exchange.
West Texas Intermediate for December delivery advanced 22 cents to $19.94 a barrel.
Gasoline futures continued a sell-off that began Monday.
PRECIOUS METALS: Futures prices eased as increased stability and strength came into the securities markets.
December delivery gold fell $3.20 an ounce to $377.60.
December silver declined 6.50 cents an ounce to $5.2180.
January platinum was down $5.70 an ounce at $494.50.
Precious metals, gold in particular, currently are being influenced more by stock market gyrations than the dollar as traders seek greater investment stability, according to William O'Neill, vice president of research at Elders Futures in New York.
"The recent rally in precious metals was a result of uncertainty and volatility in equities," he said.
Yesterday, the stock market rose strongly, creating a more defensive attitude among precious metals traders, he said.
Silver and platinum, which have more of an industrial nature than gold, were even weaker, he said.
Silver is also under pressure of "extremely high" inventories in warehouses of the Commodity Exchange, he said.
Yesterday, these stocks rose by 170,262 ounces to a record of 226,570,380 ounces, according to an exchange spokesman.
COPPER: Futures prices partially recovered Monday's declines because Chilean miners voted to strike.
The December contract rose 1.20 cents a pound to $1.14.
In Chile, workers at two copper mines, Los Bronces and El Soldado, which belong to the Exxon-owned Minera Disputada, yesterday voted to begin a full strike tomorrow, an analyst said.
Reasons for the walkout, the analyst said, included a number of procedural issues, such as a right to strike.
The analyst noted that also inherent in all metal markets was a sympathetic reaction to stocks.
In the case of copper, he said, the upbeat mood of stocks was reflected in demand for futures contracts because a stronger economy means greater buying interest for the metal.
Also contributing to the firmness in copper, the analyst noted, was a report by Chicago purchasing agents, which precedes the full purchasing agents' report that is due out today and gives an indication of what the full report might hold.
The Purchasing Management Association of Chicago's October index rose to 51.6% after three previous months of readings below 50%.
The September index was 47.1%.
A reading below 50% generally indicates a slowing in the industrial sector of the economy, while a reading above 50% points to expansion.
The Chicago report raised the possibility that the October survey of the National Association of Purchasing Management would also show a reading above 50%.
NCR Corp. unveiled two models of its Tower line of midrange computers and introduced advanced networking software to allow the Tower family to operate as a central hub in a network of computers.
The new software is based on Novell Inc.'s NetWare network operating system software.
USX Corp. posted a 23% drop in third-quarter profit, as improved oil results failed to offset weakness in steel and natural gas operations.
The nation's largest steelmaker earned $175 million, or 62 cents a share, compared with the year-earlier $228 million, or 80 cents a share.
The recent quarter includes pretax gains of $98 million from asset sales, while like gains in the year-earlier quarter totaled $61 million.
In the 1988 period, USX also had a $71 million after-tax gain from a tax dispute settlement.
Sales rose 5% to $4.4 billion from $4.2 billion.
The earnings drop appears particularly steep in comparison with last year's unusually strong third quarter, when the company was riding an industrywide boom in demand and pricing.
However, third-quarter operating profit fell 14%, as USX sold sizable chunks of its diversified and steel segments, eliminating income from those operations.
Among segments that continue to operate, though, the company's steel division continued to suffer from soft demand for its tubular goods serving the oil industry and other markets.
Peter Marcus, an analyst with PaineWebber Inc., said that a downturn in the appliance industry, coupled with sluggish automotive sales, hurt USX results.
Moreover, USX exports more than other steelmakers, and the overseas market has been under more severe pricing pressure.
The company attributed lower sales and earnings for the steel segment to the loss of results from the Lorain, Ohio, plant, which now is a 50-50 joint venture with Japan's Kobe Steel Ltd.
In the steel division, operating profit dropped 11% to $85 million.
Profit per ton of steel shipped dropped to about $33 a ton from $42 a ton last year and $53 a ton in the second quarter, analysts said.
Still, USX fared better than other major steelmakers, earning more per ton of steel shipped than either Bethlehem Steel Corp., which posted a 54% drop in net income, or Inland Steel Industries Inc., whose profit plummeted 70%.
In New York Stock Exchange composite trading yesterday, USX shares closed up $1.25, at $34.625, as the reported earnings exceeded projections by some analysts who hadn't expected as great a volume of asset sales.
The rise in the stock's price may also reflect the fact that USX's steel segment fared better than some other steelmakers'.
Charles Bradford, an analyst with Merrill Lynch Capital Markets, said USX may have received orders lost by competitors who were involved in labor contracts earlier this year.
He said USX also appeared to sell a richer mix of steel products, such as the more profitable pipe and galvanized coated sheet, than lower-priced structural goods.
The energy segment, with a 15% rise in operating profit, is clearly the company's strongest.
Higher crude oil prices helped boost operating profit for the Marathon Oil Co. unit to $198 million from $180 million.
The Texas Oil & Gas division continues to operate in the red, although losses narrowed to $9 million from $15 million.
USX announced in October that it was soliciting bids to sell TXO's oil and gas reserves.
Proceeds of that sale are to be used to reduce debt and buy back shares.
The company noted that it has reduced debt by $1.6 billion since the end of 1988 and bought back about 15.5 million shares of common stock since the fourth quarter of 1987.
USX has about $5.5 billion in long-term debt and 257 million shares outstanding.
The announced sale of the reserves was followed by news that investor Carl Icahn had increased his stake in USX to 13.1% and threatened a takeover or other business combination.
Mr. Icahn has said he believes USX would be worth more if broken up into steel and energy segments.
Profit for the nine months jumped 21% to $721 million, or $2.62 a share, from $598 million, or $2.07 a share.
Sales rose 10% to $13.8 billion from $12.5 billion.
John F. Barrett, 40, formerly executive vice president and chief financial officer, was named president and chief operating officer, posts which had been vacant.
Leon J. Level, vice president and chief financial officer of this computer services concern, and F. Warren McFarlan, a professor at Harvard University's Graduate School of Business, were elected directors, increasing board membership to nine.
David A. DiLoreto, president of metal container division, was named to the additional post of group vice president, packaging products, at this packaging, industrial and aerospace products concern, succeeding Delmont A. Davis, who was named president and chief operating officer in August.
Two leading constitutional-law experts said President Bush doesn't have the legal authority to exercise a line-item veto.
Professors Philip Kurland of the University of Chicago and Laurence Tribe of Harvard Law School said any effort by President Bush to claim authority for a line-item veto would contradict the text of the Constitution and the intent of its authors, as well as the views of previous presidents.
A line-item veto is a procedure that would allow a president to veto part of a big congressional spending bill without having to scuttle the entire measure.
Mr. Bush has said he would like to be able to use this procedure.
A White House spokesman said last week that the president is considering declaring that the Constitution implicitly gives him the authority for a line-item veto to provoke a test case.
But the two legal experts, responding to an inquiry by Sen. Edward Kennedy (D., Mass.), wrote in a joint letter that the president "lacks the constitutional authority to exercise a line-item veto."
The two professors represent different ends of the political spectrum -- Mr. Kurland is a conservative and Mr. Tribe is a liberal.
The two professors said the Constitution authorizes the president to veto entire bills, not partial measures.
Moreover, they said the first appropriations bill passed 200 years ago covered many different items, and there was no discussion of a line-item veto.
They also said that more than a dozen presidents have called for line-item veto authority since the Civil War, and "all have shared the view that such lawmaking power is beyond the reach" of the president.
Sen. Kennedy said in a separate statement that he supports legislation to give the president line-item veto power, but that it would be a "reckless course of action" for President Bush to claim the authority without congressional approval.
Trinity Industries Inc. said it reached a preliminary agreement to sell 500 railcar platforms to Trailer Train Co. of Chicago.
Terms weren't disclosed.
Trinity said it plans to begin delivery in the first quarter of next year.
In an Oct. 19 review of "The Misanthrope" at Chicago's Goodman Theatre ("Revitalized Classics Take the Stage in Windy City," Leisure & Arts), the role of Celimene, played by Kim Cattrall, was mistakenly attributed to Christina Haag.
Ms. Haag plays Elianti.
Rolls-Royce Motor Cars Inc. said it expects its U.S. sales to remain steady at about 1,200 cars in 1990.
The luxury auto maker last year sold 1,214 cars in the U.S.
Howard Mosher, president and chief executive officer, said he anticipates growth for the luxury auto maker in Britain and Europe, and in Far Eastern markets.
BELL INDUSTRIES Inc. increased its quarterly to 10 cents from seven cents a share.
The new rate will be payable Feb. 15.
A record date hasn't been set.
Bell, based in Los Angeles, makes and distributes electronic, computer and building products.
Investors are appealing to the Securities and Exchange Commission not to limit their access to information about stock purchases and sales by corporate insiders.
A SEC proposal to ease reporting requirements for some company executives would undermine the usefulness of information on insider trades as a stock-picking tool, individual investors and professional money managers contend.
They make the argument in letters to the agency about rule changes proposed this past summer that, among other things, would exempt many middle-management executives from reporting trades in their own companies' shares.
The proposed changes also would allow executives to report exercises of options later and less often.
Many of the letters maintain that investor confidence has been so shaken by the 1987 stock market crash -- and the markets already so stacked against the little guy -- that any decrease in information on insider-trading patterns might prompt individuals to get out of stocks altogether.
"The SEC has historically paid obeisance to the ideal of a level playing field," wrote Clyde S. McGregor of Winnetka, Ill., in one of the 92 letters the agency has received since the changes were proposed Aug. 17.
"Apparently the commission did not really believe in this ideal."
Currently, the rules force executives, directors and other corporate insiders to report purchases and sales of their companies' shares within about a month after the transaction.
But about 25% of the insiders, according to SEC figures, file their reports late.
The changes were proposed in an effort to streamline federal bureaucracy and boost compliance by the executives "who are really calling the shots," said Brian Lane, special counsel at the SEC's office of disclosure policy, which proposed the changes.
Investors, money managers and corporate officials had until today to comment on the proposals, and the issue has produced more mail than almost any other issue in memory, Mr. Lane said.
The SEC will probably vote on the proposal early next year, he said.
Not all those who wrote oppose the changes.
The Committee on Federal Regulation of Securities for the American Bar Association argues, for example, in its lengthy letter to the SEC, that the proposed changes "would substantially improve the {law} by conforming it more closely to contemporary business realities."
What the investors who oppose the proposed changes object to most is the effect they say the proposal would have on their ability to spot telltale "clusters" of trading activity -- buying or selling by more than one officer or director within a short period of time.
According to some estimates, the rule changes would cut insider filings by more than a third.
The SEC's Mr. Lane vehemently disputed those estimates.
The rules will eliminate filings policy-making divisions, such as sales, marketing, finance and research and development, Mr. Lane said.
The proposed rules also would be tougher on the insiders still required to file reports, he said.
Companies would be compelled to publish in annual proxy statements the names of insiders who fail to file reports on time.
Considered as a whole, Mr. Lane said, the filings required under the proposed rules "will be at least as effective, if not more so, for investors following transactions."
But Robert Gabele, president of Invest/Net, a North Miami, Fla., company that packages and sells the insider-trading data, said the proposal is worded so vaguely that key officials may fail to file the reports.
Many investors wrote asking the SEC to require insiders to report their purchases and sales immediately, not a month later.
But Mr. Lane said that while the SEC regulates who files, the law tells them when to do so.
Investors who want to change the required timing should write their representatives in Congress, he added.
The SEC would likely be amenable to legislation that required insiders to file transactions on a more timely basis, he said.
The nation's largest pension fund, which oversees $80 billion for college employees, plans to offer two new investment options to its 1.2 million participants.
The Teachers Insurance and Annuity Association-College Retirement Equities Fund said it will introduce a stock and bond fund that will invest in "socially responsible" companies, and a bond fund.
Both funds are expected to begin operation around March 1, subject to Securities and Exchange Commission approval.
For its employees to sign up for the options, a college also must approve the plan.
Some 4,300 institutions are part of the pension fund.
The new options carry out part of an agreement that the pension fund, under pressure to relax its strict participation rules and to provide more investment options, reached with the SEC in December.
The new "social choice" fund will shun securities of companies linked to South Africa, nuclear power and in some cases, Northern Ireland.
Also excluded will be investments in companies with "significant" business stemming from weapons manufacture, alcoholic beverages or tobacco.
Sixty percent of the fund will be invested in stocks, with the rest going into bonds or short-term investments.
The bond fund will invest in high-grade or medium-grade bonds, mortgages or asset-backed securities, including as much as 15% in foreign securities.
The fund also might buy and sell futures and options contracts, subject to approval by the New York State Insurance Department.
Under two new features, participants will be able to transfer money from the new funds to other investment funds or, if their jobs are terminated, receive cash from the funds.
The investment choices offered by the pension fund currently are limited to a stock fund, an annuity and a money-market fund.
New Brunswick Scientific Co., a maker of biotechnology instrumentation and equipment, said it adopted an anti-takeover plan giving shareholders the right to purchase shares at half price under certain conditions.
The company said the plan, under review for some time, will protect shareholders against "abusive takeover tactics.
W. Ed Tyler, 37 years old, a senior vice president at this printing concern, was elected president of its technology group, a new position.
Solo woodwind players have to be creative if they want to work a lot, because their repertoire and audience appeal are limited.
The oboist Heinz Holliger has taken a hard line about the problem: He commissions and splendidly interprets fearsome contemporary scores and does some conducting, so he doesn't have to play the same Mozart and Strauss concertos over and over again.
Richard Stoltzman has taken a gentler, more audience-friendly approach.
Years ago, he collaborated with the new music gurus Peter Serkin and Fred Sherry in the very countercultural chamber group Tashi, which won audiences over to dreaded contemporary scores like Messiaen's "Quartet for the End of Time."
Today, the pixie-like clarinetist has mostly dropped the missionary work (though a touch of the old Tashi still survives) and now goes on the road with piano, bass, a slide show, and a repertoire that ranges from light classical to light jazz to light pop, with a few notable exceptions.
Just the thing for the Vivaldi-at-brunch set, the yuppie audience that has embraced New Age as its very own easy listening.
But you can't dismiss Mr. Stoltzman's music or his motives as merely commercial and lightweight.
He believes in what he plays, and he plays superbly.
His recent appearance at the Metropolitan Museum, dubbed "A Musical Odyssey," was a case in point.
It felt more like a party, or a highly polished jam session with a few friends, than a classical concert.
Clad in his trademark black velvet suit, the soft-spoken clarinetist announced that his new album, "Inner Voices," had just been released, that his family was in the front row, and that it was his mother's birthday, so he was going to play her favorite tune from the record.
He launched into Saint-Saens's "The Swan" from "Carnival of the Animals," a favorite encore piece for cellists, with lovely, glossy tone and no bite.
Then, as if to show that he could play fast as well, he offered the second movement from Saint-Saens's Sonata for Clarinet, a whimsical, puckish tidbit that reflected the flip side of the Stoltzman personality.
And so it went through the first half: an ingeniously chosen potpourri of pieces, none longer than five minutes, none that would disturb or challenge a listener.
Mr. Stoltzman introduced his colleagues: Bill Douglas, pianist/bassoonist/composer and an old buddy from Yale, and jazz bassist Eddie Gomez.
An improvisational section was built around pieces by Mr. Douglas, beginning with "Golden Rain," a lilting, laid-back lead in to the uptempo "Sky," which gave Mr. Stoltzman the opportunity to wail in a high register and show off his fleet fingers.
Bach's "Air" followed.
Mr. Stoltzman tied the composer in by proclaiming him "the great improviser of the 18th century," and then built on the image by joining with Mr. Douglas in some Bach two-part inventions, cleverly arranged for clarinet and bassoon by Mr. Douglas.
Keeping the mood light, the two then chanted and chortled their way through some murderous polyrhythms, devised by Mr. Douglas as an alternative to Hindemith's dry theory-teaching techniques, and then, with Mr. Gomez, soared and improvised on the composer's tight "Bebop Etudes."
The end of the first half, however, brought what the standing-room-only crowd seemed to be waiting for: the pop singer Judy Collins, who appears on "Inner Voices."
Glamorous and pure-voiced as ever, Ms. Collins sang Joni Mitchell's "For Free" -- about an encounter with a street-corner clarinetist, to which Mr. Stoltzman contributed a clarinet obligatto -- and Mr. Douglas's lush setting of a Gaelic blessing, "Deep Peace."
"Deep Peace" also featured a slide show of lovely but predictable images of clouds, beaches, deserts, sunsets, etc.
It was all too mellow to be believed, but they probably would have gotten away with it, had they not felt compelled to add Ms. Collins's signature tune, "Amazing Grace," and ask for audience participation.
That went over the permissible line for warm and fuzzy feelings.
Was this why some of the audience departed before or during the second half?
Or was it because Ms. Collins had gone?
Either way it was a pity, because Mr. Stolzman offered the most substantial music of the evening just after intermission: Steve Reich's "New York Counterpoint," one of a series of Reich works that juxtapose a live performer with recorded tracks of his or her own playing.
(Mr. Reich's new "Different Trains" for string quartet uses the technique magisterially.)
Mr. Stoltzman must have worried that his audience might not be able to take it: He warned us in advance that "New York Counterpoint" lasts 11 1/2 minutes.
He also unfortunately illustrated this intricate, jazzy tapestry with Mr. Pearson's images, this time of geometric or repeating objects, in a kitschy mirroring of the musical structure that was thoroughly distracting from Mr. Reich's piece and Mr. Stoltzman's elegant execution of it.
The rest of the concert was more straight jazz and mellow sounds written by Charlie Parker, Ornette Coleman, Bill Douglas and Eddie Gomez, with pictures for the Douglas pieces.
It was enjoyable to hear accomplished jazz without having to sit in a smoke-filled club, but like the first half, much of it was easy to take and ultimately forgettable.
Is this the future of chamber music?
Managers and presenters insist that chamber music concerts are a hard sell, but can audiences really enjoy them only if the music is purged of threatening elements, served up in bite-sized morsels and accompanied by visuals?
What's next?
Slides to illustrate Shostakovich quartets?
It was not an unpleasant evening, certainly, thanks to the high level of performance, the compositional talents of Mr. Douglas, and the obvious sincerity with which Mr. Stoltzman chooses his selections.
But it was neither deep nor lasting: light entertainment that was no substitute for an evening of Brahms.
Ms. Waleson is a free-lance writer based in New York.
One of Ronald Reagan's attributes as President was that he rarely gave his blessing to the claptrap that passes for "consensus" in various international institutions.
In fact, he liberated the U.S. from one of the world's most corrupt organizations -- UNESCO.
This is the U.N. group that managed to traduce its own charter of promoting education, science and culture.
Ever since, the remaining members have been desperate for the United States to rejoin this dreadful group.
Now UNESCO apologists are lobbying President Bush to renege on President Reagan's decision to depart.
But we can think of many reasons to stay out for the foreseeable future and well beyond.
The U.S., along with Britain and Singapore, left the agency when its anti-Western ideology, financial corruption and top leadership got out of hand.
The personal antics of agency Director Amadou-Mahtar M'Bow drew much attention, such as when several of his top aides were uncovered as KGB plants and ejected from France and when a mysterious office fire was set just before Congress sent accountants to trace U.S. funds.
Mr. M'Bow was an extreme case, but even his replacement, the more personally genial Spanish biochemist Federico Mayor, has had little success at achieving reforms.
Several ridiculous projects continue, including the "New International Economic Order," which means redistributionism from the West to pay for everyone else's statism.
The Orwellian "New World Information Order" would give government officials rights against the press; journalists would be obliged to kowtow to their government, which would have licensing and censorship powers and, indeed, duties to block printing of "wrong" ideas.
UNESCO somehow converted the founding U.N. ideals of individual rights and liberty into "peoples' rights."
Million-dollar conferences were held to chew on subjects such as "ethical responsibilities of scientists in support of disarmament" and "the impact of the activities of transnational corporations."
The agency was so totally subverted from the high principles of its founding that even the Soviets now wonder about an agency that seemed so congenial to them.
Glasnost may be partly responsible, but Soviet Foreign Minister Eduard Shevardnadze last year admitted, "The exaggerated ideological approach undermined tolerance intrinsic to UNESCO."
UNESCO is now holding its biennial meetings in Paris to devise its next projects.
Mr. Mayor's hope that references to "press freedom" would survive unamended seems doomed to failure; the current phrasing is "educating the public and media to avoid manipulation."
He hasn't been able to replace the M'Bow cabal.
Soviets remain in charge of education programs, a former head of an African military tribunal for executions is in charge of culture, and a hard-line Polish communist in exile directs the human-rights and peace division.
Of the agency's 2,750 staff members, 230 are in the field working on actual projects, such as literacy and oceanographic research.
The position of the United States, which once contributed 25% of the budget, is that nothing has changed.
John Bolton, the assistant secretary of state for international organizations, told Congress that the continuing "statist, restrictive, nondemocratic" programs make rejoining any time soon "extremely unlikely."
This hasn't much bothered the UNESCO delegates, who last week couldn't even agree to raise funds by selling off a fancy 19th-century French chateau the agency somehow owns.
Other countries, including West Germany, may have a hard time justifying continued membership.
We see an even stronger argument against UNESCO than its unsurprising failure to reform.
This is that the Reagan Revolution spanning Eastern Europe and Tiananmen Square shows the power of ideas unencumbered by international civil servants or government functionaries.
Free markets, free minds and free elections have an appeal that seems to get muddled only when delivered through U.N. organizations -- which of course are made up largely of governments that fear these principles at home.
The Babelists of the United Nations are experts at obfuscation.
This can have its purposes at times, but there's no reason to cloud the importance and allure of Western concepts of freedom and justice.
We can see plenty of reasons to stay out, and none to rejoin UNESCO.
Researchers at Plant Genetic Systems N.V. in Belgium said they have developed a genetic engineering technique for creating hybrid plants for a number of key crops.
The researchers said they have isolated a plant gene that prevents the production of pollen.
The gene thus can prevent a plant from fertilizing itself.
Such so-called male-sterile plants can then be fertilized by pollen from another strain of the plant, thereby producing hybrid seed.
The new generation of plants will possess the flourishing, high-production trait known as "hybrid vigor," similar to that now seen in hybrid corn.
"The development could have a dramatic effect on farm production, especially cotton," said Murray Robinson, president of Delta & Pine Land Co., a Southwide Inc. subsidiary that is one of the largest cotton seed producers in the U.S.
On a commercial scale, the sterilization of the pollen-producing male part has only been achieved in corn and sorghum feed grains.
That's because the male part, the tassel, and the female, the ear, are some distance apart on the corn plant.
In a labor-intensive process, the seed companies cut off the tassels of each plant, making it male sterile.
They sow a row of male-fertile plants nearby, which then pollinate the male-sterile plants.
The first hybrid corn seeds produced using this mechanical approach were introduced in the 1930s and they yielded as much as 20% more corn than naturally pollinated plants.
The vast majority of the U.S. corn crop now is grown from hybrid seeds produced by seed companies.
A similar technique is almost impossible to apply to other crops, such as cotton, soybeans and rice.
The male part, the anthers of the plant, and the female, the pistils, of the same plant are within a fraction of an inch or even attached to each other.
The anthers in these plants are difficult to clip off.
In China, a great number of workers are engaged in pulling out the male organs of rice plants using tweezers, and one-third of rice produced in that country is grown from hybrid seeds.
At Plant Genetic Systems, researchers have isolated a pollen-inhibiting gene that can be inserted in a plant to confer male sterility.
Jan Leemans, research director, said this gene was successfully introduced in oil-producing rapeseed plants, a major crop in Europe and Canada, using as a carrier a "promoter gene" developed by Robert Goldberg at the University of California in Los Angeles.
The sterilizing gene is expressed just before the pollen is about to develop and it deactivates the anthers of every flower in the plant.
Mr. Leemans said this genetic manipulation doesn't hurt the growth of that plant.
The researchers also pulled off a second genetic engineering trick in order to get male-sterile plants in large enough numbers to produce a commercial hybrid seed crop.
They attached a second gene, for herbicide resistance, to the pollen-inhibiting gene.
Both genes are then inserted into a few greenhouse plants, which are then pollinated and allowed to mature and produce seed.
The laws of heredity dictate that half of the plants springing from these greenhouse-produced seeds will be male sterile and herbicide resistant and half will be male fertile and herbicide susceptible.
The application of herbicide would kill off the male-fertile plants, leaving a large field of male-sterile plants that can be cross-pollinated to produce hybrid seed.
Mr. Leemans said the hybrid rapeseeds created with this genetic engineering yield 15% to 30% more output than the commercial strains used currently.
"This technique is applicable to a wide variety of crops," he said, and added that some modifications may be necessary to accommodate the peculiarities of each type of crop.
He said the company is experimenting with the technique on alfalfa, and plans to include cotton and corn, among other crops.
He said that even though virtually all corn seeds currently planted are hybrids, the genetic approach will obviate the need for mechanical emasculation of anthers, which costs U.S. seed producers about $70 million annually.
In recent years, demand for hybrid seeds has spurred research at a number of chemical and biotechnology companies, including Monsanto Co., Shell Oil Co. and Eli Lilly & Co.
One technique developed by some of these companies involves a chemical spray supposed to kill only a plant's pollen.
But there have been problems with chemical sprays damaging plants' female reproductive organs and concern for the toxicity of such chemical sprays to humans, animals and beneficial insects.
However, Paul Johanson, Monsanto's director of plant sciences, said the company's chemical spray overcomes these problems and is "gentle on the female organ."
Biosource Genetics Corp., Vacaville, Calif., is developing a spray containing a gene that spreads from cell to cell and interferes with the genes that are responsible for producing pollen.
This gene, called "gametocide," is carried into the plant by a virus that remains active for a few days.
Robert Erwin, president of Biosource, called Plant Genetic's approach "interesting" and "novel," and "complementary rather than competitive."
"There is a large market out there hungry for hybrid seeds," he said.
Mr. Robinson of Delta & Pine, the seed producer in Scott, Miss., said Plant Genetic's success in creating genetically engineered male steriles doesn't automatically mean it would be simple to create hybrids in all crops.
That's because pollination, while easy in corn because the carrier is wind, is more complex and involves insects as carriers in crops such as cotton.
"It's one thing to say you can sterilize, and another to then successfully pollinate the plant," he said.
Nevertheless, he said, he is negotiating with Plant Genetic to acquire the technology to try breeding hybrid cotton.
A bitter conflict with global implications has erupted between Nomura Securities Co. and Industrial Bank of Japan, two of the world's most powerful financial companies.
The clash is a sign of a new toughness and divisiveness in Japan's once-cozy financial circles.
Not only are Japan's financial institutions putting their enormous clout to work; increasingly they're squaring off against one another in unprecedented public fashion.
Already, the consequences are being felt by other players in the financial markets -- even governments.
What triggered the latest clash was a skirmish over the timing of a New Zealand government bond issue.
Nomura was attempting to organize the 50 billion-yen ($352 million) borrowing in Japan at a time when many Japanese banks, led by Industrial Bank of Japan, were pressuring the Wellington government to help them recover loans made to a defunct investment bank that had been owned by New Zealand's civil-service pension fund.
Unwilling to put up new money for New Zealand until those debts are repaid, most banks refused even to play administrative roles in the new financing, forcing an embarrassed Nomura to postpone it this week.
The dispute shows clearly the global power of Japan's financial titans.
Aside from Nomura's injured pride, the biggest victim so far has been the New Zealand government.
Barred by its budget law from making any new domestic bond issues, Wellington's Debt Management Office had been casting abroad to raise the 3 billion New Zealand dollars (US$1.76 billion) to NZ$4 billion it needs to come up with by the end of its fiscal year next June 30.
With Japan's cash-flush banks aligned against it, though, raising money may be difficult.
Not only can they block Wellington from raising money in Japan, bankers here say, but as the largest underwriters in the Eurobond market, they might be able to scuttle borrowings there, too.
New Zealand's finance minister, David Caygill, lashed out at such suggestions.
He told reporters in Wellington Tuesday that the government hadn't guaranteed the loans to DFC New Zealand Ltd., an investment bank 80%-owned by the National Provident Fund, and wouldn't bail it out.
"It may very well be what the Japanese banks want," he told Radio New Zealand.
"I think it would be irresponsible and I am not about to be blackmailed by Japanese banks or any other international interests."
No less significant than the Japanese banks' attempt to cut off funds to pressure a foreign government are the implications of a confrontation between Japan securities and banking industries.
Anxiety is rising over recent government proposals to eventually lower the strict barriers that now separate -- and protect -- the two industries from each other.
Both sides are jealously guarding their turf, and relations have been at a flashpoint for months.
The banks badly want to break into all aspects of the securities business.
Meanwhile, the securities companies -- most of them smaller than the banks -- are seeking access only to limited kinds of banking that wouldn't open them to the full brunt of competition from the banks.
Nomura, the world's biggest securities company largely by virtue of its protected home field, and Industrial Bank of Japan, Japan's most innovative and aggressive bank in capital markets abroad, captain the opposing sides.
And their suspicions of each other run deep.
In the past year, both have tried to stretch the limits of their businesses.
Nomura started a credit-card venture with American Express Co. that allowed cardholders to use their Nomura securities accounts like a bank account, attracting the wrath of banks.
And Industrial Bank of Japan started up a London securities subsidiary that sells Japanese stocks to non-Japanese institutions overseas, a move that stirred the anger of the stock brokerage firms.
The New Zealand bond issue simply has brought the two institutions face-to-face.
ITEL CORP. reported third-quarter earnings, which were mistakenly shown in the Quarterly Earnings Surprises table in yesterday's edition to be lower than the average of analysts' estimates.
On a pretax basis, Itel's third-quarter earnings of 30 cents a share were actually 7.14% higher than the average of estimates.
Raymond E. Ross, 53 years old, formerly group vice president, U.S. plastics machinery, at this machine tool, plastics machinery and robots concern, was named senior vice president, industrial systems, succeeding David A. Entrekin, who resigned Monday.
John A. Conlon Jr., 45, was named a managing director at this investment-banking company.
He will be in charge of research, equity sales and trading, and the syndicate operation of Rothschild.
Mr. Conlon was executive vice president and director of the equity division of the international division of Nikko Securities Co.
As Yogi Berra might say, it's deja vu all over again.
Crouched at shortstop, Bert Campaneris, once Oakland's master thief, effortlessly scoops up a groundball and flips it to second.
In the outfield, Paul Blair, the Orioles' eight-time Gold Glove winner, elegantly shags a fly.
On the mound, former Red Sox great Luis Tiant, the wily master of 1,001 moves, throws an off-speed strike.
"Babies, kiddies," growls their manager -- a fellow named Earl Weaver, who, in a different time, handled four World Series teams and now handles the Gold Coast Suns.
"Old-time kiddies," he says.
Perhaps.
But for the next few months, these boys of summers long past are going to be reveling in an Indian summer of the soul.
Now that the baseball season is officially over, you see, it's time for a new season to begin.
Today is the debut of the Senior Professional Baseball Association, a new eight-team pro sports circuit, modeled after the highly successful senior tennis and golf tours and complete with good salaries, a cable television contract and even expansion plans.
One hundred and ninety two former greats, near greats, hardly knowns and unknowns begin a 72-game, three-month season in spring-training stadiums up and down Florida.
For everyone involved, it's one more swig of that elixir of youth, baseball.
"Someone always makes you quit," says legendary St. Louis Cardinals centerfielder Curt Flood, the league's commissioner.
"You feel you want one more -- one more at-bat, one more hit, one more game."
Until the baby-faced heroes of today reclaim these ballparks for spring training, there is one more.
And not just for the players.
It's one more for the baseball-loving lawyers, accountants and real estate developers who ponied up about $1 million each for the chance to be an owner, to step into the shoes of a Gene Autry or have a beer with Rollie Fingers.
"Nothing can be better than this," says Don Sider, owner of the West Palm Beach Tropics.
Early in the morning Mr. Sider, an estate lawyer, pores over last wills and testaments.
Midmorning, he dons an orange-and-blue uniform and, for fun, may field a bunt from Dave Kingman.
It's one more, too, for the fans who dream of a season that never ends.
"I feel like a little kid," says a gleeful Alex de Castro, a car salesman, who has stopped by a workout of the Suns to slip six Campaneris cards to the Great Man Himself to be autographed.
The league's promoters hope retirees and tourists will join die-hard fans like Mr. de Castro and pack the stands to see the seniors.
The league is the brainchild of Colorado real estate developer James Morley -- once a minor-leaguer himself -- who says he had the idea last January while lying on a beach in Australia.
When he sent letters offering 1,250 retired major leaguers the chance of another season, 730 responded.
Eventually, about 250 made the trip to Florida to compete for the available slots.
(Players have to be 35 or older, except for catchers, who are eligible at 32 because life behind the plate is so rough.)
For some players, the lure is money -- up to $15,000 a month.
Others, just released from the majors, hope the senior league will be their bridge back into the big-time.
But as they hurl fireballs that smolder rather than burn, and relive old duels in the sun, it's clear that most are there to make their fans cheer again or recapture the camaraderie of seasons past or prove to themselves and their colleagues that they still have it -- or something close to it.
"My fastball is good.
Real good," says 39-year-old Pete Broberg, working in the midday heat of the Tropics camp.
Mr. Broberg, who started with the now-defunct Washington Senators, says that when he left baseball in 1978, he "never looked back."
For a long time, he ignored baseball altogether, even the sports pages.
Now Mr. Broberg, a lawyer, claims he'd play for free.
"You can't give it up that easily," he says.
"I tried."
The nagging memory of one afternoon fourteen years ago drove Jim Gideon, a lean 36-year-old righthander to take a four-month leave from selling insurance in Texas to try out for Mr. Weaver's team.
"It doesn't replace pitching in the majors, but it proves to me that I would have been able to play if I'd stayed healthy," he says.
Back in 1975, late in the season, a then-21 Mr. Gideon made his only major league appearance, five and two-thirds innings for the Texas Rangers against the Chicago White Sox.
He gave up seven hits, walked five and didn't get a decision.
Arm troubles forced him back to the minors the next year.
"There's a satisfaction in going against the rules," offers Will McEnaney, once a stopper with Cincinnati's Big Red Machine.
He means the rule that a player can't cut it after a certain age.
These days he hustles to house-painting jobs in his Chevy pickup before and after training with the Tropics.
While sipping a beer after practice, he vividly recounts getting the Red Sox's Carl Yastrzemski to pop out to end the 1975 World Series, and repeating the feat against the Yankees' Roy White in 1976.
Some of the game's reigning philosophers dislike the idea of middle-aged men attempting a young man's sport.
"I personally don't enjoy seeing players who I remember vividly from their playing days running about and being gallant about their deficiencies," says Roger Angell, New Yorker magazine's resident baseball sage.
"I feel people should be allowed to remember players as they were."
Worse, says baseball author Lawrence Ritter, "Someone will get a heart attack and that will be the end of the whole story."
But the ballplayers disagree.
Most are trim.
Some have been training for months; others only recently left active status.
(No one has worked out the players' average age, but most appear to be in their late 30s.)
And there's pride.
"I'm not going to look stupid," vows former Pittsburgh Pirate second baseman Rennie Stennett, sweat dotting his brow as he prepares for some practice swings.
"It's going to be a tough league," promises the 47-year-old Mr. Campaneris.
"There will be a lot of malice."
Men who have played hard all their lives aren't about to change their habits, he says.
Nonetheless, one can't help wonder whether the game will be just a little bit slower.
At the weatherbeaten Pompano Beach municipal stadium, Mr. Blair, the 45-year-old former Oriole, knows his power isn't what it used to be.
So he adjusts.
He no longer crowds the plate.
He's not thinking about home runs anymore, just base hits.
Still, "how sweet it is," he says, savoring the fat sound of the well-hit line drive that bounces off the center field wall.
And don't expect many complete games by pitchers -- perhaps three out of 288, laughs Mr. Fingers, the former Oakland reliever.
Expect "tricky" stuff from pitchers, says Mr. Weaver, the manager.
Expect brushbacks but no beanballs, says Mr. McEnaney.
Even expect stolen bases, says the wiry and fit Mr. Campaneris: "If you know how to slide, it's no problem," he says.
And expect slower fastballs.
"I'm not so young anymore," concedes the cigar-chomping, 48-year-old Mr. Tiant.
"I won't be throwing 90 mph, but I will throw 80-plus," he says.
White-haired Pedro Ramos, at 54 the league's oldest player and a pitcher-coach with the Suns, has lost even more speed.
Stuffing a wad of Red Man into his cheek, he admits the fastball he brought into the majors in 1955 has become a slowball.
Its maximum velocity is 72 mph.
But he isn't worried.
He will compensate with the guile learned from his years in the majors.
He has good control.
He will keep the ball down, move it around.
After all, he says, "Even to make love, you need experience.
Alltel Corp. said it will acquire the 55% of Pond Branch Telephone Company Inc.'s cellular franchise that it doesn't own already.
Terms weren't disclosed.
Alltel holds 45% of the franchise, which has operations in Aiken, S.C., and Augusta, Ga.
Alltel, which provides local telephone service in 25 states, said it exercised its right of first refusal following an offer from an undisclosed third party to acquire the majority position in the franchise.
Stewart & Stevenson Services Inc. said it received two contracts totaling $19 million to build gas-turbine generators.
The separate contracts were from Paragould Light & Water Commission, a utility in Paragould, Ark., and PSE Inc., a cogeneration-plant operator in Houston.
Stewart & Stevenson makes equipment powered with diesel and gas turbines.
Liberty National Bancorp said its acquisition of Florence Deposit Bank, Florence, Ky., first announced in April, has been completed in a transaction valued at $13.1 million.
Liberty National exchanged about 78.64 shares of its common stock for each of Florence Deposit's 5,600 shares outstanding.
Liberty National, a bank holding company, has assets exceeding $3 billion.
Hani Zayadi was appointed president and chief executive officer of this financially troubled department store chain, effective Nov. 15, succeeding Frank Robertson, who is retiring early.
Mr. Zayadi was previously president and chief operating officer of Zellers Inc., a retail chain that is owned by Toronto-based Hudson's Bay Co., Canada's largest department store operator.
Tuesday, October 31, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 9% high, 8 13/16% low, 8 7/8% near closing bid, 8 15/16% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.55% 30 to 44 days; 8.25% 45 to 59 days; 8.40% 60 to 89 days; 8% 90 to 119 days; 7.90% 120 to 149 days; 7.80% 150 to 179 days; 7.55% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.62% 30 days; 8.55% 60 days; 8.45% 90 days.
CERTIFICATES OF DEPOSIT: 8.09% one month; 8.04% two months; 8.03% three months; 7.96% six months; 7.92% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market: 8.53% one month; 8.50% three months; 8.30% six months.
BANKERS ACCEPTANCES: 8.49% 30 days; 8.44% 60 days; 8.27% 90 days; 8.12% 120 days; 8.05% 150 days; 7.98% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 3/4% to 8 5/8% one month; 8 3/4% to 8 5/8% two months; 8 11/16% to 8 9/16% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 7/16% to 8 5/16% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 3/4% one month; 8 11/16% three months; 8 7/16% six months; 8 7/16% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS: Results of the Monday, October 30, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.78% 13 weeks; 7.62% 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days.
9.78%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.75%, standard conventional fixed-rate mortgages; 8.75%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.63%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Canada's gross domestic product rose an inflation-adjusted 0.3% in August, mainly as a result of service-industry growth, Statistics Canada, a federal agency, said.
The August GDP was up 2.4% from its year-earlier level.
GDP is the total value of a nation's output of goods and services.
Statistics Canada said service-industry output in August rose 0.4% from July.
Output of goods-producing industries increased 0.1%.
Separately, Statistics Canada reported that its industrial-product price index dropped 0.2% in September, its third consecutive monthly decline.
It also reported a 2.6% decline in its raw-materials price index for September.
Columbia Pictures Entertainment Inc. was dropped, effective today, from the recreational products and services industry group of the Dow Jones Equity Market Index.
Columbia Pictures is being acquired by Sony Corp., which is based in Japan.
People's Savings Financial Corp. said it will buy back as much as 10% of its 2.4 million shares outstanding because the stock is undervalued.
The holding company said it has been "unfairly associated" with other banks in New England that have had major loan losses in recent quarters.
The company said its People's Savings Bank unit doesn't have a "large exposure to construction and commercial loans that have caused the loan-loss problems in many of the banks.
A seat on the Chicago Mercantile Exchange was sold for $410,000, down $6,000 from the previous sale Oct.
Seats currently are quoted at $400,000 bid, $425,000 asked.
The record price for a full membership on the exchange is $550,000, set March 9.
In a surprise move, the British government cleared the way for a bidding war for Jaguar PLC by agreeing to remove an obstacle to a takeover of the auto maker.
Trade and Industry Secretary Nicholas Ridley told the House of Commons yesterday that he will relinquish the government's so-called golden share in the company as long as Jaguar shareholders agree.
The golden share restricts any individual holding to 15% and expires at the end of 1990.
It was in Jaguar's best interests "for the company's future to be assured and the present climate of uncertainty resolved as quickly as possible," Mr. Ridley said.
Mr. Ridley's decision fires the starting pistol for perhaps a costly contest between the world's auto giants for Britain's leading luxury-car maker.
Both General Motors Corp. and Ford Motor Co. have been trying to amass 15% stakes in Jaguar.
Ford, which already has an unwelcome 13.2% holding, is prepared to bid for the entire company and had lobbied the government to lift the takeover restrictions early.
GM has been negotiating a friendly transaction with Jaguar that likely would involve joint ventures and an eventual stake of just under 30%.
But the government's action, which caught Jaguar management flat-footed, may scuttle the GM minority deal by forcing it to fight for all of Jaguar.
"I can't believe they (GM) will let Ford have a free run," said Stephen Reitman, a European auto industry analyst at UBS-Phillips & Drew.
"I am sure they will be going for a full bid."
Many investors certainly believe a bidding war is imminent.
Jaguar shares skyrocketed yesterday after Mr. Ridley's announcement, following their temporary suspension on London's Stock Exchange.
In late trading, the shares were up a whopping 122 pence ($1.93) -- a 16.3% gain -- to a record 869 pence on very heavy volume of 9.7 million shares.
In the U.S. over-the-counter market, Jaguar shares trading as American Depositary Receipts closed at $13.625, up $1.75.
Analysts expect Ford will make the first move, perhaps today, with an initial offer of about 900 pence ($14.25) a share.
Such a proposal values Jaguar at more than #1.6 billion ($2.53 billion).
Speculation about a takeover fight has sent Jaguar shares soaring in the past six weeks.
The share price was languishing at about 400 pence before Ford's Sept. 19 announcement of its interest in a minority stake.
Ford is "in the driving seat at the moment," observed Bob Barber, an auto analyst at brokers James Capel & Co.
An aggressive Ford bid for Jaguar would put pressure on GM to make a better offer as the British company's "white knight."
Such a countermove could end Jaguar's hopes for remaining independent and British-owned.
But it isn't clear how long GM would be willing to fight Ford for Jaguar.
Because of their longstanding rivalry, GM just "wants to make sure Ford pays a huge packet for (Jaguar)," said John Lawson, an auto analyst at London's Nomura Research Institute.
People close to the GM-Jaguar talks agreed that Ford now may be able to shut out General Motors.
"It's either going to be a shootout, or there only may be one player in town," one person said.
Another person close to the talks said, "It is very hard to justify paying a silly price for Jaguar if an out-and-out bidding war were to start now."
In a statement, Jaguar's board said they "were not consulted about the (Ridley decision) in advance and were surprised at the action taken."
The statement emphasized that holders representing 75% of the shares voting at a special shareholders' meeting must agree to lift the takeover restrictions.
Jaguar officials in the U.S. noted that Ford, as Jaguar's largest shareholder, now has the power to call for such a meeting.
U.S. auto analysts also noted that Ford is in the best position to benefit from the large number of Jaguar shares that have moved over the past month into the hands of arbitragers waiting for the highest takeover bid.
Jaguar's own defenses against a hostile bid are weakened, analysts add, because fewer than 3% of its shares are owned by employees and management.
Ford officials in the U.S. declined to comment on the British government's action or on any plans to call a special Jaguar shareholders meeting.
But GM officials said they, too, were surprised by the move, which left them to "consider all our options and explore matters further."
Although GM has U.S. approval to buy up to 15% of Jaguar's stock, it hasn't yet disclosed how many shares it now owns.
In a prepared statement, GM suggested its plans for Jaguar would be more valuable in the long run than the initial windfalls investors might reap from a hostile Ford bid.
"Our intensive discussions with Jaguar, at their invitation," GM said, "have as their objectives to create a cooperative business relationship with Jaguar that would provide for the continued independence of this great British car company, to ensure a secure future for its employees and to provide an attractive long-term return for its shareholders."
Jaguar was shocked by Mr. Ridley's decision, because management had believed the government wouldn't lift the golden share without consulting the company first.
Indeed, the government is taking a calculated risk.
Mr. Ridley's announcement set off a howl of protests from members of the opposition Labor Party, who accused the Thatcher administration of backing down on promised protection for a privatized company.
The British government retained the single golden share after selling its stake in Jaguar in
The Conservative government's decision may reflect its desire to shed a politically sensitive issue well before the next election, expected in late 1991.
"It's now a very good time politically to get this over and done with," observed Daniel Jones, professor of motor industry management at the University of Cardiff in Wales.
The government, already buffeted by high interest rates and a slowing economy, has been badly hurt by last week's shake-up in Mrs. Thatcher's cabinet.
At the same time, the government didn't want to appear to favor GM by allowing a minority stake that might preclude a full bid by Ford.
Mr. Ridley hinted at this motive in answering questions from members of Parliament after his announcement.
He said he was giving up the golden share "to clear the way so the playing field is level between all contestants."
Bradley A. Stertz in Detroit contributed to this article.
Dow Chemical Co., Midland, Mich., and Eli Lilly & Co., Indianapolis, said they completed the formation of Dow Elanco, a joint venture combining their plant-sciences businesses as well as Dow's industrial pest-control business.
The companies said Dow Elanco will be the largest research-based agricultural concern in North America, with projected first-year revenue of $1.5 billion.
Dow will own 60% of the venture, with Eli Lilly holding the rest.
The venture will be based in Indianapolis.
William A. Wise, 44 years old, president of the El Paso Natural Gas Co. unit of this energy and natural-resources concern, was named to the additional post of chief executive officer, succeeding Travis H. Petty, 61, who continues as a vice chairman of the parent.
Erwin Tomash, the 67-year-old founder of this maker of data communications products and a former chairman and chief executive, resigned as a director.
Dataproducts is fighting a hostile tender offer by DPC Acquisition Partners, a group led by New York-based Crescott Investments Associates.
Under the circumstances, Dataproducts said, Mr. Tomash said he was unable to devote the time required because of other commitments.
Mr. Tomash will remain as a director emeritus.
The company had no comment on whether a replacement would be named.
Robert Q. Marston, president emeritus, University of Florida, and a director of this maker of medical devices, was named chairman.
Dr. Marston, 66 years old, succeeds Alexander T. Daignault, 72, who didn't stand for re-election due to mandatory board retirement policy.
SFE Technologies said William P. Kuehn was elected chairman and chief executive officer of this troubled electronics parts maker.
The 45-year-old Mr. Kuehn, who has a background in crisis management, succeeds Alan D. Rubendall, 45.
Jerome J. Jahn, executive vice president and chief financial officer, said Mr. Rubendall was resigning by "mutual agreement" with the board.
"He is going to pursue other interests," Mr. Jahn said.
Mr. Rubendall couldn't be reached.
Mr. Kuehn, the company said, will retain the rest of the current management team.
For the nine months ended July 29, SFE Technologies reported a net loss of $889,000 on sales of $23.4 million.
That compared with an operating loss of $1.9 million on sales of $27.4 million in the year-earlier period.
In national over-the-counter trading, SFE Technologies shares closed yesterday at 31.25 cents a share, up 6.25 cents.
Sales of new cars in Europe fell 4.2% in September from a year earlier and analysts say the market could continue to soften in the months ahead.
After a stronger-than-expected pace early this year, analysts say the market, after a series of sharp swings in recent months, now shows signs of retreating.
Statistics from 12 countries which normally account for 94% of non-communist Europe's passenger car sales showed new car registrations totaled 911,606 in September, down 21% from August and down 4.2% for the year to date.
Tokyo stocks rebounded Tuesday from two consecutive daily losses in relatively active dealings.
London shares also rose, while trading in Frankfurt, West Germany, ended higher.
In Tokyo, the Nikkei index of 225 selected issues was up 132.00 points to 35549.44.
The index fell 109.85 Monday.
Volume on the First Section was estimated at 900 million shares, up from 582 million shares Monday.
Advancing issues outnumbered decliners 542 to 362, while 208 issues were unchanged.
Small-lot buying targeted at incentive-backed issues pushed up the Nikkei.
But other sectors failed to attract investor interest and remained sluggish, making overall trading appear mixed.
Individuals and corporations, as well as dealers trading for their own account, actively bought Tuesday.
An official at Wako Securities said these investors feel the need to make quick profits, despite destabilizing external factors, such as political uncertainty tied to the ruling party's fate at next year's Lower House elections-an event which could directly affect the stock market.
The Tokyo Stock Price Index of all issues listed in the First Section, which declined 5.16 on Monday, was up 16.05, or 0.60%, at 2692.65 on Tuesday.
The Second Section index, which fell 21.44 points Monday, was up 6.84 points, or 0.19%, to close at 3642.90.
Second Section volume was estimated at 14 million shares, unchanged from Monday.
Institutional investors mostly remained on the sidelines Tuesday.
A fund manager at a life-insurance company said three factors make it difficult to read market direction.
First, he said, domestic interest rates are likely to stay at higher levels as increased anticipation of inflation followed rising consumer prices reported last week.
Second, the dollar is showing persistent strength despite a slowdown in the U.S. economy shown by economic indicators.
Third, oil prices haven't declined although supply has been increasing.
The topic that attracted participants' attention was Mitsubishi Estate's purchase of 51% of Rockefeller Center Properties, announced late Monday in New York.
Mitsubishi Estate ended the day at 2680, up 150.
The gains also sparked buying interest in other real-estate companies, traders said.
Sumitomo Realty & Development rose 40 to 2170.
Heiwa Real Estate gained 40 to 2210.
Investor focus shifted quickly, traders said.
Many of the morning-session winners turned out to be losers by afternoon.
In other stock-market news, the Tokyo Stock Exchange said that for the week ended Friday, the balance of margin buying rose 189.8 billion yen ($1.34 billion), to 7.160 trillion yen ($50.46 billion).
The balance of short positions outstanding fell 159.7 billion yen, to 779.8 billion yen.
In London, prices finished at intraday peaks, comforted by a reassuring early performance on Wall Street and news that the British government will waive its "golden share" in auto maker Jaguar.
But trading was very sketchy, as investment decision makers remain wary from gyrations and upsets of recent weeks.
"Volume has been appalling," said a dealer at a British brokerage concern.
"The market was dragged up by the scruff of its neck by Wall Street and by market makers getting caught short.
No one wants stock on their books."
Meanwhile, the broad-based Financial Times 100-share index added 30.4 points to end at 2142.6, while reaching its minimum of 2120.5 a half hour into the session.
At the close, the narrower 30-share index was up 19.7 points to 1721.4.
Volume totaled a modest 334.5 million shares, up from 257.8 million shares Monday.
The market also moved at early afternoon on news that Jaguar shares were being temporarily suspended at 746 pence ($11.80) each.
Secretary of State for Trade and Industry Nicholas Ridley said later in the day that the government would abolish its golden share in Jaguar, the luxury auto maker being stalked by General Motors and Ford Motor.
The golden share dates from Jaguar's public offering in 1984 and was designed to protect the company from takeover.
The golden share was scheduled to expire at the beginning of
But although the golden share has been waived, a hostile bidder for Jaguar would still have to alter the British concern's articles of association which ban shareholdings of more than 15%.
Jaguar shares closed at 869 pence, up 122 pence, on hefty turnover of 9.7 million shares.
As the London trading session drew to a close, the market was still listening to the parliamentary debate on the economy, with new Chancellor of the Exchequer John Major expected to clarify his approach to the British economy and currency issues.
On the Frankfurt Stock Exchange, share prices closed higher in fairly thin trading, as selective buying by foreigners helped propel prices.
The DAX index closed at 1472.76, up from 1466.29.
Despite the modest gains, traders said the market remains dull, with investors remaining cautiously on the sidelines.
Contributing to the market's reserved stance was the release later in the day of new data on the health of the U.S. economy, in the form of the U.S. index of leading indicators.
Additionally, the end of the month position-squaring might have also played a minor role, traders said.
Elsewhere, share prices closed higher in Amsterdam, Brussels, Milan and Paris.
Prices were mixed in Zurich and lower in Stockholm.
Stocks closed higher in Hong Kong, Manila, Singapore, Sydney and Wellington, but were lower in Seoul.
Taipei was closed for a holiday.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
French consumer prices rose 0.2% in September from the previous month and were up 3.4% from a year earlier, according to definitive figures from the National Statistics Institute.
The state agency's figures confirm previous estimates and leave the index at 178.9, up from 178.5 in August and 173.1 a year earlier.
The index is based on 1980 equaling 100.
A breakdown showed that food prices were the most active part of growth with a rise of 0.6%.
An official linked the gain essentially to higher prices for beef and pork.
He said summer drought problems that had hit several southern agricultural regions had stopped being a major source of price pressure in September.
Japan's index of leading indicators rose to 63.6 in August, above the so-called boom-or-bust line of 50 for the first time since May, the Economic Planning Agency said.
The leading index recovered from July's revised level of 36.6 on strong performances in consumer durables and machinery orders, among other factors, according to an agency spokeswoman.
The index is intended to measure future economic performance.
A figure above 50 indicates the economy is likely to expand; one below 50 indicates a contraction may be ahead.
Metromedia Co. said its Metromedia Long Distance unit has been renamed Metromedia-ITT Long Distance, reflecting acquisitions from ITT Corp., which licenses its name to closely held Metromedia.
Metromedia said its unit is the fifth-largest provider of long-distance communications service in the U.S., with projected 1989 revenue of more than $550 million.
Metromedia, headed by John W. Kluge, has interests in telecommunications, robotic painting, computer software, restaurants and entertainment.
South Korean consumer prices rose 5% in the first 10 months of this year, matching the government's target for the entire year, according to the Bank of Korea and the Economic Planning Board.
According to reports released by the two government agencies, domestic consumer and wholesale prices each rose by 0.2% in October from the previous month.
As a result, consumer prices for the first 10 months of 1989 surged by 5% and wholesale prices by 1.3%.
The South Korean government had been projecting a 5% consumer price increase for the entire year.
Martin Marietta Corp. said it won a $38.2 million contract from the U.S. Postal Service to manufacture and install automated mail-sorting machines.
Under terms of the three-year contract, Martin Marietta said it will make and install 267 of the new machines at 156 postal offices.
The new machines are capable of sorting by zip code up to 10,000 large flat mail pieces, including magazines and parcels, an hour.
Thomas A. Donovan, 37 years old, formerly vice president, West Coast operations, at this hazardous-waste-site remediation concern, was named executive vice president and chief operating officer, both newly created posts, and a director, filling a vacancy.
Canonie said it anticipates naming Mr. Donovan to succeed Richard F. Brissette, 55, as president and chief executive officer, effective March 1.
Mr. Brissette will remain a Canonie board member and will be a consultant to the company.
Yields on savings-type certificates of deposit dropped slightly in the week ended yesterday.
The average yield on a six-month CD of $50,000 or less was 7.90%, compared with 7.94% a week earlier.
The average one-year savings-type CD was down to 7.99% from 8.01%, according to Banxquote Money Markets, a New York information service that tracks CD yields.
"This week was uneventful for the CD market," said Norberto Mehl, chairman of Banxquote.
"The major banks haven't even reacted to sharp rises in the three-month Treasury bill rates" in the past two weeks.
Banks that adjusted payouts on CDs in the most recent week made only fractional moves, he said.
The CD trend runs counter to the direction of short-term interest rates at the Treasury bill auction Monday.
The average six-month bill was sold with a yield of 8.04%, up from 7.90%.
The average three-month issue rose to 8.05% from 7.77%.
Typically, banks offer CD yields higher than those on Treasury bills, which are considered the safest short-term investments; banks need a competitive edge to sell their products.
But when market interest rates move up rapidly, increases in bank CD yields sometimes lag.
Most yields on short-term jumbo CDs, those with denominations over $90,000, also moved in the opposite direction of Treasury bill yields.
The average six-month yield on a jumbo CD was at 7.90%, down from 7.93%, Banxquote said.
For longer-term CDs, yields were up.
The average two-year and five-year jumbos were up 0.02 of a percentage point to 7.91% and 7.96%, respectively.
However, CDs sold through major broker-dealer networks were up slightly almost across the board.
The average six-month CD in that category added 0.05 percentage point to 8.35%, for example.
Mr. Mehl attributed the rise specifically to the Treasury bill increase.
Among the major banks surveyed by Banxquote in six regions of the country, 8.33% is the highest yield available.
It is offered by the flagship banks of New York's Manufacturers Hanover Corp. in the one-year maturity only.
The yield is offered across a range of maturities at San Francisco's BankAmerica Corp. and Wells Fargo & Co.
Just two weeks ago, BankAmerica's yields in many of those maturities was 8.61%.
Still, on average, the major California banks have the highest yields on CDs, according to Banxquote.
The average yield there on six-month issues is 8.32%.
I had to reach back to French 101 when the monsieur avec clipboard leaned over my shoulder during the coffee phase of dinner and asked whether I wanted to ride in a montgolfiere.
I was a last-minute (read interloping) attendee at a French journalism convention and so far the festivities had been taken up entirely by eating, drinking, smoking, sleeping and drinking.
The man with the clipboard represented a halfhearted attempt to introduce a bit of les sportif into our itinerary.
But as the French embody a Zen-like state of blase when it comes to athletics (try finding a Nautilus machine in Paris), my fellow conventioners were having none of it.
The diners at my table simply lit more Gauloises and scoffed at the suggestion of interrupting a perfectly good Saturday morning to go golfing or even montgolfing (ballooning to you; the brothers Montgolfier, French of course, were the world's first hot-air balloonists).
Back in the U.S.A. this kind of chi-chi airborne activity wins heartwarmingly covetous responses.
As in: "You went ballooning??!!
In France??!!"
Americans it seems have followed Malcolm Forbes's hot-air lead and taken to ballooning in a heady way.
During the past 25 years, the number of balloonists (those who have passed a Federal Aviation Authority lighter-than-air test) have swelled from a couple hundred to several thousand, with some estimates running as high as 10,000.
Some 30 balloon shows are held annually in the U.S., including the world's largest convocation of ersatz Phineas Foggs -- the nine-day Albuquerque International Balloon Fiesta that attracts some 800,000 enthusiasts and more than 500 balloons, some of which are fetchingly shaped to resemble Carmen Miranda, Garfield or a 12-story-high condom.
(The condom balloon was denied official entry status this year.)
But in Epinal, a gray 16th-century river town adjacent to France's Vosges mountain region, none of these Yankee-come-lately enthusiasms for things aloft was evident.
Ballooning at the de rigueur hour of 6 a.m. held all the attraction for most people of sunrise root-canal work.
Feeling the naggings of a culture imperative, I promptly signed up.
The first thing anybody will tell you about ballooning is that it requires zip in the way of athletic prowess, or even a measure of derring-do.
(So long as you don't look down.)
They will also tell you that even if you hate heights, you can still balloon.
(I still say don't look down.
At least not when you are ascending.)
What they won't tell you is not to go aloft in anything you don't want to get wet.
I'm not referring to the traditional champagne drenching during the back-on-terra-firma toast.
I'm talking about landing in a canal.
In a porous wicker basket.
With a pilot who speaks no English.
To wit, my maiden voyage (and novitiates are referred to as virgins) began at dawn on a dew-sodden fairway and ended at noon in a soggy field.
(Balloon flights almost always occur at dawn or dusk, when the winds are lightest.)
In between came lots of coffee drinking while watching the balloons inflate and lots of standing around deciding who would fly in what balloon and in what order (the baskets hold no more than four passengers).
When it wasn't my turn in the balloon I followed its progress from the "chase car," listening to the driver holler into a walkie-talkie.
After long stretches of this attendant ground activity came 20 or so lovely minutes of drifting above the Vosges watching the silver mists rise off the river and the French cows amble about the fields.
It's hard not to feel that God's in his heaven with this kind of bird's-eye view of the world, even if your pilote in silly plaid beret kept pointing out how "belle" it all was.
Eventually little French farmers and their little French farmwives came out of their stone houses and put their hands above their tiny eyes and squinted at us.
No wonder.
We were coming down straight into their canal.
See, the other rule of thumb about ballooning is that you can't steer.
And neither can your pilot.
You can go only up or down (by heating the balloon's air with a propane burner, which does make the top of your head feel hot) and ride the air currents.
Which makes the chase car necessary.
Most balloonists seldom go higher than 2,000 feet and most average a leisurely 5-10 miles an hour.
When the balloon is cruising along at a steady altitude there is little sense of motion.
Only when one is ascending -- or in our case descending a tad trop rapidement -- does one feel, well, airborne in a picnic basket.
"What's he doing?" hissed my companion, who was the only other English-speaking member of the convention and whose knuckles were white.
"Attention," yelled our pilot as our basket plunged into the canal.
"You bet attention," I yelled back, leaping atop the propane tanks, "I'm wearing alligator loafers!"
Our pilot simply laughed, fired up the burner and with another blast of flame lifted us, oh, a good 12-inches above the water level.
We scuttled along for a few feet before he plunged us into the drink again.
Eventually we came to rest in a soggy patch of field where we had the exquisite pleasure of scrambling out of the basket into the mud while the French half of our ballooning tag team scrambled in.
I looked at my watch.
Barely half-an-hour aloft.
Back in the chase car, we drove around some more, got stuck in a ditch, enlisted the aid of a local farmer to get out the trailer hitch and pull us out of the ditch.
We finally rendezvoused with our balloon, which had come to rest on a dirt road amid a clutch of Epinalers who watched us disassemble our craft -- another half-an-hour of non-flight activity -- that included the precision routine of yanking the balloon to the ground, punching all the air out of it, rolling it up and cramming it and the basket into the trailer.
It was the most exercise we'd had all morning and it was followed by our driving immediately to the nearest watering hole.
This meant returning to the golf course, where we watched a few French duffers maul the first tee while we sat under Cinzano umbrellas, me nursing an espresso and my ego.
A whole morning of ballooning and I had been off the ground barely 30 minutes.
Still, I figured the event's envy-quotient back in the U.S.A. was near peerless.
As for the ride back to camp, our pilot and all the other French-speaking passengers clambered into the chase car.
My American companion and I were left to ride alfresco in the wicker basket.
As we streaked by a blase gendarme, I couldn't resist rearing up on my soggy loafers and saluting.
Ms. de Vries is a free-lance writer.
Treasury Undersecretary David Mulford defended the Treasury's efforts this fall to drive down the value of the dollar, saying it helped minimize damage from the 190-point drop in the stock market Oct. 13.
Testifying before a House subcommittee, Mr. Mulford said that if the Treasury hadn't intervened in foreign-exchange markets in September and early October to reduce the dollar's value, the plunge in the stock market might have provoked a steep fall in the currency that might have "unhinged financial markets."
Mr. Mulford, responding to critics of intervention, also said intervention is "highly visible," is taken seriously by financial markets and works better than "was recognized some time ago."
Differences between the Treasury and the Federal Reserve on the usefulness of intervention to help restrain the dollar resurfaced at the hearing.
Fed Vice Chairman Manuel Johnson, who had dissented from the Treasury's policy, told lawmakers, "I became convinced about what looked to me like an attempt to push the dollar down against the fundamentals in the market."
Intervention, he added, is useful only to smooth disorderly markets, not to fundamentally influence the dollar's value.
Rep. John LaFalce (D., N.Y.) said Mr. Johnson refused to testify jointly with Mr. Mulford and instead asked to appear after the Treasury official had completed his testimony.
A Fed spokesman denied Mr. LaFalce's statement.
Mr. Mulford said reports of tension between the Treasury and Fed have been exaggerated, insisting that they involved "nuances."
Mr. Johnson also said that "in the scheme of things, these things are minor."
On other matters, Mr. Mulford said West Germany is contributing to imbalances in the world economy because of its success as an exporter.
"The solution is stronger domestic growth {in Germany}," he said.
But because the growth of the German economy has been stronger than expected, Mr. Mulford said, it's difficult for the U.S. to argue that Germany ought to adopt more stimulative monetary and fiscal policies.
Germany's trade surplus is largely with other European countries rather than with the U.S., Mr. Mulford acknowledged.
But nonetheless U.S. companies might be more successful in European markets if not for the German export push, he said.
Five officials of this investment banking firm were elected directors: E. Garrett Bewkes III, a 38-year-old managing director in the mergers and acquisitions department; Michael R. Dabney, 44, a managing director who directs the principal activities group which provides funding for leveraged acquisitions; Richard Harriton, 53, a general partner who heads the correspondent clearing services; Michael Minikes, 46, a general partner who is treasurer; and William J. Montgoris, 42, a general partner who is also senior vice president of finance and chief financial officer.
The board increased by one to 26 members.
In the past year, one inside director resigned, while three others retired.
Some U.S. allies are complaining that President Bush is pushing conventional-arms talks too quickly, creating a risk that negotiators will make errors that could affect the security of Western Europe for years.
Concerns about the pace of the Vienna talks -- which are aimed at the destruction of some 100,000 weapons, as well as major reductions and realignments of troops in central Europe -- also are being registered at the Pentagon.
Mr. Bush has called for an agreement by next September at the latest.
But some American defense officials believe the North Atlantic Treaty Organization should take more time to examine the long-term implications of the options being considered.
For one thing, Pentagon officials, who asked not to be identified, worry that the U.S. will have a much tougher time persuading Europeans to keep some short-range nuclear weapons on their soil once Soviet armored forces are thinned out.
At the same time, they contend that a reduction of NATO forces under a treaty will increase the possibility of a conventional Soviet attack unless the West retains a residual force of nuclear weapons in Europe.
Allies concerned about the deadline include the British, French and smaller NATO allies, some of whom don't have adequate staffs to provide quick answers to the questions being raised by what generally are considered the most complex arms-control talks ever attempted.
So far, no ally has complained openly, preserving the impression that NATO is in line with the Bush position that a quick agreement bringing Soviet conventional forces down to parity with NATO is the West's top bargaining priority.
But even though NATO negotiators have only 10 months left under the Bush timetable, they are still wrestling over such seemingly fundamental questions as "What is a tank?"
Five of the six categories of weapons under negotiation haven't even been defined.
Tanks currently are defined as armored vehicles weighing 25 tons or more that carry large guns.
The Soviets complicated the issue by offering to include light tanks, which are as light as 10 tons.
Oleg A. Grinevsky, the chief Soviet negotiator in the conventional-arms talks, argued that this would mean the Soviets would have to destroy some 1,800 tanks, while the U.S. would lose none because it has no light tanks in Europe.
But the issue is stickier than it seems.
France, Britain and Italy all have light tanks they would like to keep out of the talks.
And some U.S. Army analysts worry that the proposed Soviet redefinition is aimed at blocking the U.S. from developing lighter, more transportable, high-technology tanks.
Defining combat aircraft is even tougher.
The Soviets insisted that aircraft be brought into the talks, then argued for exempting some 4,000 Russian planes because they are "solely defensive."
NATO hasn't budged from its insistence that any gun-carrying plane has offensive capability.
The dispute over that issue, according to one U.S. official, is a "potential treaty stopper," and only President Bush and Soviet leader Mikhail Gorbachev may be able to resolve it.
Accounting problems raise more knotty issues.
Greece and Turkey, for example, are suspected of overstating their arsenals in hopes that they can emerge from the arms-reduction treaty with large remaining forces to deter each other.
Other nations aren't sure how many weapons they have in their own arsenals.
"It's just going to be sloppy, both on our side and theirs {the Warsaw Pact's}," says one NATO analyst.
So far, neither the Bush administration nor arms-control experts in Congress seem moved by arguments that these problems may take more time to thrash out than President Bush has allowed.
They argue that the bigger danger would be that the West would delay action so long that the Soviets might back away from the current conciliatory attitude.
"So what if you miss 50 tanks somewhere?" asks Rep. Norman Dicks (D., Wash.), a member of the House group that visited the talks in Vienna.
"The bottom line is that if we can get that {Warsaw Pact} superiority brought down to parity, we ought to keep pressing ahead as quickly as possible.
I worry more about things becoming so unraveled on the other side that they might become unable to negotiate.
International Lease Finance Corp. announced a leasing contract with charter carrier American Trans Air Inc., in a transaction involving six Boeing Co. 757-200s.
The value of the jets, including spares, is in excess of $250 million.
Two of the 757-200s are new aircraft to be delivered to American Trans Air, the main subsidiary of Amtran Inc., in December 1991 and January 1992.
Four of the planes were purchased by International Lease from Singapore Airlines in a previously announced transaction.
Delivery of the first aircraft is set for early November, a second for December and two for April 1990.
Norway's unemployment rate for October was 3.6%, unchanged from September but up from 2.6% in the same month last year.
The figure excludes a record number employed by extraordinary government work programs, the Labor Directorate announced Tuesday.
Including those in the state programs, there were 143,800 Norwegians, or about 6.5% of the work force, without permanent employment in October, up from September's 136,800.
The number of people registered as jobless at the end of October declined by 900 from September to 78,600.
Those employed in state-funded special programs increased by 7,400 to 65,200 in the same period, the Directorate said.
In October 1988, there were 40,800 fewer employed by government programs.
Coca-Cola Co., aiming to boost soft-drink volume in Singapore, said it is discussing a joint venture with Fraser & Neave Ltd., its bottling franchisee in that country.
The venture would be the latest in Coke's rapid expansion of overseas investment.
So far this year, it has put nearly $700 million into bottling operations in Australia, New Zealand and France.
The move also reflects Coke's eagerness to have a hand in developing the soft-drink markets in Pacific Basin countries.
Aside from Europe, the Pacific division is where Coke will be focusing much of its attention for years to come.
That's because when Coke looks to the Pacific area, it sees an economic and demographic gold mine.
In countries such as Taiwan, South Korea and Singapore, economies are growing, resulting in a rise in disposable income that consumers can use for soft drinks.
And unlike Europe and the U.S., where populations are aging, the Pacific Basin countries have growing proportions of youths -- the heaviest consumers of Coca-Cola and other sodas.
A Coca-Cola spokesman said it is too early to say how the joint venture would be structured, or how much the company would invest in the transaction.
In the past, however, Coke has typically taken a minority stake in such ventures.
By acquiring stakes in bottling companies in the U.S. and overseas, Coke has been able to improve bottlers' efficiency and production, and in some cases, marketing.
Coke has tended to increase its control when results were sluggish in a given country.
That doesn't appear to be the case in Singapore, a country of about three million people with a relatively high soft-drink consumption rate -- a key indicator of Coke's success in a market.
In Singapore, per-capita consumption is about one-third that of the U.S.
And combining Fraser & Neave's own soft drinks with Coca-Cola's gives the Singapore company more than half the share of the soda market there, Coke said.
Fraser & Neave, which also has interests in packaging, beer and dairy products, holds the Coke licenses for Malaysia and Brunei, where per-capita consumption isn't as high as in Singapore.
Coke could be interested in more quickly developing some of the untapped potential in those markets.
A Coke spokesman said he couldn't say whether that is the direction of the talks.
Coke said the joint-venture arrangement, which needs approval from both companies' boards, should be completed early next year.
AMERICAN BRANDS Inc., Old Greenwich, Conn., said it increased its quarterly 11% to 68 cents a share from 61 cents, payable Dec. 1 to stock of record Nov. 10.
The increase follows the company's report of strong earnings for the third quarter, and reflects what American Brands called its "tradition of sharing earnings growth" with shareholders.
American Brands is a consumer products company with core businesses in tobacco, distilled spirits and life insurance.
As of Sept. 30, American Brands had 95.2 million shares outstanding.
Giovanni Agnelli & Co. announced a transaction that will strengthen its indirect control of Fiat S.p.A. and will admit Prince Karim Aga Khan as its first non-family shareholder.
Giovanni Agnelli, a limited partnership that is the master holding company for Fiat's Agnelli family, owns approximately 75% of the shares in Istituto Finanziario Industriale, which in turn owns approximately 40% of Fiat, Italy's biggest private-sector industrial group.
The company said Maria Sole Agnelli Teodorani, sister of Fiat Chairman Giovanni Agnelli, agreed to trade her shares in IFI for new ordinary shares in the limited partnership, which will give her control of 4.67% of Giovanni Agnelli & Co.
The Aga Khan, meanwhile, agreed to trade some of his stake in Luxembourg-based Ifint S.A., another Agnelli family company, for 7.45% of Giovanni Agnelli & Co.'s capital.
His new stake would be in the form of preferred shares, which receive higher dividends but have voting rights only in extraordinary shareholders assemblies.
The Aga Khan owns 10% of Ifint's capital, while IFI owns 23%.
As a result of the transaction, which is expected to be approved at a shareholders meeting Nov. 24, Giovanni Agnelli & Co. will control 79.18% of IFI's ordinary shares.
Its capital will also be raised to 232.4 billion lire ($172.5 million) from the current 204.3 billion lire.
IFI also has nonvoting preferred shares, which are quoted on the Milan stock exchange.
The value of the two transactions wasn't disclosed, but an IFI spokesman said no cash would change hands.
The move strengthens the existing links between the Agnellis and the Aga Khan, the head of the world's Ismaili Moslems who is a longtime family friend and frequently goes sailing with Mr. Agnelli.
Mr. Agnelli and the Aga Khan also have some business ties, and a spokesman for the Agnelli company didn't rule out that the current agreement could lead to further collaboration.
For instance, Ifint earlier this year bought an 18% stake in Alisarda, the Aga Khan's airline, which flies between Italy and Sardinia.
Giovanni Agnelli & Co., which was formed in January 1987 as a way of keeping the Agnellis' controlling stake in Fiat together despite an ever-growing family tree, has been playing a more active role in the Agnelli group of late.
It raised financing of 300 billion lire for the purchase this summer by another Agnelli-related group of the food concern Galbani S.p.A., by selling a chunk of its IFI shares to Mediobanca S.p.A.
Mediobanca said during the weekend that it agreed to sell the shares back to Giovanni Agnelli for 333 billion lire.
Your Oct. 2 page-one article on people riding so-called "railbikes" on railroad tracks was a disservice to your readers.
It unfortunately encourages others to engage in a highly dangerous and illegal activity that only a very few are doing now.
And it treats such activities in a frivolous, cavalier fashion, with total indifference to common sense and public safety.
Saul Resnick
Vice President
Public Affairs
Conrail
MCI Communications Corp. said it received a three-year contract valued at more than $15 million to provide network, credit-card and other telecommunications services to Drexel Burnham Lambert Inc.
Congressional Democrats and the Bush administration agreed on a compromise minimum-wage bill, opening the way for the first wage-floor boost in more than nine years.
The agreement ended a long impasse between the congressional leaders and the White House over the wage issue.
President Bush in June vetoed a measure passed by Congress and said he wouldn't accept any minimum-wage rise that went beyond limits he set early in this year's debate on the issue.
The compromise was a somewhat softened version of what the White House had said it would accept.
Under the agreement with the House and Senate leaders, the minimum wage would rise from the current $3.35 an hour to $4.25 an hour by April 1991.
Employers could also pay a subminimum "training wage" for 90 days to new workers who are up to 19 years old, and then for another 90 days if the company institutes a specific training program for the newcomers.
White House officials were delighted that the compromise includes the concept of a training wage, which Mr. Bush has fought for throughout the year.
"For the first time in history, we have a training wage that will be part" of the nation's labor laws, said Roger Porter, assistant to the president for economic and domestic policy.
White House aides said that although they made a small compromise on the length of a training wage, the final minimum-wage increase will meet the standards set by Mr. Bush.
The bill vetoed by the president in June, which the House failed to override, would have lifted the minimum wage to $4.55 an hour by late 1991, with a training wage for up to two months, generally for a worker's first job.
Mr. Bush had been holding out for a bill boosting the wage floor to $4.25 an hour by the end of 1991, coupled with a six-month training wage for workers newly hired by any employer.
Under the compromise, the $4.25 level would be reached nine months earlier, while the training subminimum would be shorter, unless it is tied to a training plan.
Democrats argued that the training wage was a way of allowing employers to pay less than the minimum wage, while new workers need far less than six months to be trained for their jobs.
Democrats had been negotiating with some Republican congressional leaders on a compromise lately.
With congressional elections next year, GOP leaders have worried about opposing a minimum-wage rise for low-paid workers at a time when Congress is moving toward a capital-gains tax cut that would directly benefit wealthier taxpayers.
Republicans have been imploring the White House to compromise on the wage issue.
In the Senate, Edward Kennedy (D., Mass.), chairman of the Labor Committee, and Pete Domenici, (R., N.M.) ranking minority member of the Budget Committee, have been working on a compromise, and their soundings showed that the Senate appeared to be heading toward enough strength to override another Bush veto, a Democratic staff official said.
The House is scheduled to vote this week on the compromise, as a substitute to a new Democratic bill, itself watered down from last spring's version.
The Senate will probably vote not long afterward.
Some Democrats thought they might have compromised too much.
Rep. Austin Murphy (D., Pa.), chairman of the House labor standards subcommittee, said they might have done better "if we'd held their feet to the fire."
Mr. Kennedy suggested Democrats "yielded a great deal" on the size of the increase, but he cited concessions from the White House on the training wage, which he said make it "less harsh."
With only 16-year-olds to 19-year-olds eligible, 68% of workers getting less than $4.25 an hour, who are adults, won't be subject to the training wage, he said.
The AFL-CIO, which previously opposed the administration's subminimum idea, said the compromise has "adequate safeguards, so the youth are not exploited and older workers are not displaced."
Gerald F. Seib contributed to this article.
Moody's Investors Service Inc. said it lowered the ratings on about $3.2 billion of Houston Lighting & Power Co.'s securities because of the company's low levels of interest coverage and internal cash generation.
Houston Lighting is a unit of Houston Industries Inc., a utility holding company in Houston.
Downgraded by Moody's were Houston Lighting's first-mortgage bonds and secured pollution-control bonds to single-A-3 from single-A-2; unsecured pollution-control bonds to Baa-1 from single-A-3; preferred stock to single-A-3 from single-A-2; a shelf registration for preferred stock to a preliminary rating of single-A-3 from a preliminary rating of single-A-2; two shelf registrations for collateralized debt securities to a preliminary rating of single-A-3 from a preliminary rating of single-A-2, and the unit's rating for commercial paper to Prime-2 from Prime-1.
Moody's said Houston Lighting's current situation has some positive aspects, including managing "very well" the construction and commercial operation risks of Units 1 and 2 of the South Texas Project nuclear power plant.
Capital requirements will be declining and no new generating facilities will be required for several years, Moody's said.
Scott C. Smith, formerly vice president, finance, and chief financial officer of this media concern, was named senior vice president.
Mr. Smith, 39, retains the title of chief financial officer.
Armstrong World Industries Inc. agreed in principle to sell its carpet operations to Shaw Industries Inc.
The price wasn't disclosed but one analyst estimated that it was $150 million.
Armstrong, which has faced a takeover threat from the Belzberg family of Canada since July, said that disposing of the carpet business would improve "total financial performance."
The move also would allow the company to concentrate on core businesses, which include ceramic tile, floor coverings and furniture.
Moreover, such a sale could help Armstrong reassure its investors and deter the Belzbergs, who own a 9.85% stake in the Lancaster, Pa., company.
Analysts expect Armstrong to use proceeds of the sale to reduce debt, buy back stock or perhaps finance an acquisition.
The carpet division had 1988 sales of $368.3 million, or almost 14% of Armstrong's $2.68 billion total revenue.
The company has been manufacturing carpet since 1967.
Recently it upgraded its plants so that it could make stain-resistant products with higher quality dyes.
For the past year or two, the carpet division's operating profit margins have hovered around 5%, high by industry standards, but disappointing compared with the 13% to 19% margins for two of Armstrong's chief businesses, flooring and building products.
Analysts hailed the planned transaction as being beneficial to Armstrong and Shaw, the market leader in the U.S. carpet industry, with an estimated 17% to 20% share.
Shaw, based in Dalton, Ga., has annual sales of about $1.18 billion, and has economies of scale and lower raw-material costs that are expected to boost the profitability of Armstrong's brands, sold under the Armstrong and Evans-Black names.
Yesterday, in composite trading on the New York Stock Exchange, Shaw's shares closed ex-dividend at $26.125, up $2.25.
Armstrong's shares, also listed on the Big Board, closed at $39.125, up 12.5 cents.
Yesterday, Armstrong reported flat earnings for the third quarter and nine months, worsened by the stock dilution of an employee stock ownership plan adopted earlier this year.
For the quarter, earnings were $47 million, or 92 cents a share, including a one-time gain of $5.9 million.
In the year-ago quarter, earnings were $42.9 million, or 93 cents a share.
Yesterday, Armstrong announced an agreement to sell its small Applied Color Systems unit to a subsidiary of the Swiss company, Brauerei Eichof Ltd.
The price wasn't disclosed.
Armstrong expects to close the sale of the color unit in late November and the carpet sale in December, with the gains to be applied to fourth quarter or first-quarter results.
The government's primary economic-forecasting gauge rose a slight 0.2% in September, but economists said the report offered little new information on the degree to which the U.S. economy is slowing.
The small increase in the index of leading indicators, which had climbed 0.5% in August but was unchanged in July, does lend support to the view that the economy has slowed noticeably.
However, it doesn't give much of a clue as to whether a recession is on the horizon.
"I don't think it provides much new information on the economy," said Richard Rippe, economist at Dean Witter Reynolds Inc.
So far this year, the index of leading indicators has risen in four months, fallen in four months and remained unchanged in the other month.
In another report yesterday, the Commerce Department said sales of new single-family houses plunged 14% in September to an annual rate of 618,000 from 719,000 in August.
The declines were particularly pronounced in the Northeast and in the South, where Hurricane Hugo was a factor.
Although September's weakness followed two strong months for home sales, the decline supports other indications that the drop in mortgage rates earlier this year has had only a limited beneficial effect on the housing market.
The September drop was the largest since a 19% drop in January 1982, but monthly changes in this measure are even less reliable than those in other economic indicators.
Because the figures are based on a small sample, the department said it is 90% confident only that new-home sales fell somewhere between 5% and 23% during the month.
The department also said it takes four months to establish a trend.
So far this year, 534,000 newly built homes have been sold, down 4.5% from the like months of 1988.
The index of leading indicators got a major boost in September from a surge in consumer expectations as measured by the University of Michigan.
This measure had dropped sharply in August.
The Commerce Department said that as a result of a new adjustment to the formula used to calculate the index, the influence of this component has been reduced.
Of the 11 components to the index, only three others rose in September: the money supply, the length of the average work week and stock prices.
Several components that track the health of the manufacturing sector of the economy turned down in September.
These include new orders for manufactured consumer goods, lead times on vendor deliveries, orders for new plant and equipment, and backlogs of orders for durable goods.
Meanwhile, the National Association of Manufacturers said yesterday a recent poll of 53 executives on its board found that 61% don't expect a recession to occur until 1991 or later.
The remainder expect a downturn to begin sometime in
Although manufacturers often are quick to call for lower interest rates, 60% of the executives said they would prefer that the Fed keep inflation-fighting as its top priority even if that means higher rates.
The other 40% said the Fed ought to worry less about inflation and bring interest rates down.
All the figures are adjusted to remove usual seasonal patterns.
Here are the net contributions of the components of the Commerce Department's index of leading indicators.
After various adjustments, they produced a 0.5% rise in the index for August and a 0.2% rise for September.
September, and the change from August, are: from 1.11 in the previous month.
Boston Edison Co. said it will take a previously reported $60 million charge against earnings in the fourth quarter.
The charge resulted from a settlement approved yesterday by the Massachusetts Department of Public Utilities.
As expected, the settlement limits rate increases for three years and ties future charges to customers for operation of the troubled Pilgrim Nuclear Power Station to that plant's performance.
In its order, the state regulatory agency said the company "must be held accountable for the mistakes made in the management of the plant's operation."
Pilgrim had been closed for 32 months.
The average interest rate rose to 8.3875% at Citicorp's $50 million weekly auction of 91-day commercial paper, or corporate IOUs, from 8.337% at last week's sale.
Bids totaling $515 million were submitted.
Accepted bids ranged from 8.38% to 8.395%.
Citicorp also said that the average rate rose to 8.0087% at its $50 million auction of 182-day commercial paper from 7.962% at last week's sale.
Bids totaling $475 million were submitted.
Accepted bids ranged from 8% to 8.019%.
The bank holding company will auction another $50 million in each maturity next Tuesday.
An imaginative novelist writing a thriller about amateur spy-chasing might invent a Clifford Stoll, but it's unlikely.
It's also unnecessary.
Amateur spy-chaser Clifford Stoll is a real person, or as he might waggishly put it, a surreal person.
He is 37, an astronomer with impressive credentials, and something of a genius at making computers do his bidding.
He once described himself as a "Berkeley Hippie," and played the role well; obligatory ragged jeans, a thicket of long hair and rejection of all things conventional, including, for a time at least, formal marriage to his "sweetheart," Martha Matthews.
He also is an entertaining writer, combining wisecracks and wordplay with programmatic detail and lucid explanations of how computers work.
In "The Cuckoo's Egg" (Doubleday, 326 pages, $19.95), he spins a remarkable tale of his efforts over 18 months to catch a computer spy.
The result last spring was the arrest by West German authorities of five young West Germans, accused of stealing information from computers in the U.S. and Europe and selling it to the Soviet KGB.
One of them, 25-year-old Markus Hess of Hannover, allegedly used the international telecommunications network to break into more than 30 high-security computers in the U.S., searching for secrets.
He probably didn't penetrate any top-secret files, but the KGB in East Berlin was willing to pay two of his associates, Peter Carl and Dirk Brezinski, $15,000 for some of the material Hess collected.
They promised yet more for really good stuff.
Mr. Stoll draws his title from the cuckoo's habit of laying eggs in the nests of other birds, making them surrogate parents.
The computer spy had discovered that a popular editing/electronic mail program called Gnu-Emacs could do tricks with the widely used Unix operating system created by AT&T.
Using Gnu-Emacs, the spy could substitute a bogus "atrun" program for the one that routinely cleans up the Unix system every five minutes.
Once his cuckoo's egg was laid, he could enter Unix and become a "super-user," with access to everything.
Mr. Stoll was scanning the heavens at the Keck observatory of the Lawrence Berkeley Laboratory in 1986 when his grant ran low and he was asked to switch to helping run the lab's computers.
He discovered a 75-cent discrepancy in the charges made to various departments for computer time and traced it to a user named "Hunter," who had no valid billing address.
Mr. Stoll suspected the intruder was one of those precocious students who has fun breaking into computers.
But after much tracking, it became evident to Mr. Stoll, through various clues, that the hacker was not on the Berkeley campus or even in California.
Finding him became an obsession for Mr. Stoll.
He made a midnight requisition of all the printers he could lay hands on so that he could monitor all the telephone lines coming into the lab's computers.
After discovering that the hacker had taken over the dormant account of a legitimate user named Joe Sventek, he rigged up an alarm system, including a portable beeper, to alert him when Sventek came on the line.
Some nights he slept under his desk.
His boss complained about neglect of other chores.
The hacker was pawing over the Berkeley files but also using Berkeley and other easily accessible computers as stepping stones to the network of computers used by the military and national security agencies.
The White Sands missile range and CIA contractor Mitre Inc. were among the targets.
When the hacker moved, Mr. Stoll moved too, calling up other systems managers to alert them but keeping his own system open to avoid arousing suspicion.
Sometimes, if the hacker seemed to be into a sensitive file, he would drag his keychain across the terminal to create static or slow the system down to frustrate his quarry.
The FBI initially showed little interest, and he had the impression other federal security agencies were tangled up in legal red tape.
The CIA told him it does not do domestic counterespionage.
One learns a lot from this book, or seems to, about crippling federal bureaucracy.
"Seems to" because it's possible that the CIA and the National Security Agency were more interested than they let on to Mr. Stoll.
Finally, he got help.
Tymnet is a major network linking computers.
One of its international specialists, Steve White, took a quick interest in Mr. Stoll's hunt, ultimately tracing the hacker to West Germany.
The West Germans then took over and finally found Markus Hess.
Eventually, Mr. Stoll was invited to both the CIA and NSA to brief high-ranking officers on computer theft.
He savored the humor of his uncombed appearance among these buttoned-up chaps.
Back in Berkeley, he was violently scolded by a left-wing lady friend for consorting with such people.
He became angry in return.
He had developed a hatred for the hacker and a grudging appreciation of the federal "spooks" who make national security their business.
At several different levels, it's a fascinating tale.
Mr. Melloan is deputy editor of the Journal.
Mips Computer Systems Inc. today will unveil a new general-purpose computer that will compete with more expensive machines from companies such as Sun Microsystems Inc. and Digital Equipment Corp.
The closely held Sunnyvale, Calif., company also will announce an agreement to supply computers to Control Data Corp., which will sell Mips machines under its own label.
The new Mips machine, called the RC6280, will cost $150,000 for a basic system.
The computer processes 55 million instructions per second and uses only one central processing chip, unlike many rival machines using several processors.
The machine employs reduced instruction-set computing, or RISC, technology.
At that price, an analyst familiar with the machine said, the computer offers up to 10 times the performance of similar machines.
"In the price range it's a tremendously high-performing product," said Sandy Gant, an analyst at the market-research firm InfoCorp.
The machine is part of an effort by Mips to establish itself as a supplier of computers, not just of integrated-circuit technology.
Mips also wants to wedge into markets other than traditional RISC applications such as engineering; Mips said the new machine will also be used by businesses and for communications.
"This clearly demonstrates that Mips is a systems company rather than just a chip company," said Mips Vice President John Hime.
The Control Data deal is a boon for Mips because it gives the the five-year-old company one more ally as it battles more established electronic concerns such as Sun, Hewlett-Packard Co., Motorola Inc. and Intel Corp. for the emerging market for RISC machines.
RISC technology speeds up a computer by simplifying the internal software.
For Mips, which expects revenue of $100 million this year, big-name allies such as Control Data are essential to attract software developers to the company's RISC architecture.
"The thing it says about Mips is that they're on a roll right now," said Ms. Gant at InfoCorp.
"They're getting some major wins," she added.
Last month, for example, Mips agreed to supply its computers to Nixdorf Computer AG of West Germany and France's Groupe Bull.
Sony Corp., Tandem Computers Inc. and Digital Equipment have agreed to sell MIPS computers and companies such as Japan's NEC Corp. and West Germany's Siemens A.G. have agreed to make Mips chips under license.
Today's agreement gives Control Data a machine to compete against Digital and other general-purpose computer makers, said John Logan, a computer-market analyst at Aberdeen Group Inc. of Boston.
The machine is essentially a mainframe computer, he said.
"Suddenly CDC (Control Data) has a competitive product to fight back against the VAX9000," a machine Digital announced last month, he added.
Control Data, based in Minneapolis, Minn., expects its sales of Mips systems, including the new RC6280, to amount to more than $100 million by the end of 1991, Mips said.
Nixdorf, Bull and others will also sell versions of the machine, said Mips President Robert Miller.
Mips will start shipping its new machine in the first quarter of 1990, he said.
The machine uses a single processor, which makes it easier to program than competing machines using several processors.
The computer can process 13.3 million calculations called floating-point operations every second.
The machine can run software written for other Mips computers, the company said.
Another fight is brewing between Congress and the Bush administration over how to pay for the savings-and-loan bailout without adding to the federal budget deficit.
In a hearing before the House Ways and Means Committee, the General Accounting Office and the Congressional Budget Office, which both are arms of Congress, advised the new S&L bailout agency to abandon plans to raise temporary working capital through debt issued from an agency that wouldn't be counted on the federal budget.
Officials of the Resolution Trust Corp. have said privately that such a plan was the most likely alternative to raise short-term cash for the bailout.
Instead, the GAO and the Congressional Budget Office said, the RTC should consider using Treasury debt, which is less expensive and subject to oversight by Congress.
The spending could be exempted from meeting deficit-reduction targets in the Gramm-Rudman budget law.
The RTC has projected that it will require between $50 billion to $100 billion in temporary working capital.
The borrowing to raise these funds would be paid off as assets of sick thrifts are sold.
The new S&L law allows the RTC to issue notes for as much as 85% of the value of the assets it holds.
But higher interest rates paid on off-budget debt could add billions to the bailout costs, and wouldn't be subject to congressional scrutiny, Ways and Means members argued.
"To allow this massive level of unfettered federal borrowing without prior congressional approval would be irresponsible," said Rep. Fortney Stark (D., Calif.), who has introduced a bill to limit the RTC's authority to issue debt.
The RTC will have to sell or merge hundreds of insolvent thrifts over the next three years.
The new S&L bailout law allows $50 billion to be spent to sell or merge sick S&Ls and their assets, but that is a net cost.
In the meantime, the agency must raise cash to maintain assets, such as real estate, until they can be sold.
Then the short-term debt is paid off through the proceeds of selling the assets.
David Mullins, assistant secretary of the Treasury, said that the working capital is necessary to reduce the final costs of the bailout, by allowing the agency to sell savings and loans without their bad assets, then hold the assets until they can be sold under favorable conditions.
He said it hasn't yet been determined how the RTC will raise the cash, but the administration doesn't want it to be included on the federal budget, because it would "distort" the budget process by requiring either exemptions from Gramm-Rudman or big increases in the budget deficit.
But the worst possibility would be raising no working capital, he said.
"If working capital financing is not provided," he said, "the RTC may have to slow {S&L sales} or dump acquired assets through fire sales.
Panhandle Eastern Corp. said it applied, on behalf of two of its subsidiaries, to the Federal Energy Regulatory Commission for permission to build a 352-mile, $273 million pipeline system from Pittsburg County, Okla., to Independence, Miss.
The natural gas pipeline concern said the 500 million cubic feet a day capacity pipeline would be built by a proposed joint venture between two Panhandle Eastern units-Texas Eastern Transmission Corp. and Trunkline Gas Co.
Texas Eastern Transmission will build and operate the system, which will connect the Arkoma Basin with several interstate pipelines.
Now was that a quarter cup or a half cup?
Not a gripping question, unless you're the pastry chef of this city's Chez Panisse restaurant and you've just lost your priceless personal dessert notebook.
Chez Panisse was listed among the top 30 restaurants in the world this year by Connoisseur magazine.
The tattered black binder, bulging with 18 years' worth of recipes held together by rubber bands, was in chef Lindsey Shere's purse when it was stolen from her house recently.
The Berkeley police don't have any leads but doubt the crime was driven by a passion for sweets.
Instead, they figure the culprit probably took money from Ms. Shere's wallet and discarded all the tips in the five-by-eight-inch looseleaf.
Chez Panisse, whose founder, Alice Waters, is considered the inventor of the cooking style known as California cuisine and whose patrons make reservations a month in advance, hasn't exactly subjected diners to vanilla ice cream because of the theft.
For one thing, Ms. Shere can draw on her cookbook, published by Random House four years ago, which is teeming with recipes for such specialties as kiwi sherbet, gooseberry fool (a creamy dish made with crushed stewed berries) and hazelnut "oeufs a la neige."
For another, sympathetic fans have sent Ms. Shere copies of her recipes clipped from magazines over the years.
Still, the restaurant's ever-changing menu of five-course dinners -- it supposedly hasn't repeated a meal since opening in 1971 -- requires constant improvisation.
And that puts added pressure on Chez Panisse dessert-menu planners.
"We make what we know how to make," says business manager Richard Mazzera.
Many in the Bay Area's pastry community express disbelief that Ms. Shere kept only one copy of such valuable notes, but she has received moral support from Baker's Dozen, a group of California pastry chefs that meets regularly to discuss issues like how to keep meringues from weeping and how bovine eating habits affect butter texture.
Ms. Shere has offered a $500 reward for the book's return but figures she'll have to reinvent many recipes from scratch.
"It's an overwhelming job," she says.
"There are so many possible proportions when you consider how many things are made out of eggs and butter and milk.
Newport Electronics Inc. named a new slate of officers, a move that follows replacement of the company's five incumbent directors last week.
Milton B. Hollander, 60 years old, was named chief executive officer, succeeding Barrett B. Weekes.
Mr. Hollander's Stamford, Conn.-based High Technology Holding Co. acquired most of its 49.4% stake in Newport in August.
Mr. Hollander was named chairman last week, succeeding Mr. Weekes, who was among the ousted directors.
The company has declined requests to discuss the changes, but Mr. Weekes has said that Mr. Hollander wanted to have his own team.
Scott Wakeman was named president and chief operating officer of U.S. operations, titles that had been held by Mr. Weekes.
Mr. Wakeman was vice president of the instrument and controls division of closely held Omega Engineering Inc., another company controlled by Mr. Hollander.
A company spokesman didn't know Mr. Wakeman's age.
James R. Lees, 51, vice president of Newport's European operations, was named executive vice president and chief operating officer of European operations, assuming some former duties of Mr. Weekes.
Arthur B. Crozier, 34, an attorney, was named secretary, succeeding John Virtue, who was another of the ousted directors.
UNIFIRST Corp. declared a 2-for-1 stock split.
The Wilmington, Mass., garment service company also boosted its quarterly dividend 20% to three cents a share adjusted for the split.
The dividend had been five cents a share.
The split and quarterly dividend will be payable Jan. 3 to stock of record Nov. 16, the company said.
The split will raise the number of shares outstanding to about 10.2 million.
Separately, UniFirst reported that net income rose 21% to $3 million, or 29 cents a share adjusted for the split, for the fourth quarter ended Aug. 26.
A year earlier UniFirst earned $2.4 million, or 24 cents a share adjusted for the split.
Sales rose to $52.4 million from $50.1 million.
Fibreboard Corp. said it completed the previously reported sale of approximately 27,500 acres of timberland near Truckee, Calif., to closely held Sierra Pacific Industries Corp., Arcata, Calif., for $32.5 million.
The lumber, insulation and fireproofing concern said the transaction, which includes a swap of other timber interests, would result in a $13.5 million after-tax gain, to be recorded in the fourth quarter.
Healthcare International Inc. said it reached a 120-day standstill agreement with its HealthVest affiliate calling for Healthcare to pay HealthVest $5 million right away and additional amounts in the future.
Under the agreement, Healthcare, a manager of health-care facilities, said it would pay HealthVest $3.9 million in overdue rent and mortgage payments and repay $1.1 million in funds that HealthVest advanced for construction work on facilities.
In return, HealthVest agreed that it won't exercise its rights and remedies against Healthcare during the 120-day period.
After the payment, Healthcare still will be $6.5 million in arrears on rent and mortgage payments to HealthVest, a real estate investment trust whose portfolio consists largely of properties operated by Healthcare.
Healthcare has given HealthVest a 12% note for that overdue amount, to be repaid over three years.
In addition, Healthcare agreed to make monthly rent and mortgage payments of $2.7 million to $3 million to HealthVest during the standstill period, to be paid when Healthcare successfully completes asset sales.
Because Healthcare actually owes HealthVest $4.2 million in rent and mortgage payments each month, the amount due above the amount paid will be added to the three-year note.
The funds should help ease a cash bind at HealthVest, which has been unable to pay its debts because Healthcare hasn't made complete rent and mortgage payments since July.
A spokesman said HealthVest has paid two of the three banks it owed interest to in October and is in negotiations with the third bank.
Healthcare, which has been in a severe liquidity bind, said it is able to make the payments because it completed a transaction with Greenery Rehabilitation Group Inc. in which Greenery purchased stock and warrants for $500,000 and loaned Healthcare $9 million.
The loan is backed by Healthcare's 5.4% stake in HealthVest and interest in certain facilities.
I was pleased to note that your Oct. 23 Centennial Journal item recognized the money-fund concept as one of the significant events of the past century.
Actually, about two years ago, the Journal listed the creation of the money fund as one of the 10 most significant events in the world of finance in the 20th century.
But the Reserve Fund, America's first money fund, was not named, nor were the creators of the money-fund concept, Harry Brown and myself.
We innovated telephone redemptions, daily dividends, total elimination of share certificates and the constant $1 pershare pricing, all of which were painfully thought out and not the result of some inadvertence on the part of the SEC.
President
The Reserve Fund
The crowning moment in the career of Joseph F. O'Kicki came as 300 local and state dignitaries packed into his elegant, marble-columned courtroom here last year for his swearing in as President Judge of Cambria County.
Baskets of roses and potted palms adorned his bench.
The local American Legion color guard led the way.
As the judge marched down the center aisle in his flowing black robe, he was heralded by a trumpet fanfare.
To many, it was a ceremony more befitting a king than a rural judge seated in the isolated foothills of the southern Allegheny Mountains.
But then Judge O'Kicki often behaved like a man who would be king -- and, some say, an arrogant and abusive one.
While his case may be extreme, it reflects the vulnerability of many small communities to domineering judges.
Last March, nine months after the judge's swearing-in, the state attorney general's office indicted him on a sweeping array of charges alleging more than 10 years of "official oppression" in Cambria County, a depressed steel and mining community in western Pennsylvania.
The allegations, ranging from theft and bribery to coercion and lewdness, paint a disquieting picture.
According to testimony in a public, 80-page grand-jury report handed up to the state attorney general, Judge O'Kicki extorted cash from lawyers, muscled favorable loans from banks and bullied local businesses for more than a decade.
Prosecutors, in an indictment based on the grand jury's report, maintain that at various times since 1975, he owned a secret and illegal interest in a beer distributorship; plotted hidden ownership interests in real estate that presented an alleged conflict of interest; set up a dummy corporation to buy a car and obtain insurance for his former girlfriend (now his second wife); and maintained 54 accounts in six banks in Cambria County.
In testimony recorded in the grand jury report, court employees said the judge, now 59 years old, harassed his secretaries, made imperial demands on his staff and hounded anyone who crossed him.
Bailiffs claimed they were required to chauffeur him to and from work, mow his lawn, chop his wood, fix his car and even drop by his house to feed his two grown mutts, Dixie and Husky.
One former bailiff charged that the judge double-crossed him by reneging on a promise of a better paying job after pocketing a $500 bribe.
Some of the allegations are simply bizarre.
Two former secretaries told the grand jury they were summoned to the judge's chambers on separate occasions to take dictation, only to find the judge in his bikini underwear.
One secretary testified that the judge once called her to his office while wearing nothing at all.
The judge, suspended from his bench pending his trial, which began this week, vehemently denies all the allegations against him, calling them "ludicrous" and "imaginative, political demagoguery."
He blames the indictment on local political feuding, unhappiness with his aggressive efforts to clear the courthouse's docket and a vendetta by state investigators and prosecutors angered by some of his rulings against them.
"I don't know whose toes I've stepped on," says the judge.
"I'll find out, eventually, who pushed the state police buttons into action."
Even if only some of the allegations stand up, however, they provide ample testimony to the awesome power of judges in rural communities.
That power can sometimes be abused, particularly since jurists in smaller jurisdictions operate without many of the restraints that serve as corrective measures in urban areas.
Lawyers and their clients who frequently bring business to a country courthouse can expect to appear before the same judge year after year.
Fear of alienating that judge is pervasive, says Maurice Geiger, founder and director of the Rural Justice Center in Montpelier, Vt., a public interest group that researches rural justice issues.
As a result, says Mr. Geiger, lawyers think twice before appealing a judge's ruling, are reluctant to mount, or even support, challenges against him for re-election and are usually loath to file complaints that might impugn a judge's integrity.
Judge O'Kicki, a stern and forbidding-looking man, has been a fixture in the local legal community for more than two decades.
The son of an immigrant stonemason of Slovenian descent, he was raised in a small borough outside Ebensburg, the Cambria County seat, and put himself through the University of Pittsburgh Law School.
He graduated near the top of his class, serving on the school law review with Richard Thornburgh, who went on to become governor of Pennsylvania and, now, U.S. Attorney General.
It was also in law school that Mr. O'Kicki and his first wife had the first of seven daughters.
He divorced his first wife three years ago and married the daughter of his court clerk.
Last year, Pennsylvania Supreme Court Justice John P. Flaherty called Mr. O'Kicki one of the finest judges "not only in Pennsylvania but in the United States."
Clearly, the judge has had his share of accomplishments.
After practicing law locally, he was elected to his first 10-year term as judge in 1971; in 1981, he was effectively re-elected.
Six years ago, Judge O'Kicki was voted president of the Pennsylvania Conference of State Trial Judges by the state's 400 judges.
He has been considered several times for appointments to federal district and appellate court vacancies in Pennsylvania.
And when he ran unsuccessfully for a state appellate court seat in 1983, the Pennsylvania Bar Association rated him "one of the best available," after interviewing local lawyers.
"He probably was the smartest guy who ever sat on our bench," says a former president of Cambria County's 150-member bar association, who, like most lawyers in Cambria County, refuses to talk about the judge publicly.
"He's sharp as a tack.
He could grasp an issue with the blink of an eye."
For more than a decade, virtually no one complained about Judge O'Kicki.
"What about those institutions that are supposed to be the bedrock of society, the banks and the bar association. . . ?" wrote a columnist for the Tribune-Democrat, a newspaper in nearby Johnstown, shortly after the scandal became public.
"If only a banker or a lawyer had spoken out years ago, the judicial process wouldn't be under the taint it is today."
Officials with the Pennsylvania Judicial Inquiry and Review Board, the arm of the state that investigates judicial misconduct, counter that they had no inkling of anything amiss in Ebensburg.
"Nobody told us; nobody called us," says an official close to the case who asked not to be named.
"Nobody had the guts to complain."
Certainly not the lawyers.
Johnstown attorney Richard J. Green Jr. shelled out $500 in loans to the judge over five years, he said in testimony to the grand jury.
"The judge never made a pretense of repaying the money," said Mr. Green.
Eventually, Mr. Green testified, he began ducking out of his office rather than face the judge when he visited.
When Mr. Green won a $240,000 verdict in a land condemnation case against the state in June 1983, he says Judge O'Kicki unexpectedly awarded him an additional $100,000.
Mr. Green thought little of it, he told the grand jury, until the judge walked up to him after the courtroom had cleared and suggested a kickback.
"Don't you think I ought to get a commission . . . or part of your fee in this case?" Mr. Green said the judge asked him.
Appalled, Mr. Green never paid the money, he testified.
But he didn't complain to the state's Judicial Inquiry and Review Board, either, saying later that he feared retribution.
Mr. O'Kicki said he will respond to Mr. Green's allegation at his trial.
Like most of Cambria County's lawyers and residents who had dealings with the judge, Mr. Green declined to be interviewed for this article.
And no one with a complaint about the judge would allow his name to be printed.
"I don't have anything much to say, and I think that's what you're going to find from everyone else you talk to up here," says local attorney Edward F. Peduzzi.
Says another lawyer: "The practice of law is a matter of biting one's lip when you live in a small community.
One had best not dance on top of a coffin until the lid is sealed tightly shut."
The judge was considered imperious, abrasive and ambitious, those who practiced before him say.
He sipped tea sweetened with honey from his high-backed leather chair at his bench, while scribbling notes ordering spectators to stop whispering or to take off their hats in his courtroom.
Four years ago, he jailed all nine members of the Cambria County School Board for several hours after they defied his order to extend the school year by several weeks to make up for time lost during a teachers' strike.
Visitors in his chambers say he could cite precisely the years, months, weeks and days remaining until mandatory retirement would force aside the presiding president judge, giving Judge O'Kicki the seniority required to take over as the county's top court administrator.
The judge, they say, was fiercely proud of his abilities and accomplishments.
"My name is judge," Judge O'Kicki told a car salesman in Ebensburg when he bought a new red Pontiac Sunbird in October 1984, according to the grand-jury report.
The dealership dutifully recorded the sale under the name "Judge O'Kicki."
Yet, despite the judge's imperial bearing, no one ever had reason to suspect possible wrongdoing, says John Bognato, president of Cambria County's 150-member bar association.
"The arrogance of a judge, his demeanor, the way he handles people are not a basis for filing a complaint," says Mr. Bognato.
"Until this came up and hit the press, there was never any indication that he was doing anything wrong."
State investigators dispute that view now, particularly in light of the judge's various business dealings in Cambria County.
The judge came under scrutiny in late 1987, after the state attorney general's office launched an unrelated investigation into corruption in Cambria County.
The inquiry soon focused on the judge.
Even his routine business transactions caused trouble, according to the grand jury report.
When the judge bought his new Sunbird from James E. Black Pontiac-Cadillac in Ebensburg five years ago, the dealership had "certain apprehensions" about the judge's reputation, according to the grand-jury report.
The dealership took the extra step of having all the paper work for the transaction pre-approved by Ebensburg's local lender, Laurel Bank.
Then, as an additional precaution, the car dealership took the judge's photograph as he stood next to his new car with sales papers in hand -- proof that he had received the loan documents.
But when the judge received his payment book, he disavowed the deal.
"There was no loan, there is no loan, there never shall be a loan," the judge wrote the bank on his judicial stationery, according to the report.
Later, the judge went a step farther.
After Laurel Bank tried to repossess the car, a vice president asked him to intervene in an unrelated legal dispute involving a trust account.
The judge wrote again.
"I find myself in an adversary relationship with Laurel Bank, and I am not inclined to extend myself as far as any favors are concerned," the judge wrote back in a letter attached to the grand jury's report.
"Perhaps if my personal matters can be resolved with Laurel bank in the near future, I may be inclined to reconsider your request. . . ."
The judge now says it was "unfortunate" that he chose to write the letter but says "there was certainly no intent to extort there."
The bank acquiesced.
It refinanced the judge's loan, lowered its interest rate and accepted a trade-in that hadn't originally been part of the deal -- a beat up 1981 Chevy Citation the dealer had to repair before it could be resold.
The incident wasn't the only time the judge got special treatment from his local bank.
Two years later, he wrote to complain that the interest he was paying on an unsecured $10,000 loan was "absolutely onerous."
Paul L. Kane, Laurel's president at the time, quickly responded.
The bank, he wrote back, was "immediately" lowering the rate by 3.5%, "as a concession to you."
The judge says he can't discuss in detail how he will defend himself at his trial, although he contends that if he were as corrupt as state prosecutors believe, he would be far wealthier than he is.
His seven-bedroom cedar and brick house outside of Johnstown is up for sale to pay for his lawyers.
The judge says he is confident he will return to his old bench.
Already, he notes, the 76 charges originally filed against him have been trimmed to 27.
Most of the allegations no longer pending were ethics charges withdrawn by state prosecutors as part of a pre-trial agreement.
The heart of the case -- "official oppression" -- remains intact.
"If I lose, I lose my position, my career, my pension, my home and my investments," says the judge.
"My God and I know I am correct and innocent.
Many thanks for Alexander Cockburn's comic masterpiece ("U.S. Economy: A House Built on Junk-Bond Sand," Viewpoint, Oct. 19).
The use of the abominable construction practices in the Soviet Union -- as evidenced by the collapse of sand apartment blocks during the Armenian earthquake -- as a metaphor for the U.S. economic system was a sublime example of Mr. Cockburn's satirical muse.
I await his sequel: the economic and social resiliency of the San Francisco Bay area and the outstanding work of the local governments and the private charitable organizations there as metaphors for the supremacy of whatever failed system Mr. Cockburn now believes in.
It should be a scream.
William S. Smith
As a money manager and a grass-roots environmentalist, I was very disappointed to read in the premiere issue of Garbage that The Wall Street Journal uses 220,000 metric tons of newsprint each year, but that only 1.4% of it comes from recycled paper.
By contrast, the Los Angeles Times, for example, uses 83% recycled paper.
With newspapers being the largest single component of solid waste in our landfills, and with our country overflowing with trash, all sectors of our society and all types of businesses must become more responsible in our use and disposal of precious natural resources.
The Wall Street Journal is an excellent publication that I enjoy reading (and must read) daily.
Please make me and thousands of other readers more comfortable with our daily purchase of your newspaper by raising your environmental standards to your overall impeccable quality levels, and increase your use of recycled paper.
Virginia M.W. Gardiner
FIRST AMERICAN FINANCIAL Corp. declared a special dividend of one share of Class B common stock for each share of Class A common stock, payable to holders of record on Nov. 10 if the Securities and Exchange Commission approves this as the effective date of the registration statement.
Shareholders of the Santa Ana, Calif., title-insurance company approved the creation of this second class of stock, which will be traded on the national over-the-counter market and which the company said would be used for acquisitions and other general corporate purposes.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
Continental Cablevision Inc. --
$350 million of senior subordinated debentures, due Nov. 1, 2004, was priced at par to yield 12 7/8%.
Rated single-B-1 by Moody's Investors Service Inc. and single-B by Standard & Poor's Corp., the issue, which is non-callable for five years, will be sold through underwriters led by Morgan Stanley & Co.
Beatrice Co. --
$251 million of notes, due Nov. 1, 1997, was priced in a two-part offering through underwriters at Salomon Brothers Inc.
The size of the issue was scaled back from an originally planned $350 million.
The first part, consisting of $151 million of 13 3/4% senior subordinated reset notes, was priced at 99.75.
The rate on the notes will be reset annually to give the issue a market value of 101.
However, the maximum coupon at which the notes can be reset is 16 1/4%.
The minimum coupon is 13 3/4%.
The second part, consisting of $100 million of senior subordinated floating-rate notes, was priced at 99 3/4 to float 4.25% above the three-month London interbank offered rate.
The initial coupon on the floating-rate notes will be 12.9375%.
The issue is rated single-B-3 by Moody's and single-B-plus by S&P.
New Jersey Wastewater Treatment Trust --
$75.1 million, two-part offering of bonds apparently was won by a Merrill Lynch Capital Markets group.
The group's bid for $40.9 million of wastewater treatment insured bonds, Series 1989 A, produced a 7.0826% true interest cost.
The Series 1989 A bonds are insured and rated triple-A by Moody's and S&P.
The group's bid for $34.2 million of wastewater treatment bonds, Series 1989 B, produced a 7.0808% true interest cost.
The Series 1989 B bonds are uninsured and rated double-A by Moody's and S&P.
Both the Series 1989 A and Series 1989 B bonds were priced to yield from 6% in 1991 to 7.15% in 2008-2009, according to a Merrill Lynch official.
Matagorda County Navigation District No. 1, Texas --
$70.3 million of pollution control revenue bonds (Houston Lighting & Power Co. Project), due Oct. 1, 2019, were tentatively priced by a Goldman, Sachs & Co. group at 98 1/4 to yield 7.649% with a coupon of 7 1/2%.
Interest on the bonds will be treated as a preference item in calculating the federal alternative minimum tax that may be imposed on certain investors.
The bonds are insured and rated triple-A by Moody's and S&P.
Federal Home Loan Mortgage Corp. --
$500 million of Remic mortgage securities is being offered in 11 classes by a Morgan Stanley group.
The offering, Series 109, is backed by Freddie Mac 10% securities.
Complete details weren't immediately available.
Lomas Mortgage Funding Corp. II --
$100 million issue of collateralized mortgage obligations is being offered in four classes by a Morgan Stanley group.
The securities yield from 9.35% to 10.48% for a 30-year issue with an average life of 21.18 years.
The 10.48% yield represents a spread to the 20-year Treasury of 2.45 percentage points.
The collateral consists of collateralized whole loans with a weighted average coupon rate of 11.08% and weighted average remaining term to maturity of 28 years.
The issue is rated triple-A by S&P, Moody's and Fitch Investors Service Inc.
The issue is 6% to 7% overcollateralized, and 75% of the loans are covered by a General Electric pool policy covering losses of as much as 10% of the original principal balance of the loans.
J.C. Penney Co. --
$350 million of JCP Master Credit Card Trust asset-backed certificates, Series B, with a final stated maturity of Oct. 15, 2001, was priced at 99.1875 to yield 9.192% with a coupon of 8.95%.
The certificates, which have an average life of 10.05 years, were priced at 1.31 percentage points over the benchmark Treasury 10-year note.
Rated triple-A by Moody's and S&P, the issue will be sold through First Boston Corp.
The issue is backed by a 12% letter of credit from Credit Suisse.
Keio Teito Electric Railway Co. (Japan) --
$300 million of bonds due Nov. 16, 1993, with equity-purchase warrants, indicating a 3 3/4% coupon at par via Nomura International Ltd.
Each $5,000 bond carries one warrant, exercisable from Nov. 30 through Nov. 2, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Tuesday.
Diesel Kiki Co. (Japan) --
$200 million of bonds due Nov. 16, 1994, with equity-purchase warrants, indicating a 4 1/2% coupon at par via Yamaichi International Europe Ltd.
Each $5,000 bond carries one warrant, exercisable from Nov. 30 through Nov. 2, 1994, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Monday.
Chugoku Electric Power Co. (Japan) --
$150 million of 8 7/8% bonds due Nov. 29, 1996, priced at 101 7/8 to yield 8 7/8% less full fees via Nikko Securities Ltd.
Fees 1 7/8.
Monte dei Paschi di Siena, Singapore branch (Italian parent), via the Law Debenture Trust Corp. --
10 billion yen ($70 million) of 6% bonds due Feb. 24, 1993, priced at 101 1/4, via Daiwa Europe Ltd.
Okobank (Finland) --
10 billion yen of 6% bonds due Nov. 30, 1992, priced at 101.225 to yield 6.056% via IBJ International.
EG&G Inc. said it acquired Laboratorium Prof. Dr. Berthold, a German maker of scientific instruments.
Terms weren't disclosed.
The Wellesley, Mass., maker of scientific instruments and electronic parts said Berthold expects 1989 sales of more than 100 million Deutsche marks ($54.5 million) and employs about 400 people.
Berthold is based in Wildbad, West Germany, and also has operations in Belgium.
John M. Kucharski, EG&G's chairman and chief executive, said the acquisition "will extend EG&G's core technologies, strengthen its position in the European Economic Community and assure a strength and presence in the Eastern European market."
He said it especially will strengthen the company's efforts in the rapidly growing field of bio-analytical instrumentation, and in applied nuclear physics.
Separately, EG&G said it sold most of its Mason Research Institute subsidiary to Transgenic Sciences Inc., a closely held biotechnology company based in Worcester, Mass.
The sale, for $7 million in cash and securities, will leave EG&G with a 12% stake in Transgenic, executives said.
Mason is the largest toxicology lab in New England, with annual revenue of $8 million and 140 employees.
Mason serves commercial and government customers, including the National Institutes of Health.
The combined companies will become profitable by January 1990, said James P. Sherblom, Transgenic's chairman and chief executive officer.
The Internal Revenue Service said it is willing to let the U.S. Tax Court decide how much oil man William Herbert Hunt will owe the government after his assets are liquidated.
The surprise announcement came after the IRS broke off negotiations with Mr. Hunt on a settlement of the one-time tycoon's personal bankruptcy case.
Although the action removes one obstacle in the way of an overall settlement to the case, it also means that Mr. Hunt could be stripped of virtually all of his assets if the Tax Court rules against him in a 1982 case heard earlier this year in Washington, D.C.
The IRS has been seeking more than $300 million in back taxes from Mr. Hunt.
Separately, a federal judge hearing Mr. Hunt's bankruptcy case yesterday turned down a proposed $65.7 million settlement between Mr. Hunt and Minpeco S.A., another major creditor in the case.
The Peruvian minerals concern had been seeking a claim of $251 million against Mr. Hunt.
In addition to turning down the compromise, Judge Harold C. Abramson said he would allow a claim of only $19.7 million.
Minpeco attorneys said they would appeal the decision to a federal district court.
Regarding Mr. Hunt's taxes, he and the IRS have apparently agreed on a basic formula for liquidating his estate in which the IRS would get 70% of the proceeds from a liquidating trust and 30% would go to other creditors.
But they have been at odds over how much Mr. Hunt would owe the government after his assets are sold.
The IRS had demanded $90 million but Mr. Hunt would agree to no more than $60 million.
Grover Hartt III, a government lawyer, warned that Mr. Hunt stood to lose certain oil and gas properties, $200,000 in English pottery, a Colorado condominium and other assets he might have kept if he had settled with the IRS.
"But they wanted to roll the dice and we're going to let them," Mr. Hartt said.
Stephen McCartin, Mr. Hunt's attorney, said his client welcomed the gamble.
The Tax Court isn't expected to rule before early next year.
Japan has found another safe outlet for its money: U.S. home mortgages.
An increasing number of big Japanese investors are buying up U.S. home mortgages that have been pooled and packaged for sale as interest-bearing instruments known as mortgage-backed securities.
As much as 10% of new U.S. mortgage securities issued by the Federal National Mortgage Association, or Fannie Mae, and Federal Home Loan Mortgage Corp., or Freddie Mac, now flow into Japanese hands.
That may not come as a surprise to Americans who have watched the Japanese snap up properties in the U.S. from golf courses to a stake in Rockefeller Center.
But it marks a big change for the Japanese, who shunned mortgage securities after getting burned by a big downturn in interest rates a few years back.
"You can't say it's a "tsunami" (tidal wave), but we're making some headway," says Fannie Mae's chairman, David O. Maxwell, who visits Tokyo at least once a year to explain and drum up investor interest in mortgage securities.
"Interest is a great deal higher than it was a year ago."
The steady growth of the mortgage securities market in the U.S. has even triggered talk of building up a similar market here.
Evidence of the growing Japanese demand for mortgage securities abounds.
Earlier this year, Blackstone Group, a New York investment bank, had no trouble selling out a special $570 million mortgage-securities trust it created for Japanese investors.
Industrial Bank of Japan, which claims to be the biggest Japanese buyer of U.S. mortgage securities, says it will more than double its purchases this year, to an amount one official puts at several billion dollars.
And a Fannie Mae seminar this week promises to draw hundreds of prospective investors, who can be expected to channel tens of billions of dollars into the market in the next few years.
"Last year, there were only several big investors who were interested," says Kinji Kato, a vice president at the international arm of Nomura Securities Co.
"This year, some investors are changing their policies and investing a lot."
Ultimately, he says, strong demand could help to drive down interest rates on mortgage securities.
At the moment, Nomura is the only Japanese institution authorized to act as a primary seller of Fannie Mae instruments.
But other Japanese institutions say privately that they are considering asking to join the 59-dealer selling group.
These securities are attractive to Japanese investors for three reasons.
First, they are safe.
While they aren't backed by the full faith and credit of the U.S. government, as Treasury bonds are, it is widely assumed that the government would support them if necessary.
(U.S. Treasury bonds are still the dollar-denominated investment of choice for long-term Japanese investors).
Second, they are liquid.
The secondary market in federally backed mortgage securities now exceeds $900 billion, or nearly half of the $2.2 trillion in U.S. residential mortgages issued.
Third, they offer high yields.
At the moment, some offer as much as 1.6 to 1.8 percentage points over Treasury securities of similar maturities.
But there is a risk, which the Japanese discovered when they first dipped their toes into the market nearly five years ago.
Since most mortgages can be prepaid or refinanced at any time, issuers of mortgage securities retain the right to buy back their bonds before maturity.
That's a headache for long-term investors, since it forces them to reinvest their money -- usually at lower rates than the original mortgage securities carried.
"Two or three years ago, the problem was that people didn't understand the prepayment risk," says Nomura's Mr. Kato.
"So they were surprised and very disappointed by prepayment."
Compounding the trouble to Japanese investors, mortgage securities pay interest monthly, since most mortgages require homeowners to make monthly payments.
But Japanese institutional investors are used to quarterly or semiannual payments on their investments, so the monthly cash flow posed administrative problems.
As a result, Japanese investors steered clear of the mortgage securities.
But they didn't lose touch with the U.S. issuers.
Since 1985, Japanese investors have bought nearly 80% of $10 billion in Fannie Mae corporate debt issued to foreigners, money that Fannie Mae uses to buy mortgages from U.S. banks.
And Japanese investors took up nearly all of two $200 million Real Estate Mortgage Investment Conduits, a kind of collateralized mortgage obligation, that were offered to foreigners this year.
In addition, further packaging of mortgage-backed securities, such as Blackstone's fund, have reduced the effects of prepayment risk and automatically reinvest monthly payments so institutions don't have to.
Freddie Mac for years has offered a so-called participation certificate that guarantees it won't be prepaid for a set number of years and offers semiannual payments.
As Georgia-Pacific's bid for Great Northern Nekoosa has shown, uninvited takeovers are still alive despite premature reports of their demise.
Therefore, the debate about poison pills will continue to rage in the boardrooms of corporations and the halls of academia.
Although poison pills come in different colors and shapes, they usually give current shareholders the right to buy more stock of their corporation at a large discount if certain events occur -- typically, if a hostile bidder acquires more than a specified percentage of the corporation's stock.
However, these discount purchase rights may generally be redeemed at a nominal cost by the corporation's directors if they approve of a bidder.
Supporters of poison pills argue that their adoption forces bidders to negotiate with a corporation's directors, who are thereby put in a better position to pursue the long-term interests of the corporation.
Recent studies by Georgeson & Co. conclude that corporations with poison pills have experienced greater stock-price appreciation than corporations without poison pills during the past few years.
Critics of poison pills argue that they harm shareholders by letting corporate management defeat takeover bids at premium prices and by deterring premium bids from ever being made to shareholders.
These critics are backed by several academic studies showing that the adoption of poison pills reduces shareholder values not merely in the short run, but also over longer periods.
Institutional investors that must evaluate poison pills on a regular basis are interested less in this general debate than in the answers to specific questions about the corporation issuing the pill.
Does this corporation have a high-quality management team with a good track record?
Does this team have a viable strategy for improving shareholder values, and does this strategy require implementation over an extended period?
Will the adoption of this particular form of a poison pill significantly improve the chances for management to carry out this strategy?
If the answers to these questions are affirmative, then institutional investors are likely to be favorably disposed toward a specific poison pill.
However, the problem is that once most poison pills are adopted, they survive forever.
Although the current management team may be outstanding, who will be the CEO in 10 years?
Although the five-year strategy may be excellent, what will be the strategy in 25 years?
The solution to this problem is a time-limited poison pill.
The limit could range from three years to seven years, depending on the composition of the management team and the nature of its strategic plan.
At the end of this period, the poison pill would be eliminated automatically, unless a new poison pill were approved by the then-current shareholders, who would have an opportunity to evaluate the corporation's strategy and management team at that time.
One rare example of a time-limited poison pill is the shareholder rights plan adopted by Pennzoil last year after it received a huge litigation settlement from Texaco.
Pennzoil's poison pill covers five years in order to give current management enough time to put these proceeds to work in a prudent manner.
Another interesting example is the poison pill adopted recently by Pittsburgh-based National Intergroup Inc., a diversified holding company.
The State of Wisconsin Investment Board, which owned about 7% of the company's voting stock, worked with management to devise a time-limited poison pill.
This pill automatically expires after three years unless continued by a vote of the shareholders.
The attitude of the Wisconsin Investment Board reflects a growing receptivity to time-limited poison pills on the part of institutional investors, as shown by the discussions at recent meetings of the Council of Institutional Investors and my informal survey of several retirement plans with large stock positions.
More widespread time limits on poison pills would allow shareholders to evaluate a specific poison pill within the context of a specific management team's strategy.
Such concrete analysis is likely to lead to more fruitful dialogue between management and shareholders than the abstract debate about poison pills.
Mr. Pozen is the general counsel and a managing director of Fidelity Investments in Boston.
Michael Blair, former president and chief executive officer of Enfield Corp., failed to win election to the company's board at a special shareholder meeting.
Mr. Blair said after the meeting that he had filed separate lawsuits in the Ontario Supreme Court for unjust dismissal against Enfield and for libel against its largest shareholder, Canadian Express Ltd., and two executives of Hees International Bancorp Inc., which controls Canadian Express.
Holders at the meeting elected a full slate of Canadian Express nominees to Enfield's 11-member board.
Mr. Blair and Hees have been feuding for months.
Yesterday's election was a sequel to Enfield's annual meeting in June when Mr. Blair disallowed proxies in favor of two Hees nominees.
The Ontario Supreme Court overturned Mr. Blair's decision.
He later resigned from his executive positions with Enfield, saying that actions by its board "amounted to {my} dismissal."
Mr. Blair said his libel suit seeks 10 million Canadian dollars (US$8.5 million) from Canadian Express and Hees executives Manfred Walt and Willard L'Heureux.
He said his suit against Enfield seeks two years severance pay, equivalent to C$720,000.
Hees and Canadian Express executives couldn't be reached for comment.
Enfield is a holding company with interests in manufacturing concerns.
It is 38.5% owned by Canadian Express, another holding company.
Hees is a merchant bank controlled by Toronto financiers Peter and Edward Bronfman.
All the concerns are based in Toronto.
Buying 51% of Rockefeller Group Inc. is right up Mitsubishi Estate Co.'s alley in one sense: The huge Japanese real estate company is entering a long-term relationship with a similarly conservative U.S. owner of tony urban property.
But in another sense, the $846 million purchase is uncharacteristically nervy, industry analysts say.
The usually cautious giant will become the majority owner of the company that owns New York's beloved Rockefeller Center at a time when tensions over Japanese purchases of U.S. property are at an all-time high.
Officials of Rockefeller Group and Mitsubishi Estate prefer to focus on the affinities, nearly dismissing the threat of a backlash from the U.S. public.
"We think there will be positive as well as negative reactions," says Raymond Pettit, senior vice president and chief financial officer of Rockefeller Group.
"On balance, we think it will be positive."
But some Japanese government officials and businessmen worry that the prominent purchase is just the sort of deal that should be avoided for the time being.
In particular, they criticize the timing, coming as it does on the heels of Sony Corp.'s controversial purchase of Columbia Pictures Entertainment Inc.
"Officially, yes, we encourage the free flow of direct investment," says a Foreign Ministry official.
"But they didn't have to choose this particular moment."
During the past year, government officials and leading business organizations have repeatedly urged Japanese companies to refrain from flashy real estate purchases in the
Since the mid-1980s, Japan's other major real estate purchases in the U.S. include Dai-Ichi Seimei America Corp.'s $670 million purchase of an office building at 153 East 53rd St. in Manhattan in 1987 and Mitsui Fudosan Inc.'s $610 million purchase of the Exxon Building, part of Rockefeller Center, in 1986.
In Los Angeles, Arco Plaza was sold to Shuwa Corp. for $620 million in 1986, and Sumitomo Life Insurance Co. paid $300 million for Atlanta's IBM Tower last year.
Altogether, annual Japanese investment in U.S. commercial real estate grew from about $1.3 billion in 1985 to about $7.1 billion in 1988.
Many Japanese companies have taken the warnings by the country's leaders to heart and sought development partnerships rather than landmark properties.
Critics say Mitsubishi Estate's decision to buy into Rockefeller reflects the degree to which companies are irritated by the pressure to act for the good of Japan.
"Those who have no money and aren't buying think it's right to refrain, but those with money who want to buy for themselves pay no attention," says an official of the Japan-U.S. Business Council.
But to Mitsubishi Estate, the acquisition has just the elements that should win support from both sides.
First of all, it is a friendly acquisition in which Rockefeller sought out Mitsubishi Estate and asked it to buy a majority share.
Secondly, the two companies found a similarity in their business and development philosophies and intend to cooperate in a range of activities from real estate to telecommunications.
Finally, Mitsubishi Estate has no plans to interfere with Rockefeller's management beyond taking a place on the board.
"We'll continue to work with them, in keeping with the reputation of the company, and we'll rely very much on their leadership," says Mitsubishi Estate President Jotaro Takagi.
Rockefeller may well have found its match in Mitsubishi Estate, a company of long history, strong government ties and sound resources.
In asset terms, Mitsubishi Estate is the largest real estate firm in Japan.
The core of its holdings is 190,000 square meters of incredibly expensive property in the Marunouchi district, the business and financial center of Tokyo, often jokingly called "Mitsubishi Village."
The Mitsubishi family company acquired that property from the government some 100 years ago when it was a portion of samurai residential land running from the moat of the Imperial Palace east toward the hodgepodge of tiny shops and twisted alleys that made up the merchants' district.
At the time, Japan had just opened its doors to the world after about 250 years of isolation and needed a Western-style business center.
Mitsubishi built the government's dream development, the story goes, in exchange for the official decision to locate Tokyo's central railway station there.
That was just an early step in a relationship with government that has earned the Mitsubishi group the dubious moniker of "seisho," literally government-business, a title that has the pejorative connotation of doing the government's bidding, but also suggests the clout inherent in maintaining such close ties.
Mitsubishi Estate is one of the dozens of companies in today's Mitsubishi group.
It's known for its cautiousness in part because it has had little need for bold overseas ventures: In the year ended March 31, 57.4% of its total revenue came from office building management.
Its earnings can rise 10% to 12% annually simply from the natural turnover of tenants and automatic rent increases, says Graeme McDonald, an industry analyst at James Capel Pacific Ltd.
For the latest fiscal year, the company's net income jumped a robust 19% to 35.5 billion yen ($250.2 million).
For Mitsubishi Estate, the Rockefeller purchase will catapult it firmly into the overseas real estate business, the one area where it has lagged notably behind Japanese competitors such as Mitsui, which had purchased the Exxon Building.
"Japanese companies need to invest in overseas real estate for diversification," says Yoshio Shima, an industry analyst at Goldman Sachs (Japan) Corp.
Rockefeller isn't the first overseas purchase for Mitsubishi Estate -- it has already played a leading role in designing Los Angeles's Citicorp Plaza.
But the Rockefeller investment is its largest.
Nonetheless, it will barely make a dent in Mitsubishi Estate's finances, analysts say.
Mitsubishi Estate hasn't decided how it will raise the funds for the purchase, which are due in cash next April, but the Marunouchi holdings alone are estimated to have a market value of as much as 10 trillion yen to 11 trillion yen.
Moreover, as a member of the Mitsubishi group, which is headed by one of Japan's largest banks, it is sure to win a favorable loan.
Analysts say the company also could easily issue new convertible bonds or warrants.
Meanwhile, at home, Mitsubishi has control of some major projects.
It is the largest private-sector landowner of the Minato-Mirai 21 project, a multibillion-yen development in the port city of Yokohama, about an hour outside Tokyo.
The project is one of a select group of public projects opened to U.S. firms under a U.S.-Japan construction trade agreement reached last year.
The centerpiece of that complex, the Landmark Tower, will be Japan's tallest building when it is completed in 1993.
Mitsubishi is also pushing ahead with a controversial plan to redevelop Marunouchi into a business center of high-tech buildings, a project budgeted for 30 years and six trillion yen.
Time Warner Inc. and Sony Corp. may be today's public enemies, but the two entertainment giants could end up becoming partners in a number of ventures as part of a settlement of their acrimonious legal dispute over Hollywood producers Peter Guber and Jon Peters.
The Warner Bros. studio and Sony signaled they are close to a settlement yesterday, asking a Los Angeles Superior Court to postpone a hearing scheduled for tomorrow on Warner's request for a preliminary injunction blocking Mr. Guber and Mr. Peters from taking the top posts at Columbia Pictures Entertainment Inc.
In separate statements, the two sides said they want to have "further discussions."
Sony is acquiring Columbia and Guber-Peters Entertainment Co. in two separate transactions valued at more than $5 billion.
Warner Communications Inc., which is being acquired by Time Warner, has filed a $1 billion breach-of-contract suit against Sony and the two producers.
Warner has a five-year exclusive contract with Mr. Guber and Mr. Peters that requires them to make movies exclusively at the Warner Bros. studio.
The two sides in the legal battle have hurled accusations of duplicity at each other for weeks, and both Warner and Sony have accused each other of trying to sabotage each other's prospects for success in the entertainment business.
But it may amount to little more than posturing; the two have continued on-again, off-again settlement talks over the last few weeks, and people familiar with the talks say the matter could be resolved within a week.
Both Warner and Sony declined to comment on the terms of the settlement discussions.
But the people familiar with the talks said that Warner isn't expected to get any cash in the settlement.
Instead, Sony is likely to agree to let Warner participate in certain of its businesses, such as the record club of Sony's CBS Records unit.
Warner has surpassed Sony as the largest record company, but it doesn't have a powerful world-wide record club like CBS.
The two sides are also discussing certain business ventures involving cable rights to Columbia's movies.
In addition, Sony is expected to agree to swap Columbia's 35% stake in the sprawling Burbank, Calif., studio that Warner and Columbia share, in exchange for the old MGM studio lot that Warner acquired with the purchase of Lorimar Telepictures Corp.
Still, it may be tough for the two to have a smooth partnership in anything, in the wake of sworn affidavits filed over the last week.
One, for example, came from CBS Records Chairman Walter Yetnikoff, who will head a committee that will oversee Sony's entertainment division, including both records and movies.
In his affidavit, Mr. Yetnikoff accused Warner Chairman Steven J. Ross of having an "antiSony, anti-Japanese bias" and said that Mr. Ross had tried to talk him out of letting Sony buy CBS Records two years ago for that reason.
Mr. Ross, who will be chairman and co-chief executive officer of Time Warner after the merger is complete, denied that in his own affidavit, and called Mr. Yetnikoff's remarks "vicious" and his claims "reckless, irresponsible and baseless," saying Warner under his leadership has started a number of businesses in Japan.
Mr. Ross also said he enjoys "warm professional and personal relationships" with Japanese executives including Sony Chairman Akio Morita, "who has visited my home here."
But despite the acrimony between Mr. Ross and Mr. Yetnikoff, officials of the Time side of Time Warner have reportedly been increasingly interested in a settlement that might yield attractive business opportunities.
Time executives such as the company's president, N.J. Nicholas, who will eventually be co-chief executive of Time Warner alongside Mr. Ross, have no personal relationships or ego at stake in the fight over the Guber-Peters duo, and were never directly drawn into the fray.
Talks between the two sides could unravel, of course, as they have more than once since Sony announced its plans to hire Mr. Guber and Mr. Peters.
But both sides appear to be more willing now to meet each other's terms to resolve the issue.
And although Warner has said it wanted the producers to fulfill the terms of their contract, the producers said in sworn court declarations that they didn't believe the relationship could be repaired after the acrimony of the legal battle.
Any settlement is also expected to exclude Mr. Guber and Mr. Peters from any of the projects they were working on at Warner.
The Guber-Peters duo have 50 projects in various stages of development and production at Warner, including "Bonfire of the Vanities" and "A Bright Shining Lie."
But that doesn't mean Mr. Guber and Mr. Peters might not eventually get their hands on some of their projects; studios develop hundreds of movies but produce only 10 to 20 each year.
Once a studio chooses not to actually make a movie that is in development, producers are typically free to take it elsewhere.
Mr. Guber and Mr. Peters also almost certainly wouldn't be able to participate in future sequels to "Batman," the blockbuster hit they produced for Warner.
But in acquiring Guber-Peters Entertainment, Sony will actually get a piece of the profits from "Batman," since the publicly held concern gets certain revenue from the movies Mr. Guber and Mr. Peters produce.
The two producers own a combined 28% stake in Guber-Peters.
Southern Co.'s Gulf Power Co. subsidiary pleaded guilty to two felony charges of conspiracy to make illegal political contributions and tax evasion, and paid $500,000 in fines.
Gulf Power's guilty plea before U.S. District Judge Robert L. Vining yesterday marks the end of only one part of a wide-ranging inquiry of Southern Co.
The company is the subject of a federal grand jury investigation into whether its officials and its utility subsidiaries conspired to cover up their accounting for spare parts to evade federal income taxes.
"The terms announced today are strictly between the United States and Gulf Power," said U.S. Attorney Robert L. Barr.
"This is only a further step in a lengthy investigation."
The plea settlement does not allow Southern Co. to charge any of the $500,000 to its customers, or take action against employees who provided information during the federal inquiry.
Gulf Power had been under investigation for violating the Utility Holding Company Act, which prohibits public utilities from making political contributions.
In a statement, Southern Co. President Edward L. Addison said, "We believe our decision to plead (guilty) to these charges is responsible and proper.
And our action today will allow Gulf Power to avoid prolonged, distracting legal proceedings."
He did not say what effect, if any, the $500,000 fine would have on the company's earnings.
Mr. Barr said yesterday's plea by Gulf Power, which came after months of negotiations, was based on evidence that Gulf Power had set up an elaborate payment system through which it reimbursed outside vendors -- primarily three Florida advertising agencies -- for making illegal political contributions on its behalf.
The Appleyard Agency, for example, allegedly made contributions from 1982 to 1984 to various funds for political candidates, then submitted bills to Gulf Power.
The contributions were funded by monthly payments of $1,000 to $2,000 to Appleyard in the guise of a "special production fee" -- in effect, hiding the nature of the payments from the Internal Revenue Service, federal prosecutors said.
The government also indicated that former Gulf Power senior vice president Jacob F. "Jake" Horton was the mastermind behind the use of the ad agencies -- Appleyard, Dick Leonard Group II Inc. and Hemmer & Yates Corp. -- to make payments to various political candidates from 1981 to 1988.
Mr. Horton, who oversaw Gulf Power's governmental-affairs efforts, died mysteriously in a plane crash in April after learning he might be fired following the uncovering of irregularities in a company audit.
Government officials declined to say whether the investigation includes the ad agencies or the politicians involved.
In New York Stock Exchange trading, Southern Co. rose 50 cents a share to $27.125.
`Frequent Drinker' Offer Stirs Up Spirited Debate
TO GRAB a bigger piece of the declining scotch market, Seagram Co. has launched a controversial "frequent drinker" promotion for its Chivas Regal brand.
Under the program, dubbed Chivas Class, customers who send in two labels from Chivas bottles will receive an upgrade in seating class on some Trans World Airlines flights.
Repeat customers also can purchase luxury items at reduced prices.
But at a time of mounting concern over alcohol abuse, some liquor marketers consider Seagram's frequent buyer promotion risky.
"I'm surprised they're doing this," says Penn Kavanagh, president of Schieffelin & Somerset Co., which markets Johnnie Walker scotches.
"I would be very leery of anything that says if you drink more, you get more."
Others question the impact on Chivas's upscale image of a promotion that has customers soaking off labels.
"It's really bizarre," says Albert Lerman, creative director at the Wells Rich Greene ad agency.
"Chivas has an image of something you would savor, rather than guzzle."
Chivas Class isn't the first such promotion.
Last year, J&B Scotch offered 500 TWA frequent flier miles in exchange for a label.
And Dewar's gave discounts on Scottish merchandise to people who sent in bottle labels.
But the scope of Seagram's Chivas promotion sets it apart.
The current campaign is just the first leg of an aggressive three-to-five-year direct marketing plan.
Seagram says the promotion is designed to build brand loyalty rather than promote heavy drinking.
Seagram asks customers to buy only two or three bottles over a 12-month period, says Richard Shaw, vice president of U.S. direct marketing.
"We're not asking them to save up 50 proof-of-purchases.
We're not saying drink more, we're saying trade up."
Goya Concocts a Milk For Hispanic Tastes
MOST FOOD companies these days are trimming the fat and cholesterol content of their products to appeal to health-conscious consumers.
But Goya Foods Inc. believes it can milk some sales by bucking the trend.
The Secaucus, N.J., company has formed a joint venture with a distributor called La Lecheria to market a higher-fat milk targeted at Hispanic consumers.
To give Leche Fresca the creamier taste Goya says Hispanics prefer, the new brand has a butterfat content of 3.8%.
That compares with 3.5% butterfat for whole milk.
A spokesman for Borden Inc., the nation's largest milk producer, concedes Goya may be on to something.
Borden sells considerably more whole milk than reduced-fat milks in southern and Hispanic markets, he says.
Borden even tested a milk with 4% butterfat in the South, but decided the market was too small.
Goya is selling Leche Fresca in nearly 500 grocery stores and bodegas in New York and parts of New Jersey.
And it's adding 15 to 20 new outlets a day, says Greg Ricca, sales director at La Lecheria.
Because of Leche Fresca's success, he says, the joint venture is developing other dairy products tailored to Hispanic tastes.
Jewelry Makers Copy Cosmetics Sales Ploys
FOR YEARS, costume jewelry makers fought a losing battle.
Jewelry displays in department stores were often cluttered and uninspired.
And the merchandise was, well, fake.
As a result, marketers of faux gems steadily lost space in department stores to more fashionable rivals -- cosmetics makers.
But lately, retailers say, fake has become more fashionable.
And jewelry makers are beginning to use many of the same marketing tricks honed in the aggressive world of cosmetics.
Last year, the total women's fashion jewelry business topped $4.9 billion, says Karen Alberg, editor of Accessories magazine.
And it's growing fast, with annual sales gains of more than 10%.
To increase their share of that business, jewelry makers such as Crystal Brands Inc.'s Trifari and Monet units and Swank Inc., maker of Anne Klein jewelry, are launching new lines with as much fanfare as the fragrance companies.
They're hiring models to stroll the aisles sporting their jewels, and they're even beginning to borrow a perennial favorite of the beauty business -- offering a gift when consumers make a purchase.
"We've started trying just about anything to keep sales moving in the stores," says Kim Renk, a Swank vice president.
But there are limits.
Ms. Renk says retailers nixed a promotion for pins with animal motifs.
Her idea: bring in live zoo animals.
Trifari, whose national ads earlier this year included paper cutouts of its costume finery, takes a tamer approach.
The company focuses on the how-to aspects, says Andrew E. Philip, president.
Trifari now trains sales help to advise customers on the best earring styles.
But cosmetics firms still have one big marketing edge: They motivate sales people with commissions.
Jewelry makers rarely pay commissions and aren't expected to anytime soon.
Odds and Ends
DESPITE GROWING interest in the environment, U.S. consumers haven't shown much interest in refillable packages for household products.
Procter & Gamble Co. recently introduced refillable versions of four products, including Tide and Mr. Clean, in Canada, but doesn't plan to bring them to the U.S.
Marketers believe most Americans won't make the convenience trade-off. . . .
Braumeisters Ltd. tests a beer brewed with oat bran, rather than rice or corn.
Called Otto's Original Oat Bran Beer, the brew costs about $12.75 a case.
No cholesterol, of course.
Northwest Airlines settled the remaining lawsuits filed on behalf of 156 people killed in a 1987 crash, but claims against the jetliner's maker are being pursued, a federal judge said.
Northwest, a unit of NWA Inc., and McDonnell Douglas Corp., which made the MD-80 aircraft, also are pursuing counterclaims against each other in the crash near Detroit Metropolitan Airport.
Terms of the settlements for the remaining 145 lawsuits against Northwest weren't disclosed.
A total of 157 lawsuits were filed on behalf of crash victims.
U.S. District Judge Julian A. Cook Jr. announced the settlements as the jury trial was to begin yesterday.
He reset opening arguments for today.
The jury will resolve the claims against McDonnell Douglas, Northwest's claim that a defect in the aircraft caused the crash, and McDonnell Douglas' claim that the plane was improperly flown.
The National Transportation Safety Board ruled that pilots failed to set the plane's wing flaps and slats properly for takeoff and failed to make mandatory preflight checks that would have detected the error.
Also, a cockpit warning system failed to alert the pilots the flaps and slats were not set for takeoff, the NTSB said.
The only passenger who survived the crash was Cecelia Cichan, then 4, of Tempe, Ariz., whose parents and brother died in the crash.
She now lives with relatives in Alabama.
Sun Myung Moon, the Korean evangelist-industrialist who in 1954 founded the Unification Church, remains the mystery man behind a multimillion-dollar political and publishing operation based in this country and catering to the American right.
But there may be less there than meets the eye.
Mr. Moon planned to convert millions of Americans to his unique brand of Christianity -- in which he plays the role of Old Testament-style temporal, political messiah -- and then to make the U.S. part of a unified international theocracy.
His original strategy (in itself a brilliant innovation for spreading a religion) was to create new economic enterprises each time he wanted to extend and fund his various religious missions.
Tax-exempt airport and street-corner solicitations were intended only to provide start-up funds.
More stable industries were to build an economically viable infrastructure for the Moon movement in North America, as they had in Japan and South Korea.
Then he would move his movement to Europe.
But that was not to be.
Throughout the 1970s and early 1980s spokesmen for both the Unification Church and its opponents in the anticult movement gave wildly exaggerated membership figures.
Their legacy lives on.
It is still common to read in the press that the church has 10,000 or more full-time American members and 25,000 "associates."
Some estimates have gone as high as 80,000 members.
But internal church documents clearly show that at its publicity-seeking heights, as when it organized a spectacular Yankee Stadium bicentennial rally in 1976, there actually were only about 2,000 full-time Unification Church members in the U.S.
Mr. Moon's support for a Watergate-beleaguered Richard Nixon, the Koreagate scandal, and his prison sentence for income-tax evasion did not help the church's recruitment efforts.
Defections, burnouts, and abduction "deprogrammings" kept member turnover high.
That the membership number has even kept close to its 1976 size is the result of the "graying" of the church.
Many of the enthusiastic young "Moonies" of the Nixon era who remained faithful to Father Moon are now parents, producing new members by procreation rather than conversion.
The reputed wealth of the Unification Church is another matter of contention.
For a while in the 1970s it seemed Mr. Moon was on a spending spree, with such purchases as the former New Yorker Hotel and its adjacent Manhattan Center; a fishing/processing conglomerate with branches in Alaska, Massachusetts, Virginia and Louisiana; a former Christian Brothers monastery and the Seagram family mansion (both picturesquely situated on the Hudson River); shares in banks from Washington to Uruguay; a motion picture production company, and newspapers, such as the Washington Times, the New York City Tribune (originally the News World), and the successful Spanish-language Noticias del Mundo.
Yet these purchases can be misleading.
Most were obtained with huge inputs of church money from South Korea and Japan, minimum cash downpayments and sizable mortgages.
Those teams of young fund-raisers selling flowers, peanuts or begging outright at traffic intersections brought in somewhere near $20 million a year during the mid-to-late 1970s, but those revenues were a pittance compared to the costs of Mr. Moon's lavish international conferences, speaking tours, and assorted land buys.
Only his factories in Japan and Korea, employing his followers at subsistence wages and producing everything from rifles to ginseng to expensive marble vases, kept the money flowing westward.
Virginia Commonwealth University sociologist David Bromley, who more than any other researcher has delved into the complex world of Unificationist finances, has concluded that profitable operations in the U.S. have been the exceptions rather than the rule.
Likewise, journalists John Burgess and Michael Isikoff of the Washington Post have estimated that at least $800 million was transferred from Japan to the U.S. to deal with the church's annual operating losses in this country.
Mr. Moon's two English-language U.S. newspapers illustrate the scope of this financial drain.
Start-up costs for the Washington Times alone were close to $50 million, and the total amount lost in this journalistic black hole was estimated at $150 million by 1984.
Since then, Moon's organization has inaugurated a pair of high-quality glossy opinion magazines, The World and I and Insight, which are a further drain.
Insiders say that not even their editors know for sure how much these show-piece publications, along with the newspapers, have cost Mr. Moon.
Many American church-owned businesses, such as a $30 million factory to build fishing vessels, are defunct.
Some components of the American church had their budgets cut in half last year and again this year.
The relatively small academic conferences that have attracted conservative guests -- and press scrutiny -- in recent years are much more narrowly targeted and austere than the thousand-person get-togethers in fancy digs and exotic locales of years past.
I attended several of these in the dual role as a presenter of research findings as well as an investigator of my hosts.
(Mr. Moon's Paragon House eventually even published three of my co-edited books on religion and politics.)
According to veteran watchers of Unificationist affairs, such as Dr. J. Gordon Melton, director of the Institute for the Study of American Religion, almost all operations are being drastically reduced as Mr. Moon now concentrates more on developing his empire in the Far East.
"Everything," one non-"Moonie" senior consultant to the Unification Church recently told me in an interview, "is going back to Korea and Japan."
(Europe had proved even less hospitable than North America.
European politicians were less reluctant to have their governments investigate and harass new religions.)
So Mr. Moon is in retreat, refocusing on the Far East.
South Korea and Japan continue to be profitable.
Moon's Tong'Il industry conglomerate is now investing heavily in China, where church accountants have high hopes of expanding and attracting converts even in the wake of the bloody massacre in Tiananmen Square.
Panda Motors is one such investment.
According to senior consultants to the church, Mr. Moon has successfully negotiated a joint venture with the Chinese government to build an automobile-parts plant in Guangdong Province, an area of China with a substantial Korean minority.
Mr. Moon has agreed to put up $10 million a year for 25 years and keep the profits in China.
In return, he has the government's blessing to build churches and spread Unificationism in that country.
Whatever respectability and ties to intellectuals and opinion-makers the publications and conferences bring really are salvage -- not the Rev. Moon's original final goals, but the ones for which he will have to settle.
Mr. Shupe is co-author (with David G. Bromley) of "`Moonies' in America: Cult, Church, and Crusade" and "Strange Gods: The Great American Cult Scare.
The Manville Personal Injury Settlement Trust said it is considering several ways to ease a liquidity crunch that could include the sale of Manville Corp. to a third party.
In a filing with the Securities and Exchange Commission, the majority holder of Manville acknowledged that the cash portion of its initial funding of $765 million will be depleted next year, and that alternative sources of funds will be necessary to meet its obligations.
The trust, which was created as part of Manville's bankruptcy-law reorganization to compensate victims of asbestos-related diseases, ultimately expects to receive $2.5 billion from Manville, but its cash flow from investments has so far lagged behind its payments to victims.
Spokespersons for both the trust and the company refused to comment on whether any talks with a possible acquirer of Manville had actually taken place.
The trust is considering a sale of its Manville holdings, but Manville has the right of first refusal on any sales of its stock held by the trust.
Manville, a forest and building products concern, has offered to pay the trust $500 million for a majority of Manville's convertible preferred stock.
Manville and the trust are discussing the offer, but no decision has been made.
The filing also said the trust is considering a sale of Manville securities in the open market; an extraordinary dividend on the common stock; or a recapitalization of Manville.
The Soviet Union's jobless rate is soaring to 27% in some areas, Pravda said.
It said the situation is caused by efforts to streamline bloated factory payrolls.
Unemployment has reached 27.6% in Azerbaijan, 25.7% in Tadzhikistan, 22.8% in Uzbekistan, 18.8% in Turkmenia, 18% in Armenia and 16.3% in Kirgizia, the Communist Party newspaper said.
All are non-Russian republics along the southern border of the Soviet Union, and all but Kirgizia have reported rioting in the past six months.
The newspaper said it is past time for the Soviet Union to create unemployment insurance and retraining programs like those of the West.
Pravda gave no estimate for overall unemployment but said an "Association of the Unemployed" has cropped up that says the number of jobless is 23 million Soviets, or 17% of the work force.
An 11-week dispute involving Australia's 1,640 domestic pilots has slashed airline earnings and crippled much of the continent's tourist industry.
"The only people who are flying are those who have to," said Frank Moore, chairman of the Australian Tourist Industry Association.
He added: "How is a travel agent going to sell a holiday when he cannot guarantee a return flight?"
Transport giant TNT, which owns half of one of the country's two major domestic carriers, said the cost of the dispute had been heavy, cutting TNT's profits 70% to $12 million in the three months to Sept. 30.
Brazilian financier Naji Nahas, who was arrested on Monday after 102 days in hiding, is likely to be interrogated next week by the Brazilian judiciary.
Mr. Nahas, who single-handedly provoked a one-day closure of Brazil's stock markets in June when he failed to honor a debt of $31.1 million owed to his brokers, yesterday blamed his predicament on the president of the Sao Paulo stock exchange; a few days before Mr. Nahas's failure, the exchange raised the required margin on stock-margin transactions.
China's parliament ousted two Hong Kong residents from a panel drafting a new constitution for the colony.
The two, Szeto Wah and Martin Lee, were deemed unfit because they had condemned China's crackdown on its pro-democracy movement.
The committee is formulating Hong Kong's constitution for when it reverts to Chinese control in 1997, and Chinese lawmakers said the two can only return if they "abandon their antagonistic stand against the Chinese government and their attempt to nullify the Sino-British joint declaration on Hong Kong."
NUCLEAR REACTOR FOR ISRAEL?
Israeli officials confirmed that Energy Minister Moshe Shahal and his Canadian counterpart, Jake Epp, discussed a possible Israeli purchase of a $1.1 billion Canadian nuclear reactor for producing electricity.
However, a Canadian Embassy official in Tel Aviv said that Canada was unlikely to sell the Candu heavy-water reactor to Israel since Israel hasn't signed the Nuclear Non-Proliferation Treaty.
Israel has been accused in the past of using subterfuge to seek elements needed to develop nuclear weapons.
The South Korean government is signing a protocol today establishing formal diplomatic relations with Poland.
The two are also signing a trade agreement.
South Korean government officials said they don't expect that Seoul can loan money to Warsaw, but it can "offer experience."
Poland is the second Communist nation to recognize the Seoul government; South Korea established diplomatic relations with Hungary in February 1989.
Venezuela will hold a debt-equity auction Friday, with 32 potential bidders participating.
Earlier this year, Venezuela announced it was opening up debt-equity swaps to foreign investors but said the program would be limited to a net disbursement of $600 million a year.
Friday's auction will be limited to $150 million disbursed by the Central Bank to potential investors.
The office of foreign investment has authorized some $1.78 billion worth of investment proposals, said Edwin Perozo, superintendent of foreign investment.
Most of the proposals are in tourism, basic industry and fishery and agro-industry projects, he said.
Under the debt-equity program, potential investors will submit sealed bids on the percentage of discount they are willing to purchase the debt at, and the bids will be allocated based on these discount offers.
The Venezuelan central bank set a 30% floor on the bidding.
A song by American singer Tracy Chapman praising jailed black leader Nelson Mandela was banned from South African state radio and television.
The South African Broadcasting Corp. said the song "Freedom Now" was "undesirable for broadcasting." . . .
Britain's House of Commons passed a law that will force English soccer fans to carry identity cards to enter stadiums.
The "anti-hooligan" law, which would deprive troublemakers of cards, must be ratified by the House of Lords and is expected to become effective early next year.
A federal judge ruled that Imelda Marcos wasn't brought to the U.S. against her will and that marital privileges, which protect spouses from incriminating each other, don't apply in her case.
As a result, Judge John F. Keenan of New York ordered Mrs. Marcos to turn over to the court all pleadings and documents she may have filed in foreign countries in opposition to U.S. requests for evidence.
Mrs. Marcos had claimed that she didn't have to turn over the documents because she was brought here involuntarily and because providing the materials would violate her marital privilege.
In 1988, a year and a half after Mrs. Marcos and her late husband, Ferdinand Marcos, the ousted president of the Philippines, fled the Philippines for Hawaii, they were charged with racketeering, conspiracy, obstruction of justice and mail fraud in a scheme in which they allegedly embezzled more than $100 million from their homeland.
Much of the money was fraudulently concealed through purchases of prime Manhattan real estate, federal prosecutors have charged.
Mrs. Marcos's trial is expected to begin in March.
U.S. law requires criminal defendants to turn over foreign documents such as those sought in the Marcos case.
The law is meant to overcome delays caused by defendants' use of foreign procedures to block U.S. requests for records, Judge Keenan said in his opinion.
For instance, the documents could involve foreign business dealings or bank accounts.
The U.S. has charged that the Marcoses' alleged crimes involved bank accounts in the Philippines, Hong Kong, the U.S. and other countries.
On the allegation of kidnapping, Judge Keenan wrote, "The suggestion that Mrs. Marcos was brought to this country against her will is unsupported by affidavit or affirmation."
The judge also said the two marital testimonial privileges cited by Mrs. Marcos don't apply.
The first one permits a witness to refuse to testify against her spouse.
But Judge Keenan said that privilege's purpose is "fostering harmony in marriage."
Because Mr. Marcos died Sept. 28, the privilege can no longer apply, the judge said.
The second marital privilege cited by Mrs. Marcos protects confidential communications between spouses.
But Judge Keenan said that privilege is meant to protect private utterances -- not litigation papers filed with foreign governments, as Mrs. Marcos's attorneys maintained.
Though Judge Keenan threw out most of Mrs. Marcos's objections, he agreed with one of her concerns: that turning over the foreign documents could violate the defendant's constitutional right against self-incrimination.
As a result, he said he will examine the Marcos documents sought by the prosecutors to determine whether turning over the filings is self-incrimination.
Judge Keenan also directed the prosecutors to show that Mrs. Marcos's Fifth Amendment right against self-incrimination won't be violated.
Mrs. Marcos's attorney in New York, Sandor Frankel, declined to comment on the ruling.
Mrs. Marcos hasn't admitted that she filed any documents such as those sought by the government.
Charles LaBella, the assistant U.S. attorney prosecuting the Marcos case, didn't return phone calls seeking comment.
U.S. AND BRITISH LAW FIRMS announce rare joint venture in Tokyo.
Sidley & Austin, a leading Chicago-based law firm, and Ashurst Morris Crisp, a midsized London firm of solicitors, are scheduled today to announce plans to open a joint office in Tokyo.
The firms will be registered under Japanese law as foreign legal consultants and their practice with Japanese clients will be limited to advising them on matters of foreign law.
The office may also be able to advise foreign and multinational clients on international law and general matters.
The office will provide "one-stop shopping" for Japanese financial institutions and other clients seeking advice on access to the world capital markets, according to A. Bruce Schimberg, Sidley's senior banking specialist, who will move to Tokyo from Chicago to open the office next year.
The Sidley-Ashurst venture will also be staffed by another Sidley partner specializing in corporate law, a partner from Ashurst concentrating on acquisitions and a Japanese attorney.
The office will tap the resources of Sidley's 700 lawyers in the U.S., London and Singapore as well as the 400 Ashurst staff members in London and Brussels.
Ashurst is new to the Far East.
Sidley will maintain its association with the Hashidate Law Office in Tokyo.
THE UNITED AUTO WORKERS said it will seek a rehearing of a U.S. appellate court ruling against the union's claim that the state of Michigan engages in wage-discrimination against female employees.
A three-judge panel of the court in Cincinnati made the ruling Saturday.
The UAW is seeking a hearing by the full 14-judge panel.
The union sued the state in November 1985, alleging that it intentionally segregated job classifications by sex and paid employees in predominantly female jobs less than males in comparable jobs.
The UAW also charged that the state applied its own standards for determining pay in a discriminatory manner.
In November 1987, a district court judge in Detroit ruled against the UAW.
The union is the bargaining representative for more than 20,000 Michigan state employees.
NEW JERSEY MERGER:
One of the largest law firms in central New Jersey has been created through the merger of Norris, McLaughlin & Marcus, a 41-lawyer firm, and Manger, Kalison, McBride & Webb, a health-care specialty law firm with 14 lawyers.
Norris McLaughlin is a general-practice firm that has expanded recently into such specialties as banking, labor and environmental work.
The merged firm will carry Norris McLaughlin's name.
DRUG WARS:
A Texas legislator proposes color-coding drivers' licenses of some drug offenders.
The bill would authorize courts to order the licenses as a condition of probation.
State Senator J.E. "Buster" Brown, a Republican who is running for Texas attorney general, introduced the bill.
He said an altered license would be an "embarrassment" to teenagers and young adults and would act as a deterrant to drug use.
Richard Avena, executive director of the Texas Civil Liberties Union, called the proposal "political gimmickry," and said it fails to recognize the drug problem as a health issue.
The amendment, offered by Rep. Douglas Bosco (D., Calif.), was approved 283-132 during debate on a bill designed to strengthen the Transportation Department's authority in dealing with leveraged buy-outs of airlines.
The bill would require the agency to block the acquisition of 15% or more of an airline's stock if the purchase threatened safety, reduced the carrier's ability to compete, or put the airline under foreign control.
Debate on the legislation, which faces a veto threat from President Bush, is to continue today.
The amendment would require the department to block the purchase of a major airline by anyone who has run two or more carriers that have filed for protection from creditors under Chapter 11 of the Bankruptcy Code.
In 1983, Texas Air's Continental Airlines filed for bankruptcy.
Earlier this year, Texas Air's Eastern Airlines filed for bankruptcy.
"This ought to be subtitled the `Don't let Frank Lorenzo take over another airline' amendment," said Rep. James Oberstar (D., Minn.), chairman of the House aviation subcommittee, who argued that the provision was unnecessary because the bill already would give the department ample power to block undesirable deals.
For years, a strict regimen governed the staff meetings at Nissan Motor Co.'s technical center in Tokyo's western suburbs.
Employees wore identification badges listing not only their names but also their dates of hire.
No one could voice an opinion until everybody with more seniority had spoken first, so younger employees -- often the most enthusiastic and innovative -- seldom spoke up at all.
But in 1986, the badges and the "don't speak out of turn" rule were abolished -- early steps in a cultural revolution still rolling on with all the subtlety of a freight train.
In recent years, Nissan has instituted flex-time work schedules and allowed employees to dress casually, even in blue jeans.
A rule forbidding staffers to own competitors' cars has been lifted, and now many designers drive foreign cars to get useful ideas.
Nissan's decades-old corporate song filled with references to Mount Fuji has been scrapped in favor of a snappy tune sung by a popular Japanese vocalist.
And in a Japanese corporate first, Nissan recently opened the first coed company dormitory for single employees at the suburban Tokyo technical center.
"We had lots of internal debate about this one," concedes Tadahiko Fukuyama, a senior public-relations official.
"But in the end, top management decided to follow the voice of the younger generation."
This corporate glasnost is a big reason Nissan, after years of making lackluster cars and lousy profits, has loosened up its rigid ways and now is riding a string of hits, ranging from the sleek Maxima sedan and Porsche-like 300ZX to the whimsically nostalgic Pao, a minicar sold only in Japan.
The company's turnaround is far from complete; many crucial tests are just beginning.
But its surprising progress so far holds important lessons for companies in trouble.
The big one: A company's culture can't be radically changed unless top management first admits that things have gone badly awry and then publicly leads the charge.
Atsushi Muramatsu, Nissan's executive vice president for finance, helped set the tone in December 1986, when the company was heading toward the first operating loss by a Japanese auto maker since the nation's postwar recovery.
"This is a time of self-criticism to discover what is wrong with us," he said.
Yutaka Kume, who took the helm as Nissan's president in June 1985, added simply, "I am deeply disappointed."
No wonder.
Nissan, Japan's second-largest auto maker and the world's fourth-largest, was getting beat up not only by its bigger rival, Toyota Motor Corp., but also by Honda Motor Co., the most successful Japanese car company in the U.S. but a relative pipsqueak in Japan.
Nissan's market share in Japan had been dropping year by year since the beginning of the decade.
Its U.S. sales sagged, partly because of price increases due to the rising yen.
Worst of all, Nissan was preoccupied with management infighting, cronyism and corporate rigidity.
Consider the experience of Satoko Kitada, a 30-year-old designer of vehicle interiors who joined Nissan in 1982.
At that time, tasks were assigned strictly on the basis of seniority.
"The oldest designer got to work on the dashboard," she recalls.
"The next level down did doors.
If a new person got to work on part of the speedometer, that was a big deal."
This system produced boring, boxy cars that consumers just weren't buying.
Desperately hoping to spark sales, Nissan transferred 5,000 middle managers and plant workers to dealerships.
Meanwhile, President Kume ordered everyone from top executives to rookie designers to go "town watching," to visit chic parts of Tokyo to try to gain insights into developing cars for trend-setters.
Some town-watching excursions were downright comic.
One group of middle-aged manufacturing men from the company's Zama plant outside Tokyo was supposed to check out a trendy restaurant in the city.
But when they arrived at the door, all were afraid to go in, fearing that they would be out of place.
Other trips were more productive.
Mr. Kume himself visited Honda's headquarters in Tokyo's upscale Aoyama district.
He liked the well-lighted lobby display of Honda's cars and trucks so much that he had Nissan's gloomy lobby exhibit refurbished.
Later, Nissan borrowed other Honda practices, including an engineering "idea contest" to promote inventiveness.
One engineer developed a "crab car" that moves sideways.
Such sudden cultural shifts may come across as a bit forced, but they seem to be genuine -- so much so, in fact, that some older employees have resisted.
Nissan handled the die-hards in a typically Japanese fashion: They weren't fired but instead "were neglected," says Kouji Hori, the personnel manager at the Nissan Technical Center.
Despite the pain of adjusting, the cultural revolution has begun to yield exciting cars.
A year ago, the company completely revamped its near-luxury sedan, the $17,699 Maxima, which competes against a broad range of upscale sedans; it replaced its boxy, pug-nosed body with sleek, aerodynamic lines.
Since then, Nissan also has launched new versions of the $13,249 240SX sporty coupe and 300ZX sports car.
The restyled 300ZX costs as much as $33,000 and is squared off against the Porche 944, which begins at $41,900.
Besides new styling, the new Nissans have more powerful engines and more sophisticated suspension systems.
All three new models are outselling their predecessors by wide margins.
In its home market, Nissan has grabbed attention with limited-production minicars featuring styling odd enough to be cute.
One is the Pao, a tiny coupe with a peelback canvas top and tilted headlights that give it a droopy-eyed look.
Nissan initially planned to sell just 10,000 Paos, but sales have passed 50,000, and there's a one-year waiting list for the car.
Then, there's the S-Cargo, an offbeat delivery van with a snail-like body that inspired its name.
Nissan helped develop a Tokyo restaurant with both vehicles as its design theme.
The chairs are S-Cargo seats, and a gift shop sells such items as alarm clocks styled like the Pao's oversized speedometer.
All these vehicles have sharply improved Nissan's morale and image -- but haven't done much for its market share.
Nissan had 29% of the Japanese car market in 1980 before beginning a depressing eight-year slide that continued through last year.
Strong sales so far this year are certain to turn the tide, but even the 25% market share that Nissan expects in 1989 will leave it far below its position at the beginning of the decade.
Nissan concedes that it won't recoup all its market-share losses in Japan until at least 1995, and even that timetable might prove optimistic.
"Everyone else is going to catch up" with Nissan's innovative designs, says A. Rama Krishna, auto analyst at First Boston (Japan) Ltd.
Nissan's pace of new-model hits will slow, he adds, just as arch-rival Toyota unleashes its own batch of new cars.
Likewise, in the U.S., Nissan has grabbed 5.2% of the car market so far this year, up from 4.5% a year ago.
But even that brings Nissan only to the share it had in 1987, and leaves the company behind its high of 5.5% in 1980 and 1982.
Why?
So far, Nissan's new-model successes are mostly specialized vehicles with limited sales potential.
In compact and subcompact cars, the bread-and-butter sales generators for Japanese auto makers, Nissan still trails Toyota and Honda.
Nissan hopes that that will start to change this fall, with its new version of the Stanza compact sedan.
The Stanza has been a nonentity compared with Honda's hugely successful Accord and Toyota's Camry.
But this year, Honda has revamped the Accord and made it a midsized car.
Nissan instead has kept its new Stanza a bit smaller than that and cut the base price 6%; at $11,450, Stanza prices start $749 below the predecessor model yet have a more-powerful engine.
Accord prices start at $12,345.
Nissan's risk is that its low-base-price strategy might get lost amid the highly publicized rebates being offered by Detroit's Big Three.
But "on a new car, a rebate doesn't work well" because it cheapens the vehicle's image, contends Thomas D. Mignanelli, executive vice president of Nissan's U.S. sales arm.
Even if the new Stanza succeeds, Nissan will remain behind in the subcompact segment, where its Sentra doesn't measure up to the Honda Civic and Toyota Corolla.
Nissan will introduce a completely revamped Sentra next fall.
At the opposite end of the market, Nissan launches its luxury Infiniti division on Nov. 8 -- three years after Honda pioneered Japanese luxury cars and two months after Toyota's Lexus went on sale.
Nissan started advertising Infiniti fully eight months before the cars hit American showrooms.
The ads featured fences, rocks and pussy-willow buds -- almost anything but the cars themselves.
The ads have generated some laughs but also plenty of attention because they are so unlike any other U.S. auto advertising.
On the other hand, Nissan's sales goals for Infiniti are modest compared with Toyota's targets for Lexus.
Nissan will build only about 3,500 of the $38,000 Infiniti Q45 sedans each month, sending about 2,000 of them to the U.S. and keeping the rest for sale in Japan.
Toyota wants to sell about 49,000 Lexus LS400 sedans next year in the U.S. alone.
"When I saw the Lexus sales projections, I got worried," confesses Takashi Oka, who led the Infiniti development team.
But on reflection, Mr. Oka says, he concluded that Nissan is being prudent in following its slow-startup strategy instead of simply copying Lexus.
"Infiniti is Nissan's big business move for the 21st century, and we're in no hurry to generate large profits right away," Mr. Oka says.
Despite plans to add two new Infiniti models next year, bringing the total to four, Infiniti won't show profits for at least five years, he adds.
These days Nissan can afford that strategy, even though profits aren't exactly robust.
Nissan had record net income of 114.63 billion yen ($868 million) in the fiscal year ended last March 31, a remarkable recovery from the 20.39 billion yen of two years earlier, when the company lost money on operations.
Nissan has increased earnings more than market share by cutting costs and by taking advantage of a general surge in Japanese car sales.
But Nissan expects to earn only 120 billion yen in the current fiscal year, a modest increase of 4.7%.
The big reason: For all its cost-cutting, Nissan remains less efficient than Toyota.
In its last fiscal year, Nissan's profit represented just 2.3% of sales, compared with 4.3% at Toyota.
To help close the gap, Nissan recently established a top-level cost-cutting committee.
Nissan is the world's only auto maker currently building vehicles in all three of the world's key economic arenas -- the U.S., Japan and Europe.
That gives it an enviable strategic advantage, at least until its rivals catch up, but also plenty of managerial headaches.
For example, Nissan's U.S. operations include 10 separate subsidiaries -- for manufacturing, sales, design, research, etc. -- that report separately back to Japan.
And in July, Nissan's Tennessee manufacturing plant beat back a United Auto Workers organizing effort with aggressive tactics that have left some workers bitter.
"We are in a transitional phase from being a Japanese company to becoming an international company based in Japan," says Mr. Muramatsu, the executive vice president.
He promises that Nissan will soon establish a holding company overseeing all U.S. operations, just as it's doing in Europe.
Perhaps the biggest challenge, however, will be to prevent a return to its former corporate rigidity as its recovery continues.
Already, personnel officials are talking about the need for a "Phase Two" cultural-reform effort of some sort.
"We are still only half way through the turnaround of this company, and there are many more things to do," President Kume says.
He adds, however, that "the momentum we have generated is unstoppable.
As expected, Warner Bros. Records said it agreed to form a recorded-music and music-publishing joint venture with former MCA Records Chairman Irving Azoff.
Warner said it will provide financing for the venture, but didn't disclose terms.
Mr. Azoff hasn't named the company yet, but any records it produces will be distributed by Warner.
Warner is part of Warner Communications Inc., which is in the process of being acquired by Time Warner Inc.
Mr. Azoff resigned as head of MCA Records, a unit of MCA Inc., in September, and had been discussing a joint venture with both Warner and MCA.
In a statement yesterday, Mr. Azoff said he chose Warner, the largest record company, because "their standing in the entertainment industry is second to none.
President Bush and Soviet leader Mikhail Gorbachev will hold an informal meeting in early December, a move that should give both leaders a political boost at home.
The White House is purposely not calling the meeting a summit so that there won't be any expectation of detailed negotiations or agreements.
Rather, senior administration officials said that the unexpected meeting was scheduled at Mr. Bush's request because of his preference for conducting diplomacy through highly personal and informal meetings with other leaders.
The two leaders will meet on Dec. 2 and 3, alternating the two days of meetings between a U.S. and a Soviet naval vessel in the Mediterranean Sea.
The unusual seaborne meeting won't disrupt plans for a formal summit meeting next spring or summer, at which an arms-control treaty is likely to be completed.
In announcing the meeting yesterday, Mr. Bush told reporters at the White House that neither he nor Mr. Gorbachev expects any "substantial decisions or agreements."
Instead, he said that the purpose is simply for the two to get "better acquainted" and discuss a wide range of issues without a formal agenda.
Despite the informal nature of the session and the calculated effort to hold down expectations, the meeting could pay significant political dividends for both leaders.
Mr. Gorbachev badly needs a diversion from the serious economic problems and ethnic unrest he faces at home.
American officials have said that a meeting with the leader of the U.S. could help bolster his stature among Soviet politicians and academics, whose support he needs.
For his part, Mr. Bush has been criticized regularly at home for moving too slowly and cautiously in reacting to Mr. Gorbachev's reforms and the historic moves away from communism in Eastern Europe.
A face-to-face meeting with Mr. Gorbachev should damp such criticism, though it will hardly eliminate it.
Senate Majority Leader George Mitchell (D., Maine), who has been the most prominent Democratic critic of Mr. Bush's handling of the Soviet relationship, praised the president for arranging the meeting.
But he added: "The mere fact of a meeting doesn't deal with the substance of policy."
Mr. Bush said that the December meeting, which was announced simultaneously in Moscow, will be held in the unusual setting of ships at sea to hold down the "fanfare" and force the two sides to limit participation to just small groups of advisers.
"By doing it in this manner we can have, I would say, more time without the press of social activities or mandatory joint appearances, things of that nature for public consumption," Mr. Bush said.
Soviet Foreign Minister Eduard Shevardnadze, at a news conference in Moscow, said, "As the two sides plan to hold a full-scale summit in late spring-early summer next year, they found it useful, I would say even necessary, to hold an interim informal meeting."
Although no specific agreements are expected, Mr. Shevardnadze said "that doesn't mean they will be without an agenda."
If the two leaders cover the subjects that have been featured in lower level U.S.-Soviet meetings, their talks would include human rights, Soviet reforms, regional disputes, relations with allies, economic cooperation, arms control, and joint efforts to fight narcotics, terrorism and pollution.
The president specifically mentioned U.S. economic advice to Moscow as a possible topic.
Mr. Gorbachev has for months been publicly urging the U.S. to drop its restrictions on Soviet trade.
He recently told a small group of American businessmen in Moscow that he hoped to sign a general trade agreement with the U.S., possibly at the 1990 summit.
The Soviets hope a trade agreement would give them Most-Favored Nation status, which would lower the tariffs on Soviet exports to the U.S.
In an unusually candid article about the latest economic woe -- unemployment -- Pravda yesterday reported that three million Soviets have lost their jobs as a result of perestroika and the number could grow to 16 million by the year 2005.
Economists in Moscow are now proposing that the state start a system of unemployment benefits.
But one Bush administration official knowledgeable about the summit plan cautioned against assuming that there will be bold new initiatives on the Soviet economy or other issues.
"Don't take this as some big opening for major movement on economic cooperation, or arms control, or the environment," he said.
"Those things will all come up, but in a fairly informal way."
Instead, this official said, "This is vintage George Bush.
This was George Bush's own idea.
It's George Bush wanting to meet a foreign leader and talk to him directly."
Aside from the Soviet economic plight and talks on cutting strategic and chemical arms, one other issue the Soviets are likely to want to raise is naval force reductions.
Western analysts say that, given the meeting's setting at sea, Gorbachev is unlikely to pass up the opportunity to press once again for negotiated cuts in the navies of both the North Atlantic Treaty Organization and the Warsaw Pact.
That theme has been a recurring one for Soviet military officials for much of this year.
They argue that as the Kremlin follows through on announced plans to cut land forces -- the Soviets' area of greatest strength -- the U.S. should show more willingness to cut sea forces -- Washington's area of greatest superiority.
One of the reasons Bush administration aides are anxious to insist that the coming meeting will be informal is to avoid comparisons with the last such loosely structured superpower gathering, former President Reagan's 1986 meeting with Mr. Gorbachev in Reykjavik, Iceland.
That meeting sent shivers through the Western alliance because Mr. Reagan was pulled into discussing the possible elimination of nuclear weapons without consulting American allies.
Mr. Bush said that he initiated talks with the Soviets on the informal meeting by sending a proposal to Mr. Gorbachev last July, which the Soviet leader readily accepted.
But word of the possible session was closely held by the president and a handful of top aides, and word of it didn't reach many second-level officials until the past few days.
Indeed, many senior officials had been insisting for weeks that Mr. Bush wasn't interested in such an informal get-together.
Though President Bush's political critics at home have been urging him to open a more direct dialogue with Mr. Gorbachev, it actually was the arguments of leaders within the Soviet bloc itself that led the president to seek the December meeting.
Mr. Bush decided he wanted the meeting after talking in Europe in July with the leaders of Poland and Hungary, who urged him to support Mr. Gorbachev's efforts to transform the Soviet system and to urge him to loosen his grip on Eastern Europe, a senior aide said.
While flying home from those discussions, Mr. Bush drafted a letter to Mr. Gorbachev suggesting an informal get-together to precede their formal summit next year.
Peter Gumbel in Moscow contributed to this article.
Banca Nazionale del Lavoro said its potential losses from lending to Iraq could reach 1.175 trillion lire ($872 million), marking the bank's first quantification of potential costs of unauthorized lending by its Atlanta branch.
BNL previously reported that its Georgia branch had taken on loan commitments topping $3 billion without the Rome-based management's approval.
State-owned BNL, Italy's largest bank, has filed charges against the branch's former manager, Christopher Drogoul, and a former branch vice president, alleging fraud and breach of their fiduciary duties.
BNL also said that its board had approved "after an in-depth discussion," a letter to the Bank of Italy outlining measures the state-owned bank has taken or plans to take to improve controls on its foreign branches.
The central bank had ordered BNL to come up with a suitable program by yesterday.
Bank of Italy has also ordered BNL to shore up its capital base to account for potential foreign loan losses, and the Rome bank has outlined a 3 trillion lire capital-raising operation.
BNL was unable to elaborate on what measures were planned by the bank to improve controls on its branches abroad.
Hardly a day passes without news photos of the police dragging limp protesters from some building or thoroughfare in one of our cities.
Of recent note are the activities of the pro- and anti-abortionists, anti-nuclear activists, animal rights protesters, college students concerned about racism, anti-apartheid groups, various self-styled "environmentalists" and those dissatisfied with the pace of the war against AIDS.
Maybe he didn't start it, but Mohandas Gandhi certainly provided a recognizable beginning to non-violent civil disobedience as we know it today.
The Mahatma, or "great souled one," instigated several campaigns of passive resistance against the British government in India.
Unfortunately, according to Webster's Biographical Dictionary, "His policies went beyond his control and resulted . . . in riots and disturbances" and later a renewed campaign of civil disobedience "resulted in rioting and a second imprisonment."
I am not a proponent of everything Gandhi did, but some of his law breaking was justified because India was then under occupation by a foreign power, and Indians were not able to participate fully in decisions that vitally affected them.
It is difficult, however, to justify civil disobedience, non-violent or not, where citizens have full recourse to the ballot box to effect change.
Where truly representative governments are safeguarded by constitutional protections of human rights and an independent judiciary to construe those rights, there is no excuse for breaking the law because some individual or group disagrees with it.
There may be a few cases where the law breaking is well pinpointed and so completely non-invasive of the rights of others that it is difficult to criticize it.
The case of Rosa Parks, the black woman who refused to sit at the back of the bus, comes to mind as an illustration.
But most cases of non-violent civil disobedience are not nearly so benign.
The public has a tendency to equate lawful demonstrations with non-violent civil disobedience.
It is true that both are non-violent, but there is a fundamental difference between them.
Lawful demonstrations, such as peaceful picketing and other assemblages that do not disturb the peace or cause a public nuisance or interfere with the rights of others, are rights guaranteed by any truly free system of government.
Civil disobedience, violent or non-violent, is intentional law breaking.
The subject of this discussion is non-violent civil disobedience; but, before we get on with that, let me make just a few tangential remarks about lawful demonstrations.
They are useful to call public attention to grievances, but they have little value in educating anyone about the issues in dispute.
The delight of television in dramatic confrontation encourages overuse of slogans chanted through bullhorns, militant gestures, accusatory signs and other emotionally inspired tactics.
Civilized discourse and an environment where compromise can begin are lost in a hostile posture abetted by superficial media interviews.
At best, demonstrations are overused and boringly uninformative; at worst, they can become the stimuli that lead to law breaking.
Demonstrations are particularly apt to degenerate into criminal conduct when they leave the site of the grievance and become mobile.
Petty criminals and street people looking for excitement attach themselves like remora to the fringes of the crowd and use the protest as an excuse for rock throwing, auto trashing, arson, window breaking, looting, pocket picking and general hooliganism.
Soon the whole purpose of the demonstration is lost in mob mania.
There are better ways to promote a cause.
Where non-violent civil disobedience is the centerpiece, rather than a lawful demonstration that may only attract crime, it is difficult to justify.
Some find no harm in the misdemeanors of trespass, minor property destruction, blocking traffic and the like.
They say these are small prices to pay for galvanizing action for the all-important cause.
The crimes may appear small, but the prices can be huge.
Here are two cases to illustrate.
Assume a neighborhood demonstration to protest speeding on a certain road or a careless accident involving a police car.
The protesters lie down in the street, blocking traffic, and will not move until the authorities carry them away.
Assume that someone caught in the jam has a heart attack.
There is no way to get an ambulance in quickly to move him to a hospital.
He dies.
The demonstration was non-violent and involved only a simple misdemeanor, but its impact on that individual was violent and terminal.
Assume that a TV network is airing a celebrity interview program with a live audience.
The politician appearing is highly controversial and has recently generated a good deal of rancor amid certain groups.
In a planned protest against his appearance, several members of the studio audience chain themselves in front of the TV cameras in such a way that the program cannot continue.
The network must refund money to the advertisers and loses considerable revenue and prestige.
The demonstrators have been non-violent, but the result of their trespasses has been to seriously impair the rights of others unconnected with their dispute.
It might be alleged that TV has done more than its share to popularize and promote non-violent civil disobedience, so the second situation hypothesized above would be simply a case of "chickens coming home to roost."
Or maybe the TV network would lose nothing.
Geraldo or Phil would probably pull up another camera and interview the chained protesters.
Let us look for a moment at another type of non-violent civil disobedience that only harms other people indirectly, yet does irreparable damage to the nation as a whole.
I am referring to those young men who chose to disobey their country's call to arms during the Vietnam war and fled to Canada or some other sanctuary to avoid combat.
Their cowardly acts of civil disobedience, which they tried to hide under the cloak of outrage at a war they characterized as "immoral," weakened the national fabric and threw additional burdens on those who served honorably in that conflict.
Even more at fault are those leaders in and out of government who urged and supported their defections, thereby giving great help and comfort to the enemy propagandists.
It is amazing that the ensuing mass executions in Vietnam and Cambodia do not weight more heavily on minds so morally fine-tuned.
Worse, it remained to a well-meaning but naive president of the United States to administer the final infamy upon those who fought and died in Vietnam.
Under the guise of "healing the wounds of the nation," President Carter pardoned thousands of draft evaders, thus giving dignity to their allegations of the war's "immorality."
The precedent having been set, who can complain if future generations called upon to defend the U.S. yield to the temptation to avoid the danger of combat by simply declaring the war immoral and hiding until it is over?
Finally, I think it important to point out the extraordinarily high visibility of non-violent civil disobedience in these days of intensive media coverage.
Give television a chance to cover live any breaking of the law, and no second invitation will be required.
This brings into question the motives of those who lead civil disobedience demonstrations.
Do they want the spotlight for themselves or for their cause?
Here is a good rule of thumb: If the movement produced the leader, the chance that he is sincere is much greater than if the leader produced the movement.
In either case, ask yourself whether you have become better informed on the issues under protest by watching the act of civil disobedience.
If you have not, it is probable that a thorough airing of the dispute by calm and rational debate would have been the better course.
Mr. Agnew was vice president of the U.S. from 1969 until he resigned in 1973.
Gov. George Deukmejian and key legislators agreed to back a temporary one-quarter-cent increase in the state sales tax to raise $800 million for repairs and relief associated with last month's earthquake.
The tax increase, which will be considered at a special session of the state legislature that begins tomorrow, would cover only part of the estimated $4 billion to $6 billion in total damage caused by the Oct. 17 quake.
Aside from as much as $3.45 billion in recently approved federal aid, the state is expected to draw from a gubernatorial emergency fund that currently stands at an estimated $700 million.
"I am not aware that there is anything but bipartisan agreement for the general outline" of the revenue-raising plan, said a spokesman for the governor, after a Monday meeting with legislative leaders over the quake-relief question.
The tax increase -- on top of the current six-cent per dollar sales tax -- would become effective this Dec. 1 and expire Dec. 31, 1990.
The sales-tax plan was preferred over an alternative that would have boosted the state gasoline tax.
Some legislators expressed concern that a gas-tax increase would take too long and possibly damage chances of a major gas-tax-increasing ballot initiative that voters will consider next June.
Despite continuing problems in its newsprint business, Kimberly-Clark Corp. posted a 20% gain in third-quarter net income.
The consumer-products and newsprint company said net rose to $108.8 million, or $1.35 a share, from $90.5 million, or $1.12 a share, a year ago.
Sales rose 6.2% to $1.45 billion from $1.37 billion.
After a flat second quarter tied largely to lower newsprint earnings, Kimberly-Clark attributed the gain to improved results in its consumer businesses in North America, Brazil and Korea.
Those gains came from higher prices, particularly for disposable diapers and tissue products, and from increased sales, primarily for feminine-care products, the company said.
Newsprint results continued to be depressed, the company added, because of industrywide price discounting.
The quarter-to-quarter comparison was also enhanced by charges taken in the year-earlier period, including $11 million related to the modernization of a pulp and newsprint mill in Alabama.
In the 1989 period also, interest expense and tax rates were lower than a year ago.
In the first nine months, profit rose 10% to $313.2 million, or $3.89 a share, from $283.9 million, or $3.53 a share.
Sales rose 6.7% to $4.27 billion from $4 billion.
In New York Stock Exchange composite trading, Kimberly-Clark closed at $66.50 a share, up $1.50.
INTENSIVE AUDITS are coming to 55,500 taxpayers as research guinea pigs.
This is the year: Unsuspecting filers of 1988 personal returns are being picked randomly for thorough audits to help the IRS update its criteria for enforcement, audit selection, and use of resources.
The last Taxpayer Compliance Measurement Program survey covered 1985 returns.
The 1988-return project starts Jan. 1 and is to be done by May 31, 1991.
Specially trained IRS agents will look for under-reported income and unsupported deductions and credits.
The agents will make more than routine inquiries about such items as marital status and dependents; they want to look at living standards and business assets.
But they also are to see that taxpayers get all allowable tax benefits and to ask if filers who sought IRS aid were satisfied with it.
Courts have ruled that taxpayers must submit to TCMP audits, but the IRS will excuse from the fullscale rigors anyone who was audited without change for either 1986 or 1987.
Rewards have been suggested -- but never adopted -- for filers who come through TCMP audits without change.
PENALTY OVERHAUL is still likely, congressional sources say.
Long-debated proposals to simplify the more than 150 civil penalties and make them fairer and easier to administer are in the House tax bill.
But they were stripped from the Senate bill after staffers estimated penalty revenue would fall by $216 million over five years.
Still, congressional aides say penalty reform is a strong candidate for enactment, even if not this time around, although some provisions may be modified.
Sen. Pryor (D., Ark.), a leader on the issue who generally backs the House plan, wants some changes -- for one, separate sanctions for negligence and large misstatements of tax owed, not a single penalty.
He would ease the proposed penalties for delayed payroll-tax deposits and for faulty Form 1099 and other reports that taxpayers correct voluntarily.
The General Accounting Office urges Congress to ensure that all penalties retain their force as deterrents.
TAXPAYERS' RIGHTS are defined by a growing number of states.
The 1988 tax act created a federal bill of rights spelling out IRS duties to protect taxpayers' rights in the assessment and collection of taxes.
States are following suit.
California enacted a rights law in 1988.
In 1989, Illinois, Kansas, Ohio, Oregon and South Carolina have adopted rights laws, the Federation of Tax Administrators, a state officials' group, reports; the features vary.
And taxpayer groups are urging legislation in many other states.
One group is the Committee on State Taxation, which comprises 330 multistate corporations and advises the Council of State Chambers of Commerce.
The group's Mark Cahoon says its efforts begun in 1989 have led to the introduction of bills in Massachusetts, Minnesota and Colorado to establish evenhanded procedures affecting all kinds of taxpayers.
The group also seeks uniformity among states in provisions for taxpayers' rights.
This week, New York City announced a 10-point policy patterned on the federal bill of rights for taxpayers.
THE MILEAGE RATE allowed for business use of a car in 1989 has risen to 25.5 cents a mile for the first 15,000 from 24 cents in 1988, the IRS says; the rate stays 11 cents for each added mile.
Also unaltered: 12 cents for charitable activities and nine cents for medical and moving costs.
IRA BALANCES could be used to qualify for bank services under a bill entered by Reps. Chandler (R., Wash.) and Andrews (D., Texas).
The bill would thwart a recent Labor Department opinion that investing individual-retirement-account funds to earn free checking violates the law.
HUGO FELLED vast timberlands.
South Carolina's congressional delegation has entered Senate and House bills to provide special casualty-loss treatment and other tax relief for timber growers in the hurricane disaster areas.
HE RODE HIS HOBBY, but he couldn't milk it, the Tax Court says.
The court often weighs deductions of sideline-business costs: Do they stem from a profit-seeking activity or a nondeductible hobby?
But it's rare to see both functions in one case.
Charles O. Givens of Mount Vernon, Ind.-investment broker, ex-accountant, and son of a former stable owner-bred Tennessee Walking Horses for six years, raised cattle for four, and never made a profit on either.
He claimed losses totaling $42,455 -- and the IRS denied them all.
Special Judge Galloway noted that Givens managed horse-breeding in a businesslike way: He kept detailed accounts, practiced soil conservation, enhanced his experience by consulting experts, spent several hours a day doing chores, and dropped the sideline when his best brood mare died.
Yet he took little businesslike care with his cattle: He had no prior experience and didn't seek business counsel about them.
The judge said Givens may deduct his $30,180 of losses from horse breeding, but rejected the $12,275 in deductions from the cattle operation.
BRIEFS:
The IRS already is doing intensive TCMP audits of 19,000 returns for 1987 and fiscal 1988 filed by corporations with under $10 million in assets. . . .
President Bush says he will name Donald E. Kirkendall to the new Treasury post of inspector general, which has responsibilities for the IRS. . . .
The U.S. and Finland signed an income-tax treaty, subject to ratification.
An arbitrator awarded Eastern Airlines pilots between $60 million and $100 million in back pay, a decision that could complicate the carrier's bankruptcy-law reorganization.
Eastern, a unit of Texas Air Corp., said it is examining the ruling to determine if it can appeal.
It's unclear whether Eastern will succeed in overturning the arbitrator's decision, made in a long-simmering "pay parity" dispute that predates both the carrier's Chapter 11 petition and its 1986 acquisition by Texas Air.
All Eastern's previous court efforts to head off the pilots' demands have failed.
An Eastern spokesman said he doesn't expect that the arbitrator's ruling "will have any overall material effect on the company's strategic plan."
Bankruptcy experts said the law isn't clear on how such an arbitration ruling can affect a company's case.
Like any other creditor, the pilots will have to apply to the court for payment of their claim.
That may leave a lot of leeway for U.S. Bankruptcy Judge Burton R. Lifland to decide what, if anything, the pilots actually collect.
In August, he issued the ruling that let the pilots pursue their back-pay grievance before the arbitrator.
The pilots' contract with Eastern calls for a mutually acceptable private arbitrator to resolve such grievances.
In a statement to employees, Eastern said the company was disappointed by the ruling.
"The obligation is totally unwarranted," the statement said.
James Linsey, a lawyer for the Air Line Pilots Association, said the pilots were extremely pleased.
"This is a blow not only to Eastern but to the creditors committee," he said.
Eastern's creditors committee, along with the company, has consistently opposed the pilots' claim, which if paid would have to come out of money both hope to use to pay off other bankruptcy claims.
Eastern and its creditors are in the final, delicate stages of negotiating a second reorganization plan to pay off the airline's debts.
An earlier plan, which had received the creditors' approval in July, fell apart when Eastern changed its business plan.
It isn't known whether the pilot claim was figured into either plan.
The dispute between Eastern and its pilots is over a "pay parity" clause in the pilots' contract.
The clause was part of an agreement in which pilots accepted a substantial pay cut as long as no other labor group got a raise.
Shortly after Texas Air took control of Eastern, some Machinists union supervisors received a 20% pay raise.
The pilots argued that this triggered a pay raise for them.
Eastern has disputed the claim, but a federal district court, an appeals court and now the arbitrator have all sided with the pilots.
The two sides don't even agree about how much money is at issue.
The pilots put the amount as high as $100 million, the company at $65 million.
Another arbitrator is hearing another pay parity case between Eastern and its pilots, resulting from a similar set of circumstances involving a separate pay raise granted another union.
A decision on that case isn't expected before mid-November.
Ironically, many of the pilots involved have left Eastern or are still striking the carrier, which filed for bankruptcy protection March 9.
About 800 have crossed the picket lines and returned to work.
Few people in the advertising business have raised as many hackles as Alvin A. Achenbaum.
The general public may not know his name, but he's famous -- make that infamous -- in advertising circles: A marketing consultant, he pioneered slashing ad agency commissions, to the delight of advertising clients and the dismay of agencies.
Now, after beating them, Mr. Achenbaum is joining them.
Backer Spielvogel Bates Worldwide named Mr. Achenbaum, 62, vice chairman of professional services, reporting directly to Carl Spielvogel, chairman and chief executive officer.
He joins Nov. 13, dissolving his consulting firm, Canter, Achenbaum Associates.
In years past, the ad industry's most distinguished executives didn't hesitate to excorciate Mr. Achenbaum.
They have since mellowed, although one senior Young & Rubicam executive, echoing others, said: "I think ad agencies owe Carl {Spielvogel} a vote of thanks for getting him out of the consulting business."
But industry executives also believe hiring Mr. Achenbaum is a shrewd move for Backer Spielvogel, a unit of Saatchi & Saatchi.
Mr. Achenbaum has counted among his clients some of the most visible blue-chip advertisers in the country, including Nissan, Toyota, Seagram and Backer Spielvogel clients Hyundai and J.P. Morgan.
At Backer Spielvogel, he will work with clients and potential clients on marketing strategies; aside from agency compensation issues, he helped Nissan, for example, come up with its positioning and pricing for its new Infiniti line.
His client contacts, meanwhile, could prove a gold mine for an agency that has had few new business wins of late.
"I've done over 40 ad agency searches {for clients}, so I have a pretty good notion of what clients are interested in when they look for an agency," Mr. Achenbaum said.
As a consultant, he has given seminars at agencies including Ogilvy & Mather on how to win new business.
Mr. Spielvogel said he hopes Mr. Achenbaum will do some strategic consulting at the agency for "non-clients, in hopes that they become clients."
At Backer Spielvogel, Mr. Spielvogel's hallmark has been personal involvement with all major clients.
He pampers them; he invites them to fabulous parties; he strokes them.
Mr. Achenbaum, too, delves into his clients' business.
"Carl has a much higher degree of intimacy with his clients than is ordinary for an agency his size.
And with Al's record of being a delver and a detail guy, you can see how the two fit," said Alan Gottesman, an analyst with PaineWebber.
Mr. Achenbaum's move follows the announcement last month that his consulting partner, Stanley Canter, 66, would retire.
When the announcement came out, "I picked up the phone and said, `Why don't you come to us?'" Mr. Spielvogel said.
Mr. Achenbaum, who had been considering paring down his firm or merging it with another small consulting outfit, soon agreed.
The two men are longtime friends and tennis partners, having met about 25 years ago.
Before becoming a consultant in 1974, Mr. Achenbaum was a senior executive at J. Walter Thompson Co.
He spent most of his career formulating marketing strategies, but became best-known for chipping away at ad agency compensation.
Ad agencies typically earned a straight 15% commission; if a client spent $100 million on TV time, the agency made $15 million.
But Mr. Achenbaum pioneered negotiated fees, which often worked out to less than 15%.
More recently, he negotiated "indemnification" clauses in which an ad agency in some cases must pay a client if it drops the account.
He ultimately became so well-known for cutting compensation, however, that clients didn't seek him out for anything else.
"I was very frustrated," he said.
"The fact of the matter is, I am a marketer.
That's another reason {for the Backer Spielvogel job}.
It struck me as a way to get back to what I really want to do."
Mr. Spielvogel added pointedly: "The pressure on commissions didn't begin with Al Achenbaum."
Mr. Spielvogel said Mr. Achenbaum will work with clients to determine the mix of promotion, merchandising, publicity and other marketing outlets, and to integrate those services.
He will concentrate on, among others, J.P. Morgan and Hyundai.
Mr. Achenbaum helped Morgan in its recent agency search, and he has a long relationship with Hyundai, which is having severe troubles, including declining sales.
"The trail of revenue is increasingly going away from pure advertising, and going towards other services," Mr. Spielvogel said.
Instead of being just an ad agency, he said: "We have redefined our mission here.
Our mission is to help our clients grow, and to use every tool of marketing communications to accomplish that."
Industry executives are wishing Mr. Achenbaum well.
Leonard Matthews, then-president of the American Association of Advertising Agencies, called Mr. Achenbaum a "quisling" in an incendiary 1987 speech.
Yesterday, Mr. Matthews, now a consultant with the Stamford, Conn., firm Matthews & Johnston, quipped, "I think he'll be very good at that {new job}.
And much better at that than at {the price-cutting} he's been doing recently."
Cotton Inc. Campaign
Cotton Inc., the fiber company that represents cotton growers, will begin a new ad campaign, developed by Ogilvy & Mather, Thanksgiving Day.
J. Nicholas Hahn, Cotton Inc.'s president and chief executive, was an outspoken critic of WPP Group's acquisition of Ogilvy Group earlier this year.
During the takeover, Mr. Hahn said he would put his account up for review if WPP's bid were successful, but he didn't.
Cotton Inc.'s new $9 million campaign calls cotton the "Fabric of Our Lives."
The campaign replaces its "Take Comfort in Cotton" ads and marks the end of its national cooperative advertising efforts.
For years, the company's ads were tied in with pitches for Cannon sheets or Martex towels, for example, and an announcer at the end of the ads would tell customers where to "find the true performance label."
With the new TV spots, Ogilvy & Mather has opted for a family style with lots of laughter, hugs and tears.
"We're making a fairly obvious plea for some emotional reaction," says Tom Rost, creative director at Ogilvy & Mather.
Cotton Inc. will spend nearly $2 million on broadcasting on Thanksgiving Day alone, advertising on such programs as "Good Morning America," "Macy's Thanksgiving Day Parade" and the NFL holiday game.
Frank Mingo Dies at 49
Frank L. Mingo, one of the pioneers of advertising targeted at black audiences, died at the age of 49 after a stroke.
Mr. Mingo was chief executive officer of the Mingo Group, which he founded in 1977 and which created ads for the black market.
Clients include Miller Brewing Co. and General Motors.
Mr. Mingo was hospitalized Sept. 23 and died Monday, according to Samuel J. Chisholm, the agency's president and chief operating officer.
Ad Notes. . . .
EARNINGS:
Omnicom Group Inc., New York, reported third-quarter net income rose 54% to $5.6 million, or 22 cents a share, from $3.6 million, or 15 cents a share, a year earlier.
Revenue increased 20% to $246.6 million from $204.8 million.
Prime Minister Lee Kuan Yew, Singapore's leader and one of Asia's leading statesmen for 30 years, recently announced his intention to retire next year -- though not necessarily to end his influence.
The prime minister, whose hair is thinning and gray and whose face has a perpetual pallor, nonetheless continues to display an energy, a precision of thought and a willingness to say publicly what most other Asian leaders dare say only privately.
The 66-year-old Mr. Lee recently spent an hour discussing the state of Asia and the world with two Journal reporters in his plainly furnished, wood-paneled office.
The interview did not touch on Singapore's domestic affairs.
Skipping personal pleasantries, Mr. Lee picked up exactly where he left off several months earlier -- before the government crackdown in China -- when he had warned that the orthodox leadership in Beijing feared a plurality of views.
Excerpts follow:
On China's turmoil: "It is a very unhappy scene," he said.
"It took Zhao Ziyang (former premier and party chief) 10 years to build a team of economists who understood how the Western economies work and now that team is part in exile, part being rusticated and part missing."
Rebuilding that team, Mr. Lee predicted, will take another 10 years.
"That's very sad for China and for Asia because China could have been a good engine for growth, not just for Hong Kong and Taiwan but for Japan, Korea and the rest of Asia."
On similarities between China and the Soviet Union: "In important particulars, the Soviets are different from the Chinese.
They are already industrialized. . . .
Their problem is one of inefficiency of an industrial economy.
The Chinese problem is much greater -- it's how to industrialize to begin with."
Asked if the Soviets, like Chinese officials, won't one day face a similar conflict between the desire to liberalize economically and yet retain political control, Mr. Lee said, "I would think that the Soviets face a deeper dilemma because they have been more in blinkers than the Chinese -- I mean keeping their people cut off from the outside world."
Mikhail Gorbachev, he said, is ahead of China's leaders in his awareness of the world.
"But I think the Soviet peoples are more introverted than the Chinese."
Regardless, he said, he still believes the Soviet Union, while falling far short of the efficiency of a Western economy, may well manage to improve considerably.
On Asia-Pacific prosperity: "If America can keep up the present situation -- her markets open for another 15 years, with adjustments, and Japan can grow and not cut back, and so too, Korea, Taiwan, Hong Kong, Singapore, ASEAN, Australia and New Zealand -- then in 15 years, the economies of these countries would be totally restructured to be able to almost sustain growth by themselves."
In such an arrangement, "all benefit," he said.
"And if the Europeans come in, they benefit too.
It's not a zero-sum game."
Asked about the possibility of greater economic cooperation among Asia-Pacific nations, which will be discussed Nov. 6 and 7 at a ministerial meeting in Canberra, Mr. Lee said the goal "is to have a free and open world trading system."
An Asian bloc isn't intended, he said.
"That's not possible."
On U.S.-Japan relations: "I'm encouraged.
I think the earlier strident notes struck by {U.S. Commerce Secretary Robert} Mosbacher and {U.S. Trade Representative} Carla Hills have been more rounded.
I believe the U.S. is becoming more patient and circumspect," he said.
"It's the total relationship that is important."
The total relationship, as Mr. Lee sees it, is "the flow of dollars to the U.S. to fund the deficits, the investments the Japanese are making in the U.S. in order to satisfy American demand that American products consumed in America should be made as much as possible in America by Americans with Japanese technology and capital."
Japan's recent political turbulence, Mr. Lee said, may mean Japan will slow market adjustments.
"They'll be more timorous in tackling their own voters, like opening up more to agricultural imports from America, hurting their farmers."
On U.S. military presence in Asia: Asked if his offer to allow the American military to use facilities in Singapore would help preserve America's presence in the region at bases in the Philippines, he said, "What we have done is make it easier for the Philippines to continue to host American bases without it being said they are lackeys of the imperialists and the only ones in Asia or in Southeast Asia.
We are willing to share the political burden of being host to America, an imperial power.
We think it isn't such a great burden, that it carries no stigma, and we are prepared to do it."
On U.S.-Philippine relations: "It's such a mixed-up relationship going back into history. . . .
I really do not understand how it is that Filipinos feel so passionately involved in this father figure that they want to dispose of and yet they need.
I just don't understand it.
My relationships with the British are totally different.
They lorded it over me.
They did me some good.
They did themselves even more good.
They let me down when the Japanese came down {during World War II}. . . .
I don't feel down or done in because I show British serials on my television network or read their books.
I mean it is a normal adult relationship.
"But the Filipinos and the Americans, when I talk to them, there's so much passion about Filipino manhood being diminished as a result of being squatted upon by the Americans and so on.
The occasional Englishman tries to put on airs but we let it pass. . . .
It's just comic when they try to pretend they're still the master race."
Mr. Lee added that the Filipinos are "making it very difficult" for the U.S. military presence to last beyond five or 10 years.
On military alternatives if the U.S. pulls back: "The Soviets already are present.
I suppose sooner or later, the Japanese would have to fill up a large part of the gap on the naval side.
Maybe the Chinese, maybe even the Indians."
On economic consequences of a diminished U.S. presence: "America is the only major power in recent history that has used its military might to sustain a system that enables all participants to equally benefit without her as the provider of the security taking royalties."
Asked why so few nations seem to share his views of America, he said, "Many people see it that way.
But they have just taken it for granted."
On Cambodia: "Let's assume that {former Cambodian leader Prince Norodom} Sihanouk does what the press wants him to do and joins up with {Vietnamese-backed Cambodian leader} Hun Sen.
Is the trouble over?
Can Sihanouk and Hun Sen knock off the Khmer Rouge still supported by China?
He can't.
"What is the way forward?
To get the Khmer Rouge as part of a process for elections.
And when they lose, then we can expect China to stop aid.
Let's put it bluntly.
The Chinese cannot be seen to have made use of the Khmer Rouge and then discard them."
Ms. House is vice president of Dow Jones International Group.
Mr. Wain is editor of The Asian Wall Street Journal.
Everything looked good as neurosurgeon Walter Levy and colleagues carefully cut away a woman's spinal tumor at the Cleveland Clinic in 1978.
Using small electrical shocks applied to her feet, they were able to monitor sensory nerves.
The shocks generated nerve impulses that traveled via spine to brain and showed up clearly on a brain-wave monitor, indicating no damage to the delicate spinal tissue.
Then, says Dr. Levy, "she woke up paralyzed."
The damage was to her motor nerves, which couldn't be monitored along with the sensory nerves, he explains.
The tragedy, he adds, "galvanized me" to look for a way to prevent similar cases.
Dr. Levy's answer may come with a new kind of magnetic brain probe, a device that he and dozens of U.S. researchers are studying with great hope.
Besides holding the promise of safer spinal surgery, the probe could improve the diagnosis of brain and nerve disorders such as strokes and multiple sclerosis.
Perhaps most exciting, the device is thrusting open a window to the workings of the brain.
The probe, which is painless, non-invasive and apparently harmless, employs strong magnetic fields to induce small whirlwinds of electricity within the brain.
If positioned over the brain's motor-control area, the hand-held electromagnets generate nerve impulses that zip down motor nerves and activate muscles, making, say, a finger twitch.
In principle, they will enable doctors to check the body's motor system the way an electrician tests a home's electrical circuits by running current through them.
"Until now, we've had no objective way of measuring motor function," says Keith Chiappa, a neurologist conducting clinical tests with the devices at Boston's Massachusetts General Hospital.
"All we could do was tell a patient, `squeeze my fingers as hard as you can' or `raise your arm.'
" Under the best circumstances such tests are subjective; when a patient is unconscious, they don't work at all.
Magnetic brain tweaking started in the early 1900s, when researchers produced flashes of light in the visual field with magnets.
In the 1960s, Mayo Clinic researchers developed magnetic devices to stimulate motor nerves in the hand and other limbs.
But for brain tests, the unwieldy machines "would have required patients to stand on their heads," says Reginald Bickford, a researcher at the University of California at San Diego.
The field took off in 1985 after scientists at Britain's Sheffield University developed a handy, compact magnet for brain stimulation.
Since then, at least two commercial versions have been put on the U.S. market, and an estimated 500 have been sold.
In August, a Chicago conference on such devices attracted more than 100 researchers, who reported studies on everything from brain mapping to physical therapy.
"We don't feel we can use {the devices} routinely in surgery yet, but we're getting close," says Dr. Levy, who is now with the University of Pittsburgh.
A problem, he adds, is that anesthetized brains are more resistant to magnetic stimulation than awake ones.
The devices could help indicate when surgery would help, says Charles Tator, a University of Toronto neurosurgeon.
For example, paralyzed car-crash victims occasionally have some intact spinal tissues that, if preserved by emergency surgery, enable partial recovery.
But such operations typically aren't performed because there is no sign right after an injury that surgery would be beneficial.
"The cost {of magnetic stimulators} would seem like peanuts if we could retrieve limb function" in such people, Dr. Tator says.
Scientists caution there is a chance the magnet technique might spark seizures in epileptics.
But no significant problems have been reported among hundreds of people tested with the devices.
The main sensation, besides feeling like a puppet jerked with invisible strings, is "like a rap on the head," says Sam Bridgers, a neurologist who has studied the brain stimulators at Yale University.
One apparent side effect is a minor increase in a brain hormone.
And some doctors who have conducted hours of tests on themselves report temporary headaches.
At least two companies, Cadwell Laboratories Inc. of Kennewick, Wash., and Novametrix Medical Systems Inc. of Wallingford, Conn., now sell versions of the magnetic devices.
The machines, which at $12,500 are inexpensive by medical standards, haven't been approved in the U.S. for marketing as brain stimulators but are sold for stimulating nerves in the hand, legs and other non-brain areas.
Researchers can apply for permission to use the probes for brain studies.
At the University of Kentucky, a team led by Dean Currier, a physical therapy researcher, is testing the stimulators in conjunction with electric shocks to induce muscle contractions to help prevent wasting of thigh muscles after knee surgery.
Similarly, a Purdue University team led by heart researcher W.A. Tacker hopes to develop ways to magnetically induce cardiac muscle contractions.
The devices might someday serve as temporary pacemakers or restarters for stopped hearts, says Dr. Tacker, whose prototype was dubbed the "Tacker whacker."
The devices' most remarkable possibilities, though, involve the brain.
Probing with the stimulators, National Institutes of Health scientists recently showed how the brain reorganizes motor-control resources after an amputation.
Similar studies are expected to reveal how stroke patients' brains regroup -- a first step toward finding ways to bolster that process and speed rehabilitation.
Scientists also are exploring memory and perception with the new machines.
At the State University of New York at Brooklyn, researchers flash two groups of different letters on a computer screen in front of human guinea pigs.
Between flashes, certain areas in subjects' brains are jolted with a magnetic stimulator.
When the jolt is timed just right, the subjects don't recall seeing the first group of letters.
"Where does that first stimulus go?" exclaims SUNY neurologist Paul Maccabee.
"Trying to answer that is suggesting all kinds of theories," such as precisely where and how the brain processes incoming signals from the eyes.
He and others say that the machines are weak enough that they don't jeopardize the memory.
Both the SUNY team and researchers at the National Magnet Laboratory in Cambridge, Mass., are working with more potent magnetic brain stimulators.
Among other things, the stronger devices may be able to summon forth half-forgotten memories and induce mood changes, neurologists say.
Du Pont Co., Hewlett-Packard Co. and Los Alamos National Laboratory said they signed a three-year, $11 million agreement to collaborate on superconductor research.
The collaboration will include at least 25 researchers and will be aimed primarily at developing thin films of high-temperature superconductors for use in electronics, the companies said.
The materials, discovered during the past three years, conduct electricity without resistance and promise smaller, faster computers and other new technologies.
Joint-research programs have proliferated as U.S. companies seek to spread the risks and costs of commercializing new superconductors and to meet the challenges posed by foreign consortia, especially in Japan.
The latest research pact bolsters Du Pont's growing portfolio of investments in superconductors.
The Wilmington, Del., chemicals concern previously signed research superconductor agreements with Oak Ridge National Laboratory and with Argonne National Laboratory.
Last year, Du Pont agreed to pay $4.5 million for rights to superconductor work at the University of Houston.
Hewlett-Packard is a Palo Alto, Calif., computer maker.
The Los Alamos laboratory is one of three U.S. Department of Energy national laboratories designed as pilot centers to foster joint industry-government programs to speed the transfer of new superconductors to the marketplace.
J.C. PENNEY Co., Dallas, said it issued $350 million of securities backed by credit-card receivables.
The offering was priced with an 8.95% coupon rate at 99.1875% to yield 9.19%.
The retailer said the securities are expected to be rated triple-A by Standard & Poor's Corp. and Aaa by Moody's Investors Service Inc.
They pay interest only for 115 months, with principal payments beginning thereafter.
The expected average life of the certificates is 10 years, with the final scheduled payment in October, 2001.
First Boston Corp. is sole underwriter.
As part of the transaction, J.C. Penney will sell a portion of its credit-card receivables to its JCP Receivables Inc. unit, which will then transfer them to a master trust.
The trust will issue the certificates.
Credit support will be provided by a letter of credit facility from Credit Suisse in favor of the trustee, Fuji Bank & Trust Co., for the benefit of the certificate holders.
J.C. Penney will continue to service the receivables.
Battle-tested Japanese industrial managers here always buck up nervous newcomers with the tale of the first of their countrymen to visit Mexico, a boatload of samurai warriors blown ashore 375 years ago.
"From the beginning, it took a man with extraordinary qualities to succeed in Mexico," says Kimihide Takimura, president of Mitsui group's Kensetsu Engineering Inc. unit.
Here in this new center for Japanese assembly plants just across the border from San Diego, turnover is dizzying, infrastructure shoddy, bureaucracy intense.
Even after-hours drag; "karaoke" bars, where Japanese revelers sing over recorded music, are prohibited by Mexico's powerful musicians union.
Still, 20 Japanese companies, including giants such as Sanyo Industries Corp., Matsushita Electronics Components Corp. and Sony Corp. have set up shop in the state of Northern Baja California.
Keeping the Japanese happy will be one of the most important tasks facing conservative leader Ernesto Ruffo when he takes office Nov. 1, as the first opposition governor in Mexico's modern history.
Mexico, with its desperate need for investment, and Japan, with its huge budget surplus, would seem like a perfect match.
But the two countries remain separated by a cultural barrier wider than the ocean.
Conservative Japanese investors are put off by what they consider Mexico's restrictive investment regulations and loose work habits.
From the Mexicans' viewpoint, vaunted tactics of methodical Japanese managers don't count for much in a land where a saying says "there are no fixed rules."
Japan ranks as only the fourth largest foreign investor in Mexico, with 5% of the total investments.
That is just 1% of all the money Japan has invested abroad.
Mexican President Carlos Salinas de Gortari would like to change that.
The young president so admires Japanese discipline that he sends his children to a Japanese school in Mexico City.
He already has finagled a $2 billion loan from the Japanese government.
But Mexico urgently needs more help.
Mr. Salinas's unpopular Institutional Revolutionary Party, or PRI, faces congressional elections in 1991.
For the PRI to stand a chance, Mr. Salinas has to press on with an economic program that so far has succeeded in lowering inflation and providing moderate economic growth.
But maintaining the key components of his strategy -- a stable exchange rate and high level of imports -- will consume enormous amounts of foreign exchange.
Mr. Salinas needs big investment inflows -- quickly.
The problem is that Japanese businesses make decisions with a view well beyond the coming months that weigh so heavily on Mr. Salinas.
"The Japanese will come to Mexico, but not immediately," says Kazushige Suzuki, director-general of the Japanese External Trade Organization in Mexico.
If not now, when?
"When the fruit is ripe, it falls from the tree by itself," he says.
Pressed on the matter, he is more specific.
"There will be big Japanese investments probably five to 10 years from now."
Ryukichi Imai, Japan's ambassador to Mexico, agrees that Mexico may be too eager.
"There seems to be a presumption in some sectors of (Mexico's) government that there is a lot of Japanese money waiting behind the gate, and that by slightly opening the gate, that money will enter Mexico.
I don't think that is the case."
Mexican officials maintain the Japanese reserve is only a result of unfamiliarity.
"Because of distance, it takes a while for them to appreciate the economic stability we've achieved," says one economic policymaker.
Mexico is sending a number of missions to Japan looking for a major breakthrough investment in telecommunications, petrochemicals or tourism.
It is hoped that other Japanese would then follow the leader.
But Japanese investors say that their reluctance to invest stems not only from concerns about Mexico's economic outlook, but also reservations about Mexico's recently revamped investment law.
Unable to get a new law through a congress with a strong leftist bloc, Mexico jury-rigged the existing law's regulations.
It created special 20-year trusts to allow foreigners 100% ownership in some once-closed industries.
It also made artful use of semantics, redefining as non-strategic industries some that had been in the national domain.
"Those devices don't give sufficient certainty to our bosses in Japan," says Yasuo Nakamura, representative of the Industrial Bank of Japan.
Mr. Nakamura cites the case of a customer who wants to build a giant tourism complex in Baja and has been trying for eight years to get around Mexican restrictions on foreign ownership of beachfront property.
He could develop the beach through a trust, but instead is trying have his grandson become a naturalized Mexican so his family gains direct control.
Some say the best hope for the Mexicans is catching the eye of Japan by promoting the one industry the Japanese clearly like -- the border assembly plants, known as "maquiladoras," which are open to 100% foreign control.
"We must do more to help the Japanese here in Baja if we want them to invest elsewhere," says Mr. Ruffo, the governor-elect of the National Action Party and himself a succesful businessman.
Plant operators are heartened by Mr. Ruffo's pledge to cut corruption associated with the ruling party officials.
But Mr. Ruffo frets that an even bigger problem could be protectionism from the U.S., where some politicians oppose what they consider Japanese efforts to use maquiladoras to crack the U.S. market through the back door.
Shaken by tumbling stock prices and pessimistic projections of U.S. economic growth, currency analysts around the world have toned down their assessments of the dollar's near-term performance.
Most of the 10 analysts polled last week by Dow Jones International News Service in Frankfurt, Tokyo, London and New York expect the U.S. dollar to ease only mildly in November.
Opinion is mixed over its three-month prospects.
Half of those polled see the currency trending lower over the next three months, while the others forecast a modest rebound after the New Year.
In late afternoon New York trading yesterday, the dollar stood at 1.8415 West German marks, up from 1.8340 marks late Monday, and at 142.85 yen, up from 141.90 yen late Monday.
A month ago, a similar survey predicted the dollar would be trading at 1.8690 marks and 139.75 yen by the end of October.
Sterling was trading at $1.5805, down from $1.5820 late Monday.
In Tokyo Wednesday, the U.S. currency was trading at about 142.95 yen at midmorning, up from 142.80 yen at the opening and up from Tuesday's Tokyo close of 142.15 yen.
The average of estimates of the 10 economists polled puts the dollar around 1.8200 marks at the end of November and at 141.33 yen.
By late January, the consensus calls for the dollar to be trading around 1.8200 marks and near 142 yen.
Those with a bullish view see the dollar trading up near 1.9000 marks and 145 yen, while the dollar bears see the U.S. currency trading around 1.7600 marks and 138 yen.
A number of those polled predict the dollar will slip as the Federal Reserve eases interest rates.
David Owen, an economist at Kleinwort Benson & Co. in London, said he expects further cuts in short-term U.S. rates in an effort to encourage a narrowing of the trade gap and to ensure a soft landing in the U.S. economy.
Robert White, a vice president and manager of corporate trade at First Interstate of California, agreed with that view and predicted the U.S. federal funds rate will drop to between 7 3/4% and 8% within 60 days from its current level at 8 13/16%.
Fed funds is the rate banks charge each other on overnight loans; the Fed influences the rate by adding or draining reserves from the banking system.
Mr. White also predicted a half-point cut in the U.S. discount rate in the near future.
The discount rate, currently 7%, is the rate the Fed charges member banks for loans, using government securities as collateral.
He expects such a cut "because of problems in several sectors of the economy, particularly real estate and automobiles."
Bolstering his argument, the Commerce Department reported yesterday that new home sales for September were down 14% from August's revised 3.1% fall.
The drop marked the largest monthly tumble since a 19% slide in January 1982.
In last month's survey, a number of currency analysts predicted the dollar would be pressured by a narrowing of interest rate differentials between the U.S. and West Germany.
Indeed, in early October the West German central bank raised its discount and Lombard rates by a full percentage point.
Several other European central banks, notably in Britain, followed the West German Bundesbank's lead by raising their own key rates.
And a week later, Japan raised its official discount rate by a half point to 3.75%.
The Japanese discount rate is the central bank's base rate on loans to commercial banks.
After a surprisingly sharp widening in the U.S. August merchandise trade deficit -- $10.77 billion from a revised $8.24 billion in July and well above expectations -- and a startling 190-point drop in stock prices on Oct. 13, the Federal Reserve relaxed short-term interest rates, knocking fed funds from around 9% to 8 3/4%.
But predictions that central banks of the Group of Seven (G-7) major industrial nations would continue their massive dollar sales went astray, as the market drove the dollar downward on its own, reacting to Wall Street's plunge and subsequent price volatility, lower U.S. interest rates and signs of a slowing U.S. economy.
G-7 consists of the U.S., Japan, Britain, West Germany, Canada, France and Italy.
Tomoshige Kakita, senior deputy manager in the treasury department of Mitsui Bank Ltd. in Tokyo, suggested that uncertainty about U.S. stocks and bonds has made Japanese investors leery of holding those securities in the near term, thus damping dollar demand.
But, Mr. Kakita added, once U.S. equities regain some stability, players will move back into dollar-denominated investments, especially Treasury bonds, whose value rises when interest rates decline.
Mr. Kakita said the key dollar-yen exchange rate is at 135 yen.
"If 135 is broken, some panic will be seen," he predicted, explaining that Japanese institutions are comfortable with the dollar anywhere between current levels and 135 yen.
Jens-Uwe Fischer, a senior trader at Manufacturers Hanover Trust Co. in Frankfurt, said he expects the dollar to recover within the next three months to around 1.88 marks as U.S. economic data, particularly U.S. trade figures, level off.
He contended that the Fed won't ease rates further, but predicted Bundesbank officials will relax key rates in West Germany.
Alfred Zapfel, chief trader at Bank of Boston in Frankfurt, took an opposite stance.
He said he expects U.S. interest rates to decline, dragging the dollar down to around 1.80 marks by the end of January after a short-lived dash to 1.87 marks by the end of November.
West German interest rates, he said, will remain unchanged.
"But I'm not one of these great dollar bears you see more of these days," Mr. Zapfel said.
"I can't really see it dropping far below 1.80 marks."
Scott Greene, chief foreign exchange dealer with Julius Baer & Co. in New York, fits the description of a "great dollar bear."
He predicted the U.S. unit will skid below 1.80 marks to around 1.78 marks this month and 1.75 marks by the beginning of the new year.
"We're finally seeing the culmination of all the recessionary buildup of the last few months," he said, noting a continuing downward trend in U.S. interest rates, a shaky stock market and "gloomier economic times ahead" all signal a significantly lower dollar.
In the wake of British Chancellor of the Exchequer Nigel Lawson's surprise resignation and sterling's subsequent nose-dive, most analysts had little good to say about the pound's near-term prospects.
Mr. Owen of Kleinwort Benson suggested that the new chancellor, John Major, will take a tough line in his autumn statement later this month, helping to underpin the pound.
But, he warned, the currency will remain at risk.
On the Commodity Exchange in New York, gold for current delivery dropped $3.10 to $374.70 an ounce in moderate trading.
Estimated volume was 3.5 million ounces.
In early trading in Hong Kong Wednesday, gold was quoted at $373.80 an ounce.
Christopher Hill in Tokyo, Nicholas Hastings in London, Erik Kirschbaum in Frankfurt and Caitlin Randall and Douglas Appell in New York contributed to this article.
West Germany will repeal the unpopular turnover tax on securities transactions as of Jan. 1, 1991, Economics Minister Helmut Haussmann said.
He said the government will also repeal the 1% transaction tax on the first-time purchase of stakes in companies.
The announcement follows several comments by government officials that the government will speed up the repeal of the tax, which was originally scheduled to fall with the start of the single internal market in the European Community at the end of 1992.
The securities-turnover tax has been long criticized by the West German financial community because it tends to drive securities trading and other banking activities out of Frankfurt into rival financial centers, especially London, where trading transactions isn't taxed.
The tax has raised less than one billion marks ($545.3 million) annually in recent years, but the government has been reluctant to abolish the levy for budgetary concerns.
In the interview, Mr. Haussmann didn't specify the amount of revenue the government will lose after the tax disappears.
The new date means that the tax will be officially repealed before the end of the current parliamentary term at the end of 1990 and guarantees its abolition even if the current center-right coalition loses the elections in December 1990.
Earlier this year, President Bush made a final "take-it-or-leave it" offer on the minimum wage: an increase to $4.25 an hour over three years, and only if accompanied by a lower wage for the first six months of a job.
Now, the White House has decided to accept the higher wage over only two years.
The sub-minimum wage would apply only to first-time teen-age workers for 90 days.
The White House had enough votes to sustain a veto but chose to avoid a confrontation.
The only permanent losers will be the 200,000 or so workers everyone agrees will be priced out of a job at the $4.25 rate Congress is likely to approve today.
It is compromises such as this that convince Washington's liberals that if they simply stay the course, this administration will stray from its own course on this and other issues.
The head trader of Chemical Banking Corp.'s interest-rate options group has left the company, following valuation errors that resulted in a $33 million charge against its third-quarter results.
Chemical said Steven Edelson resigned recently, but one individual close to the situation said the resignation was forced.
Mr. Edelson couldn't be reached for comment.
A separate inquiry by Chemical cleared Mr. Edelson of allegations that he had been lavishly entertained by a New York money broker.
That inquiry hasn't resolved similar allegations involving another Chemical options trader.
In other personnel changes stemming from problems in its options unit:
-- Chemical named James Kennedy, a trader in swaps contracts for the bank, to assume Mr. Edelson's duties and to be trading manager for derivative products, including swaps and interest-rate options.
-- Lee Wakeman, vice president in charge of options research who discovered the valuation errors and was asked by senior management to straighten out the mess, resigned to take a position in asset and liability management at Continental Bank in Chicago.
Mr. Wakeman, whom Chemical tried to keep, didn't return calls for comment.
Separately, Chemical confirmed that it took an undisclosed charge in the second quarter for losses on forward-rate agreements involving foreign currency written by its branch in Frankfurt, West Germany.
A Chemical spokeswoman said the second-quarter charge was "not material" and that no personnel changes were made as a result.
The spokeswoman said the Frankfurt situation was "totally different" from problems in the interest-rate options unit.
According to individuals familiar with the situation, the Frankfurt loss stemmed from a computer program for calculating prices on forward-rate agreements that failed to envision an interest-rate environment where short-term rates were equal to or higher than long-term rates.
While the incidents involving interest-rate options and forward-rate agreements are unrelated, some observers say they echo a 1987 incident in which Bankers Trust New York Corp. restated the value of its foreign exchange options contracts downward by about $80 million.
These complex products require close monitoring because each must be valued separately in light of current market conditions.
In an interest-rate options contract, a client pays a fee to a bank for custom-tailored protection against adverse interest-rate swings for a specified period.
In a forward-rate agreement, a client agrees to an exchange rate on a future currency transaction.
Some competitors maintain the interestrate option loss, in particular, may have resulted more from Chemical's taking large and often contrarian positions than a valuation problem.
Started three years ago, Chemical's interest-rate options group was a leading force in the field.
From 1987 to 1988, the value of Chemical's option contracts outstanding mushroomed to $37 billion from $17 billion.
More importantly, the volume of options written exceeded those purchased by almost 2-to-1.
With such a lopsided book of options, traders say, Chemical was more vulnerable to erroneous valuation assumptions.
The Chemical spokeswoman said the bank has examined its methodologies and internal controls.
"We consider our internal controls to have worked well," she said, adding that some procedures have been strengthened.
Its valuation methodologies, she said, "are recognized as some of the best on the Street.
Not a lot was needed to be done.
When Thomas W. Wathen went big league last year, he acquired a treasure-trove of Americana along with a well-known but ailing security business: Pinkerton's Inc.
There was a wanted poster offering "Rewards for the Arrest of Express and Train Robbers Frank James and Jesse W. James" and the original Pinkerton's logo with an open eye and the inscription "We Never Sleep," which inspired the phrase "private eye."
Then there were two gold watches once owned by Allan Pinkerton, who founded the company in Chicago in 1850.
But there were supposed to be three, Mr. Wathen's company claims.
The missing watch is emblematic of the problems Mr. Wathen encountered in building his closely held California Plant Protection Security Service into the largest detective and security agency in the U.S. through acquisitions.
The ever-optimistic Mr. Wathen has learned that while acquiring a big brand-name company can be a shortcut to growth, it can also bring a host of unforeseen problems.
"We cleared out a lot of rats' nests," says the 60-year-old security veteran.
Mr. Wathen, who started his career as an Air Force investigator and worked as a security officer for several large companies, built his California Plant Protection from a tiny mom-and-pop security patrol firm here in the San Fernando Valley.
He joined the firm in 1963 and bought it from the owners the next year.
Over the next 20 years, California Plant Protection opened 125 offices around the country.
Yet although California Plant Protection was netting bigger and bigger clients -- the firm provided security for the 1984 Summer Olympics in Los Angeles -- it still didn't have the name recognition of Pinkerton's.
So when American Brands Inc. decided to sell the unit in 1987 as part of a divestiture of its food and security industries operations, Mr. Wathen saw a chance to accomplish several objectives.
He decided he could easily merge Pinkerton's operations with his own while slashing overhead costs because the two already operated in many of the same cities.
He could acquire a staff of loyal Pinkerton's employees, many of whom had spent their entire careers with the firm, he could eliminate a competitor and he could get the name recognition he'd wanted.
Mr. Wathen also relished the chance to demonstrate an entrepreneur like himself, who'd spent his whole career in the security business, could run Pinkerton's better than an unfocused conglomerate or investment banker.
"The security business is my favorite subject.
I love this business," he says.
"Most of the LBO guys don't know how to run a business anyway."
But there were hitches, not the least of which was that, Mr. Wathen says, he proceeded almost blindly in doing the $95 million acquisition, which was completed in January 1988.
"We weren't allowed to do any due diligence because of competitive reasons.
If we had, it might have scared us off," he says.
Five years of rapid expansion under American Brands, with an emphasis on marketing the agency's services instead of improving them, had hurt Pinkerton's profits, Mr. Wathen claims.
He says his team couldn't tell whether accounts receivable had been paid or not.
Pinkerton's had locked itself into low-price contracts to win new business, with no hope of profitability until the contracts expired, he adds.
And regional offices were "egregiously overstaffed," he claims.
One office had 19 people doing the work of three, "and half of the employees had company automobiles."
American Brands declined to comment on Mr. Wathen's accusations.
The acquisition combined the country's second-largest security company, Pinkerton's, with 1987 sales of $410 million, and the fourth largest, California Plant Protection, with $250 million in sales, creating the industry's biggest firm, which took on the Pinkerton's name.
Even after divesting itself of $120 million of unprofitable business, the new Pinkerton's will have sales of about $610 million this year and operating profit roughly double the industry average of 2%-3% of sales, says Lloyd Greif of Sutro & Co. in Los Angeles, which arranged the Pinkerton's acquisition.
Mr. Wathen says his turnaround strategy has been simple: just hack away at the fat.
He began by closing 120 of the combined companies' 260 offices in two months, eliminating about 31% of the company's 2,500-person adminstrative staff, including more than 100 sales positions.
He shut down the company's tony New York headquarters.
Pinkerton's world headquarters today is a nondescript, two-story office building across the street from the small Van Nuys Airport.
Next, Mr. Wathen raised Pinkerton's rates, which were 75-cents-an-hour lower than California Plant Protection's average rate of around $8.63.
And he got rid of low-margin businesses that just weren't making money for the company.
Mr. Wathen, who says Pinkerton's had a loss of nearly $8 million in 1987 under American Brands, boasts that he's made Pinkerton's profitable again.
But Mr. Wathen's team still must pay down about $82 million of long-term bank debt from the acquisition within the next four years.
Last year, earnings of the combined companies didn't cover debt service and Pinkerton's was forced to borrow $20 million of subordinated debt.
"We wouldn't have had to refinance if a lot of the problems hadn't been there," Mr. Wathen says.
This year, Mr. Wathen says the firm will be able to service debt and still turn a modest profit.
Now Pinkerton's could become entangled in a protracted legal fracas with its former parent.
The company recently filed suit in state court in Los Angeles against American Brands, seeking at least $40 million in damages from the Old Greenwich, Conn.-based company.
The suit alleges that American Brands misrepresented the financial condition of Pinkerton's before the sale, failed to disclose pending lawsuits and material contracts in which Pinkerton's was in default, hadn't registered the Pinkerton's name and trademark in the United Kingdom and didn't tell California Plant Protection about some labor controversies.
"We have previously had discussions with representatives of Pinkerton's Inc. concerning the {sale of the company} and we concluded that we did not have liability under the contract," says American Brands.
"As this is now a litigation matter, we have no further comment."
And then there's the case of the missing gold watch.
The lawsuit alleges that an inventory of Pinkerton's memorabilia disclosed that one of the watches hadn't been forked over by American Brands.
"American Brand's failure to surrender the gold watch has damaged new Pinkerton's in an amount as yet {to be} determined and deprived it of a valuable artifact for which it had bargained," the suit charges.
The key to Pinkerton's future will be sticking to what it does best -- being a security company, says Mr. Wathen.
The company is also renewing its emphasis on investigations, particularly undercover investigations for corporations.
Although investigations now account for only about 5% of Pinkerton's total revenue, that side of the business has traditionally been the more "glamorous" of the two and it carries historical and sentimental value.
(Author Dashiell Hammett, who wrote "The Maltese Falcon," was a former Pinkerton's detective.)
American Brands "just had a different approach," Mr. Wathen says.
"Their approach didn't work; mine is.
Farm prices in October edged up 0.7% from September as raw milk prices continued their rise, the Agriculture Department said.
Milk sold to the nation's dairy plants and dealers averaged $14.50 for each hundred pounds, up 50 cents from September and up $1.50 from October 1988, the department said.
Commercial vegetables, led by lettuce and tomatoes, rose 19% in October; oranges and other fruits rose 5%.
Broiler prices fell 6.5 cents in October to 30.6 cents a pound, while turkey prices rose 1.2 cents a pound to 38.5 cents.
Egg prices averaged 64.2 cents a dozen, down 0.2 cent from September.
Hogs rose $3.40 to $46.80 a hundredweight in October, while beef cattle slipped 80 cents to $67.40 for each hundred pounds and calves dropped 90 cents to $90.20.
Soybeans averaged $5.28 a bushel, down 42 cents from September; corn averaged $2.20, down seven cents, and sorghum grain averaged $3.61 for each hundred pounds, down 19 cents, according to the department.
Paramount Communications Inc., New York, completed the sale of its Associates Corp. consumer and commercial finance subsidiary to a unit of Ford Motor Co. for $3.35 billion.
Paramount, which agreed to sell the unit in July, said it would realize net proceeds from the sale of $2.6 billion, with an after-tax gain of $1.2 billion.
Paramount said the gain would be recorded in its fourth quarter, which ended yesterday.
Paramount said the sale "completes the strategic restructuring" it began in 1983, and would enable it to focus on its entertainment and publishing businesses.
Ford said in July it planned to operate Associates, based in Dallas, as a separate entity in its Ford Financial Services Group.
Paramount said Associates has about $14 billion in total assets, making it third-largest in terms of assets among independent finance companies in the U.S.
Sea Containers Ltd., in a long-awaited move to repel a hostile takeover bid, said it will sell $1.1 billion of assets and use some of the proceeds to buy about 50% of its common shares for $70 apiece.
Together with the 3.6 million shares currently controlled by management, subsidiaries and directors, the completed tender offer would give Sea Containers a controlling stake.
Describing itself as "asset rich," Sea Containers said it will move immediately to sell two ports, various ferries, ferry services, containers, and other investments.
Of the proceeds, $500 million will be used to fund its tender offer.
Sea Containers added that the recapitalization plan will reduce its debt by more than $500 million.
The company, which has 13.8 million common shares outstanding, said in mid-June that it was considering a restructuring to ward off a hostile takeover attempt by two European shipping concerns.
In late May, Stena Holding AG and Tiphook PLC, launched a $50-a-share, or $777 million, tender offer for the Hamilton, Bermuda-based Sea Containers.
In mid-August, the companies, through their jointly owned holding company, Temple Holdings Ltd., sweetened the offer to $63 a share, or $963 million.
Officials for Temple declined to comment.
News of the restructuring plan sent Sea Containers' shares up $1 to $62 in New York Stock Exchange composite trading.
Walter Kirchberger, an analyst with PaineWebber Inc., said that offering holders a higher, $70-a-share price is "a fairly effective method of blocking" the Stena-Tiphook bid.
Michael Carstens, an analyst with Tucker Anthony & R.L. Day, added that the sale of assets would allow Sea Containers to focus on its core container businesses.
For holders who decide not to tender their shares, Sea Containers will issue one share of preferred stock with a stated value of $25, plus a cash dividend on the common stock.
The company said its directors, management and subsidiaries will remain long-term investors and won't tender any of their shares under the offer.
Sea Containers said the offer will proceed after the Bermuda Supreme Court lifts or modifies an interim injunction restraining the company from buying its shares.
That injunction resulted from litigation between Temple and Sea Containers last May.
The company said the court has indicated it will make a decision on or about Nov. 27.
Sea Containers will soon set a date for its annual shareholder meeting to seek holder approval for the offer.
You'd think all the stories about well-heeled communities and developers getting HUD grants would prompt Congress to tighten up on upscale housing subsidies.
No way.
Congress has just made it easier for the affluent to qualify for insured loans from the deficit-ridden Federal Housing Administration.
It appears that the only thing Congress is learning from the HUD story is how to enlarge its control of the honey pot going to special interests.
Right now, the largest loan the FHA can insure in high-cost housing markets is $101,250.
Last week, housing lobbies persuaded Congress to raise the ceiling to $124,875, making FHA loans more accessible to the well-to-do.
But it does that at the cost of deepening the taxpayer's exposure if the FHA is forced to pay for more loans going sour.
This is no idle fearlast year the FHA lost $4.2 billion in loan defaults.
But the higher mortgage ceiling is only the starter kit for what Senator Alan Cranston and Majority Leader George Mitchell have in mind for housing.
The Senate Banking Committee will begin hearings next week on their proposal to expand existing federal housing programs.
Other Senators want to lower the down payments required on FHA-insured loans.
That would be a formula for ensuring even more FHA red ink.
Experience has shown that the most important element in predicting a housing-loan default is the down payment.
Because a purchaser can use an FHA loan to finance all points and closing costs, the FHA can wind up lending more than a house is worth.
If housing prices continue to fall, many borrowers would be better off walking away from their homes and leaving taxpayers with the losses.
Much the same thing happened with busted S&Ls, a problem Congress just "solved" with a $166 billion bailout.
We hear that HUD Secretary Jack Kemp is toying with going along with some of the Cranston-Mitchell proposals.
That sounds like a formula for ensuring that he gets dragged into the next HUD tar pit.
A group of 27 Senators has written Mr. Kemp urging him to reject Cranston-Mitchell and focus on programs that empower the poor rather than create vast new government obligations.
But even if he agrees, Mr. Kemp doesn't write the nation's housing law -- Congress does.
And the majority of Members cynically view the current discrediting of HUD as mainly a chance to shove through their own slate of projects.
Exhibit A is last week's House vote to fund 40 pet projects out of the same discretionary fund that is at the heart of the HUD scandal.
None of the grants had been requested by HUD, judged competitively or were the subject of a single hearing.
More and more observers now realize that the key to ending future HUD scandals lies in forcing Congress to clean up its own act.
This week, a Baltimore Sun editorial said the Lantos subcommittee on HUD should forget about Sam Pierce's testimony for the moment and call some other witnesses: the various congressional sponsors of the 40 pork-barrel projects.
The Sun concluded that Mr. Pierce is only part of the problem -- and a part that's gone.
"If HUD is to be reformed," it concluded, Members of Congress will "have to start looking into, and doing something about, the practices of their colleagues."
Of course, self-reform is about the last thing this Congress is interested in.
Proponents of expanding FHA programs say they merely want to help home buyers who are frozen out of high-priced markets.
But the FHA program is hemorrhaging bad loans.
Jack Kemp has submitted a package of reforms, and they are surely headed for the Capitol Hill sausage-grinder.
Like the S&L mess before it, this is a problem Congress should be solving, not ignoring.
Gillette Co., Boston, said it is planning to restructure its South African subsidiary.
Under the plan, Gillette South Africa will sell manufacturing facilities in Springs, South Africa, and its business in toiletries and plastic bags to Twins Pharmaceuticals Ltd., an affiliate of Anglo American Corp., a South African company.
Terms were not disclosed.
A final agreement has not been signed, and the moves will not have a material effect on the company, Gillette said.
The company said it is part of a continuing world-wide restructuring in which it has downsized or sold operations in several countries.
Gillette said its continued presence in South Africa "enables it to make meaningful contributions to South African society, to the lives of its employees and to the communities in which it operates."
Gillette South Africa employs about 250 people.
About 60% of the work force will continue with Gillette or transfer to Twins Pharmaceuticals, the company said.
The Soviet legislature approved a 1990 budget yesterday that halves its huge deficit with cuts in defense spending and capital outlays while striving to improve supplies to frustrated consumers.
The vote to approve was
A proposal to raise prices of beer, tobacco and luxuries was rejected 338-44.
Soviet President Mikhail S. Gorbachev told the legislators they had made a good start, but that the most difficult work was still ahead.
The Tass news agency said the 1990 budget anticipates income of 429.9 billion rubles (US$693.4 billion) and expenditures of 489.9 billion rubles (US$790.2 billion).
Those figures are almost exactly what the government proposed to legislators in September.
If the government can stick with them, it will be able to halve this year's 120 billion ruble (US$193 billion) deficit.
Officials proposed a cut in the defense budget this year to 70.9 billion rubles (US$114.3 billion) from 77.3 billion rubles (US$125 billion) as well as large cuts in outlays for new factories and equipment.
Tass said the final budget and economic plan calls for a sharp increase in the production of consumer goods.
Trial and Terror
At times I sequester my mind When I must think with precision, Detached from all other thoughts While trying to reach a decision.
But often nothing's resolved, To my frustration and fury: With pros and cons in limbo, I feel like a hung jury.
-- Arnold J. Zarett.
Daffynition
Rodeo applause: broncs cheer.
-- Marvin Alisky.
Ocean Drilling & Exploration Co. will sell its contract-drilling business, and took a $50.9 million loss from discontinued operations in the third quarter because of the planned sale.
The New Orleans oil and gas exploration and diving operations company added that it doesn't expect any further adverse financial impact from the restructuring.
In the third quarter, the company, which is 61%-owned by Murphy Oil Corp. of Arkansas, had a net loss of $46.9 million, or 91 cents a share, compared with a restated loss of $9 million, or 18 cents a share, a year ago.
The latest period had profit from continuing operations of $4 million.
Revenue gained 13% to $77.3 million from $68.5 million.
Ocean Drilling said it will offer 15% to 20% of the contract-drilling business through an initial public offering in the near future.
It has long been rumored that Ocean Drilling would sell the unit to concentrate on its core oil and gas business.
Ocean Drilling said it won't hold any shares of the new company after the restructuring.
After 20 years of pushing labor proposals to overhaul the nation's health-care system, Bert Seidman of the AFL-CIO is finding interest from an unlikely quarter: big business.
Corporate leaders, frustrated by double-digit increases in health-care costs, are beginning to sound like liberal Democrats.
Failure to check rising medical costs ultimately could "lead some of us who today are free-market advocates to re-examine our thinking and positions with respect to government-sponsored national health insurance," Arthur Puccini, a General Electric Co. vice president, warned earlier this year.
The pocketbook impact of health benefits has driven business and labor to a surprising consensus.
Both the AFL-CIO and the National Association of Manufacturers are calling for measures to control rising costs, improve quality and provide care to the 31 million Americans who currently lack health insurance.
Agreement on these points is a long way from a specific program, and nobody expects the U.S. to rush toward radical restructuring of the health-care system.
But there are signs that labor-management cooperation could change the politics of health-care legislation and the economics of medicine.
"I can't remember a time when virtually everyone can agree on what the problem is," says Mr. Seidman, who heads the AFL-CIO's department dealing with health matters.
Because the Bush administration isn't taking the initiative on health issues, business executives are dealing with congressional Democrats who champion health-care revision.
"Business across the country is spending more time addressing this issue," says Sen. Edward Kennedy (D., Mass.).
"It's a bottom-line issue."
Business complained earlier this year when Sen. Kennedy introduced a bill that would require employers to provide a minimum level of health insurance to workers but doesn't contain cost-control measures.
Partly in response, a bipartisan group of senators from the finance and labor committees is drafting a plan to attract broader support.
It will feature a cost-containment provision designed to keep expanded benefits from fueling higher care prices.
At 11.1% of gross national product, U.S. health costs already are the highest in the world.
By contrast, Japan's equal 6.7% of GNP, a nation's total output of goods and services.
Management and labor worry that the gap makes U.S. companies less competitive.
Chrysler Corp. estimates that health costs add $700 to the price of each of its cars, about $300 to $500 more per car than foreign competitors pay for health.
"The cost of health care is eroding standards of living and sapping industrial strength," complains Walter Maher, a Chrysler health-and-benefits specialist.
Labor is upset because many companies are using higher employee insurance premiums, deductibles and co-payments to deflect surging medical costs to workers.
Health benefits are contentious issues in the strikes against Pittston Co. and Nynex Corp.
In their new contract this year, American Telephone & Telegraph Co. and the Communications Workers of America agreed to look for "prompt and lasting national solutions" to rising health-care costs.
Some analysts are cynical about the new corporate interest in health-care overhaul.
Carl Schramm, president of the Health Insurance Association of America, scoffs at "capitalists who want to socialize the entire financing system" for health.
"They hope they can buy some government cost discipline," but this is a false hope, Mr. Schramm says.
He asserts that government has done an even worse job of controlling its health bill than business.
So far neither the Bush administration nor Congress is prepared to lead the way toward revamping health care.
The administration lacks a comprehensive health-care policy.
Congress still is struggling to dismantle the unpopular Catastrophic Care Act of 1988, which boosted benefits for the elderly and taxed them to pay for the new coverage.
A bipartisan commission established by Congress and headed by Sen. John Rockefeller (D., W.Va.) is scheduled to present new plans for dealing with the uninsured and long-term care for the elderly by next March 1.
A quadrennial commission appointed by Health and Human Services Secretary Louis Sullivan is taking a broad look at the economics of Medicare for the elderly, Medicaid for the poor and the health system in general.
It is expected to report next summer.
"No magic bullet will be discovered next year, an election year," says Rep. Fortney Stark (D., Calif.)
But 1991 could be a window for action.
The pressure for change will rise with costs.
"I think employers are really going to be the ones to push for major change," says Sharon Canner, a health expert at NAM.
Any major attempt to revamp the health-care system is likely to trigger opposition from politically powerful interest groups, particularly the American Medical Association, and perhaps from the public as well, if Congress takes steps that patients fear will limit the availability of care.
The NAM embraces efforts, which both the administration and the medical profession have begun, to measure the effectiveness of medical treatments and then to draft medical-practice guidelines.
Advocates hope that such standards will improve treatment while limiting unnecessary tests and medical procedures.
HHS Secretary Sullivan estimates that as much as 25% of the medical procedures performed each year may be inappropriate or unnecessary.
Limiting care won't be easy or popular.
"To slow the rise in total spending, it will be necessary to reduce per-capita use of services," the NAM warns in a policy statement.
This will "require us to define -- and redefine -- what is `necessary' or `appropriate' care.
This involves trade-offs and {it} cuts against the grain of existing consumer and even provider conceptions of what is `necessary.'"
The AFL-CIO also embraces treatment guidelines.
In addition, it's toying with an approach that would impose health-expenditure ceilings or budgets on the government as a whole and on individual states as a way to slow health-care spending.
At a meeting here on Nov. 15, the labor federation plans to launch a major effort to build grass-roots support for health-care overhaul.
Stelco Inc. said it plans to shut down three Toronto-area plants, moving their fastener operations to a leased facility in Brantford, Ontario.
The company said the fastener business "has been under severe cost pressures for some time."
The fasteners, nuts and bolts, are sold to the North American auto market.
A company spokesman declined to estimate the impact of the closures on earnings.
He said the new facility will employ 500 of the existing 600 employees.
The steelmaker employs about 16,000 people.
Stelco said it has an option to lease a 350,000-square-foot building in Brantford and proposes to spend 24.5 million Canadian dollars (US$20.9 million) on the facility.
The three existing plants and their land will be sold.
First Security Corp. said it tentatively agreed to acquire Deseret Bancorp. for stock valued at about $18 million.
Terms call for First Security to issue about 0.55 share of its stock for each Deseret share held, or a total of about 550,000 First Security shares.
It has about 12.3 million shares outstanding.
Deseret, with about $100 million in assets, is the parent of the Deseret Bank, which has six offices and headquarters at Pleasant Grove, Utah.
The purchase price is equal to about 1.65 times Deseret's roughly $10.7 million book value, or assets less liabilities.
Salt Lake City-based First Security, with $5.4 billion in assets, said the agreement is subject to shareholder and regulatory approval, and that it hopes to complete the transaction early next year.
Georgia-Pacific Corp.'s unsolicited $3.19 billion bid for Great Northern Nekoosa Corp. was hailed by Wall Street despite a cool reception by the target company.
William R. Laidig, Nekoosa's chairman, chief executive officer and president, characterized the $58-a-share bid as "uninvited" and said Nekoosa's board would consider the offer "in due course."
T. Marshall Hahn Jr., Georgia-Pacific's chairman and chief executive, said in an interview that all terms of the offer are negotiable.
He added that he had spoken with Mr. Laidig, whom he referred to as a friend, by telephone Monday evening.
"I'm hopeful that we'll have further discussions," Mr. Hahn said.
On Wall Street, takeover stock traders bid Nekoosa's stock well above the Georgia-Pacific bid, assuming that Nekoosa's will either be sold to a rival bidder or to Georgia-Pacific at a higher price -- as much as $75 a share, according to some estimates.
Yesterday, Nekoosa common closed in composite New York Stock Exchange trading at $62.875, up $20.125, on volume of almost 6.3 million shares.
Georgia-Pacific closed down $2.50, at $50.875 in Big Board trading.
Takeover stock traders noted that with the junk-bond market in disarray, Georgia-Pacific's bid is an indication of where the takeover game is headed: namely, industrial companies can continue bidding for one another, but financial buyers such as leveraged buy-out firms will be at a disadvantage in obtaining financing.
"The way the world is shaping up, the strategic buyer is going to be the rule and the financial buyer is going to be the exception," said one trader.
For the paper industry specifically, most analysts said the deal will spur a wave of paper-company takeovers, possibly involving such companies as Union Camp Corp., Federal Paperboard Co. and Mead Corp.
The analysts argued that Georgia-Pacific's offer, the first hostile bid ever among major players in the paper industry, ends the unwritten taboo on hostile bids, and will push managements to look closely at the industry's several attractive takeover candidates.
"Consolidation has been long overdue.
It was just the culture of the industry that kept it from happening.
The Georgia-Pacific offer has definitely changed the landscape," said Gary Palmero of Oppenheimer & Co.
Added Mark Rogers of Prudential-Bache Securities Inc.: "It's much easier to be second."
A Georgia-Pacific acquisition of Nekoosa would create the largest U.S. forest-products company.
Based on 1988 sales, Georgia-Pacific ranked third at $9.51 billion, behind Weyerhaeuser Co. at $10 billion and International Paper Co. at $9.53 billion.
Nekoosa ranked 11th with sales of $3.59 billion.
The combined company would have had 1988 sales of $13.1 billion.
But such a combination also presents great risks.
At a time when most analysts and industry consultants say pulp and paper prices are heading for a dive, adding capacity and debt could squeeze Georgia-Pacific if the industry declines more than the company expects.
Moreover, any unexpected strengthening of the dollar would hurt Georgia-Pacific because two of Nekoosa's major product lines -- containerboard, which is used to make shipping boxes, and market pulp -- are exported in large quantities.
"Nobody knows how deep the cycle is going to be," said Rod Young, vice president of Resource Information Systems Inc., a Bedford, Mass., economic-forecasting firm.
"Depending on how far down you go, it may be difficult to pay off that debt."
One person familiar with Georgia-Pacific said the acquisition would more than double the company's debt of almost $3 billion.
It also could be a drag on Georgia-Pacific earnings because the roughly $1.5 billion in goodwill -- the amount by which the bid exceeds Nekoosa's book value of $1.5 billion -- will have to be subtracted from earnings over a period of decades.
Georgia-Pacific's Mr. Hahn said that a combined operation would allow savings in many ways.
The two companies each produce market pulp, containerboard and white paper.
That means goods could be manufactured closer to customers, saving shipping costs, he said.
Moreover, production runs would be longer, cutting inefficiencies from adjusting machinery between production cycles.
And Georgia-Pacific could save money in selling pulp, because the company uses its own sales organization while Nekoosa employs higher-cost agents.
Mr. Hahn said Georgia-Pacific has accounted in its strategy for a "significant downturn" in the pulp and paper industry, an event that he said would temporarily dilute earnings.
But he said that even under those conditions, the company still would realize a savings of tens of millions of dollars in the first year following a merger.
"The fit is so good, we see this as a time of opportunity," he said.
Georgia-Pacific, which has suspended its stock-repurchase program, would finance the acquisition with all bank debt, provided by banks led by BankAmerica Corp.
Georgia-Pacific owns 349,900 Nekoosa shares and would need federal antitrust clearance to buy more than $15 million worth.
U.S. clearance also is needed for the proposed acquisition.
For Nekoosa, defense options may be undercut somewhat by the precarious state of the junk-bond market, which limits how much value the target could reach in a debt-financed recapitalization.
The company's chairman, Mr. Laidig, and a group of advisers met at the offices of Wachtel Lipton Rosen & Katz, a law firm specializing in takeover defense.
Nekoosa also is being advised by Goldman, Sachs & Co.
Georgia-Pacific's advisers are Wasserstein, Perella & Co., which stands to receive a $15 million fee if the takeover succeeds, and the law firm of Shearman & Sterling.
People familiar with Nekoosa said its board isn't likely to meet before the week after next to respond to the bid.
The board has 10 business days to respond.
In addition to the usual array of defenses, including a so-called poison pill and a staggered board, Nekoosa has another takeover defense: a Maine state law barring hostile bidders from merging acquired businesses for five years.
Nekoosa is incorporated in Maine.
Georgia-Pacific has filed a lawsuit in federal court in Maine challenging the poison pill and the Maine merger law.
Nekoosa's poison pill allows shareholders to vote to rescind it, but Georgia-Pacific isn't likely to pursue such a course immediately because that would take 90 to 120 days, and wouldn't affect the provisions of the Maine law.
Among companies mentioned by analysts as possible counterbidders for Nekoosa are International Paper, Weyerhaeuser, Canadian Pacific Ltd. and MacMillan Bloedel Ltd.
"I'm sure everybody else is putting pencil to paper," said Kathryn McAuley, an analyst with First Manhattan Co.
International Paper and Weyerhaeuser declined to comment.
Canadian Pacific couldn't be reached for comment, and MacMillan Bloedel said it hasn't any plans to make a bid for Nekoosa.
Investors were quick to spot other potential takeover candidates, all of which have strong cash flows and low-cost operations.
Among paper company stocks that rallied on the Big Board because of the offer were Union Camp, up $2.75 to $37.75, Federal Paperboard, up $1.75 to $27.875, Mead, up $2.375 to $38.75, and Temple Inland Inc., up $3.75 to $62.25.
In over-the-counter national trading, Bowater Inc. jumped $1.50 to $27.50.
Some analysts argued that there won't be a flurry of takeovers because the industry's continuing capacity-expansion program is eating up available cash.
Moreover, some analysts said they expect a foreign paper company with deeper pockets than Georgia-Pacific to end up acquiring Nekoosa, signaling to the rest of the industry that hostile bids are unproductive.
"This is a one-time event," said Lawrence Ross of PaineWebber Inc., referring to the Georgia-Pacific bid.
But many analysts believe that, given the attractiveness of paper companies' cash flows, as well as the frantic consolidation of the paper industry in Europe, there will be at least a few more big hostile bids for U.S. companies within the next several months.
The buyers, these analysts added, could be either foreign or other U.S.concerns.
"The Georgia-Pacific bid may open the door to a new era of consolidation" in the paper industry, said Mark Devario of Shearson Lehman Hutton Inc.
"I don't think anyone is now immune from takeover," said Robert Schneider of Duff & Phelps Inc., Chicago.
He added: "Every paper company management has to be saying to itself, `Before someone comes after me, I'm going to go after somebody.'"
Prudential-Bache's Mr. Rodgers said he doesn't see the industry's capacity-expansion program hindering takeover activity.
Several projects, he said, are still on the drawing board.
Moreover, "it's a lot cheaper and quicker to buy a plant than to build one."
Indeed, a number of analysts said that Japanese paper companies are hungry to acquire additional manufacturing capacity anywhere in the world.
Some predicted that Nekoosa will end up being owned by a Japanese company.
Meanwhile, Shearson Lehman's Mr. Devario said that, to stay competitive, the U.S. paper industry needs to catch up with the European industry.
Since the most-recent wave of friendly takeovers was completed in the U.S. in 1986, there have been more than 100 mergers and acquisitions within the European paper industry, he said.
Lyphomed Inc., Rosemont, Ill., and Medco Research Inc., Los Angeles, said the Food and Drug Administration granted full marketing approval for a new drug for the treatment of a condition in which the heart beats between 150 and 200 beats a minute.
The condition, known as paroxysmal supraventricular tachycardia, leads to dizziness and fainting.
The typical healthy heart beats 70 times a minute.
The drug, called adenocard, returns the heart to a normal rhythm within seconds, according to Lyphomed.
Medco Research developed the drug and licensed it to Lyphomed for sale in the U.S. and Canada.
Private industry's labor costs rose 1.2% in the third quarter, matching the second-quarter pace, as health insurance costs continued to soar, the Labor Department said.
The increase in wage and benefit costs in the third quarter was greater than the 1% rise reported for the third quarter of 1988.
"Wage increases and overall compensation increases are beginning to curl upward a little bit," said Audrey Freedman, a labor economist at the Conference Board, a business research organization.
"One would have thought this would have happened two or three years ago as the labor market tightened.
It is a considerably delayed reaction and it's not a severe one at all," she added.
The new data underscored the severity of the nation's health-care cost problem.
In the 12 months ended in September, wages and salaries of private-sector workers rose 4.4%, while health insurance costs spurted by 13.7%.
The consumer price index climbed 4.3% in the same period.
Despite the big increases in health-care costs, wages still account for a far greater share of overall labor costs.
The overall private-sector employment cost index, which includes both wages and benefits, rose 4.7% in the 12 months ended in September, compared with 4.5% for both the 12 months ended in June and the 12 months ended September 1988.
Labor costs are climbing at a far more rapid pace in the health care industry than in other industries.
For instance, wages of private-sector hospital workers leaped 6.6% in the 12 months ended in September, compared with 4.4% for workers in all industries.
In the third quarter, wages and salaries in all private industry rose 1.2%, compared with 1% increases in both the second quarter and in the third quarter of 1988.
For the past five years, unions haven't managed to win wage increases as large as those granted to nonunion workers.
For private-sector union workers, the cost of wages and benefits rose 0.9% in the third quarter.
For nonunion workers, the costs rose 1.4%.
Labor costs continued to rise more rapidly in service industries than in goods-producing industries, the report showed.
It also found them rising much more in the Northeast than elsewhere.
Including employees of state and local -- but not the federal -- governments, the employment cost index rose 1.6% in the third quarter, compared with a 1.3% rise in the same quarter in 1988.
The index rose 1.1% in the second quarter.
For the 12 months ended in September, this index was up 5.1%.
It rose 4.8% for the 12 months ended in June and 4.7% in the 12 months ended in September 1988.
Unlike most economic indicators, none of these figures are adjusted for seasonal variations.
DeSoto Inc. said it is dismissing 200 employees as part of a restructuring aimed at producing pretax savings of $10 million annually.
Under the plan, DeSoto said it will sell certain assets and businesses that don't meet strategic and profitability objectives.
The Des Plaines, Ill., chemical coatings concern, which has about 2,000 employees world-wide, said it plans to sell its domestic rigid container packaging and flexible adhesives businesses, and its Chicago Heights, Ill., resin plant.
The company said it plans to use the sale proceeds to invest in business opportunities more closely identified with the company's "refocused direction.
StatesWest Airlines, Phoenix, Ariz., said it withdrew its offer to acquire Mesa Airlines because the Farmington, N.M., carrier didn't respond to its offer by the close of business yesterday, a deadline StatesWest had set for a response.
However, StatesWest isn't abandoning its pursuit of the much-larger Mesa.
StatesWest, which has a 7.25% stake in Mesa, said it may purchase more Mesa stock or make a tender offer directly to Mesa shareholders.
StatesWest had proposed acquiring Mesa for $7 a share and one share of a new series of StatesWest 6% convertible preferred stock it values at $3 a share.
Earlier, Mesa had rejected a general proposal from StatesWest to combine the two carriers in some way.
StatesWest serves 10 cities in California, Arizona and Nevada.
Mesa flies to 42 cities in New Mexico, Arizona, Wyoming, Colorado and Texas.
A shiny new takeover deal sparked a big rally in stock prices, which buoyed the dollar.
Bond prices also edged higher.
Georgia-Pacific's $3.18 billion bid for Great Northern Nekoosa helped drive the Dow Jones Industrial Average up 41.60 points, to 2645.08, in active trading.
The dollar drew strength from the stock market's climb.
Long-term bond prices rose despite trepidation about what a key economic report will show today.
Analysts said the offer for Great Northern Nekoosa broke the pall that settled over the takeover business for the past three weeks in the wake of the collapsed UAL Corp. buy-out.
Great Northern Nekoosa soared $20.125 a share, to $62.875, substantially above the $58 a share Georgia-Pacific is offering.
That indicates speculators are betting a higher offer is in the wings.
Prices of other paper makers rose sharply, although Georgia-Pacific fell $2.50 a share, to $50.875.
Despite all the furor over program trading, program trading played a big role in yesterday's rally.
Some traders point out that as the big brokerage firms back out of program trading for their own accounts or for clients, opportunities increase for others to engage in the controversial practice.
That's what happened yesterday.
The rally notwithstanding, there are plenty of worries about the short-term course of stock prices.
A slowing economy and its effect on corporate earnings is the foremost concern of many traders and analysts.
Unless the Federal Reserve eases interest rates soon to stimulate the economy, profits could remain disappointing.
Yesterday's major economic news -- a 0.2% rise in the September index of leading economic indicators -- had little impact on financial markets.
But the next important piece of news on the economy's health -- this morning's release of the national purchasing manager's survey for October -- could prompt investors into action.
A report late yesterday that the Chicago-area purchasing managers survey showed increased economic activity in that part of the country cut into bond-price gains.
If the national survey confirms a pickup in the manufacturing sector, it could further depress bond prices while bolstering stock prices and the dollar.
Meanwhile, bond investors are laboring under the onus of a national debt ceiling debate.
Although the Treasury is expected to announce details of its November quarterly refunding operation today, the Nov. 79 schedule could be delayed unless Congress and the president act soon to lift the nation's debt ceiling.
In major market activity:
Stock prices rallied in active trading.
Volume on the New York Stock Exchange totaled 176.1 million shares.
Advancing issues on the Big Board surged ahead of decliners 1,111 to
Bond prices rose.
The Treasury's benchmark 30-year bond gained less than a quarter of a point, or less than $2.50 for each $1,000 of face amount.
The yield on the issue slipped to 7.91%.
The dollar gained against most foreign currencies.
In late afternoon New York trading, the dollar was at 1.8415 marks and 142.85 yen compared with 1.8340 marks and 141.90 yen late Monday.
Bouygues S.A., a diversified construction concern based in Paris, said its consolidated profit for the 1989 first half, after payments to minority interests, surged to 188 million French francs ($30.2 million) from 65 million francs a year earlier.
Revenue rose 21% to 22.61 billion francs from 18.69 billion francs.
The company didn't specify reasons for the strong earnings gain.
But Bouygues said its first-half profit isn't indicative of the full-year trend because of the highly seasonal nature of many of the company's activities.
For all of 1988, Bouygues had consolidated profit of 519 million francs, after payments to minority interests, on revenue of 50 billion francs.
The group has forecast 1989 revenue of 56.9 billion francs.
QVC Network Inc. said it completed its acquisition of CVN Cos. for about $423 million.
QVC agreed to pay $19 and one-eighth QVC share for each of CVN's 20 million fully diluted shares.
The acquisition brings together the two largest competitors to Home Shopping Network Inc., which now reaches more viewers than any other company in the video shopping industry.
Among them, Home Shopping, QVC and CVN already control most of that young and fast-growing market, which last year had sales of about $1.4 billion.
Coast Savings Financial Inc. reported a third-quarter loss, citing a previously announced capital restructuring program.
The Los Angeles thrift holding company said it had a loss of $92.2 million, or $6.98 a share, for the quarter ended Sept. 30.
Coast earned $10.2 million, or 67 cents a share, in the year-ago quarter.
The year-ago results have been restated to comply with government regulations.
The restructuring program is designed to increase the company's tangible capital ratio.
It includes removing $242 million in good will from the books, issuing $150 million in preferred stock and commencing an exchange offer for $52 million in convertible bonds.
During the third quarter, the company charged about $46 million against earnings in reducing goodwill, added $20 million to its general loan loss reserves and established a $30 million reserve for its high-yield bond portfolio.
The company said its junk-bond portfolio after these moves had been reduced to less than 1% of assets.
Philip Morris Cos. is launching a massive corporate advertising campaign that will put the tobacco giant's name in TV commercials for the first time since the early 1950s, when it stopped advertising its namesake cigarette brand on television.
The campaign, a patriotic celebration of the 200th anniversary of the Bill of Rights, doesn't mention cigarettes or smoking; cigarette ads have been prohibited on television since 1971.
But even before it begins, the campaign is drawing fire from anti-smoking advocates, who criticize Philip Morris's attempt to bolster its beleaguered image by wrapping itself in the document that is a cornerstone of American democracy.
Philip Morris, which became the U.S.'s largest food company last year with its $12.9 billion acquisition of Kraft Inc., seems determined to evolve beyond its roots in Marlboro country.
The company's research suggests that its name recognition among most consumers remains unusually low, although its array of brands -- including Maxwell House coffee, Jell-O, Cheez Whiz, and Miller beer -- blanket supermarket shelves.
The company is expected to spend about $30 million a year on its two-year corporate campaign, created by WPP Group's Ogilvy & Mather unit in New York.
The initial spots will appear during morning and prime-time news shows.
Philip Morris hopes that by taking its Bill of Rights theme to the airwaves, in addition to publications, it will reach the broadest possible audience.
Until now, its corporate ads, mainly promoting its sponsorship of the arts, have appeared almost exclusively in newspapers and magazines.
"Most people -- whether in Toledo, Tucson or Topeka -- haven't got a clue who we are," says Guy L. Smith, Philip Morris's vice president of corporate affairs.
"If they think well of the company through our support of the Bill of Rights, it follows they'll think well of our products."
Mr. Smith says the Bill of Rights commercial, which trumpets the themes of liberty and freedom of expression, isn't designed to have any special appeal for smokers.
Although Philip Morris typically tries to defend the rights of smokers with free-choice arguments, "this has nothing to do with cigarettes, nor will it ever," the spokesman says.
But some anti-smoking activists disagree, expressing anger at what they see as the company's attempt to purchase innocence by association.
"I'm outraged because this company is portraying itself at the heart of American culture and political freedom and in fact it's a killer," says Michael Pertschuk, former chairman of the Federal Trade Commission and a tobacco-industry critic.
"It should be treated like the Medellin {drug} mafia, not the Founding Fathers."
Mr. Pertschuk adds that the new commercial dovetails perfectly with major aspects of Philip Morris's political strategy.
These include trying to protect its print advertising by invoking the First Amendment, and wooing blacks by portraying itself as a protector of civil rights.
(The commercial features, among others, the voice of Martin Luther King Jr., the slain civil rights leader.)
Many marketers say Philip Morris's approach will be effective, but they agree that the ads' implied smoking message is unmistakable.
"This is clever, subliminal advertising that really says, `Smokers have rights, too,'" says Al Ries, chairman of Trout & Ries Inc., a Greenwich, Conn., marketing strategy firm.
"This is designed to get the wagons in a circle and defend the smoking franchise."
Richard Winger, a partner at Boston Consulting Group, adds: "It's very popular to drape yourself in the flag these days.
If you can do that and at the same time send a message that supports your business, that's brilliant."
RJR Nabisco Inc. and American Brands Inc. say they have no plans to follow Philip Morris's lead.
(Indeed, RJR Nabisco is currently under fire for having sent 80-second videotapes touting its Now brand to consumers who smoke American Brands' Carltons.)
Despite the criticism, Philip Morris's corporate campaign runs little risk of getting yanked off the tube.
"They aren't showing James Madison taking a puff or lighting up," says Laurence Tribe, a professor of constitutional law at Harvard University.
"All they are trying to do is borrow some of the legitimacy of the Bill of Rights itself.
Technology stocks woke up, helping the over-the-counter market rise from its recent doldrums.
The Nasdaq Composite Index surged 4.26, or about 0.94%, to 455.63.
It was the market's biggest gain since rising more than 7 points on Oct. 19.
Advancing OTC stocks outpaced decliners by 1,120 to 806.
But the move lagged a stronger rise in New York Stock Exchange issues.
The Big Board's composite index was up more than 1.4%, and the Dow Jones Industrial Average jumped 1.6%.
Nasdaq's gain was led by its biggest industrial stocks.
The Nasdaq 100 rose 7.08 to 445.23.
The Financial Index of 100 biggest banks and insurance issues added 2.19 to 447.76.
Other strong sectors were indicated in gains of the Transportation Index, up 7.55 to 475.35, and the Utility Index, up 8.68 to 730.37.
National Market System volume improved to 94,425,000 shares from 71.7 million Monday.
Many of Nasdaq's biggest technology stocks were in the forefront of the rally.
Microsoft added 2 1/8 to 81 3/4 and Oracle Systems rose 1 1/2 to 23 1/4.
Intel was up 1 3/8 to 33 3/4.
But traders who watch the stocks warned the rise may be yet another "one-day phenomenon."
Technology stocks bore the brunt of the OTC market's recent sell-off, and traders say it's natural that they rebound sharply now that the market has turned around.
But, they caution, conservative investors would do well to sell into the strength.
"They are always the first to be sold when people are taking profits, because people are most scared of the high-technology stocks," said Robin West, director of research for Ladenburg Thalmann's Lanyi division, which specializes in emerging growth stocks.
The technology group includes many of the OTC market's biggest stocks, which dominate the market-weighted Nasdaq Composite Index.
Analysts say rallies in the group historically have lifted the market, while weakness in the sector often sank unlisted share prices broadly.
But increasing volatility in the sector has exhausted investors who try to follow its dips and swings.
The stocks have been pummeled repeatedly by inventory gluts and disappointing earnings as the industry matures and slows.
Some even claim the group has become a lagging, not leading, indicator.
The technology sector of the Dow Jones Equity Market Index has risen only about 6.24% this year, while the Nasdaq Composite Index has gained 18.35%.
While the composite index lost less than a third of its year-to-date gains in the market's recent decline, the technology group's gains were more than halved.
The OTC technology sector is far from a cohesive unit.
The group is divided primarily between software, semiconductors and computers.
While computer stocks have taken the biggest hit from the slowdown in the industry, many software and semiconductor stocks have continued to outperform the market.
Microsoft is up more than 50% this year, while Intel is up more than 40%.
The technology group is also split between large companies and small, with the biggest stocks trading as blue-chip issues in the institutional marketplace, while the smaller stocks churn on their individual merits or faults, analysts say.
The volatility of smaller technology companies has served the group well overall in recent stock trading, according to Hambrecht & Quist's technology stock indexes.
The brokerage firm tracks technology stocks with its Technology Index, which appreciated only 10.59% in the first nine months of this year.
But the firm also tracks smaller technology companies as a subset of the larger group.
That index, which contains technology companies with annual revenues of $200 million or less, gained 17.97% by Sept. 30 this year -- still lagging the S&P 500, but leading larger technology firms.
Yesterday, bank stocks lagged behind the overall OTC market.
The Nasdaq Bank Index rose 0.17 to 432.78.
George Jennison, who trades bank stocks for Shearson Lehman Hutton, said the stocks tend to fall behind because they aren't traded as much as many other issues.
But, he added, interest-rate-sensitive stocks in general are stalled.
"The interest-rate sensitives aren't rallying with the rest of the market because of fears about what the (Federal Reserve) will do," Mr. Jennison said.
He said that investors will scour the October employment report, due out Friday, for clues about the direction of the economy and the immediate outlook for interest rates.
On the other hand, Mr. Jennison noted that the recent slide in bank and thrift stocks was at least halted yesterday.
Shearson Lehman Hutton gave small investors some welcome news by announcing that it would no longer handle index-arbitrage-related program trades for its accounts.
Shearson, with its in-house order execution system, has handled the bulk of such program trades in the over-the-counter market.
The trading has been blamed for much of the market's recent volatility.
Jaguar topped the most-active list, as its American depository receipts climbed 1 3/4 to 13 5/8 with more than 6.6 million ADRs traded.
Britain said it would waive its "golden share" in the luxury auto maker if shareholders vote to allow a suitor to acquire more than 15% of the company.
The announcement effectively removes the British government as an impediment to a takeover of the company, which is being stalked by General Motors and Ford.
Gen-Probe was another active takeover stock.
It surged 2 3/4 to 6 on volume of more than 1.7 million shares after the company agreed to be acquired by Japan's Chugai Pharmaceutical for about $110 million -- almost double the market price of Gen-Probe's stock.
Priam Corp. lost 5/32 to 3/32 after filing for protection from its creditors under Chapter 11 of the federal Bankruptcy Code.
MCI Communications added 1 1/2 to 43 3/8.
The company has toted up over $40 million in contracts in the past two days.
Monday, MCI announced a $27 million multiyear contract with the investment bank Stuart-James.
Yesterday, it received a $15 million, three-year contract from Drexel Burnham Lambert.
Florida National Banks of Fla. slid 1 1/8 to 24 3/4.
Late Monday, the Federal Reserve Board said it is delaying approval of First Union Corp.'s proposed $849 million acquisition of Florida National Banks pending the outcome of an examination into First Union's lending practices in low-income heighborhoods.
Florida National said yesterday that it remains committed to the merger.
Dycom Industries gained 3/4 to 16 3/4 after it said it agreed to buy Ansco & Associates and two affiliates for cash and stock.
The value of the transaction wasn't disclosed.
The companies being acquired provide telecommunications services to the telephone industry.
Willamette Industries, whose stock has suffered steep losses in recent sessions, surged 1 1/2 to 49.
The stock was one of many in the paper products industry that rose following Georgia-Pacific's $3.18 billion bid for Great Northern Nekoosa.
A permanent smoking ban on virtually all domestic airline routes won approval from the House, which separately sent to President Bush a nearly $67 billion fiscal 1990 bill including the first construction funds for the space station.
The smoking prohibition remains attached to a $27.1 billion transportation bill that must still overcome budget obstacles in Congress.
But yesterday's action put to rest any lingering resistance from tobacco interests.
Faced with inevitable defeat, the once dominant industry declined any recorded vote on the ban, which covers all but a fraction of 1% of daily flights in the U.S.
The sole exceptions are an estimated 30 flights of six hours or more beginning or ending in Hawaii and Alaska.
Assuming final enactment this month, the prohibition will take effect 96 days later, or in early February.
On a 394-21 roll call, the House adopted the underlying transportation measure.
But the bill still faces budget questions because it also is the vehicle for an estimated $3.1 billion in supplemental appropriations for law enforcement and anti-drug programs.
The additional spending pushes the measure more than $2 billion above its prescribed budget ceiling, and the House Appropriations Committee leadership must now seek a waiver in hopes of completing action today.
The separate $67 billion bill sent to the White House had budget difficulties, too, but was saved ultimately by its importance to a broad spectrum of interests in Congress and the administration itself.
No single bill this year includes more discretionary spending for domestic programs and, apart from the space station, the measure incorporates far-reaching provisions affecting the federal mortgage market.
The current ceiling on home loans insured by the Federal Housing Administration is increased to $124,875 during fiscal 1990.
And in anticipation of increased lending, the cap on FHA loan guarantees would rise to approximately $73.8 billion.
Separately, the bill gives authority to the Department of Housing and Urban Development to facilitate the refinancing of high-interest loans subsidized by the government under the so-called Section 235 home-ownership program for lower-income families.
This provision met early and strong resistance from investment bankers worried about disruptions in their clients' portfolios.
But the promise of at least $15 million in new savings helped to forge a partnership between HUD Secretary Jack Kemp and lawmakers wanting to protect their projects elsewhere.
The estimated $1.8 billion for the space station would be double last year's level, and total appropriations for the National Aeronautics and Space Administration would grow 16% to nearly $12.4 billion.
A string of costly projects, including the high-speed national aerospace plane and the advanced communications technology satellite, would continue to be developed within these limits.
And while imposing a statutory cap of $1.6 billion on future spending, the bill would give NASA $30 million for the start-up of the CRAF-Cassini mission, a successor to the Voyager space probe.
Separately, the National Science Foundation is promised a 7.7% increase to bring its appropriations to $2.07 billion.
And while pursuing these initiatives, Congress and the White House are squeezed too by steady increases -- $551 million -- in veteran's medical care.
The result is that all sides resort to sleight of hand to make room for competing housing and environmental programs, and the commitments now will drive excess spending into fiscal 1991.
Senior members of the House Budget Committee are reduced in frustration to raising doomed parliamentary obstacles to individual bills, yet admit that much of the disorder now stems from the fiscal legerdemain associated with their own summit agreement with the White House this past spring.
"It's hard to get the administration's attention on anything," said Rep. Bill Frenzel (R., Minn.), "because the whole agreement was built on gimmickry."
Among the subsidies continued in the transportation bill is $30.7 million to maintain commercial air service for an estimated 92 communities, often in rural areas.
Senate Appropriations Committee Chairman Robert Byrd (D., W.Va.) strongly resisted deeper cuts sought by the House.
But at a time when the White House wants to kill the entire program, Republicans have been among its leading champions.
Sen. Pete Domenici (R., N.M.), the ranking Republican on the Senate Budget Committee, used his influence to preserve more than $132,000 in subsidies for air service to Sante Fe, N.M., and more than $2.1 million would go for service to eight communities in the western Nebraska district of GOP Rep. Virginia Smith on the House Appropriations Committee.
GP Express, an independent airline serving much of Nebraska, estimates that nearly 40% of its revenues come from the subsidies that, in some cases, exceed the cost of a ticket.
For example, a passenger can fly from Chardon, Neb., to Denver for as little as $89 to $109, according to prices quoted by the company.
But given the few number of users, the cost to the federal government per passenger is estimated at $193, according to House and Senate appropriations committees.
The House action yesterday came as the Senate remained mired in difficulties over a $17.25 billion measure covering the budgets for the State, Commerce, and Justice departments in fiscal 1990.
The compromise bill passed the House last week but has now provoked jurisdictional fights with the Senate Foreign Relations Committee, which jealously protects its prerogatives over operations at the State Department.
The same jealousy can breed confusion, however, in the absence of any authorization bill this year.
House and Senate appropriators sought to establish a Nov. 30 deadline after which their bill would become the last word on how funds are distributed.
But on a 53-45 roll call this provision was stripped from the bill last night after Foreign Relations Chairman Claiborne Pell (D., R.I.) complained that it was an intrusion on exclusive powers vested in his panel for more than three decades.
Coda Energy Inc. said it arranged a $50 million credit facility with NCNB Texas National Bank, a unit of NCNB Corp., of Charlotte, N.C.
The Dallas oil and gas concern said that $10 million of the facility would be used to consolidate the company's $8.1 million of existing bank debt, to repurchase 4 million of its 4.9 million shares outstanding of Series D convertible preferred stock, and to purchase a 10% net-profits interest in certain oil and gas properties from one of its existing lenders, National Canada Corp.
The remaining $40 million can be used over three years for oil and gas acquisitions, the company said.
Ted Eubank, Coda's president, said the loan carries an interest rate of prime plus one percentage point, with 85% of the company's net oil and gas revenue each month dedicated to repayment.
The company put up "virtually all" of its oil and gas properties as collateral, he said.
General Dynamics Corp. was given an $843 million Air Force contract for F-16 aircraft and related equipment.
Loral Corp.'s defense systems division received a $54.9 million Air Force contract for a F-15 weapons system trainer.
Southern Air Transport Inc. won $47.5 million in Air Force and Navy contracts for transportation services.
International Business Machines Corp. was given a $31.2 million Air Force contract for satellite data systems equipment.
Directed Technologies received a $28.3 million Defense Advanced Research Projects Agency contract for advanced propulsion systems research.
Propper International Inc. got a $22.8 million Defense Logistics Agency contract for combat camouflage trousers.
Santa Fe Pacific was the kind of story Wall Street loved.
Since the value of its assets wasn't known, analysts were free to pick a number.
In one of many rosy scenarios, Bear Stearns's Gary Schneider wrote in March that its real estate alone had a value of $4.5 billion.
Throw in its railroad, minerals, pipeline and oil assets, he and others argued, and the Chicago-based conglomerate should be worth 30 a share.
And why should holders expect to realize that presumed "worth?"
That was another reason the Street loved Santa Fe.
With real estate experts Olympia & York and Samuel Zell's Itel owning close to 40% of Santa Fe's stock, management was under pressure -- in a favored phrase of Wall Street -- to quickly "maximize values."
But value, it turns out, is only what a buyer will pay.
And with the company's recent announcement that it is contemplating a partial sale of its real estate, the values suddenly look poorer.
Santa Fe has disclosed that it is negotiating to sell a 20% interest in its real estate unit to the California Public Employees Retirement System for roughly $400 million.
Since the real estate unit also includes debt, the imputed value of the real estate itself is close to $3 billion.
"The implied current net asset value of 22.70 {per share} is well below the 30 level that the Street believed," PaineWebber says.
"The upside was in the intangible real estate . . . which is no longer an intangible."
So what is Santa Fe worth?
If the railroad is valued on a private market basis -- at the same multiple of earnings as in the recent sale of CNW -- it would have a value of $1.65 billion.
A compromise between bulls and bears puts remaining assets and cash -- including its 44% stake in its publicly traded pipeline -- at $2 billion.
Santa Fe also has $3.7 billion in debt.
In addition, its railroad lost a $750 million antitrust suit, which is on appeal, and which analysts say could be settled for one-third that amount.
That nets out to about $17 a share for the company on a private market basis.
But Santa Fe, currently trading at 18 7/8, isn't likely to realize private market values by selling assets, because the tax against it would be onerous.
Its plan, instead, is to spin off the remainder of its real estate unit and to possibly do the same with its mining and energy assets.
Robert D. Krebs, Santa Fe's chairman, argues that since its businesses are valued in different ways, "the sum of the parts may be greater than the whole."
But it isn't clear why that should be so.
The spinoff argument, after all, reverses the current notion that assets are worth more to private buyers than to public shareholders.
And real estate usually hasn't traded well under public ownership.
Salomon Brothers says, "We believe the real estate properties would trade at a discount . . . after the realty unit is spun off. . . .
And what about the cost, and risk, of waiting to realize the hypothetical private market values?"
Some analysts remain bullish.
Mr. Schneider of Bear Stearns says he is recalculating the worth of the company's assets and, in the meantime, is sticking to his "buy" recommendation on the belief that he will find "values" of 30 a share.
He adds: "If for any reason I don't have the values, then I won't recommend it."
First Boston's Graeme Anne Lidgerwood values Santa Fe at 24, down from her earlier estimate of 29.
Her recent report classifies the stock as a "hold."
But it appears to be the sort of hold one makes while heading for the door.
Quoting from the report: "The stock's narrow discount to asset valuation makes it a relatively unappealing investment at current prices, especially given the risk that our projections could be on the aggressive side."
Chairman Krebs says the California pension fund is getting a bargain price that wouldn't have been offered to others.
In other words: The real estate has a higher value than the pending deal suggests.
Since most of the unit's real estate is in California, the pension fund will be a useful political ally in a state where development is often held hostage to zoning boards.
And, as Mr. Zell says, with Itel and O&Y on the unit's board, the real estate will be run by "a very unusual group" to say the least.
It is possible then that Santa Fe's real estate -- even in a state imperiled by earthquakes -- could, one day, fetch a king's ransom.
But as Drexel analyst Linda Dunn notes, its properties will be developed over 15 to 20 years.
So despite Wall Street's rosy talk of quickly "maximizing values," holders could be in for a long wait.
Santa Fe Pacific (NYSE; Symbol: SFX)
Business: Railroad, natural resources and real estate
Year ended Dec. 31, 1988:
Revenue: $3.14 billion
Net loss: $46.5 million; 30 cents a share
Third quarter, Sept. 30, 1989:
Net income: 21 cents a share vs. net loss of $4.11 a share
Average daily trading volume: 344,354 shares
Orkem S.A., a French state-controlled chemical manufacturer, is making a friendly bid of 470 pence ($7.43) a share for the 59.2% of U.K. specialty chemical group Coates Brothers PLC which it doesn't already own, the two sides said.
The offer, which values the whole of Coates at #301 million, has already been accepted by Coates executives and other shareholders owning 12.4% of the company.
The acceptances give Orkem a controlling 53.2% stake in the company.
Orkem and Coates said last Wednesday that the two were considering a merger, through Orkem's British subsidiary, Orkem Coatings U.K. Ltd.
Orkem, France's third-largest chemical group, said it would fund the acquisition through internal resources.
The takeover would be followed by a restructuring of Orkem's U.K. unit, including the addition of related Orkem businesses and possibly further acquisitions.
Orkem said it eventually would seek to make a public share offering in its U.K. business.
Intelogic Trace Inc. said it is exploring alternatives to maximize shareholder value, including the possible sale of the company.
But Asher B. Edelman, who controls about 16% of the San Antonio, Texas, computer-servicing company, insisted that the announcement didn't have anything to do with the ongoing battle for control of Datapoint Corp.
Any sale of Intelogic could have an impact on the battle between Mr. Edelman and New York attorney Martin Ackerman for control of Datapoint.
Intelogic holds 27.5% of Datapoint's common shares outstanding.
Mr. Edelman said the decision "has nothing to do with Marty Ackerman."
Mr. Ackerman contended that it was a direct response to his efforts to gain control of Datapoint.
Intelogic was spun off from Datapoint four years ago, shortly after Mr. Edelman took control of Datapoint.
Marks & Spencer PLC reported a 12% gain in first-half pretax profit, mainly because of improving performances in the U.K. and continental Europe.
In the six months ended Sept. 30, pretax profit at the British clothing and food retailer rose to #208.7 million ($330.1 million) from #185.5 million a year ago.
The results surpassed analysts' forecasts, which averaged around #200 million, and Marks & Spencer responded in trading on London's Stock Exchange with an eight pence rise to 188 pence.
Profit after tax and minority interest but before extraordinary items rose 12% to #135.2 million; per-share earnings rose to five pence from 4.5 pence.
Marks declared an interim per-share dividend of 1.85 pence, compared with 1.7 pence a year earlier.
Sales increased 11% to #2.5 billion from #2.25 billion, while operating profit climbed 13% to #225.7 million from #199.8 million.
Sales in North America and the Far East were inflated by acquisitions, rising 62% to #278 million.
Operating profit dropped 35%, however, to #3.8 million.
Brooks Brothers, which Marks bought last year, saw operating profit drop in half to #5 million.
Federal and state thrift examiners said they saw evidence of criminal wrongdoing in the collapse of Lincoln Savings & Loan Association, and a California regulator described an attempted "whitewash" by deputies of chief federal regulator Danny Wall.
In a riveting day of hearings before the House Banking Committee, the examiners described finding shredded documents, a mysterious Panamanian subsidiary, millions of dollars funneled into a Swiss bank, and a complacent attitude by Mr. Wall's deputies, one of whom was portrayed as acting more like a public-relations man for the thrift than a federal regulator.
A California official also said he sent the Federal Bureau of Investigation a packet of documents relating to a previously reported $400,000 contribution from Lincoln's parent solicited by Sen. Alan Cranston (D., Calif.).
Federal examiner Alex Barabolak said Lincoln's operations amounted to "pyramiding debt to provide a luxurious life style for its owners."
Another federal examiner, John Meek, said Lincoln's principal owner, Charles Keating Jr., and his family drew off at least $34 million from the thrift in salaries, bonuses and proceeds from securities sales in the 3 1/2 years before federal authorities seized it earlier this year.
Lincoln's collapse may cost taxpayers as much as $2.5 billion, according to estimates, making it the most expensive thrift failure in history.
"I think there's overwhelming evidence to indicate probable criminal activity," said Mr. Meek, who participated last year in an examination of the Irvine, Calif., thrift.
He said the evidence pointed to wrongdoing by Mr. Keating "and others," although he didn't allege any specific violation.
Richard Newsom, a California state official who last year examined Lincoln's parent, American Continental Corp., said he also saw evidence that crimes had been committed.
"It sure smells like it," he said.
He said 30% of the loans he sampled were "dead meat on the day they were made."
The state examiner also said supervisors of a parallel federal examination seemed so reluctant to demand write-downs of Lincoln's bad loans that he immediately grew suspicious.
"Later on, my concerns about a whitewash became even more serious," he said.
He called the sour loans "appalling" and added, "You opened the file up and it just jumped at you."
Leonard Bickwit, a Washington attorney for Lincoln's parent corporation, said in an interview, "We deny any criminal behavior by the association or its officers."
"Those who testified {yesterday} have consistently maintained that anyone who didn't agree with them is part of a coverup, a whitewash, or the subject of excessive influence," Mr. Bickwit said.
"We simply don't agree with that or the findings of their investigation."
Mr. Wall's deputies complained that they hadn't been given an opportunity to respond to the criticism brought out during the Banking Committee's hearings, which Committee Chairman Henry Gonzalez (D., Texas) has used as a forum to flay Mr. Wall's handling of the affair and to demand that he step aside from his job.
"A couple of things Mr. Newsom said were at least misleading," said Kevin O'Connell, one of the Washington regulators responsible for the handling of Lincoln.
In an interview, he said federal regulators eventually declared one of the loans the state regulator cited to be a total loss, and forced Lincoln to make an $18 million downward adjustment on another.
"Our response to the whitewash would simply be, look what happened," another Washington official, Alvin Smuzynski, said in an interview.
Federal officials seized the association in April, a day after the parent corporation entered bankruptcy-law proceedings.
The government later brought a $1.1 billion fraud suit against Mr. Keating and others.
Rep. Gonzalez has complained that regulators waited far too long, however, ignoring a recommendation from regional officials to place Lincoln into receivership two years before it failed.
"He took the reckless course of ignoring the evidence," Rep. Gonzalez said.
State thrift examiner Eugene Stelzer said he found the chief federal examiner Steve Scott to be totally uninterested in one allegedly fraudulent series of transactions.
"Frankly, it was like he worked for the Lincoln public-relations department," Mr. Stelzer testified.
And David Riley, a federal examiner who worked under Mr. Scott, said he found his chief oddly upbeat about Lincoln.
Asked to comment, a spokesman for Mr. Scott said: "Mr. Scott has spoken to his attorney, who has advised him not to talk to anybody."
Mr. Meek said that a day or two before Lincoln's parent entered bankruptcy proceedings, he and other examiners saw "a truck with a sign on it that said it was from the `Document Destruction Center.'
We observed at least two large plastic bags of shredded paper loaded into this truck."
Mr. Bickwit said the paper had been donated to "a charitable organization that sells it for recycling.
They shredded it simply because it contained financial information about their creditors and depositors."
Mr. Meek said his suspicions were aroused by several foreign investments by Lincoln, including $22 million paid to Credit Suisse of Switzerland, an $18 million interest in Saudi European Bank in Paris, a $17.5 million investment in a Bahamas trading company, and a recently discovered holding in a Panama-based company, Southbrook Holdings.
Mr. Bickwit said, "I can see why an S&L examiner would regard these as unusual activities," but said the overseas investments "essentially broke even" for the S&L.
LTV Steel Co. is boosting the prices of flat rolled steel products by an average of 3% following a recent erosion in the prices of such crucial steel products.
The big questions are whether the increase, effective Jan. 1, 1990, will stick, and whether other major steelmakers will follow suit.
It is widely expected that they will.
The increase is on the base price, which is already being discounted by virtually all steel producers.
But LTV's move marks the first effort by a major steelmaker to counter the free fall in spot prices.
Major steel producers are selling cold rolled sheet steel at about $370 a ton, compared with a peak price of $520 a ton in 1988.
Second-tier companies are receiving even less per ton.
LTV's planned increase, which was announced in an Oct. 26 memo to district managers, doesn't affect electrogalvanized steel or tin plate.
LTV confirmed the price-increase plan, saying the move is designed to more accurately reflect the value of products and to put steel on more equal footing with other commodities.
A spokesman for LTV Steel, which is a unit of Dallas-based LTV Corp., noted that steel prices, adjusted for inflation, increased only 1.7% between 1981 and the fourth quarter of 1988, while the prices of other industrial commodities increased nearly five times as much.
At the same time, steelmakers are trying to invest more to modernize technology and make themselves more competitive.
But analysts say the company is also trying to prevent further price drops.
Moreover, they note that LTV may be trying to send a signal to major customers, such as Chrysler Corp. and Whirlpool Corp., that steelmakers need more money.
Both companies are in the process of negotiating contracts with LTV and others.
"They {LTV} may believe this can impact contract negotiations and is their signal to the world that now is the time to get tough on prices," said Peter Marcus, an analyst with PaineWebber Inc.
Mr. Marcus believes spot steel prices will continue to fall through early 1990 and then reverse themselves.
He isn't convinced, though, that the price decline reflects falling demand because the world economy remains relatively strong.
And while customers such as steel service centers are continuing to reduce inventories through the fourth quarter, they eventually will begin stocking up again, he notes.
It won't be clear for months whether the price increase will stick.
Steelmakers announced a round of base-price increases last year, but began offering sizable discounts over the summer.
In fact, LTV was the first steelmaker to publicly boost discounts for buyers of cold rolled sheet steel and hot-dipped galvanized sheet steel.
In composite New York Stock Exchange trading yesterday, LTV common shares fell 12.5 cents to close at $1.50.
The Treasury plans to raise $2.3 billion in new cash with the sale Monday of about $16 billion in short-term bills to redeem $13.71 billion in maturing bills.
However, the Treasury said it will postpone the auction unless it has assurances of enactment of legislation to raise the statutory debt limit before the scheduled auction date.
The offering will be divided evenly between 13-week and 26-week bills maturing on Feb. 8, 1990, and May 10, 1990, respectively.
Tenders for the bills, available in minimum $10,000 denominations, must be received by 1 p.m. EST Monday at the Treasury or at Federal Reserve banks or branches.
J.C. Penney Co. is extending its involvement in a televised home-shopping service by five to 10 years.
Shop Television Network Inc., of Los Angeles, said Penney agreed to continue its exclusive arrangement with Shop Television, which does the production, marketing and cable distribution for the J.C. Penney Television Shopping Channel.
The channel reaches 6.5 million homes, a Penney spokesman said.
Michael Rosen, president of Shop Television, said Penney decided to extend its involvement with the service for at least five years.
If, by that time, the network reaches 14 million homes, the contract will be renewed for five more years.
Earlier this year, Penney abandoned another home shopping venture, Telaction Corp., after investing $106 million in it.
The company took a $20 million charge in the fiscal first quarter ended April 29, related to discontinuing the service.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
LUTHER BURBANK CROSS-BRED PLANTS to produce the billion-dollar Idaho potato.
Bioengineers set out to duplicate that feat -- scientifically and commercially -- with new life forms.
In 1953, James Watson and his colleagues unlocked the double helix of DNA (deoxyribonucleic acid), the genetic key to heredity.
Twenty years later, two California academics, Stanley Cohen and Herbert Boyer, made "recombinant" DNA, transplanting a toad's gene into bacteria, which then reproduced toad genes.
When Boyer met Robert Swanson, an M.I.T.-trained chemist-turned-entrepreneur in 1976, they saw dollar signs.
With $500 apiece and an injection of outside capital, they formed Genentech Inc.
Commercial gene-splicing was born.
Genentech's first product, a brain protein called somatostatin, proved its technology.
The next to be cloned, human insulin, had market potential and Genentech licensed it to Eli Lilly, which produced 80% of the insulin used by 1.5 million U.S. diabetics.
Their laboratory credentials established, Boyer and Swanson headed for Wall Street in 1980.
At the time, Genentech had only one profitable year behind it (a modest $116,000 on revenue of $2.6 million in 1979) and no product of its own on the market.
Nonetheless, the $36 million issue they floated in 1980 opened at $35 and leaped to $89 within 20 minutes.
The trip from the test tube was not without snags.
Boyer and Cohen, for instance, both still university researchers, had to be talked into applying for a patent on their gene-splicing technique -- and then the Patent Office refused to grant it.
That judgment, in turn, was reversed by the U.S. Supreme Court, leaving Cohen and Boyer holding the first patents for making recombinant DNA (now assigned to their schools).
Gene-splicing now is an integral part of the drug business.
Genentech's 1988 sales were $335 million, both from licensing and its own products.
The portfolio unit of the French bank group Credit Lyonnais told stock market regulators that it bought 43,000 shares of Cie. de Navigation Mixte, apparently to help fend off an unwelcome takeover bid for the company.
Earlier yesterday, the Societe de Bourses Francaises was told that a unit of Framatome S.A. also bought Navigation Mixte shares, this purchase covering more than 160,000 shares.
Both companies are allies of Navigation Mixte in its fight against a hostile takeover bid launched last week by Cie.
Financiere de Paribas at 1,850 French francs ($297) a share.
Navigation Mixte's chairman had suggested that friendly institutions were likely to buy its stock as soon as trading opened Monday.
The Credit Lyonnais purchase, for 33,000 regular common shares and 10,000 newly created shares, is valued at about slightly more than 80 million French francs.
Unocal Corp., Los Angeles, said it and Petroleos de Venezuela S.A. would create a petroleum marketing and refining general partnership in the Midwest.
The joint venture, Uno-Ven Co., would generate total annual revenue of about $500 million and have 1,100 employees, a Unocal spokesman said.
Unocal said the venture would enable it to recover more of its refining and marketing investment and prepare for expected growth in exploration, production, chemicals and other areas.
It said financing would consist of $250 million from a private placement obtained through Shearson Lehman Hutton Inc. and a $150 million revolving credit line underwritten by Chase Manhattan Bank.
In addition to Unocal's 153,000 barrel-a-day refinery near Lemont, Ill., the new venture would control 17 distribution terminals, a lubricating-oil blending and packaging plant, and 131 company-owned Unocal service stations.
It said the venture, expected to take control of the facilities Dec. 1, would also serve another 3,300 independent Unocal gasoline stations.
Petroleos will supply 135,000 barrels of oil a day for the refinery, Unocal said.
Mitsubishi Heavy Industries Ltd. said unconsolidated pretax earnings in the fiscal first half surged 79% to a record 63.25 billion yen ($445.7 million), reflecting strong demand for a variety of products.
In the period ended Sept. 30, net income rose 90% to 31.18 billion yen, or 9.34 yen a share, from 16.38 billion yen, or 5.05 yen a share.
A year ago, the Tokyo company had pretax profit of 35.38 billion yen.
Sales amounted to 1.011 trillion yen, climbing 29% from 787.02 billion yen.
Encouraged by the brisk performance, Mitsubishi plans to raise its per-share dividend to 3.50 yen from three yen.
Company officials said the current robust domestic demand that has been fueling sustained economic expansion helped push up sales of products like ships, steel structures, power systems and machinery and resulted in sharply higher profit.
Senate leaders traded proposals aimed at speeding action on legislation to narrow the deficit and raise the federal government's debt limit -- but the major stumbling block remains President Bush's proposal to cut the capital-gains tax rate.
Democrats want the tax provision to be a separate bill, subject to the usual procedural obstacles.
Republicans, meanwhile, want to try to protect the measure by combining it with two politically popular issues that Democrats could find hard to block.
The talks between Senate Majority Leader George Mitchell of Maine and his GOP counterpart, Sen. Robert Dole of Kansas, are expected to resume today.
Last night, after meeting with Mr. Bush and administration officials at the White House, Mr. Dole proposed streamlining the fiscal 1990 deficit-reduction bill, now stalled in a House-Senate conference committee, and passing a long-term extension of the federal debt ceiling without any accompanying amendments.
Under this plan, two provisions currently in the House version of the deficit-cutting bill -- repeal of both the catastrophic-illness insurance program and a controversial 1986 tax provision intended to counter discrimination in employee-benefit plans -- would be made into a separate bill.
Republicans would try to attach a capital-gains provision to that legislation, hoping the political popularity of its other two parts would dissuade Democrats from blocking it.
Democrats want to avoid having to make that choice by making the capital-gains tax cut an individual bill.
Sen. Mitchell is confident he has sufficient votes to block such a measure with procedural actions.
Both plans would drop child-care provisions from the House version of the deficit-reduction legislation and let it progress as a separate bill.
While that could make it vulnerable to a veto by Mr. Bush, Democrats argue that a presidential rejection would give their party a valuable issue in next year's congressional elections.
Senate Democrats are to meet today to consider the GOP proposal.
Yesterday, Mr. Dole seemed weary of the Bush administration's strategy of pushing the capital-gains measure at every chance in the face of Democratic procedural hurdles.
Pushing the issue on legislation needed to avoid default by the federal government, he told reporters, "doesn't seem to be very good strategy to me."
At 12:01 a.m. EST today, the federal government's temporary $2.87 trillion debt limit expired.
To avoid default, lawmakers must pass legislation raising the limit to $3.12 trillion from $2.80 trillion by next Wednesday, according to the Treasury.
Pressed by Chairman Dan Rostenkowski (D., Ill.) of the House Ways and Means Committee, Treasury Undersecretary Robert Glauber told a congressional hearing that the administration would give up its demand for the capital-gains tax cut if faced with a potential default.
Price Stern Sloan Inc. said it hired an investment banking firm to assist in evaluating restructuring or merger alternatives and reported a net loss of $8.1 million, or $2.14 a share, for the third quarter ended Sept.
These results compare with net income of $1.8 million, or 44 cents a share, for the corresponding period last year.
This quarter's loss includes pretax charges of $4.9 million on the proposed discontinuation of the company's troubled British subsidiary, and $3.7 million of other write-offs the company said were non-recurring and principally related to inventory, publishing advances and pre-publication costs.
The publishing concern said it retained the investment banking firm of Donaldson, Lufkin & Jenrette Securities Inc. to act as its financial adviser, assisting in the evaluation of various financial and strategic alternatives, including debt refinancing, raising capital, recapitalization, a merger or sale of the company.
The company also retained attorney Martin P. Levin, a director of the company and former head of the Times-Mirror Publishing Group, as an adviser.
Net sales for this year's third quarter were $14 million, down from $21.4 million last year.
The company attributed the decrease in part to the exclusion of the company's British sales from the current year's figures as a result of the subsidiary's status as a proposed discontinued operation and, in part, to lower sales in certain key foreign and domestic accounts.
U.K. sales for last year's quarter were about $3 million.
Stock prices surged as a multibillion-dollar takeover proposal helped restore market players' confidence about the prospects for further deal-making.
Paper and forest-products stocks were especially strong, as the offer for Great Northern Nekoosa by Georgia-Pacific triggered speculation that the industry could be in for a wave of merger activity.
The Dow Jones Industrial Average climbed 41.60 to 2645.08 even though some late selling caused the market to retreat from session highs.
Trading was moderate, with 176,100,000 shares changing hands on the New York Stock Exchange.
Aside from the takeover news, big buy orders were placed for blue-chip shares in afternoon trading.
Traders said the buy programs came from very large institutional accounts that were also active in the stock-index futures markets.
At one point, almost all of the shares in the 20-stock Major Market Index, which mimics the industrial average, were sharply higher.
Some 1,111 Big Board issues advanced in price and only 448 declined, while broader market averages rose sharply.
Standard & Poor's 500-Stock Index climbed 5.29 to 340.36, the Dow Jones Equity Market Index added 4.70 to 318.79 and the New York Stock Exchange Composite Index climbed 2.65 to
Great Northern surged 20 1/8 to 62 7/8, well above Georgia-Pacific's offering price of $58 a share, amid speculation that other suitors for the company would surface or that the bid would be raised.
Nearly 6.3 million shares, or about 11.5% of the company's shares outstanding, changed hands in Big Board composite trading.
With stocks having been battered lately because of the collapse of takeover offers for UAL, the parent company of United Airlines, and AMR, the parent of American Airlines, analysts viewed the proposal as a psychological lift for the market.
The $3.18 billion bid, which had been rumored since last week, "creates a better feeling that there's value in the market at current levels and renews prospects for a hot tape," says A.C. Moore, director of research at Argus Research Corp.
Traders and analysts alike said the market's surge also reflected an easing of concerns about volatility because of moves by a number of brokerage firms to curtail or cease stock-index arbitrage.
Much of the instability in stock prices lately has been blamed on arbitrage trading, designed to profit from differences in prices between stocks and index futures.
"People are looking for an ability to try and read the market, rather than be manipulated," said Dudley A. Eppel, manager of equity trading at Donaldson, Lufkin & Jenrette.
He noted that institutional investors showed "pretty general" interest in stocks in the latest session.
But traders also said arbitrage-related trading contributed to the market's surge, as buy programs boosted prices shortly after the opening and sporadically through the remainder of the session.
Georgia-Pacific fell 2 1/2 to 50 7/8, but most paper and forest-products stocks firmed as market players speculated about other potential industry takeover targets.
Within the paper sector, Mead climbed 2 3/8 to 38 3/4 on 1.3 million shares, Union Camp rose 2 3/4 to 37 3/4, Federal Paper Board added 1 3/4 to 23 7/8, Bowater gained 1 1/2 to 27 1/2, Stone Container rose 1 to 26 1/8 and Temple-Inland jumped 3 3/4 to 62 1/4.
Forest-products issues showing strength included Champion International, which went up 1 3/8 to 31 7/8; Weyerhaeuser, up 3/4 to 27 1/4; Louisiana-Pacific, up 1 1/8 to 40 3/8, and Boise Cascade, up 5/8 to 42.
The theme of industry consolidation had surfaced earlier this year among drug stocks, which posted solid gains in the latest session.
Pfizer gained 1 7/8 to 67 5/8, Schering-Plough added 2 1/4 to 75 3/4, Eli Lilly rose 1 3/8 to 62 1/8 and Upjohn firmed 3/4 to 38.
Also, SmithKline Beecham rose 1 3/8 to 39 1/2.
An advisory committee of the Food and Drug Administration recommended that the agency approve Eminase, the company's heart drug.
Two rumored restructuring candidates in the oil industry moved higher: Chevron, which rose 1 3/4 to 68 1/4 on 3.5 million shares, and USX, which gained 1 1/4 to 34 5/8.
Pennzoil is rumored to be accumulating a stake in Chevron in order to push for a revamping of the company; investor Carl Icahn has recently increased his stake in USX, which separately reported earnings that were in line with expectations.
Paramount Communications, which completed the $3.35 billion sale of its Associates Corp. financial-services unit to Ford Motor, gained 1 1/8 to 55 7/8 after losing one point Monday amid rumors of a delay.
The company said the sale would produce a $1.2 billion gain in the fourth quarter.
BankAmerica climbed 1 3/4 to 30 after PaineWebber boosted its investment opinion on the stock to its highest rating.
The upgrade reflected the 20% decline in shares of the bank since the firm lowered its rating in early October, based on the belief the stock had become expensive.
Sea Containers, which unveiled a proposed restructuring, advanced 1 to 62.
The company said it would repurchase half of its common shares at $70 each, sell an estimated $1.1 billion in assets and pay a special preferred-stock dividend to common-stock holders.
Shaw Industries, which agreed to acquire Armstrong World Industries' carpet operations for an undisclosed price, rose 2 1/4 to 26 1/8.
Armstrong added 1/8 to 39 1/8.
ERC Corp. rose 7/8 to 12.
The company agreed definitively to be acquired by Ogden Corp. in a stock swap valued at about $82.5 million.
Ogden gained 1 1/4 to 32 7/8.
Ocean Drilling & Research dropped 1 1/4 to 21 1/2 following news of a restructuring plan that calls for the company to reorganize its drilling business into a separate company and offer a 15% to 20% stake to the public.
The American Stock Exchange Market Value Index rose 1.71 to 370.58.
Volume totaled 11,820,000 shares.
Imperial Holly fell 1 5/8 to 27 1/8 in the wake of its third-quarter earnings report.
Net income was down from a year ago, when a gain from the restructuring of a retirement plan boosted earnigs.
Cilcorp Inc., Peoria, Ill., said it agreed to acquire the environmental consulting and analytical service businesses of Hunter Environmental Services Inc. of Southport, Conn.
The utility holding company said Hunter will receive 390,000 shares of a new series of Cilcorp convertible preferred stock with a face value of $39 million for the businesses.
Cilcorp will also assume $22 million of Hunter's existing debt.
As part of the agreement, Cilcorp said it will pay Hunter $4 million in exchange for agreements not to compete.
Cilcorp said the businesses to be acquired had revenue of $76 million for the year ended March 31.
Separately, Cilcorp said it plans to purchase as many as 1.4 million shares, or 10% of its common stock outstanding from time to time on the open market and through privately negotiated transactions.
The company, which currently has 13.5 million common shares outstanding, said it has no specific plans for the shares.
BUSH AND GORBACHEV WILL HOLD two days of informal talks next month.
The president said that he and the Kremlin leader would meet Dec. 2-3 aboard U.S. and Soviet naval vessels in the Mediterranean to discuss a wide range of issues without a formal agenda.
A simultaneous announcement was made in Moscow.
Bush said that neither he nor Gorbachev expected any "substantial decisions or agreements."
The seaborne meetings won't disrupt plans for a formal summit next spring or summer, at which an arms-control treaty is likely to be completed.
The two leaders are expected to discuss changes sweeping the East bloc as well as human-rights issues, regional disputes and economic cooperation.
Israel's army lifted a blockade around a Palestinian town in the occupied West Bank, ending a 42-day campaign of seizing cars, furniture and other goods to crush a tax boycott.
While residents claimed a victory, military authorities said they had confiscated the equivalent of more than $1.5 million to make up for the unpaid taxes.
East German leader Krenz arrived in Moscow for talks today with Gorbachev on restructuring proposals.
In East Berlin, Communist Party officials considered legalizing New Forum, the country's largest opposition alliance, as about 20,000 demonstrators staged protests in three cities to press demands for democratic freedoms.
The House approved a permanent smoking ban on nearly all domestic airline routes as part of a $27.1 billion transportation bill that must still overcome budget obstacles in Congress.
The chamber also sent to Bush a nearly $67 billion fiscal 1990 measure that includes the first construction funds for a space station.
Nicaragua's Ortega postponed until today a decision on whether to end a 19-month-old cease-fire in the conflict with the Contra rebels.
In Washington, the Senate voted to condemn Ortega's threat to cancel the truce, and Bush said he would review U.S. policy toward Managua, including the possibility of renewing military aid to the rebels.
Chinese leader Deng told former President Nixon that the U.S. was deeply involved in "the turmoil and counterrevolutionary rebellion" that gripped Beijing last spring.
Nixon, on the fourth day of a private visit to China, said that damage to Sino-U.S. relations was "very great," calling the situation "the most serious" since 1972.
Afghanistan's troops broke through a guerrilla blockade on the strategic Salang Highway, allowing trucks carrying food and other necessities to reach Kabul after a missile attack on rebel strongholds.
The convoy of about 100 vehicles was the first to make deliveries to the capital in about 10 days.
Turkey's legislature elected Prime Minister Ozal as the country's first civilian president since 1960, opening the way for a change of government under a new premier he will select.
The vote in Ankara was boycotted by opposition politicians, who vowed to oust Ozal.
He begins his seven-year term Nov. 9, succeeding Kenan Evren.
South Africa's government dismissed demands by right-wing Conservatives, the nation's main opposition party, for emergency talks on Pretoria's recent tolerance of dissent.
The government also urged whites to refrain from panic over growing black protests, such as the massive anti-apartheid rally Sunday on the outskirts of Soweto.
Researchers in Belgium said they have developed a genetic engineering technique for creating hybrid plants for a number of crops, such as cotton, soybeans and rice.
The scientists at Plant Genetic Systems N.V. isolated a gene that could lead to a generation of plants possessing a high-production trait.
A bomb exploded at a leftist union hall in San Salvador, killing at least eight people and injuring about 30 others, including two Americans, authorities said.
The blast, which wrecked the opposition labor group's offices, was the latest in a series of attacks in El Salvador's 10-year-old civil war.
Hungary's Parliament voted to hold a national referendum on an election to fill the new post of president.
The balloting to decide when and how to fill the position, which replaces a collective presidency under a pact signed by the ruling Socialists and opposition groups, is to be held Nov.
The State Department denied asylum to a Vietnamese man who escaped from his homeland by lashing himself to the rudder housing of a tanker for two days in monsoon seas.
A spokesman for Democratic Sen. Pell of Rhode Island said, however, that the Immigration and Naturalization Service would review the stowaway's request.
Ogden Projects Inc. said net income jumped to $6.6 million, or 18 cents a share, in the third quarter.
The Fairfield, N.J., company, which is 92%-owned by Ogden Corp., New York, had net of $1.1 million, or four cents a share, a year ago.
Revenue soared to $101.7 million from $39.5 million.
Ogden Projects, whose shares began trading on the New York Stock Exchange in August, closed yesterday at $26.875, down 75 cents.
The stock began trading this summer at $14 apiece.
Ogden Projects, which has interests in solid-waste recovery and hazardous-waste cleanup, said it has 13 facilities in operation, up from seven a year ago.
Meanwhile, Ogden Corp., which also has interests in building maintenance and management, reported third-quarter net income of $27.1 million, or 67 cents a share, more than twice the $13.5 million, or 34 cents a share, a year earlier.
Revenue rose 33% to $378.1 million from $283.8 million.
Under attack by its own listed companies and powerful floor traders, the New York Stock Exchange is considering reinstituting a "collar" on program trading that it abandoned last year, according to people familiar with the Big Board.
The exchange also may step up its disclosure of firms engaged in program trading, these people said.
Big Board officials wouldn't comment publicly.
But in an interview in which he called the stock market's volatility a "national problem," Big Board Chairman John J. Phelan Jr. said, "We are going to try to do some things in the short intermediate term" to help the situation.
Mr. Phelan has been viewed by many exchange members as being indifferent to stock-price swings caused by program trades.
He said he is "very surprised" by the furor over program trading and the exchange's role in it that has raged in recent days.
Mr. Phelan said that the Big Board has been trying to deal quietly with the issue, but that banning computer-assisted trading strategies entirely, as some investors want, would be like "taking everybody out of an automobile and making them ride a horse."
The exchange has a board meeting scheduled for tomorrow, and it is expected that some public announcement could be made after that.
Big Board officials have been under seige from both investors and the exchange's own floor traders since the Dow Jones Industrial Average's 190-point tumble on Oct. 13.
Mr. Phelan hasn't been making public remarks in recent days, and many people have urged him to take more of a leadership role on the program trading issue.
What the Big Board is considering is re-establishing a "collar" on program trading when the market moves significantly.
Early last year, after a 140-point, one-day drop in the Dow, the Big Board instituted the collar, which banned program trading through the Big Board's computers whenever the Dow moved 50 points up or down in a day.
It didn't work.
"The collar was penetrated on a number of occasions," meaning securities firms figured out ways to conduct program trades to circumvent the collar and use the Big Board's electronic trading system, Mr. Phelan said.
That was when the exchange took a new tack by publishing monthly statistics listing the top 15 program trading firms.
Exchange officials emphasized that the Big Board is considering a variety of actions to deal with program trading.
People familiar with the exchange said another idea likely to be approved is expanding the monthly reports on program trading to cover specific days or even hours of heavy program trading and who was doing it.
Meanwhile, another big Wall Street brokerage firm joined others that have been pulling back from program trading.
American Express Co.'s Shearson Lehman Hutton Inc. unit said it ceased all index-arbitrage program trading for client accounts.
In stock-index arbitrage, traders buy and sell large amounts of stock with offsetting trades in stock-index futures to profit from fleeting price discrepancies between the two markets.
Shearson, which in September was the 11th-biggest program trader on the Big Board, had already suspended stock-index arbitrage for its own account.
Also, CS First Boston Inc.'s First Boston Corp. unit, the fifth-biggest program trader in September, is "preparing a response" to the program-trading outcry, officials of the firm said.
First Boston is one of the few major Wall Street firms that haven't pulled back from program trading in recent days.
Mr. Phelan is an adroit diplomat who normally appears to be solidly in control of the Big Board's factions.
But he has been getting heat from all sides over program trading.
Mr. Phelan's recent remarks that investors simply must get used to the stock-market volatility from program trading have drawn criticism from both the exchange's stock specialists, who make markets in individual stocks, and from many companies that have shares listed on the Big Board.
Mr. Phelan said that his predicting continued volatility is just "how the world is.
If bringing the message is a crime, I'm guilty of it."
But he said this doesn't mean he is satisfied with the market's big swings.
"We're trying to take care of a heck of a lot of constituents," Mr. Phelan said.
"Each one has a different agenda."
For example, in a special meeting Monday with Mr. Phelan, senior officials of some of the Big Board's 49 stock specialist firms complained that the exchange is no longer representing their interests.
"We are looking for representation we haven't had," a specialist said.
"We've had dictation."
After another session Mr. Phelan held yesterday with major brokerage firms such as Morgan Stanley & Co., Goldman, Sachs & Co., PaineWebber Group Inc. and First Boston -- all of which have engaged in program trading -- an executive of a top brokerage firm said, "Clearly, the firms want the exchange to take leadership."
Many specialist firms resent the Big Board's new "basket" product that allows institutions to buy or sell all stocks in the Standard & Poor's 500-stock index in one shot.
Ultimately, the specialists view this as yet another step toward electronic trading that could eventually destroy their franchise.
"His {Phelan's} own interests are in building an electronic marketplace," said a market maker.
The basket product, while it has got off to a slow start, is being supported by some big brokerage firms -- another member of Mr. Phelan's splintered constituency.
Mr. Phelan has had difficulty convincing the public that the Big Board is serious about curbing volatility, especially as the exchange clearly relishes its role as the home for $200 billion in stock-index funds, which buy huge baskets of stocks to mimic popular stock-market indexes like the Standard & Poor's 500, and which sometimes employ program trading.
The Big Board wants to keep such index funds from fleeing to overseas markets, but only as long as it "handles it intelligently," Mr. Phelan said.
Despite what some investors are suggesting, the Big Board isn't even considering a total ban on program trading or stock futures, exchange officials said.
Most revisions it will propose will be geared toward slowing down program trading during stressful periods, said officials working with the exchange.
Computers have made trading more rapid, but that can be fixed with some fine-tuning.
"I think if you {can} speed things up, you can slow them down," Mr. Phelan said.
"That's different than wrecking them."
While volatility won't go away, he said, "Volatility is greater than program trading.
What I'm trying to say to people is, it's proper to worry about program trading, but it's only a piece of the business."
For example, Mr. Phelan said that big institutions have so much control over public investments that they can cause big swings in the market, regardless of index arbitrage.
"A lot of people would like to go back to 1970," before program trading, he said.
"I would like to go back to 1970.
But we're not going back to 1970."
Indeed, Mr. Phelan said that if stock-market volatility persists, the U.S. may lose its edge as being the best place to raise capital.
"Japan's markets are more stable," he said.
"If that continues, a significant number of {U.S.} companies will go over there to raise money."
In coming days, when the Big Board formulates its responses to the program-trading problem, Mr. Phelan may take a more public role in the issue.
Lewis L. Glucksman, vice chairman of Smith Barney, Harris Upham & Co., said: "This is a problem that's taking on a life of its own.
The program trading situation seems to have driven individual investors as well as others out of the market, and even Europeans are suspicious.
The exchange should take a pro-active position."
For now, however, Mr. Phelan said: "I refuse to get out there and tell everybody everything is hunky-dory.
We have a major problem, and that problem is volatility."
Craig Torres contributed to this article.
A NEW MINIMUM-WAGE PLAN has been worked out by Congress and Bush, opening the way for the first increase in over nine years.
The compromise proposal, ending a long impasse between Democrats and the president, would boost the minimum wage to $4.25 an hour by April 1991 from $3.35 now.
The legislation also includes a lower "training wage" for new workers who are teen-agers.
The Big Board is considering reviving a curb on program trading when the market is volatile.
The exchange, which abandoned such a "collar" last year because it didn't prevent sharp price swings, has been under attack recently for not taking action against program trading.
Great Northern Nekoosa reacted coolly to Georgia-Pacific's takeover bid of $58 a share, or $3.19 billion, though the suitor said all terms are negotiable.
Great Northern's stock soared $20.125, to $62.875, on speculation that a higher bid would emerge.
Stock prices rallied as the Georgia-Pacific bid broke the market's recent gloom.
The Dow Jones industrials finished up 41.60, at 2645.08.
The dollar and bond prices also closed higher.
Leading indicators rose a slight 0.2% in September, a further indication the economy is slowing but without any clear sign of whether a recession looms.
Meanwhile, new-home sales plunged 14% in the month.
Labor costs climbed 1.2% in private industry during the third quarter, matching the second-quarter rise.
Health-insurance costs soared.
Time Warner and Sony could end up becoming partners in several business ventures as part of a settlement of their dispute over Hollywood producers Peter Guber and Jon Peters.
A bidding war for Jaguar became more likely as Britain unexpectedly decided to end restrictions blocking a takeover of the luxury car maker.
Sea Containers plans to sell $1.1 billion of assets and use some of the proceeds to buy about 50% of its common shares for $70 each.
The company is trying to fend off a hostile bid by two European shipping firms.
Eastern Airlines pilots were awarded between $60 million and $100 million in back pay by an arbitrator, a decision that could complicate the carrier's bankruptcy reorganization.
LTV Steel is boosting prices of flat rolled steel products an average 3%, but it's unclear whether the increases, set for Jan. 1, 1990, will stick.
Southern's Gulf Power unit paid $500,000 in fines after pleading guilty to conspiracy to make illegal political contributions and tax evasion.
More big Japanese investors are buying U.S. mortgage-backed securities, reversing a recent trend.
USX's profit dropped 23% in the third quarter as improved oil results failed to offset weakness in the firm's steel and natural gas operations.
Miniscribe reported a negative net worth and hinted it may file for Chapter 11.
The disk-drive maker disclosed a major fraud two months ago.
Markets --
Stocks: Volume 176,100,000 shares.
Dow Jones industrials 2645.08, up 41.60; transportation 1205.01, up 13.15; utilities 219.19, up 2.45.
Bonds: Shearson Lehman Hutton Treasury index 3426.33, up
Commodities: Dow Jones futures index 129.63, up 0.25; spot index 129.84, off 0.25.
Dollar: 142.85 yen, up 0.95; 1.8415 marks, up 0.0075.
Bond prices staggered in seesaw trading, rising on reports of economic weakness and falling on reports of economic strength.
Treasury bonds got off to a strong start, advancing modestly during overnight trading on foreign markets.
"We saw good buying in Japan and excellent buying in London," said Jay Goldinger, market strategist and trader at Capital Insight Inc., Beverly Hills, Calif.
The market's tempo was helped by the dollar's resiliency, he said.
Late in London, the dollar was quoted at 1.8410 West German marks and 142.70 Japanese yen, up from late Monday in New York.
British sterling eased to $1.5775 from $1.5825.
When U.S. trading began, Treasury bonds received an additional boost from news that sales of new single-family homes fell 14% in September.
The contraction was twice as large as economists projected and was the sharpest decline since a 19% drop in January 1982.
Economists said the report raised speculation that the economic slowdown could turn into a recession, which would pave the way for the Federal Reserve to lower interest rates.
But later in the day, a report by the Purchasing Management Association of Chicago cast doubt on the recession scenario.
The association said its October index of economic activity rose to 51.6% after having been below 50% for three consecutive months.
A reading below 50% indicates that the manufacturing industry is slowing while a reading above 50% suggests that the industry is expanding.
Bond prices fell after the Chicago report was released.
By the end of the day, bond prices were mixed.
The benchmark 30-year bond was nearly 1/4 point higher, or up about $2.50 for each $1,000 face amount.
New two-year notes ended unchanged while three-year and four-year notes were slightly lower.
Municipal bonds ended unchanged to as much as 1/2 point higher while mortgage-backed securities were up about 1/8 point.
Corporate bonds were unchanged.
In the corporate market, an expected debt offering today by International Business Machines Corp. generated considerable attention.
The giant computer maker is slated to offer $500 million of 30-year non-callable debentures through underwriters led by Salomon Brothers Inc.
Traders expect the bonds to yield about 0.60 to 0.65 percentage point above the Treasury's benchmark 30-year bond, which ended Tuesday with a yield of about 7.90%.
The last time IBM tapped the corporate debt market was in April 1988, when it offered $500 million of debt securities.
IBM's visits to the debt market are closely watched by treasurers at other corporations and by credit market analysts.
Some analysts believe the company has the ability to pinpoint the trough in interest-rate cycles.
In October 1979, just days before the Federal Reserve raised interest rates, IBM offered $1 billion in debt securities.
The boost in rates sent IBM's bonds tumbling, leaving underwriters with millions of dollars of losses and triggering a sell-off in the overall market.
The company "can't be bullish if they're doing a sizable 30-year bullet," said one analyst.
Others said IBM might increase the size of the offering to as much as $1 billion if investor demand is strong.
The company has $1 billion in debt filed with the Securities and Exchange Commission.
"I think the $500 million is a little bit of a fire drill," said Jim Ednee, head of the industrial bond department at Drexel Burnham Lambert Inc.
"I think as the pricing time arrives, the bonds will come a little richer and in a larger amount."
Treasury Securities
Treasury prices ended mixed in light trading.
The benchmark 30-year bond was quoted late at 102 12/32 to yield 7.90% compared with 102 7/32 to yield 7.92% Monday.
The latest 10-year notes were unchanged at 100 16/32 to yield 7.904%.
Short-term rates also were mixed.
The discount rate on three-month Treasury bills rose slightly from the average rate at Monday's auction to 7.79% for a bond-equivalent yield of 8.04%.
The discount rate on six-month Treasury bills fell slightly to 7.60% for a bond-equivalent yield of 7.99%.
Corporate Issues
Two junk bond issues were priced yesterday, including a scaled-backed offering by Beatrice Co.
A spokesman for underwriters Salomon Brothers Inc. said Beatrice cut its high-yield offering to $251 million from a planned $350 million after it became clear the company would have to give investors higher yields.
In the two-part offering, $151 million of senior subordinated reset notes were priced at 99.75 and carried a rate of 13 3/4%, while the $100 million of senior subordinated floating rate notes were priced to float at 4.25 percentage points above the London Interbank Offered Rate, or LIBOR.
The one-year LIBOR rate yesterday was 8 7/16%.
Since the recent deterioration of the junk-bond market, at least two other junk issuers have said they plan to scale back planned high-yield offerings, and several issues have been postponed.
William Carmichael, Beatrice chief financial officer, said favorable market conditions in September prompted the company to plan more debt than necessary.
"However, given the changes in the market conditions that have occurred since then, we decided to sell only the amount needed to proceed with our contemplated recapitalization," he said.
Under the firm's original bank credit agreement, it was required to raise $250 million of subordinated debt to be used to repay some of the bank borrowings drawn to redeem $526.3 million of increasing rate debentures in August.
A month ago, when Beatrice first filed to sell debt, the company had planned to offer $200 million of its senior subordinated reset notes at a yield of 12 3/4%.
The $150 million in senior subordinated floating-rate notes were targeted to be offered at a price to float four percentage points above the three-month LIBOR.
By October, however, market conditions had deteriorated and the reset notes were targeted to be offered at a yield of between 13 1/4% and 13 1/2%.
Mr. Carmichael said investors also demanded stricter convenants.
Continental Cablevision Inc., via underwriters at Morgan Stanley & Co., priced $350 million of junk bonds at par to yield 12 7/8%.
Mortgage-Backed Securities
J.C. Penney & Co. issued $350 million of securities backed by credit-card receivables.
The securities were priced at 99.1875 to yield about 9.19%.
Underwriters at First Boston Corp. said the J.C. Penney credit-card securities are the first with a 10-year average life, which is much longer than previous such issues.
Elsewhere, Ginnie Mae's 9% issue for November delivery was quoted at 98 18/32 bid, up 5/32 from late Monday, to yield about 9.333% to a 12-year average life assumption.
Freddie Mac's 9 1/2% issue was quoted at 99 20/32, up 3/32 from Monday.
Fannie Mae's 9% issue was at 98 7/32, up 1/8.
On the pricing front, an 11-class issue of $500 million Federal Home Loan Mortgage Corp.
Remic mortgage securities was launched by a Morgan Stanley group.
The offering is backed by Freddie Mac's 10% issue with a weighted average term to maturity of 29.583 months.
Municipal Issues
Municipal bonds were little changed to 1/2 point higher in late dealings.
"We were oversold and today we bounced back.
Some accounts came in for some blocks in the secondary {market}, which we haven't seen for a while," said one trader.
"There were no {sell} lists and the calendar is lightening up a bit.
There's light at the end of the tunnel for municipals," he said, adding that he expects prices to "inch up" in the near term.
The market's tone improved after Monday's pricing of $813 million New York City general obligation bonds.
The issue's smooth absorption eased fears that supply would overwhelm demand in coming sessions, traders said.
Demand for the bonds was strong enough to permit underwriters to trim some yields in the tax-exempt portion of the offering late Monday.
A two-part $75.1 million offering of wastewater treatment bonds by the New Jersey Wastewater Treatment Trust was more than half sold by late in the session, according to lead underwriter Merrill Lynch Capital Markets.
The debt was reoffered priced to yield from 6% in 1991 to 7.15% in 2008-2009.
Foreign Bonds
Most foreign government bonds markets were quiet.
West German bonds firmed a bit after Monday's fall, but traders said the market remains bearish due to speculation that interest rates could rise again.
In a speech given Friday but released late Monday, Bundesbank Vice President Helmut Schlesinger suggested that it was risky to claim that the booming German economy has reached the peak of its cycle.
His comments were interpreted as a sign that higher interest rates are possible.
On Oct. 5, the Bundesbank raised the Lombard and discount rates by one percentage point to 8% and 6%, respectively, the highest levels in seven years.
Germany's 7% bond due October 1999 was unchanged at 99.35 to yield 7.09% while the 6 3/4% notes due July 1994 rose 0.025 point to 97.275 to yield 7.445%.
Japanese government bonds showed little change.
Japan's benchmark No. 111 issue due 1998 ended on brokers' screens at 95.90, down 0.02 point, to yield 5.435%.
British government bonds were little changed as investors awaited an address on economic policy by John Major, the new Chancellor of the Exchequer.
Britain's benchmark 11 3/4% bond due 2003/2007 rose 2/32 to 111 1/2 to yield 10.14% while the 11 3/4% notes due 1991 were unchanged at 98 21/32 to yield 12.95%.
Paramount Communications Inc. said it sold two Simon & Schuster information services units to Macmillan Inc., a subsidiary of Maxwell Communication Corp.
The two units are Prentice Hall Information Services, which publishes tax, financial planning and business law information, among other services, and Prentice Hall Information Network, which electronically delivers tax information.
Terms weren't disclosed, but industry executives said the units were sold for $40 million.
Arthur H. Rosenfeld, previously president of the Prentice Hall Tax and Professional Services division, was named president of the newly formed Macmillan Professional and Business Reference division.
Simon & Schuster retains the Corporation Law looseleaf service, which will become part of its Prentice Hall Law & Business unit.
A governing body of both the Financial Accounting Standards Board and the Governmental Accounting Standards Board voted to give the FASB jurisdiction over accounting standards for certain government-owned entities.
The Financial Accounting Foundation voted 12-2 that FASB accounting rules supercede GASB rules in regard to utilities, hospitals, and colleges and universities owned by the government.
GASB rules still apply for other government units.
After the GASB was founded in 1984, 11 years after the FASB, the government-owned entities were supposed to follow FASB rules unless the GASB superceded them.
The GASB had told governments they didn't have to follow FASB rules on depreciation, making it difficult for bond-rating agencies to compare private and state-owned schools, which compete in the public bond market.
The foundation vote is effective for the affected government entities with fiscal years that begin starting next Jan. 1 and makes the financial results of the hospitals, colleges and schools easier to compare with for-profit businesses.
But it may lead to separate financial reports based on different rules for the government entities under FASB rules and those still under GASB rules.
"Managers of government entities are often more concerned with the political and legal structure and financial-report comparability with profit-making businesses isn't always as high a priority," a foundation spokesman said.
Avery Inc. said it completed the sale of Uniroyal Chemical Holding Co. to a group led by management of Uniroyal Chemical Co., the unit's main business.
It valued the transaction at $800 million.
Avery, which continues to operate a coal company it expects to sell at a loss, said in proxy materials it intends to seek control of one or more companies.
After fees and repayment of debt, Avery is left with about $24 million in cash and securities from the Uniroyal sale.
Avery paid $750 million, including various legal and financing fees, to acquire Uniroyal Chemical, Middlebury, Conn., in 1986 -- a move that burdened Avery with debt.
In over-the-counter trading, Avery shares were quoted yesterday at a bid price of 93.75 cents a share.
According to Avery, for the year ended Sept. 30, 1988, Uniroyal Chemical had sales of $734.2 million and a net loss of $47.1 million.
An Avery spokesman said that the loss was magnified by accounting adjustments and that the company's loss was smaller on a cash basis.
Uniroyal has 2,600 employees and facilities in the U.S., Canada, Brazil, Italy and Taiwan.
In a related development, Avery said it completed a recapitalization in which its controlling shareholders and top officers, Nelson Peltz and Peter W. May, surrendered warrants and preferred stock in exchange for a larger stake in Avery's common shares.
On a fully diluted basis, the two raised their stake to 68% from 51%.
In December 1988, Messrs. Peltz and May sold their stock in Triangle Industries Inc., a packaging company they controlled, to Pechiney Corp. of France.
The executives had profited handsomely by building American National Can Co., Triangle's chief asset.
In January 1989, the two men acquired the non-packaging assets of Triangle, including a controlling stake in Avery and, by extension, Uniroyal Chemical.
In the August proxy material, Avery said that unless it sold Uniroyal, its ability to service debt would be hurt and Avery's shareholder value would "continue to erode."
Until Avery makes an acquisition, Messrs. Peltz and May will waive their direct salaries and bonuses, the company said.
For at least the next six months, however, Avery will continue to pay $200,000 a month for management services to a company controlled by Messrs. Peltz and May, according to the proxy material.
Clarcor Inc. said a plan to sell its J.L. Clark Inc. subsidiary to a group headed by Anderson Industries Inc. for $70.3 million has been terminated.
Clarcor, a maker of packaging and filtration products, said the two companies couldn't agree on terms of a definitive agreement.
The sale price of the unit, which makes packaging products, was to consist of cash, notes and an amount to be determined by the unit's future performance.
Clarcor said it is inviting proposals from other prospective purchasers of the unit.
Both Clarcor and Anderson are based in Rockford, Ill.
Rally's Inc. said it adopted a shareholders rights plan to protect shareholders from an inadequately priced takeover offer.
The plan provides for the distribution of one common stock-purchase right as a dividend for each share of common outstanding.
Each right entitles shareholders to buy one-half share of common for $30.
Earlier this month, a group led by three of the company's directors, Burt Sugarman, James M. Trotter III and Willam E. Trotter II, indicated it had a 45.2% stake in the Louisville, Ky., fast-food company and that it planned to seek a majority of seats on Rally's nine-member board.
The company said it was "concerned about the announced intent to acquire control of the company" by a Sugarman-led group.
Fujitsu Ltd. said it wants to withdraw its controversial one-yen bid to design a waterworks computer system for the city of Hiroshima.
Meanwhile, Japan's Fair Trade Commission said it was considering launching an investigation into whether the bid, the equivalent of less than a penny, violates anti-monopoly laws.
Hiroshima last week held an auction to pick the contractor, expecting to pay about 11 million yen for the project.
Eight companies submitted bids, but Fujitsu won the contract by essentially saying it would do the job for free.
News of the bid drew sharp criticism from other computer companies and industry observers.
Fujitsu itself, which said the bid hadn't been approved by its headquarters, was clearly embarrassed.
The bid wasn't "socially acceptable," a company spokeswoman said.
Hiroshima officials said they still consider the contract in effect and had no immediate plans to cancel it.
They said they wanted to wait for the outcome of any government investigation before deciding what to do.
The city's Department of Consumer Affairs charged Newmark & Lewis Inc. with failing to deliver on its promise of lowering prices.
In a civil suit commenced in state Supreme Court in New York, the agency alleged that the consumer-electronics and appliance discount-retailing chain engaged in deceptive advertising by claiming to have "lowered every price on every item" as part of an advertising campaign that began June 1.
The agency said it monitored Newmark & Lewis's advertised prices before and after the ad campaign, and found that the prices of at least 50 different items either increased or stayed the same.
In late May, Newmark & Lewis announced a plan to cut prices 5% to 20% and eliminate what it called a "standard discount-retailing practice" of negotiating individual deals with customers.
The consumer agency also disputed Newmark & Lewis's continuing strategy of advertising "new lower prices" when allgedly there haven't been price reductions since June 1.
Richard D. Lewis, president of the 47-store chain, defended the company's pricing campaign, saying it didn't use "the misleading expression `reduced from original prices.'"
Mr. Lewis said the company marked price tags and advertised at its "lowest possible prices" for all its merchandise to reduce public confusion.
Mr. Lewis said the company gave the Consumer Affairs department "volumes of documents" to substantiate its statements, and made "every effort to comply" with all the agency's policies.
In its suit, the consumer agency seeks fines of $1,000 per violation of the city's Consumer Protection Law, costs of investigation, and an injunction to prevent Newmark & Lewis from continuing its allegedly deceptive advertising.
Wary investors have been running for the stock market's equivalent of bomb shelters, buying shares of gold-mining and utility companies.
Those two groups have recently been leading the list of stocks setting new highs.
On Friday, when only a dozen common stocks hit 52-week highs on the New York Stock Exchange, five were gold-mining issues, and another four were utilities.
On Monday, when a mere seven common stocks managed new highs, six were utilities or golds.
At first glance, gold and utilities seem strange bedfellows.
After all, gold prices usually soar when inflation is high.
Utility stocks, on the other hand, thrive on disinflation, because the fat dividends utilities pay look more attractive when prices are falling (or rising slowly).
But the two groups have something very important in common: They are both havens for scared money, stocks for people who hate stocks.
It's as if investors, the past few days, are betting that something is going to go wrong -- even if they don't know what.
If the stock market and the economy catch their breath and show that they're on firmer footing, these stocks might well fall back.
Indeed, that happened to some extent yesterday, as industrial stocks rebounded, partly on news of takeovers in the paper industry.
Still, a lot of investors clearly have revived their interest in gold and utility shares.
"The primary overriding thing is that people are frightened," says Martin Sass, a New York money manager.
"The aftershocks of Oct. 13 (when the Dow Jones Industrial Average dropped 190 points) are still reverberating."
Certainly, the Oct. 13 sell-off didn't settle any stomachs.
Beyond that, money managers and analysts see other problems.
Inventories are creeping up; car inventories are already high, and big auto makers are idling plants.
Takeover fever has cooled, removing a major horse from the market's cart.
Britain's unsettled political scene also worries some investors.
"The gyrations in the British government" add political uncertainty on top of high inflation and a ragged stock market, says John Hoffman, assistant director of research at Smith Barney, Harris Upham & Co.
"One of the three major markets in the world is getting chewed up pretty bad."
"If the Fed does not come to the rescue and produce lower short-term interest rates over the next 30 days, the market's going to flounder," says Larry Wachtel, a market analyst with Prudential-Bache Securities.
With this sort of sentiment common, it's natural for investors to seek out "defensive" investments.
Utilities are a classic example: Even in recessions, people continue to use electric power, water and gas at a fairly steady rate.
Such defensive issues as food, tobacco, and drug stocks have been in favor for some time.
But many of these stocks have now become expensive.
Mr. Wachtel points to Coca-Cola Co. and PepsiCo Inc. as examples: They're selling for 18 to 22 times estimated 1990 per-share earnings.
Gold stocks aren't cheap on this basis, either, with many selling for 20 times earnings or more.
Even utility stocks aren't all that inexpensive, at an average of 14 times earnings.
But the two groups represent a further step in defensiveness.
If gold stocks and utilities continue to lead, it may signal that the market is in for rough times.
That's just what Joseph Granville expects.
"We are going to explode lower," says the flamboyant market seer, who had a huge following a few years back.
"Anyone telling you to buy stocks in this market is technically irresponsible.
You don't want to own anything long except gold stocks."
One reason for his gloom is a weekly tally he keeps of stocks within a point of hitting new highs or lows.
Last Friday, 96 stocks on the Big Board hit new 12-month lows.
But by Mr. Granville's count, 493 issues were within one point of such lows.
Robert Stovall, a veteran New York money manager and president of Stovall/Twenty-First Securities, has money in both gold and utility issues.
"I think we could very well have {an economic} slowdown, beginning very soon if not already," he says.
Mr. Stovall doesn't expect an actual recession.
But he does expect "a muffler dragger" of an economy, with "very slow growth, maybe one quarter of no growth at all."
In such a climate, utility stocks look good to him.
He favors FPL Group Inc., Florida Progress Corp., TECO Energy Inc., Wisconsin Energy Corp., and Dominion Resources Inc.
The appeal of gold issues, Mr. Stovall says, is that "they're a counter group.
You go into them because they move counter to the general market."
He adds that gold stocks had been down so long they were "ready for a bounce."
His favorites are American Barrick Resources Corp., Echo Bay Mines Ltd. and Coeur d'Alene Mines Corp.
Nevertheless, Mr. Stovall emphasizes that "you don't buy {gold stocks} based on powerful fundamentals."
In addition to having high price-earnings ratios, most pay puny dividends, if any.
"The earning power {of gold mining companies} is restricted unless the gold price hops up over $425 an ounce," he says.
Abby Cohen, an investment strategist for Drexel Burnham Lambert, also thinks it makes sense to have some money in both utilities and gold.
"My outlook is for a decline of about 10% in corporate profits" in 1990, she says.
But "a bunch of utilities" should post profit increases.
Among utilities, Drexel currently favors Entergy Corp. and General Public Utilities Corp.
As for gold, she notes that it usually rises when the dollar is weak, as it has been lately.
Among gold stocks, Drexel likes Battle Mountain Gold Co., Newmont Gold Co. and Freeport-McMoRan Gold Co.
It never ceases to amaze me how the business world continues to trivialize the world's environmental problems ("Is Science, or Private Gain, Driving Ozone Policy?" by George Melloan, Business World, Oct. 24).
To suggest that a 10% drop in ozone by the middle of the next century would be negligible is irresponsible and shortsighted.
Consider the fact that a mere 2% drop in ozone would increase birth defects and mutations by allowing solar radiation to alter the DNA structure.
Even a small reduction is unacceptable and to suggest otherwise is penny-wise and pound-foolish.
The reason environmentalists "don't mind seeing new crises arise" is because there are new crises.
Crises larger and more dangerous to the quality of life than they were 10 years ago.
If you are doubtful, consider for a moment that the Pomton Lakes Reservoirs in northern New Jersey, which supply the tristate area with drinking water, are riddled with toxic PCBs.
This is a fact and not the product of some environmental doomsayer or a group's ploy to create a market.
It's time business leaders and the general public learn that mankind does not rule over this natural environment but is rather the integral, symbiotic player within nature's workings.
Mark T. Kuiper Jersey City, N.J.
Mr. Melloan's column was right on the money, but I wish it could have gone one step further.
As an employee of a major refrigerator and freezer manufacturer, I have been heavily involved in dealing with the political manifestations of the Rowland-Molina theory (named after the researchers who found in 1974 that chlorofluorocarbons contributed to the depletion of ozone in the earth's atmosphere) and the Montreal Protocol.
An important part of my effort has been to understand the science so I can explain it to corporate colleagues facing major changes in product design.
In my research, I have found a paper by Joseph Scotto of the National Cancer Institute and several colleagues reporting an 11-year decrease in UV-B radiation at eight U.S. measurement sites.
Our concern for the ozone layer, of course, grows out of the potential for increasing UV-B radiation, which could damage flora and fauna.
The last of the measurements reported was in 1985, but recent conversations with Mr. Scotto indicated that he knew of no recent changes in the trend.
I understand, but haven't yet verified, that there are studies by Norwegians, Russians and the Max Planck Institute that show either unchanging or declining UV-B at the surface.
To me, this calls into question the validity of the Rowland-Molina theory and hence the whole chlorofluorocarbons replacement effort.
This, in turn, threatens the massive vested interests of which you have written.
My questions on this subject at a recent meeting at the World Resources Institute with representatives of the National Resource Development Commission, the Environmental Protection Agency, Friends of the Earth, etc. were greeted with derision and some mumbled comments about that report being discredited.
When I expressed amazement that no one was undertaking a more current and credible UV-B study, I was urged to get back to the agenda topic, which was, ironically, a schedule for getting rid of HCFCs, the so-called soft CFCs that are such an important part of the CFC substitution scenario.
Subsequently, I have learned that a private group, of which Du Pont is a part, is funding a modest program to continue data gathering at the Scotto report stations as well as to develop more sophisticated UVB measuring instruments.
But this is almost an underground activity.
To my knowledge, no government entities, including the EPA, are pursuing UV-B measurements.
The topic never comes up in ozonedepletion "establishment" meetings, of which I have attended many.
It seems to me that such measurements are a vital part of any intellectually honest evaluation of the threat posed by CFCs.
While recognizing that professional environmentalists may feel threatened, I intend to urge that UV-B be monitored whenever I can.
Frederick H. Hallett Vice President Industry and Government Relations White Consolidated Industries Inc. Washington
The relationship between surface release of CFCs and global stratospheric ozone loss was identified back in 1974.
Although, like all scientific theories, it had its initial opponents, few experts question the connection now.
The discovery of the ozone "hole" over Antarctica and the results of ground-based and high-altitude aircraft experiments conducted over the past several years serve as evidence that ozone depletion is related to CFC concentrations.
In the September issue of Scientific American, Thomas E. Graedel, distinguished member of the technical staff at AT&T Bell Laboratories, and Paul J. Crutzen, director of the air chemistry division of the Max Planck Institute for Chemistry in Mainz, West Germany, wrote, "It is now quite evident that chlorofluorocarbons, particularly CFC-11 and CFC-12 are the major culprits responsible for ozone depletion."
Mr. Melloan quotes Peter Teagan and invokes the name of Arthur D. Little Inc. to support his statement.
However, unlike Messrs. Graedel and Crutzen, who are both pioneers in the study of atmospheric chemistry, Mr. Teagan has no special expertise in the area.
He is a mechanical engineer, not an atmospheric chemist.
It is insulting and demeaning to say that scientists "needed new crises to generate new grants and contracts" and that environmental groups need them to stay in business.
Solving the global environmental problems we all face will require an unprecedented level of cooperation and communication among industry, policy makers and the scientific community world-wide.
Karen Fine Coburn Publisher Global Environmental Change Report Arlington, Mass.
Nearly two months after saying it had been the victim of widespread fraud, MiniScribe Corp. disclosed it had a negative net worth of $88 million as of July 2 and hinted that it might be forced to file for protection under bankruptcy laws.
Richard Rifenburgh, chairman and chief executive of the Longmont, Colo., disk-drive maker, also said the company continued losing money in the third quarter and expects to sustain further losses through the end of the year.
Mr. Rifenburgh told industry analysts he is moving "aggressively" to negotiate out-of-court settlements on a number of shareholder lawsuits, but noted that the company could file for bankruptcy-law protection if settlement talks fail.
Mr. Rifenburgh also noted that 150 million shares of MiniScribe common stock were traded during the past three years, "so there's a tremendous amount of exposure."
MiniScribe has said that its financial results for the past three fiscal years would have to be restated because of the allegedly fraudulent accounting and marketing practices that inflated revenues and net income.
MiniScribe also hasn't filed any financial statements for 1989.
Mr. Rifenburgh said such statements should be ready by the end of November.
He said he expects the company to have $500 million in sales for this year.
He didn't say what the company expected to report for year-earlier sales, which will be restated from the previously reported $603 million.
The release of MiniScribe's new balance sheet came one day after it introduced its new line of one-inch disk drives, on which it is pinning much of its hope for survival.
Although it is not the first company to produce the thinner drives, which store information in personal computers, MiniScribe says it is the first with an 80-megabyte drive; the company plans to introduce a 120-megabyte drive next year.
Analysts and consultants had mixed reactions to yesterday's announcements, praising Mr. Rifenburgh's efforts but questioning whether the company can survive in a highly competitive marketplace.
"It's a wait-and-see attitude," said Dave Vellante, vice president of storage research for International Data Corp.
Others pointed out that at least four other disk-drive makers will have competitive one-inch drives early next year and that the industry already operates on very thin margins.
The company also faces delisting by the National Association of Securities Dealers.
The company continues to trade in the over-the-counter market with an exception to listing requirements.
MiniScribe filed a status report with the NASD on Monday, detailing its efforts to comply with listing requirements and requesting an extension of the exception, but hasn't received a response.
MiniScribe common closed yesterday at $1.9375, down 6.25 cents, and has been trading for several months at less than $3 a share.
Meanwhile, U.S. Attorney Jerry Rafferty in Denver is reviewing the report prepared by MiniScribe's outside directors, to determine if criminal charges should be brought before a grand jury.
The MiniScribe report outlines a host of allegedly fraudulent practices, including the shipment of bricks and defective disk drives that were booked as sales, and inventory forgeries in accounting records.
The internal investigation also criticized MiniScribe's auditors, Coopers & Lybrand, for allegedly ignoring numerous red flags.
Mr. Rifenburgh said the board still hasn't acted on most of the internal report's recommendations, pending restatement of the balance sheet.
He added that he expects to make a recommendation within a few weeks on whether MiniScribe should file its own lawsuits against former company officers and directors.
American Enterprise Institute scholar Norman Ornstein in the Oct. 21 TV Guide on "What TV News Doesn't Report About Congress -- and Should":
By concentrating all their resources on the pay raise, Wright and Tower, the networks actually overlooked some major stories that showed the flaws and shortcomings of the institution. . . .
An imaginative producer could easily have created a fast-moving and interesting piece about how Congress really works -- and why voters in, say, West Virginia got a federally funded university project and building while voters in Arkansas did not.
But nobody did such a piece, reflecting a contemporary axiom: the more a scandal has to do with a congressman's duties as a congressman, the less likely it is to catch the fancy of a network.
Ethicist Michael Josephson, in one of his institute's recent publications on "Journalism: In the Year 2000":
The operative definition of newsworthiness will favor virtually unrestrained use of personal, sensitive and intimate facts.
Traditional standards of relevancy and importance ("is this something the public ought to know") will be replaced by a much broader test ("is this something the public is interested in knowing").
And, since the public has always been fascinated by gossip and voyeurism, reporters and editors will strain for creative angles to justify the inclusion of collateral facts about private lives including sexual activities and domestic relationships, activities of family members, and all matters about mental and physical health.
Similarly, visual images will be more vivid, sensational and, sometimes, gruesome.
One consequence of the trend toward tabloid standards of taste will be fierce attacks from politicians who will find sufficient evidence of abuse to arouse an already cynical public to control the press.
Bankers Trust New York Corp. won permission from the Federal Reserve Board to move the company's private placement department to its fledgling securities subsidiary.
The seemingly mundane action, which was opposed by the Securities Industry Association, a trade group, has important implications for banks' recent entry into the underwriting of corporate securities.
The Fed's action increases the volume of publicly registered securities that banks' securities affiliates will be able to underwrite.
Several other banks have similar applications pending.
Over the past two years, the Fed has given a handful of banks' securities affiliates permission to underwrite and deal in a variety of corporate, asset-backed and municipal securities that had previously been the sole domain of securities firms.
Securities firms have challenged those Fed approvals, saying they violate federal laws separating the banking and securities businesses.
However, the Fed limited the revenue that banks could earn from these new underwriting activities to no more than 10% of the revenue earned from other securities activities long open to banks, such as dealing in U.S. Treasurys.
For some banks that 10% ceiling created problems.
But, by allowing BT Securities Inc. to handle private placements, the Fed boosted the volume of new types of underwriting that the unit can do.
Private placements involve debt and equity securities, typically in denominations of $1 million, that are sold to institutional investors and aren't registered with the Securities and Exchange Commission.
Last year, Bankers Trust said it placed $10 billion of corporate debt and equities privately.
Companies listed below reported quarterly profit substantially different from the average of analysts' estimates.
The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share.
Estimated and actual results involving losses are omitted.
The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days.
Otherwise, actual profit is compared with the 300-day estimate.
Bonnie J. Stedt was named an executive vice president of the American Express Travel Related Services Co. unit of this travel and financial services firm.
She retains her duties of human-resources director.
Joe F. Lynch, the 56-year-old chairman and chief executive officer of First Continental Real Estate Investment Trust, was named to the new post of vice chairman of this bank holding company.
Every workday at 11 a.m., 40-year-old Mike Sinyard dons cycling clothes, hops on a bike he keeps at his Morgan Hill, Calif., office and sets out to cover a distance most people would travel only by car.
As many as 50 of his employees at Specialized Bicycle Components Inc. ride with him.
When they return to their desks at 1 p.m., they have pedaled 20 miles.
Such fervor for cycling helped Mr. Sinyard build a creative company at the forefront of its industry.
Founded by bike enthusiasts rather than businessmen, Specialized spotted the appeal of fat-tired bikes that go almost anywhere and began mass-producing them in 1981.
In the past five years, the company's sales have grown to $80 million from $26 million.
Today, so-called mountain bikes account for two-thirds of the $2 billion spent annually on all bicycles in the U.S.
With 65% of its sales coming from mountain bikes, Specialized is widely considered to be a market leader.
(Accessories, largely for mountain-bike users, account for much of the rest of sales.)
But today, the company needs its entrepreneurial spirit more than ever.
One large competitor after another is leaping into the booming market Specialized helped create, turning out mountain bikes with such well-known names as Schwinn, Peugeot, Raleigh and Nishiki.
Thus, Mr. Sinyard's company must innovate more than ever to stay ahead of them, by developing new products specifically for mountain biking.
At the same time, though, it must become more structured to better manage its growth.
Accomplishing both will be a balancing act as challenging as riding a unicycle.
It is a problem common to small companies that have grown fast -- especially when their success attracts big-time competitors.
"The big word around Specialized is passion," says Erik Eidsmo, a former ski-industry executive whom Mr. Sinyard recruited from Citicorp to run marketing and sales.
"What I hope to bring to this is another word: process.
That's my challenge.
It's Mike's challenge as well."
Mr. Eidsmo is one of several key people from outside the cycling industry who were hired to bring the free-wheeling, fast-growing company under tighter control.
"We had a lot of problems," Mr. Sinyard says.
While the company's sales were soaring, "We still had a system that was probably appropriate for $10 million to $20 million in sales."
Adds Mr. Eidsmo, "What felt good that day was done that day."
Since his arrival in May, Mr. Eidsmo has put in place techniques learned while working for Citicorp, such as management-by-objective, detailed project plans and forecasts of company sales and product trends.
"We're finally getting -- and it's been very painful -- some understanding of what the company's long-term horizon should begin to look like," Mr. Eidsmo says.
"But it's risky," he says of Specialized's attempt to adopt a corporate structure.
"You don't want to lose the magic" of the company's creative drive.
Hoping to stay ahead of the pack, the company is emphasizing innovation.
At a recent trade show, convention-goers lined up to view a new Specialized bike frame that weighs just 2.7 pounds -- a pound less than the lightest mountain-bike frame on the market.
By replacing the frame's steel lugs with titanium ones, Mr. Sinyard's company plans to make its next generation of frames even lighter.
At the trade show, Specialized also unveiled a revolutionary three-spoked bike wheel developed jointly by Specialized and Du Pont Co.
Made of space-age materials, the wheel spokes are designed like airplane wings to shave 10 minutes off the time of a rider in a 100-mile race, the company claims.
It currently costs $750, though Mr. Sinyard thinks the price can be reduced within three years to between $200 and $250.
He was able to slash the price of the company's least expensive mountain bike to $279 from $750 in
But demands on the company's creativity are certain to grow.
Competition is intensifying as larger companies invade a mountain-bike market Mr. Sinyard's company once had virtually all to itself.
U.S. Cycling Federation official Philip Milburn says mountain biking is "growing at such a monstrous rate that a lot of companies are getting into this."
One especially coveted Specialized market the new players are targeting is mountain-bike accessories, which Mr. Eidsmo calls "the future of our business."
Accessories not only sell faster than whole bikes, they also offer profit margins nearly double the 25% to 30% or so on sales of complete cycles.
To get a piece of the business, Nike Inc., Beaverton, Ore., introduced a line of mountain-bike shoes.
About a month ago, Michelin Tire Corp., Greenville, S.C., began selling mountain-bike tires, for years a Specialized stronghold.
Competition in the sale of complete bikes is heating up too.
Trek Bicycle Corp., which accounts for one-quarter of the $400 million in annual sales at its Milwaukee-based parent, Intrepid Corp., entered the mountain-bike business in 1983.
Trek previously made only traditional road bikes, but "it didn't take a rocket scientist to change a road bike into a mountain bike," says Trek's president, Dick Burke.
The segment now makes up roughly two-thirds of his company's total sales.
At Giant Bicycle Inc., Rancho Dominguez, Calif., sales have tripled since the company entered the U.S. mountain-bike business in 1987.
A subsidiary of a Taiwanese holding company with world-wide sales of $150 million, Giant is one example of the sudden globalization of Mr. Sinyard's once-cozy market niche.
Schwinn Bicycle Co., Chicago, established joint ventures with bike companies in mainland China and Hungary to sell bikes.
In the past year, Derby International Corp., Luxembourg, has acquired such major brands as Peugeot, Raleigh and Nishiki.
In response to the internationalization of the business, Mr. Sinyard's company is replacing independent distributors overseas with wholly owned subsidiaries.
The move will cut out the cost of a middleman and give Specialized more control over marketing and sales.
But as Bill Austin, Giant's president, puts it, "With some of the bigger players consolidating their strength, the game has changed.
Carl E. Pfeiffer, chief executive officer, was named to the additional post of chairman of this specialty-metals manufacturing concern.
Robert C. Snyder, a director and chief operating officer of the company, succeeds Mr. Pfeiffer as president.
Roger M. Marino, president, was named to the new post of vice chairman.
Michael Ruettgers, who had been executive vice president, operations, was named president and chief operating officer.
EMC manufactures data-storage systems for mainframes and minicomputers.
Richard J. Riordan was elected a director of this single-family home builder, increasing the board to nine.
He is a senior partner with the law firm of Riordan & McKinzie and is a partner in Riordan Venture Management.
John Franco, 47 years old, formerly vice chairman of Capital Holding Corp. and president of its Accumulation Investment Group, was named chief executive officer of this insurance holding company, effective Dec. 1, succeeding Robert T. Shaw, who remains chairman.
I.C.H. also named Steven B. Bing, 42, senior vice president since 1986, as president, succeeding John W. Gardiner, who will join the HMS Acquisition Corp. division of Hicks, Muse & Co., which has agreed to buy most of I.C.H.'s Denver-based subsidiaries.
MCI Communications Corp. said it won a $27 million contract from Stuart-James Co., a Denver investment banking concern, to provide voice and data telecommunications services.
The agreement calls for MCI to provide data service, 800 and Vnet service, a virtual private network service.
The companies wouldn't disclose the length of the contract except to say it was a multiyear agreement.
The head of British Satellite Broadcasting Ltd. said he hopes to raise about #450 million ($711 million) before the satellite-TV venture makes its delayed debut next spring -- with a major chunk coming from new investors.
"We'll raise it through bank loans.
We'll raise it through {new} equity.
And we'll raise it through existing shareholders" as well as through junk bonds, said Anthony Simonds-Gooding, the private consortium's chief executive.
He said he believes the bank loan, to be arranged by February, will supply about half of the financing.
British Satellite, which already has raised #423.5 million from 10 backers, initially expected to seek an additional #400 million.
Mr. Simonds-Gooding said the additional financing may leave British Satellite owned by about 20 investors, including Australian entrepreneur Alan Bond, whose nearly 36% stake would be reduced to as little as 20%.
Bond Corp., British Satellite's biggest investor, would like to withdraw from the satellite-TV consortium, and analysts have speculated Hollywood studios might buy the Bond stake.
But Mr. Simonds-Gooding said he isn't talking to any studios about investing.
Besides Bond Corp., British Satellite's other backers include Pearson PLC, Reed International PLC and Granada Group PLC.
The consortium faced a setback in May when technical problems forced it to postpone the September launch until next spring.
Continued uncertainty about the timing of the consortium's debut could make it hard to find a #450 million cash injection.
Mr. Simonds-Gooding conceded that British Satellite's potential U.K. lenders "are saying, `When you're on the air, you'll {actually} get the money.'"
The bankers also insist that the loans depend on the consortium raising more money from new and existing backers.
British Satellite today is unveiling a #30 million advertising and promotional drive for the consortium's planned five channels of movies, sports, entertainment and news shows.
As part of the drive, the first 50,000 viewers who put up #10 each will get a package valued at #170 -- including a satellite receiving dish, equipment installation and a three-month subscription to its pay-movie service.
British Satellite faces competition from Sky Television, a satellite-TV venture begun last February and owned by Rupert Murdoch's News Corp.
The rivals currently are locked in a costly bidding contest for Hollywood film rights.
Shares closed sharply higher in London in the year's thinnest volume Monday, supported largely by a technical bounce after last week's sharp declines.
Tokyo stocks posted a second-consecutive loss Monday, while trading in Frankfurt, West Germany, was mixed.
In London, the Financial Times 100-share index finished 30.1 points higher at 2112.2.
The index settled off the high of 2117.1 posted after Wall Street opened stronger.
But it showed strength throughout the session, hitting a low of only 2102.2 within the first few minutes of dealings.
The 30-share index settled 23.2 points higher at 1701.7.
Volume was only 256.6 million shares, breaking the previous 1989 low of 276.8 million shares recorded Oct. 23.
Turnover was also down substantially from 840.8 million shares on Friday.
Dealers said the market was supported to some extent by a firmer pound, gains on Wall Street and shopping by market-makers to cover internal requirements for selected stocks in the 100-share index.
Dealers attributed most of the day's gains to market-makers moving prices higher, rather than an outbreak of significant buying interest.
Prices were up across the board, with most blue-chip stocks registering solid gains.
Though the market was stronger, dealers said fresh buying interest was sidelined ahead of a potential market-affecting debate in the House of Commons set for Tuesday.
It will be Chancellor of the Exchequer John Major's first appearance before the opposition Labor Party.
The market is keenly interested in hearing what he has to say about the status of the current 15% base lending rate.
In London trading, Courtaulds, a chemicals and textiles company, increased 15 pence to 362 after it disclosed plans to spin off its textiles operations into a separately listed company on Jan. 1.
It was the most active of the 100-share index at 8.3 million shares, 6.5 million of which were traded by midday.
Jaguar ended 22 higher at 747.
Dealers said fresh buying was drawn into Jaguar after a senior executive of Daimler-Benz, the auto maker, told a British television interviewer during the weekend that the West German company held talks with the luxury auto maker over possible joint ventures.
Although Daimler has said it isn't interested in mounting a bid for Jaguar, dealers said its name further underlined the growing interest in the British concern.
Glaxo was the biggest gainer, jumping 35 to #13.78 ($21.72) on anticipation of a stock split next week.
Total turnover in Glaxo was a thin 975,000 shares.
In Tokyo, stocks had a second-consecutive loss Monday in quiet trading with the exception of concentrated buying in some incentive-backed issues.
The Nikkei index of 225 selected issues fell 109.85 points to 35417.44.
The index fell 151.20 Friday.
In early trading in Tokyo Tuesday, the Nikkei index rose 35.28 points to 35452.72.
On Monday, volume on the First Section was estimated at 600 million shares, down from 1.24 billion shares Friday.
Declining issues outnumbered advancers 551 to 349; 224 issues were unchanged.
Investors, who took profits Friday, mostly took a wait-and-see attitude Monday amid uncertainty in the foreign-currency market and New York stocks, traders said.
Takamori Matsuda, an analyst at Dresdner-ABD Securities, said fading expectation for lower interest rates made investors step back from real-estate shares, which advanced last week.
Some traders said institutions were waiting to see the U.S. jobless rate to be issued Friday.
The Tokyo Stock Price Index of all issues listed in the First Section, which fell 15.82 points Friday, was down 5.16 points, or 0.19%, at 2676.60.
The Second Section index, which fell 36.87 points Friday, was down 21.44 points, or 0.59%, to close at 3636.06.
Second Section volume was estimated at 15 million shares, down from 24.5 million shares Friday.
Monday's losers included railway, electric-utility and high-technology issues.
The energy of participating investors streamed into Tokyu Group shares, pushing prices of its companies up across the board.
Tokyu Group announced during the weekend that each Group company will buy the others' stocks to defend themselves against a rumored takeover.
The announcement fueled speculation for future advances in the shares.
Tokyu Department Store advanced 260 to 2410.
Tokyu Corp. was up 150 at 2890.
Tokyu Construction gained 170 to 1610.
Other winners Monday included nonferrous metals, which attracted investors because of a surge in gold prices on the back of the unstable dollar.
Petroleum companies were also popular because of expectations of a weaker dollar, which cuts dollar-denominated crude-oil prices.
Share prices in Frankfurt closed narrowly mixed after listless and directionless trading.
The DAX index closed at 1466.29, up only 3.36.
Traders said turnover was particularly thin as investors waited for Wall Street to set the direction for the week.
Most expect the decline in New York stock prices to continue this week.
Another factor weighing on the Frankfurt market involves fears about the impending wage talks between the IG Metall metal-workers union and industry representatives, which could result in a wave of strikes next spring, traders said.
A few blue-chip stocks posted strong gains, boosted by special factors, while the majority of shares ended little changed.
Elsewhere, stock prices were lower in Brussels, Milan and Stockholm, and mixed in Amsterdam, Paris and Zurich.
Stocks closed higher in Hong Kong, Manila, Seoul, Sydney, Taipei and Wellington, but were lower in Singapore.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
Deere & Co. said it reached a tentative agreement with the machinists' union at its Horicon, Wis., plant, ending a month-old strike by workers at the facility.
The maker of farm equipment said the three-year labor agreement with the International Association of Machinists and Aerospace Workers at John Deere Horicon Works, Deere's primary facility for producing lawn and grounds-care equipment, takes effect immediately and extends through Oct. 1, 1992.
About 1,150 employees are covered by the new agreement, Deere said.
Courtaulds PLC announced plans to spin off its textiles operations to existing shareholders in a restructuring to boost shareholder value.
The British chemical and textile company's plan, which requires shareholder approval, would create a new, listed U.K. stock with a probable market capitalization between #300 million ($473 million) and #400 million, analysts said.
The establishment of the separate company, to be called Courtaulds Textiles, could be effective as early as next year's first quarter.
Investors welcomed the move.
Courtaulds' shares rose 15 pence to 362 pence, valuing the entire company at about #1.44 billion.
Courtaulds' spinoff reflects pressure on British industry to boost share prices beyond the reach of corporate raiders.
Courtaulds' restructuring is among the largest thus far in Britain, though it is dwarfed by B.A.T Industries PLC's plans to spin off roughly #4 billion in assets to help fend off a takeover bid from Anglo-French financier Sir James Goldsmith.
The divested Courtaulds textile operations had operating profit of #50 million on #980 million in revenue in the year ended March 31.
Some analysts have said Courtaulds' moves could boost the company's value by 5% to 10%, because the two entities separately will carry a higher price earnings multiple than they did combined.
In addition, Courtaulds said the moves are logical because they will allow both the chemicals and textile businesses to focus more closely on core activities.
Courtaulds has been under pressure to enhance shareholder value since takeover speculators -- including Australian financier Kerry Packer -- surfaced holding small stakes last year.
Though Mr. Packer has since sold his stake, Courtaulds is moving to keep its institutional shareholders happy.
Even without a specific takeover threat, Courtaulds is giving shareholders "choice and value," said Julia Blake, an analyst at London stockbrokers Barclays de Zoete Wedd.
In a statement, the company said: "Both parts can only realize their full potential and be appropriately valued by the market if they are separately quoted companies.
The sharper definition and the autonomy which each will thereby gain will benefit shareholders, customers and employees."
Courtaulds Chairman and Chief Executive Sir Christopher Hogg will remain in both posts at the surviving chemical company after the spinoff.
Sanwa Shutter Corp. said its affiliated company in Malaysia, established this April, will begin manufacturing steel doors Wednesday.
Its partner in the joint venture is Sin Kean Boon Metal Industries, Penang, Malaysia.
Company officials said the new company, Sin Kean Boon-Sanwa (J.V.) is capitalized at the equivalent of 54 million yen ($381,000).
The Japanese concern has a 40% stake, while the local partner has a 60% stake.
The new company was created to meet growing demand for steel doors, concurrent with increasing local concern about fire prevention, the company said.
Barbara Hackman Franklin, president of Franklin Associates, was elected a director of this building products maker.
Ms. Franklin, 49 years old, fills the position vacated by Naomi G. Albanese, who retired earlier this year at age 72.
NEC Corp. said it plans to more than double its British subsidiary's capacity for the production of semiconductor wafers.
Officials at the Japanese semiconductor maker said the company intends to increase investment in plant and equipment by 10 billion yen ($70.6 million), to 90 billion yen, in the year ending March 31, with the extra funds used to increase production overseas.
Officials said they weren't sure how the money will be distributed among overseas units, but added that NEC Semiconductors U.K. Ltd. will receive priority.
Officials also disclosed it's possible that NEC may reduce domestic production of one-megabit chips to five million a month from six million, beginning January, because of deteriorating market prices.
Japan's steel exports fell 12.2% in September from a year earlier and were down 1.1% from the previous month, the Japan Iron and Steel Federation reported.
September was the 10th consecutive month in which steel exports failed to reach the year-earlier level.
A federation official attributed the decline to brisk demand from domestic industries backed by continuing economic expansion in Japan.
Japanese steel companies are apparently focusing on domestic sales, but the official said it doesn't necessarily mean that local sales contracts are increasing that markedly.
"They are just too busy to meet domestic demand and have little room for overseas shipments," the official said.
After a bad start, Treasury bonds were buoyed by a late burst of buying to end modestly higher.
"The market was pretty dull" for most of the day, said Robert H. Chandross, vice president at Lloyds Bank PLC.
He said some investors were reluctant to plunge into the market ahead of several key economic indicators due this week, especially Friday's potentially market-moving employment report.
During the first hour of trading yesterday, prices fell as much as 1/4 point, or down about $2.50 for each $1,000 face amount.
But market activity was energized as investors started to view the lower price levels as attractive.
And the Treasury's $17.6 billion auction of short-term bills, which generated strong buying interest, helped to lift the bond market out of the doldrums.
"We saw good retail demand by small banks, individuals and institutions and that is one reason why the market advanced" late in the day, said Sung Won Sohn, senior vice president and chief economist at Norwest Corp., Minneapolis.
He said the change in sentiment also reflected perceptions that the slate of economic statistic due this week will be "conducive to a bond market rally."
The employment report, which will provide the first official measure of the economy's strength in October, is expected to show smaller gains in the generation of new jobs.
Other key economic indicators due this week include today's release of the September leading indicators index and new-home sales.
Tomorrow, the October purchasing managers report is due and on Thursday comes October chain-store sales.
Despite yesterday's modest bond market gains, economists say investors are anxious about the Treasury's huge quarterly refunding of government debt, the timing of which depends on Congressional efforts to raise the debt ceiling.
Although the Treasury will announce details of the November refunding tomorrow, it could be delayed if Congress and President Bush fail to increase the Treasury's borrowing capacity.
The debt ceiling is scheduled to fall to $2.8 trillion from $2.87 trillion at midnight tonight.
The Treasury's benchmark 30-year bond rose 1/8 point.
Mortgage-backed securities were up less than 1/8 point and investment-grade corporate bonds were unchanged.
Strong demand for New York City's $813 million general obligation bonds propped up the municipal market.
Traders said most municipal bonds ended 1/2 point higher.
The New York City issue included $757 million of tax-exempt bonds priced to yield between 6.50% to 7.88%, depending on the maturity.
The $56 million of New York's taxable general obligation bonds were priced to yield between 9.125% to 9.90%.
As expected, the longer-term tax-exempt New York bonds had yields nearly as high as those on taxable long-term Treasury bonds.
The yield on the benchmark 30-year Treasury bond ended yesterday at about 7.92%.
Bond dealers said the rates for the long-term tax-exempt New York City bonds were among the highest, as a percentage of Treasury rates, for any New York City issue in recent memory.
A spokesman for New York City Comptroller Harrison Goldin said the high rates reflect investors concerns about the city's financial health and political uncertainties.
New York bonds, which have been hammered in recent weeks on the pending supply and reports that the city's economy is growing weaker, rose 1/2 point yesterday.
Treasury Securities
Treasury bonds ended slightly higher in light trading.
The benchmark 30-year bond ended at 102 7/32 to yield 7.92%, compared with Friday's price of 102 2/32 to yield 7.93%.
The latest 10-year notes ended at about 100 16/32 to yield 7.90%, compared with 100 11/32 to yield 7.93% on Friday.
Short-term interest rates rose at the government's regular weekly Treasury-bill auction.
The average discount rate on three-month bills was 7.78% and the rate on six-month bills was 7.62%.
Those rates are up from 7.52% and 7.50%, respectively, at last week's auction.
Due to the Treasury's need to raise funds quickly before the current authority to issue debt expires at midnight tonight, yesterday's auction was structured differently from previous sales.
The Treasury bills sold yesterday settle today, rather than the standard settlement day of Thursday.
And because of the early settlement, the three-month bills actually have a 93-day maturity, and the six-month bills have an 184-day maturity.
Because of the early settlement, the Federal Reserve was unable to purchase bills for its system account.
However, analysts expect the Fed to buy Treasury bills that were auctioned yesterday in the secondary market.
The Treasury also held a hastily scheduled $2 billion sale of 51-cash management bills yesterday.
Here are details of yesterday's three-month and six-month bill auction:
Rates are determined by the difference between the purchase price and face value.
Thus, higher bidding narrows the investor's return while lower bidding widens it.
The percentage rates are calculated on a 360-day year, while the coupon equivalent yield is based on a 365-day year.
Both issues are dated Oct. 31.
The 13-week bills mature Feb. 1, and the 26-week bills mature May 3, 1990.
Here are details of yesterday's 51-day cash management bill auction:
Interest rate 8.07%
The bills are dated Oct. 31 and mature Dec. 21, 1989.
Corporate Issues
The junk bond prices of Western Union Corp. tumbled after the company said it won't proceed with an exchange offer to holders of its reset notes.
The Upper Saddle River, N.J., communications firm said it is considering alternatives to the restructuring of the senior secured notes because of changes in the high-yield market.
In June, Western Union was forced to reset the interest rate on the senior secured notes due in 1992 to 19 1/4% from 16 1/2%, a move which increased the firm's annual interest payments by $13.8 million.
Although the notes held at a price of 92 to 93 immediately after the reset, they started falling soon afterward.
Yesterday, Western Union's senior secured reset notes fell 3 3/4 points, or about $37.50 for each $1,000 face amount, to close at 50 1/4.
Other Western Union securities were also lower.
The company's 7.90% sinking fund debentures were quoted at a bid price of 14 1/4 and an offered price of 30, while the 10 3/4% subordinated debentures of 1997 were being bid for at 28 and offered at around 34 3/4.
The 10 3/4% debentures last traded at 35.
High-yield traders said spreads between the bid and offered prices of Western Union junk bonds have been widening for some time, and in certain cases, bids for Western Union securities are not available.
Elsewhere, prices of investment-grade and high-risk, high-yield junk bonds ended unchanged.
In the new-issue market for junk securities, underwriters at Salomon Brothers Inc. are expected to price today a $350 million junk bond offering by Beatrice Co..
The two-part issue consists of $200 million of senior subordinated reset notes maturing in 1997 and $150 million of subordinated floating rate notes also maturing in 1997.
Portfolio managers said expectations are for the issue to be priced at a discount with a coupon of 13 3/4% and a yield of about 14%.
The Chicago-based food and consumer goods concern was acquired in April 1986 in a $6.2 billion leveraged buy-out engineered by Kohlberg Kravis Roberts & Co.
Proceeds from the note sale will be used to repay a portion of the bank borrowings used by Beatrice to redeem its $526.3 million principal amount of increasing rate debentures in August.
Meanwhile, underwriters at Morgan Stanley & Co. are expected today to price a $350 million high-yield offering by Continental Cablevision Inc.
The senior subordinated debentures maturing in 2004 are targeted to be offered at a yield of between 12 5/8% to 12 3/4%.
Mortgage-Backed Securities
Mortgage securities ended 2/32 to 4/32 higher in light trading.
Ginnie Mae's 9% issue for November delivery finished at 98 1/2, up 4/32, and its 10% issue at 102 3/8, up 4/32.
Freddie Mac's 9% issue ended at 97 19/32, up 2/32.
In the derivative market, insurance companies have scaled back their purchases of Remic securities, or real estate mortgage investment conduits, as they assess potential claims from the recent California earthquake and hurricane in the Carolinas.
This could mean diminished issuance of derivative mortgage issues during the next few weeks.
Insurance companies have been major buyers of prepayment-protected planned amortization classes (PACs) during the past few months.
The PACs appeal to insurance companies and other investors because they have higher yields than topgrade corporate bonds and carry the guarantee of Freddie Mac and Fannie Mae, quasi-federal agencies.
In the asset-backed market, Beneficial Corp. offered $248 million of securities backed by home-equity loans, the second large deal in the past week.
Last week, a unit of MNC Financial Corp. offered $268 million of home-equity securities.
Both the MNC and Beneficial offering were underwritten by Merrill Lynch Capital Markets, the leading Wall Street firm in the home-equity securities market, which was created early this year.
Municipal Issues
The improved tone in the municipal market, largely an offshoot of the New York City sale's reception, helped municipal futures rebound from early lows, but the spread between the contract and Tbond futures continued to grow more negative.
The MOB spread, or difference between the municipal and T-bond futures contracts, has been near all-time lows in recent trading, driven basically by concerns that new-issue supply would overwhelm demand.
December municipal futures ended up 11/32 point to 92-14, having pulled off a morning low of 91-23 as cash municipals rebounded.
But front month T-bond futures settled the afternoon session up a slightly greater 13/32 at 99-04.
Foreign Bonds
British government bonds ended moderately higher, encouraged by a steadier pound and a rise in British stocks.
The benchmark 11 3/4% bond due 2003/2007 rose 10/32 to 111 14/32 to yield 10.14%, while the Treasury's 12% notes due 1995 rose 7/32 to 103 5/8 to yield 11.04%.
West German government bonds fell as much as 0.60 point in light, nervous trading.
The 7% Treasury bond due October 1999 ended off 0.60 point to 99.35 to yield 7.09%, while the 6 3/4% notes due 1994 fell 0.35 point to 97.25 to yield 7.45%.
Japanese government bonds continued to erode as the dollar remained resilient against the yen.
Japan's No. 111 4.6% bond due 1998 ended the day on brokers screens at 95.11 to yield 5.43%.
So-called cross-border acquisitions totaled $23.1 billion in the second quarter, down from $33.6 billion a year earlier, according to the accounting firm KPMG Peat Marwick.
In a cross-border transaction, the buyer is in a different region of the globe from the target.
Such transactions numbered 670 in the second quarter, up from 527 a year earlier.
However, the total value declined for deals of $100 million and up.
The downturn in total value may be only temporary, suggested Herb Adler, a KPMG Peat Marwick partner.
He explained, in part, that restructuring to prepare for the Common Market expansion due in 1992 "has become more of a strategic priority, both for companies inside and outside the European Community."
In the second quarter, middle-market cross-border transactions -- deals under $100 million each -- numbered 619 and totaled $6 billion, compared with 478 such transactions totaling $4.9 billion a year earlier, the firm said.
Large cross-border deals numbered 51 and totaled $17.1 billion in the second quarter, the firm added.
That compared with 49 such transactions totaling $28.7 billion as year earlier.
Rymer Foods Inc. said its board authorized the purchase of as many as 500,000 of its common stock purchase warrants at a price of $4 a warrant.
The food company, which has 720,000 warrants and about 2.9 million common shares outstanding, said it may increase the offer to purchase any or all warrants that are properly tendered.
A warrant permits a holder to acquire one share of common stock for $17.50 a share.
The warrants expire on Oct. 15, 1992, and may be called by the company at a price of $5.25.
The offer is scheduled to expire on Nov. 28, unless extended.
In New York Stock Exchange composite trading, Rymer closed yesterday at $10.875, down 12.5 cents.
Seasonal Stackup
Air-traffic problems, though often quite grim, This time of year leave us in stitches, When we notice around our airport A holding pattern for witches.
-- Edward F. Dempsey.
Double-Jointed
"I am beside myself," I've said in moments of heat, Without ever bothering To marvel at the feat.
-- Joshua Adams.
Humility Helper
The ultimate blow to the ego is learning that even your mistakes go unnoticed.
-- Ivern Ball.
Gen-Probe Inc., a biotechnology concern, said it signed a definitive agreement to be acquired by Chugai Pharmaceutical Co. of Tokyo for about $110 million, or almost double the market price of Gen-Probe's stock.
The move is sure to heighten concerns about increased Japanese investment in U.S. biotechnology firms.
It is also likely to bolster fears that the Japanese will use their foothold in U.S. biotechnology concerns to gain certain trade and competitive advantages.
Gen-Probe, an industry leader in the field of genetic probes, which is a new technology used in diagnostic tests, last year signed an agreement for Chugai to exclusively market its diagnostic products in Japan for infectious diseases and cancer.
Chugai agreed then to fund certain associated research and development costs.
That arrangement apparently has worked well, and Thomas A. Bologna, president and chief executive officer of Gen-Probe, founded in 1983, said the sale of the company means "we will be able to concentrate on running the business rather than always looking for sources of financing."
Chugai agreed to pay $6.25 a share for Gen-Probe's 17.6 million common shares outstanding on a fully diluted basis.
Yesterday, in national trading in the over-the-counter market, Gen-Probe common closed at $3.25 a share.
Because the U.S. leads in most areas of biotechnology -- largely because of research investment by the U.S. government -- the sale is sure to increase concerns that Japanese companies will buy American know-how and use it to obtain the upper hand in biotechnology trade and competition.
"The biotechnology firms may be setting up their own competitors," said Richard Godown, president of the Industrial Biotechnology Association.
He added that until now the Japanese have only acquired equity positions in U.S. biotechnology companies.
"They are piggybacking onto developed technology," he said.
During the past five years, Japanese concerns have invested in several of the U.S.'s 431 independent biotechnology companies.
Chugai has been one of the most active Japanese players in U.S. biotechnology companies; it has an equity investment in Genetics Institute Inc., Cambridge, Mass., and a joint-venture agreement with Upjohn Co., Kalamazoo, Mich.
The Japanese government, Mr. Godown said, has stated that it wants 10% to 11% of its gross national product to come from biotechnology products.
"It is becoming more of a horse race every day between the U.S. and Japan," he said, adding that some fear that as with the semiconductor, electronics, and automobile industries, Japanese companies will use U.S.-developed technology to gain trade advantages.
Mr. Bologna said the sale would allow Gen-Probe to speed up the development of new technology, and to more quickly apply existing technology to an array of diagnostic products the company wants to offer.
By 1988, when only 10 genetic probe-based tests of diagnostic infectious diseases of humans had been approved for marketing by the Food and Drug Administration, eight of them had been developed and sold by Gen-Probe.
Osamu Nagayama, deputy president of Chugai, which spends about 15% of its sales on research and development, was unable to pinpoint how much money Chugai would pump into Gen-Probe.
"We think Gen-Probe has technology important to people's health," he said, adding: "We think it is important for us to have such technology."
He and Mr. Bologna emphasized that both companies would gain technological knowledge through the sale of Gen-Probe, which will expand "significantly" as a result of the acquisition.
In 1988, Chugai had net income of $60 million on revenue of $991 million.
GenProbe had a net loss of $9.5 million on revenue of $5.8 million.
Recently, Gen-Probe received a broad U.S. patent for a technology that helps detect, identify and quantify non-viral organisms through the targeting of a form of genetic material called ribosomal RNA.
Among other things, Mr. Bologna said that the sale will facilitate Gen-Probe's marketing of a diagnostic test for acquired immune deficiency syndrome, or AIDS.
Chugai also will help Gen-Probe with its regulatory and marketing expertise in Asia, Mr. Bologna said.
The tender offer for Gen-Probe's shares is expected to begin next Monday, the company said.
It was supposed to be a routine courtesy call.
A half-dozen Soviet space officials, in Tokyo in July for an exhibit, stopped by to see their counterparts at the National Space Development Agency of Japan.
But after a few pleasantries, the Soviets unexpectedly got serious.
The Soviets have a world-leading space program, the guests noted.
Wouldn't the Japanese like a piece of it?
The visitors then listed technologies up for sale, including launch services and propulsion hardware.
"We were just surprised," says Tad Inada, NASDA's director for international affairs.
"Shocked."
That Moscow, with its dilapidated economic machine, would try to sell high technology to Japan, one of the world's high-tech leaders, sounds like a coals-to-Newcastle notion.
But "the Soviet Union has areas where it isn't behind Japan," says Mikhail Shapovalov of the Soviet Ministry of Foreign Economic Relations.
"We have obtained through the development of Cosmos {the Soviet space program} technologies you don't see anywhere else."
The sales pitch mightn't be as farfetched as it seems.
Japan-U.S. trade relations are bumpy these days, and some Japanese favor decreasing their reliance on U.S. technology in light of the FSX fighter-plane flap, when U.S. officials reversed an earlier decision and refused to share certain crucial fighter-plane technology.
And, despite its image as a technology superpower, Japan has a lot of weaknesses.
It's a world leader in semiconductors, but behind the U.S. in making the computers that use those chips.
It's a world leader in auto manufacturing, but its aviation industry is struggling, and its space program is years behind the U.S., the Europeans and the Soviets.
One question being debated in the Soviet Union is how to use the defense sector's research-and-production expertise in the rest of the economy.
Many plants that used to make military equipment are now being ordered to produce televisions, videocassette recorders, small tractors and food-processing machinery.
The Soviets also hope to make better use of their considerable expertise in theoretical science, which has helped them win twice as many Nobel science prizes as the Japanese.
Where they lag behind the Japanese is in turning the scientific inventiveness into improved production.
By contrast, the Japanese have proved adept at making use of Soviet inventions.
Kobe Steel Ltd. adopted Soviet casting technology in 1966 and used it for 14 years until it developed its own system.
Kawasaki Steel Corp. bought a Soviet steel-casting patent two years ago and has jointly developed the system with the Soviets.
In 1991, the Soviets will take a Japanese journalist into space, the first Japanese to go into orbit.
Soviet efforts to sell their technology abroad don't appear to worry the U.S., Japan's principal ally.
"We have never opposed the development of economic relations between our allies and the Soviet Union," says a State Department official.
"Frankly, I wouldn't expect the Japanese to get hooked on anybody's technology, least of all the Soviets."
Under Mikhail Gorbachev's perestroika, the Soviets have sought economic ties all over the world, including new export markets.
They believe technology is one of their best bets, and some Soviet officials say Moscow will even consider declassifying military know-how if the price is right.
The Soviets held export exhibitions that included high-tech items in New York and West Germany.
Last week, a Soviet delegation came to Japan to push more space technologies.
Japan is a major target for the Soviets.
In August, representatives of Keidanren, Japan's largest business organization, visited Moscow to explore exports and investments that would help the Soviet economy.
Out of the blue, the Soviet Chamber of Commerce handed over details on 59 technologies that the Japanese might want to buy.
These mainly involved such areas as materials -- advanced soldering machines, for example -- and medical developments derived from experimentation in space, such as artificial blood vessels.
A main motive is hard cash.
But, while the Soviets can't expect direct technology flow from Japan, they also hope to benefit from Japanese manufacturing expertise.
"The Soviet Union has a lot of know-how, but it has been difficult to put that into actual production because of various structural problems in the economy," says Mr. Shapovalov, the Foreign Ministry official.
The Soviets are "contemplating a flexible system under which it would be possible to develop {technology} jointly and even to market it jointly," he says.
Even if the Japanese find Soviet technology desirable, such discussions would be fraught with political complications.
Still stinging from the international backlash over the sale two years ago of sensitive military technology to the Soviets by a subsidiary of Japan's Toshiba Corp., many Japanese are eager to avoid appearing to help the Soviets in any way.
Another hurdle concerns Japan's attempts to persuade the Soviet Union to relinquish its post-World War II control of four islands north of Japan.
So far, the Soviets have provided only the sketchiest information about their technology and business plans.
And what they have shown isn't impressive.
"My impression is that there isn't anything which arouses our interest at first glance," says an official from Japan's Ministry of International Trade and Industry.
Peter Gumbel in Moscow contributed to this article.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
MAY 1, 1975, SIGNALED A DISTRESSFUL May Day for securities houses, which were forced to end 183 years of charging fixed commissions.
It scared brokers, but most survived.
It took effect after seven years of bitter debate between the Securities and Exchange Commission and traders and exchanges.
Despite warnings from such leaders as former Federal Reserve Board Chairman William McChesney Martin that unfixed commissions would undo the industry, the SEC in September 1973 said full competition must start May l, 1975.
The timing for change was right.
Institutions had become active market players in the early 1970s and sought exchange seats to handle their own trades.
And the industry was rife with brokers trying to secure big client orders by using kickbacks, gifts, women and junkets.
Within three weeks of the 1975 end to fixed rates there were all-out price wars among brokers fighting for institutional business, with rate slashes of 35% to 60% below pre-May 1 levels.
Ray Garrett Jr., SEC chairman, said the "breadth and depth of the discounting is more than I expected."
Even a federal measure in June allowing houses to add research fees to their commissions didn't stop it.
Longer term, the impact is unclear.
The change prompted the rise of discount brokers and a reduction in securities research firms.
But there are currently more exchange members than in 1975, with the bigger houses gaining a larger share of total commissions.
Commissions, however, account for a smaller share of investment-house business as takeover advisory fees have soared.
Foreign stock markets, with which the U.S. is entwined, also have ended fixed commissions in recent years.
It came in London's "Big Bang" 1986 deregulation; and Toronto's "Little Bang" the same year.
Paris is currently phasing out fixed commissions under its "Le Petit Bang" plan.
President Bush said that three members of his cabinet will lead a presidential mission to Poland to gauge how the U.S. can help the new non-Communist government's economic changes.
Mr. Bush announced several weeks ago that he intended to send such a mission, composed of top government aides and business and labor leaders.
The mission will visit Poland from Nov. 29 to Dec. 2, the White House said.
In remarks at a White House ceremony marking Polish Heritage Month, Mr. Bush announced that Agriculture Secretary Clayton Yeutter, Commerce Secretary Robert Mosbacher and Labor Secretary Elizabeth Dole will lead the U.S. group.
Michael Boskin, chairman of the Council of Economic Advisers, also will be a member.
In addition, the White House said that Charles Harper, chairman of ConAgra Inc., and John McGillicuddy, chairman of Manufacturers Hanover Corp., will be among a group of at least 15 business and labor representatives in the presidential mission.
Mr. Bush said the group is to "focus on economic sectors where U.S. expertise and cooperation can indeed make a difference."
Mr. Bush has asked Congress to provide more than $400 million in economic aid and food grants for Poland's new government, but has been chided by Democrats for failing to do more.
Warner Communications Inc. is close to an agreement to back a new recorded music and music publishing company in partnership with Irving Azoff, who resigned in September as head of MCA Inc.'s MCA Records unit.
Warner and Mr. Azoff declined comment, as did MCA, where Mr. Azoff had also been discussing such a venture.
But record industry executives familiar with the talks said Mr. Azoff and Warner came to an agreement yesterday to form a 50-50 joint-venture company funded by Warner and run by Mr. Azoff.
Among other things, they said, Mr. Azoff would develop musical acts for a new record label.
The agreement is said to be similar to Warner's 50-50 partnership with record and movie producer David Geffen, whose films and records are distributed by the Warner Bros. studio and the Warner records unit.
Although Mr. Azoff won't produce films at first, it is possible that he could do so later, the sources said.
Like Mr. Geffen's arrangement, the venture gives Mr. Azoff a link to the world's largest and most successful record distributor; in the U.S. alone, Warner has a 40% share of the market, about double its nearest competitor, Sony Corp.'s CBS Records.
For Warner, meanwhile, it gives the company a second young partner with a finger on the pulse of the hottest trends in the music business.
The 41-year-old Mr. Azoff, a former rock 'n' roll manager, is credited with turning around MCA's once-moribund music division in his six years at the company.
But Mr. Azoff had been negotiating for more than a year to get out of his MCA contract, which expired in 1991.
Mr. Azoff reportedly was bored and frequently clashed with top MCA management over a number of issues such as compensation and business plans.
Mr. Azoff also was eager to return to a more entrepreneurial role in which he had a big financial stake in his own efforts.
In an interview at the time of his resignation from MCA, he said: "I'd rather build a company than run one.
Part of a Series}
Tom Panelli had a perfectly good reason for not using the $300 rowing machine he bought three years ago.
"I ate a bad tuna sandwich, got food poisoning and had to have a shot in my shoulder," he says, making it too painful to row.
The soreness, he admits, went away about a week after the shot.
Yet the rowing machine hasn't been touched since, even though he has moved it across the country with him twice.
A San Francisco lawyer, Mr. Panelli rowed religiously when he first got the machine, but, he complains, it left grease marks on his carpet, "and it was boring.
It's a horrible machine, actually.
I'm ashamed I own the stupid thing."
Mr. Panelli has plenty of company.
Nearly three-fourths of the people who own home exercise equipment don't use it as much as they planned, according to The Wall Street Journal's "American Way of Buying" survey.
The Roper Organization, which conducted the survey, said almost half of the exercise equipment owners found it duller than they expected.
It isn't just exercise gear that isn't getting a good workout.
The fitness craze itself has gone soft, the survey found.
Fewer people said they were working up a sweat with such activities as jogging, tennis, swimming and aerobics.
Half of those surveyed said they simply walk these days for exercise.
That's good news for marketers of walking shoes.
The survey also detected a bit more interest in golf, a positive sign for country clubs and golf club makers.
The survey's findings certainly aren't encouraging for marketers of health-club memberships, tennis rackets and home exercise equipment, but people's good intentions, if not their actions, are keeping sales of some fitness products healthy.
For instance, sales of treadmills, exercise bikes, stair climbers and the like are expected to rise 8% to about $1.52 billion this year, according to the National Sporting Goods Association, which sees the home market as one of the hottest growth areas for the 1990s.
But even that group knows some people don't use their machines as much as they should.
"The first excuse is they don't have enough time," says research director Thomas Doyle.
"The second is they don't have enough discipline."
With more than 15 million exercise bikes sold in the past five years, he adds, "a lot of garages, basements and attics must be populated with them."
Still, the average price of such bikes rose last year to $145.
Mr. Doyle predicts a trend toward fewer pieces of home exercise equipment being sold at higher prices.
Electronic gimmicks are key.
Premark International Inc., for example, peddles the M8.7sp Electronic Cycling Simulator, a $2,000 stationary cycle.
On a video screen, riders can see 30 different "rides," including urban, mountain and desert scenes, and check how many calories are burned a minute.
Nancy Igdaloff, who works in corporate payments at Bank of America in San Francisco, may be a good prospect for such a gizmo.
She's trying to sell a $150 exercise bike she bought about five years ago for her roommate.
But rather than write off home fitness equipment, she traded up: Ms. Igdaloff just paid about $900 for a fancier stationary bike, with a timer, dials showing average and maximum speeds and a comfortable seat that feels almost like a chair.
"I'm using it a lot," she says.
"I spent so much money that if I look at it, and I'm not on it, I feel guilty."
The poll points up some inconsistencies between what people say and what they do.
A surprising 78% of people said they exercise regularly, up from 73% in 1981.
This conjures up images of a nation full of trim, muscular folks, and suggests couch potatoes are out of season.
Of course, that isn't really the case.
The discrepancy may be because asking people about their fitness regime is a bit like inquiring about their love life.
They're bound to exaggerate.
"People say they swim, and that may mean they've been to the beach this year," says Krys Spain, research specialist for the President's Council on Physical Fitness and Sports.
"It's hard to know if people are responding truthfully.
People are too embarrassed to say they haven't done anything."
While she applauds the fact that more Americans are getting up from the television to stroll or garden, she says the percentage of Americans who do "real exercise to build the heart" is only 10% to 20%.
So many people fudge on answers about exercise, the president's council now uses specific criteria to determine what is considered vigorous: It must produce contractions of large muscle groups, must achieve 60% of maximum aerobic capacity and must be done three or more times a week for a minimum of 20 minutes.
One of the council's goals, set in 1980, was to see more than 60% of adults under 65 years of age getting vigorous exercise by 1990.
That target has been revised to 30% by the year 2000.
But even that goal may prove optimistic.
Of 14 activities, the Journal survey found that 12 -- including bicycling, skiing and swimming -- are being done by fewer Americans today than eight years ago.
Time pressures and the ebb of the fitness fad are cited as reasons for the decline.
Only walking and golf increased in popularity during the 1980s -- and only slightly.
Jeanette Traverso, a California lawyer, gave up running three times a week to play a weekly round of golf, finding it more social and serene.
It's an activity she feels she can do for life, and by pulling a golf cart, she still gets a good workout.
"I'm really wiped out after walking five hours," she says.
Most people said they exercise both for health and enjoyment.
"If you sit down all the time, you'll go stiff," says Joyce Hagood, a Roxboro, N.C., homemaker who walks several miles a week.
"And it's relaxing.
Sometimes, if you have a headache, you can go out and walk it right off."
Only about a quarter of the respondents said they exercise to lose weight.
Slightly more, like Leslie Sherren, a law librarian in San Francisco who attends dance aerobics five times a week, exercise to relieve stress.
"Working with lawyers," she says, "I need it."
But fully 90% of those polled felt they didn't need to belong to a health club.
"They're too crowded, and everybody's showing off," says Joel Bryant, a 22-year-old student from Pasadena, Calif.
"The guys are being macho, and the girls are walking around in little things.
They're not there to work out."
But at least they show up.
Nearly half of those who joined health clubs said they didn't use their membership as often as they planned.
Feeling they should devote more time to their families or their jobs, many yuppies are skipping their once-sacred workout.
Even so, the Association of Quality Clubs, a health-club trade group in Boston, says membership revenues will rise about 5% this year from last year's $5 billion.
A spokeswoman adds, however, that the group is considering offering "a behavior-modification course, similar to a smoking-cessation program, to teach people ways to stay with it."
There are die-hard bodies, of course.
The proprietor of Sante West, an aerobics studio in San Francisco's Marina district, which was hit hard by the earthquake, says, "People were going nuts the minute we opened," three days after the quake.
"The emotional aspect is so draining, they needed a good workout."
Perhaps the most disturbing finding is that the bowling alley may be an endangered American institution.
The survey reported the number of people who said they bowl regularly has fallen to just 8% from 17% in 1981.
The American Bowling Congress claims a higher percentage of the public bowls regularly, but concedes its membership has declined this decade.
To find out why, the group recently commissioned a study of the past 20 years of bowling-related research.
Three reasons were pinpointed: a preference for watching bowling and other sports on television rather than actually bowling, dowdy bowling centers, and dissatisfaction with bowling itself.
People who start bowling expecting it to be a pleasurable exercise "have been generally disappointed," the report said.
But not Richard Cottrell, a San Francisco cab driver who bowls in two weekly leagues.
He hit the lanes three years ago on the advice of his doctor.
"It's good exercise," he says.
"I can't do anything score-wise, but I like meeting the girls."
He says bowling helps him shed pounds, though that effort is sometimes thwarted by the fact that "when I'm drinking, I bowl better."
His Tuesday night team, the Leftovers, is in first place.
WPP GROUP'S Ogilvy & Mather expects profit margins to improve to 11.5% in 1990 in the U.S.
Yesterday's edition didn't specify where the improvement would take place.
Concerning your Sept. 29 article "Retailers Face Cutbacks, Uncertain Future": The outcome of our leveraged buyout is looking very positive.
Unlike most of the other retailers mentioned in the story, Jos. A. Bank Clothiers Inc. is not in serious financial problems.
We did experience some difficulties with the initial LBO terms and, as your article made clear, successfully restructured our debt earlier this year, something those other retailers have yet to accomplish.
Your were on target regarding industry problems, but wide of the mark in portraying the financial health of this company.
Chairman and CEO Jos. A. Bank Clothiers Inc. Owings Mills, Md.
Private housing starts in Japan were unchanged in September from a year earlier at 144,610 units, the Construction Ministry said.
The flat report followed a four-month string of declines.
The down trend was partly the result of tighter credit sparked by a discount rate increase by the Bank of Japan in May.
The central bank also unexpectedly raised the base rate by half a percentage point to 3.75% Oct. 11 as part of an inflation-fighting move that indirectly increases interest rates charged on new home construction loans.
If there's somethin' strange in your neighborhood . . .
If there's something' weird and it don't look good.
Who ya gonna call?
For starters, some people call Ed and Lorraine Warren.
When it comes to busting ghosts, the Monroe, Conn., couple are perfect demons.
They claim to have busted spirits, poltergeists and other spooks in hundreds of houses around the country.
They say they now get three or four "legitimate" calls a week from people harried by haunts.
"I firmly believe in angels, devils and ghosts," says Mr. Warren, whose business card identifies him as a "demonologist."
If psychics don't work, but your house still seems haunted, you can call any one of a swelling band of skeptics such as Richard Busch.
A professional magician and musician, he heads the Pittsburgh branch of the Committee for the Scientific Investigation of the Paranormal.
Mr. Busch says there is a scientific explanation for all haunts, and he can even tell you how to encourage the spirits.
"All you have to do is eat a big pizza, and then go to bed," he says.
"You'll have weird dreams, too."
Either way, the ghostbusting business is going like gangbusters.
Tales of haunts and horrors are proliferating beyond the nation's Elm Streets and Amityvilles.
"I get calls nearly every day from people who have ghosts in their house," says Raymond Hyman, a skeptical psychology professor at the University of Oregon.
In a public opinion poll published in the October issue of Parents Magazine, a third of those queried said they believe that ghosts or spirits make themselves known to people.
"The movies, the books, the tabloids -- even Nancy Reagan is boosting this stuff," says Paul Kurtz, a philosophy professor at the State University of New York at Buffalo, who heads the Committee for the Scientific Investigation of the Paranormal.
The committee, formed in 1967, now has 60 chapters around the world.
The spirits, of course, could hardly care less whether people do or don't believe in them.
They don't even give a nod to human sensibilities by celebrating Halloween.
For the spooks it's just another day of ectoplasmic business as usual, ghostbusters say; the holiday seems to occasion no unusual number of ghost reports.
One of the busiest ghostbusters is Robert Baker, a 68-year-old semi-retired University of Kentucky psychology professor whose bushy gray eyebrows arch at the mere mention of a ghost.
Mr. Baker says he has personally bested more than 50 haunts, from aliens to poltergeists.
Mr. Baker heads the Kentucky Association of Science Educators and Skeptics.
Like Hollywood's Ghostbusters, Kentucky's stand ready to roll when haunts get out of hand.
But they don't careen around in an old Cadillac, wear funny suits or blast away at slimy spirits.
Mr. Baker drives a 1987 Chevy and usually wears a tweed jacket on his ghostbusting forays.
"I've never met a ghost that couldn't be explained away by perfectly natural means," he says.
When a Louisville woman complained that a ghost was haunting her attic, Mr. Baker discovered a rat dragging a trap across the rafters.
A foul-smelling demon supposedly plagued a house in Mannington, Ky.
Mr. Baker found an opening under the house that led to a fume-filled coal mine.
When the weather cools, Mr. Baker says, hobos often hole up in abandoned houses.
"People see activity in there, and the next thing you know, you've got a haunting," he says.
On a recent afternoon, Mr. Baker and a reporter go ghost-busting, visiting Kathleen Stinnett, a Lexington woman who has phoned the University of Kentucky to report mysterious happenings in her house.
Mrs. Stinnett says she never believed in ghosts before, but lately her vacuum cleaner turned itself on, a telephone flew off its stand, doors slammed inexplicably, and she heard footsteps in her empty kitchen.
"I was doing the laundry and nearly broke my neck running upstairs to see who was there, and it was nobody," she says, eyes wide at the recollection.
Mr. Baker hears her out, pokes around a bit, asks a few questions and proposes some explanations.
Of the self-starting vacuum cleaner, he says: "Could be Cuddles, {Mrs. Stinnett's dog}."
The flying telephone: "You tangle the base cord around a chair leg, and the receiver does seem to fly off."
The ghostly footsteps: "Interstate 64 is a block away, and heavy traffic can sure set a house to vibrating."
"I'm not sure he's explained everything," Mrs. Stinnett says grudgingly.
"There are some things that have gone on here that nobody can explain," she says.
Mr. Baker promises to return if the haunting continues.
For especially stubborn haunts, Mr. Baker carries a secret weapon, a vial of cornstarch.
"I tell people it's the groundup bones of saints," he says.
"I sprinkle a little around and tell the demons to leave.
It's reassuring, and it usually works."
Oregon's Mr. Hyman has investigated claims of flying cats, apparitions and bouncing chandeliers and has come up with a plausible explanation, he says, for every one.
"Invariably," he says, "eyewitnesses are untrustworthy."
Two years ago, a Canadian reader bet Omni Magazine $1,000 that it couldn't debunk the uncanny goings-on in "the Oregon Vortex," a former Indian burial ground in southern Oregon.
To viewers from a distance, visitors to the spot seemed to shrink disproportionately, relative to the background.
The magazine called in Mr. Hyman as a consultant.
He showed up with a carpenter's level, carefully measured every surface and showed how the apparent shrinkage was caused by the perspective.
"A very striking illusion," Mr. Hyman says now, his voice dripping with skepticism, "but an illusion nevertheless."
The Canadian wound up writing a check.
The Rev. Alphonsus Trabold, a theology professor and exorcism expert at St. Bonaventure University in Olean, N.Y., frequently is asked to exorcise unruly spirits, and he often obliges.
"On certain occasions a spirit could be earthbound and make itself known," he says.
"It happens."
Father Trabold often uses what he calls "a therapeutic exorcism": a few prayers and an admonition to the spirit to leave.
"If the person believes there's an evil spirit, you ask it to be gone," he says.
"The suggestion itself may do the healing."
But sometimes more energetic attacks are required.
To wrestle with a demon in a house owned by a Litchfield, Conn., woman, the Warrens recently called in an exorcist, the Rev. Robert McKenna, a dissident clergyman who hews to the Catholic Church's old Latin liturgy.
I attend, and so does a television crew from New York City.
Mr. Warren pronounces the Litchfield case "your typical demonic infestation."
A Scottish dwarf built the small red house 110 years ago and now his demonic ghost haunts it, Mr. Warren says.
The owner, who begs anonymity, asserts that the dwarf, appearing as a dark shadow, has manhandled her, tossing her around the living room and yanking out a hank of hair.
Two previous exorcisms have failed.
"This is a very tenacious ghost," Mr. Warren says darkly.
Father McKenna moves through the house praying in Latin, urging the demon to split.
Suddenly the woman begins swaying and then writhing.
"She's being attacked by the demon," Mrs. Warren stagewhispers as the priest sprinkles holy water over the squirming woman, and the television camera grinds.
A half-hour later, the woman is smiling and chatting; the demon seems to have gone.
But Mr. Warren says the woman has "psychic burns" on her back from the confrontation.
She declines to show them.
"This was an invisible, powerful force that's almost impossible for a layman to contemplate," Mr. Warren says solemnly as the ghostbusting entourage packs up to leave.
"This time though," he says, "I think we got it."
Lyrics from "Ghostbusters" by Ray S. Parker Jr. 1984 by Golden Torch Music Corp. (ASCAP) and Raydiola Music (ASCAP).
All administrative rights for the U.S. jointly controlled by both companies.
International copyright secured.
Made in USA.
All rights Reserved.
Reprinted by permission.
BROKERAGE HIRING languishes amid market turmoil.
But survivors earn more.
Shearson Lehman Hutton Inc. counts under 39,000 workers, down 100 from the start of the year and off 8,500 from after its merger and the market collapse two years ago.
Another major firm has cut 6,000 workers, 13% of its staff, since Black Monday.
The Bureau of Labor Statistics says securities firms in New York City alone have slashed 17,000 jobs from the December 1987 peak of 163,000.
Average annual earnings of those who have hung on, though, surged to $78,625 last year from $69,553 in 1987.
Any hiring is confined to retail sales.
Illinois Company Investments had been trimming its ranks until last summer.
But then it was acquired by Household International Inc.
Now it offers richer commissions to lure a broker a week.
Interstate/Johnson Lane Inc. this year adds 70 people -- 60 of them in retail -- to its 1,300-member staff.
A.G. Edwards & Sons runs training classes and looks for experienced brokers.
"We're always going to hire someone we consider to be a winner," an Edwards official says.
SKILLED WORKERS aplenty are available to cope with earthquake damage.
"I don't foresee any shortages over the next few months," says Ken Allen, an official of Operating Engineers Local 3 in San Francisco.
Ironically, "up until the quake, we desperately tried to fill jobs," especially for crane and bulldozer operators.
But the Oct. 17 temblor put a halt to much nonessential building, and heavy rains last week slowed the rest, freeing construction workers for earthquake repairs.
The supply of experienced civil engineers, though, is tighter.
In recent months, California's Transportation Department has been recruiting in Pennsylvania, Arizona and Texas for engineers experienced in road and bridge design.
But, with the state offering only $39,000 a year and California's high standard of living, "there aren't too many to choose from," says Brent Scott, a recruiting officer.
He says the department now has 75 openings and wants to hire 625 civil engineers over the next 15 months.
THE IRS may taketh what the Labor Department giveth.
But stay tuned.
Employee-benefit specialists drew a collective sigh of relief in early October when the Labor Department backed away from a proposal that companies let former employees and beneficiaries -- along with active workers -- borrow against balances in 401(k) and similar savings plans.
In an advisory letter, the department said that, starting Oct. 18, loans could be limited to "parties in interest," which generally means active workers but also includes retirees who continue as directors and 10% shareholders.
Now comes word that IRS regulations being drafted could put companies in violation of the tax code if they make loans to retiree shareholders and directors but don't make them available to other former workers who usually earned less.
The IRS says the question won't be settled until the regulations are issued "shortly."
But violation could bring substantial tax penalties to both employer and employees.
"It's a severe case of regulatory whiplash," complains Henry Saveth of consultant A. Foster Higgins & Co.
Frederick Rumack of Buck Consultants has asked Labor to recraft its rule to remove the IRS threat.
CORPORATE DOWNSIZING digs deeper.
Outplacement consultant Right Associates says the average pay of its clients fell to $66,743 last year from $70,765 in 1987; severance pay dropped to 25 weeks from 29.
Both reflect the dismissal of lower-level and shorter-tenure executives.
FIRST TEACH THYSELF.
Executives universally believe workers should know their employer-sponsored benefits.
But three out of four managers can't accurately state the value of their own packages, consultant Noble Lowndes says.
MEA CULPA.
Fully 62% of the doctors surveyed for Metropolitan Life Insurance Co. think their fellow physicians are responsible for rising health-care costs, ahead of hospitals (55%) and patients (48%).
NO, YOU WORK!
Only one in four companies with flexible benefit plans lets workers buy or sell vacation days, consultant Towers Perrin says.
Employees like the option but firms say it's too tough to run.
STUDENTS SHUN burger flipping for jobs tied to careers.
Some even study.
"Fast-food jobs aren't popular no matter what they pay," says a Tufts official.
Working students, she explains, want "some satisfaction."
University of Michigan students look for jobs related to planned careers.
Carnegie Mellon, though, says some students conclude they can help their careers most by hitting the books: "They're opting to build their resumes through good grades and leadership roles in fraternities."
Slowing economies in some areas limit student choice.
Student job postings at Boston University slip 10% this year following a 10% drop in 1988.
Still, the school says there are an ample number and pay is up to $7.20 an hour from $6.90 last year.
M.B.A. candidates at the University of Pittsburgh earn up to $15 an hour on marketing or computer projects.
THE CHECKOFF: Fiery ambition:
Hyatt Corp. hires a University of Wyoming graduate with degrees in geology and petroleum engineering for $7.50 an hour to tend wood fires at a Colorado ski resort. . . .
Is somebody telling us something?
Our copy of Racine (Wis.) Labor comes through the mail wrapped around two sections of Baseball Card News.
Democracy is making a return with a vengeance to Latin America's most populous and deeply indebted country.
On Nov. 15, when Brazilians elect a president for the first time in 29 years, the country's 82 million voters will have 22 candidates to choose from.
The candidates have been crisscrossing this huge country of 145 million people, holding rallies and televised debates in hope of being elected to what must be one of the world's most thankless political jobs: trying to drag Brazil out of its economic and social mess.
"I feel sorry for whoever wins," says a Brazilian diplomat.
Who that winner will be is highly uncertain.
A half-dozen candidates, backing policies ranging from Thatcherism to watered-down Marxism, are given a chance of winning.
"Whoever says he knows which of the six will win is out of his mind," says Antonio Britto, a centrist member of Parliament.
The favorite remains Fernando Collor de Mello, a 40-year-old former governor of the state of Alagoas.
He came out of nowhere to grab the lead in opinion polls, probably less because of his vague program to "build a new Brazil" than because of his good looks, the open backing of the powerful Rede Globo television network and his reputation as a hunter of "maharajahs," or overpaid and underworked civil servants.
But after building up a commanding lead, the moderate to conservative Mr. Collor has slipped to about 30% in the polls from a high of about 43% only a few weeks ago.
To avoid a runoff, one candidate would have to win 50% of the vote -- a feat that most analysts consider impossible with so many candidates running.
Two left-wing politicians, Socialist Leonel Brizola, a former governor of Rio de Janeiro state, and Marxist-leaning Luis Inacio da Silva, currently are running neck and neck at about 15%, and three other candidates are given a chance of reaching the Dec. 17 runoff election between the two biggest vote-getters: Social Democrat Mario Covas and two conservatives, Paulo Salim Maluf, a former governor of the state of Sao Paulo, and Guilherme Afif Domingos.
The uncertainty is sending shivers through Brazilian financial markets.
The dollar, the best indicator of the country's mood, has skyrocketed on the parallel market, as has gold.
Capital flight is reported to be strong.
The big question is whether the new president will have the strength and the political support in Congress to take steps to cure Brazil's economic ills.
President Jose Sarney, who took office in 1985 when the man picked by an electoral college became critically ill, appears to be simply trying to avoid hyperinflation.
The unpopular Mr. Sarney, whose task was to bring about a smooth transition to democracy after 21 years of military rule, isn't seeking re-election.
What comes out of the ballot box could be crucial in determining whether Brazil finally lives up to the potential of the world's eighth largest economy or keeps living up to its other, less enviable title: that of the developing world's largest debtor, teetering on the brink of hyperinflation, mired in deficits and stagnation, with huge economic inequalities and social discontent boiling under the surface.
If Brazil devises an economic strategy allowing it to resume growth and service debt, this could lead it to open up and deregulate its sheltered economy, analysts say, just as Argentinian President Carlos Saul Menem has been doing even though he was elected on a populist platform.
"Depending on the president, we could either be a trillion-dollar economy by the end of the century or stay where we are," says political scientist Amaury de Souza.
"And where we are is bad."
Despite valiant efforts by Finance Minister Mailson Ferreira da Nobrega, inflation came to 36% in September alone and is expected to top 1,000% for the year.
That might have been considered hyperinflation not long ago, but Argentina endured price increases of almost 200% in July before bringing the rate down sharply in August and September.
Still, massive internal debt has forced the government to borrow massively on the domestic market and to offer inflation-adjusted returns of 2% to 3% a month just to get investors to hold on to its paper.
About $70 billion is estimated to be tied up in the short-term money market, which acts both as a hedge against inflation for consumers and an accelerator of inflation and deficits for the government.
By some estimates, Brazil's internal debt, or combined public deficit, could reach 6.5% of its $351 billion gross domestic product.
Much of the money goes into subsidies or keeping inefficient state-controlled companies operating.
Among the results is a frequent breakdown of public services.
It's not uncommon to wait three minutes for a dial tone after picking up the telephone, and then to be interrupted by a busy signal before finishing dialing the number.
Officials also say a national electricity shortage might not be far off.
Economists, businessmen and some politicians agree that the answer is an orthodox economic austerity program including reduced state spending; focusing spending on vital areas such as education, health and welfare; turning state companies private; reforming the tax system, raising public service rates to match costs; and possibly a temporary wage and price freeze and a devaluation of the cruzado.
Analysts also say it's inevitable that Brazil will seek to renegotiate its $115 billion foreign debt, on which it suspended interest payments last month.
Analysts say, however, that a tough economic program would have to be accompanied by measures to shield the poor from its recessionary effects, for instance by subsidizing staple food items.
About 80% of Brazil's voters are believed to live near the poverty level.
Of the three candidates with a serious chance of winning, Mr. Collor comes closest to advocating the sort of measures that economists say are necessary.
But his inexperience raises doubts that he would have the political power to carry them out.
The 67-year-old Mr. Brizola has been vague about his intentions and often inflammatory in his rhetoric, but analysts say he probably would be pragmatic.
Mr. da Silva, a 43-year-old former factory worker and labor leader, is the most radical, vowing to withhold payments on the foreign debt and saying he "wouldn't go around putting the country up for sale to the highest bidder."
But despite the differences in what they say, according to some analysts here, economic constraints mean the next president may not have many choices about what he does.
Hospital Regulation Sparks Kentucky Feud
WHICH IS the best medicine for runaway health costs: competition or regulation?
The question is at the root of a brawl between Humana Inc., the big for-profit hospital and insurance company, and its not-for-profit brethren in its home state of Kentucky.
The battle focuses on the state's certificate-of-need law, which regulates investment in new medical technology.
The law has prevented $216 million of unnecessary expenditures since 1986, according to William S. Conn, president of the Kentucky Hospital Association.
But according to David Jones, Humana's chief executive, it promotes technology monopolies, stifles innovation and raises prices.
If the Legislature doesn't repeal the law, due for revision in 1990, Mr. Jones says Humana may move its insurance operations, including 3,000 jobs in Louisville, to another state.
The company complains that it paid $10 million to non-Humana hospitals in its latest fiscal year for services provided to its insurance plan members.
But Humana says its own facilities could serve its insured for less if they were properly equipped.
Mr. Conn charges that Humana's own actions undermine its argument.
When a hospital in Lexington installed a lithotripter last year, demand for a similar kidney-stone smashing machine at a Humana hospital in Louisville fell 34%.
The Humana hospital responded by jacking up prices to make up for lost revenue, Mr. Conn says, and now charges as much as $8,000 for the procedure, which costs only about $3,500 in Lexington.
Humana contends that $8,000 represents an extreme case and that its regular charge for lithotripsy is $4,900.
Meanwhile, another hospital's proposal for a new-generation lithotripter is pending before the board that administers the certificate-of-need law.
Humana, which wants to acquire one of the new machines itself, is on the record as opposed to the proposal.
Debt-Burdened Doctors Seek Financial Security
HEALTH-CARE experts have long worried that young doctors emerging from medical school with a mountain of debt will choose careers in high-paying specialties instead of primary care, where more physicians are needed most.
Now there's a new wrinkle in what young doctors want: More than half of 300 residents responding to recent survey said they'd prefer a guaranteed salary over traditional fee-for-service compensation in their first professional position.
And 81% preferred a group practice or health maintenance organization, while just 11% favored solo practice.
"Ten years ago, a physician would go to a town and take out a loan (to start a practice)," says James Merritt, president of Merritt, Hawkins & Associates, an Irvine, Calif., physician recruiter that conducted the survey.
"They won't do that very often today at all.
They're looking for something that's very safe."
The numbers behind such fears: The average debt of medical school graduates who borrowed to pay for their education jumped 10% to $42,374 this year from $38,489 in 1988, says the Association of American Medical Colleges.
That's 115% more than in 1981.
Money isn't the only reason for the shift in practice preferences.
It reflects values of a generation that wants more time for families and personal interests, says John H. Moxley III, who directs physician-executive searches for Korn/Ferry International.
"This is a change in the social fabric of medicine," he says.
Related Roommates Trim Hospital Bills
WHEN Catherine Bobar spent several weeks at the Medical Center of Vermont recently with a bone infection in her toe, she shared a room just like most patients.
But unlike most patients, her roommate was her husband.
"It was certainly good to have him handy," Mrs. Bobar says.
The 12-bed "cooperative care" unit is one of about 18 nationwide where a family member or friend helps care for a patient in the hospital.
"The philosophy is to make the patient and the family very responsible for a portion of their own care," says Anthony J. Grieco, medical director of cooperative care at New York University Medical Center, where the concept began 10 years ago.
"It helps us, and them, while they're here, and it certainly makes them a better health-care team when they get home."
It also saves money.
Because patients require less attention from nurses and other staff, room charges are lower -- about $100 less per day than a regular room at the Vermont hospital.
Cancer patients needing prolonged radiation therapy, diabetics learning to manage their blood sugar levels, and cardiac bypass patients are among those who spend time on cooperative-care units.
The approach has generated so much interest that NYU is host to the first conference on cooperative care Nov. 30.
"It's really part of the hospital of the 21st century," Dr. Grieco says.
Odds and Ends
THE CHIEF NURSING officer can be responsible for more than 1,000 employees and at least one-third of a hospital's budget; a head nurse typically oversees up to 80 employees and $8 million.
So says the Commonwealth Fund, a New York philanthropist that's sponsoring a $1 million project to develop joint masters in business and nursing programs at 10 universities. . . .
Meharry Medical College in Nashville, Tenn., launches a new research publication in the spring: the Journal on Health Care for the Poor and Underserved.
A group of Michigan investors has offered to buy Knight-Ridder Inc.'s ailing Detroit Free Press for $68 million but has left unclear how the offer will be financed.
The offer came just prior to arguments before the U.S. Supreme Court over whether the Free Press should be allowed to enter into a joint operating pact with Gannett Co.'s Detroit News.
The group led by Birmingham, Mich., publicist William D. McMaster didn't name an investment banker backing the deal or say how much its members will contribute to the offer.
Indeed, some individuals identified with the group said they haven't committed any money to the bid and weren't aware of it until they heard about it in local news accounts over the weekend.
Knight-Ridder wouldn't comment on the offer.
The company has said the paper isn't for sale, and has rebuffed Mr. McMaster's earlier requests for access to Free Press financial statements.
In his letter to Knight-Ridder President James K. Batten, Mr. McMaster said he arrived at the $68 million figure using Knight-Ridder's corporate financial statements and comments by Knight-Ridder officials that the Free Press has a $50 million value in salvage.
But in an interview, Mr. McMaster said he and his investment banker would need access to full financial records before firming up the offer.
Mitsui & Co. said it started a joint venture with Dae Woong Chemical Co., a major pharmaceutical manufacturer in South Korea, to manufacture antibiotic medicines.
The new company is capitalized at about $3.5 million.
Mitsui expects the antibiotic products to be exported to Southeast Asia and Africa.
It also hopes to enter the U.S. market.
NRM Energy Co. said it filed materials with the Securities and Exchange Commission calling for it to restructure into a corporation from a limited partnership.
The partnership said it is proposing the change largely because the provisions of its senior notes restrict it from making distributions on its units outstanding.
NRM suspended its common distribution in June 1988 and the distribution on its $2 cumulative convertible acquisition preferred units in September.
However, unpaid distributions on the acquisition preferred are cumulative and would total $23 million a year, hurting NRM's financial flexibility and its ability to raise capital, NRM said.
In following several other oil and gas partnerships that have made the conversion to a corporation in the last year, NRM also noted that tax advantages for partnerships have diminished under new tax laws and said it would save $2 million a year in administrative costs from the change.
Under the plan, NRM said holders of its common units will receive one share of new common stock in Edisto Resources Corp. for every 14.97 common units owned.
Holders of NRM's $2 cumulative convertible acquisition preferred units will receive one new common share in Edisto for every 1.342 units they own.
After the transaction, current common unitholders will own about 21.3% of Edisto, current acquisition preferred holders will own 72.3%, and current stockholders of Edisto will own about 6.4%, about the same stake as Edisto owns now in NRM.
Edisto currently is the general partner of NRM.
As the largest holder of acquisition preferred units, Mesa Limited Partnership would own about 28% of Edisto after the transaction.
As part of the transaction, Edisto agreed to give Mesa, an Amarillo, Texas, oil and gas partnership managed by T. Boone Pickens Jr., a seat on its board.
NRM said its $2.60 senior cumulative convertible preferred units will be converted into an equal number of shares of $2.60 senior cumulative convertible preferred stock of Edisto.
The transaction is subject to approval of NRM unitholders of record on Oct. 23, among other conditions.
NRM said it expects unitholders to vote on the restructuring at a meeting Dec. 15.
Sherwin-Williams Co. and Whittaker Corp. said they've discontinued talks toward a definitive agreement regarding Sherwin-Williams' acquisition of Whittaker's chemical coating group.
The companies reached an agreement in principle for the sale in August.
Terms weren't disclosed.
Cleveland-based Sherwin-Williams produces paints and coatings, while the Los Angeles-based Whittaker coatings group produces industrial coatings.
USG Corp. agreed to sell its headquarters building here to Manufacturers Life Insurance Co. of Toronto, and will lease the 19-story facility until it moves to a new quarters in 1992.
The building-materials concern didn't disclose terms of the sale, which will close in the first quarter of next year.
Proceeds from the planned sale of the 250,000-square-foot building "will help reduce the debt incurred as a result of our July 1988 recapitalization," said a USG official.
The recently revived enthusiasm among small investors for stock mutual funds has been damped by a jittery stock market and the tumult over program trading.
After hitting two-year highs this summer, net sales of stock funds slowed in September, according to the Investment Company Institute, a trade group.
The sales recovery screeched to a halt this month, some analysts say.
"Confidence was starting to come back because we didn't have wildly volatile days," says Tyler Jenks, research director for Kanon Bloch Carre & Co., a Boston research firm.
"Now everything" -- such as program trading and wide stock market swings -- "that everyone had pushed back in their consciousness is just sitting right there."
Net sales of stock funds in September totaled $839.4 million, down from $1.1 billion in August, the institute said.
But if reinvested dividends are excluded, investors put in only $340 million more than they pulled out for the month.
October's numbers, which won't be released for a month, are down further, mutual fund executives say.
Investors in stock funds didn't panic the weekend after mid-October's 190-point market plunge.
Most of the those who left stock funds simply switched into money market funds.
And some fund groups said investors actually became net buyers.
But the stock market swings have continued.
The recent outcry over program trading will cast a pall over the stock-fund environment in the coming months, some analysts say.
"The public is very close to having had it," Mr. Jenks says.
Investors pulled back from bond funds in September, too.
Net sales of bond funds for the month totaled $1.1 billion, down two-thirds from $3.1 billion in August.
The major reason: heavy outflows from high-risk, high-yield junk bond funds.
Big withdrawals from the junk funds have continued this month.
Overall, net sales of all mutual funds, excluding money market funds, fell to $1.9 billion in September from $4.2 billion in August, the trade group said.
"Small net inflows into stock and bond funds were offset by slight declines in the value of mutual fund stock and bond portfolios" stemming from falling prices, said Jacob Dreyer, the institute's chief economist.
Many small investors went for the safety of money market funds.
Assets of these and other short-term funds surged more than $5 billion in September, the institute said.
Analysts say additional investors transferred their assets into money funds this month.
At Fidelity Investments, the nation's largest fund group, money funds continue to draw the most business, says Michael Hines, vice president, marketing.
In October, net sales of stock funds at Fidelity dropped sharply, Mr. Hines said.
But he emphasized that new accounts, new sales, inquiries and subsequent sales of stock funds are all up this month from September's level.
Investor interest in stock funds "hasn't stalled at all," Mr. Hines maintains.
He notes that most of the net sales drop stemmed from a three-day period following the Friday the 13th plunge.
"If that follows through next month, then it will be a different story," he says.
But, Mr. Hines adds, sales "based on a few days' events don't tell you much about October's trends."
One trend that continues is growth in the money invested in funds.
Buoyed by the continued inflows into money funds, assets of all mutual funds swelled to a record $953.8 billion in September, up fractionally from $949.3 billion in August.
Stock-fund managers, meantime, went into October with less cash on hand than they held earlier this year.
These managers held 9.8% of assets in cash at the end of September, down from 10.2% in August and 10.6% in September 1988.
Large cash positions help buffer funds from market declines but can cut down on gains in rising markets.
Managers of junk funds were bolstering their cash hoards after the September cash crunch at Campeau Corp.
Junk-portfolio managers raised their cash position to 9.4% of assets in September from 8.3% in August.
In September 1988, that level was 9.5%.
Investors in all funds will seek safety in the coming months, some analysts say.
Among stock funds, the conservative growth-and-income portfolios probably will remain popular, fund specialists say.
"There will be a continuation and possibly greater focus on conservative equity funds, at the expense of growth and aggressive growth funds," says Avi Nachmany, an analyst at Strategic Insight, a New York fund-research concern.
Secretary of State Baker, we read, decided to kill a speech that Robert Gates, deputy national security adviser and a career Soviet expert, was going to give to a student colloquium, the National Collegiate Security Conference.
We keep wondering what Mr. Gates wanted to say.
Perhaps he might have cited Mr. Gorbachev's need for "a stable currency, free and competitive markets, private property and real prices" and other pie-in-the-sky reforms.
Perhaps he'd have called for "a decentralized political and economic system" without a dominant communist party.
Or political arrangements "to alleviate the grievances and demands of Soviet ethnic minorities and republics."
Why, a Bob Gates might even have said, "Nor are Soviet problems susceptible to rescue from abroad through abundant Western credits."
If Mr. Gates had been allowed to say these things, we would now be hearing about "discord" and "disarray" on foreign policy.
Dark hints would be raised that parts of the administration hope Mr. Gorbachev would fail, just as they were when Vice President Quayle voiced similar sentiments.
It's somehow OK for Secretary Baker himself, however, to say all the same things.
In fact, he did; the quotes above are from Mr. Baker's speech of two weeks ago.
So far as we can see, there is no disagreement among Mr. Baker, Mr. Quayle, the Mr. Gates we've read, or for that matter President Bush.
They all understand point one: Nothing the U.S. can do will make much difference in whether Mr. Gorbachev succeeds with perestroika.
Perhaps Mr. Gates would emphasize more than Mr. Baker the many hurdles the Soviet leader must leap if he is going to succeed.
But everyone agrees that Mr. Gorbachev's problems result from the failure of his own system.
They can be relieved only by changing that system, not by pouring Western money into it.
GATT membership will not matter to Donbas coal miners short of soap, nor will a START treaty make any difference to Ukrainian nationalists.
On the other hand, so long as Mr. Gorbachev is easing his grip on his empire, everyone we've heard agrees that the U.S. can benefit by engaging him.
If a deal can be made to cut the world's Ortegas loose from Moscow, why not?
We don't expect much good from nuclear-arms control, but conventional-arms talks might demilitarize Eastern Europe.
There's nothing in the least contradictory in all this, and it would be nice to think that Washington could tolerate a reasonably sophisticated, complex view.
Yet much of the political culture seems intent on castigating the Bush administration for not "helping" Mr. Gorbachev.
So every time a Bush official raises a doubt about Mr. Gorbachev, the Washington community shouts "Cold War" and "timidity," and an administration spokesman is quickly trotted out to reply, "Mr. Bush wants perestroika to succeed."
Mr. Baker seems especially sensitive to the Washington ailment known as Beltway-itis.
Its symptoms include a cold sweat at the sound of debate, clammy hands in the face of congressional criticism, and fainting spells when someone writes the word "controversy."
As one unidentified official clearly in the late stages of the disease told the Times: "Baker just felt that there were some lines in the speech that could be misinterpreted and seized by the press."
In short, the problem is not intra-administration disagreement, but preoccupation with the prospect that perestrokia might fail, and its political opponents will ask "Who lost Gorbachev?"
Mr. Baker may want to avoid criticism from Senate Majority Leader George Mitchell, but as Secretary of State his audience is the entire Free World, not just Congress.
In any case, he's likely to find that the more he muzzles his colleagues, the more leaks will pop up all around Washington, a lesson once learned by Henry Kissinger.
Letting officials express their own nuances can be educational.
We note that in Rome yesterday Defense Secretary Cheney said that European euphoria over Mr. Gorbachev is starting to be tempered by a recognition of "the magnitude of the problems he was trying to deal with."
It is in the Western interest to see Mr. Gorbachev succeed.
The odds are against him, as he himself would no doubt tell you.
The ultimate outcome depends on what he does, not on what we do.
Even if the press is ready to seize and misinterpret, these are not very complicated thoughts.
Surely there is someone in the administration, maybe Bob Gates, who could explain them to college students, or even schoolchildren.
Vernon E. Jordan was elected to the board of this transportation services concern.
Mr. Jordan has served as executive director of the United Negro College Fund, director of the Voter Education Project of the Southern Regional Council and attorney-consultant to the U.S. Office of Economic Opportunity.
His election increases Ryder's board to 14 members.
The American Stock Exchange said a seat was sold for $160,000, down $5,000 from the previous sale last Friday.
Seats are currently quoted at $151,000, bid, and $162,000, asked.
Two gunmen entered a Maryland restaurant, ordered two employees to lie on the floor and shot them in the backs of their heads.
The killers fled with less than $100.
Describing this and other grisly killings, Sen. Strom Thurmond (R., S.C.) recently urged fellow lawmakers to revive a broad federal death penalty.
"The ultimate punishment," he declared, "will protect the law-abiding from the vicious, cruel individuals who commit these crimes."
There's just one problem: The law that Sen. Thurmond is pushing would be irrelevant in the case of the Maryland restaurant murders and almost all other killings.
Most murders are state crimes, so any federal capital-punishment law probably would turn out to be more symbolism than substance.
Yet the bill is riding high on the furor over drug trafficking.
Senate Republicans, after repeatedly failing to attach death-penalty amendments to unrelated legislation, have finally gotten a full-blown death-penalty bill through committee.
The Democratic leadership agreed to allow a floor vote on the issue before the end of the year -- a debate certain to focus on the alleged racial inequality of death sentencing.
Even some Democrats concede that there is probably a majority in the Senate that favors some kind of broad capital-punishment measure.
The pending bill, introduced by Mr. Thurmond, would revive the long-dormant federal death-penalty laws by instituting legal procedures required by the Supreme Court.
In 1972, the high court swept aside all capital-punishment laws -- federal and state alike -- as unconstitutional.
But in 1976, the court permitted resurrection of such laws, if they meet certain procedural requirements.
For instance, juries would have to consider specific "aggravating" and "mitigating" factors before deciding whether to condemn someone to death.
Since that 1976 ruling, 37 states have reintroduced the death penalty.
But congressional Democrats have blocked the same from occurring at the federal level, with the exception of a 1988 law allowing capital punishment for certain drug-related homicides.
The Thurmond bill would establish a federally administered death sentence for 23 crimes, most of which were formerly punishable by death under federal statutes that the Supreme Court invalidated.
Among these crimes are murder on federal land, presidential assassination and espionage.
The Thurmond bill would also add five new crimes punishable by death, including murder for hire.
(Separately, the Senate last week passed a bill permitting execution of terrorists who kill Americans abroad.)
Amid the swirl of punitive rhetoric surrounding the issue, one critical question involves whether a federal death penalty, on top of existing state laws, would deter any would-be criminals.
For one thing, it's unlikely that many people would receive federal death sentences, let alone be executed.
Most of the crimes incorporated in the Thurmond bill are exceedingly rare -- killing a Supreme Court justice, for instance, or deliberately causing a train wreck that results in a death.
In fact, only 28 defendants would have been eligible for federal death sentences if the Thurmond bill had been in effect in the past three years, according to a study by the Senate Judiciary Committee's Democratic staff.
The last federal execution before the Supreme Court's 1972 ruling banning the death penalty took place in 1963, meaning that the federal government didn't exercise its execution authority for eight years.
"In that sense, the whole debate is sort of a fraud," argues a Democratic Senate staff member.
"It's distracting attention from serious issues, like how to make DEA, FBI and Customs work together" on drug enforcement.
Republicans acknowledge that few people would be executed under the Thurmond bill, but they contend that isn't the point.
"Many scholars are of the opinion that the mere existence of the penalty deters many people from the commission of capital crimes," says Sen. Orrin Hatch (R., Utah).
Executions, regardless of how frequently they occur, are also "proper retribution" for heinous crimes, Mr. Hatch argues.
Thomas Boyd, a senior Justice Department official, says the new federal drug-related crimes punishable by death since last November may result in a jump in capital sentences, though that hasn't happened so far.
In addition to resuscitating the old issue of whether death sentences deter criminals, this bill has made race a major part of the death-penalty debate.
Before the bill left committee, Sen. Edward Kennedy (D., Mass.) attached an amendment that would allow a defendant to escape from a death sentence in jurisdictions shown to have meted out executions in a racist manner.
The amendment prompted an ironic protest from Mr. Thurmond, who complained that it would "kill" capital punishment.
A large number of studies suggest that state judges and juries have imposed the penalty in a racially discriminatory fashion.
And the Kennedy amendment would invade not only federal but state sentencings, in two important ways.
It would allow all defendants to introduce statistical evidence showing racially disproportionate application of the death penalty in the past.
And it would shift the burden to prosecutors to disprove that discrimination caused any statistical racial disparities.
"That burden is very difficult, if not impossible, to meet," says Mr. Boyd.
"How do you prove a negative?"
Since most prosecutors wouldn't be able to demonstrate conclusively that racial considerations didn't affect sentencing, executions everywhere might come to a halt, Mr. Boyd explains.
At least 15 major studies purport to show that particular states have imposed the death penalty disproportionately against killers of whites compared with blacks, and against black defendants compared with white defendants.
Conservatives question the validity of the studies and note that the Supreme Court ruled in 1987 that such research, regardless of its accuracy, isn't relevant to a constitutional attack on a particular death sentence.
The Kennedy amendment would, in effect, legislate around the Supreme Court ruling.
Lawyers would eagerly seize on the provision in their death-penalty appeals, says Richard Burr, director of the NAACP Legal Defense and Educational Fund's capital-punishment defense team.
Mr. Kennedy failed to get his amendment incorporated into last year's anti-drug legislation, and it will be severely attacked on the Senate floor this time around.
But if it survives, it could prompt other statutory changes, according to the Mr. Burr.
It might force Congress and the states to narrow the death penalty only to convictions shown to be relatively free of racial imbalance -- murders by repeat offenders who torture their victims, perhaps.
Narrowing the penalty in this fashion would clearly reduce whatever deterrent effect it now has.
And that, in turn, would only strengthen the argument of those who oppose execution under any circumstances.
A state judge postponed a decision on a move by holders of Telerate Inc. to block the tender offer of Dow Jones & Co. for the 33% of Telerate it doesn't already own.
Vice Chancellor Maurice A. Hartnett III of Delaware's Court of Chancery heard arguments for more than two hours here, but he made no comment and asked no questions.
He could rule as early as today on the motion seeking a temporary injunction against the Dow Jones offer.
Dow Jones has offered to pay $18 a share, or about $576 million, for the remaining Telerate stake.
The offer will expire at 5 p.m. EST on Nov. 6, unless extended again.
Robert Kornreich, an attorney for the Telerate holders, told Judge Hartnett the Dow Jones offer is "arrogant" and "hostile."
He accused Dow Jones of "using unfair means to obtain the stock at an unfair price."
Michael Rauch, an attorney for Dow Jones, defended the offer as adequate, based on what the company considers realistic projections of Telerate's revenue growth, in the range of 12%.
He also contended that the plaintiffs failed to cite any legal authority that would justify such an injunction.
Telerate provides information about financial markets through an electronic network.
Dow Jones publishes The Wall Street Journal, Barron's magazine, other periodicals and community newspapers and operates electronic business information services.
Japan's exports of cars, trucks and buses declined 2.4% to 535,322 units in September from a year earlier, the Japan Automobile Manufacturers Association said.
The association attributed the drop to a trend among auto makers to move manufacturing operations overseas.
With the exception of August, when exports rose 2.1%, exports have declined every month from year-earlier levels since March.
Lone Star Technologies Inc. said its Lone Star Steel Co. unit sued it in federal court here, seeking to recover an intercompany receivable valued at a minimum of $23 million.
The lawsuit was filed by Lone Star Steel's unsecured creditors' committee on behalf of Lone Star Steel, which has been operating under Chapter 11 of the federal Bankruptcy Code since June 30.
Lone Star Technologies said it and its subsidiary's creditors agree that the parent company owes the unit money, but they haven't been able to reach agreement on the amount.
Judith Elkin, lawyer for the creditors, said the creditors group is challenging certain accounting entries on the parent company's books and estimates that the receivable owed the steel company could be as much as $40 million.
The Lone Star Steel lawsuit also asks the court to rule that Lone Star Technologies is jointly responsible for a $4.5 million Lone Star Steel pension payment that was due, but wasn't paid, in September and that the parent company can't recover the amount from its subsidiary if the parent company makes the payment.
Separately, Lone Star Technologies said the bankruptcy court granted Lone Star Steel an extension until year end on its exclusive period to present a reorganization plan.
The 120-day exclusivity period was to expire yesterday.
Under Chapter 11, a company continues to operate, but is protected from creditor lawsuits while it tries to work out a plan to pay its debt.
Nothing was going to hold up the long-delayed settlement of Britton vs. Thomasini.
Not even an earthquake.
On the afternoon of Oct. 17, after hours of haggling with five insurance-claims adjusters over settling a toxic-waste suit, four lawyers had an agreement in hand.
But as Judge Thomas M. Jenkins donned his robes so he could give final approval, the major earthquake struck, its epicenter not far from his courtroom in Redwood City, Calif.
The walls shook; the building rocked.
For a while, it looked like the deal -- not to mention the courtroom itself -- was on the verge of collapse.
"The judge came out and said, `Quick, let's put this on the record,'" says Sandy Bettencourt, the judge's court reporter.
"I said, `NOW?'
I was shaking the whole time."
A 10-gallon water cooler had toppled onto the floor, soaking the red carpeting.
Lights flickered on and off; plaster dropped from the ceiling, the walls still shook and an evacuation alarm blared outside.
The four lawyers climbed out from under a table.
"Let's close the door," said the judge as he climbed to his bench.
At stake was an $80,000 settlement involving who should pay what share of cleanup costs at the site of a former gas station, where underground fuel tanks had leaked and contaminated the soil.
And the lawyers were just as eager as the judge to wrap it up.
"We were never going to get these insurance companies to agree again," says John V. Trump, a San Francisco defense lawyer in the case.
Indeed, the insurance adjusters had already bolted out of the courtroom.
The lawyers went to work anyway, duly noting that the proceeding was taking place during a major earthquake.
Ten minutes later, it was done.
For the record, Jeffrey Kaufman, an attorney for Fireman's Fund, said he was "rattled -- both literally and figuratively."
"My belief is always, if you've got a settlement, you read it into the record." says Judge Jenkins, now known in his courthouse as "Shake 'Em Down Jenkins."
The insurance adjusters think differently.
"I didn't know if it was World War III or what," says Melanie Carvain of Morristown, N.J.
"Reading the settlement into the record was the last thing on my mind.
Edison Brothers Stores Inc. said it agreed to buy 229 Foxmoor women's apparel stores from Foxmoor Specialty Stores Corp., a unit of Dylex Ltd. of Toronto.
Terms weren't disclosed.
Edison said the acquired stores would be integrated into its current operations.
BROWN-FORMAN Corp. (Louisville, Ky.) --
David R. Jackson, formerly vice president, managing director of corporate communications for Maxwell Communication Inc., was named vice president and assistant to the chairman of this maker of alcoholic beverages and consumer products.
Your Oct. 4 front page noted that British lawyers have to wear wigs in court and that these wigs are made from horses' tails.
Do you think the British know something that we don't?
Yale Jay Lubkin
Owings, Md.
Applause for "Sometimes, Talk Is the Best Medicine," in your Oct. 5 Marketplace section.
Indeed, the "art of doctoring" does contribute to better health results and discourages unwarranted malpractice litigation.
Elaborating on the concern about doctors' sacrificing earnings in order to spend "talk time" with patients, we are finding the quality of the time spent is the key to true rapport.
Even brief conversations can show caring and trust, and need not restrict the efficiency of the communication or restrain the doctor's earnings.
The issue is far-reaching.
Right now, the American populace is spending about 12% of our gross national product on health care.
That amounts to more than $350 billion a year.
And it is estimated that more than 20% of that, $70 billion, goes to "defensive medicine" -- those measures taken by doctors to protect themselves from the most unlikely possibilities.
So we all stand to benefit if patient-physician relations become a "partnership."
President North American Physicians Insurance Risk Retention Group
Chrysler Corp. Chairman Lee A. Iacocca said the nation's No. 3 auto maker will need to close one or two of its assembly plants because of the slowdown hitting the industry.
In an interview with the trade journal Automotive News, Mr. Iacocca declined to say which plants will close or when Chrysler will make the moves.
But he said, "we have too many plants in our system.
So the older or most inefficient capacity has got to go."
According to industry analysts, Chrysler plants most likely to close are the St. Louis No. 1 facility, which builds Chrysler LeBaron and Dodge Daytona models; the Toledo, Ohio, Jeep plant, which dates back to the early 1900s; and two Canadian plants that build the Jeep Wrangler and Chrysler's full-sized vans.
Chrysler has had to temporarily close the St. Louis and Toledo plants recently because of excess inventories of vehicles built there.
At Chrysler's 1990 model preview last month, Chrysler Motors President Robert A. Lutz said the No. 3 auto maker, along with other U.S. manufacturers, might be forced to "realign . . . capacity" if market demand doesn't improve.
But Mr. Iacocca's remarks are the most specific indication to date of how many plants could be in jeopardy.
General Motors Corp. has signaled that as many as five of its U.S. and Canadian plants may not survive the mid-1990s as it struggles to trim its excess vehicle-production capacity.
The overcapacity problem has intensified in recent years, with foreign auto makers beginning car and truck production in the U.S.
With companies such as Honda Motor Co., Toyota Motor Corp. and Nissan Motor Co. running so-called transplant auto operations, Japanese auto production in the U.S. will reach one million vehicles this year.
"Unless the market goes to 19 million units -- which we all know it's not going to do -- we have the inescapable fact that the transplants are adding capacity," Mr. Lutz said last month.
The Japanese-managed plants eventually will have the capacity to build some 2.5 million vehicles in the U.S. and that will translate into "market share that is going to have to come out of somebody," he added.
Already Chrysler has closed the Kenosha, Wis., plant it acquired when it bought American Motors Corp. in 1987.
Chrysler has also launched a $1 billion cost-cutting program that will cut about 2,300 white-collar workers from the payroll in the next few months.
Revco D.S. Inc., the drugstore chain that filed for bankruptcy-court protection last year, received a $925 million offer from a group led by Texas billionaire Robert Bass.
Revco reacted cautiously, saying the plan would add $260 million of new debt to the highly leveraged company.
It was Revco's huge debt from its $1.3 billion leveraged buy-out in 1986 that forced it to seek protection under Chapter 11 of the federal Bankruptcy Code.
Revco insists that the proposal is simply an "expression of interest," because under Chapter 11 Revco has "exclusivity rights" until Feb. 28.
Those rights prevent anyone other than Revco from proposing a reorganization plan.
Also under Chapter 11, a reorganization plan is subject to approval by bondholders, banks and other creditors.
A financial adviser for Revco bondholders, David Schulte, of Chilmark Partners, had mixed reactions to the offer.
He said he feared a Revco reorganization might force bondholders to accept a "cheap deal," and that the Bass group's offer would give them more money.
However, the group is offering to pay off bondholders in cash only -- $260.5 million -- and no equity.
The Revco bonds are high-yield, high-risk "junk" bonds; holders have $750 million in claims against Revco, Mr. Schulte said.
Revco received the offer Oct. 20, but issued a response yesterday only after a copy of the proposal was made public by bondholders.
Acadia Partners Limited Partnership, a Fort Worth, Texas, partnership that includes the Robert M. Bass Group, made the proposal.
Mr. Bass is based in Fort Worth.
Analysts said the nation's second-largest drugstore chain was a valuable company, despite its financial woes.
Its problem, they say, is that management paid too much in the leveraged buy-out and the current $515 million debt load is keeping Revco in the red.
"If bought at the right price, it could still be profitable," said Jeffrey Stein, an analyst at McDonald & Co., Cleveland.
In addition, Revco's 1,900 stores in 27 states represent a lot of real estate, he said, and demographics are helping pharmacies: The nation's aging population will boost demand for prescription drugs.
Last week, Revco's parent company, Anac Holding Corp., said the company reported a loss of $16.2 million for the fiscal first quarter, compared with a loss of $27.9 million in the year-earlier quarter.
Sales were $597.8 million, up 2.4% from the previous year.
The company, based in Twinsburg, Ohio, said its operating profit before depreciation and amortization increased 51%, to $9.2 million from $6.1 million.
Acadia Partners and the Bass Group declined to comment.
The partnership also includes American Express Co., Equitable Life Assurance Society of the U.S. and Shearson Lehman Hutton Inc.
The offer consists of $410.5 million in cash and the rest in notes.
Acadia would sell up to 10% of the equity in the reorganized company to creditors and bondholders in exchange for the cash distribution, but creditors and bondholders would receive no discount for their shares.
Revco's chairman and chief executive officer, Boake A. Sells, said both the company and the bondholders have put forth reorganization plans, but little progress has been made since negotiations began this summer.
He said he has not met with representatives from Acadia.
Any reorganization proposal, Mr. Sells said, is difficult to assess because it must be agreed upon by the company, bondholders, banks and other creditors.
Revco has $1.5 billion in claims outstanding.
"It's not like the board can decide" by itself, Mr. Sells said, adding, "we're indifferent to (the Bass) plan.
We just want a plan that satisfies creditors and at the end leaves a healthy Revco."
But Mr. Schulte, the bondholders' adviser, said Revco was dragging its feet in responding to the proposal.
"They want to pretend it doesn't exist," he said.
Mr. Schulte, who met with Acadia representatives on Oct. 10, said, "It's certainly a responsible offer.
It's not an effort to steal the company" in the middle of the night.
Copper futures prices failed to extend Friday's rally.
Declines came because of concern that demand for copper may slow down.
The December contract was down three cents a pound, settling at $1.1280, which was just above the day's low of $1.1270.
Futures prices fell during three of five sessions last week, and the losses, individually and cumulatively, were greater than the advances.
Two of the major factors buoying prices, the prolonged strikes at the Highland Valley mine in Canada and the Cananea mine in Mexico, were finally resolved.
Also, the premiums paid by the U.S. government on a purchase of copper for the U.S. Mint were lower than expected, and acted as a price depressant, analysts said.
The mint purchases were at premiums about 4 1/2 cents a pound above the respective prices for the copper.
At the time merchants were asking for premiums of about five cents a pound.
All this has led to prolonged selling in futures, mostly on the part of computer-guided funds.
Prices fell through levels regarded as important support areas, which added to the selling.
The reluctance of traders to buy contracts indicates that they have begun focusing on demand rather than supply.
At least one analyst noted that as production improves, the concern among traders is whether the prospective increased supply will find buyers because of uncertainty over national economies.
"Demand from Japan is expected to continue strong, but not from other areas of the world into the first quarter of next year," he said.
Japan normally depends heavily on the Highland Valley and Cananea mines as well as the Bougainville mine in Papua New Guinea.
Recently, Japan has been buying copper elsewhere.
But as Highland Valley and Cananea begin operating, they are expected to resume their roles as Japan's suppliers.
According to Fred Demler, metals economist for Drexel Burnham Lambert, New York, "Highland Valley has already started operating and Cananea is expected to do so soon."
The Bougainville mine is generally expected to remain closed until at least the end of the year.
It hasn't been operating since May 15 because of attacks by native landowners.
A recent attempt to resume operations was cut short quickly by these attacks.
However, traders disregarded a potential production disruption in Chile and a continued drop in inventories.
Workers at two Chilean mines, Los Bronces and El Soldado, which belong to the Exxon-owned Minera Disputado group, will vote Thursday on whether to strike after a two-year labor pact ends today.
The mines produced a total of 110,000 tons of copper in 1988.
According to Drexel's Mr. Demler, the potential strike is expected to be resolved quickly, which may be one reason why the situation didn't affect prices much.
Another analyst said that, if there was any concern, it was that a strike could encourage other walkouts in Chile.
London Metal Exchange copper inventories fell 550 tons last week to 83,950 tons, a smaller-than-expected decline.
But that development also had little effect on traders' sentiment.
Mr. Demler said that stocks of copper in U.S. producers' hands at the end of September were down 16,000 metric tons from August to 30,000 tons.
Outside the U.S., he said, producer stocks at the end of August were 273,000 tons, down 3,000 tons from the end of July.
Consumer stocks of copper in the U.S. fell to 44,000 tons at the end of September from 54,000 tons a month earlier, and stocks of copper held by consumers and merchants outside of the U.S. at the end of July stood at 123,000 tons, down from 125,000 tons in June.
The high point of foreigners' copper stocks this year was 136,000 tons at the end of April, according to Mr. Demler.
In other commodity markets yesterday:
GRAINS AND SOYBEANS:
The prices of most corn, soybean and wheat futures contracts dropped slightly as farmers in the Midwest continued to rebuild stockpiles that were depleted by the 1988 drought.
Buying by the Soviets has helped to prop up corn prices in recent weeks, but a lack of any new purchases kept prices in the doldrums.
COFFEE:
Futures prices rose slightly in a market filled with rumors that a new international coffee agreement might still be achieved.
The December contract ended with a gain of 1.29 cents a pound at 74.35 cents.
According to one analyst, prices opened higher because of reports over the weekend that Brazil and Colombia, at the Pan-American summit meeting in Costa Rica, had agreed to a reduction in their coffee export quotas for the sake of creating a new agreement.
The reports, attributed to the Colombian minister of economic development, said Brazil would give up 500,000 bags of its quota and Colombia 200,000 bags, the analyst said.
These reports were later denied by a high Brazilian official, who said Brazil wasn't involved in any coffee discussions on quotas, the analyst said.
The Colombian minister was said to have referred to a letter that he said President Bush sent to Colombian President Virgilio Barco, and in which President Bush said it was possible to overcome obstacles to a new agreement.
The minister was also quoted as saying that a new pact could be achieved during the first half of next year, according to the analyst.
PRECIOUS METALS:
Futures prices showed modest changes in light trading volume.
December delivery gold eased 40 cents an ounce to $380.80.
December silver was off 3.7 cents an ounce at $5.2830.
January platinum rose 90 cents an ounce at $500.20.
The market turned quiet after rising sharply late last week, according to one analyst.
Last week's uncertainty in the stock market and a weaker dollar triggered a flight to safety, he said, but yesterday the market lacked such stimuli.
There was some profit-taking because prices for all the precious metals had risen to levels at which there was resistance to further advance, he said.
The dollar was also slightly firmer and prompted some selling, as well, according to the analyst.
Louisiana-Pacific Corp. said its board authorized the purchase of as many as five million of its common shares for employee stock plans and other general corporate purposes.
The forest-products concern currently has about 38 million shares outstanding.
In yesterday's composite trading on the New York Stock Exchange, Louisiana-Pacific shares closed at $39.25, down 37.5 cents.
When the Supreme Soviet passed laws on workers' rights in May 1987 and on self-managing cooperatives a year later, some Western observers assumed Mikhail Gorbachev had launched the Soviet Union on a course that would lead inevitably to the creation of a market economy.
Their only doubt concerned the possibility that Mr. Gorbachev might not survive the opposition that his reforms would arouse and that the whole process might be reversed.
If Mr. Gorbachev's goal is the creation of a free market, he and these Western observers have good reason to fear for his future, as economic liberalization within communist societies leads inexorably to demands for fundamental political reform accompanied by civil unrest.
These fears were clearly apparent when, last week, Secretary of State James Baker blocked a speech by Robert Gates, deputy national security adviser and Soviet expert, on the ground that it was too pessimistic about the chances of Mr. Gorbachev's economic reforms succeeding.
Yet the Soviet leader's readiness to embark on foreign visits and steady accumulation of personal power, particularly since the last Politburo reshuffle on Sept. 30, do not suggest that Mr. Gorbachev is on the verge of being toppled; nor does he look likely to reverse the powers of perestroika.
Indeed, the Soviet miners strike this summer clearly demonstrated that Mr. Gorbachev must proceed with economic reform.
But is he so clever that he has achieved the political equivalent of making water run uphill?
And has he truly persuaded the Communist Party to accept economic change of a kind that will, sooner or later, lead to its demise?
An alternative and more convincing explanation, confirmed by recent events and a close inspection of the Gorbachev program, is that the new Soviet economic and social structures are intended to conform to a model other than that of the market.
For example, while the laws on individual labor activity allow a citizen to earn a living independent of the state, strict provisions are attached on how far this may lead to the development of a free market.
Before becoming self-employed, or setting up a cooperative, workers must seek permission from the local soviet (council).
Permission is far from automatic: The soviets have the legal right to turn down applications and impose conditions, and they appear to be exercising these powers.
Private dressmaking, for example, is allowed in 10 Soviet republics but banned by five; shoemaking is allowed in seven but illegal in nine.
The controls on cooperatives appeared relatively liberal when first introduced.
But that changed following a resolution from the Supreme Soviet banning cooperatives from operating in some areas of the economy, and permitting activity in others only if the cooperatives are under contract to the state.
All independent media activity is now illegal, which perhaps is not surprising, but so is the manufacture of perfume, cosmetics, household chemicals and sand candles.
Medical cooperatives, among the most successful in the U.S.S.R., are banned from providing general-practitioner services (their main source of income), carrying out surgery, and treating cancer patients, drug addicts and pregnant women.
Earlier this month, the Supreme Soviet adopted two more resolutions restricting the freedom of cooperatives: The first enables the soviets to set prices for which goods may be sold; the second bans cooperatives from buying "industrial and food goods" from the state or other cooperatives.
If Mr. Gorbachev is looking toward unleashing the productive forces of the market, these latest resolutions are nothing short of reckless.
Along with some other revealing indicators, these developments suggest that while Mr. Gorbachev wishes to move away from some rigid central controls, he is bent on creating economic structures of a kind that would scarcely find favor with the Austrian or Chicago schools of economic thought.
Mr. Gorbachev has ruled out the use of the market to solve the problem of insufficient consumer goods.
He told the Congress of People's Deputies on May 30: "We do not share this approach, since it would immediately destroy the social situation and disrupt all the processes in the country."
Having rejected central economic planning for economic reasons, and the market for fear of the social (political) consequences, Mr. Gorbachev seeks a "third way" that would combine the discipline and controls of the former with the economic benefits of the latter.
Most important, this would leave the party intact and its monopoly of political power largely undisturbed.
Indeed, Mr. Gorbachev's proposals display a close conceptual resemblance to the tenets of Italian fascism, whose architects spoke specifically of a "third way": of having produced a historic synthesis of socialism and capitalism.
They, too, promised to combine economic efficiency with order and discipline.
The emergence of Russian corporatism had been anticipated in journalist George Urban's introduction to a series of colloquies -- "Can the Soviet System Survive Reform?" -- published this spring.
"Communism will reach its final stage of development in a feckless Russo -- corporation-socialist in form, nationalistic in content and Oriental in style -- that will puzzle the world with alternating feats of realism and recklessness. . . ."
The fascist concept of corporatism envisaged an "organic" society in which citizens were spiritually and morally unified, and prepared to sacrifice themselves for the nation.
This unification was to be brought about through policies and institutions that would unite workers and employers with government in a fully integrated and "harmonic" society.
The key to the creation of the "organic" state lay in the formation of "natural" groups that would undertake the role of decision-making.
By contrast, a parliamentary system based on abstract political rights and groups was held to cause, rather than resolve, conflict.
The closeness of Soviet perestroika to the fascist social blueprint of Mussolini was evident when Mr. Gorbachev presented his economic vision to the Soviet Congress.
In doing so, he neither rejected a socialist planned economy nor embraced the free market.
Instead, he proposed a "law-governed economy," in which there would be a "clear-cut division between state direction of the economy and economic management."
The latter would be undertaken by "enterprises, joint stock companies and cooperatives."
These would not function independently, but would act together to form "combines, unions and associations" to tackle problems and coordinate their activities.
Mr. Gorbachev is in a much stronger position to pursue the corporatist ideal than was Mussolini, who was never able to influence business giants such as Pirelli and Fiat.
The Soviet Communist Party has the power to shape corporate development and mold it into a body dependent upon it.
To ensure the loyalty of the business sector, Mr. Gorbachev may offer concessions and powers that will allow the business community to preserve its own interests, probably by restricting competition.
However, Mr. Gorbachev must ensure that within this "alliance" the business sector remains subordinate to the party.
At the same time, he must give it sufficient freedom to provide the economic benefits so desperately needed.
It is the promise of economic returns that is supposed to make the corporatist model attractive to both the party and labor.
The work force provides the third arm of the "alliance."
Within the alliance it is supposed to act as a balancing force, guarding against excessive control by government or abuse of its economic position by business, for either could result in a deterioration of its living standards (under the new resolutions, workers councils may demand that a cooperative be closed or its prices be reduced).
By providing workers with the opportunity to move into the private sector where wages tend to be higher, and by holding out the promise of more consumer goods, Mr. Gorbachev hopes to revive the popularity of the party.
At the same time, the strategy requires that he deal effectively with those who seek genuine Western-style political pluralism.
The most important development in Mr. Gorbachev's policy for marginalizing the opposition movement is the claim that the U.S.S.R. also suffers from terrorism.
An increasing number of references by the Soviet press to opposition groups now active in the U.S.S.R., particularly the Democratic Union, allege that they show "terroristic tendencies" and claim that they would be prepared to kill in order to achieve their aims.
It is possible that, in perpetuating such myths, the ground is being laid for the arrest of opposition activists on the ground of terrorism.
Mr. Gorbachev would appear to see his central task, however, as that of ensuring that foundations of an alliance among labor, capital and the state are properly laid before the demands for a multiparty system reach a crescendo.
If he were able to construct a popular and efficient corporatist system, he or his heir would be wellplaced to rein in political opposition, and to re-establish control in Eastern Europe.
The weaknesses in his plan do not lie in the political calculations -- Mr. Gorbachev is a consummate political leader, perhaps one of the greatest -- but in its economic prescription.
Contrary to widespread belief, Mussolini failed to live up to his promise to make the trains run on time; it is doubtful whether Soviet-style corporatism will make Soviet trains run on time, or fill the shops with goods that the consumers so desperately crave.
Miss Brady is deputy director of the Russian Research Foundation in London.
New construction contracting climbed 8% in September to an annualized $274.2 billion, with commercial, industrial and public-works contracts providing most of the increase, according to F.W. Dodge Group.
Through the first nine months of the year, the unadjusted total of all new construction was $199.6 billion, flat compared with a year earlier.
The South was off 2% after the first nine months, while the North Central region was up 3%.
The Northeast and West regions were unchanged.
A small decline in total construction for the entire year is possible if contracting for housing doesn't increase in response to this year's lower mortgage rates, said George A. Christie, vice president and chief economist of Dodge, the forecasting division of publisher McGraw-Hill Inc.
The seasonally adjusted Dodge Index reached 175 in September, its highest level this year, from 162 in August.
The index uses a base of 100 in 1982.
Newly contracted residential work edged up 2% in September to an annualized $121.2 billion, largely because multifamily building rebounded from a very weak August.
"At the end of the third quarter, there was still no evidence of renewed home building in response to the midyear decline of mortgage rates," Mr. Christie said.
Housing has been weak all year and especially so in the past five months.
Contracting for non-residential buildings rose 10% in September to an annualized $100.8 billion.
Commercial and industrial construction rose sharply, partly because of three large projects, each expected to cost more than $100 million.
Institutional building, such as hospitals and schools, eased in September following a surge in August.
Although the third quarter was the best so far this year for non-residential building, weakness early in the year held the nine-month total to $69.6 billion, up just 1% from a year earlier.
Public-works and utility projects, also known as non-building contracting, grew 18% to $52.2 billion in September, but the nine-month total of $36.9 billion was down 3% from a year earlier.
The Sept. 30 end of the federal fiscal year may have prodded contractors to get any behind-schedule road and bridge construction under way "before the clock ran out," Mr. Christie said, referring to threatened 5% across-the-board budget cuts.
a-Monthly construction contract values are reported on an annualized, seasonally adjusted basis.
Moody's Investors Service Inc. said it lowered ratings on long-term debt of CS First Boston Inc., the holding company of Wall Street giant First Boston Corp., because of First Boston's "aggressive merchant banking risk" in highly leveraged takeovers.
In downgrading CS First Boston's subordinated domestic, Euromarket and Swiss debt to single-A-3 from single-A-2, Moody's is matching a move made by the other major credit rating concern, Standard & Poor's Corp., several months ago.
Moody's also confirmed the Prime-1 rating, its highest, on CS First Boston's commercial paper, or short-term corporate IOUs.
In addition, Moody's said it downgraded Financiere Credit Suisse-First Boston's senior and subordinated Swiss debt to single-A-2 from single-A-1 and lowered Financiere CSFB N.V.'s junior subordinated perpetual Eurodebt, guaranteed by Financiere Credit Suisse -- First Boston, to single-A-3 from single-A-2.
About $550 million of long-term debt is affected, according to Moody's.
A spokesman for CS First Boston said: "We remain committed to a full range of businesses, including merchant banking.
We think that the ratings revision is unfortunate but not unexpected.
Our commitment to manage these businesses profitably will continue."
First Boston's merchant banking risks mounted last month as highly leveraged Campeau Corp., First Boston's most lucrative client of the decade, was hit by a cash squeeze and the high-risk junk bond market tumbled.
First Boston incurred millions of dollars of losses on Campeau securities it owned as well as on special securities it couldn't sell.
First Boston financings for several other highly leveraged clients, including Ohio Mattress, unraveled as the high-risk junk bond market plummeted.
Moody's said its rating changes actions "reflect CS First Boston's aggressive merchant banking risk as well as the risk profile of its current merchant banking exposures."
It said CS First Boston "has consistently been one of the most aggressive firms in merchant banking" and that "a very significant portion" of the firm's profit in recent years has come from merchant banking-related business.
"Moody's believes that the uncertain environment for merchant banking could put pressure on CS First Boston's performance," the rating concern said, citing "continued problems" from the firm's exposures to "various Campeau-related firms" and to Ohio Mattress.
"These two exposures alone represent a very substantial portion of CS First Boston's equity," Moody's said.
"Total merchant banking exposures are in excess of the firm's equity.
Quotron Systems Inc. plans to cut about 400, or 16%, of its 2,500 employees over the next several months.
"This action will continue to keep operating expenses in line" with revenue, said J. David Hann, president and chief executive officer of Los Angeles-based Quotron.
The move by the financial information and services subsidiary of Citicorp is a "response to changing conditions in the retail securities industry, which has been contracting" since October 1987's stock market crash, the executive added.
Quotron, which Citicorp purchased in 1986, provides price quotations for securities, particularly stocks.
Quotron also provides trading and other systems, services for brokerage firms, and communications-network services.
Independent providers of financial information, including Quotron, have been under some pressure as the major securities houses try to regain their hold on the production of market data and on the related revenue.
Shearson, Goldman, Sachs & Co., Morgan Stanley & Co. and Salomon Inc. are discussing formation of a group to sell securities-price data.
The job cuts, to be made in a number of areas at various job levels, are "a streamlining of operations," a spokeswoman said.
The company has no immediate plans to close any operations, she said, but Quotron may subcontract some work that it has been doing in-house, including refurbishment and production of Quotron 1000 equipment used in delivering financial data.
The spokeswoman said the move isn't directly a response to Quotron's loss of its two biggest customers, Merrill Lynch & Co. and American Express Co.'s Shearson Lehman Hutton Inc., to Automated Data Processing Inc. earlier this year.
The spokeswoman noted that last week, Kidder, Peabody & Co., the securities subsidiary of General Electric Co., chose a Quotron subsidiary to provide order-processing services.
And Oct. 24, Quotron said it will market the automated trading system of broker-dealer Chapdelaine Government Securities Inc.
Quotron isn't profitable on Citicorp's books because of the interest charges the New York bank holding company incurred in buying the financial-data concern for $680 million, says Ronald I. Mandle, analyst for Sanford C. Bernstein & Co.
But Citicorp "does view Quotron) as being crucial to the financial-services business in the 1990s," the analyst added.
This past summer, Quotron sold its customer-service unit, employing 600, to Phoenix Technologies Inc., a closely held computer-service firm in Valley Forge, Pa.
Terms weren't disclosed.
The Oakland Athletics' four-game sweep over the San Francisco Giants in the World Series may widen already-sizable losses that the ABC network will incur on the current, final year of its baseball contract.
The 1989 Series, disrupted by a devastating earthquake and diminished in national interest because both teams came from the San Francisco Bay area, is likely to end up as the lowest-rated Series of this decade and probably since the event has been broadcast.
The first three games were seen by an average of only 17% of U.S. homes, a sharp decline from the 23.7% rating for last year's Series.
A final ratings tally from A.C. Nielsen Co. is due today.
The sweep by the A's, whose pitchers and home-run hitters dominated the injury-prone Giants, will only make things worse for ABC, owned by Capital Cities/ABC Inc.
The network had been expected to have losses of as much as $20 million on baseball this year.
It isn't clear how much those losses may widen because of the short Series.
Had the contest gone a full seven games, ABC could have reaped an extra $10 million in ad sales on the seventh game alone, compared with the ad take it would have received for regular prime-time shows.
ABC had based its budget for baseball on a six-game Series.
A network spokesman wouldn't comment, and ABC Sports officials declined to be interviewed.
But some industry executives said ABC, in anticipation of a four-game sweep, limited its losses by jacking up the number of commercials it aired in the third and fourth games.
A World Series telecast typically carries 56 30-second commercials, but by the fourth game ABC was cramming in 60 to 62 ads to generate extra revenue.
ABC's baseball experience may be of interest to CBS Inc., which next season takes over the broadcasting of all baseball playoffs in a four-year television contract priced at $1.06 billion.
CBS Sports President Neal Pilson has conceded only that CBS will have a loss in the first year.
But other industry executives contend the losses could reach $250 million over four years and could go even higher if the World Series end in four-game romps.
The Series typically is among the highest-rated sports events on television.
Last year's series, broadcast by General Electric Co.'s NBC, was the lowest-rated Series in four years; instead of featuring a major East Coast team against a West Coast team, it pitted the Los Angeles Dodgers against the losing Oakland A's.
ABC's hurdle was even higher this year with two teams from the same area.
The Series got off to a lukewarm start Oct. 14 with a 16.2% rating; the next night it drew 17.4% of homes.
Then came the earthquake and a damaging delay of 11 days.
Some people had hoped ABC's ratings would go up because of the intense focus on the event in the aftermath of the earthquake.
An analyst's opinion to that effect even sent Capital Cities/ABC shares soaring two weeks ago.
But interest instead decreased.
The third game, last Friday night, drew a disappointing 17.5 rating.
Bargain hunters helped stock prices break a weeklong losing streak while bond prices and the dollar inched higher.
The Dow Jones Industrial Average gained 6.76 points to 2603.48 in light trading after losing more than 92 points last week.
Bond prices continued to edge higher in anticipation of more news showing a slower economy.
Although the dollar rose slightly against most major currencies, the focus in currency markets was on the beleaguered British pound, which gained slightly against the dollar.
Trading volume on the New York Stock Exchange dwindled to only 126.6 million shares yesterday as major brokerage firms continued to throw in the towel on program trading.
Kidder Peabody became the most recent firm to swear off stock-index arbitrage trading for its own account, and Merrill Lynch late yesterday took the major step of renouncing the trading strategy even for its clients.
Yet that didn't eliminate program trading from the market.
The Dow industrials shot up 23 points in the opening hour, at least in part because of buy programs generated by stock-index arbitrage, a form of program trading involving futures contracts.
But interest waned as the day wore on and investors looked ahead to the release later this week of two important economic reports.
The first is Wednesday's survey of purchasing managers, considered a good indicator of how the nation's manufacturing sector fared in October.
The other is Friday's measure of October employment, an indicator of the broader economy's health.
Both are expected to show continued sluggishness, which would be good for bonds and bad for stocks.
In major market activity: Stock prices rose in light trading.
But declining issues on the New York Stock Exchange outnumbered gainers 774 to 684, and broader market indexes were virtually unchanged.
Bond prices crept higher.
The Treasury's benchmark 30-year bond gained about an eighth of a point, or about $1.25 for each $1,000 face amount.
The yield on the issue slipped to 7.92%.
The dollar gained.
In late New York trading the dollar was quoted at 1.8340 marks and 141.90 yen, compared with 1.8300 marks and 141.65 yen Friday.
The British pound, pressured by last week's resignations of key Thatcher administration officials, nevertheless rose Monday to $1.5820 from Friday's $1.5795.
If Japanese companies are so efficient, why does Kawasaki-Rikuso Transportation Co. sometimes need a week just to tell its clients how soon it can ship goods from here to Osaka?
Why, until last spring, did the Long-Term Credit Bank of Japan sometimes take several days to correct typographical errors in its paper work for international transactions?
Because the companies have lacked office computers considered standard equipment in the U.S. and Western Europe, Japanese corporations' reputation as hi-tech powerhouses is only half right.
Their factories may look like sets for a Spielberg movie, but their offices, with rows of clerks hunched over ledgers and abacuses, are more like scenes from a Dickens novel.
Now, the personal-computer revolution is finally reaching Japan.
Kawasaki-Rikuso, a freight company, set up its own software subsidiary this year and is spending nearly a year's profit to more than double the computer terminals at its main office.
In April, the Long-Term Credit Bank linked its computers in Tokyo with its three American offices.
Overall, PC sales in Japan in the first half of 1989 were 34% higher than in the year-earlier period.
Combined PC and work-station use in Japan will jump as much as 25% annually over the next five years, according to some analysts, compared with about 10% in the U.S.
And with a labor shortage and intense competitive pressure to improve efficiency, more and more Japanese companies are concluding that they have no choice.
"We have too many people in our home offices," says Yoshio Hatakeyama, the president of the Japan Management Association.
"Productivity in Japanese offices is relatively low."
With Japanese companies in a wide range of industries -- from heavy industry to securities firms -- increasing their market share world-wide, the prospect of an even more efficient Japanese economic army may rattle foreigners.
But it also offers opportunities; Americans are well poised to supply the weapons.
Japan may be a tough market for outsiders to penetrate, and the U.S. is hopelessly behind Japan in certain technologies.
But for now, at least, Americans are far better at making PCs and the software that runs them.
After years of talking about selling in Japan, more and more U.S. companies are seriously pouring in.
Apple Computer Inc. has doubled its staff here over the past year.
Lotus Development Corp. has slashed the lag between U.S. and Japan product introductions to six months from three years.
Ungermann-Bass Inc. has a bigger share of the computer-network market in Japan than at home.
But the Japanese have to go a long way to catch up.
Typical is one office of the Ministry of International Trade and Industry's Machinery and Information Industries Bureau -- the main bureaucracy overseeing the computer industry.
"Personal Computer" yearbooks are lined up on nearly every desk, and dog-eared copies of Nikkei Computer crowd magazine racks.
But amid the two dozen bureaucrats and secretaries sits only one real-life PC.
While American PC sales have averaged roughly 25% annual growth since 1984 and West European sales a whopping 40%, Japanese sales were flat for most of that time.
Japanese office workers use PCs at half the rate of their European counterparts and one-third that of the Americans.
Moreover, Japanese offices tend to use computers less efficiently than American offices do.
In the U.S., PCs commonly perform many tasks and plug into a broad network.
In Japan, many desktop terminals are limited to one function and can't communicate with other machines.
The market planning and sales promotion office of Nomura Securities Co., for example, has more than 30 computers for its 60 workers, a respectable ratio.
But the machines aren't on employees' desks; they ring the perimeter of the large office.
Some machines make charts for presentations.
Others analyze the data.
To transfer information from one to the other, employees make printouts and enter the data manually.
To transmit charts to branch offices, they use a fax machine.
Meanwhile, a woman sitting next to a new Fujitsu terminal writes stock-market information on a chart with a pencil and adds it up with a hand calculator.
In an efficient setup, the same PC could perform all those tasks.
In the U.S., more than half the PC software sold is either for spreadsheets or for database analysis, according to Lotus.
In Japan, those functions account for only about a third of the software market.
Machines dedicated solely to word processing, which have all but disappeared in the U.S., are still more common in Japan than PCs.
In the U.S., one-fifth of the office PCs are hooked up to some sort of network.
In Japan, about 1% are linked.
"Computers here are used for data gathering," says Roger J. Boisvert, who manages the integrated-technologies group in McKinsey & Co.'s Tokyo office.
Some Japanese operations, such as securities-trading rooms, may be ahead of their American counterparts, he says, but "basically, there's little analysis done on computers in Japan."
Of course, simply buying computers doesn't always solve problems, and many American companies have erred by purchasing technology they didn't understand.
But healthy skepticism is only a small reason for Japan's PC lag.
Various cultural and economic forces have suppressed demand.
Because the Japanese "alphabet" is so huge, Japan has no history of typewriter use, and so "keyboard allergy," especially among older workers, remains a common affliction.
"I have no experience before with such sophisticated machinery," says Matsuo Toshimitsu, a 66-year-old executive vice president of Japan Air Lines, explaining his reluctance before accepting a terminal in his office this summer.
While most American employees have their own private space, Japanese "salarymen" usually share large, common tables and rely heavily on old-fashioned personal contact.
Top Japanese executives often make decisions based on consensus and personal relationships rather than complex financial projections and fancy presentations.
And Japan's management system makes it hard to impose a single, integrated computer system corporatewide.
Besides, a computer processing the Japanese language needs a huge memory and much processing capability, while the screen and printer need far better definition to depict accurately the intricate symbols.
Until recently, much of the necessary technology has been unavailable or at least unaffordable.
Some analysts estimate the average PC costs about 50% more in Japan than the U.S.
But the complex language isn't the only reason.
For the past decade, NEC Corp. has owned more than half the Japanese PC market and ruled it with near-monopoly power.
With little competition, the computer industry here is inefficient.
The U.S. market, too, is dominated by a giant, International Business Machines Corp.
But early on, IBM offered its basic design to anybody wanting to copy it.
Dozens of small companies did, swiftly establishing a standard operating system.
That spurs competition and growth, allows users to change and mix brands easily, and increases software firms' incentive to write packages because they can be sold to users of virtually any computer.
If a record industry lacked a common standard, Sony CD owners could listen to a Sony version of Madonna's "Like a Prayer" but not one made for a Panasonic player.
That is the state of Japan's computer industry.
NEC won't release its code, and every one of the dozen or so makers has its own proprietary operating system -- all incompatible with each other.
IBM established its standard to try to stop falling behind upstart Apple Computer, but NEC was ahead from the start and didn't need to invite in competitive allies.
Meanwhile, the big players haven't tried to copy the NEC standard.
Corporate pride as well as the close ties common among Japanese manufacturers help explain why.
Most rivals "have a working relationship with NEC, often through cross-licensing of technology," the Japan Personal Computer Software Association noted recently.
"They hesitate to market NEC-compatible machines; NEC disapproves of such machines, and marketing one would jeopardize their relationship."
The result, according to many analysts, is higher prices and less innovation.
While tens of thousands of software packages using the IBM standard are available in the U.S., they say only about 8,000 are written for NEC.
A year ago, Japan's Fair Trade Commission warned NEC about possible violations of anti-monopoly laws for discouraging retailers from discounting.
In Japan, "software is four to five years behind the U.S. because hardware is four to five years behind, because NEC is enjoying a monopoly," complains Kazuhiko Nishi, the president of Ascii Corp., one of Japan's leading PC-magazine publishing and software companies.
"There are no price wars, no competition."
An NEC spokeswoman responds that prices are higher in Japan because customers put a greater emphasis on quality and service than they do in the U.S.
She adds that some technological advances trail those in the U.S. because the Japanese still import basic operating systems from American companies.
But the market is changing.
The government is funding several projects to push PC use.
Over the next three years, public schools will get 1.5 million PCs, a 15-fold increase from current levels.
In the private sector, practically every major company is setting explicit goals to increase employees' exposure to computers.
Toyota Motor Corp.'s sales offices in Japan have one-tenth the computers per employee that its own U.S. offices do; over the next five years, it is aiming for rough parity.
Within a year, Kao Corp., a major cosmetics company, plans to eliminate 1,000 clerical jobs by putting on a central computer network some work, such as credit reports, currently performed in 22 separate offices.
By increasing the number of PCs it uses from 66 to 1,000, Omron Tateishi Electronics Co., of Kyoto, hopes not only to make certain tasks easier but also to transform the way the company is run.
"Managers have long been those who supervise their subordinates so orders would be properly acted on," a spokesman says.
"But new managers will have to be creators and innovators . . . and for that purpose it is necessary to create an environment where information from both inside and outside the company can be reached easily, and also shared."
Meanwhile, more computer makers now are competing for the new business.
Seiko Epson Corp., a newcomer to the industry, fought off a legal challenge and started selling NEC clones last year.
It has won about 15% of the retail PC market.
Sony Corp., which temporarily dropped out of the PC business three years ago, started selling its work station in 1987 and quickly became the leading Japanese company in that market.
In a country where elbow room is scarce, laptop machines will take a large portion of the industry's future growth.
Toshiba Corp. busted open that sector this summer with a notebook-sized machine that retails for less than 200,000 yen (under $1,500) -- one of the smallest, cheapest PCs available in the country.
Fujitsu Ltd. is lavishing the most expensive promotion campaign in its history -- including a 100,000-guest bash at Tokyo Dome -- for its sophisticated sound/graphics FM Towns machine, which it advertises for everything from balancing the family checkbook to practicing karaoke, bar singing.
Many of the companies are even dropping their traditional independence and trying to band together to create some sort of standard.
Two years ago, most of the smaller makers joined under the Microsoft Corp. umbrella to adopt a version of the American IBM AT standard.
That hasn't generated much sales, but this summer Microsoft rallied all the major NEC competitors to make their new machines compatible with the IBM OS/2 standard.
A healthy, coherent Japanese market could also make it far easier for Japanese companies to sell overseas, where their share is still minimal.
But it could also help American companies, which also are starting to try to open the market.
As with many other goods, the American share of Japan's PC market is far below that in the rest of the world.
U.S. makers have under 10% share, compared with half the market in Europe and 80% at home.
Though no formal trade barriers exist, the Japanese computer industry is difficult for outsiders to enter.
"If it were an open market, we would have been in in 1983 or 1984," says Eckhard Pfeiffer, who heads Compaq Computer Corp.'s European and international operations.
His company, without any major effort, sells more machines in China than in Japan.
Although it has opened a New Zealand subsidiary, it is still only "studying" Japan, the only nation that hasn't adopted IBM-oriented specifications.
And because general retail centers such as ComputerLand have little presence in Japan, sales remain in the iron grip of established computer makers.
But the Americans are also to blame.
They long made little effort here.
IBM, though long a leader in the Japanese mainframe business, didn't introduce its first PC in Japan until five years after NEC did, and that wasn't compatible even with the U.S. IBM standard.
Apple didn't introduce a kanji machine -- one that handles the Chinese characters of written Japanese -- until three years after entering the market.
Critics also say American companies charge too much.
Japan's FTC says it is investigating Apple for allegedly discouraging retailers from discounting.
But the U.S. companies are redoubling their efforts.
Apple recently hired its first Japanese president, luring away an official of Toshiba's European operations, as well as a whole Japanese top-management team.
Earlier this year, it introduced a much more powerful kanji operating system and a kanji laser printer.
IBM just last year started selling its first machine that could run in both Japanese and English and that substantially enhances compatibility with its American products.
"It may take five years to break even in Japan," says John A. Siniscal, who runs the Asia-Pacific office for McCormack & Dodge, a U.S. software company.
"But it's an enormous business opportunity.
From a reading of the somewhat scant English-language medical literature on RU-486, the French abortion pill emerges as one of the creepiest concoctions around.
This is not only because it kills the unborn, a job at which it actually is not outstandingly efficient, zapping only 50% to 85% of them depending on which study you read (prostaglandin, taken in conjunction with the pill, boosts the rate to 95%).
By contrast, surgical abortion is 99% effective.
Abortion via the pill is far more of an ordeal than conventional surgical abortion.
It is time-consuming (the abortion part alone lasts three days, and the clinical part comprises a week's worth of visits), bloody (one woman in a Swedish trial required a transfusion, although for most it resembles a menstrual period, with bleeding lasting an average of 10 days), and painful (many women require analgesic shots to ease them through).
Nausea and vomiting are other common side effects.
Timing is of the essence with RU-486.
It is most effective taken about a week after a woman misses her menstrual period up through the seventh week of pregnancy, when it is markedly less effective.
That is typically about a three-week window.
So far, all the studies have concluded that RU-486 is "safe."
But "safe," in the definition of Marie Bass of the Reproductive Health Technologies Project, means "there's been no evidence so far of mortality."
No one has researched the long-term effects of RU-486 on a woman's health or fertility.
The drug seems to suppress ovulation for three to seven months after it is taken.
Some women clearly have no trouble eventually conceiving again: The studies have reported repeaters in their programs.
But there are no scientific data on this question.
Rather ominously, rabbit studies reveal that RU-486 can cause birth defects, Lancet, the British medical journal, reported in 1987.
However, Dr. Etienne-Emile Baulieu, the French physician who invented RU-486, wrote in a Science magazine article last month that the rabbit-test results could not be duplicated in rats and monkeys.
The drug has a three-dimensional structure similar to that of DES, the anti-miscarriage drug that has been linked to cervical and vaginal cancer in some of the daughters of the women who took it.
All the published studies recommend that women on whom the drug proves ineffective not carry the pregnancy to term but undergo a surgical abortion.
A risk of birth defects, a sure source of lawsuits, is one reason the U.S. pharmaceutical industry is steering clear of RU-486.
One might well ask: Why bother with this drug at all?
Some abortion advocates have been asking themselves this very question.
RU-486 "probably represents a technical advance in an area where none is needed, or at least not very much," said Phillip Stubblefield, president of the National Abortion Federation, at a reproductive health conference in 1986.
Many physicians have expressed concern over the heavy bleeding, which occurs even if the drug fails to induce an abortion.
It typically takes from eight to 10 years to obtain the Food and Drug Administration's approval for a new drug, and the cost of testing and marketing a new drug can range from $30 million to $70 million.
The Health and Human Services Department currently forbids the National Institutes of Health from funding abortion research as part of its $8 million contraceptive program.
But the Population Council, a 37-year-old, $20 million nonprofit organization that has the backing of the Rockefeller and Mellon foundations and currently subsidizes most U.S. research on contraceptives, has recently been paying for U.S. studies of RU-486 on a license from its French developer, Roussel-Uclaf, a joint subsidiary of the German pharmaceutical company Hoechst and the French government.
In the year since the pill went on the French market, the National Organization for Women and its offshoot, former NOW President Eleanor Smeal's Fund for a Feminist Majority, have been trying to browbeat the U.S. pharmaceutical industry into getting involved.
(Its scare-tactic prediction: the pill "will be available in the U.S., either legally or illegally, in no more than 2-5 years.")
Following the feminist and population-control lead has been a generally bovine press.
A June 1988 article in Mother Jones magazine is typical of the general level of media ignorance.
"For a woman whose period is late, using RU-486 means no waiting, no walking past picket lines at abortion clinics, and no feet up in stirrups for surgery," burbles health writer Laura Fraser.
"It also means she will never have to know whether she had actually been pregnant."
Wrong on all counts, Miss Fraser.
RU-486 is being administered in France only under strict supervision in the presence of a doctor.
(Roussel reportedly has every pill marked and accounted for to make sure none slips into the black market.)
Thus, a woman who used RU-486 to have an abortion would have to make three trips to the clinic past those picket lines; an initial visit for medical screening (anemics and those with previous pregnancy problems are eliminated) and to take the pill, a second trip 48 hours later for the prostaglandin, administered either via injection or vaginal suppository, and a third trip a week later to make sure she has completely aborted.
Furthermore, because timing is so critical with RU-486, she will learn, via a pelvic examination and ultrasound, not only that she is pregnant, but just how pregnant she is.
No doctor who fears malpractice liability would likely expose a non-pregnant patient to the risk of hemorrhaging.
Many women may even see the dead embryo they have expelled, a sight the surgical-abortion industry typically spares them.
At seven weeks, an embryo is about three-fourths of an inch long and recognizably human.
At the behest of pro-choice members of Congress, a four-year reauthorization bill for Title X federal family-planning assistance now contains a $10 million grant for "development, evaluation and bringing to the marketplace of new improved contraceptive devices, drugs and methods."
If this passes -- a Senate version has already been cleared for a floor vote that is likely early next year -- it would put the federal government into the contraceptive marketing business for the first time.
It also could put the government into the RU-486 business, which would please feminists dismayed at what they view as pusillanimity in the private-sector drug industry.
We do not know whether RU-486 will be as disastrous as some of the earlier fertility-control methods released to unblinking, uncritical cheers from educated people who should have known better.
(Remember the Dalkon Shield and the early birth-control pills?)
We will not know until a first generation of female guinea pigs -- all of whom will be more than happy to volunteer for the job -- has put the abortion pill through the clinical test of time.
Mrs. Allen is a senior editor of Insight magazine.
This article is adapted from one in the October American Spectator.
On June 30, a major part of our trade deficit went poof!
No figure juggling; no witchcraft; just vastly improved recording of some of our exports.
The result?
The Commerce Department found that U.S. exports in 1988, net of imports, were understated by $20.9 billion a year and understated at the annualized rate of $25.4 billion in the first quarter of 1989.
More than half of the "newly found" net exports were from just a few service-sector categories.
Some of the biggest service-industry exporters -- American financial-service companies, for example -- have yet to be fully included in our export statistics.
Nearly 10 years ago, representatives of service-sector companies worked out a plan with the Commerce Department to improve the data on service-sector exports.
Both groups believed that tens of billions of dollars of service exports -- such as inbound tourism; legal, accounting and other professional services furnished to foreigners; financial, engineering and construction services; and the like -- were not being counted as exports.
The monthly "trade deficit" figure is limited to traditional merchandise trade: manufactured goods and raw materials.
In the quarterly balance-of-payments report, those merchandise trade figures are merged with statistics on exports and imports of services, as well as returns on investments abroad by Americans and returns on foreign investments in the U.S.
Over time, through benchmark surveys, the corrected data on service exports and imports have been gathered.
The first three major areas of the service sector to be revamped were expenditures by foreign students in the U.S. (net after expenditures by Americans studying abroad), some exports by professional firms (a law firm billing a German client for services rendered in watching legislation in Washington is as much an export as shipment of an American jet engine), and improved data from travel and tourism.
In just these three areas, the Commerce Department found $23 billion more exports than previously reported and $11.6 billion more imports, with the net result that the U.S. service surplus in 1988 increased by $11.3 billion, to $19 billion.
Combined with recalculations and revisions in other trade areas, the value of U.S. net exports that had not previously been recorded was about $20 billion a year.
That means that the U.S. trade deficit was running closer to $75 billion than to $95 billion in 1988, and $55 billion (annualized) rather than $80 billion in the first quarter of 1989.
These revised figures also may explain some of the recent strength of the dollar.
The materially smaller trade deficit may have been already discounted in the market.
What does this mean for trade policy?
Too early to tell, but a trade deficit that is significantly smaller than we imagined does suggest a review of our trade posture.
It does not relieve the need for our market-opening efforts for both goods and services, but it does suggest that it is our exports of services, and not just borrowing, that is financing our imports of goods.
Mr. Freeman is an executive vice president of American Express.
The collapse of a $6.79 billion labor-management buy-out of United Airlines parent UAL Corp. may not stop some of Wall Street's top talent from collecting up to $53.7 million in fees.
According to one person familiar with the airline, the buy-out group -- led by United's pilots union and UAL Chairman Stephen Wolf -- has begun billing UAL for fees and expenses it owes to investment bankers, law firms and banks.
The tab even covers $8 million in commitment fees owed to Citicorp and Chase Manhattan Corp., even though their failure to obtain $7.2 billion in bank loans for the buy-out was the main reason for its collapse.
Under a merger agreement reached Sept. 14, the UAL board agreed to reimburse certain of the buy-out group's expenses out of company funds even if the transaction wasn't completed, provided the group didn't breach the agreement.
The failure to obtain financing doesn't by itself constitute a breach.
The merger agreement says the buy-out group is entitled to be repaid $26.7 million in fees for its investment bankers, Lazard Freres & Co. and Salomon Brothers Inc., and its law firm, Paul Weiss Rifkind Wharton & Garrison.
The buy-out group is also entitled to $16 million to repay a fund created by the pilots union for an employee stock ownership plan.
In addition to the $8 million for Citicorp and Chase, Salomon Brothers is also owed $3 million for promising to make a $200 million bridge loan.
A spokesman for the buy-out group wasn't immediately available for comment.
Separately, UAL stock rose $4 a share to $175 in composite trading on the New York Stock Exchange on reports that Los Angeles investor Marvin Davis has asked United Airlines unions if they're interested in cooperating with Mr. Davis in a new bid for UAL.
But neither the pilots nor the machinists appear interested, and Mr. Davis is barred from making a new bid under terms of an agreement he made with UAL in September unless UAL accepts an offer below $300 a share.
Wall Street continued to buckle under the public outcry against computer-driven program trading.
Kidder, Peabody & Co., a unit of General Electric Co., announced it would stop doing stock-index arbitrage for its own account, and Merrill Lynch & Co. pulled out of the practice altogether.
At the New York Stock Exchange, which has been buffeted by complaints from angry individual investors and the exchange's own listed companies, Chairman John J. Phelan Jr. held an emergency meeting with senior partners of some of the Big Board's 49 stock specialist firms.
The specialists, a trader said, were "livid" about Mr. Phelan's recent remarks that sophisticated computer-driven trading strategies are "here to stay."
Many investors blame program trading for wild swings in the stock market, including the 190-point plunge in the Dow Jones Industrial Average on Oct. 13.
A specialist is an exchange member designated to maintain a fair and orderly market in a specified stock.
Mr. Phelan's meeting with the floor brokers comes as he prepares to explain the exchange's position on program trading to key congressional regulators in a closed session tomorrow, according to exchange officials.
A Big Board spokesman would only say, "We're working the problem and looking at the issue and meeting with a broad number of customers and constituents to get their views and ideas on the issue."
The program-trading outcry was taken to a new level when giant Contel Corp. said it and 20 or more of the Big Board's listed companies are forming an unprecedented alliance to complain about the exchange's role in program trading.
The decision by Merrill, the nation's largest securities firm, represents the biggest retreat yet from program trading.
Merrill has been the fourth-biggest stock-index arbitrage trader on the Big Board this year, executing an average of 18.1 million shares a month in such trades, or about one million shares a day.
Merrill's move is one of the most sweeping program-trading pullbacks of recent days, because the big securities firm will no longer execute stock-index arbitrage trades for customers.
Most Wall Street firms, in pulling back, have merely stopped such trading for their own accounts.
Merrill has been one of the main firms executing index arbitrage for customers.
Merrill also said it is lobbying for significant regulatory controls on program trading, including tough margin -- or down-payment -- requirements and limits on price moves for program-driven financial futures.
Merrill, in a statement by Chairman William A. Schreyer and President Daniel P. Tully, said index arbitrage "has been clearly identified in the investing public's mind as a contributing factor to excess market volatility," so Merrill won't execute such trades until "effective controls" are in place.
In stock-index arbitrage, traders buy and sell large amounts of stocks with offsetting trades in stock-index futures and options.
The idea is to lock in profits from short-term swings in volatile markets.
Last Thursday, PaineWebber Group Inc. also said it would cease index arbitrage altogether, but the firm wasn't as big an index arbitrager as Merrill is.
Other large firms, including Bear, Stearns & Co. and Morgan Stanley & Co., last week announced a pullback from index arbitrage, but only for the firms' own accounts.
Kidder made an abrupt about-face on program trading yesterday, after a special meeting between the firm's president and chief executive officer, Michael Carpenter, and its senior managers.
Just a week ago, Mr. Carpenter staunchly defended index arbitrage at Kidder, the most active index-arbitrage trading firm on the stock exchange this year.
Index arbitrage, Mr. Carpenter said last week, doesn't have a "negative impact on the market as a whole" and Kidder's customers were "sophisticated" enough to know that.
But yesterday, Mr. Carpenter said big institutional investors, which he wouldn't identify, "told us they wouldn't do business with firms" that continued to do index arbitrage for their own accounts.
"We were following the trend of our competitors who were under pressure from institutions," he said.
Kidder so far this year has executed a monthly average of 37.8 million shares in index-arbitrage trading, and is second only to Morgan Stanley in overall program trading, which includes index arbitrage.
Most of Kidder's program trading is for its own account, according to the New York Stock Exchange.
Kidder denied that GE's chairman and chief executive, John F. Welch, had anything to do with Kidder's decision.
But at least one chief executive said he called Mr. Welch to complain about Kidder's aggressive use of program trading, and other market sources said they understood that Mr. Welch received many phone calls complaining about Kidder's reliance on index arbitrage as a major business.
Kidder has generally been sensitive to suggestions that GE makes decisions for its Kidder unit.
"Our decision had nothing to do with any pressure Mr. Welch received," Mr. Carpenter said.
"This was a Kidder Peabody stand-alone decision."
A spokeswoman for GE in Fairfield, Conn., said, "Absolutely no one spoke to Jack Welch on this subject" and added, "Anyone who claims they talked to Jack Welch isn't telling the truth."
Supporters of index arbitrage haven't been publicly sticking up for the trading strategy, as some did during the post-crash outcry of 1987.
But Merrill Lynch, in its statement about pulling out of index arbitrage, suggested that the current debate has missed the mark.
Merrill said it continues to believe that "the causes of excess market volatility are far more complex than any particular computer trading strategy.
Indeed, there are legitimate hedging strategies used by managers of large portfolios such as pension funds that involve program trading as a means of protecting the assets of their pension beneficiaries."
Merrill's index arbitragers will continue to do other kinds of computer-assisted program trading, so there probably won't be any layoffs at the firm, people familiar with Merrill's program operation said.
Meanwhile, Bear Stearns Chairman and Chief Executive Alan C. Greenberg said his firm will continue stock-index arbitrage for its clients.
At the firm's annual meeting last night, he told shareholders that index arbitrage won't go away, despite the public outcry.
"If they think they are going to stop index arbitrage by causing a few Wall Street firms to quit, they are crazy," Mr. Greenberg said.
"It's not going to stop it at all."
Mr. Greenberg, noting that stock-index arbitrage rises and ebbs with stock market's volatility, said that for the first four months of the firm's fiscal year beginning in July, stock-index arbitrage had been a "break-even" proposition for Bear Stearns.
In response to a shareholder's suggestion, Mr. Greenberg agreed that European firms will simply pick up the index-arbitrage business left behind by U.S. institutions.
Pressure from big institutional investors has been the major catalyst for Wall Street's program-trading pullback.
And there was speculation yesterday that Fidelity Investments and other large mutual-fund companies might soon follow the lead of Kemper Corp. and other institutions in cutting off trading business to securities firms that do program trading.
A Fidelity spokesman in Boston denied the speculation, saying the program-trading issue was more of a regulatory problem.
But a much smaller mutual fund company, the USAA Investment Management Co. unit of USAA, San Antonio, Texas, said it informed nine national brokerage firms it will cease business with them unless they stop index-arbitrage trading.
USAA, with 400,000 mutual fund accounts, manages more than $10 billion, $2 billion of which is in the stock market.
Michael J.C. Roth, USAA executive vice president, called program trading "mindless."
He said there is "no valid investment reason" for stock-index futures to exist.
A program-bashing move is clearly on.
Charles Wohlstetter, chairman of Contel, who is helping organize the alliance of Big Board-listed firms, said he had no time to work yesterday because he received so many phone calls, faxes and letters supporting his view that the Big Board has been turned into a "gambling casino" by program traders.
"We are reaching the moment of truth" on Wall Street, said Rep. Edward J. Markey (D., Mass.), chairman of the House subcommittee on telecommunications and finance.
"{Wall Street} is beginning to realize -- as Shakespeare said -- the trouble is not in our stars, but in ourselves."
Craig Torres and Anne Newman contributed to this article.
An ancient red-figured Greek kylix, or drinking cup, was recovered backstage at Sotheby's this spring and has been returned to the Manhattan couple who lost it in a burglary three years ago.
Robert Guy, an associate curator at the Princeton Art Museum, was previewing a June antiquities sale at the auction house when he recognized the kylix, which he, as a specialist in Attic pottery and a careful reader of the Stolen Art Alert in "IFAR Reports," knew was stolen.
The timing of his visit was fortuitous; the man who had brought it in for an estimate had returned to collect it and was waiting in the hall.
To confirm Mr. Guy's identification, Sotheby's and IFAR exchanged photos by fax, and the waiting man, apparently innocent of knowledge that the kylix was stolen, agreed to release it.
The cup had been insured, and in short order it was given over to a Chubb & Son representative.
The original owners happily repaid the claim and took their kylix home.
A former curator of the Museum of Cartoon Art in Rye Brook, N.Y., pleaded guilty in July to stealing and selling original signed and dated comic strips, among them 29 Dick Tracy strips by Chester Gould, 77 Prince Valiant Sunday cartoons by Hal Foster, and a dozen Walt Disney animation celluloids, according to Barbara Hammond, the museum's director.
He sold them well below market value to raise cash "to pay off mounting credit-card debts," incurred to buy presents for his girlfriend, his attorney, Philip Russell, told IFAR.
The curator, 27-year-old Sherman Krisher of Greenwich, Conn., had worked his way up from janitor in seven years at the museum.
The theft was discovered early this year, soon after Ms. Hammond took her post.
Sentencing was postponed on Aug. 18, when Mr. Krisher was hospitalized for depression.
His efforts to get back the stolen strips had resulted in recovery of just three.
But on Oct. 6, he had reason to celebrate.
Two days earlier, his attorney met in a Park Avenue law office with a cartoon dealer who expected to sell 44 of the most important stolen strips to Mr. Russell for $62,800.
Instead, New York City police seized the stolen goods, and Mr. Krisher avoided jail.
He was sentenced to 500 hours of community service and restitution to the museum of $45,000.
Authorities at London's Heathrow Airport are investigating the disappearance of a Paul Gauguin watercolor, "Young Tahitian Woman in a Red Pareo," that has two sketches on its verso (opposite) side.
Valued at $1.3 million, it was part of a four-crate shipment.
The air-waybill number was changed en route, and paper work showing that the crates had cleared customs was misplaced, so it was a week before three of the four crates could be located in a bonded warehouse and the Gauguin discovered missing.
Although Heathrow authorities have been watching a group of allegedly crooked baggage handlers for some time, the Gauguin may be "lost."
Chief Inspector Peter Seacomb of the Criminal Investigation Department at the airport said, "It is not uncommon for property to be temporarily mislaid or misrouted."
Officials at the University of Virginia Art Museum certainly would agree.
Their museum had purchased an Attic black-figured column krater and shipped it from London.
It was reported stolen in transit en route to Washington, D.C., in February.
Months later, the Greek vase arrived in good condition at the museum in Charlottesville, having inexplicably traveled by a circuitous route through Nairobi.
Two Mexican college dropouts, not professional art thieves, have been arrested for a 1985 Christmas Eve burglary from the National Museum of Anthropology in Mexico City.
About 140 Mayan, Aztec, Mixtec and Zapotec objects, including some of Mexico's best-known archaeological treasures, were taken.
The government offered a reward for the return of the antiquities, but routine police work led to the recovery.
As it turned out, Carlos Perches Trevino and Ramon Sardina Garcia had hidden the haul in a closet in the Perches family's home for a year.
Then they took the art to Acapulco and began to trade some of it for cocaine.
Information from an arrested drug trafficker led to the two men and the recovery of almost all the stolen art.
Among other happy news bulletins from the German Democratic Republic, the Leipzig Museum of Fine Arts announced that it has recovered "Cemetery in the Snow," a painting by the German Romantic painter Caspar David Friedrich.
The artist's melancholy subjects bring high prices on the world market, and the U.S. State Department notified IFAR of the theft in February 1988.
According to a source at the East Europe desk, two previously convicted felons were charged, tried, convicted and sentenced to prison terms of four and 12 years.
The precious canvas, cut from its frame at the time of the theft, was found in nearby Jena, hidden in the upholstery of an easy chair in the home of the girlfriend of one of the thieves.
No charges were brought against her.
Trompe l'oeil painting is meant to fool the eye, but Robert Lawrence Trotter, 35, of Kennett Square, Pa., took his fooling seriously.
He painted one himself in the style of John Haberle and sold it as a 19th-century original to antique dealers in Woodbridge, Conn.
Mr. Trotter's painting showed a wall of wood boards with painted ribbons tacked down in a rectangle; tucked behind the ribbons were envelopes, folded, faded and crumpled papers and currency.
Mr. Trotter's fake Haberle was offered at a bargain price of $25,000 with a phony story that it belonged to his wife's late aunt in New Canaan, Conn.
The dealers immediately showed their new acquisition to an expert and came to see it as a fake.
They persuaded Mr. Trotter to take it back and, with the help of the FBI, taped their conversation with him.
After his arrest, the forger admitted to faking and selling other paintings up and down the Eastern seaboard.
Ms. Lowenthal is executive director of the International Foundation for Art Research (IFAR).
Ford Motor Co. said it is recalling about 3,600 of its 1990-model Escorts because the windshield adhesive was improperly applied to some cars.
Separately, Ford and Mazda Motor Corp.'s U.S. sales arm said they are recalling about 88,500 1988-model Mercury Tracers and 220,000 1986, 1987 and 1988 model Mazda 323s equipped with 1.6-liter fuel-injected engines to replace the oil filler cap.
Mazda makes the Tracer for Ford.
As a result of the adhesive problem on the Ford Escort subcompacts, windshields may easily separate from the car during frontal impact, the U.S. auto maker said.
When properly applied, the adhesive is designed to retain the windshield in place in a crash test at 30 miles per hour.
A Ford spokesman said the Dearborn, Mich., auto maker isn't aware of any injuries caused by the windshield problem.
Ford said owners should return the cars to dealers so the windshields can be removed and securely reinstalled.
Mazda and Ford said a combination of limited crankcase ventilation and improper maintenance could cause engine oil in some of the Mercury Tracers and Mazda 323s to deteriorate more rapidly than normal, causing increased engine noise or reduced engine life.
They said the problems aren't safety related.
Both companies will replace the oil filler cap with a ventilated oil filler cap.
Both also will inspect and replace, if necessary, oil filters and oil strainers, at no charge to owners.
For owners who have followed the recommended oil maintenance schedule, Mazda will extend to five years or 60,000 miles the warranty term for engine damage due to abnormal engine oil deterioration.
The normal term for the 1986 and 1987 model 323 is two years or 24,000 miles; the term for the 1988 323 is three years or 50,000 miles.
Ford said the term on its warranty is already six years or 60,000 miles.
Separately, Ford said it will offer $750 cash rebates to buyers of its 1990-model Ford Bronco sport utility vehicle.
It said it will also offer buyers the option of financing as low as 6.9% on 24-month loans.
Ford also offered the low financing rate option on 1989-model Broncos, which previously carried a $750 cash discount.
Ford said the new offer will begin Saturday and run indefinitely.
The Supreme Court agreed to decide whether the federal Pension Benefit Guaranty Corp. may require LTV Corp. to reassume funding responsibility for a $2.3 billion shortfall in the company's pension plans.
The high court's decision, expected next spring, may affect the stability of many large corporate pension plans that have relied on the availability of pension insurance provided by the federal pension regulatory and insurance agency.
The agency, which is funded through insurance premiums from employers, insures pension benefits for some 30 million private-sector workers who take part in single-employer pension plans.
It recently reported assets of $2.4 billion and liabilities of $4 billion.
In its appeal to the high court, the agency said the federal appeals court ruling, which favored LTV, threatened to transform the agency from an insurer of troubled pension plans into an "open-ended source of industry bailouts."
The ruling also may determine how quickly LTV is able to complete its Chapter 11 reorganization.
LTV filed for protection under Chapter 11 in federal bankruptcy court in 1986.
The filing was partly the result of the $2.3 billion shortfall in LTV's three pension plans operated for its LTV Steel Co. subsidiary's employees.
In January 1987, as LTV Steel continued operating while under reorganization, the agency terminated the three LTV pension plans to keep its insurance liability from increasing.
Termination means that the agency's insurance assumes the liabilities and pays the pension benefits already owed under the plans, but workers don't accrue new benefits.
A few months later, under pressure from the United Steelworkers of America, LTV instituted a new program to provide retirement benefits similar to those in the terminated plans.
Because the federal pension agency had taken over the old plans, LTV would be responsible only for benefits paid under the new pension plans.
But the agency viewed the creation of the new plans as an abuse of federal pension law and an attempt to transfer the liability of the $2.3 billion shortfall from LTV to federal insurance.
The agency also concluded that LTV's financial status had improved while it was under reorganization.
In September 1987, it ordered LTV to reassume liability and funding for the three original plans.
LTV challenged the order, and a federal district court in New York in June 1988 ruled that the agency improperly ordered LTV to reassume responsibility for the plans.
In May, a federal appeals court in New York agreed that the agency acted unlawfully.
The appeals court said there was no evidence that Congress intended to allow the pension agency to consider a company's creation of new benefit plans as a basis for ordering that company to reassume liability for old plans.
The appeals court also said the agency had to consider a company's long-term ability to fund pension plans, not just short-term improved financial status.
In Dallas, LTV said that it was disappointed that the court agreed to hear the case because it believes the move will further delay its Chapter 11 proceedings.
The company hasn't been able to come up with a reorganization plan, in part, because of the sizable disagreement with the pension agency.
But LTV, a steel, aerospace and energy concern, said it is confident that the Supreme Court will uphold the lower-court decisions and said it expects to continue discussions with the agency about a settlement while the case is being reviewed.
(Pension Benefit Guaranty Corp. vs. LTV Corp.
The commercial was absolutely silent.
Breaking into the raucous Chicago Bears-Cleveland Browns match during last week's Monday night football game, it was nothing but simple block letters superimposed on the TV screen.
"Due to the earthquake in San Francisco, Nissan is donating its commercial air time to broadcast American Red Cross Emergency Relief messages.
Please contribute what you can," the ad said.
The Nissan logo flashed on the screen for a moment, and then came a taped plea for donations from former President Reagan -- followed by the silent print telling viewers where to call.
Within two hours, viewers pledged over $400,000, according to a Red Cross executive.
Call it disaster marketing.
Nissan Motor is just one of a slew of advertisers that have hitched their ads to the devastating San Francisco quake and Hurricane Hugo.
Sometimes, the ads attempt to raise money; always, they try to boost good will.
By advertising disaster relief, these companies are hoping to don a white hat and come out a hero.
But the strategy can backfire; if the ads appear too self-serving, the companies may end up looking like rank opportunists instead of good Samaritans.
That hasn't deterred plenty of companies.
Along with Nissan, Grand Metropolitan PLC's Burger King and New York Life Insurance have tied ads to Red Cross donations.
Other ads don't bother with the fundraising; a touching, if self-congratulatory, American Telephone & Telegraph ad that aired Sunday intermixed footage of the devastation in San Francisco and Charleston, S.C., with interviews of people recounting how AT&T helped.
At Nissan, "we felt we wanted to do something to help them gather money, and we had this airtime on Monday Night Football," explains Brooke Mitzel, a Nissan advertising creative manager.
"What did we get out of it?
We got some exposure . . . and pretty much good will."
The ads are just the latest evidence of how television advertising is getting faster on the draw.
While TV commercials typically take weeks to produce, advertisers in the past couple of years have learned to turn on a dime, to crash out ads in days or even hours.
The big brokerage houses learned the art of the instant commercial after the 1987 crash, when they turned out reassuring ads inviting investors right back into the stock market.
They trotted out another crop of instant commercials after the sudden market dip a few weeks ago.
Nissan created its quake ad in a weekend.
But as advertisers latch onto disasters with increasing frequency, they risk hurting themselves as much as helping the cause.
They chance alienating the customers they hope to woo by looking like opportunistic sharks.
"People see extra messages in advertising, and if a manufacturer is clearly trying to get something out of it . . . if it's too transparent . . . then consumers will see through that," warns John Philip Jones, chairman of the advertising department at the Newhouse School of Public Communications at Syracuse University.
"It can backfire because companies can step across the line and go too far, be too pushy," agrees Gary Stibel, a principal with New England Consulting Group, Westport, Conn.
"The ultimate form of charity is when you don't tell anyone."
Still, he says that only a few of the quake-related campaigns have been "tasteless" and that "the majority have been truly beneficial to the people who need the help.
We don't consider that ambulance chasing."
The companies running the disaster ads certainly don't see themselves as ambulance chasers, either.
Burger King's chief executive officer, Barry Gibbons, stars in ads saying that the fast-food chain will donate 25 cents to the Red Cross for every purchase of a BK Doubles hamburger.
The campaign, which started last week and runs through Nov. 23, with funds earmarked for both the quake and Hugo, "was Barry's idea," a spokeswoman says.
"Barry felt very committed.
He felt we should be giving something back."
While the campaign was Mr. Gibbons's idea, however, he won't be paying for it: The donations will come out of the chain's national advertising fund, which is financed by the franchisees.
And by basing donations on BK Doubles, a new double-hamburger line the fast-food chain is trying to push, Burger King works a sales pitch into its public-service message.
Toyota's upscale Lexus division, a sponsor of the World Series, also put in a plug for Red Cross donations in a World Series game it sponsored.
"The World Series is brought to you by Lexus, who urges you to help relieve the suffering caused by the recent earthquake . . . ," the game announcer said.
And New York Life made a plea for Red Cross donations in newspaper ads in the San Francisco area, latching onto the coattails of the Red Cross's impeccable reputation: "The Red Cross has been helping people for 125 years.
New York Life has been doing the same for over 140 years."
Nancy Craig, advertising manager for the Red Cross, readily admits "they're piggybacking on our reputation."
But she has no problem with that, she says: "In the meanwhile, they're helping us."
The Red Cross doesn't track contributions raised by the disaster ads, but it has amassed $46.6 million since it first launched its hurricane relief effort Sept. 23.
Ad Notes. . . .
NEW ACCOUNT:
Northrup King Co., Golden Valley, Minn., awarded its $4 million field-crop-seeds account to Creswell, Munsell, Fultz & Zirbel, a Cedar Rapids, Iowa, division of Young & Rubicam.
The account had previously been handled by Saatchi & Saatchi Wegener, New York.
TV GUIDE:
Wieden & Kennedy, Portland, Ore., was named to handle the News Corp. publication's $1 million to $2 million trade-ad account.
N W Ayer, the New York agency that had handled the account since 1963, resigned the account about two weeks ago.
NO ALCOHOL:
Miller Brewing Co. will introduce its first non-alcoholic beer Jan. 1.
The brew, called Miller Sharp's, will be supported by ads developed by Frankenberry, Laughlin & Constable, Milwaukee.
RADIO:
Viacom Broadcasting Inc. definitively agreed to acquire KOFY(AM) and KOFY-FM in San Francisco for about $19.5 million from Pacific FM Inc.
The Supreme Court let stand a New York court's ruling that the manufacturers of a drug once used to prevent miscarriages must share liability for injuries or deaths when the maker of an individual dose is unknown.
The high court's action, refusing to hear appeals by several drug companies, is likely to have a significant impact at several levels.
The most immediate effect is in New York, where former manufacturers of the anti-miscarriage drug DES -- the synthetic female hormone diethylstilbestrol -- face the prospect of shared liability for damages in many of the 700 to 1,000 DES lawsuits pending in that state.
The lawsuits stemmed from the development of cancer and other problems in the daughters of women who took the drug.
On a broader scale, the ruling could encourage other states' courts to adopt the logic of the New York court, not only in DES cases but in other product-related lawsuits, as well.
The New York Court of Appeals ruling parallels a 1980 decision by the California Supreme Court requiring shared liability among manufacturers for injuries when it can't be determined which company is at fault.
Paul Rheingold, a New York lawyer who represents DES victims, said that before the New York ruling, only the states of Washington and Wisconsin had followed the California decision.
Now that the New York decision has been left intact, other states may follow suit.
"Generally, when New York and California go one way, it has a tremendous influence on other states, especially small ones," said Mr. Rheingold.
The high court refused to hear appeals by Rexall Drug Co., which went out of business in 1987 and was taken over by RXDC Liquidating Trust; E.R. Squibb & Sons Inc., a unit of Squibb Corp.; and Eli Lilly & Co.
The appeals involved DES, which was approved by the Food and Drug Administration for use from the 1940s until 1971 to prevent miscarriages during pregnancy.
In 1971, the FDA banned the use of DES after studies linked it to cancer and other problems in daughters of women who took the drug.
Lawsuits over the harm caused by DES have flooded federal and state courts in the past decade.
In many cases, the lawsuit was filed long after the drug was used -- the cancer in the daughters was typically not detected for years -- and there is no way to prove which of several companies manufactured the doses consumed by certain women.
Under traditional legal theories, inability to prove which company manufactured a drug that caused an injury or death would lead to the lawsuit being dismissed.
But in its ruling last April, the New York court said that all producers of the anti-miscarriage drug should share liability when the manufacturer of a specific dose can't be determined.
Each company's share of liability would be based on their share of the national DES market.
The New York court also upheld a state law, passed in 1986, extending for one year the statute of limitations on filing DES lawsuits.
The effect is that lawsuits that might have been barred because they were filed too late could proceed because of the one-year extension.
(Rexall Drug Co. vs. Tigue; E.R. Squibb & Sons Inc. vs. Hymowitz, and Eli Lilly & Co. vs. Hymowitz)
Government Contractors
The high court, leaving intact a $4.25 million damage award against General Dynamics Corp., declined to resolve questions about a legal defense against civil lawsuits often used by government contractors.
Last year, the Supreme Court defined when companies, such as military contractors, may defend themselves against lawsuits for deaths or injuries by asserting that they were simply following specifications of a federal government contract.
In that decision, the high court said a company must prove that the government approved precise specifications for the contract, that those specifications were met and that the government was warned of any dangers in use of the equipment.
But last February, a federal appeals court in New Orleans upheld a damage award against General Dynamics, rejecting the company's use of the government contractor defense.
The appeals court said the defense is valid only if federal officials did more than rubber stamp a company's design or plans and engaged in a "substantive review and evaluation" on a par with a policy decision.
General Dynamics appealed to the high court, backed by numerous business trade groups, arguing that the appeals court definition restricts the defense too severely.
General Dynamics was sued by the families of five Navy divers who were killed in 1982 after they re-entered a submarine through a diving chamber.
The accident was caused by faulty operation of a valve.
A federal district court awarded damages to the families and the appeals court affirmed the award.
(General Dynamics Corp. vs. Trevino
Court in Brief
In other action yesterday, the high court:
-- Let stand the mail fraud and conspiracy conviction of John Lavery, a former vice president of Beech-Nut Nutrition Corp., a unit of Nestle S.A.
The conviction stemmed from federal charges of consumer fraud for sale of phony infant apple juice between 1978 and 1983.
(Lavery vs. U.S.)
-- Left intact an award of $1.5 million in damages against Dow Chemical Co. in the death of an Oregon man from exposure to Agent Orange.
The award was made by a federal court to the widow of a U.S. Forest Service employee who contracted Hodgkin's disease after using herbicides containing Agent Orange in a weed-killing program.
It can be hoped that Spanish Prime Minister Felipe Gonzalez will draw the right conclusion from his narrow election victory Sunday.
A strong challenge from the far left, the Communist coalition Izquierda Unida, failed to topple him.
He should consider his victory a mandate to continue his growth-oriented economic reforms and not a demand that he move further left.
If he follows the correct path, he may be able to look back on this election as the high-water mark of far-left opposition.
The far left had some good issues even if it did not have good programs for dealing with them.
It could point to plenty of ailments that the Spanish economic rejuvenation so far has failed to cure.
Unemployment still is officially recorded at 16.5%, the highest rate in Europe, although actual joblessness may be lower.
Housing is scarce and public services -- the court system, schools, mail service, telephone network and the highways -- are in disgraceful condition.
Large pockets of poverty still exist.
The left also is critical of the style of the Socialist government -- a remarkable parallel to the situation in Britain.
Mr. Gonzalez and his colleagues, particularly the finance minister, Carlos Solchaga, are charged with having abandoned their socialist principles and with having become arrogant elitists who refuse even to go on television (controlled by the state) to face their accusers.
In response to this, the Socialist prime minister has simply cited his free-market accomplishments.
They are very considerable: Since 1986, when Spain joined the European Community, its gross domestic product has grown at an annual average of 4.6% -- the fastest in the EC.
In that time more than 1.2 million jobs have been created and the official jobless rate has been pushed below 17% from 21%.
A 14% inflation rate dropped below 5%.
Net foreign investment through August this year has been running at a pace of $12.5 billion, about double the year-earlier rate.
Mr. Gonzalez also has split with the left in reaffirming Spain's NATO commitment and in renewing a defense treaty with the U.S.
Mr. Gonzalez is not quite a closet supply-side revolutionary, however.
He did not go as far as he could have in tax reductions; indeed he combined them with increases in indirect taxes.
Yet the best the far-left could do was not enough to deter the biggest voting bloc -- nearly 40% -- from endorsing the direction Spain is taking.
Now he can go further.
He should do more to reduce tax rates on wealth and income, in recognition of the fact that those cuts yield higher, not lower, revenues.
He could do more to cut public subsidies and transfers, thus making funds available for public services starved of money for six years.
The voters delivered Mr. Gonzalez a third mandate for his successes.
They, as well as numerous Latin American and East European countries that hope to adopt elements of the Spanish model, are supporting the direction Spain is taking.
It would be sad for Mr. Gonzalez to abandon them to appease his foes.
Monday, October 30, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 8 3/4% high, 8 11/16% low, 8 3/4% near closing bid, 8 3/4% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.:8.50% 30 to 44 days; 8.25% 45 to 62 days; 8.375% 63 to 89 days; 8% 90 to 119 days; 7.90% 120 to 149 days; 7.80% 150 to 179 days; 7.55% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000:8.55% 30 days; 8.50% 60 days; 8.45% 90 days.
CERTIFICATES OF DEPOSIT: 8.09% one month; 8.04% two months; 8.03% three months; 7.96% six months; 7.92% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market: 8.55% one month; 8.55% three months; 8.35% six months.
BANKERS ACCEPTANCES: 8.47% 30 days; 8.42% 60 days; 8.25% 90 days; 8.10% 120 days; 8.02% 150 days; 7.95% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 3/4% to 8 5/8% one month; 8 13/16% to 8 11/16% two months; 8 11/16% to 8 9/16% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 7/16% to 8 5/16% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 11/16% three months; 8 7/16% six months; 8 3/8% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS: Results of the Monday, October 30, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.78%, 13 weeks; 7.62%, 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days.
9.86%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par).
9.76%, standard conventional fixed-rate mortgages; 8.75%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.70%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Oh, that terrible Mr. Ortega.
Just when American liberalism had pulled the arms plug on the Contras and their friend Ronald Reagan, along comes Mr. Ortega in Costa Rica this weekend to "blunder" into the hands of what are often called conservatives.
Conservatives are the faction in U.S. politics which always said that Mr. Ortega and his friends don't want to hold an election in Nicaragua.
Liberals are the faction that says, Give peace a chance; now they are saying Mr. Ortega should give them a break, lest the conservatives ask them to vote for bullets instead of bandages.
We suspect Daniel Ortega knows the difference between a blunder and a strategy.
He knows that making George Bush look silly in a photograph with him will trigger Noriegan fulminations, and that announcing an end to the liberals' cease-fire will produce mainly their concern over the Contras' military activities in northern Nicaragua.
Mr. Ortega understands better than those who worry about his behavior that what sustains the Sandinista movement is not democratic peace, but nondemocratic unpeace.
It is the presence of internal and external "enemies" which justifies the need for a large, active army that Mikhail Gorbachev's Soviet Union continues to supply with bullets.
Annualized interest rates on certain investments as reported by the Federal Reserve Board on a weekly-average basis:
a-Discounted rate.
b-Week ended Wednesday, October 25, 1989 and Wednesday October 18, 1989.
c-Yields, adjusted for constant maturity.
Cetus Corp. said the government of Spain approved the marketing of its Proleukin interleukin-2 drug to treat kidney cancer.
The biotechnology concern said Spanish authorities must still clear the price for the treatment, but that it expects to receive such approval by year end.
Four other countries in Europe have approved Proleukin in recent months.
Cetus is currently trying to obtain federal regulatory clearance for U.S. distribution.
The Treasury Department proposed that banks be required to keep detailed records of international wire transfers, which officials believe is the main vehicle used by drug traffickers to move billions of dollars in and out of the U.S.
In recent testimony on Capitol Hill, Treasury officials said they were considering the new reporting requirements, and the expected publication of the proposal in the Federal Register today is the first official step toward creating final regulations.
The Treasury is still working out the details with bank trade associations and the other government agencies that have a hand in fighting money laundering.
Among the possibilities the Treasury is considering are requirements that banks keep records identifying the originators and recipients of international wire transfers.
Another suggestion would draw banks more directly into tracking down money launderers by developing a "suspicious international wire transfer profile," which banks would use to spotlight questionable payments.
But banks may prefer using a profile that targets selected transactions, rather than a blanket reporting requirement.
Banks now are required only to report cash deposits or withdrawals of $10,000 or more.
But wire transfers from a standing account -- including those bigger than $10,000 -- aren't reported.
Officials believe this has left a gaping loophole that illegal drug businesses are exploiting.
Authorities estimate that revenues from illegal drugs in the U.S. total about $110 billion annually.
Sen. John Kerry (D., Mass.), chairman of a Senate Foreign Relations subcommittee that oversees the issue of money laundering, criticized the proposal for ignoring wire transfers between foreign banks that are executed and cleared on U.S. wire systems.
The American Bankers Association didn't have any comment on the plan.
The proposal now enters a 60-day comment period, after which the Treasury will propose final regulations, followed by another comment period.
Western Union Corp. took steps to withdraw its proposed debt swap for $500 million in high-interest notes and said it is looking at other alternatives for refinancing the debt.
Western Union had said two weeks ago that it might withdraw the pending offer, which would have replaced $500 million in so-called reset notes, now paying 19.25% annual interest and set to come due in 1992, with two new issues paying lower interest.
Yesterday the company said it had filed a request with the Securities and Exchange Commission to withdraw the registration statement regarding the proposed swap.
A Western Union spokesman, citing adverse developments in the market for high-yield "junk" bonds, declined to say what alternatives are under consideration.
But some holders of the Western Union notes expect the company to propose a more-attractive debt swap that will give them a substantial equity stake in the company.
Western Union has had major losses in recent years as its telex business has faltered in the face of competition from facsimile machines and as other business ventures have gone awry.
The major question, said one holder who asked not to be named, is whether New York investor Bennett S. LeBow, whose Brooke Partners controls Western Union, is willing to offer a large enough equity stake to entice bondholders into agreeing to a new swap.
The $500 million in notes, the largest chunk of Western Union's $640 million in long-term debt, stems from the company's major restructuring in December 1987.
The notes became burdensome when reset provisions allowed their interest rate to be raised to 19.25% last June.
Western Union had offered to swap each $1,000 face amount of the notes for six shares of common stock and two new debt issues: a $500 note paying an interest rate starting at 16.75% annually and rising in later years, due in 1992, and a $500 note, due in 1997, paying a fixed rate of 17% and including rights protecting a holder against a decline in the trading price of the bond.
Western Union must make $48 million in interest payments on the reset notes on Dec. 15, and a company spokesman said it fully intends to meet the payments.
But Western Union has said it must lower the interest rate on its debt to regain full financial health.
Genentech Inc. said the West German distributor of its heart drug TPA reached a joint marketing agreement with a subsidiary of Hoechst AG, which makes the rival anti-clotting agent streptokinase.
The biotechnology concern said the agreement between its longtime West German distributor, Boehringer-Ingleheim's Dr. Karl Thomae G.m.b.H. subsidiary, and Hoechst's Behringwerke subsidiary was an attempt to expand the market for blood-clot drugs in general.
A Genentech spokeswoman said the agreement calls for Hoechst to promote TPA for heart patients and streptokinase for other clot-reducing purposes.
Investors in the over-the-counter market dumped banking and insurance issues, sending the Nasdaq composite index lower for the third consecutive session.
All Nasdaq industry indexes finished lower, with financial issues hit the hardest.
Despite some early computer-guided program buying, the Nasdaq composite fell 1.39 to 451.37.
The OTC market now has declined in eight of the past 11 sessions.
The Nasdaq bank index fell 5.00 to 432.61, while the insurance index fell 3.56 to 528.56, and the "other finance" index dropped 3.27 to 529.32.
The largest financial issues, as measured by the Nasdaq financial index, tumbled 3.23 to
Meanwhile, the index of the 100 biggest non-financial stocks, the Nasdaq 100, gained 0.47 to 438.15.
Profit-taking accounted for much of the slide in OTC stock prices, according to David Mills, senior vice president of Boston Company Advisers.
He said many portfolio managers, whose year-end bonuses are tied to annual performance, are selling now rather than risk seeing their gains erode further.
"The profit locking-in is definitely going on," said Mr. Mills, whose firm manages $600 million for Boston Co.
Tax-loss sellers, those investors who sell loss-making stocks so they can deduct their losses from this year's income, are also getting out, Mr. Mills said.
That's helping put pressure on both the market's winners and its losers.
"The stocks that have been the best are having big pullbacks, and the ones that have been the worst are getting clobbered," Mr. Mills said.
He expects the market to sink further and to reach a low sometime next month or in December.
The selling by money managers and individual investors is turning traders bearish as well.
"We are advising a lot of our clients to make moves that make sense to them, rather than waiting until the last minute, because things have been so volatile," said William Sulya, head of OTC trading at A.G. Edwards & Sons in St. Louis.
Ralph Costanza, head of the OTC trading department at Smith Barney, Harris Upham, said many market players are awaiting some resolution of the current debate over program trading.
Much of the market's recent volatility has been blamed on this large-scale computerized trading technique that can send stock prices surging or plummeting in a matter of minutes.
The problem has been particularly damaging to the OTC market, traditionally a base for the small investor.
Weisfield's surged 14 to 53 after agreeing in principle to be acquired by a unit of Ratners Group for $50 a share.
The stock jumped 9 1/2 Friday, when the company announced it was in takeover talks.
Ratners and Weisfield's said they expect to sign definitive agreements shortly and to complete the transaction by Dec. 15.
Mid-State Federal Savings Bank advanced 1 1/2 to 20 1/4 after it said it is in talks with a possible acquirer.
The bank said the talks resulted from solicitations by its financial adviser.
Jaguar assumed its recently customary place on the OTC most active list as its American depository receipts gained 1/4 to 11 7/8 on volume of 1.2 million shares and Daimler-Benz joined the list of companies interested in the British car maker.
Daimler said it has had talks with Jaguar about possible joint ventures.
Meanwhile, General Motors and Ford Motor continue their pursuit of the company.
Ford has acquired more than 13% of Jaguar's shares, and GM has received U.S. regulatory clearance to buy 15%.
ShowBiz Pizza Time gained 1 1/2 to 13.
The company reported third-quarter operating profit of 37 cents a share, compared with 12 cents a share a year earlier.
A third-quarter charge of $3.5 million related to planned restaurant closings resulted in a net loss for the quarter.
Employers Casualty, which reported a $53.9 million third-quarter loss late Friday, fell 2 1/4 to 13 3/4.
The loss was largely due to a $55.2 million addition to reserves.
Employers Casualty had a loss of $3.6 million in the year-earlier quarter.
Old Stone fell 1 5/8 to 13 1/2.
Late Friday, the company reported a loss of $51.3 million for the third quarter after earning $9.2 million a year before.
The loss came after a $23.3 million addition to loan-loss reserves.
The bank made a $4.5 million provision in the 1988 quarter.
Old Stone repeated projections that it will be profitable for the fourth quarter and will about break even for the year.
Abraham Lincoln Federal Savings Bank sank 4 to 13 1/2 after announcing a shakeup that will change senior management and reorganize the bank's mortgage business as a separate unit.
The bank also said it will establish a loan-loss reserve of $2.5 million to $4 million against a construction loan that is in default.
The bank, which previously said it was for sale, said it has received no offers and that its board will review whether to continue soliciting bids.
Medical scientists are starting to uncover a handful of genes which, if damaged, unleash the chaotic growth of cells that characterizes cancer.
Scientists say the discovery of these genes in recent months is painting a new and startling picture of how cancer develops.
An emerging understanding of the genes is expected to produce an array of new strategies for future cancer treatment and prevention.
That is for the future.
Already, scientists are developing tests based on the newly identified genes that, for the first time, can predict whether an otherwise healthy individual is likely to get cancer.
"It's a super-exciting set of discoveries," says Bert Vogelstein, a Johns Hopkins University researcher who has just found a gene pivotal to the triggering of colon cancer.
"Only a decade ago cancer was a black box about which we knew nothing at the molecular level.
Today, we know that the accumulation of several of these altered genes can initiate a cancer and, then, propel it into a deadly state."
Scientists call the new class of genes tumor-suppressors, or simply anti-cancer genes.
When functioning normally, they make proteins that hold a cell's growth in check.
But if the genes are damaged -- perhaps by radiation, a chemical or through a chance accident in cell division -- their growth-suppressing proteins no longer work, and cells normally under control turn malignant.
The newly identified genes differ from a family of genes discovered in the early 1980s called oncogenes.
Oncogenes must be present for a cell to become malignant, but researchers have found them in normal as well as in cancerous cells, suggesting that oncogenes don't cause cancer by themselves.
In recent months, researchers have come to believe the two types of cancer genes work in concert: An oncogene may turn proliferating cells malignant only after the tumor-suppressor gene has been damaged.
Like all genes, tumor-suppressor genes are inherited in two copies, one from each parent.
Either copy can make the proteins needed to control cell growth, so for cancer to arise, both copies must be impaired.
A person who is born with one defective copy of a suppressor gene, or in whom one copy is damaged early in life, is especially prone to cancer because he need only lose the other copy for a cancer to develop.
Emerging genetic tests will be able to spot such cancer-susceptible individuals, ushering in what some scientists believe is a new age of predictive cancer diagnosis.
Bill and Bonnie Quinlan are among the first beneficiaries of the new findings.
The Dedham, Mass., couple knew even before Bonnie became pregnant in 1987 that any child of theirs had a 50% chance of being at risk for retinoblastoma, an eye cancer that occurs about once every 20,000 births.
Mr. Quinlan, 30 years old, knew he carried a damaged gene, having lost an eye to the rare tumor when he was only two months old -- after his mother had suffered the same fate when she was a baby.
Because of the isolation of the retinoblastoma tumor-suppressor gene, it became possible last January to find out what threat the Quinlan baby faced.
A test using new "genetic probes" showed that little Will Quinlan had not inherited a damaged retinoblastoma supressor gene and, therefore, faced no more risk than other children of developing the rare cancer.
"It made our New Year," says Mr. Quinlan.
This test was the first to predict reliably whether an individual could expect to develop cancer.
Equally important, the initial discovery of the gene that controls retinal cell growth, made by a Boston doctor named Thaddeus Dryja, has opened a field of cancer study, which in recent months has exploded.
"It turns out that studying a tragic but uncommon tumor made possible some fundamental insights about the most basic workings of cancer," says Samuel Broder, director of the National Cancer Institute.
"All this may not be obvious to the public, which is concerned about advances in treatment, but I am convinced this basic research will begin showing results there soon."
To date, scientists have fingered two of these cancer-suppressors.
Dr. Dryja made his retinoblastoma discovery in 1986.
Then last spring, researchers reported finding a gene called p53 which, if impaired, turns healthy colon cells cancerous.
Soon after that report, two other research teams uncovered evidence that the same damaged p53 gene is present in tissue from lung and breast cancers.
Colon, lung and breast cancers are the most common and lethal forms of the disease, collectively killing almost 200,000 Americans a year.
Right now about a dozen laboratories, in the U.S., Canada and Britain, are racing to unmask other suspected tumor-suppressing genes.
They have about seven candidates.
Researchers say the inactivation of tumor-suppressor genes, alone or in combination, appears crucial to the development of such scourges as cancer of the brain, the skin, kidney, prostate, and cervix.
There is evidence that if people inherit defective versions of these genes, they are especially prone to cancer, perhaps explaining, finally, why some cancers seem to haunt certain families.
The story of tumor-suppressor genes goes back to the 1970s, when a pediatrician named Alfred G. Knudson Jr. proposed that retinoblastoma stemmed from two separate genetic defects.
He theorized that in the eye cancer, an infant inherited a damaged copy of a gene from one parent and a normal copy from the other.
The tumor, he suggested, developed when the second, normal copy also was damaged.
But there was no way to prove Dr. Knudson's "two-hit" theory.
Back then, scientists had no way of ferreting out specific genes, but under a microscope they could see the 23 pairs of chromosomes in the cells that contain the genes.
Occasionally, gross chromosome damage was visible.
Dr. Knudson found that some children with the eye cancer had inherited a damaged copy of chromosome No. 13 from a parent who had had the disease.
Under a microscope he could actually see that a bit of chromosome 13 was missing.
He assumed the missing piece contained a gene or genes whose loss had a critical role in setting off the cancer.
But he didn't know which gene or genes had disappeared.
Then, a scientific team led by molecular geneticist Webster Cavenee, then at the University of Utah, found the answer.
The team used a battery of the newly developed "gene probes," snippets of genetic material that can track a gene's presence in a cell.
By analyzing cells extracted from eye tumors, they found defects in the second copy of chromosome 13 in the exact area as in the first copy of the chromosome.
The finding riveted medicine.
It was the first time anyone had showed that the loss of both copies of the same gene could lead to the eruption of a cancer.
"It was extraordinarily satisfying," says Dr. Knudson, now at Fox Chase Cancer Research Center in Philadelphia.
"I was convinced that what was true of retinoblastoma would be true for all cancers."
It was an audacious claim.
But in Baltimore, Dr. Vogelstein, a young molecular biologist at Johns Hopkins Medical School, believed Dr. Knudson was right, and set out to repeat the Cavenee experiment in cells from other cancers.
His was one of two research teams in 1984 to report dual chromosome losses for a rare childhood cancer of the kidney called Wilm's tumor.
Dr. Vogelstein next turned his attention to colon cancer, the second biggest cancer killer in the U.S. after lung cancer.
He believed colon cancer might also arise from multiple "hits" on cancer suppressor genes, because it often seems to develop in stages.
It often is preceded by the development of polyps in the bowel, which in some cases become increasingly malignant in identifiable stages -- progressing from less severe to deadly -- as though a cascade of genetic damage might be occurring.
Dr. Vogelstein and a doctoral student, Eric Fearon, began months of tedious and often frustrating probing of the chromosomes searching for signs of genetic damage.
They began uncovering a confusing variety of genetic deletions, some existing only in benign polyps, others in malignant cells and many in both polyps and malignant cells.
Gradually, a coherent picture of cancer development emerged.
If both copies of a certain gene were knocked out, benign polyps would develop.
If both copies of a second gene were then deleted, the polyps would progress to malignancy.
It was clear that more than one gene had to be damaged for colon cancer to develop.
Their report galvanized other molecular biologists.
"It was the confirming evidence we all needed that {gene} losses were critical to the development of a common tumor," says Ray White at Howard Hughes Medical Institute in Salt Lake City.
But Dr. Vogelstein had yet to nail the identity of the gene that, if damaged, flipped a colon cell into full-blown malignancy.
They focused on chromosome 17.
For months the Johns Hopkins researchers, using gene probes, experimentally crawled down the length of chromosome 17, looking for the smallest common bit of genetic material lost in all tumor cells.
Such a piece of DNA would probably constitute a gene.
When they found it last winter, Dr. Vogelstein was dubious that the search was over.
His doubts stemmed from the fact that several years earlier a Princeton University researcher, Arnold Levine, had found in experiments with mice that a gene called p53 could transform normal cells into cancerous ones.
The deletion Dr. Vogelstein found was in exactly the same spot as p53.
But Mr. Levine had said the p53 gene caused cancer by promoting growth, whereas the Johns Hopkins scientists were looking for a gene that suppressed growth.
Despite that, when the Johns Hopkins scientists compared the gene they had found in the human cancer cells with the Mr. Levine's p53 gene they found the two were identical; it turned out that in Mr. Levine's cancer studies, he had unknowingly been observing a damaged form of p53 -- a cancer-suppressing gene.
The discovery "suddenly puts an obscure gene right in the cockpit of cancer formation," says Robert Weinberg, a leader in cancer-gene research at Whitehead Institute in Cambridge, Mass.
Evidence now is emerging that the p53 suppressor gene is involved in other cancers, too.
Researchers in Edinburgh, Scotland, have found that in 23 of 38 breast tumors, one copy of chromosome 17 was mutated at the spot where gene p53 lies.
The scientists say that since breast cancer often strikes multiple members of certain families, the gene, when inherited in a damaged form, may predispose women to the cancer.
The p53 gene has just been implicated in lung cancer.
In a report out last week, John Minna and colleagues at the National Cancer Institute say that about half the cells taken from lung cancer tissue they tested are missing this gene.
There also are reports from several labs, as yet unpublished, of missing p53 genes in tissue taken from kidney, brain and skin cancers.
At the same time, the Johns Hopkins team and others are rushing to pinpoint other tumor-suppressor genes.
Dr. Vogelstein hopes soon to isolate one on chromosome 18, also involved in colon cancer.
Ray White in Utah and Walter Bodmer, a researcher in Great Britain, are close to finding another gene involved with some types of colon cancer, thought to be on chromosome 5.
Dr. Minna believes people who inherit a defective gene somewhere on one of their two copies of chromosome 3 are especially prone to lung cancer.
Recently, he and others reported that the retinoblastoma suppressor gene may also be involved in some lung cancers, as well as several other more common cancers, too.
Where these discoveries will lead, scientists can only speculate.
Already two major pharmaceutical companies, the Squibb unit of Bristol-Myers Squibb Co. and Hoffmann-La Roche Inc., are collaborating with gene hunters to turn the anticipated cascade of discoveries into predictive tests and, maybe, new therapies.
Some researchers say new cancer drugs to slow or reverse tumor growth may be based on the suppressor proteins normally produced by the genes.
The idea would be to administer to patients the growth-controlling proteins made by healthy versions of the damaged genes.
It may even be possible to replace defective genes with healthy versions, though no one has come close to doing that so far.
In any case, says Dr. Minna of the National Cancer Institute, "We're witnessing the discovery of one of the most important steps in the genesis of cancer.
Many investors give Michael Foods about as much chance of getting it together as Humpty Dumpty.
But now at least there's a glimmer of hope for the stock.
Burger King, which breaks thousands of fresh eggs each morning, is quietly switching over to an alternative egg product made by Michael Foods.
Known as Easy Eggs, the product has disappointed investors.
When the company this month announced lower-than-forecast sales of Easy Eggs, the stock dropped nearly 19%.
Michael won't confirm the identities of any Easy Egg customers, nor will it say much of anything else.
Two Minneapolis shareholder suits in the past month have accused top officers of making "various untrue statements."
These federal-court suits accuse the officers of failing to disclose that Easy Eggs were unlikely to sell briskly enough to justify all of Michael's production capacity.
But at least Burger King has signed on, and says that by year end it won't be using any shell eggs.
The Miami fast-food chain, owned by Grand Metropolitan of Britain, expects to consume roughly 34 million pounds of liquefied eggs annually.
So there is reason to believe that Michael's hopes for a bacteria-free, long-shelf-life egg weren't all hype.
(Easy Eggs are pasteurized in a heat-using process.)
Still, caution is advisable.
A company official says Michael's break-even volume on Easy Eggs is around 60 million pounds a year -- apparently well above current shipments and a far cry from what the company once suggested was a billion-pound market waiting for such a product.
Perhaps to debunk the analysts' talk of over-capacity, Michael today will take some of the skeptics on a tour of its new Gaylord, Minn., plant.
There has been no announcement of the Burger King arrangement by either party, possibly for fear that McDonald's and other fast-food rivals would seize on it in scornful advertising.
But Burger King operators independently confirm using Michael's product.
Other institutional users reportedly include Marriott, which is moving away from fresh eggs on a region-by-region basis.
The extent of Marriott's use isn't known, and Marriott officials couldn't be reached for comment.
Michael Foods has attracted a good many short-sellers, the people who sell borrowed shares in a bet that a stock price will drop and allow the return of cheaper shares to the lender.
Many analysts question management's credibility.
"The stock, in my opinion, is going to go lower, not only because of disappointing earnings but {because} the credibility gap is certainly not closing," says L. Craig Carver of Dain Bosworth.
Mr. Carver says that at a recent Dain-sponsored conference in New York, he asked Michael's chief executive officer if the fourth quarter would be down.
The CEO, Richard G. Olson, replied "yes," but wouldn't elaborate.
(The company didn't put out a public announcement.
A spokesman said later that Mr. Olson was being "conservative" in his estimate.
But the spokesman added that while Michael will earn less than last year's $1.20 a share, it thinks Street estimates of $1 or so are low.)
Analyst Robin Young of John Kinnard & Co., Minneapolis, calls himself "the last remaining bull on the stock."
He argues that Michael Foods is misunderstood: "This is a growth company in the packaged food industry -- a rare breed, like finding a white rhino."
Earnings aren't keeping pace, he says, because of heavy investments in the egg technologies and drought-related costs in its potato business.
Mr. Carver, however, believes the company's egg product won't help the bottom line in the short run, even though it "makes sense -- it's more convenient" and justifies its price, which is higher than shell eggs, because of health and sanitation concerns.
Prospective competition is one problem.
Last week a closely held New Jersey concern, Papetti High-Grade Egg Products Co., rolled out an aseptically packaged liquefied item called Table Ready.
Company President Steve Papetti says Marriott will be among his clients as well.
Michael shares closed at 13 3/4 yesterday in national over-the-counter trading.
Says New York-based short seller Mark Cohodes, "In my mind this is a $7 stock."
Michael late yesterday announced a $3.8 million stock buy-back program.
Michael, which also processes potatoes, still relies on spuds for about a fourth of its sales and nearly half its pretax profit.
But dry growing conditions in the Red River Valley of Minnesota and North Dakota are pushing spot prices of potatoes beyond what Michael contracted to pay last spring.
Company lawyers recently sent letters to growers saying that Michael "would take very seriously any effort . . . to divert its contracted-for potatoes to other outlets."
Still, analysts believe that profit margins in the potato business will be down again this year.
Pierre Peladeau, a Canadian newspaper publisher little-known in the U.S., figures to become a big player in North American printing -- and his ambitions don't end there.
Yesterday, Quebecor Inc., a Montreal printing, publishing and forest-products company 53%-owned by Mr. Peladeau, agreed to acquire Maxwell Communication Corp.'s U.S. printing subsidiary, Maxwell Graphics Inc., for $500 million in cash and securities.
The purchase, expected to be completed by year end, will make Quebecor the second-largest commercial printer in North America, behind only R.R. Donnelley & Sons Co., Chicago.
The printing customers that Quebecor will gain through Maxwell Graphics include the Sunday newspaper supplement Parade, Time, Sports Illustrated and TV Guide.
But the transaction is just Mr. Peladeau's latest step in a larger design: to build Quebecor through acquisitions into an integrated paper, publishing and printing concern with a reach throughout North America.
He already has achieved vertical integration on a limited scale: Quebecor can put a weekly newspaper on almost any Quebec doorstep without using outside help, from chopping down the tree to making the newsprint to flinging it up onto the porch.
Analysts say Quebecor's purchase is part of a trend toward consolidation in the North American printing industry.
Along with Donnelley, says Jacques Massicotte, an analyst with Nesbitt Thomson Deacon Inc. in Montreal, "Quebecor has positioned itself as one of the two key players."
He adds: "I think this is a great strategic move for Quebecor.
They are buying an operation that is running well."
Mr. Peladeau says he isn't trying to catch up to Donnelley, which has annual sales of over $3 billion.
"Size doesn't matter," Mr. Peladeau says.
"What counts is the bottom line."
Some of Mr. Peladeau's ventures, including an earlier push into the U.S. market, haven't paid off on the bottom line.
Quebecor started the Philadelphia Journal, a daily tabloid, in 1977 and closed it three years later.
The venture cost Quebecor $12 million, Mr. Peladeau says.
More recently, some former Quebecor executives started their own printing company, specializing in printing and distributing advertising circulars.
Quebecor still lags in the Quebec circulars market, while Mr. Peladeau's former employees are expanding across Canada.
Mr. Peladeau took his first big gamble 25 years ago, when he took advantage of a strike at La Presse, then Montreal's dominant French-language newspaper, to launch the Journal de Montreal.
The tabloid's circulation soared to 80,000, but plunged to under 10,000 when the La Presse strike ended.
Still, Mr. Peladeau stuck with the venture.
Now the Journal, flush with ads and hugely profitable, is even with La Presse in weekend circulation and outsells it 3 to 2 every weekday.
Mr. Peladeau has never made any apologies for publishing the tabloid, a brash mix of crime and sports.
"I've read Balzac," he answers critics.
"It's tabloid news from A to Z."
Quebecor also publishes a second tabloid in Montreal, the struggling 18-month-old Montreal Daily News; dailies in Quebec City and Winnipeg, Manitoba; and dozens of weeklies covering most of Quebec.
A series of recent acquisitions made it the dominant magazine publisher in Quebec.
After a recent merger, it is also the only province-wide distributor of magazines and newspapers in Quebec.
Finally, with Maxwell Communication, the company controls 54% of Donohue Inc., a Quebec City pulp and paper concern.
In yesterday's accord, Quebecor agreed to pay $400 million in cash for Maxwell Graphics, and to give Maxwell Communication a 20% stake, valued at $100 million, in Quebecor's new printing subsidiary.
The new, as yet unnamed, subsidiary will combine Quebecor's existing printing unit and Maxwell Graphics.
It will have 61 plants from coast to coast and $1.5 billion in annual sales.
Quebecor will own 57.5% of the new subsidiary.
Caisse de Depot et Placement, the Quebec government pension-fund agency, will pay $112.5 million for the remaining 22.5% stake in the printing operation.
Pierre-Karl Peladeau, the founder's son and the executive in charge of the acquisition, says Quebecor hasn't decided how it will finance its share of the purchase, but he says it most likely will use debt.
The Maxwell deal is Quebecor's second big printing acquisition in just over a year.
Last October, Quebecor bought 23 Canadian printing plants from BCE Inc., a Montreal telecommunications, manufacturing, energy and real estate company.
That purchase doubled Quebecor's annual printing revenue to $750 million.
Maxwell's sale of its U.S. printing unit was expected, the last major business to be disposed of in a major reshuffling of assets.
According to its most recent annual report, covering the 15 months ended March 31, Maxwell Communication bought $3.85 billion in assets -- including Macmillan Inc. and Official Airlines Guides -- and sold $2 billion in non-strategic businesses.
Now, Maxwell founder Robert Maxwell says he has an appetite for new acquisitions in the U.S., adding that he could spend "a good deal more" than $1 billion on another U.S. purchase.
In London trading yesterday, Maxwell Communication shares rose nine pence, to 216 pence ($3.41).
In Montreal, Quebecor's multiple voting Class A stock closed at C$16.375 (US$13.94), down 12.5 Canadian cents.
Quebecor Class B stock closed at C$15.375, up 62.5 Canadian cents.
Craig Forman in London contributed to this article.
G.D. Searle & Co. said the Food and Drug Administration approved the sale of Kerlone, a hypertension drug developed by a joint venture between Searle and a French concern.
Searle, a unit of Monsanto Co., said the "beta-blocker" high-blood-pressure drug Kerlone is the first product to reach the market through Lorex Pharmaceuticals, the U.S. company jointly owned by Searle and Synthelabo, a French pharmaceutical concern owned by France's L'Oreal S.A.
The U.S. Equal Employment Opportunity Commission sued New York state for age discrimination against appointed state judges.
The suit, filed in federal court in Manhattan, charges that New York's mandatory retirement age of 76 violates federal law.
Separately, the commission intervened in a Connecticut state judge's age-bias suit in federal court in New Haven.
The commission's filing in that case challenges Connecticut's mandatory retirement age of 70 for appointed judges.
The New York suit was filed on behalf of Justice Isaac Rubin, whose appointment to the state appellate division expires at year end, and all other judges hurt by the alleged age discrimination.
The suit, assigned to federal Judge Kimba Wood, seeks a permanent injunction, back pay for judges who have been forced to retire, reinstatement of retired judges and "other affirmative relief necessary to eradicate the effects of (New York's) unlawful employment practices."
Justice Rubin, a state judge since 1969, said the mandatory-retirement age hurts the court system because it deprives the state of experienced judges still capable of serving on the bench.
"The issue isn't age -- age is just a number.
The issue is one of a judge's experience, his competence and his physical ability to serve on the bench," Justice Rubin said.
"I've had no problems performing my duties and responsibilities."
Because Justice Rubin turned 76 on May 9, he isn't eligible to be reappointed to the bench at the end of the year.
The suit's impact on New York may be narrow, however.
Most New York judges are elected, and the federal age-discrimination law doesn't apply to elected officials, said James L. Lee, regional attorney for the EEOC in New York.
Under New York law, elected judges must retire at age 70, but then can be appointed to two-year terms until they reach 76.
A spokeswoman for the state's Office of Court Administration declined to comment on the suit.
But she said the state currently has 35 appointed judges who are over 70.
In Connecticut, however, most state judges are appointed by the governor and approved by the state legislature.
The parties in the Connecticut case have agreed to stay proceedings pending the appeal of another EEOC age-bias case against Vermont.
In the Vermont case, a federal judge ruled that the state's mandatory age of 70 for appointed judges was illegal; Vermont's appeal of that decision is pending before the U.S. Second Circuit Court of Appeals in Manhattan.
Aaron Ment, Connecticut's chief court administrator, declined to comment on the suit and the EEOC's intervention.
He said the state has 165 appointed judges and 15 "trial referees," who are former judges over age 70 and serve a restricted role on the bench.
ORGANIZED CRIME Strike Forces likely to be abolished next month.
U.S. Attorney General Dick Thornburgh's plan to dissolve the 14 regional organized-crime strike forces is expected to go into effect next month, despite the opposition of Democratic congressional leaders and lawyers in the special units.
The units are autonomous from U.S. attorneys' offices and focus exclusively on prosecuting organized-crime cases.
In February, Mr. Thornburgh announced his plan to abolish the units.
He says the strike-force lawyers will work more efficiently under the supervision of U.S. attorneys.
Mr. Thornburgh will be free to disband the strike forces after Congress approves a $479 million appropriation for federal law-enforcement and drug-interdiction agencies, according to David Runkel, a Justice Department spokesman.
The bill is expected to pass in Congress next month.
Congress temporarily halted Mr. Thornburgh's effort with an appropriation resolution that prohibited him from using budgeted funds to implement his plan.
Opponents say Mr. Thornburgh's plan will needlessly break up longtime, tightly knit crime-fighting units that have successfully prosecuted major organized-crime figures.
They predict that organized-crime activity will increase once the units are dissolved and their responsibilities transferred to U.S. attorneys' offices.
Some former strike-force personnel say the units have already begun to break up.
The Eastern District unit in Brooklyn, N.Y., lost seven of its 15 attorneys this year partly because the lawyers were troubled by the proposed reorganization, says Laura A. Brevetti, who left the strike force to join Morrison Cohen Singer & Weinstein, a New York law firm.
"Those who have left have expressed an opinion that the strike force should continue," Ms. Brevetti says.
But Mr. Runkel contends there has been no exodus of strike-force lawyers.
He says 27 lawyers have left and 21 have been hired since Mr. Thornburgh announced his plan.
At the time the plan was announced, there were 135 lawyers.
Some congressional leaders intend to continue to fight for independent strike forces.
A spokesman for Sen. Edward M. Kennedy (D., Mass.) says Mr. Thornburgh would be required to reinstate the units next year if an proposed omnibus crime bill is passed.
Among other things, the bill calls for a reorganization of the Justice Department.
The Senate is expected to consider the bill shortly, says the senator's spokesman.
Mr. Runkel says he doubts Mr. Kennedy can muster enough congressional support to reorganize the Justice Department.
"We will vigorously oppose the bill," he says.
"I don't think (the reorganization is) going to happen."
WHITMAN & RANSOM recruits lawyers from disbanding firm:
The 204-lawyer New York firm will bring in at least 12 partners and a not yet determined number of associates from Golenbock & Barell, which will dissolve Dec. 31.
Golenbock, with 35 lawyers, has lost several partners during the past year.
Some Golenbock lawyers won't be invited to join Whitman & Ransom, according to partners at both firms.
Whitman & Ransom managing partner Maged F. Riad said the Golenbock recruits will enhance the firm's corporate and litigation departments.
SHORT SKIRTS not welcome in Texas court:
Shelly Hancock, a male county court judge in Houston, refused to let a woman plead guilty to a drunk-driving charge because her skirt stopped three inches above her knees.
The woman appeared in court Thursday to enter her plea, but when she started to approach the bench, she was stopped by Judge Hancock.
He told the woman's lawyer, Victor Blaine, that the short skirt was inappropriate for a court appearance.
Despite Mr. Blaine's protests, the judge rescheduled her case for Nov. 27.
Kelly Siegler, an assistant district attorney who was in the courtroom, disputed suggestions the action was sexist, saying she had seen Judge Hancock turn away male defendants dressed in shorts, tank tops or muscle shirts "many times."
Judge Hancock didn't return phone calls.
Warner Communications Inc. and Sony Corp. resumed settlement talks on their legal battle over Hollywood producers Peter Guber and Jon Peters, but continued to level strong accusations at each other in legal documents.
Warner has filed a $1 billion breach of contract suit in Los Angeles Superior Court against Sony and the Guber-Peters duo, who in turn are countersuing Warner for trying to interfere in Sony's acquisition of Columbia Pictures Entertainment Inc. and Guber Peters Entertainment Co. in two transactions valued at over $5 billion.
Although settlement talks had been dropped, attorneys for the two sides apparently began talking again yesterday in an attempt to settle the matter before Thursday, when a judge is expected to rule on Warner's request for an injunction that would block the two producers from taking over the management of Columbia.
Yesterday, in documents filed in connection with that case, Warner accused Sony officials of falsely claiming that they never read the five-year contract requiring the two producers to make movies exclusively for Columbia, citing Securities and Exchange Commission filings made by Sony that described the contracts.
Warner was referring to documents filed last week in which Sony Corp. of America Vice Chairman Michael Schulof and Walter Yetnikoff, president of its CBS Records unit, said they had taken Mr. Guber and Mr. Peters at their word when the producers told them that getting out of the contract would be no problem because of a previous oral agreement.
Wayne Smith, an attorney at Gibson, Dunn & Crutcher in Los Angeles representing Sony, said the Sony executives hadn't seen the contract because "it wasn't relevant once Guber and Peters told them Warner would let them terminate it at any time."
Mr. Smith said statements about the contract made in SEC filings were made by attorneys who did have access to the contracts but who weren't part of the negotiations between Sony and the duo.
Warner executives also filed new sworn affidavits denying claims by Messrs. Guber and Peters that the two sides had an oral agreement that enabled the producers to terminate their contract with Warner should the opportunity to run a major studio come up.
But Mr. Smith said Sony intends to prove that the oral agreement did in fact exist, and that even the existing written contract doesn't preclude the producers from taking executive posts at another studio.
Warner described as "nonsense" yesterday Sony's assertions in prior court filings that Mr. Guber and Mr. Peters could in theory run Columbia while still fulfilling their contract to produce movies for Warner.
Such a dual role would be "impractical and unethical," Warner said, adding, "that concept is as silly as suggesting that the head coach of the Los Angeles Dodgers could simultaneously be general manager of the San Francisco Giants."
Warner, which is in the process of being acquired by New York-based Time Warner Inc., also said it paid the two producers a fixed annual salary of $3 million.
Dataproducts Inc. said it filed a lawsuit in Delaware Chancery Court to block a tender offer by DPC Acquisition Partners, alleging that the hostile offer violates a standstill agreement between the two concerns.
DPC, an investor group led by New York-based Crescott Investment Associates, had itself filed a suit in state court in Los Angeles seeking to nullify the agreement.
Earlier this year, Dataproducts had rejected a $15 a share offer from DPC, saying it wasn't adequately financed.
DPC last week launched a new, $10-a-share offer for the Woodland Hills, Calif.-based computer printer maker.
DPC said it couldn't comment on the suit.
Boeing Co.'s third-quarter profit leaped 68%, but Wall Street's attention was focused on the picket line, not the bottom line.
In fact, the earnings report unfolded as representatives of the world's No. 1 jet maker and the striking Machinists union came back to the negotiating table for their first meeting in two weeks.
Doug Hammond, the federal mediator in Seattle, where Boeing is based, said the parties will continue to sit down daily until a new settlement proposal emerges or the talks break off again.
Despite the progress, Boeing indicated that the work stoppage, now in its 27th day, will have "a serious adverse impact" on the current quarter.
For the third quarter, net rose to $242 million, or $1.05 a share, from $144 million, or 63 cents a share.
Sales climbed 71% to $6.36 billion from $3.72 billion as the company capitalized on the ravenous global demand for commercial airliners.
Because it's impossible to gauge how long the walkout by 55,000 Machinists rank and file will last, the precise impact on Boeing's sales, earnings, cash flow and short-term investment position couldn't be determined.
The investment community, however, strongly believes that the strike will be settled before there is any lasting effect on either Boeing or its work force.
The company's total firm backlog of unfilled orders at Sept. 30 stood at a mighty $69.1 billion, compared with $53.6 billion at the end of
Although the company could see fourth-quarter revenue shrink by nearly $5 billion if it isn't able to deliver any more planes this year, those dollars actually would just be deferred until 1990.
And the company is certain to get out some aircraft with just supervisors and other non-striking employees on hand.
Before the union rejected the company's offer and the strike was launched with the graveyard shift of Oct. 4, Boeing had been counting on turning 96 aircraft out the door in the present period.
That included 21 of the company's 747-400 jumbo jets, its most successful product.
"It's not a pretty picture," said David Smith, an analyst with Raymond James & Associates.
"But it would just mean a great first and second quarter next year."
Phillip Brannon of Merrill Lynch Capital Markets added: "You don't want to minimize this and say nobody is looking at it.
But the strike hasn't gone on long enough for Boeing to lose business in any real sense."
That's the primary reason the company's share price has held up so well when, in Mr. Smith's words, "most companies would have unraveled" by now.
In New York Stock Exchange composite trading, Boeing closed yesterday at $54.50 a share, off a scant 12.5 cents.
Still, Boeing went through its normal verbal gymnastics and played up the downside.
In a statement, Chairman Frank Shrontz asserted that the company "faces significant challenges and risks," on both its commercial and government contracts.
For instance, he noted that spending on Pentagon programs is shrinking, and Boeing is either the prime contractor or a major supplier on many important military projects, including the B-2 Stealth bomber, the V-22 Osprey tilt-rotor aircraft and the Air Force's next-generation tactical fighter.
Because of cost overruns on fixed-price military work, Mr. Shrontz said, the company's defense business will record "a significant loss" in 1989.
Moreover, Mr. Shrontz added, production-rate increases that have been implemented on the 737, 747, 757 and 767 programs have resulted in "serious work force skill-dilution problems."
Suppliers and subcontractors are experiencing heightened pressure to support delivery schedules.
And, of course, there's the unsteady labor situation.
Besides the Machinists pact, accords representing 30,000 of the company's engineering and technical employees in the Puget Sound and Wichita, Kan., areas expire in early December.
Also, a contract with the United Auto Workers at the company's helicopter plant in Philadelphia expired Oct. 15.
This contract, covering about 3,000 hourly production and maintenance workers, is being extended on a day-to-day basis.
The Machinists rejected a proposal featuring a 10% base wage increase over the life of the three-year contract, plus bonuses of 8% the first year and 3% the second.
On top of that, Boeing would make cost-of-living adjustments projected to be 5% for each year of the contract.
The union, though, has called the offer "insulting."
The company reiterated yesterday that it's willing to reconfigure the package, but not add to the substance of it.
For the nine months, Boeing's net increased 36% to $598 million, or $2.60 a share, from $440 million, or $1.92 a share.
Sales soared 28% to $15.43 billion from $12.09 billion.
In a separate matter, the Justice Department yesterday said Boeing agreed to pay the government $11 million to settle claims that the company provided inaccurate cost information to the Air Force while negotiating contracts to replace the aluminum skins on the KC-135 tanker aircraft.
The settlement relates to four contracts negotiated from 1982 to 1985, prosecutors said.
They added that the settlement is the culmination of a 2 1/2-year investigation into the company's aluminum pricing practices in connection with KC-135s.
A Boeing spokesman responded: "All along the company has said there was no grounds for criminal prosecution.
That was borne out by the Justice Department's decision" to settle the case.
Foothills Pipe Lines Ltd. filed an application with Canadian regulators to build a 4.4 billion Canadian dollar (US$3.74 billion) pipeline to transport natural gas from Canada's Arctic to U.S. markets beginning in
The application by Foothills, owned by Calgary-based Nova Corp. of Alberta and Westcoast Energy Inc. of Vancouver, Canada, is expected to kick off what could be a contentious battle for the right to transport vast quantities of gas to southern markets from still-undeveloped fields in Canada's Mackenzie River delta.
"This is a pre-emptive strike by Foothills," said Rick Hillary, natural gas manager of the Calgary-based Independent Petroleum Association of Canada, an industry group.
"Foothills wants to make it clear to other pipeline companies that it's on first insofar as transporting gas from the Arctic to southern markets," Mr. Hillary said.
At least two rival applications are expected to emerge in coming months, including one from TransCanada PipeLines Ltd., Canada's largest natural gas pipeline operator.
Another is expected from a consortium of oil and gas producers who won conditional approval this month from Canada's National Energy Board to export about 9.2 trillion cubic feet of Mackenzie delta gas to the U.S. starting in 1996.
The producers include Shell Canada Ltd., a unit of Royal Dutch/Shell Group; Esso Resources Canada Ltd., a unit of Imperial Oil Ltd., which is 71%-owned by Exxon Corp.; and Gulf Canada Resources Ltd., a unit of Olympia & York Developments Ltd.
"The {National Energy Board} approval of the exports just waved the starting flag for the next stage, the rush to build facilities to transport the gas," said Bill Koerner, an analyst with Brady & Berliner, a Washington, D.C., law firm.
Foothills' main rival to build a Mackenzie Delta pipeline is likely to be TransCanada PipeLines.
The Toronto-based company, together with Tenneco Inc. of Houston, has had an incomplete proposal filed with Canadian regulators since 1984 that it is now updating.
Like Foothills, TransCanada's Polar Gas consortium plans to build a pipeline directly south from the Mackenzie River delta in Canada's western Arctic with an initial capacity to transport 1.2 billion cubic feet of gas daily.
Industry sources said they expect a fierce battle to emerge between TransCanada, which has a monopoly on Canadian gas transportation east of Alberta, and Nova and Westcoast, which control the pipelines within and running west of Alberta, respectively.
"This is virgin territory, unclaimed, and it's going to be nasty," said one observer, who asked not to be named.
"Neither is going to back down easily."
TransCanada declined to comment on the Foothills application.
But last week Gerald Maier, president and chief executive officer of TransCanada, said the company "intends to be a party to any transportation system that goes up there" and that it would consider joint ventures with other players to ensure it has a role.
A number of issues still need to be resolved before Canadian regulators give any project the final go-ahead.
First, the price of natural gas will have to almost double.
Kent Jesperson, president of Foothills, said the company believes the project would be viable if gas prices reach US$3.25 a thousand cubic feet by 1995, in current dollars, up from a current spot price of about US$1.50.
Mr. Jesperson's US$3.25 estimate is somewhat below the $3.39 floor price that Calgary-based consulting firm Paul Ziff & Co. recently said would be needed for Mackenzie delta gas producers to see a return on their investment.
U.S. gas buyers must also decide whether they want to enter firm contracts for Mackenzie delta gas or develop Alaskan reserves in the Prudhoe Bay area first, a project that has been on hold for more than a decade.
Robert Pierce, chairman and chief executive of Foothills, said it's too early to say whether Alaskan or Mackenzie delta gas would flow to market first.
But Foothills said it plans to seek regulatory approval to build an alternative line, the Alaska Natural Gas Transportation System further north toward Alaska.
If that option is favored by gas buyers and regulators, Foothills said it would build another smaller pipeline connecting Mackenzie Delta reserves to the Alaska mainline.
It's also likely that regulators will try to forge some kind of consensus between the would-be pipeline builders before undertaking any hearings into rival projects.
Douglas Stoneman, vice president of Shell Canada, noted that producers would prefer to avoid hearings into competing proposals that would lengthen the regulatory review process and bog down development.
Interprovincial Pipe Line Co., an oil pipeline operator rumored to be mulling a gas pipeline proposal of its own, said that isn't in the cards.
Instead, Richard Haskayne, president and chief executive of Interprovincial's Calgary-based parent, Interhome Energy Inc., said the company would prefer to work with other "interested parties" on a joint proposal.
As for Foothills' pre-emptive bid, Mr. Haskayne said, "If they think it gives them some kind of priority position, well, that's their strategy.
The Federal Reserve Board said it is delaying approval of First Union Corp.'s proposed $849 million acquisition of Florida National Banks of Florida Inc., pending the outcome of an examination into First Union's lending practices in low-income neighborhoods.
The decision reflects the Fed's tougher stance on enforcing the Community Reinvestment Act, a federal law passed in 1977 to help low-income residents obtain loans.
In recent years, unions and community groups have won big commitments from banks to make low-interest loans in certain neighborhoods by threatening to hold up proposed acquisitions with protests to the Fed about reinvestment act compliance.
Few petitions, however, have actually delayed or scuttled mergers.
The current dispute involves allegations that Charlotte, N.C.-based First Union hasn't lived up to its responsibilities under the reinvestment act.
During the summer, Legal Services Corp., a Florida legal aid group, filed a petition with the Fed on behalf of residents in four Florida counties.
The petition challenged First Union's lending record in the state, saying that the bank-holding company had "shut itself off from contact with the low-income community and is redlining almost every black neighborhood that it serves in the state."
In deferring action on the merger, the Fed said, "The Board does not believe that there is sufficient information in the record at this time to allow {it} to reach a final conclusion on First Union's record of helping to meet the credit needs of the communities it serves in Florida and North Carolina, including low to moderate-income neighborhoods in those communities."
The Fed said the Comptroller of the Currency is expected to begin a Community Reinvestment Act examination of First Union's Florida and North Carolina banking units in the next two weeks.
First Union, with assets of about $32 billion, said it was disappointed by the delay but said it would cooperate with regulatory authorities.
The bank added that it believes the review will "demonstrate that First Union is in compliance with the requirements of the Community Reinvestment Act."
The company has already missed its initial Oct. 1 target date for completing the merger.
It said yesterday it still expects to close the acquisition later this year or early in 1990.
Florida National, if acquired, would almost double First Union's banking franchise in Florida to $17 billion in assets.
That would make it the second-largest bank, after Barnett Banks Inc., in a state widely considered to be the most lucrative banking market in the country.
In New York Stock Exchange composite trading yesterday, First Union shares rose 25 cents to $23.
Florida National stock closed unchanged at $25.875 in national over-the-counter trading.
Earlier this year, the Fed denied an application by Continental Bank Corp. to purchase Grand Canyon State Bank in Scottsdale, Ariz., on grounds that Continental hadn't fully complied with the Community Reinvestment Act.
At the time, the Fed said the denial, the first ever on such grounds, signaled the agency's new emphasis on the Community Reinvestment Act.
Eastern Airlines' creditors committee backed off a move to come up with its own alternative proposals to the carrier's bankruptcy reorganization plans, according to sources familiar with the committee.
In a meeting in New York yesterday, the committee put on hold instructions it gave two weeks ago to its experts to explore other options for Eastern's future, the sources said.
The consultants had been working to finish a report this week.
That means Eastern, a unit of Texas Air Corp. of Houston, can go forward with its pitch for creditor approval as early as today, when it is expected to deliver a revised reorganization plan to the committee.
The committee intends to meet next week to make a recommendation on the new plan.
In another development yesterday, creditors were told that $40 million they had expected to become available for implementing a reorganization may not materialize, according to one source.
Texas Air has run into difficulty reselling about $20 million of debt securities because of problems in the junk bond market, the person said.
And plans to raise another $20 million through changes to an insurance policy have hit a snag, the source said.
An Eastern spokesman said "the $40 million will have no effect whatsoever on the asset structure of Eastern's plan.
Forty million in the total scheme of things is not that significant."
It is unclear what caused the creditors to do an about-face on exploring alternatives to Eastern's new reorganization plan.
However, since Eastern first filed for Chapter 11 protection March 9, it has consistently promised to pay creditors 100 cents on the dollar.
Because the carrier is still pledging to do that, some committee members successfully argued that there's little reason yet to explore a different plan, according to one person familiar with the creditors' position.
Earlier this month the accounting firm of Ernst & Young and the securities firm of Goldman, Sachs & Co., the experts hired by the creditors, contended that Eastern would have difficulty meeting earnings targets the airline was projecting.
Ernst & Young said Eastern's plan would miss projections by $100 million.
Goldman said Eastern would miss the same mark by at least $120 million.
The consultants maintained Eastern wouldn't generate the cash it needs and would have to issue new debt to meet its targets under the plan.
Eastern at the time disputed those assessments and called the experts' report "completely off base."
Yesterday, Joel Zweibel, an attorney for Eastern's creditors committee, declined to comment on whether the experts had ever been instructed to look at other choices and whether they now were asked not to.
He said only that the committee has not yet taken any position on Eastern's reorganization plan and that the two sides were still negotiating.
"In every case, people would like to see a consentual plan," he said.
Eastern and its creditors agreed in July on a reorganization plan that called for the carrier to sell off $1.8 billion in assets and to emerge from Chapter 11 status in late 1989 at two-thirds its former size.
Eastern eventually decided not to sell off a major chunk, its South American routes, which were valued at $400 million.
Such a change meant the reorganization plan the creditors had agreed on was no longer valid, and the two sides had to begin negotiating again.
Eastern has publicly stated it is exceeding its goals for getting back into operation and has predicted it would emerge from Chapter 11 proceedings early next year, operating more flights than it originally had scheduled.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
New York City --
$813.4 million of general obligation bonds, Fiscal 1990 Series C and D, including $757.4 million of tax-exempt bonds and $56 million of taxable bonds, tentatively priced by a Goldman Sachs & Co. group.
Yields for tax-exempt bonds range from 6 1/2% in 1990 to 7.88% in 2003-2005.
Yields for taxable bonds range from 9 1/8% in 1994 to 9.90% in 2009 and 2010.
The bonds are all rated single-A by Moody's Investors Service Inc.
The underwriters expect a single-A-minus rating from Standard & Poor's Corp., which has the issue under review.
Collateralized Mortgage Securities Corp. --
$150 million of Remic mortgage securities offered in 12 classes by First Boston Corp.
The offering, Series 1989-3, is by a company established by First Boston for issuing Remics and other derivative mortgage securities.
It is backed by Government National Mortgage Association 9 1/2% securities with a weighted average remaining term to maturity of 29 years and being offered at market prices.
Beneficial Corp. --
$248.3 million of securities backed by home-equity loans through Merrill Lynch Capital Markets.
The offering, with an expected average life of 3.2 years, will float monthly at 20 basis points above the rate on an index of 30-day double-A-rated commercial paper, which now yields about 8.50%.
The issue has an expected final maturity date of 1998.
The offering is rated triple-A by Moody's and S&P, based on the quality of the underlying home equity loans and a letter of credit covering 10% of the deal from Union Bank of Switzerland.
The offering is being made through BCI Home Equity Loan Asset-Backed Certificates, Series 1989-1.
Rochester Community Savings Bank --
$200 million of 8.85% certificates backed by automobile loans priced to yield 8.99% via First Boston Corp.
The issue, through RCSB 1989-A Grantor Trust, was priced at a yield spread of 100 basis points above the Treasury 7 3/4% note due July 1991.
The offering has an expected average life of 1.7 years and a final maturity date of May 15, 1995.
The issue is rated triple-A by Moody's, based on the quality of the underlying auto loans and a letter of credit covering 13% of the deal from Credit Suisse.
South Australian Government Finance Authority (agency) --
125 million Australian dollars of zero-coupon Eurobonds due Dec. 12, 1994, priced at 50.9375 to yield 15.06% less fees via Hambros Bank Ltd.
Guaranteed by the South Australian Treasury.
Fees 1 3/8.
Government Insurance Office of New South Wales (agency) --
A$50 million of 17 1/2% Eurobonds due Dec. 4, 1991, priced at 101.95 to yield 17.06 less fees via Westpac Banking Corp.
Fees 1 1/4.
Swedish Export Credit Corp. (Sweden) --
100 million Swiss francs of 6 1/8% privately placed notes due Sept. 30, 1996, priced at 100 3/4 to yield 5.99% via Citicorp Investment Bank Switzerland.
Call from Sept. 30, 1993, at 100 3/16, declining by 1/16 point a year to to par.
Fees 1 3/4.
West German insurance giant Allianz AG entered the takeover battle between France's Cie. Financiere de Paribas and Cie. de Navigation Mixte.
Allianz said it won French government approval to buy as much as one-third of Navigation Mixte, a diversified financial, transport and food holding company.
The move comes a week after Paribas announced that it was preparing to bid for 66.7% control of Navigation Mixte.
Munich-based Allianz's brief explanatory statement said it is acting to protect its own interests as a shareholder of Navigation Mixte.
That would be a blow to both Paribas and Navigation Mixte.
Each had claimed Allianz, Europe's largest insurance company, as a tacit ally.
The Allianz statement also reinforced the belief that the takeover battle could be a long one.
It led to broad market speculation that Paribas now will sweeten its bid, which is expected to be formally launched later this week, after approval from French government regulators.
Allianz's entry reflects the increasing eagerness of West German companies, looking ahead to the reduction in European Community internal barriers in 1992, to get involved in what until now were considered internal French affairs.
Deutsche Bank, Dresdner Bank and Commerzbank all also have expressed eagerness to expand in France before 1992.
Dresdner Bank this month moved to acquire Banque Internationale des Placements, a small French merchant bank that Deutsche Bank had looked at and passed over.
Commerzbank had hoped to buy a stake in Credit Lyonnais, until the Socialists returned to government last year and canceled plans to privatize the large French bank.
Deutsche Bank has actively sought a French acquisition for at least two years.
Lately, analysts say, Deutsche Bank has shocked some in the French financial community by indicating it wants a strong bank with a large number of branches.
"We are still looking," said a Deutsche Bank spokesman.
"The banks we think would fit into our concept are either government-owned or not for sale, though Deutsche Bank would be able to pay a good price."
While Allianz officials weren't willing to comment in any detail on their plans, they said Allianz currently holds between 5% and 10% of Navigation Mixte, an apparent increase from the 5% stake that Navigation Mixte officials had earlier announced.
Paris market sources said they believed Allianz was buying yesterday morning, and Navigation Mixte moved up 108 francs ($17.19) to close at 1,908 francs in heavy trading.
It was the first day of trading following the suspension of Navigation Mixte shares last Monday, when Paribas announced its plan to pay 1,850 francs for each Navigation Mixte share.
Allianz also holds a 50% stake in Navigation Mixte's insurance subsidiary, one of France's largest insurance groups, which it bought for about 6.5 billion francs just before Paribas launched its bid.
Navigation Mixte holds the remaining 50%.
Allianz said in its statement that it was acting to protect that interest, which ties it to Navigation Mixte as a partner.
Allianz's statement stressed the company's previously announced position that Paribas's offer price is too low.
Allianz also suggested, without saying so directly, that it regrets that Paribas isn't bidding for all of Navigation Mixte's shares.
The problem here, analysts say, is that if Paribas wins its 66.7%, remaining Navigation Mixte shares will fall in value.
That displeases many current holders, such as Allianz, which couldn't be sure of selling all their shares if they tendered to Paribas.
The Allianz statement led to speculation that Allianz eventually could sell to Paribas.
That would be bad news for Navigation Mixte's current management, which was counting on Allianz to help fend off Paribas.
Allianz didn't say whom, if anyone, it will support.
It said simply that it will boost its Navigation Mixte stake as it sees fit over the coming days to protect itself, as long as it has French regulatory officials' approval.
Paribas currently intends to offer 1,850 francs a share for Navigation Mixte shares that receive full dividends this year.
It is to offer 1,800 francs for shares created on July 1, which receive partial dividends.
Alternatively, it would offer to swap three Paribas shares for one Navigation Mixte share.
Paribas already holds about 18.7% of Navigation Mixte, and the acquisition of the additional 48% would cost it about 11 billion francs under its current bid.
The bid values Navigation Mixte at around 23 billion francs, depending on how many holders of Navigation Mixte warrants exchange them for shares before the bid expires.
Penn Central Corp., Cincinnati, said it agreed in principle to acquire Noranda Inc.'s Carol Cable Co. unit for $177 million.
The company said Carol Cable, based in Pawtucket, R.I., is a leading supplier of electrical and electronic wire and cable for the distributor, retail and original equipment manufacturer markets.
Carol Cable, which operates 12 manufacturing plants, had operating profit of $11.7 million on sales of $153.3 million for the first six months of this year and operating profit of $25.6 million on sales of $294.6 million for all of 1988.
The maker of telecommunications and defense equipment said Carol Cable's portfolio and market focus would complement the company's current wire and cable businesses.
The plan is subject to a satisfactory due diligence investigation of Carol Cable by Penn Central, a definitive agreement and regulatory approvals.
Fletcher Challenge Ltd. said its Petrocorp unit agreed to acquire certain Alberta oil and gas interests from Amoco Corp.'s Canadian unit, for about 130 million Canadian dollars (US$110.6 million).
Fletcher Challenge, a big New Zealand-based forest products concern with forestry operations in Canada, said the assets include stakes in four natural gas fields and one oil field near Provost, Alberta, plus gas processing facilities and about 247,000 acres of undeveloped land.
The proposed purchase requires approval from Investment Canada, which monitors large foreign investments in Canada.
Amoco Canada Petroleum Co., which operates the major properties included in the asset package, said the sale is part of a plan to streamline its assets.
Petrocorp, a New Zealand-based oil and gas producer, said the planned purchase would be its first oil and gas acquisition outside its home country, and would form the basis for a new stand-alone exploration and production unit in Canada.
MiniScribe Corp., Longmont, Colo., said it introduced a one-inch high, 80-megabyte hard disk drive that it hopes will prove popular with makers of high-performance laptop and portable computers.
The troubled disk drive maker aims with the new 3 1/2-inch disks to revive its reputation and sales growth.
MiniScribe said the disk drives have more memory capacity than other disks that size.
MiniScribe said it expects to begin full volume production of the drives in the U.S. and Singapore in the first quarter next year.
A drive with 120 megabytes of capacity is scheduled for release during the third quarter of 1990.
MiniScribe has been on the rocks since it disclosed early this year that its earnings reports for 1988 weren't accurate.
After an internal investigation, the company found that senior officials used a variety of schemes to fabricate sales gains, including counting shipments of bricks and defective drives as sales.
The New York Times Co. said it reached a settlement with independent home delivery dealers in the metropolitan New York area that will free the newspaper to expand home delivery circulation.
The settlement stemmed from a lawsuit the dealers filed in 1982 when the Times began its own competing direct delivery service.
The pact calls for the Times to pay dealers $3.6 million over six years, as well as other payments in the form of subsidies over three years, based on the number of "new customers started by the dealers and on pricing structures," the Times said.
The amount of the settlement will be taken as a charge against earnings in the fourth quarter.
The settlement, which involves most of the 300 independent newspaper dealers in the New York area, will allow the Times to freely operate its own direct home delivery system.
Home delivery is the fastest growing segment of the Times's 1.1 million daily circulation.
Currently, about 60% of home delivery subscribers in the New York area receive the paper directly from the Times.
Mercury Savings & Loan Association, Huntington Beach, Calif., reported a third-quarter loss of $3.9 million, or 61 cents a share, compared with net income of $1.4 million, or 22 cents a share, in the year-earlier quarter.
Mercury attributed the loss to rapid prepayments of loans and costs incurred in refinancing many house loans this past spring and summer, when interest rates dipped.
The thrift hired an investment banker earlier this month to advise it regarding a possible sale or merger.
Mercury also is shrinking itself, part of its plan to change its emphasis from buying mortgage loans from mortgage brokers to making loans directly.
Such a focus is "more profitable, more efficient and gives us a greater sense of control," said William A. Shane, Mercury's senior executive vice president.
As of Sept. 30, Mercury's assets were $2.25 billion, down from $2.62 billion a year ago.
For the nine months, Mercury posted a loss of $5.4 million, or 86 cents share, against net income of $4 million, or 63 cents share, a year earlier.
Mercury shares closed yesterday at $4.625, up 50 cents, in New York Stock Exchange composite trading.
Bancroft Convertible Fund Inc., New York, likely will reject a renewed offer from Florida investor Robert I. Green to buy Bancroft for $18.95 a share.
Sigmund Levine, Bancroft secretary and treasurer, said the closed-end fund's directors will consider Mr. Green's offer in a couple of weeks at a regular meeting.
"He hasn't added anything," Mr. Levine said, predicting the board will again reject Mr. Green's proposal.
In a Securities and Exchange Commission filing, Mr. Green said he had boosted his holdings in Bancroft common to 10.4% from 8.5%, and renewed an offer he made in March to acquire the fund.
Mr. Levine noted that Bancroft's shares have been trading at or above Mr. Green's offering price for the last several months.
He said Bancroft attorneys are scheduled to meet with Mr. Green's attorneys in Delaware Chancery Court at the end of this week to respond to the investor's request for company records for the past five years.
Mr. Green couldn't be reached.
Giant Group said a federal court in Delaware has denied a motion by Rally's Inc. seeking to block a group led by Giant Chairman Burt Sugarman from acquiring more of the company's shares.
Rally's, a fast-food chain based in Louisville, Ky., is contending that Mr. Sugarman and two other company directors failed to disclose to the Securities and Exchange Commission that they intended to acquire a big Rally stake.
Mr. Sugarman has in turn contended that the other major shareholder group -- whose interests are represented by three other directors connected to trusts in the name of the children of the company's founder, James Patterson -- has ties to a competing fast food chain, Wendy's International Inc.
The company last week assembled a three-member committee of directors aligned with neither side to analyze the situation.
Each group controls more than 40% of Rally's stock.
The company just went public earlier this month.
Rally's had no comment, but was expected to make an announcement this morning about the situation.
Singer Bette Midler won a $400,000 federal court jury verdict against Young & Rubicam in a case that threatens a popular advertising industry practice of using "sound-alike" performers to tout products.
The decision in Los Angeles federal court stems from a 1985 Mercury Sable TV ad that Young & Rubicam worked up for Ford Motor Co.
The ad agency had approached Ms. Midler about appearing, but she declined, citing a longstanding policy of refusing advertising work.
The agency then turned to a former backup singer for Ms. Midler who appeared in the ad and crooned what was generally considered a more than credible imitation of Ms. Midler's 1973 hit song "Do You Wanna Dance."
The appeals court held: "When a distinctive voice of a professional singer is widely known and is deliberately imitated in order to sell a product, the sellers have appropriated what is not theirs."
The judge in the jury trial said there was insufficient evidence to hold Ford liable in the case.
In a statement, Young & Rubicam called the award "unfortunate but bearable."
Peter Laird, a Los Angeles lawyer for Ms. Midler, said, "We believe that the verdict reaffirms her position and our position that advertisers and advertising agencies cannot with impunity imitate the voices of well-known performers.
That is a property right that belongs to the performer."
The award, although far less than the $10 million, including punitive damages, that Ms. Midler sought, is likely to force Madison Avenue to further rethink how they use famous songs in ads.
Last year's appeals court decision, for instance, spawned several suits, reportedly including a recent action by the heirs of singer Bobby Darin against McDonald's Corp. over its "Mac Tonight" TV commercials, a rough parody of Mr. Darin's "Mack the Knife" trademark.
The appeals-court decision last year was particularly surprising because the same court had dismissed a similar case in 1970 involving singer Nancy Sinatra and a tire ad -- also a Young & Rubicam product.
Ms. Sinatra sued over the use of her "These Boots are Made for Walkin'" song in the ad.
At that time, the court held that such a claim would interfere with federal copyright law, which has always cracked down on the unauthorized copying of songs and musical compositions but never actual performances.
"One thing that is a little unnerving is that you had three old men on the court of appeals in California coming up with a statement that Nancy Sinatra is not distinctive but that Bette Midler is.
I am not sure that judges, many of whom I like very much, are proper repositories for making distinctions about pop singers," said Richard Kurnit, a New York advertising lawyer.
Nonetheless, Mr. Kurnit said that the latest decisions are having a chilling effect.
"It has made people think twice about how they use music and is forcing them to be more circumspect about doing a particular rendition of a song in its most famous form," he said.
Joanne Lipman contributed to this article.
James River Corp., Richmond, Va., said it acquired the tissue operations of Buhrmann-Tetterode N.V. of the Netherlands for about $77 million.
The Dutch unit, known as Celtona B.V., is a leading maker of consumer and away-from-home tissue products for the Benelux region.
In addition, the acquisition includes production assets of Invercon Papermils, a maker of household tissue products for the U.K. and Ireland.
The combined operations had 1988 revenue of about $100 million.
James River, a maker of pulp, paper and plastic products, already has interests in tissue businesses in France, Spain, Italy and Turkey.
The company said it plans to form European ventures with Italian and Finnish companies.
The Celtona operations would become part of those ventures.
Vitro S.A. of Monterrey, Mexico, said its THR Corp. subsidiary has entered into definitive loan agreements in connection with Vitro's $21.25-a-share tender offer for Anchor Glass Container Corp.
The agreements are with Security Pacific National Bank and an affiliate of Donaldson, Lufkin & Jenrette Securities Corp.
Proceeds of the loan agreement, together with funds from Vitro, will permit the purchase of all shares outstanding of Anchor and the payment of all related costs and expenses.
Vitro said the definitive agreements require that Anchor obtain a waiver from its bank lenders of existing covenant defaults under its bank facilities.
Since Anchor is still seeking this waiver, Vitro said the tender offer is being extended until 5 p.m. EST tomorrow.
The dollar finished mostly stronger yesterday, boosted by a modest recovery in share prices.
The Dow Jones Industrial Average climbed 6.76 points in a spate of bargain-hunting following last week's declines.
"Attention is fixed on the stock market for lack of anything else to sink our teeth into," said Robert White, a vice president at First Interstate of California.
Some analysts predict that in the absence of market-moving news to push the U.S. unit sharply higher or lower, the currency is likely to drift below 1.80 marks this week.
But others reject the view, and forecast the dollar will continue to hold its current tight trading pattern.
They argue that weakness in both the yen and sterling have helped offset bearish U.S. economic news and have lent support to the dollar.
In late New York trading yesterday, the dollar was quoted at 1.8340 marks, up from 1.8300 marks late Friday, and at 141.90 yen, up from 141.65 yen late Friday.
Sterling was quoted at $1.5820, up from $1.5795 late Friday.
The dollar rose against the Swiss and French francs.
In Tokyo Tuesday, the U.S. currency opened for trading at 142.32 yen, up from Monday's Tokyo close of 142.17 yen.
Last week, the surprise resignation of British Chancellor of the Exchequer Nigel Lawson sent the British pound into a tailspin.
While sterling bounced back from session lows in a bout of short-covering yesterday, foreign exchange dealers said that any hopes that the pound would soon post significant gains have evaporated.
Traders said that statements made over the weekend to quell concern about the stability of Prime Minister Margaret Thatcher's government and the future of her economic program largely failed to reassure investors and bolster the flagging British unit.
In her first televised interview following Mr. Lawson's resignation, Mrs. Thatcher reiterated her desire to keep sterling strong and warned again that full entry into the European Monetary System's exchange rate mechanism would provide no easy solution to Britain's economic troubles.
She said that the timing of the United Kingdom's entry would depend on the speed with which other members liberalize their economies.
Mrs. Thatcher's remarks were seen as a rebuff to several leading members of her own Conservative Party who have called for a more clear-cut British commitment to the EMS.
At the same time, a recent poll shows that Mrs. Thatcher has hit the lowest popularity rating of any British leader since polling began 50 years ago.
Comments by John Major, who has succeeded Mr. Lawson, also failed to damp market concern, despite his pledge to maintain relatively high British interest rates.
According to one London-based analyst, even higher interest rates won't help the pound if Britain's government continues to appear unstable.
One U.S. trader, however, dismissed sterling doomsayers while acknowledging there is little immediate upside potential for the U.K. unit.
"There is no question that the situation is bad, but we may be painting a gloomier picture than we should," he said.
He predicts the pound will continue to trade in a very volatile fashion, with "fits of being oversold and overbought" before recovering its losses.
Dealers also note that the general lack of enthusiasm for the yen has helped bolster the U.S. dollar.
They observe that persistent Japanese investor demand for dollars for both portfolio and direct investment has kept a base of support for the dollar at around 140 yen.
The dollar began yesterday on a firm note in Tokyo, closing higher in late trade.
In Europe, the dollar closed slightly up in a market dominated by cross trades.
On the Commodity Exchange in New York, gold for current delivery settled at $377.80 an ounce, down 70 cents.
Estimated volume was a moderate 3.5 million ounces.
In early trading in Hong Kong Tuesday, gold was quoted at $376.80 an ounce.
General Electric Capital Corp.'s Monogram Bank USA acquired a Visa and MasterCard portfolio from Commercial Federal Savings & Loan Association, an Omaha, Neb., unit of Commercial Federal Corp. of Omaha.
Terms weren't disclosed.
The portfolio currently includes $95 million in receivables, GE Capital said.
GE Capital is a financial services subsidiary of General Electric Co. of Fairfield, Conn., which also has broadcasting and electrical-products businesses.
GE Capital said Commercial Federal Savings will continue to market Visa and MasterCard programs while Monogram provides "operational and marketing support" and actually owns the accounts.
With the acquisition, Monogram, Blue Ash, Ohio, has more than 2.4 million total accounts, GE Capital added.
EAST GERMANS RALLIED in three cities to demand democratic freedoms.
As the country's new leader, Egon Krenz, prepared to travel to Moscow today for talks with Soviet leader Gorbachev, hundreds of thousands of East Germans massed in the streets of Leipzig, Halle and Schwerin to call for internal freedoms and the legalization of the New Forum opposition group.
Krenz, however, vowed to preserve the Communist Party's hold on political power and said East Germans shouldn't destabilize the nation with unrealistic demands.
Communist officials this month have faced nearly daily pro-democracy protests, accompanied by the flight to the West by thousands of East Germans.
Soviet police clashed with demonstrators in Moscow following a candlelight vigil around the KGB's Lubyanka headquarters in memory of those persecuted under Stalin.
More than 1,000 Muscovites attended the service.
A splinter group demonstrated in Pushkin Square, where the police clubbed and detained a number of protesters.
Police in Yugoslavia dispersed about 1,000 ethnic Albanians who were protesting the trial of the former Communist Party chief of the southern province of Kosovo.
Azem Vlasi and 14 others are accused of inciting riots and strikes and opposing constitutional limits to Kosovo's autonomy.
If convicted, they could be sentenced to death.
A court in Jerusalem sentenced a Palestinian to 16 life terms for forcing a bus off a cliff July 6, killing 16 people, Israeli radio reported.
He also received 20-year sentences for each of the 24 passengers injured.
It was considered the stiffest sentence passed since the start of the 22-month-old Arab uprising in the Israeli-occupied territories.
U.S. and Soviet negotiators opened talks in New York aimed at resolving differences in proposals to reduce chemical-weapons arsenals.
While the Kremlin has urged a ban on output of the poison gases, the White House wants to continue producing the weapons even after an international treaty calling for their destruction is signed.
South Africa's government said peaceful demonstrations such as the anti-apartheid rally Sunday near Soweto have helped ease tensions and assisted political changes.
About 70,000 people attended the anti-government rally, at which leaders of the banned African National Congress refused to renounce violence to end apartheid.
Secretary of State Baker expressed concern that Nicaraguan President Ortega may attempt to use alleged attacks by the U.S.backed Contra rebels as an excuse to scuttle elections scheduled for February.
Ortega had threatened to end a 19-month-old ceasefire.
Baker's remarks came as the White House urged both sides to honor the truce.
The USS Lexington returned to dock in Pensacola, Fla., following an accident Sunday in which the pilot of a training jet crashed into the ship, killing five sailors.
The captain of the aircraft carrier, the oldest in the Navy, said the flier was making his first attempt to land on a carrier.
Four people torched three U.S. flags on the central steps of the U.S. Capitol in a bid to test a new federal law protecting the American flag from desecration.
All four demonstrators were arrested.
The law, which Bush allowed to take effect without his signature, went into force Friday.
Chinese officials said armed police would replace soldiers in Tiananmen Square as part of a scaling down of Beijing's five-month-old state of emergency.
Separately, the U.S. Embassy has filed three protests in as many days with China's government, alleging harassment of diplomats and their families, an embassy source said.
Authorities in Algeria said the toll from two earthquakes Sunday had reached at least 30 dead and about 250 injured.
The heaviest damage was reported in Tipasa, about 40 miles west of Algiers.
As rescue teams continued searching for victims, hundreds of suvivors accused the government of a feeble response following the temblors.
Britain's Thatcher summoned senior advisers for strategy talks as opinion polls showed the prime minister's popularity had hit a record low following the resignation last Thursday of Chancellor of the Exchequer Lawson.
One poll, conducted for the British Broadcasting Corp., found that 52% of voters believed that she should quit.
Lawmakers in Hungary approved legislation granting amnesty to many people convicted of crimes punishable by less than three years in prison.
They also established an office to control government and party finances.
The laws take effect next month.
Died: Robert V. Van Fossan, 63, chairman of Mutual Benefit Life Insurance Co., Sunday, in Morristown, N.J., of cancer.
Fluor Corp. said it was awarded a $300 million contract to provide engineering and construction-management services at a copper mine in Irian Jaya, Indonesia, for a unit of Freeport-McMoRan Copper Co.
Fluor, based in Irvine, Calif., will direct expansion of the mine's capacity to 52,000 metric tons a day from 32,000 metric tons a day.
Completion of the project is expected by mid-1992.
In 1988, Fluor had revenue of $5.1 billion and earnings of $56.4 million, or 71 cents a share.
Nixdorf Computer AG, citing continued profitability problems, said it will have to reduce personnel further, notably in research and development sectors.
The troubled West German computer company said, in a statement to its employees, that the number of persons working in product development will be reduced world-wide to 2,440 from 2,888 by the end of 1990.
The number of workers in production sectors will be cut by 488, to 5,200 by September.
The cuts will be made half within Germany and half abroad.
In the first nine months of 1989, Nixdorf said, sales rose 5% amid good growth in selected areas such as banks and trading companies.
The company also cited some success in damping cost increases and said it wants to return to profitability in 1990.
It cited the expected beneficial effects of a concentration on key products, further structural changes within the group and cooperation agreements with other companies.
GREAT NORTHERN NEKOOSA is being sought by another big paper company, Georgia-Pacific, for $58 a share, or about $3.18 billion.
The tender offer, which surprised analysts because it appeared to be unsolicited, could spark a period of industry consolidation.
Analysts questioned whether Georgia-Pacific will ultimately prevail, saying other paper concerns may make competing bids.
Two more securities firms bowed to the outcry over program trading.
GE's Kidder Peabody unit said it would stop doing stock-index arbitrage for its own account, while Merrill Lynch said it was halting such trading entirely.
Also, the Big Board met with angry stock specialists.
A big pension-insurance case will be reviewed by the Supreme Court.
The justices agreed to decide whether federal insurers can require LTV to take back responsiblilty for funding its $2.3 billion pension shortfall.
Drug companies lost a major liability case.
The Supreme Court let stand a New York ruling that all manufacturers of an anti-miscarriage drug are liable for injuries or deaths if the actual maker isn't known.
Revco received a $925 million takeover offer from Texas financier Robert Bass and Acadia Partners.
The drugstore chain reacted cautiously, saying the plan would further swell its huge debt, which forced the company into Chapter 11 protection last year.
Rockefeller Group agreed to sell a 51% interest to Mitsubishi Estate, a major Japanese developer and property owner, for $846 million.
Officials at some Rockefeller units are said to be unhappy with the agreement.
Continental Air replaced its top executive for the sixth time in as many years.
Chairman and Chief Executive Joseph Corr was succeeded by Frank Lorenzo, chief of parent Texas Air.
United Air's parent may have to pay as much as $53.7 million to the labor-management buy-out group for fees and expenses incurred in their failed $6.79 billion takeover bid.
Gen-Probe agreed to be bought by Chugai Pharmaceutical for about $110 million.
The sale is likely to fuel concern about growing Japanese investment in U.S. biotechnology firms.
Boeing posted a 68% jump in third-quarter earnings, but Wall Street's attention was focused on the continued strike at the aircraft maker.
The Fed delayed approval of First Union's $849 million acquisition of Florida National Banks pending a review of First Union's lending practices in low-income neighborhoods.
Allianz of West Germany entered the takeover battle between France's Paribas and Navigation Mixte.
Maxwell agreed to sell its U.S. printing unit to Quebecor for $500 million, making Quebecor the No. 2 commercial printer in North America.
New construction contracts rose 8% in September, led by commercial, industrial and public-works projects, according to F.W. Dodge Group.
Western Union took steps to withdraw a $500 million debt swap, citing turmoil in the junk bond market.
Markets --
Stocks: Volume 126,630,000 shares.
Dow Jones industrials 2603.48, up 6.76; transportation 1191.86, up 1.43; utilities 216.74, up 0.88.
Bonds: Shearson Lehman Hutton Treasury index 3416.81, up
Commodities: Dow Jones futures index 129.38, off 0.11; spot index 130.09, off 0.71.
Dollar: 141.90 yen, up 0.25; 1.8340 marks, up 0.0040.
Pacific Telesis Group said its Pacific Bell unit sustained property damage of about $45 million to $50 million from the California earthquake earlier this month.
The San Francisco-based telecommunications company said it carries $150 million of earthquake insurance with a $10 million deductible provision.
Sam Ginn, chairman and chief executive officer, told securities analysts in New York that the company expects somewhat slower per-share earnings growth in 1990, although annual growth should return to the traditional figure of about 7% thereafter.
As factors contributing to the temporary slowdown, he cited one-time rate reductions prescribed by California regulators as a prelude to a new framework that removes profit constraints.
He also mentioned increased capital investment by Pacific Bell for network improvements.
Mr. Ginn said the company's cellular operations now serve about 341,000 customers, up 46% from a year ago.
General Motors Corp. is planning to build a new engine plant in Europe that may be built in Britain, provided the company can reach a satisfactory agreement with unions, sources said.
Officials of Vauxhall Motors Ltd., GM's British unit, were meeting with union leaders late yesterday in hopes of winning such an accord.
The engine plant may encompass plans for a joint components venture with Jaguar.
Alternatively, a separate engine plant may be built as part of GM's planned tie-up with the British luxury car maker, the sources said.
Sources said a "complex and detailed" announcement of a joint agreement between General Motors and Jaguar would be made by Jaguar "some time in the next 2 1/2 weeks.
Cray Research Inc. won government clearance for its proposed reorganization of founder Seymour Cray's supercomputer design team into a separate company.
Internal Revenue Service approval of the move as a tax-free transaction was the last hurdle to splitting up the world's dominant maker of supercomputers, which Mr. Cray founded in 1974.
Cray's directors set Nov. 15 as the record date for distribution of shares in the new company, to be called Cray Computer Corp.
It will trade over the counter under the symbol CRAY.
The plan calls for Cray Research holders to receive one share in the new company for every two shares held.
An estimated 14.7 million Cray Computer shares will be distributed, Cray Research said.
Under the accord, Cray Research will transfer to Mr. Cray's fledgling operation $53.3 million of assets primarily related to the Cray-3 development project his team is undertaking and will lend Cray Computer $98.6 million.
Cray Research will retain a 10% interest in the new company, which will be based in Colorado Springs, Colo.
When it announced the planned breakup in May, Cray Research said development costs of several competing projects were squeezing its earnings growth.
After the split, the two companies presumably will be rivals for orders from government and commercial customers.
Interface Systems Inc., Ann Arbor, Mich., said it will report net income for the fourth quarter ended Sept. 30 fell to $470,000, or 11 cents a share, from $805,000, or 19 cents a share, a year earlier.
Chairman Carl L. Bixby said the decline occurred although revenue rose 30% to more than $8.3 million from $6.4 million a year earlier.
The company, which makes computer parts said fiscal 1989 earnings were "down slightly" from $3.2 million, or 74 cents a share, in fiscal l988.
The company said fiscal 1989 revenue increased about 30% to more than $32 million from $25.3 million.
Mr. Bixby said that early signs point to improved earnings and revenue in the first quarter of fiscal 1990.
"The current backlog of orders is strong throughout the corporation," he said.
Priam Corp. said it filed for protection under Chapter 11 of the federal Bankruptcy Code and announced a 35% reduction in its world-wide employment.
The filing in bankruptcy court here follows a string of quarterly losses and product glitches for the maker of harddisk drives for minicomputers and microcomputers.
Priam had a loss of $25.4 million for the fiscal year ended July 7, compared with year-earlier profit of $543,000, or two cents a share.
Revenue for the year fell 13% to $122.7 million.
The 200-person staff cutback announced yesterday will bring Priam's employment to about 380 workers, less than half of what it was before a similar, 230-person reduction in August.
The company yesterday also said it was scrapping one of its major new products, a 760-megabyte drive, which, while technically proficient, didn't hold much promise of generating substantial orders because financing problems caused a nine-month delay in getting the product to market.
The French Economics Ministry approved a planned asset swap between the defense and electronics group Thomson-CSF S.A. and the bank group Credit Lyonnais.
The ministry said the swap, details of which were disclosed last Thursday, will allow both state-controlled companies to reinforce operations in their main markets and argued that the move shows the dynamism of France's state-sector concerns.
The approval also ends any hope that Banque Nationale de Paris, another state-sector bank, might have had about taking Credit Lyonnais's place in the accord.
It hinted over the weekend that it would have been interested in a hook-up with Thomson-CSF.
Under details of the accord, Credit Lyonnais will take slightly more than 50% of Thomson-CSF Finance in exchange for about 14% of its own shares.
The move will help the bank to keep up with international solvency ratios being phased in by the Bank for International Settlements and will also represent the first time that its voting shares have been held by a party other than the government.
Bio-Technology General Corp. received tenders for 97.9% of its 7.5% convertible senior subordinated notes due April 15, 1997, and 96% of its 11% convertible senior subordinated debentures due March 1, 2006.
In exchange offers that expired Friday, holders of each $1,000 of notes will receive $250 face amount of Series A 7.5% senior secured convertible notes due Jan. 15, 1995, and 200 common shares.
For each $1,000 face amount of debentures, holders received $250 of Series B 11% senior secured convertible notes due Oct. 15, 1998, and 200 common shares.
Bio-Technology, a New York maker of genetically engineered products for human and animal health care, said it made the exchange offer to reduce its interest payments.
Japanese companies have long been accused of sacrificing profit to boost sales.
But Fujitsu Ltd. has taken that practice to a new extreme.
Japan's biggest computer maker last week undercut seven competitors to win a contract to design a mapping system for the city of Hiroshima's waterworks.
Its bid: one yen, or less than a U.S. penny.
The bid created such a furor that Fujitsu said it is now offering to withdraw from the project.
"From a common-sense viewpoint, it was not socially acceptable," a Fujitsu spokeswoman said yesterday.
Hiroshima city officials couldn't be reached to find out whether they would drop Fujitsu's bid.
Fujitsu said it issued the low bid because it wanted a foot in the door of a potentially lucrative market.
"We desperately wanted the contract because we want experience in the field," the Fujitsu spokeswoman said.
"We expect a big market in the future, so in the long term it will be profitable.
It's a kind of an investment."
Hiroshima's waterworks bureau said the municipal government had budgeted about 11 million yen ($77,500) for the project.
"I was flabbergasted," Tatsuhara Yamane, head of the bureau, was quoted by Kyodo news service as saying.
"I understand the firm's enthusiasm in getting the deal, but such a large company would have been better off showing a little more discretion."
Indeed, Fujitsu officials admitted they may have been a little overzealous.
The Fujitsu spokeswoman said headquarter officials didn't approve the bid in advance and will take measures so this kind of thing doesn't happen in the future.
"It's contrary to common sense," she added.
Specifically, Fujitsu won the right to design the specifications for a computerized system that will show water lines throughout the city.
The system could be used in a fire or earthquake to locate problems, among other things.
A waterworks official said Fujitsu will have to design the system so it would be compatible with other makers' equipment.
But industry officials expressed concern that the initial project might give Fujitsu an edge in winning more lucrative contracts later.
Fujitsu said it hopes the Hiroshima contract will help it secure pacts with other municipalities.
Japanese local governments are expected to invest heavily in computer systems over the next few years, and many companies expect that field to provide substantial revenue.
"In the near future, it will be a big market, not just for waterworks, but for all mapping systems," the Fujitsu spokeswoman said.
"We can expect a hundreds-of-billions-of-yen market."
No foreign companies bid on the Hiroshima project, according to the bureau.
But the Japanese practice of deep discounting often is cited by Americans as a classic barrier to entry in Japan's market.
Earlier this year, the U.S. complained that Japan's supercomputer makers were effectively closing out foreign competitors by slashing prices as much as 90% for universities.
Fujitsu wasn't the only company willing to sacrifice profit on the project.
Three competitors bid between 300,000 yen and 500,000 yen, according to the Hiroshima government office.
Other bids ranged from about 10 million yen to 29 million yen.
American Airlines will expand its trans-Atlantic service 30% beginning next year with six new daily flights between the U.S. and Europe, officials announced yesterday.
American, a unit of AMR Corp., is the nation's largest airline.
The new nonstop flights, starting next May, will include Chicago-Warsaw, Chicago-Helsinki, Miami-Madrid, Dallas-Barcelona, a second daily Chicago-Paris flight and a second daily Chicago-Manchester flight, the officials said.
Chicago has the largest population of citizens of Polish heritage in any city outside Poland.
With the new service, American will fly 161 flights a week to 17 European cities.
The additions solidify American's position as the third-largest U.S. transatlantic carrier, behind PanAm Corp.'s Pan American World Airways and Trans World Airlines.
Karstadt AG said sales for its domestic group rose 4.6% in the first nine months of 1989 from a year earlier.
The West German retailing group also said that the results of the first three quarters suggest it will meet its profit goal for the year.
Earnings at the department-store division, which generates the bulk of profit, should remain at least stable, while income at the mail-order and tourism units is likely to fall slightly from 1988, the company said.
Karstadt didn't give any group sales or profit figures for the first nine months.
Georgia-Pacific Corp. offered to acquire Great Northern Nekoosa Corp. for $58 a share, or about $3.18 billion.
The offer capped a week of rumors that Georgia-Pacific, an Atlanta-based forest-products company, was considering making a bid for Nekoosa, a paper-products concern based in Norwalk, Conn.
Executives at Nekoosa couldn't be reached, and officials at Georgia Pacific declined to comment.
Analysts, however, were surprised because the tender offer appeared unsolicited.
"It's quite a bombshell," said one, adding that the offer could spark a period of industry consolidation.
The two companies would appear to be a logical fit because of their complementary lines, and analysts described the offer, representing a 36% premium over Nekoosa's market price, as fair.
Nekoosa closed yesterday at $42.75, up $2.75, in New York Stock Exchange composite trading.
But industry observers still questioned whether Georgia Pacific will ultimately prevail.
"You have to watch out for counterbids," said one analyst. "
International Paper or Weyerhaeuser could step in."
The bid for Great Northern, a notice of which appears in an advertisement in today's Wall Street Journal, is the first big takeover offer since the collapse of a $6.79 billion buy-out of United Airlines parent UAL Corp. Oct. 13.
That collapse, following on the heels of disarray in the market for high-risk, high-yield bonds, cast doubt on the entire takeover business, which has fueled both big profits among Wall Street securities firms and big gains in the stock market generally.
While Georgia-Pacific's stock has outperformed the market in the past two years, Nekoosa has lagged the market in the same period.
Yesterday's rise in Nekoosa's share price came on volume of 786,700 shares, four times the daily average.
According to Dow Jones Professional Investor Report, options trading in Nekoosa was also heavy, ranking only behind International Business Machines Corp. and UAL in volume on the Chicago Board Options Exchange.
According to the Value Line Investment Survey, demand for Nekoosa's commodity paper has weakened, prompting earnings to decline by 6.6% in the third quarter ended Sept. 30.
Value Line added, "With discounts widening on business papers, and with newsprint and corrugated shipments flat, we expect negative earnings comparisons through next year."
By contrast, Value Line said Georgia-Pacific "is in a comparatively good position to deal with weakening paper markets," because its production is concentrated not in the Northwest but in the South, where it should be able to avoid some of the cost pressures from rising wood-chip prices.
Also, it isn't exposed to the weakening newsprint business, and is strong in the less-cyclical tissue business.
The purchase of Nekoosa would easily eclipse Georgia-Pacific's $530 million acquisition of Brunswick Pulp & Paper Co. last year.
That acquisition, which also included the assumption of $135 million in debt, was designed to allow Georgia-Pacific to capitalize on the strong demand for softwood pulp, as well as reduce its exposure to the housing market.
Wasserstein Perella & Co. is the dealer-manager for the offer, which will expire Nov. 29, unless extended.
Ratners Group PLC's U.S. subsidiary has agreed to acquire jewelry retailer Weisfield's Inc. for $50 a share, or about $55 million.
Weisfield's shares soared on the announcement yesterday, closing up $11 to close at $50 in national over-the-counter trading.
Ratners and Weisfield's said they reached an agreement in principle for the acquisition of Weisfield's by Sterling Inc.
The companies said the acquisition is subject to a definitive agreement.
They said they expect the transaction to be completed by Dec. 15.
Weisfield's, based in Seattle, Wash., currently operates 87 specialty jewelry stores in nine states.
In the fiscal year ended Jan. 31, the company reported sales of $59.5 million and pretax profit of $2.9 million.
Ratners, which controls 25% of the British jewelry market, would increase the number of its U.S. stores to about 450 stores from 360.
It has said it hopes to control 5% of jewelry business in the U.S. by 1992; currently it controls about 2%.
McDonnell Douglas Corp. received contracts totaling $244.8 million for 72 F-A-18 aircraft for the Navy and helicopter spare parts for the Army.
Aerojet General Corp., a unit of GenCorp Inc., was awarded a $40.1 million Air Force contract for Minuteman missile rocket motors.
Rockwell International Corp. received a $26.7 million Navy contract for submarine ballistic missiles.
Honeywell Inc. got a $22.3 million Navy contract for aircraft missile warning sets.
Beech Aircraft Corp., a unit of Raytheon Co., received an $11.5 million Air Force contract for C-12 aircraft support.
Analog Devices Inc. said it may purchase as many as one million of its common shares over the next several months.
Analog also said that a one million share buy-back program announced in March is substantially complete.
The company, which makes integrated circuits and other electronic parts, now has about 47 million common shares outstanding.
In New York Stock Exchange composite trading yesterday, Analog Devices closed at $8.875, up 25 cents.
John Lehman's editorial-page article on the Pentagon as a haunted house omits the real roots of its ghost population ("In the Pentagon, the Undead Walk," Oct. 18).
The media's treatment of the Defense Department during the Vietnam War, the Carter administration's denigration of the military, and the public scapegoating of Lt. Col. Oliver North have all served to emasculate the poor souls who live there.
The resulting haunted house tends to reward followership, not leadership, it creates guilt about wearing the uniform, and raises doubt about having the will to fulfill the ghosts' role, i.e., to be able to win if called on.
Perhaps the Halloween season is a good time for Congress to be looking at funding for some ghostbusting equipment.
Mike Greece Former Air Force Career Officer New York
Where does Mr. Lehman get off castigating Gen. George Marshall for muscling in on naval prerogatives?
Ever since the days of Alfred Thayer Mahan (U.S. naval officer and naval historian) and Teddy Roosevelt the Navy has been the service most favored by Washington officialdom.
Mr. Lehman overlooks the fact that the Navy possesses its own air force (the carrier fleet) and its own army (the Marines), which in turn has its own air force.
Of course these turf battles are unseemly, wasteful and potentially dangerous and should be resolved in the interest of national security, but Mr. Lehman seems to be part of the problem rather than part of the answer.
L.H. Blum Beaumont, Texas
I agree with Mr. Lehman 100%!
Isn't this the same guy who resigned as Navy secretary because he couldn't get his 1,000-ship Navy?
I personally do not want to hasten Mr. Lehman's demise, but I can see him figuring prominently in his own article.
Carl Banerian Jr. Birmingham, Mich.
For the sixth time in as many years, Continental Airlines has a new senior executive.
Gone is D. Joseph Corr, the airline's chairman, chief executive and president, appointed only last December.
Mr. Corr resigned to pursue other business interests, the airline said.
He could not be reached for comment.
Succeeding him as chairman and chief executive will be Frank Lorenzo, chairman and chief executive of Continental's parent, Texas Air Corp.
Mr. Lorenzo, 49 years old, is reclaiming the job that was his before Mr. Corr signed on.
The airline also named Mickey Foret as president.
Mr. Foret, 44, is a 15-year veteran of Texas Air and Texas International Airlines, its predecessor.
Most recently he had been executive vice president for planning and finance at Texas Air.
Top executives at Continental haven't lasted long, especially those recruited from outside.
But Mr. Corr's tenure was shorter than most.
The 48-year-old Mr. Corr was hired largely because he was credited with returning Trans World Airlines Inc. to profitability while he was its president from 1986 to 1988.
Before that, he was an executive with a manufacturing concern.
At Continental he cut money-losing operations, which helped produce a modest profit in this year's second quarter.
But Mr. Corr, a stunt pilot in his spare time, was understood to be frustrated by what he regarded as limited freedom under Mr. Lorenzo.
While not officially an executive at Continental during Mr. Corr's tenure, Mr. Lorenzo is known for keeping close tabs on Texas Air's operating units.
Continental is Texas Air's flagship and was built painfully to its present size under Mr. Lorenzo after emerging from bankruptcy proceedings in 1986.
It's unclear what role, if any, Mr. Lorenzo's recent exploration of a possible sale of a stake in Continental had in Mr. Corr's departure.
One source familiar with the airline said, however, that Mr. Corr wasn't informed in advance during the summer when Mr. Lorenzo began discussions with potential buyers.
During his tenure, Mr. Corr attempted through a series of meetings to inform managers of some of the company's future plans, traveled widely to talk to employees and backed training sessions designed to improve the carrier's image.
Mr. Foret is one of a handful of executives Mr. Lorenzo has relied on over the years.
Previously, he had served in financial planning positions at the company's Eastern Airlines unit.
Another longtime ally, Phil Bakes, currently heads Eastern, now in Chapter 11 bankruptcy proceedings.
Mr. Bakes previously had a turn at running Continental.
Among the other alumni are Stephen Wolf, now chairman of UAL Inc., and Thomas Plaskett, president of Pan Am Corp.
Doskocil Cos. said its bank-debt payments have been extended until May 31, 1990, to give it more time to sell its Wilson Foods Corp. retail and fresh meat operations.
The company was to repay $58 million in debt on Dec. 31 and $15 million on March 31.
The company acquired the debt when it paid $155 million to purchase Wilson last year.
An agreement to sell the Wilson assets for $150 million in cash and notes collapsed in late September, when the buyer, a company controlled by George Gillett, couldn't secure financing.
Companies listed below reported quarterly profit substantially different from the average of analysts' estimates.
The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share.
Estimated and actual results involving losses are omitted.
The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days.
Otherwise, actual profit is compared with the 300-day estimate.
Charles D. Way, president of this restaurant operator, assumed the additional post of chief executive officer.
He succeeds Alvin A. McCall in the position.
Mr. McCall will remain chairman.
Australia's inflation is expected to rise as high as 8.3% in the quarter ending March 30, but could fall to around 7% by June, according to economists.
The government said the consumer price index rose 2.3% in the quarter ended Sept. 30 from the previous quarter and 8% from a year ago.
Charles A. Pearce, 66 years old, will retire from his post as chief executive officer of this bank holding company effective Dec. 31.
He will remain chairman.
Charles R. Simpson Jr., 46, president and chief operating officer, will assume the chief executive's post.
It is a peaceful time in this part of western India.
The summer crop is harvested, winter sowing has yet to begin.
Farmers in loose turbans and fancy earrings spend their afternoons laughing and gossiping at the markets.
One could imagine such a lull in the lives of the Arabs before the quadrupling of oil prices.
For just as the Arabs were in the 1960s, the farmers of Sidhpur are on the brink of global power and fame.
The Arabs had merely oil.
These farmers may have a grip on the world's very heart.
Or, at least, its heart disease.
That is because Sidhpur has a near-monopoly on the world's supply of flea seed, also known as flea wort or, in Western parlance, psyllium: a tiny, tasteless, obscure seed that, according to early research, may reduce cholesterol levels in the blood.
Ever since the link to cholesterol was disclosed, Americans have begun scarfing up psyllium in their breakfast cereals.
If further research proves the seed's benefits, this dusty farm district could become the epicenter of a health-food fad to rival all fads since cod-liver oil.
"This seed's not grown anywhere else in India, or anywhere else in the world," says T.V. Krishnamurthy, a vice president of Procter & Gamble India Ltd., a major psyllium buyer and promoter.
"The proper climatic conditions don't exist in many places in the world."
Arvind Patel, a processor and exporter of the seed, raves: "If psyllium takes the place of oat bran, it will be huge."
Whether psyllium makes Sidhpur's fortune depends on cholesterol-fearing Americans, the U.S. Food and Drug Administration and, of course, the outcome of further research.
Only one thing is certain here: Pysllium is likely to remain solely an export item from Sidhpur for a long time.
Local farmers say it is as good a cash crop as mustard or fenugreek, a legume.
But they have no desire to eat a bowl of psyllium each morning, and, perhaps, little need: lean, frugal vegetarians, the farmers are innocents in the clogged, treacherous world of cholesterol.
Psyllium is an annual herb, Plantago ovata, that has been used for centuries by folk doctors here, mainly as a laxative and anti-diarrheal.
As such, the soluble fiber has an almost fanatic following in northern India.
"I can assure you," attests a 25-year-old lawyer in New Delhi, with a meaningfully raised eyebrow, "from personal experience, it works."
A prominent businessman in Bombay gives a similar testimonial: "I have been taking it daily since 1961.
" Folk doctors also prescribe it for kidney, bladder and urethra problems, duodenal ulcers and hemorrhoids.
Some apply it to gouty joints.
The plant has a hairy stem that produces flowers and diminutive seeds.
It is the seed's colorlessness and size -- 1,000 of them weigh only 1.5 grams, or about as much as two paper clips -- that explain the historical allusions to fleas.
The transluscent husk of the seed is removed, sifted and crushed; the seed itself is fed to animals.
Some 90% of the crop, which was worth $26 million last year, is exported.
For decades, psyllium husk has been the main ingredient in such laxatives as Procter & Gamble Co.'s Metamucil, the top-selling brand in the U.S., and Ciba-Geigy Corp.'s Fiberall.
But some time ago, researchers discovered that soluble fibers also lower cholesterol levels in the blood.
Cincinnati-based P&G took an interest; it ordered two studies on psyllium and cholesterol.
One of the studies, done at the University of Minnesota, tested 75 people with raised cholesterol levels.
After 16 weeks, the group that took three daily teaspoons of Metamucil saw a significant dip in their general cholesterol levels, and an even larger reduction in levels of low-density lipoproteins, the so-called bad cholesterol.
In late 1987, P&G asked the FDA for approval to market Metamucil as the first non-prescription, cholesterol-lowering product in the
In April, the psyllium bandwagon got more crowded.
General Mills Inc., the food giant, launched a breakfast cereal called Benefit, containing psyllium, oat, wheat and beet bran; the words, "reduce cholesterol" were prominently displayed on its package.
In September, Kellogg Co. launched a competing psyllium-fortified cereal called Heartwise.
Suddenly, on television, in advertisements and on their cereal boxes, Americans were inundated with news about the obscure seed.
The flood of claims and counter-claims worried consumers and actually hurt sales of the new cereals.
This month, the Food and Drug Administration expressed concern that Americans might someday, in various forms, ingest too much psyllium.
Currently, there is a lull in the psyllium war.
The FDA has asked Kellogg and General Mills to show research that their cereals are safe.
It also ordered P&G to produce more studies to buttress its claims that Metamucil can lower cholesterol.
But the agency hasn't yanked psyllium off store shelves.
If the FDA approves the new uses of psyllium, other companies are expected to rush to market with psyllium products.
"It's going to be a sensational thing," says Mr. Krishnamurthy of P&G in Bombay.
Says psyllium exporter Mr. Patel: "I just got back yesterday from the U.S.
In the newspapers, on the radio and TV, psyllium is everywhere."
But the news of the boom has yet to trickle down to the farmers.
They only know of one use for the crop, as a laxative, and with psyllium prices currently languishing in the wake of a bumper crop, they think of the seed as a marginal crop, something to grow between summer wheat crops.
"Psyllium's not a good crop," complains Sooraji Jath, a 26-year-old farmer from the village of Lakshmipura. "
You get a rain at the wrong time and the crop is ruined."
Even at the Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council, the government agency that promotes the seed, the psyllium boom is distant thunder.
The staff brags about psyllium's hefty contribution to American regularity, without quite grasping the implications of the research on cholesterol.
The council's annual report has psyllium on its last page, lumped with such unglamorous export items as sarsaparilla and "Nux vomica," a plant that induces vomiting.
In one way, the psyllium middlemen -- the buyers and exporters -- are glad to keep news of the boom to themselves.
They want psyllium prices low for their purchases next year.
But there's a catch.
Sidhpur and adjacent districts are the only places in the world where psyllium is grown in large quantities.
This is partly due to the particular demands of the crop.
Psyllium needs sandy soil, dew during the first few weeks, and then total dryness when its seeds are maturing.
Small crops are grown in Pakistan, France, Spain, Italy, Belgium and Brazil, but their quality can't compare to that of Indian psyllium.
Big buyers like Procter & Gamble say there are other spots on the globe, and in India, where the seed could be grown.
"It's not a crop that can't be doubled or tripled," says Mr. Krishnamurthy.
But no one has made a serious effort to transplant the crop.
In Sidhpur, it is almost time to sow this year's crop.
Many farmers, too removed to glean psyllium's new sparkle in the West, have decided to plant mustard, fennel, cumin, fenugreek or castor-oil seeds.
Mr. Jath is thinking of passing up psyllium altogether this year in favor of a crop with a future such as cumin or fennel.
"Maybe I'll plant castor-oil seeds."
His brother, Parkhaji, whose head is swathed in a gorgeous crimson turban, nods vigorous assent.
So when next year's psyllium crop is harvested in March, it may be smaller than the 16,000 metric tons of the past few years -- right at the crest of the psyllium boom.
And the world could experience its first psyllium shortage.
Kellwood Co. said it completed a previously announced acquisition of Crowntuft Manufacturing Corp., a New York-based maker of chenille robes and lounge wear.
The apparel maker wouldn't disclose terms of the agreement.
Kellwood said Gabriel Hakim Sr., president of Crowntuft, will continue to head Crowntuft's management group.
A seat on the Chicago Mercantile Exchange was sold for $416,000, down $36,000 from the previous sale Oct.
Seats currently are quoted at $410,000 bid, $425,000 asked.
The record price for a full membership on the exchange is $550,000, set March 9, 1989.
Small businesses say a recent trend is like a dream come true: more-affordable rates for employee-health insurance, initially at least.
But then they wake up to a nightmare.
The reasonable first-year rates can be followed by increases of 60% or more if a covered employee files a major claim, they complain.
Insurance premiums for one small Maryland concern went up 130% in less than two years, the last increase coming after one of its three workers developed a herniated disk.
"There's a distinct possibility that I may lose my job over this," the employee, Karen Allen, of Floor Covering Resources, Kensington, Md., recently told a congressional hearing.
She said her employer can't afford the rate increases, and she fears she won't find another job with a benefit plan covering her ailment.
For employee and employer alike, the worry is widespread.
Surveys repeatedly show that small-business owners rank the availability and rising cost of health insurance as one of their biggest concerns.
The House Energy and Commerce Committee's health subcommittee, headed by Democratic Rep. Henry Waxman of California, is looking into complaints that small businesses not only can't keep reasonably priced employee-health insurance if claims are filed, but often can't get coverage at all if a worker is termed medically uninsurable.
"I have an old-fashioned name for people in that position: sick people who need health insurance," Rep. Waxman says. "
What we're seeing now makes a mockery of the idea of insurance: collect premiums from the healthy, dump the sick and let them pay their own bills."
Some lawmakers may seek legislation to limit overly restrictive insurance policies.
The concern grows out of increased efforts by the insurers to woo the small-business market.
As larger companies increasingly self-insure, or use reserves to pay their own workers' medical bills, the insurance industry has turned to the small-employer market that was once a backwater for them.
"Insurance companies will offer a good rate if no one is sick, but it's a roll of the dice," says Rosemary Heinhold of the Small Business Service Bureau, a group representing 35,000 small businesses nationwide.
"One case of cancer or a high-risk pregnancy with a sick infant, and rates go up 40% to 60%.
Small-business people end up paying insurance premiums worth two to three times the cost of one illness."
In addition, the group says some of its member companies have been denied insurance because individual workers had medical problems that ranged from a mild cardiac condition to psychological counseling after a divorce, hemorrhoids and overweight.
The Health Insurance Association of America, an insurers' trade group, acknowledges that stiff competition among its members to insure businesses likely to be good risks during the first year of coverage has aggravated the problem in the small-business market.
But it says that rapid rate increases are directly tied to the soaring cost of health care.
Some business analysts blame the problem on tough competition in the insurance market.
They say insurance companies use policies aimed at excluding bad risks because their competitors do.
But the general practice makes it more difficult to combine small groups of people into larger groups, thus spreading the risk over a larger base of premiums.
"I'm not accusing insurers of dereliction of duty," Robert Patricelli of the U.S. Chamber of Commerce told Mr. Waxman's panel.
"You can't ask one carrier to underwrite on social grounds when that might destroy it in the marketplace."
Rep. Waxman and Democratic Sen. Edward Kennedy of Massachusetts have proposed regulation to deal with the problem.
The proposal is just part of legislation that would require businesses to provide health benefits, an idea that is strongly opposed by small business who say it would just compound the insurance-cost problems.
But small-business lobbyists say they support the idea, included in the Kennedy-Waxman bill, of new laws or regulations requiring greater use of community rating, which pegs rates to the use of health care by a community or other large group, and is designed to prevent insurance companies from taking only low-risk small companies as clients.
But first on the list of priorities, says the National Federation of Independent Business, is to prohibit state laws requiring the inclusion of specialty items, such as psychiatric care, in basic health plans.
Such requirements, they argue, make it difficult to provide a basic, low-cost health-benefits package.
"Before the state of Wisconsin mandated that mental-health care be covered, there were only 70 mental-health clinics in the state; now there are 400," says Carolyn Miller, an NFIB lobbyist.
She contends that similar mandates have driven up insurance costs 20% in Maryland and 30% in California.
The insurance-industry association also strongly disagrees with the proposed community rating, which "doesn't save one dollar," argues James Dorsch, HIAA's Washington counsel.
"It just makes healthy businesses subsidize unhealthy ones and gives each employer less incentive to keep his workers healthy."
Mr. Dorsch says the HIAA is working on a proposal to establish a privately funded reinsurance mechanism to help cover small groups that can't get insurance without excluding certain employees.
The complexities of the insurance problem make the outcome difficult to predict.
But to Ms. Allen, the employee whose back problem triggered a huge insurance-rate increase, the issue was simple.
"What good is having health insurance," she asked, "when it's so expensive that it becomes impossible to keep after only one major claim?
The Belgian consumer price index rose a provisional 0.1% in October from the previous month and was up 3.64% from October 1988, the Ministry of Economic Affairs said.
The index, which uses a base of 1981 as 100, was calculated at 140.91 points in October, from 140.74 in September.
Annual inflation rose to 3.64% in October from 3.55% in September.
Belgium's inflation has been rising steadily for the past year, but the ministry said the latest rise is slower than gains in September and August.
Nashua Corp., rumored a potential takeover target for six months, said that a Dutch company has sought U.S. approval to buy up to 25% of Nashua's shares.
Nashua immediately responded by strengthening a poison-pill plan and saying it will buy back up to one million of its shares, or 10.4% of the 9.6 million outstanding.
Nashua, whose major business is selling copiers, facsimile machines and related supplies, said Reiss & Co. B.V. of the Netherlands filed a request with the Federal Trade Commission under the Hart-Scott-Rodino Act for permission to buy more than $15 million of Nashua's stock but less than 25%.
Previously, an affiliate of Unicorp Canada disclosed a stake of less than 5% in Nashua, according to Daniel M. Junius, Nashua's treasurer.
Nashua's stock has fluctuated sharply on takeover speculation, rising to a high for the year of $42.875 a share in June from $29.75 in March.
But the company has had weak results so far this year, with earnings declining 43% to $13.7 million, or $1.43 a share, on a 4% decline in revenue to $713.5 million through the first nine months of the year.
Its stock has slumped recently, closing unchanged Friday at $29 a share in composite trading on the New York Stock Exchange; at that price, the company has a market value of about $278.4 million.
Nashua announced the Reiss request after the market closed.
Mr. Junius said Nashua's "intention is to remain an independent public company."
The company said it amended its shareholder rights plan by reducing to 10% from 20% the level of ownership by an outsider that would trigger the issuance to other holders of rights to buy additional shares of Nashua common at half price.
In addition, the company's board authorized the purchase of up to an additional one million shares.
Under a program approved by the company in 1987 that didn't specify a share amount, Nashua had purchased 481,000 shares through Sept. 29.
Alex Henderson, an analyst at Prudential-Bache Securities, said that while Nashua's performance this year has been "atrocious," the company nonetheless is attractive as a "classic breakup candidate because there's no similarity between its {four} businesses."
He estimated the breakup value at $55 a share.
In addition to selling Japanese-made photocopiers and facsimile machines in Europe and copier supplies in the U.S., Nashua has three other major businesses: labels and tapes, data storage disks for computers and mail-order photofinishing.
The closely held supermarket chain named Frank Nicastro vice president and treasurer.
The 47-year-old Mr. Nicastro joins Grand Union from Singer Co., where he was treasurer.
The current account deficit on France's balance of payments narrowed to 1.48 billion French francs ($236.8 million) in August from a revised 2.1 billion francs in July, the Finance Ministry said.
Previously, the July figure was estimated at a deficit of 613 million francs.
Seasonally adjusted figures for August weren't available because of a recent strike that has disrupted the ministry's data collection.
Weisfield's Inc. said it is in preliminary discussions regarding the possible sale of the company.
A spokesman for the retail jeweler said the company would provide more details today and that it expects to reach a definitive agreement by the end of the week.
In over-the-counter trading Friday, Weisfield's gained $9.50 to $39.
At that price, the company has an indicated value of $42.9 million.
Weisfield's had about 1.1 million shares outstanding as of July 31.
The stock gained $2.75 Thursday to close at a then-52 week high.
In the aftermath of the Beijing massacre on June 4, economists advanced wildly divergent views on how Hong Kong would be affected.
Among the most upbeat was BT Brokerage (Asia) Ltd.
In a June 5 reaction, the Bankers Trust Co. unit proclaimed the economy "shockproof."
Others were more cautious.
In a July analysis titled "From Euphoria to Despair," W.I. Carr (Far East) Ltd., another securities firm, said that eroding confidence might undermine future economic development.
Today, with business activity in Hong Kong staggering along at an uneven pace, the economy itself seems locked in a struggle between hope and fear.
Manufacturers have survived the turmoil in China largely unscathed.
Signs of revival seem evident in Hong Kong's hard-hit hotel sector.
But in the stock and real-estate markets, activity remains spotty even though prices have regained much of their lost ground.
Waning demand reported by importers, retailers and even fancy restaurants all reinforce a profile of a community that is sharply tightening its belt.
As many economists and businessmen see it, those incongruities underscore a paradox that seems likely to bedevil the economy throughout the 1990s.
That paradox is Hong Kong's economically rewarding yet politically perilous relationship with China.
As a model of capitalist efficiency on southern China's doorstep, Hong Kong's prospects look good.
China's land and labor offer inexpensive alternatives to local industry.
China-bound freight streams through the territory's port.
In the decade since the communist nation emerged from isolation, its burgeoning trade with the West has lifted Hong Kong's status as a regional business center.
These benefits seem secure despite China's current economic and political troubles.
But to Hong Kong, China isn't purely business.
It is also the sovereign power that, come 1997, will take over this British colony.
China's leaders have promised generous liberties for post-1997 Hong Kong.
That promise sounds shaky now that those same leaders have fallen back on Marxist dogma and brute force to crush their nation's democracy movement.
Outflows of people and capital from Hong Kong have been growing since the sovereignty issue first arose in the early 1980s.
A widely held assumption all along has been that, given its robust economy, Hong Kong will be able to attract sufficient foreign money and talent to comfortably offset the outflows.
With interest in emigration and investment abroad soaring since June 4, that assumption no longer seems so safe.
Investment and emigration plans take time to come to fruition.
Only four months have passed since the Beijing massacre, and few are prepared to predict its ultimate impact.
The only consensus is that more money and people may leave Hong Kong than had been thought likely.
This expected blow has cast a pall over the economy's prospects.
The question, as many people see it, is how long such uncertainty will last.
Maureen Fraser, an economist with W.I. Carr, a subsidiary of France's Banque Indosuez, believes that the territory may not be able to regain its momentum until some time after 1997.
It may experience an upswing or two in between.
But with local investors shaken by China's political and economic turmoil, she says, a genuine recovery may not arrive until Hong Kong can prove itself secure under Chinese sovereignty.
"Investors have to accept the possibility of a significant slowdown in economic activity in the runup to 1997," she says.
"Over the next few years, I would advise caution."
In a soon-to-be published book on the territory, a political economist, Miron Mushkat, has derived three future scenarios from interviews with 41 Hong Kong government officials and businessmen.
Nearly half of them argue that Hong Kong's uneasy relationship with China will constrain -- though not inhibit -- long-term economic growth.
The rest are split roughly between optimists who expect Hong Kong to hum along as before and pessimists who foresee irreparable chaos.
The interviews took place two years ago.
Since the China crisis erupted, Mr. Mushkat says, the scenario as depicted by the middle-of-the-road group bears a remarkable resemblance to the difficulties Hong Kong currently faces.
The consensus of this group, which he dubs "realists," is that the local economy will grow through the 1990s at annual rates averaging between 3% and 5%.
Such a pace of growth, though respectable for mature industrialized economies, would be unusually slow for Hong Kong.
Only twice since the 1960s has annual gross domestic product growth here fallen below 5% for two or more consecutive years.
The first instance occurred in 1967-68, when China's Cultural Revolution triggered bloody street rioting in the colony.
The other came in 1974-75 from the combined shock of world recession and a severe local stock market crash.
During the past 10 years, Hong Kong's economic growth has averaged 8.3% annually.
Given Hong Kong's record, Mr. Mushkat's "realists" might have sounded unduly conservative when the interviews took place two years ago.
Under the current circumstances, he says, their scenario no longer seems unrealistic.
"The city could lose some of its entrepreneurial flavor.
It could lose some of its dynamism," says Mr. Mushkat, a director of Baring Securities (Hong Kong) Ltd., a unit of Britain's Barings PLC. "
It doesn't have to be a disaster.
It just means that Hong Kong would become a less exciting place."
Going by official forecasts of GDP, which measures the colony's output of goods and services, minus foreign income, Mr. Mushkat's "realists" seem relatively close to the mark.
After taking into account the fallout from the China crisis, the government has projected 1989 GDP growth of 5%.
The updated forecast, published Aug. 25, compares with an earlier forecast of 6% published March 1 and a 7.4% rate achieved in
Sir Piers Jacobs, Hong Kong's financial secretary, says a further downward revision may be justified unless the economy stages a more convincing rally.
"We aren't looking at anything like a doomsday scenario," he says.
"But clearly we're entering a difficult period."
Many factors besides a dread of 1997 will have a bearing on Hong Kong's economy.
One concerns Japanese investors.
Barely visible on Hong Kong's property scene in 1985, by last year Japan had become the top foreign investor, spending $602 million.
The market has grown relatively quiet since the China crisis.
But if the Japanese return in force, their financial might could compensate to some extent for local investors' waning commitment.
Another -- and critical -- factor is the U.S., Hong Kong's biggest export market.
Even before the China crisis, weak U.S. demand was slowing local economic growth.
Conversely, strong consumer spending in the U.S. two years ago helped propel the local economy at more than twice its current rate.
Indeed, a few economists maintain that global forces will continue to govern Hong Kong's economic rhythm.
Once external conditions, such as U.S. demand, swing in the territory's favor, they argue, local businessmen will probably overcome their 1997 worries and continue doing business as usual.
But economic arguments, however solid, won't necessarily impress Hong Kong's 5.7 million people.
Many are refugees, having fled China's unending cycles of political repression and poverty since the Communist Party took power in 1949.
As a result, many of those now planning to leave Hong Kong can't easily be swayed by momentary improvements in the colony's political and economic climate.
Emigration applications soared in 1985, when Britain and China ratified their accord on Hong Kong's future.
In 1987, Hong Kong's most prosperous year for a decade, 30,000 left, up 58% from the previous year.
Last year, 45,000 went.
The government predicts that annual outflows will level off over the next few years at as much as 60,000 -- a projection that is widely regarded as unrealistically low.
A large number of those leaving are managers and professionals.
While no one professes to know the exact cost of such a "brain drain" to the economy, hardly anyone doubts that it poses a threat.
"When the economy loses a big portion of its work force that also happens to include its most productive members, economic growth is bound to be affected," says Anthong Wong, an economist with Hang Seng Bank.
While Wall Street is retreating from computer-driven program trading, big institutional investors are likely to continue these strategies at full blast, further roiling the stock market, trading executives say.
Bowing to a mounting public outcry, three more major securities firms -- Bear, Stearns & Co. Inc., Morgan Stanley & Co. and Oppenheimer & Co. -- announced Friday they would suspend stock-index arbitrage trading for their own accounts.
PaineWebber Group Inc. announced a pullback on Thursday from stock-index arbitrage, a controversial program-trading strategy blamed by many investors for encouraging big stock-market swings.
Though the trading halts are offered as a sign of concern about recent stock market volatility, most Wall Street firms remain open to handle program trading for customers.
Trading executives privately say that huge stock-index funds, which dwarf Wall Street firms in terms of the size of their program trades, will continue to launch big programs through the stock market.
Wells Fargo Investment Advisers, Bankers Trust Co. and Mellon Capital Management are among the top stock-index arbitrage clients of Wall Street, trading executives say.
These huge stock-index funds build portfolios that match the S&P 500 stock index or other stock indexes, and frequently swap between stocks and futures to capture profits.
"They will do it every chance they get," said one program-trading executive.
Consequently, abrupt swings in the stock market are not likely to disappear anytime soon, they say.
In fact, without Wall Street firms trading for their own accounts, the stock-index arbitrage trading opportunities for the big funds may be all the more abundant.
"More customers may come to us now," said James Cayne, president of Bear Stearns Cos.
Executives who manage these funds see the current debate over program trading as a repeat of the concern expressed after the 1987 crash.
They noted that studies completed after the 1987 crash exonerated program trading as a source of volatility.
"The issues that are (now) being raised, in classic anti-intellectual fashion, fly in the face of a number of post-crash studies," said Fred Grauer, chairman of Wells Fargo Investment Advisers.
A Bankers Trust spokesman said that the company's investment arm uses stock-index arbitrage to enhance investors' returns.
Officials at Mellon Capital were unavailable for comment.
Stock-index funds have grown in popularity over the past decade as pension funds and other institutional investors have sought a low-cost way to match the performance of the stock market as a whole.
Many money managers who trade stock actively have trouble consistently matching the S&P-500's returns.
Some stock-index funds are huge.
Wells Fargo Investment Advisers, for example, managed $25 billion in stock investments tracking the S&P 500 at the end of June, according to Standard & Poor's Corp.
Mr. Grauer said $2 billion of that is used in active index arbitrage.
Stock-index funds frequently use the futures markets as a hedging tool, but that is a far less aggressive strategy than stock-index arbitrage, in which traders buy and sell big blocks of stocks with offsetting trades in stock-index futures to profit from price differences.
The 190-point plunge in the stock market Oct. 13 has heightened concerns about volatility.
And while signs of an economic slowdown, softer corporate earnings and troubles with takeover financing all have contributed to the stock market's recent weakness, many investors rushed to blame program trading for aggravating market swings.
The Wall Street firms' pullback followed their recent blacklisting by several institutional investors.
Last Tuesday, Kemper Corp.'s Kemper Financial Services Inc. unit said it would no longer trade with firms committed to stock-index arbitrage, including the three that later suspended stock-index arbitrage trading on Friday.
Phoenix Mutual Life Insurance Co. and Founders Asset Management Inc. also cut off brokerage firms that engage in program trading.
Though it is still doing stock-index arbitrage trades for customers, Morgan Stanley's trading halt for its own account is likely to shake up firms such as Kidder, Peabody & Co. that still do such trades for their own account.
Morgan Stanley has consistently been one of the top stock-index arbitrage traders in recent months.
Indeed, Morgan Stanley's president, Richard B. Fisher, said the firm is putting up money to form a group of regulators, investors and investment banks to find out if stock-index arbitrage artificially induces stock-market volatility.
"We have to clear up these issues and find out what is present that is creating artificial volatility," Mr. Fisher said.
"There is no question that investor confidence (in the stock market) is critical."
Joining the call for some kind of study or regulatory action, Merrill Lynch & Co. recommended program-trading reforms late Friday, including higher margins on stock-index futures and greater regulatory coordination.
Separately, Mr. Cayne of Bear Stearns said his firm is working with regulators to balance margin requirements to "enhance stabilization."
Margin rules determine the minimum amount of cash an investor must put up when buying a security.
Current rules permit investors to put up less cash for futures than for stocks.
Some observers say that different rules governing stock and futures markets are partly responsible for volatility.
These rules, they say, permit faster and cheaper trading in futures than in stocks, which frequently knocks the two markets out of line.
Stock-index arbitrage, because it sells the more "expensive" market and buys the "cheaper" one, attempts to reestablish the link between the stock and futures markets, and the adjustments are often abrupt.
But unequal trading rules allow the futures market to trade differently from stocks, which invites frequent bouts of stock-index arbitrage in the first place.
"There has to be better coordination on a regulatory basis," said Christopher Pedersen, director of trading at Twenty-First Securities Corp.
"One agency should have the authority over all equity products.
Like so many trends in the entertainment industry, the current spate of rape dramas on television seems to represent a confluence of high-mindedness and self-interest.
The former comes from the latest wave of political activism in Hollywood, especially around feminist issues such as abortion.
The latter comes from the perception, on the part of many people in network TV, that their only hope of keeping viewers from defecting to cable is to fill the airwaves with an increasingly raw sensationalism.
Put these together, and you get programs about rape.
The best of the crop was last week's season premiere of "In the Heat of the Night," the NBC series based on a 1967 feature film about a black Philadelphia police detective in a small Southern town.
In the series, Virgil Tibbs (Howard Rollins) and his wife, Althea (Anne-Marie Johnson) have settled in Sparta, Miss.
Because the show has acquired a sense of place by being filmed on location in Georgia, this episode -- in which Althea gets raped by an arrogant white schoolteacher -- does a decent job of tracing the social repercussions of the crime.
Obviously, it's harder to establish a sense of place in a one-shot TV movie.
But tonight's offering, "Settle the Score" (9-11 p.m. EST, on NBC), doesn't even try.
This tale of a Chicago policewoman returning home to find the man who raped her 20 years earlier is supposed to be set in the Ozarks.
But it's more like an illustration of what Ben Stein describes in his study of social attitudes in the TV industry: "Fear of violence and animosity . . . because of race or religion, fear and lack of comprehension about the politics of small-town people . . . produce a powerful wave of dislike of small towns in the minds of TV writers and producers."
The writer and executive producer of "Settle the Score," Steve Sohmer, is a graduate of Yale who participated in a PBS documentary, aired this summer, in which six members of the Yale class of 1963 ruminated about their lives since graduation.
At one point in the documentary, Mr. Sohmer, who is Jewish, says he felt rejected by many of the Protestants and Southerners he met at Yale.
He quotes one student saying, "You're just the kind of Jewboy we Southerners can't stand.
" Mr. Sohmer confesses that it was partly in response to such attitudes that he is now "a dweller on one of the two islands off the coast of America."
But is exile in Hollywood enough?
Not to judge by "Settle the Score," in which Mr. Sohmer seems to be settling a score of his own.
Of all the unflattering portraits of small-town America I've seen on TV, this film is the most gratuitously nasty.
The sole sympathetic character is the prodigal daughter Kate (Jaclyn Smith), and she is tolerable only by virtue of having nothing in common with her kinfolk, a truly benighted pack of Southern Protestants whose grim existence consists mostly of growing peaches and repressing sex.
I mean, these folks are so uptight that they blame pretty Kate for the fact that when she was a teen-ager, someone tied her hands behind her back, thrust her head into a gunny sack, brutally raped and beat her, and then left her to die in a cold-storage room.
Her Pa (Howard Duff) is the kind of guy who, while saying grace at the supper table, pauses at the word "sin" and glares at the daughter he hasn't seen for two decades, because he knows in his heart that she enjoyed what happened in the cold-storage room, and has been indulging the same taste ever since in the fleshpots of Chicago.
People like Pa do exist, of course.
But in Mr. Sohmer's Ozarks, he is but the tip of the patriarchal iceberg.
Every man Kate encounters is either sniggeringly puritanical, viciously patronizing, revoltingly lecherous, or all three.
Add the fact that any one of them, including Pa, could be her attacker, and you have a setting that doesn't resemble small-town America, or even Hollywood's nightmare of small-town America, so much as a paranoid feminist dystopia like Margaret Atwood's "The Handmaid's Tale," itself soon to be (you guessed it) a Hollywood movie.
There are two exceptions: Josh (Jeffrey DeMunn), the local doctor who has always loved Kate; and Lincoln (Richard Masur), Kate's simple-minded but affectionate brother.
Josh makes clumsy passes at Kate when she's seething with anger and fear, but we know from the outset that he's not a member of the evil patriarchy.
How could he be?
He's the director of the local Planned Parenthood chapter.
As for Lincoln, if you can't guess why he's so sweet to his sister when everybody else hates her, then I'm not going to tell you.
As for the women, they're pathetic.
Kate's Ma (Louise Latham) is a moral coward.
Her sister-in-law (Amy Wright) is a sniveling prude afraid that Kate will seduce all the married men in town, including a particularly loathsome fellow named Tucker, whose idea of fun is to leave his wife at home tending to her bruises and cigarette burns, while he bullies Kate into a dance that consists of drooling on her while trying to break her ribs.
At the very least, it would appear that Sis is a poor judge of masculine charm.
Yet even these insulting caricatures are not as bad as the moral hypocrisy at the heart of "Settle the Score."
In the aforementioned episode of "In the Heat of the Night," we saw Althea being attacked, but we weren't invited to enjoy the spectacle.
In Mr. Sohmer's film, by contrast, we are urged to share the perverse excitement of the rapist creeping up on his victim, as the camera ogles Kate in various stages of undress and lingers on the sight of her trussed-up body during frequent flashbacks to the rape.
At this point, the truce between feminism and sensationalism gets mighty uneasy.
Take the scene in which Kate stands naked by a lighted window, whispering to her hidden assailant, "Look all you want.
Starting tomorrow, I'm stalking you.
" Or the one in which she and Josh are stranded in the city, and, after insisting on separate motel rooms, she knocks on his door to pour out her feelings about the rape -- wearing nothing but a mini-slip and a push-up bra.
Surely the question is obvious.
With friends like Mr. Sohmer, do the feminists of Hollywood need enemies?
Crossland Savings Bank's stock plummeted after management recommended a suspension of dividend payments on both its common and preferred stock because Crossland may not meet the new government capital criteria effective Dec. 7.
In composite trading on the New York Stock Exchange Friday, Crossland closed at $5.25, down $1.875, a 26% decline.
A spokesman said the savings bank may not qualify for the capital requirements because, under the proposed guidelines, its $380 million of preferred stock doesn't meet the "core capital" criteria outlined under the new Financial Institutions Reform, Recovery and Enforcement Act of 1989.
He added that final guidelines to be published in early November will determine whether the bank is in compliance.
Crossland said it retained three investment bankers to assist it in developing and implementing a financial restructuring plan.
It wouldn't identify the bankers.
Additionally, Crossland reported a third-quarter loss of $175.5 million, or $13.44 a share, compared with net income of $27.1 million, or $1.16 a share, a year ago.
A major factor in the third-quarter loss was the write-down of $143.6 million of goodwill.
The spokesman said that the proposed guidelines caused Crossland to revise its business objectives and, consequently, to write down the asset value of some previous acquisitions.
Crossland recorded an additional $20 million in loan loss reserves in the third quarter.
Net interest income for the third quarter declined to $35.6 million from $70.1 million a year ago.
However, non-interest income rose to $23.5 million from $22 million.
Third-quarter loan originations dropped sharply to $663 million from $1 billion a year ago.
Standard & Poor's Corp. lowered the rating on Crossland's preferred stock to double-C from single-B-minus and placed it on CreditWatch for possible further downgrade.
It also placed on CreditWatch for possible downgrade other securities, including the double-B-minus/B rating of Crossland's certificates of deposit and the single-B rating of its senior subordinated capital notes.
About $518 million of debt is affected.
The envelope arrives in the mail.
Open it and two soulful eyes on a boy's brown face peer out from the page, pleadingly.
Does the tyke have a good mind about to be wasted?
Is he a victim of Gramm-Rudman cuts?
No, but he's endangered all the same: His new sitcom on ABC needs a following to stay on the air.
ABC hasn't had much luck with shows featuring blacks in recent years, and the producers of one new arrival are a bit desperate.
"Homeroom," a show about a black ad executive who gives up the boardroom for a fourth-grade classroom, is flunking the ratings test.
So producers Alyce and Topper Carew spun their Rolodexes and gathered names of black opinion makers to mount a direct-mail campaign.
By wooing a core black audience they figure they might keep the show alive at least until the spring semester.
Using direct mail for a TV show is like fishing for whale with a breaded hook.
It just isn't done.
But employing this kind of gut-wrenching plea to black consciousness makes it even more unusual.
Still, Mr. Carew thinks he can reach a good chunk of the three million-plus black homes he needs by mailing to the almost 10,000 blacks who form what he calls "the grapevine."
"The grapevine isn't organized, but you and I know it exists," says Mr. Carew, referring to the often uncannily small world of black professionals and community leaders.
"This is a very personal, ethnic style," Mr. Carew says. "
I want people in the barber shops and the beauty shops and standing in line at the rib joints to be talking about the show.
I want white America to talk about it, too, but I'm convinced that the grapevine is what's happening."
ABC says it is aware of the producers' action, but the mailing was sent without the network's blessing.
The letter, in fact, takes a jab at ABC for being a laggard in black programming.
Meanwhile, as the Sunday evening show struggles to stay afloat against the tough competition of "Murder, She Wrote," the grapevine idea is threatening to turn into a weed: The tactic apparently has inspired sample viewings, but accolades are slow in coming.
Doug Alligood, a black advertising executive who tracks black viewing patterns, gives the Carews an "A" for marketing moxie, but isn't alone in his lukewarm reaction.
Some shows just don't impress, he says, and this is one of them.
TransCanada PipeLines Ltd. said it plans to shift its headquarters to Calgary, Alberta, from Toronto next year to cut costs and be closer to the upstream natural-gas industry.
Gerald Maier, president and chief executive officer of the natural-gas pipeline and marketing concern, said the company's future growth is "increasingly linked" to decisions made by Calgary-based gas producers.
"Since deregulation of the market in 1985, producers have become much more intensely involved in both transportation and marketing," Mr. Maier said. "
It's a matter of being close to those suppliers; many of those companies don't know us as well as they should."
TransCanada transports all gas that moves eastward from Alberta.
That includes all the gas consumed in Ontario and Quebec, along with the bulk of Canadian gas exports to the
Walter Litvinchuk, vice president of Pan-Alberta Gas Ltd., a Calgary-based gas marketing concern, said the industry will welcome the move.
"Having more than a token presence here should enhance communications and business relationships," Mr. Litvinchuk said. "
Since the cost of transporting gas is so important to producers' ability to sell it, it helps to have input and access to transportation companies."
The move, which could cost TransCanada as much as 50 million Canadian dollars (US$42.5 million) in relocation and severance payments, should be complete by next summer, Mr. Maier said.
All 700 Toronto-based employees will be offered positions in Calgary, the company said.
The company will save between C$4 million and C$6 million annually in office expenses and other administrative costs by moving to Calgary, Mr. Maier added.
Part of both the costs and the savings could be passed on to shippers on the TransCanada pipeline through tolls, which are based on the value of the pipeline system and the cost of operating it.
TransCanada is 49.1% owned by Montreal-based holding company BCE Inc.
Since its founding in 1818, Brooks Brothers, the standard-bearer of the Ivy League look, has eschewed flashy sales promotions and fashion trends -- the rules that most retailers live by.
But with sales growth sluggish and other men's stores putting on the heat, the venerable retailer can no longer afford such a smug attitude.
So two weeks ago, thousands of Brooks Brothers charge customers -- customers conditioned to wait for twice-yearly clearance sales -- got a surprise: an invitation to come in and buy any one item for 25% off.
During the four-day promotion, shoppers at the Short Hills, N.J., store lined up to pay for big-ticket items like coats and suits.
That's not all.
Departing from its newspaper ads featuring prim sketches of a suit or a coat, Brooks Brothers is marketing an updated image in a new campaign that carries the slogan, "The Surprise of Brooks Brothers."
One color photo displays a rainbow of dress shirts tied in a knot; another picture shows neckties with bold designs.
The message is loud and clear: This is not your father's Brooks Brothers.
As part of its national ad pitch, Brooks Brothers will show less preppy women's clothes, moving away from its floppy-tie business stereotype.
One ad shows a bright red jacket paired with a black leather skirt.
And the ad copy is cheeky: "How can you be a Wall Street hot shot without at least one Brooks Brothers suit in your portfolio?"
Brooks Brothers hopes that shaking its time-honored traditions will attract more young men and more women and change consumer perceptions about its range of merchandise.
"We have men who only buy their shirts and underwear here or younger customers who only buy their {job} interview suit here," says William Roberti, chairman and chief executive officer of Brooks Brothers. "
We want them to buy more of their wardrobe here."
Industry watchers agree that Brooks Brothers is long overdue in updating its buttoned-down image, which has stunted its growth.
When acquired in May 1988 by British retailer Marks & Spencer PLC, Brooks Brothers' annual operating profit was about $41.8 million on sales of $290.1 million.
Mr. Roberti concedes that since the $750 million takeover, "sales growth hasn't been dramatic."
For the 11 months ended March 31, operating profit at the 52-store chain totaled $40.5 million on sales of $286.8 million.
As Brooks Brothers jumps into the fashion fray, it will be playing catch up.
Many clothiers, especially Ralph Lauren, have cashed in on the recent popularity of updated Ivy League and English styles.
In keeping with men's broader fashion scope today, businessmen are dabbling in English and Italian suits that are conservative but not stodgy.
The rigid Ivy League customer, Brooks Brothers' bread and butter, meanwhile is becoming extinct.
Thus, Brooks Brothers has lost customers to stores that offer more variety such as Paul Stuart, Barneys New York and Louis, Boston.
"Brooks Brothers no longer has a lock on the {Ivy League} customer who is status-conscious about his clothes," says Charlie Davidson, president of the Andover Shop, a traditional men's store in Cambridge, Mass.
By making a break from tradition, Brooks Brothers is seeking a delicate balance.
If it promotes fashion too much, the shop risks alienating its old-line customers; by emphasizing "value," it risks watering down its high-minded mystique.
Fashion industry consultants also question whether the company can make significant strides in its women's business, given that its customer base is less established and that conservative business dress for women is on the decline.
Brooks Brothers' aim is for 20% of total sales to come from the women's department, up from the current 12%.
"Everybody forgets that there are fashion cycles in classic merchandise," observes Carol Farmer, a retail consultant.
"For women, dressing for success in a real structured way is over."
Despite these challenges, Marks & Spencer sees big potential in Brooks Brothers, noting the widely recognized name and global presence.
Marks & Spencer plans to open roughly 18 more U.S. stores in the next five years.
Brooks Brothers says business is robust at its 30 outlets in Japan and two shops in Hong Kong.
Marks & Spencer is also considering opening stores across Europe sometime in the future.
Alan Smith, president of Marks & Spencer North America and Far East, says that Brooks Brothers' focus is to boost sales by broadening its merchandise assortment while keeping its "traditional emphasis."
The British parent is also streamlining: Brooks Brothers, which continues to make almost all of its merchandise, recently shut one of its two shirt plants in Paterson, N.J., and has closed boys' departments in all but 20 stores.
Brooks Brothers is also remodeling its stores.
Wednesday, it will unveil a $7 million refurbishing at its flagship store on Madison Avenue.
With newly installed escalators, the store retains its signature wood-and-brass look but is less intimidating.
More shirts and sweaters will be laid out on tables, instead of sitting behind glass cases, so that customers can "walk up and touch them," Mr. Roberti says.
Because the biggest growth in menswear is in casual sportswear, Brooks Brothers is chasing more of that business.
The entire second floor of its Madison Avenue store is now casual sportswear featuring items such as ski sweaters, leather backpacks and a $42 wool baseball hat with the store's crest.
The centerpiece of the overhaul, according to Mr. Roberti, is the men's tailored clothing department, where Brooks Brothers has added new suit styles and fabrics.
"The perception out there is that we are very conservative and we only sell one type of suit," Mr. Roberti says, referring to Brooks Brothers' signature three-button "sack suit," with a center-vented jacket and boxy fit.
But it now offers more two-button versions and suits with a tapered fit.
It also plans to add suits cut for athletic men with broader upper bodies.
Next spring, nearly 30% of its suits will have pleated pants, compared with virtually none a couple of years ago.
Says Mr. Roberti: "We want to turn the customer on.
Ferro Corp. said it will buy back as many as one million common shares.
The maker of chemical and industrial materials didn't say how much it would pay or when it would make the transactions.
Ferro also said it would cancel the unused portion of a 1987 buy-back plan for administrative reasons.
The plan calls for the company to buy back 2,250,000 shares, which reflects a 3-for-2 stock split this year.
So far the company had bought back 1.6 million shares.
In New York Stock Exchange composite trading Friday, Ferro closed at $25.25, down 50 cents.
Arthur Price abruptly quit as president and chief executive officer of MTM Entertainment Inc., a Los Angeles production company that has fallen on hard times.
Mr. Price, 61 years old, also stepped down from the board of TVS Entertainment PLC, the British TV company that last year bought MTM, producer of such TV programs as "Hill Street Blues" and "The Mary Tyler Moore Show."
A TVS spokesman said he didn't know Mr. Price's plans.
James Gatward, TVS's chief executive, said in a statement that he will "assume overall responsibility" for MTM's operations until a successor is named.
Industry analysts speculated that Mr. Price's sudden departure may have stemmed from conflicts with Mr. Gatward.
Mr. Price "wanted to run the MTM business" and may have regretted selling the company to TVS, suggested Charles Denton, managing director of Zenith Productions, a subsidiary of Carlton Communications PLC, London.
Mr. Gatward declined to comment, and Mr. Price couldn't be reached on Friday.
In the TVS statement, Mr. Price said "leaving MTM was a very difficult decision," but added that "it is now time for a change. . . ."
The $320 million purchase of MTM represented an audacious international move for TVS, which then was about half the U.S. concern's size.
At the time, Mr. Gatward said his friendship with Mr. Price had smoothed the way for its link with the small British company.
But TVS stunned industry analysts last month by disclosing that it expected MTM to post an operating loss for this year.
In that announcement, TVS also said it was trimming production finance and hiring a new U.S. sales manager.
Mr. Gatward has spent a lot of time since late September at MTM's headquarters; he eliminated three departments and fired six executives, according to the TVS spokesman.
Further staff cuts are likely, the spokesman indicated.
"Obviously, we are looking at making economies across the board."
TVS blames difficulties in peddling reruns of MTM shows to U.S. broadcasters for the problems at MTM.
The market for reruns sold to local U.S. broadcasters has been weak for the past three or four seasons.
Mr. Price co-founded MTM in 1969 with U.S. actress Mary Tyler Moore and Grant Tinker, her then-husband.
Mr. Tinker later left to become chairman of National Broadcasting Co.
The TVS spokesman said Mr. Price still holds about an 8% TVS stake, acquired as part of the MTM acquisition.
In late trading on London's Stock Exchange Friday, TVS shares rose four pence to 195 pence a share.
Two rival bidders for Connaught BioSciences extended their offers to acquire the Toronto-based vaccine manufacturer Friday.
Institut Merieux S.A., which offered 942 million Canadian dollars (US$801.2 million), or C$37 a share for Connaught, said it would extend its bid, due to expire last Thursday, to Nov. 6.
A C$30-a-share bid by Ciba-Geigy Ltd., a pharmaceutical company based in Basel, Switzerland, and California-based Chiron Corp., a bioresearch concern, was extended to Nov. 16.
It had been due to expire Friday evening.
Merieux previously said it would ensure its bid remained open pending a final decision by Canadian regulators on whether to approve the takeover.
Merieux, a vaccine and bioresearch firm based in Lyon, France, is controlled 50.1% by state-owned Rhone Poulenc S.A.
The Canadian government previously said Merieux's bid didn't offer enough "net benefit" to Canada to be approved, and gave Merieux an until mid-November to submit additional information.
Merieux officials said last week that they are "highly confident" the offer will be approved once it submits details of its proposed investments to federal regulators.
Both offers are conditional on regulatory approvals and enough shares being tendered to give the bidders a majority of Connaught's shares outstanding.
Institut Merieux, which already holds a 12.5% stake in Connaught, said that at the close of business Thursday, 5,745,188 shares of Connaught and C$44.3 million face amount of debentures, convertible into 1,826,596 common shares, had been tendered to its offer.
At the close of business Thursday, Ciba-Geigy and Chiron said 11,580 common shares had been tendered to their offer.
At last report, Connaught had 21.8 million shares outstanding.
Separately, the Ontario Supreme Court said it will postpone indefinitely a ruling on the lawsuit launched by the University of Toronto against Connaught in connection with the Merieux bid.
In a statement prepared by lawyers for the university and Connaught, the parties said they agreed that as a result of reaching a C415 million research accord, "It is unnecessary that there be a judgment on the merits {of the case} at this time."
Lawyers for the two sides weren't immediately available for comment.
The university had sought an injunction blocking Connaught's board from recommending or supporting an offer for the company by Merieux.
Conseco Inc. said it is calling for the redemption on Dec. 7 of all the 800,000 remaining shares outstanding of its $1.875 Series A convertible preferred stock at $26.805 a share.
The insurance concern said all conversion rights on the stock will terminate on Nov. 30.
Until then, Conseco said the stock remains convertible into common stock at the rate of 1.439 shares of common stock for each share of preferred stock, which is equivalent to a conversion price of $17.50 a common share.
In New York Stock Exchange trading Friday, Conseco closed at $19.50, down 25 cents.
Centerior Energy Corp. said the Ohio Water Development Authority approved terms for two series of tax-exempt bonds to finance a water-pollution control and solid-waste disposal facilities.
The authority will issue a total of $446.5 million of pollution-control revenue bonds.
Proceeds of the sale will go to Centerior's operating subsidiaries to finance the projects, located at a nuclear unit located near Cleveland.
The bonds will be issued for a term of 34 years at an interest rate of 8%.
Goldman, Sachs & Co. is the underwriter.
General Motors Corp.'s GMC Truck division put a $750 cash incentive on its 1990 full-sized Jimmy and Suburban trucks.
The program, which runs through Jan. 4, also offers low-rate financing in lieu of the cash rebate.
After days of intense but fruitless negotiations, a federal judge last week threatened to convert William Herbert Hunt's Chapter 11 personal bankruptcy case into a Chapter 7 liquidation.
Judge Harold C. Abramson raised the possibility after talks to end a feud between two major creditors failed and all three reorganization plans in the case ran into roadblocks.
If the case is converted to Chapter 7, what remains of the oil tycoon's once-vast estate -- now believed to have a value of less than $125 million -- would be sold off quickly with most of the proceeds going to the Internal Revenue Service, whose claim for $300 million in back taxes has priority in the case.
Hundreds of smaller creditors could get nothing, according to attorneys involved.
While admitting such a move would be "devastating" to most creditors, Judge Abramson told a courtroom filled with nearly two dozen attorneys that he was concerned about the toll mounting legal bills will take on Mr. Hunt's shrinking estate and about the fact that, following voting by creditors, none of the reorganization plans appeared to be viable in their present form.
"It would be a shame to have a Chapter 7 after all the progress in this case," said Judge Abramson.
Under Chapter 11 of the Federal Bankruptcy Code, a company continues to operate under protection from creditors' lawsuits while it works out a plan to pay its debts.
Under Chapter 7, the assets of a company are sold off to pay creditors.
Despite his reluctance to take the latter step, the judge indicated he would move quickly after hearing testimony later this week in the bitter dispute between Manufacturers Hanover Trust Co. and Minpeco S.A., a minerals concern owned by the Peruvian governmemt.
The Manufacturers Hanover Corp. unit, which is seeking repayment of a $36 million loan, has asked the court to give its claim priority over that of Minpeco, which won a $132 million judgment against Mr. Hunt, his brother Nelson Bunker Hunt and other defendants last year in a case stemming from their alleged attempts to corner the silver market in
While claiming that penalties, legal fees and interest have driven the value of its claim to more than $250 million, Minpeco has agreed to settle for an allowed claim of as much as $65.7 million.
But even that is disputed by Manufacturers Hanover which, in alliance with the IRS, contends that Minpeco has already collected more than its actual damages from other defendants in the silver-conspiracy case.
Under prodding from Judge Abramson, a Minpeco executive flew in from Peru last week to talk directly with executives from Manufacturers Hanover on a settlement.
Despite long private sessions in both New York and Dallas, the two sides ended the week "6,000 miles and many dollars apart," according to attorney Hugh Ray, who represents Manufacturers Hanover.
Meanwhile, inside the courtroom, the judge said he would fine attorneys for the two creditors $50 every time they referred to each other with terms such as "liar" or "slime."
All three major creditors -- the IRS, Minpeco and Manufacturers Hanover -- voted against and effectively doomed a reorganization plan proposed by Mr. Hunt.
A reorganization plan proposed jointly by the IRS and Manufacturers Hanover was stalled by a negative vote from Minpeco.
The mineral concern's own reorganization plan met a similar fate after opposition from the IRS and Manufacturers Hanover.
Neither plan is dead, however, and the judge could force creditors to accept some version of them after ruling on the Minpeco-Manufacturers Hanover dispute.
Meanwhile, settlement negotiations continue between Mr. Hunt and the IRS, which has already reached a tentative agreement with Nelson Bunker Hunt.
The two sides have been far apart on how much Herbert Hunt will continue to owe the government after his assets are sold.
Stuart E. Eizenstat, a partner in the Washington law firm of Powell, Goldstein, Frazer & Murphy, was named a director of this utility holding company, increasing board membership to 14.
Pacific First Financial Corp. said it signed a non-binding letter of intent to acquire the construction lending unit of Old Stone Bank of California.
Terms haven't been finalized, but the transaction is expected to close by year end, Pacific First said.
Old Stone's construction lending portfolio includes about $250 million in real-estate loans outstanding.
The unit has 30 employees in four California offices, the company said.
Pacific First owns Pacific First Federal Savings Banks and other financial services firms.
General Electric Co.'s rail-car leasing unit completed the $178.5 million purchase of similar businesses from Leucadia National Corp. and Brae Corp., 74%-owned by Leucadia, the sellers said.
The buyer was GE Capital Railcar Services, Chicago, a major owner of railway equipment and part of the GE Capital operations.
Leucadia, New York, estimated it had a pre-tax gain on the transaction of $57 million, including its part of Brae's gain.
Because of tax-loss carry-forward, Leucadia said it expects to escape taxes on "a substantial portion of the gain."
The estimated gain for Brae is $15 million, including a tax credit of $7 million, the sellers said.
"The credit for income taxes is a result of having provided deferred income taxes applicable to the sold assets at the higher income tax rates in effect in prior years," the sellers said.
Automatic Data Processing Inc. plans to redeem on Nov. 16 its $150 million of 6.5% convertible subordinated debentures due March 1, 2011.
The computing-services concern will pay $1,059.04 for each $1,000 face amount of debt.
The conversion price for the debentures is $41.725 a share.
In New York Stock Exchange composite trading Friday, Automatic Data closed at $46.50 a share, down $2.25.
If all the debt is converted to common, Automatic Data will issue about 3.6 million shares; last Monday, the company had nearly 73 million shares outstanding.
Automatic Data is redeeming the bonds because the after-tax cost of the interest on the bonds is higher than the dividend yield on the common, a spokesman said.
Dow Jones & Co. extended its tender offer of $18 a share, or about $576 million, for the 33% of Telerate Inc. that it doesn't already own until 5 p.m. EST, Nov. 6.
The offer, which Telerate's two independent directors have rejected as inadequate, previously had been scheduled to expire at midnight Friday.
Dow Jones said it extended the offer to allow shareholders time to review a supplement to the Dow Jones tender offer circular that it mailed last Friday.
The supplement contains various information that has been filed with the Securities and Exchange Commission since Dow Jones launched the offer on Sept. 26, but it doesn't change the terms and conditions of the offer except to extend its expiration date.
In Delaware Chancery Court litigation, Telerate has criticized Dow Jones for not disclosing that Telerate's management expects the company's revenue to increase by 20% annually, while Dow Jones based its projections of Telerate's performance on a 12% revenue growth forecast.
In the tender offer supplement, Dow Jones discloses the different growth forecasts but says it views the 20% growth rate "as a hoped-for goal" of Telerate's management "and not as a realistic basis on which to project the company's likely future performance."
Telerate shares fell 50 cents on Friday to close at $20 each in New York Stock Exchange composite trading.
Dow Jones shares also fell 50 cents to close at $36.125 in Big Board composite trading.
Dow Jones has said it believes the $18-a-share price is fair to Telerate's minority shareholders.
Late last week, representatives of Dow Jones and Telerate began negotiations about the terms of the offer, but those talks didn't result in any changes in the offer.
Telerate provides information about financial markets through an electronic network.
Dow Jones, which owns 67% of Telerate, publishes The Wall Street Journal, Barron's magazine, community newspapers and operates financial news services and computer data bases.
Chamberlain Manufacturing Corp. won a $25.8 million Army contract for 155mm artillery shell casings.
Avondale Industries Inc. received a $13.5 million Navy contract for ship spare parts.
Air & Water Technologies Corp. completed the acquisition of Falcon Associates Inc., a Bristol, Pa., asbestos-abatement concern, for $25 million of stock.
Air & Water, which provides environmental services and systems, paid about 1.4 million of its shares for Falcon.
In American Stock Exchange composite trading Friday, Air & Water closed unchanged at $17.50.
At July 31, Air & Water had nearly 10 million shares outstanding.
The Canadian pig herd totaled 10,674,500 at Oct. 1, down 3% from a year earlier, said Statistics Canada, a federal agency.
Sows for breeding and bred gilts totaled 1,070,000, down 2% from a year ago.
(Jacksonville, Fla.) -- Charles Bates, president, chief executive and chief operating officer will resign from these positions and the board effective Oct. 31.
Norman J. Harrison, chairman, will succeed him as chief executive.
Roger L. Sutton, executive vice president, was appointed as the new president and chief operating officer.
Kerry P. Charlet will become executive vice president, and retain his positions as chief financial officer and treasurer.
Upset over the use of what it says are its exclusive trademarks, Hells Angels Motorcycle Corp. is fighting back -- in court.
Concord New Horizons Corp., creators of a 1988 movie called Nam Angels, used the gang's name and trademarks without authorization, the not-for-profit corporation says in a complaint filed in federal court.
Nam Angels depicts a group of the cycle gang's members on a mercenary mission to Viet Nam during the war years.
In addition to being broadcast on cable television, the movie also is being distributed on videocassettes, the suit alleges in seeking unspecified damages.
Also named in the suit is Media Home Entertainment Inc. of Culver City, Calif., its parent, Heron Communications Inc., and Broadstar Television of Los Angeles, holders of the copyright on the movie.
A Concord spokeswoman called the suit "unfounded" but declined to comment further.
Besides being upset with the film's use of the Hells Angels name and logos, the Angels are angry with their depiction in the movie.
"There is absolutely no way our board or membership would have approved the portrayal of the Hells Angels in this movie," said George Christie, president of the club's Ventura chapter.
"Portrayal of our members as disloyal to each other is totally contrary to the most important values of our organization -- loyalty and trust."
Nam Angels shows Angels fighting with each other and also depicts them as showing no remorse when a member is killed.
Both of these actions aren't characteristic of real Hells Angels, Mr. Christie said.
Hells Angels was formed in 1948 and incorporated in 1966.
In addition to 26 chapters in the U.S., there are 40 chapters in foreign countries.
Douglas H. Miller, self-employed in the oil and gas securities business, was named chairman of this oil and gas exploration company, filling a vacancy.
Mr. Miller, who has been a Coda director, also was named chief executive officer, succeeding Ted Eubank, who remains president and chief operating officer.
Lawrence M. Gressette Jr., president, was elected to the additional posts of chairman and chief executive officer of this utility holding company, effective Feb. 1, 1990.
The 57-year-old Mr. Gressette, who was also elected chairman and chief executive of all Scana subsidiaries, succeeds John A. Warren.
Mr. Warren will remain on the company's board.
The American Stock Exchange said a seat was sold for $165,000, unchanged from the previous sale Oct. 13.
Seats on the Amex currently are quoted at $151,000 bid and $200,000 asked.
The world had a big yuk recently when the Soviets reported a rash of UFO landings, one of them bringing tall aliens who glowed in the dark to Voronezh.
It is the opinion of Timothy Good, author of "Above Top Secret: The World UFO Cover-Up" (Quill/William Morrow, 592 pages, $12.95), that the world laughs too fast.
Here is a bible for UFO watchers, complete with pictures of people who say they've had personal relationships with aliens.
One photo shows a woman sporting a scar she says was made by a laser beam (a low-caliber weapon, from the looks of the wound).
So far anyway, our alien visitors seem more intent on brightening our skies than pulverizing us.
Mr. Good devotes much serious space to the events of Feb. 25, 1942, when American gunners spotted strange lights in the sky above Los Angeles.
Air-raid sirens sounded the alarm at 2:25 a.m., summoning 12,000 air wardens to duty.
Soon all hell broke loose.
Ground batteries, targeting an odd assortment of aircraft traveling at highly unusual speeds, opened up a furious fusillade.
The sky filled with 12.8-pound shells, several of which fell back to Earth, destroying homes and buildings.
When the smoke cleared, six people were dead (three from heart attacks), and everyone wondered what in the world they were shooting at.
Mr. Good, who documents these things as best he can, provides an official explanation in the form of a memorandum from Chief of Staff George C. Marshall to President Roosevelt: "1,430 pounds of ammunition," he wrote his commander in chief, were expended on "unidentified aircraft," flying at speeds as slow as 200 mph and elevations between 9,000 and 18,000 feet.
Well, thousands of Californians on the scene insisted the ammo had been uselessly aimed at a large, hardy UFO, but you will just have to make your own decision about such sightings.
One thing's for sure: There have been a ton of them, and greater beings than the editors of the National Enquirer have shown interest.
Gerald Ford, a fairly down-to-earth fellow, once sent a letter to the chairman of the Armed Services Committee recommending that "there be a committee investigation of the UFO phenomenon.
I think we owe it to the American people to establish credibility regarding UFOs and to produce the greatest possible enlightenment on the subject."
Jimmy Carter went further in a 1976 campaign promise: "If I become president, I'll make every piece of information this country has about UFO sightings available to the public, and the scientists.
I am convinced that UFOs exist because I have seen one. . . ."
But you know about campaign promises.
It still doesn't look like governments are coughing up everything they know.
Still, despite their efforts to convince the world that we are indeed alone, the visitors do seem to keep coming and, like the recent sightings, there's often a detail or two that suggests they may actually be a little on the dumb side.
For instance, witnesses in Voronezh say the pinheaded behemoths and their robot friend, after strolling around the city park, left behind some rocks.
Now why, you have to ask yourself, would intelligent beings haul a bunch of rocks around the universe?
Or land in Russia so often.
In a 1961 incident, a Soviet mail plane disappeared off the radar screen just after radioing its position to ground control in Sverdlovsk.
A search party soon found the unscathed aircraft in a forest clearing much too small to have allowed a conventional landing.
What's more, the seven mail personnel aboard were missing.
Again, you have to ask the obvious question: Why would intelligent beings kidnap seven Soviet mailmen?
Speculation as to the nature of aliens will no doubt continue until we wake up one morning to find they've taken over "The Today Show," the way they overwhelm an entire town in Jack Finney's "Invasion of the Body Snatchers" (Fireside/Simon & Schuster, 216 pages, $8.95).
Maybe some of our talk-show hosts and anchors have already been taken over?
The point of this 1955 novel, which spawned two movies, is that the soulless pod people replicated by alien plants are virtually indistinguishable from human folks.
Another guy who thinks they're out there and closing fast is Whitley Strieber, whose new novel, "Majestic" (Putnam, 317 pages, $18.95), takes a look at a reported 1947 UFO crash near the Roswell Army Air Field in a New Mexico desert.
Mr. Strieber knows a lot about aliens.
He even had sex with one -- sort of, and not intentionally -- as readers learned in his "Communion" (a book recently described in the New York Times as a "nonfiction best seller").
The way Mr. Strieber tells it in his earnest prose, the intelligence officer who found the craft's strange debris was forced by the government to call the flower-inscribed scraps parts of a weather balloon.
The apparent crash became top secret, and the alien creatures went away upset with the rude ways of human beings.
We lost our chance to communicate with sweet-natured visitors "about four feet tall {who} looked as though they were made of puffed-up marshmallow."
Mr. Shiflett is an editorial writer for the Rocky Mountain News.
Trustcorp Inc. will become Society Bank & Trust when its merger is completed with Society Corp. of Cleveland, the bank said.
Society Corp., which is also a bank, agreed in June to buy Trustcorp for 12.4 million shares of stock with a market value of about $450 million.
The transaction is expected to close around year end.
When the economy stumbled in the mid-1970s, Akzo NV fell out of bed.
Towering overcapacity in the synthetic fiber business, which accounted for half of the Dutch chemical company's sales, led to huge losses and left Akzo's survival in doubt.
It wasn't until the early 1980s that Akzo nursed itself back to health.
Now, as a new downturn in the chemical industry looms, Akzo says it is in far better shape to cope.
Investment analysts generally agree.
Aside from slashing costs and investing heavily in its plants, Akzo has spent 3.9 billion guilders ($1.88 billion) on acquisitions since 1983 to give it better balance.
During the same period, the company has sold about 1.6 billion guilders of assets.
The fibers business, whose products go into textiles, carpeting and myriad industrial uses, now accounts for only 20% of Akzo's sales.
"We have definitely become less cyclical," Syb Bergsma, executive vice president-finance, said in an interview.
Still, Akzo hasn't yet found a way to achieve another goal: a large presence in the U.S. market for prescription drugs.
Mr. Bergsma said prices for U.S. pharmaceutical companies remain too high, making it unlikely that Akzo will pursue any major acquisitions in that area.
But he said Akzo is considering "alliances" with American drug companies, although he wouldn't elaborate.
An indication of Akzo's success in reshaping itself will come Thursday when it reports third-quarter results.
Analysts expect the company to show profit of about 225 million guilders, up 9% from 206.3 million guilders a year earlier.
A bigger test will come next year if, as many analysts expect, bulk chemical prices slump in Europe.
"Maybe Akzo can surprise the investment world a bit," said Jaap Visker, an analyst at Amsterdam-Rotterdam Bank NV.
He figures Akzo is likely to be one of the few major chemical companies to show profit growth next year.
The bank projects Akzo will show per-share earnings of 24 guilders in 1990, up from an estimated 22.5 guilders for this year and the 20.9 guilders reported for 1988.
At James Capel & Co. in London, analyst Jackie Ashurst notes that Akzo is less exposed than many of its rivals to the most volatile chemical products.
For example, Akzo has only minor petrochemical operations, is small in plastics and doesn't make fertilizers.
Thus, while Akzo profited less than many rivals from the boom of recent years in petrochemicals and plastics, it has less to fear from the current slump.
The company is exposed to bulk chemicals, however.
Although bulk-chemical prices have begun falling in the U.S., they are generally stable in Europe, Mr. Bergsma said.
A decline may come in the first half of 1990, he said, but the market doesn't appear on the verge of a severe downturn.
To reduce the danger of such pricing cycles, Akzo has invested heavily in specialty chemicals, which have highly specific industrial uses and tend to produce much higher profit margins than do bulk chemicals.
Akzo's biggest move in this area was the 1987 acquisition of Stauffer Chemical Co.'s specialty chemical business for $625 million.
In a less glamorous field, Akzo is the world's biggest producer of industrial salt, used as a raw material for the chemical industry as well as for such tasks as melting ice.
Akzo also makes products derived from salt, such as chlorine and caustic soda.
In the fibers division, profit remains weak, largely because of persistent overcapacity.
But Akzo is still slimming down: It recently announced plans to eliminate about 1,700 fiber-related jobs in the Netherlands and West Germany.
Although the polyester and rayon markets remain mostly bleak, Akzo has high hopes for some emerging fiber businesses, such carbon fibers and aramid, extremely strong fibers used to reinforce tires and metals and to make such products as bullet-proof vests.
Akzo's Twaron aramid fiber is a distant second to Du Pont Co.'s Kevlar, which dominates the market.
Mr. Bergsma said world-wide industry sales of aramid fibers are expected to total about $500 million this year.
Sales growth of 10% a year seems possible, he said, and Akzo expects its Twaron business to become profitable in 1990.
Akzo also has spent heavily on acquisitions in paints, auto finishes and industrial coatings.
In August, for example, it completed the $110 million acquisition of Reliance Universal Inc., a U.S. maker of industrial coatings for wood, metals and plastics, from Tyler Corp.
Mr. Bergsma said Akzo is likely to see strong profit growth from coatings as it realizes cost savings and other benefits from its greater scale.
For Akzo's drug business, where profits have shown litle change for the past five years, Mr. Bergsma predicted moderate profit growth.
Akzo is the leading seller of birth-control pills in Europe but is still seeking regulatory approvals to enter that market in the U.S. and Japan.
Mr. Bergsma said Akzo hopes to have approval to sell its Marvelon pill in the U.S. in 1992.
Akzo also has small operations in diagnostic tests, generic drugs and veterinary products.
Veterinary products are showing especially strong growth, Mr. Bergsma said.
Among the leading products is a flu shot for horses.
We're sorry to see Nigel Lawson's departure from the British government.
He is a politician with the courage of true conviction, as in summarily sacking exchange controls and in particular slashing the top rate of income taxation to 40%.
But in the end his resignation as Chancellor of the Exchequer may be a good thing, especially if it works as he no doubt intends -- by forcing Prime Minister Thatcher and her counterparts elsewhere to confront the genuine intellectual issues involved.
The early omens, we admit, scarcely suggest so wholesome an outcome.
The Fleet Street reaction was captured in the Guardian headline, "Departure Reveals Thatcher Poison."
British politicians divide into two groups of chickens, those with their necks cut and those screaming the sky is falling.
So far as we can see only two persons are behaving with a dignity recognizing the seriousness of the issues: Mr. Lawson and Sir Alan Walters, the counterpoint of the Chancellor's difficulties, who also resigned as personal adviser to Mrs. Thatcher.
The problem is that on the vital issue of monetary policy and exchange rates, conservative, free-market economists divide into at least three incompatible camps.
There are the strict monetarists, who believe that floating exchange rates free an economy to stabilize its price level by stabilizing the monetary aggregates.
There are the supply-side globalists, who seek to spread the advantages of a common currency through fixed exchange rates.
And there are the twin-deficit Keynesians, who predict/advocate devaluations to balance trade flows.
This is a problem not only for Prime Minister Thatcher but for President Bush, as shown in the ongoing bickering over the dollar between the Federal Reserve and the Mulford Treasury.
In the British case, Mr. Lawson is the closest thing in London to a supply-side globalist.
He not only slashed marginal tax rates, initially sparking fresh growth in Britain, but he wanted to regulate monetary policy by targeting exchange rates, indeed joining the European Monetary System.
While no doubt agreeing with Mr. Lawson on everything else, Sir Alan is a dyed-in-the-wool monetarist, inclined to defend floating rates to the death.
To make matters even more confusing, the earlier U.S. experience made clear that Mr. Lawson's tax cuts would have profound effects on Britain's international accounts and the value of sterling.
They increased the after-tax rate of return and made Britain a far more attractive place to invest, producing sudden capital inflows.
By accounting definitions, this had to produce a sudden trade deficit.
As in the U.S., it also produced a sudden burst in the demand for sterling, that is a surge in the sterling monetary aggregates, M-Whatever.
At this point, the options were: Crunch money to stop the boost in the aggregates, as Sir Alan surely advised, and forget the soaring pound.
To push the pound even lower trying to cure the trade deficit, a policy Britain has repeatedly proved disastrous.
Or to supply enough money to meet the increased demand and stabilize the exchange rate, as the Chancellor argued, and ensure the permanence of this policy by joining the EMS.
Faced with a similar situation, Paul Volcker let the dollar soar, (though monetary aggregates also grew so rapidly monetarists issued egg-on-the-face warnings of inflation).
But this devastated the U.S. manufacturing sector, laying the seeds of protectionism.
Mr. Lawson, though not allowed to join the EMS, chose to "shadow" the deutsche mark.
He reaped inflation along with rapid growth, no doubt validating Sir Alan's predictions in the Prime Minister's mind.
But more recently, the pound has been falling with high inflation, which has also seemed almost impervious to the high interest rates Mr. Lawson deployed to stop it.
So the British experience presents a genuine puzzle that reaches far beyond the shores of Albion.
We had been soliciting opinions on it long before Mr. Lawson's resignation, and offer some of the collection for the benefit of his successor and one-time deputy, John Major.
To begin with, we should note that in contrast to the U.S. deficit, Britain has been running largish budget surpluses.
In pursuit of this mystery, Keynesian adepts and twin-deficit mavens need not apply.
We should also add Mr. Lawson's own explanation, as we understand it.
Unlike the U.S., Britain never achieved even a momentary reduction in real wages.
The wage stickiness, which OECD studies confirm is particularly high in Britain, gives its economy a structural bias toward inflation.
Inflation is easier to spark and harder to control.
We should also concede that in the British experience the monetarist cause regains some of the credibility it lost in the U.S. experience.
Nearby Paul Craig Roberts, a distinguished supply-sider with monetarist sympathies, argues the case for Sir Alan.
Perhaps the fiscal shock of tax cuts is after all best absorbed by floating rates, though of course in the event Mr. Lawson resigned over whether to support a weak pound, not restrain a strong one.
We recall that Mr. Roberts not only chides the Chancellor for being too easy because of a desire to constrain sterling, but also led the chorus saying that Mr. Volcker was too tight when he let the dollar rise.
Somewhere in between there must be a golden mean, perhaps measured by M-Whatever, but perhaps measured by purchasing power parity.
The globalists tend to think Mr. Lawson ran onto technical reefs.
In fixing rates the choice of initial parities is crucial, for example, and perhaps he picked the wrong pound-DM rate.
For that matter, perhaps he fixed to the wrong currency.
We sympathize with Mrs. Thatcher's reluctance to tie her currency to one governed by the domestic political imperatives of West Germany.
Perhaps the shock would have been less if they'd fixed to another low-tax, deregulated, supply-side economy.
Alan Reynolds of Polyconomics adds his suspicion that the unrecognized inflationary culprit is the budget surplus.
Those who can shake Keynesian ghosts out of their heads might recognize that the retirement of gilts for cash is equivalent to an expansionary open-market operation, indeed, it is the definition of an open market operation to expand the money supply.
Mr. Reynolds also notes that since British banks have no reserve requirements, high interest rates are less likely to curb inflation than to cause recession.
We would add that in political terms, Mrs. Thatcher's problem was failing to decide between the Chancellor and her adviser.
In the end, neither policy was followed, and instead of learning anything we are left with a mystery.
In particular, "shadowing" a currency is anything but fixing; it is an open announcement that the exchange rate target has no credibility.
All the more so when strong voices are heard opposing the policy.
Better to have a true monetarist policy, just for the experience.
So Mr. Lawson had to resign.
In the end his move was sparked by remarks in excerpts from Sir Alan's autobiography in The American Economist, a 10,000-circulation academic journal.
But it was the underlying situation that became intolerable.
What Mr. Major and Mrs. Thatcher will do now remains to be seen.
They confront stubborn inflation and a sagging economy, that is to say, stagflation.
This cannot be solved by provoking a further downturn; reducing the supply of goods does not solve inflation.
Our advice is this: Immediately return the government surpluses to the economy through incentive-maximizing tax cuts, and find some monetary policy target that balances both supply and demand for money (which neither aggregates nor interest rates can do).
This was the version of supply-side economics that, in the late 1970s and early '80s, worked in America and world-wide to solve a far more serious stagflation than afflicts Britain today.
Ogilvy & Mather, whose declining profitability prompted its takeover by WPP Group earlier this year, will see its profit margins bounce back to the "11.5% range" in 1990, said Graham Phillips, the agency's new chairman-elect.
The ad agency's pretax profit margins were slightly under 10% at the time of the takeover, according to analysts; London-based WPP's goal is to increase margins to 12%.
Mr. Phillips made his comments during an interview detailing his plans for the agency.
British-born, the 24-year Ogilvy veteran was named last week to succeed Kenneth Roman, who is leaving by year's end to take a top post at American Express, an Ogilvy client.
Surrounded by stacks of paper, two computers and photos of himself boating and flying, Mr. Phillips laid out several changes he hopes to make at the agency.
First and foremost, Mr. Phillips said he hopes to improve client service.
Ogilvy under the fastidious Mr. Roman gained a reputation as occasionally being high-handed in its treatment of clients, of preaching what strategy a client should -- indeed, must -- follow.
And some of its top client-service executives, including Mr. Phillips, were promoted to the point they were saddled with administrative duties, with little time to see clients.
But Mr. Phillips recently freed himself up to spend more time with clients by delegating much of his administrative work to a deputy.
He also plans to get to know clients that Mr. Roman was closer to, such as Lever Brothers, American Express and Seagram.
The two men are planning joint visits to a number of clients to attempt to smoothly hand over the reins.
"Clients want to see more of our senior people involved in the business -- not once a month, but two or three times a week," he said.
Mr. Phillips also hopes to finally implement a reorganization announced earlier this year but put on hold by the WPP takeover.
The reorganization is supposed to make one-stop shopping -- buying advertising, public relations and design all in one place, or "Ogilvy Orchestration" in Ogilvyspeak -- a reality.
Under the reorganization, Ogilvy plans to name one executive on each account as a "client service director" to work as the client's single contact for all those services.
"There is little or no integration of our work, quality is spotty, there is no single focus," Mr. Phillips complained to staffers in March, when the reorganization was announced.
Now Mr. Phillips says he hopes to have the new system in place for several clients -- including American Express, American Telephone & Telegraph and Ryder -- by year's end.
Industry executives and analysts are divided on whether Mr. Phillips is up to the task.
He isn't as well-known to clients as is Mr. Roman.
Under his watch, office politicking was often rampant in the agency's New York operation and the office there has had a dismal new-business record for more than a year.
And while last week the agency hired a top Chiat/Day/Mojo executive, Bill Hamilton, to try to bolster its work, "Graham has to get the revenue of that New York office moving," says James Dougherty, an analyst with County NatWest Securities.
The one thing Mr. Phillips clearly does have going for him is continuity, although it isn't certain if that will be enough.
As Mr. Dougherty says, "The last thing they need is enormous disruption at the top . . . and Graham is obviously a long-term member of the Ogilvy Mafia, as we call it."
Mr. Phillips and Mr. Roman are indeed quite similar in substance, if not in style.
While Mr. Roman is a workaholic detailsman, Mr. Phillips would rather delegate, leaving him time for his interests outside the office.
Mr. Roman, by contrast, seems rarely to cut loose at all, although he did appear at Ogilvy's Halloween party Friday decked out in duck feet and a duck hat, costumed as a "lame duck."
Mr. Phillips said the company's expected margin improvement will be all but inevitable, given that the company's profitability was dragged down this year by an expensive move to luxurious, oversized new New York headquarters.
The move, budgeted at about $7 million, actually came in at about $10 million, he said.
But margins will be helped, too, by some other cost-saving steps.
Ogilvy eliminated the mail room staff, closed the executive dining room and, after the takeover, let go half a dozen financial executives.
WPP, which assumes financial control of its businesses in a hands-on way, instituted a new financial system and plans to sublet some floors in Ogilvy's new headquarters building to outsiders.
The fact that the agency will now be part of a U.K. company, under British accounting rules, will also make the profit picture look better.
Y&R's Klein Steps Down
Arthur Klein, president of Young & Rubicam's New York office, stepped down "temporarily" in the wake of charges by a federal grand jury in New Haven, Conn., that he, the agency and another top executive bribed Jamaican tourist officials to win its account in 1981.
In an internal memo, Alex Kroll, the agency's chairman, said Mr. Klein decided to remove himself to minimize "negative reaction" from prospective clients and others and to prepare for his defense.
"The fact that he is in the process of defending himself against the present charges could conceivably have an adverse impact on Y&R," Mr. Kroll wrote.
He said Mr. Klein will return to his post at the end of the trial "at which he will be vindicated."
Mr. Klein will work with Mr. Kroll on some of the agency's joint venture activities and acquisitions while the case is pending.
Peter Georgescu, president of Y&R's ad operations, will assume Mr. Klein's day-to-day role.
Wells Rich's New Partner
Wells, Rich, Greene named Cheryl Heller as an executive vice president and creative partner in its image group, which concentrates on fashion and visually oriented advertising.
Ms. Heller, 38, had headed up Boston agency Heller/Breene, a unit of WCRS.
The agency, with about $35 million in billings, will be dissolved, with some of its staffers absorbed by WCRS's Della Femina McNamee unit in Boston, Ms. Heller said.
She said it was too early to say what would happen to its clients, including Reebok and Apple.
At Wells Rich, Ms. Heller will concentrate on accounts that include Philip Morris's Benson & Hedges cigarette brand, which relies on print ads, Ms. Heller's specialty.
As previously reported, the account is troubled, with Philip Morris asking Backer Spielvogel Bates, Ogilvy & Mather, and possibly others to try their hand at developing new creative work.
Wells Rich declined to comment on the status of the account, as did the other agencies.
Waxman Industries Inc. said holders of $6,542,000 face amount of its 6 1/4% convertible subordinated debentures, due March 15, 2007, have elected to convert the debt into about 683,000 common shares.
The conversion price is $9.58 a share.
The company said the holders represent 52% of the face amount of the debentures.
Waxman sells a variety of hardware products for the home repair market.
R.H. Macy & Co., the closely held department store chain, said in a financial filing Friday that its sales for the fiscal fourth quarter ended July 29 were up 10% to $1.59 billion against $1.44 billion a year earlier.
Comparable store sales for the quarter were up 7.3%.
The net loss for the quarter was $43.1 million against a year-earlier loss of $106 million.
The loss in the fourth quarter of 1988 reflected in part expenses for an unsuccessful bid for Federated Department Stores Inc., as well as the restructuring of some of its department store operations.
For the year, sales were up 5.6% to $6.97 billion compared with $6.61 billion in fiscal 1988.
Sales for both years reflect 12-month performances for each year of I. Magnin, Bullock's, and Bullocks Wilshire.
Macy acquired those three businesses in May 1988.
On a comparable store basis, including the new acquisitions for both years, sales for fiscal 1989 were up 1.9%.
Macy reported a net loss for fiscal 1989 of $53.7 million compared with a net loss of $188.2 million for fiscal 1988.
The company's earnings before interest, taxes and depreciation, which bondholders use a measurement of the chain's ability to pay its existing debt, increased 11% in fiscal 1989 to $926.1 million from $833.6 million.
The $833.6 million figures includes the new acquisitions.
Excluding those businesses, earnings before interest, taxes and depreciation for 1988 would have been $728.5 million.
As of Feb. 1, 1990, the Bullocks Wilshire stores will operate as I. Magnin stores.
Altogether, Macy and its subsidiaries own or lease 149 department stores and 61 specialty stores nationwide.
Although management led a leveraged buy-out of R.H. Macy in July 1986, the company still makes financial filings because of its publicly traded debt.
The company estimates its total debt at about $5.2 billion.
This includes $4.6 billion of long-term debt, $457.5 million in short-term debt, and $95.7 million of the current portion of long-term debt.
In a letter to investors, Chairman Edward S. Finkelstein wrote that he expects the company to "benefit from some of the disruption faced by our competitors.
While our competitors are concerned with their financial viability and possible ownership changes, we will be concentrating on buying and selling merchandise our customers need and want."
Mr. Finkelstein is apparently referring to B. Altman and Bonwit Teller, two New York retailers that have recently filed for Chapter 11 bankruptcy protection, as well as the retail chains owned by financially troubled Campeau Corp.
Those chains include Bloomingdale's, which Campeau recently said it will sell.
Other retail properties for sale include Saks Fifth Avenue and Marshall Field, retailers now owned by B.A.T PLC, the British tobacco conglomerate.
In his letter, Mr. Finkelstein also referred to the recent San Francisco earthquake.
Mr. Finkelstein flew to San Francisco the day after the earthquake, and found that 10 to 12 of his company's stores had sustained some damage, including the breakage of most windows at the I. Magnin store on Union Square.
"The volume and profit impact on our fiscal first quarter will not be positive, but looking at the whole fiscal year, we don't see the effect as material," wrote Mr. Finkelstein.
RJR Nabisco Inc. said it agreed to sell its Baby Ruth, Butterfinger and Pearson candy businesses to Nestle S.A.'s Nestle Foods unit for $370 million.
The sale, at a higher price than some analysts had expected, helps the food and tobacco giant raise funds to pay debt and boosts Nestle's 7% share of the U.S. candy market to about 12%.
The candy businesses had sales of about $154 million last year, which was roughly 12% of total revenue for RJR's Planters LifeSavers unit, according to a memorandum distributed by RJR's owner, Kohlberg Kravis Roberts & Co., to bankers last December.
The Nestle acquisition includes a candy plant in Franklin Park, Ill., which employs about 800 workers.
The sale, which had been expected, is part of KKR's program to pay down $5 billion of a $6 billion bridge loan by February.
Roughly $2 billion of that debt has already been repaid from previous asset sales, and RJR expects to use another $2 billion from the pending, two-part sale of most of its Del Monte unit.
That sale, however, could still fall through if financing problems develop.
Thus, it remains crucial for RJR to obtain top dollar for its smaller assets like the candy brands.
Louis Gerstner Jr., chairman and chief executive officer of New York-based RJR, called the sale a "significant step" in the company's divestiture program, as well as a "a strategic divestiture."
Since KKR bought RJR in February for $25 billion of debt, it has agreed to sell nearly $5 billion of RJR assets.
RJR's executives have said they will dispense with certain brands, in particular, that aren't leaders in their markets.
"RJR Nabisco and Planters LifeSavers will concentrate more on our own core businesses," Mr. Gerstner said Friday.
Baby Ruth and Butterfinger are both among the top-selling 15 chocolate bars in the U.S., but RJR's overall share of the roughly $5.1 billion market is less than 5%.
Nestle's share of 7% before Friday's purchases is far below the shares of market leaders Hershey Foods Corp. and Mars Inc., which have about 40% and 36% of the market, respectively.
"This means Nestle is now in the candybar business in a big way," said Lisbeth Echeandia, publisher of Orlando, Fla.-based Confectioner Magazine.
"For them, it makes all kinds of sense.
They've been given a mandate from Switzerland" to expand their U.S. chocolate operations.
Nestle S.A. is based in Vevey, Switzerland.
The new candy bars, "make an important contribution to our Nestle Foods commitment to this very important strategic unit," said C. Alan MacDonald, president of Nestle Foods in Purchase, N.Y.
Aetna Life & Casualty Co.'s third-quarter net income fell 22% to $182.6 million, or $1.63 a share, reflecting the damages from Hurricane Hugo and lower results for some of the company's major divisions.
Catastrophe losses reduced Aetna's net income by $50 million, including $36 million from Hugo.
Last year catastrophe losses totaled $5 million, when net was $235.5 million, or $2.07 a share.
The year-earlier results have been restated to reflect an accounting change.
The insurer has started processing claims from the Northern California earthquake nearly two weeks ago.
But because these claims are more difficult to evaluate and have been coming in more slowly, the company has no estimate of the impact of the earthquake on fourth-quarter results.
In New York Stock Exchange composite trading Friday, Aetna closed at $60, down 50 cents.
In the latest quarter, Aetna had a $23 million loss on its auto/homeowners line, compared with earnings of $33 million last year.
Profit for its commercial insurance division fell 30% to $59 million, reflecting higher catastrophe losses and the price war in the property/casualty market for nearly three years.
However, Aetna's employee benefits division, which includes its group health insurance operations, posted a 34% profit gain to $106 million.
Third-quarter results included net realized capital gains of $48 million, which included $27 million from the sale of Federated Investors in August and a $15 million tax credit.
In the nine months, net rose 4.3% to $525.8 million or $4.67 a share, from $504.2 million, or $4.41 a share, last year.
Out of the mouths of revolutionaries are coming words of moderation.
Here, at a soccer stadium near the black township of Soweto yesterday, were eight leaders of the African National Congress, seven of whom had spent most of their adult lives in prison for sabotage and conspiracy to overthrow the government.
Here were more than 70,000 ANC supporters, gathering for the first ANC rally inside South Africa since the black liberation movement was banned in 1960.
Here was the state security appartus poised to pounce on any words or acts of provocation, let alone revolution.
But the words that boomed over the loudspeakers bore messages of peace, unity, negotiation and discipline.
"We stand for peace today and we will stand for peace tomorrow," said Walter Sisulu, the ANC's former secretary general who, along with five of his colleagues, served 26 years in prison before being released two weeks ago.
Some members of the huge crowd shouted "Viva peace, viva."
These are curious times in South African politics.
The government and the ANC, the bitterest of enemies, are engaged in an elaborate mating dance designed to entice each other to the negotiating table.
Pretoria releases the ANC leaders, most of whom were serving life sentences, and allows them to speak freely, hoping that the ANC will abandon its use of violence.
The ANC leaders speak in tones of moderation, emphasizing discipline, hoping the government will be encouraged to take further steps, such as freeing Nelson Mandela, the most prominent ANC figure, and unbanning the organization.
The government of President F.W. de Klerk is using this situation to improve its international image and head off further economic sanctions.
Meanwhile, the many organizations inside the country that back the ANC are taking the opportunity to regain their strength and mobilize their supporters even though the state of emergency, which has severely curtailed black opposition, remains in force.
The result is that the unthinkable and illogical are happening.
Six months ago, government approval for an ANC rally was inconceivable.
Equally inconceivable is that the ANC, given the chance to hold a rally, would extend a hand, albeit warily, to the government.
In a message read out at the rally, exiled ANC President Oliver Tambo, who can't legally be quoted in South Africa, said the country was at a crossroads and that Mr. de Klerk "may yet earn a place among the peacemakers of our country" if he chooses a "path of genuine political settlement."
Still, this doesn't mean that either the government or the ANC is changing stripes -- or that either has moved significantly closer to the other.
The government may ease repression in some areas, but it still keeps a tight grip in others.
For instance, it releases Mr. Sisulu without conditions, yet his son, Zwelakhe, a newspaper editor, is restricted to his home much of the day and isn't allowed to work as a journalist.
The ANC vows to keep up pressure on the government.
Speakers yesterday called on foreign governments to increase sanctions against Pretoria and urged supporters inside the country to continue defying emergency restrictions and racial segregation, known as apartheid.
"We cannot wait on the government to make changes at its own pace," Mr. Sisulu said.
Because the ANC remains banned, both the government, which approved the rally, and the organizers, who orchestrated it, denied it was an ANC rally.
They both called it a "welcome home" gathering.
Nevertheless, an ANC rally by any other name is still an ANC rally.
The recently released leaders sat high atop a podium in one section of the stadium stands.
Behind them was a huge ANC flag and an even bigger sign that said "ANC Lives, ANC Leads."
Next to them was the red flag of the outlawed South African Communist Party, which has long been an ANC ally.
In the stands, people waved ANC flags, wore ANC T-shirts, sang ANC songs and chanted ANC slogans.
"Today," said Mr. Sisulu, "the ANC has captured the center stage of political life in South Africa."
As a police helicopter circled overhead, Mr. Sisulu repeated the ANC's demands on the government to create a climate for negotiations: Release all political prisoners unconditionally; lift all bans and restrictions on individuals and organizations; remove all troops from the black townships; end the state of emergency, and cease all political trials and political executions.
If these conditions are met, he said, the ANC would be prepared to discuss suspending its guerrilla activities.
"There can be no question of us unilaterally abandoning the armed struggle," he said. "
To date, we see no clear indication that the government is serious about negotiations.
All their utterances are vague."
Echoing a phrase from Mr. de Klerk, Mr. Sisulu said, "Let all of us who love this country engage in the task of building a new South Africa.
When Westinghouse Electric Corp. shuttered its massive steam turbine plant in Lester, Pa., three years ago, it seemed like the company had pulled the plug on its century-old power generation business.
But now Westinghouse is enjoying a resurgence in demand for both steam and combustion turbines and may even join the growing legion of independent electric producers.
And with its new venture with Japan's Mitsubishi Heavy Industries Ltd., announced last week, it is poised to penetrate growing markets overseas.
For the first time since the mid-1970s, Westinghouse this year has seen a significant increase in orders for power plants.
Most are from independent producers instead of regulated utilities, and Westinghouse believes it will ride a wave of demand stretching over the next six years.
Analysts agree, predicting that the revived market could significantly boost Westinghouse's bottom line in coming years.
"Westinghouse's earnings could be materially enhanced in the mid-1990s or sooner," says Russell L. Leavitt, of Salomon Brothers Inc.
The company expects a need for 140,000 megawatts of new generation in the U.S. over the next decade.
Already this year, it has received orders for four 150-megawatt advanced combustion turbines from Florida Power & Light Co. and for two 300-megawatt plants from Intercontinental Energy Corp., among others.
Westinghouse's own role as a supplier also is changing.
In the past, the company usually took token equity positions in power plants it supplied as a "kicker" to close deals.
But last June's annnouncement that Westinghouse would put up all of the $70 million to build a new 55-megawatt plant could herald a new age.
Westinghouse's plant will provide electrical power to the Southern California Edison Co. and backup power and steam to the U.S. Borax & Chemical Co.
"We haven't decided on a strategy yet, but we could become an independent producer depending on whether we're the developer or just the supplier," says Theodore Stern, executive vice president of the company's energy and utility systems group.
At the same time, Westinghouse hopes its venture with Mitsubishi will help fend off growing competition, particularly in the U.S., from such European competitors as Asea Brown Boveri AG, Siemens AG, and British General Electric Co.
Under the agreement, Westinghouse will be able to purchase smaller combustion turbines from its Japanese partner, and package and sell them with its own generators and other equipment.
Westinghouse also jointly will bid on projects with Misubishi, giving it an edge in developing Asian markets.
In addition, the two companies will develop new steam turbine technology, such as the plants ordered by Florida Power, and even utilize each other's plants at times to take advantage of currency fluctuations.
"Even though we'll still compete against Mitsubishi, we can also work jointly on some projects, and we'll gain a lot of sourcing flexibility," Mr. Stern contends.
The Westinghouse-Mitsubishi venture was designed as a non-equity transaction, circumventing any possible antitrust concerns.
Westinghouse carefully crafted the agreement because the Justice Department earlier this year successfully challenged a proposed steam turbine joint venture with Asea Brown Boveri.
It is expected that the current surge in demand for new power will be filled primarily by independent producers which, unlike utilities, aren't regulated and therefore don't need government approval to construct new plants.
Westinghouse expects about half of its new orders for turbines to come from independent producers for at least the next six years.
Despite shutdowns of the company's Lester and East Pittsburgh plants, the company believes it has sufficient capacity to meet near-term demand with its much smaller and more efficient manufacturing facilities in North Carolina.
Still, Westinghouse acknowledges that demand from independent producers could evaporate if prices for fuel such as natural gas or oil rise sharply or if utilities, which have been pressured by regulators to keep down rates, are suddenly freed to add significant generating capacity.
Even if that scenario occurs, Westinghouse figures it is prepared.
The company already is gearing up for a renaissance of nuclear power even though it hasn't received an order for a domestic nuclear plant in a decade.
John C. Marous, chairman and chief executive officer, says he expects a commercial order by 1995 for the company's AP600 nuclear power plant, which is under development.
"Once we see an order, we expect it'll be on line by 2000.
Among the things I learned covering the World Series these past few weeks is that the Richter scale, which measures earthquakes, isn't like the one in your bathroom.
A quake that measures two on the Richter isn't twice as severe as a "one" -- it's 10 times worse.
A "three" is 10 times 10 again, and so on.
That put the "seven" of Oct. 17 in perspective for me.
Think I'll buy one of those "I Survived" T-shirts after all.
By Richterian standards, the show that the Oakland Athletics put on Friday and Saturday nights, in putting a mercifully swift end to the game's Longest Short Series, rated somewhere between a 10 and an 11.
The boys with the white elephants on their sleeves might not have made the earth move much, but they certainly did some impressive things with baseballs.
The Pale Pachyderms propelled six of 'em out of the unfriendly confines of Candlestick Park during the two games en route to 13-7 and 9-6 wins over the San Francisco Giants.
Combined with their two pre-quake victories, way back on Oct. 14 and 15 (the scores were 5-0 and 5-1, remember?), that gave them a sweep of the best-of-seven series.
The joke here is that the Giants lost by de fault.
That's geologically correct, but a trifle unfair otherwise.
They showed up, but didn't -- or couldn't -- challenge.
They led for nary an inning in the four games, and managed to stir their fans only once.
That came in the seventh inning of Game Four when, trailing 8-2, they scored four times and brought their big heat -- Will Clark and Kevin Mitchell -- to the plate with one out and a runner on.
But Clark flied out to short right field and Mitchell's drive to left was caught on the warning track by Rickey Henderson as 62,000 sets of lungs exhaled as one.
"I went out to Todd {Burns, the A's reliever} and told him that we weren't gonna let this guy beat us," said Oakland catcher Terry Steinbach of the decisive confrontation with Mitchell, the National League's reigning home-run king.
"I told him to make Mitchell reach for everything, and that's what we did.
The ball he hit wasn't a strike.
If it had been, he mighta hit it out."
But if the A's hadn't won in four, they would have prevailed in five, or six, or seven.
The best team won this Series, which is more unusual than it may sound.
Baseball ain't football, where the good teams beat up on the bad ones.
The best baseball teams win six of 10 games and the worst win four of 10.
Without becoming overly contentious, allow me to suggest that several recent champions of the world according to us (as in U.S.) might not have ranked No. 1 in many polls.
That list includes last season's champs, the Los Angeles Dodgers, who rode a miracle home run by Kirk Gibson and two faultless pitching performances by Orel Hershiser to a five-game triumph over a bewitched, bothered Oakland crew.
These A's, however, got few grades as low as B on their 1989 report card.
They led the Major Leagues in regular-season wins with 99 and flattened the Toronto Blue Jays four games to one for the American League pennant before stomping their cross-bay rivals.
The pithiest testimony to their domination of the just-concluded tournament came from Giants' manager Roger Craig after his team had fallen in Game Three to a five-home-run barrage that tied a 61-year-old Series record.
Asked what he would do differently on the morrow, Craig allowed that he might play his outfielders deeper, "maybe on the other side of the fence."
The A's offensive showing in the Series got an A, as in awesome.
Their 85 total bases broke a record for a four-game set, and their nine home runs tied one.
Eight Oakland players hit homers, with centerfielder Dave Henderson getting two, both on Friday.
Rickey Henderson, the do-everything leadoff man, had nine hits and set or tied four-game Series marks for triples (2) and stolen bases (3).
The sole A not to homer was cleanup hitter Mark McGwire, their regular-season leader with 33, and he contributed five hits plus a diving fielding play on a ground ball in Game Three that stopped a Giant rally while the issue still was in doubt.
"Think I'll redo my image -- get this changed to a glove," quipped the big first baseman Saturday night, fingering the gold bat he wears on a neck chain.
Even with that power show, though, the Oakland Series' star, certified by the Most Valuable Player award, was a pitcher, Dave Stewart.
He shut out the Giants on five hits in Game One, and allowed three runs on five hits in seven innings Friday after the 12-day break caused by the earthquake.
Stewart's honor was a nice note on a couple of grounds.
One was that, despite his 62 regular-season wins over the past three seasons in the Land Beyond the Late News, he has been overshadowed by his more-muscular mates and missed out on prizes that might have been his due.
The other is that he's an Oakland native, and lifted residents' spirits by his visits to quake-hit areas last week.
Afterward, as the A's toasted their victory with beer (they dispensed with traditional champagne showers in deference to the quake victims), Stewart said he thought his championship-team ring would outshine his individual trophy.
"Give me four or five more Series with these guys, and I don't care if I ever win a Cy Young," he said, in reference to baseball's best-pitcher award.
Indeed, the possibility of an A's ring cycle, a/k/a a dynasty, was a major topic of post-game discussion Saturday, so much so that Sandy Alderson, the team's general manager, felt obliged to dampen it.
"People change, teams change," he cautioned.
"It's easier to get worse than better in this game."
He might have added an interesting historical fact: The last Series sweep, by the Cincinnati Reds, came in 1976, which also was the first year of baseball player free agency.
It was widely predicted that free agency would allow the glamorous, "big market" teams to monopolize the best talent, but quite the opposite has occurred: Twelve different clubs have won titles in the 14 seasons since its advent.
The number includes such unstylish burgs as, well, Oakland.
The rationale for responding to your customers' needs faster than the competition can is clear: Your company will benefit in terms of market share, customer satisfaction and profitability.
In fact, managers today are probably more aware of speed as a competitive variable than ever before.
However, for many, managing speed does not come naturally.
"Most of us grew up believing in the axioms `Haste makes waste' and `Don't cut corners,' ideas that seem to run counter to the concept of managing speed," says Dean Cassell, vice president for product integrity at Grumman Corp.
"But in the real world, you learn that speed and quality are not a trade-off.
Speed is a component of quality -- one of the things we must deliver to satisfy customers."
Companies that actually market speed as part of their service train their managers to lead and participate in teams that increase speed and improve quality in everyday operations.
Managers learn to spot opportunities to increase customer satisfaction through speed, and shift some responsibility for analyzing, improving and streamlining work processes from themselves to teams of employees.
One team at the Federal Express Ground Operations station in Natick, Mass., focused on a particularly time-sensitive operation: the morning package sort.
Every morning, tractor-trailer trucks arrive at the Natick Ground Station from Boston's Logan Airport, carrying the day's package load.
In peak periods that load may include 4,000 pieces.
The packages must be sorted quickly and distributed to smaller vans for delivery, so couriers can be on the road by 8:35.
No customer is present at the morning package sort, but the process is nevertheless critical to customer satisfaction.
"We're committed to deliver the customer's package by a stated time, usually 10:30," notes Glenn Mortimer, a Federal Express courier who led the Natick team.
"The sooner our vans hit the road each morning, the easier it is for us to fulfill that obligation."
Following a problem-solving formula used by teams throughout Federal Express, members of the Natick team monitored their morning routine, carefully noting where and when the work group's resources were used effectively and where they were idle, waiting for others upstream in the process to send packages their way.
"We suspected there was downtime built into our process.
But we didn't know just where it was until we completed our data gathering," Mr. Mortimer says.
"We used the data to redesign our sorting system and put our resources where they could do the most good."
The team even created a points system to identify those couriers and subgroups that were doing the most to reduce package-sort cycle time.
Winners of the friendly competition earn a steak dinner out with their spouses.
"Monitoring shows that the Natick team's new system really does reduce cycle time for the morning package sort," reports James Barksdale, chief operating officer at Federal Express.
"The vans leave at least 15 minutes earlier, on average, than they used to.
And service levels have increased to the point where they're consistently above 99%."
A cross-functional team at Union Carbide's Tonawanda, N.Y., facility, which produces air-separation plants, followed a similar path to reduce manufacturing cycle time.
"The team included craftsmen from the shop floor as well as engineering, scheduling and purchasing personnel," reports Alan Westendorf, director of quality.
"First, they produced a flowchart detailing the process by which an air-separation plant actually gets built.
Then they identified snags in the process."
The Tonawanda team determined that holdups for inspections were the main problem and identified which kinds of delays involved critical inspections and which were less critical or could be handled by workers already on the line.
The team then proposed modifications in their work process to management.
"The streamlined manufacturing process benefits our customers in at least two ways," Mr. Westendorf concludes.
"First, we have better quality assurance than ever, because the people building the product have taken on more responsibility for the quality of their own work.
Second, we trimmed more than a month off the time required to deliver a finished product."
At Grumman's Aircraft Systems Division, a cross-functional team reduced the cycle time required to produce a new business proposal for an important government contract.
The team was composed of representatives from engineering, manufacturing, corporate estimating, flight test, material, quality control, and other departments.
"We needed contributions from all these departments to generate the proposal," says Carl Anton, configuration-data manager for Grumman's A-6 combat aircraft program.
"But instead of gathering their input piecemeal, we formed the team, which reached consensus on the proposal objectives and produced a statement of work to guide all the functions that were involved."
Armed with this shared understanding and requisite background information, each department developed its specialized contribution to the proposal, submitting data and cost estimates on a closely managed schedule.
"We cleared up questions and inconsistencies very quickly, because the people who had the skills and perspective required to resolve them were part of the task team," Mr. Anton explains.
The team trimmed more than two months from the cycle time previously required to develop comparable proposals.
"The team eliminated the crisis mentality that proposal deadlines can generate.
The result was a more thoughtful, complete and competitive proposal," Mr. Anton concludes.
The successes achieved at Federal Express, Union Carbide and Grumman suggest that managing speed may be an underutilized source of competitive advantage.
Managers in all three companies recognize speed as a component of quality and a key to customer satisfaction.
They effectively lead team efforts to reduce cycle time.
And they prepare all their people to increase the speed and improve the quality of their own work.
Mr. Labovitz is president of ODI, a consulting firm in Burlington, Mass.
Home taping of pre-recorded music cuts into record industry revenues, but banning home taping would hurt consumers even more.
That's the conclusion of an independent report prepared by the Office of Technology Assessment at the request of the House and Senate judiciary committees.
The report is to be released today.
The report says the availability of such advanced analog recording equipment as cassette recorders doesn't seem to increase the quantity of home copying.
That finding, the report says, casts doubt on the record industry's contention that the new generation of digital recording equipment will inevitably lead to wholesale abuse of copyrighted material by home tapers.
The longstanding position of the Recording Industry Association of America, a trade group based in Washington, D.C., is that record companies, performers, songwriters and music publishers need to be remunerated by government-imposed fees on the sale of blank tapes and recording equipment to make up for royalties lost to home taping.
"I think it is a nail in the coffin in any royalty tax proposal," says Gary Shapiro, vice president for government and legal affairs of the Electronic Industries Association in Washington.
"What {the report} shows is everything we've been saying for the past eight or nine years -- that audio taping is the best thing to happen for the recording industry.
The people who tape the most buy the most."
Trish Heimers, a spokesperson for RIAA says her organization hasn't received a copy of the completed report yet and has no immediate comment.
A recent agreement between the recording industry and electronics manufacturers requires that any digital audio tape, or DAT, recorder sold in the U.S. have a built-in device that restricts its ability to make second copies from DAT tape copies of digital compact disks.
But the disappointing sales of DAT machines here and abroad so far have not seemed to warrant the three years of legal wrangling that went into the agreement.
Under current copyright laws, it is considered "fair use" to reproduce copyrighted material for one's personal use or for use by one's family or friends, while copying for purposes of resale or profit is prohibited.
A survey contained in the 291-page report, "Copyright and Home Copying: Technology Challenges the Law," found that most people consider home copying for such personal use a "right" -- a right, moreover, that was exercised by 40% of Americans over the age of 10 in the past year.
The study says that the "ambiguous legal status" of home copying makes it "appropriate to examine the effects on consumers, as well as on industry."
Reports by the Office of Technology Assessment don't prescribe any specific legislative action but suggest a range of options that Congress may pursue.
The study also says that advent of new communications technologies makes "an explicit congressional definition of the legal status of home copying more desirable in order to reduce legal and market uncertainties and to prevent de facto changes to copyright law through technology," and says that finding an "appropriate balance of harms and benefits is a political decision, not a technical one.
Switzerland's most famous raider says he isn't one.
Werner K. Rey believes fortunes are made by being friendly.
And in little more than a decade of being friendly -- and at the same time rocking the staid Swiss business community with some U.S.-style wheeling and dealing -- the 46-year-old Mr. Rey has grown from a modest banker to a billionaire.
He achieved this in part with an uncanny talent for getting his foot peacefully in the door of established European companies.
His latest coup: September's masterminding of the five billion Swiss-franc ($3.07 billion) merger between Adia S.A., the world's second-largest temporary employment agency, and Inspectorate International S.A., a Rey-controlled product-inspection company.
Shareholders must approve the merger at general meetings of the two companies in late November.
But approval is almost certain since Mr. Rey and a friendly Adia management are in control.
After the transaction, Mr. Rey estimates the value of his 20% stake in the new company, to be held by his Omni Holding AG, will be about 1 billion Swiss francs.
This will be his return on an original investment of between 50 million Swiss francs and 80 million Swiss francs.
Mr. Rey bought a controlling stake in Inspectorate for 18 million Swiss francs in 1982, building up the little-known engineering company with European and U.S. acquisitions.
"I like to succeed," says Mr. Rey during a recent morning of working at home, which he also likes.
Home is an estate with green meadows opening onto Lake Geneva and a low-slung house whose rooms overlook the water and offer a view of the French Alps.
In the corner of his reception room is a delicate antique desk piled high with dossiers.
There is a small Renoir on the wall.
Zurich-based magazine Bilanz lists Mr. Rey as having a fortune of about 1.5 billion Swiss francs.
Writes Bilanz: "No one in Switzerland ever came so far so fast . . .
He was simply the first in this country to realize that treasures were just lying around waiting to be picked up.
In short: Rey found companies with weak earnings but rich assets."
However, the Swiss financial press in general, as well as many analysts, have had a hard time making up their minds about Mr. Rey and his un-Swiss ways.
For Switzerland's most prestigious newspaper, Neue Zuercher Zeitung, Mr. Rey seems destined to remain the "former Bally raider," an image that has proved hard to overcome.
In 1976, as an upstart in the eyes of Switzerland's establishment, Mr. Rey laid the foundations of his present-day prominence with an unheard-of raid on Bally, the country's traditional shoemaker.
Sitting beside a banker at a luncheon in London, where he was working as a financial consultant, he learned that a large packet of Bally's shares was up for sale.
Looking into Bally, he could hardly believe what he saw: a company with enormous real-estate holdings in major European cities and a market capitalization of 28 million Swiss francs; it had 7,000 employees.
Investing four million Swiss francs earned from his financial transactions and two million Swiss francs from his parents and his wife, Mr. Rey acquired 20% of Bally's shares.
But such tactics were alien to Switzerland in 1976, and still aren't common because of share restrictions that companies are allowed to maintain.
Eventually, Mr. Rey was forced to sell his Bally shares to the weapons maker Oerlikon-Buehrle Holding AG as establishment pressure grew on this hostile move into the Swiss old boys' network.
Mr. Rey made 50 million Swiss francs on the sale.
"Bally was not an unfriendly takeover," he insists.
Buying from willing shareholders makes an unfriendly takeover impossible, Mr. Rey contends.
"I bought from willing shareholders."
Nevertheless, Mr. Rey has been very careful since then to make sure his moves are welcome.
And he has worked to shed his raider image.
In 1979, his career as an industrialist began with the acquisition of the Swiss metals works Selve, based in Thun.
With the nonferrous metals business undermined in Switzerland by tough foreign competition and high domestic costs, this looked like a dull undertaking.
But Mr. Rey brought about a merger in the next few years between the country's major producers; the increased efficiency has perked up the industry.
Three years later, machinery producer Ateliers de Constructions Mecaniques de Vevey S.A. was to become part of the Rey empire.
Once again the company's future looked less than rosy.
But after restructuring under new management, the profits began rolling in.
A major boost to Mr. Rey's respectability among the Swiss came in 1986 when he sold 60% of his Phibro Bank to the conservative Swiss cantonal banks.
They renamed it Swiss Cantobank and are using it to expand abroad.
In 1987, Mr. Rey bested leading publishing houses to take over Switzerland's Jean Frey AG, a major producer of magazines and newspapers.
And with the recent acquisition of 30% of Winterthur-based machinery manufacturer Gebrueder Sulzer AG, Mr. Rey has enjoyed the status of white knight.
Sulzer preferred him to financier Tito Tettamanti, whose secretive raid on the company's stock had led to a bitter battle.
Meanwhile, as such strategic investments have mounted, the merchant-banking arm of Mr. Rey's Omni Holding has been busily buying and selling dozens of companies, often after a financial or corporate restructuring.
Today, this branch of Mr. Rey's empire runs under the name Omnicorp Offering Services and handles mergers and acquisitions, placement of securities and real estate.
In its portfolio are such diverse companies as United Kingdom-based Air Europe; Checkrobot Inc., a U.S. company that makes supermarket checkout machines; Norment Industries, a U.S. manufacturer of securities systems; Com Systems Inc., a U.S. regional telephone company; and major real-estate projects in the U.S. and Europe.
For financial analysts, reading Omni's accounts is a tough challenge.
"Companies move in and out," says Helga Kern of KK Swiss Investment.
Financial analysts note that Mr. Rey is attracted to companies that are undervalued on the basis of their real-estate interests.
In August, Omni unexpectedly bought Inspectorate's 80% stake in Harpener AG of West Germany, a land-rich company.
The internal transaction within the Rey empire puzzled Harpener's small shareholders, but analysts say it makes sense for Inspectorate-Adia to focus on its main businesses of product inspection and temporary help.
Mr. Rey says the move is yet another example of his conservatism.
He explains that companies with real estate give "security."
The real estate can be used, he points out, as guarantees for bank loans for corporate development.
He says he wants to "influence" but not "manage" companies.
"I don't want to be like {financier Alan} Bond and the other Australians.
I don't want companies to be built around me as a person.
I want them to stand alone.
Ultimate Corp. signed a letter of intent to market Hewlett-Packard Co. minicomputers, the companies said.
Ultimate expects the 3 1/2-year agreement to generate $100 million in sales, but it wouldn't estimate profit.
Under terms of the pact, Ultimate, a computer-systems concern, will market the full line of HP 9000 series 800 multipleuser minicomputers.
Hewlett-Packard is based in Palo Alto, Calif.
In the second step of a reorganization that began earlier this year, Boeing Co. said it will create a Defense and Space Group to consolidate several divisions.
Meanwhile, Boeing officials and representatives of the Machinists union met separately last night with a federal mediator in an attempt to break the month-old strike that has shut the aerospace giant's assembly lines at a time when it has an $80 billion backlog of jetliner orders.
The two sides were scheduled to meet with the mediator this morning.
Machinists already have rejected a package that would provide a 10% pay raise plus bonuses over the three-year life of the contract.
Boeing has said repeatedly it won't expand its offer and the machinists have responded that the offer isn't good enough.
However, the resolve of some of the striking 57,000 machinists might be weakening.
About 1,000 strikers signed petitions last week calling for Boeing and Machinists representatives to schedule new meetings.
The two sides hadn't met since Oct. 18.
While Boeing's commercial business is booming, its military business is feeling the effects of a declining defense budget after a strong buildup during the Reagan presidency.
In May, the company consolidated its Aerospace and Electronics groups; the new Defense and Space Group will contain the Aerospace and Electronics division and Advanced Systems, both based in the Seattle area; Boeing Helicopters in Philadelphia; Boeing Military Airplanes in Wichita, Kan., and ArgoSystems in Sunnyvale, Calif.
B. Dan Pinick, president of Boeing Aerospace and Electronics, will become president of the new group, which will become operational Jan. 2.
In addition, Boeing said it also will reorganize all its work in Wichita into military and commercial divisions.
All of the changes will reduce its overhead and streamline operations, Boeing said.
Analysts agreed.
"It's a further step to better returns in the hemorrhaging defense business," said Steven Binder, an analyst with Bear, Stearns & Co. in New York.
"They had to do it."
Howard Rubel, an analyst with C.J. Lawrence, Morgan Grenfell Inc. in New York, said the shift reflects Boeing confidence in Mr. Pinick, described by Mr. Rubel as an expert on doing business with the military.
"His side of the business has been successful in a tough environment," Mr. Rubel said.
A two-day meeting of representatives of Cocom, the 17-nation group that oversees exports of sensitive goods to communist countries, didn't take any substantive decisions on trimming the list of items under controls.
Nor did it ease restrictions on exports to Poland and Hungary, according to U.S. officials who attended the talks.
The U.S. had been under pressure from several Cocom members, especially France, West Germany and Italy, to ease restrictions on some types of machine tools, which those countries argued were now widely available to East Bloc countries from non-Cocom members.
For several years some European countries have complained that outdated Cocom lists and restrictions served more to hamper their trade than to add to Western security.
Some countries also have been pressing for special treatment for Hungary and Poland as they move toward more democratic rule, just as special treatment had been agreed on for China.
But U.S. officials said representatives at the meeting decided that this was "a matter for further discussion at future meetings."
They added that "all of us (Cocom members) look at the changes in Hungary and Poland in a positive way, but a question of this scope deserves further discussion and study."
The officials also said the meeting agreed to continue treating China as a special case, despite the recent repression of dissent there, but to offer no further concessions.
The U.S. officials said that despite the rapid changes under way in Eastern Europe and the Soviet Union, all the Cocom members agreed on "the continuing need for this organization," which was founded 40 years ago at the start of the Cold War.
The officials said the meeting agreed to continue working toward "streamlining" Cocom's restricted products list, and to improve procedures for punishing companies that don't comply with the export restrictions.
The officials said this meeting "put in motion" procedural steps that would speed up both of these functions, but that no specific decisions were taken on either matter.
Unisys Corp.'s announcement Friday of a $648.2 million loss for the third quarter showed that the company is moving even faster than expected to take write-offs on its various problems and prepare for a turnaround next year.
At the same time, the sheer size of the loss, coupled with a slowing of orders, made some securities analysts wonder just how strong that turnaround will be at the computer maker and defense-electronics concern.
"Unisys is getting clobbered.
Just clobbered," said Ulric Weil, an analyst at Weil & Associates who had once been high on the company.
"The quarter was terrible, and the future looks anything but encouraging."
Unisys, whose revenue inched up 3.7% in the quarter to $2.35 billion from $2.27 billion in the year-earlier quarter, had an operating loss of about $30 million.
On top of that, the Blue Bell, Pa., concern took a $230 million charge related to the layoffs of 8,000 employees.
That is at the high end of the range of 7,000 to 8,000 employees that Unisys said a month ago would be laid off.
Unisys said that should help it save $500 million a year in costs, again at the high end of the previously reported range of $400 million to $500 million.
The company also took a write-off of $150 million to cover losses on some fixed-price defense contracts, as some new managers took a hard look at the prospects for that slow-growing business.
In addition, Unisys set up an unspecified reserve -- apparently $60 million to $70 million -- to cover the minimum amount it will have to pay the government because of its involvement in the defense-procurement scandal.
Unisys also noted that it paid $78.8 million in taxes during the quarter, even though tax payments normally would be minimal in a quarter that produced such a big loss.
The tax payments will leave Unisys with $225 million in loss carry-forwards that will cut tax payments in future quarters.
In addition, Unisys said it reduced computer inventories a further $100 million during the quarter, leaving it within $100 million of its goal of a reduction of $500 million by the end of the year.
Still, Unisys said its European business was weak during the quarter, a worrisome sign given that the company has relied on solid results overseas to overcome weakness in the U.S. over the past several quarters.
The company also reported slower growth in another important business: systems that use the Unix operating system.
That would be a huge problem if it were to continue, because Unisys is betting its business on the assumption that customers want to move away from using operating systems that run on only one manufacturer's equipment and toward systems -- mainly Unix -- that work on almost anyone's machines.
In addition, Unisys must deal with its increasingly oppressive debt load.
Debt has risen to around $4 billion, or about 50% of total capitalization.
That means Unisys must pay about $100 million in interest every quarter, on top of $27 million in dividends on preferred stock.
Jim Unruh, Unisys's president, said he is approaching next year with caution.
He said the strength of the world-wide economy is suspect, and doesn't see much revenue growth in the cards.
He also said that the price wars flaring up in parts of the computer industry will continue through next year.
He said the move toward standard operating systems means customers aren't locked into buying from their traditional computer supplier and can force prices down.
That, he said, is why Unisys is overhauling its whole business: It needs to prepare for a world in which profit margins will be lower than computer companies have been used to.
"We've approached this not as a response to a temporary condition in the industry but as a fundamental change the industry is going through," Mr. Unruh said.
"The information-systems industry is still going to be a high-growth business, and we're confident that we have tremendous assets as a company.
But we don't minimize the challenges of the near term."
Securities analysts were even more cautious, having been burned repeatedly on Unisys this year.
Some had predicted earnings of more than $4 a share for this year, up from last year's fully diluted $3.27 a share on earnings of $680.6 million.
But the company said Friday that it had losses of $673.3 million through the first nine months, compared with earnings a year earlier of $382.2 million, or $2.22 a share fully diluted, as revenue inched up 1.4% to $7.13 billion from $7.03 billion.
And Unisys is expected to do little better than break even in the fourth quarter.
So Steve Milunovich at First Boston said he is cutting his earnings estimate for next year to $2 a share from $3.
"I was feeling like I was too high to begin with," he said.
Mr. Weil of Weil & Associates said he will remain at $1 a share for next year but said he wonders whether even that low target is at risk.
"The break-even point for next year is much lower, but is it low enough?" he asked.
Reflecting the concern, Unisys stock fell a further 75 cents to $16.25 in composite trading Friday on the New York Stock Exchange.
If a TV weatherman gets butterflies facing the camera again after a questionable forecast, Donald H. Straszheim surely understands.
The chief economist of Merrill Lynch & Co. finds himself in such a position as he buzzes the Midwest on his first road trip since backpedaling on a major prediction.
Mr. Straszheim expects he will take some heat, and he's right.
Since the last time he traveled this way several months ago, he has recanted a series of bold forecasts of a recession.
In February 1988, for example, Merrill Lynch's weekly commentary announced that "the economy is likely to fall into recession in early 1989."
The forecasts were widely disseminated, and, in a splashy ad campaign launched in the summer of 1988, Merrill Lynch urged investors to buy bonds.
It said long-term interest rates, then above 9%, could drop to 7% by the end of 1989, so bonds, which benefit from falling rates, would be a good buy.
The firm also raised the percentage of bonds in its model portfolio from 40% to 45% and later to 55%.
But this September -- just when many market economists, including some at Merrill Lynch, believed that Mr. Straszheim was about to be proved right -- he took a detour if not a U-turn.
He softened the talk about a recession.
Now, in fact, he is predicting economic growth of 2.9% this year and 2.1% next year, a more optimistic outlook than the consensus of some four dozen top forecasters surveyed by Blue Chip Economic Indicators newsletter.
And, just recently, Merrill Lynch cut the recommended bondholdings back to 50%.
While such changes might sound minor, they aren't: Merrill Lynch manages or oversees some $300 billion in retail accounts that include everything from mutual funds to individual annuities.
Two well-known colleagues who believe Mr. Straszheim was right the first time are David Bostian Jr. and A. Gary Shilling, both of whom run their own New York research firms.
Mr. Bostian said in August that his macroeconomic index signaled recession.
Mr. Shilling, who was Merrill Lynch's chief economist from 1967 to 1971, has heralded a recession for months.
"My own personal opinion is that Don threw in the towel just about the time he should have doubled his bet," he says.
Now a rocky stock market and weak corporate profits may further threaten the economy.
And Mr. Straszheim conceded after a recent drop in manufacturing jobs that "it may prove to be the case that we got whipsawed -- that we pulled the recession forecast at just the wrong time."
He adds, "That's the forecasting business."
However risky the business, it's brisk these days.
Pestered by bosses, brokers, clients and media people and pushed by their own egos, Wall Street economists are forecasting about everything from broad economic trends to the dinkiest monthly indicator.
But the surprisingly durable seven-year economic expansion has made mincemeat of more than one forecast.
This isn't the quiet economic science practiced in the universities.
This is the commercial version.
Carrying the new message on the road, Mr. Straszheim meets confrontation that often occurs in inverse proportion to the size of the client.
No sophisticated professional expects economists to be right all the time.
Some smaller clients don't seem to notice his switch.
But with some clients, the talk can heat up a bit.
Dennis O'Brien, the treasurer of Commonwealth Edison Co. in Chicago, adopts a polite approach, waiting for an opportunity to ask about the forecast.
A good half-hour into breakfast at the Palmer House, Mr. O'Brien looks up from his plate after Mr. Straszheim says something about people who believe interest rates are about to nosedive.
"I'm one of them who hope they will, with $6 billion in debt on the books.
Is that the forecast?" Mr. O'Brien asks, trying to pin down the economist.
He doesn't fully succeed, although Mr. Straszheim lists an array of interest-rate scenarios.
In a chilly conference room at Alliance Capital Management in Minneapolis, in contrast, the firm's money managers seem ready to pin Mr. Straszheim to the wall.
Alfred Harrison, the manager, shoves Mr. Straszheim's handout back at him: "Do we want to go through this?
Or can we ask you why you changed your forecast just when it's about to be right?"
Swiveling in his chair, Mr. Straszheim replies that the new outlook, though still weak, doesn't justify calling a recession right now. "
It's all in this handout you don't want to look at.
We could still have a recession" at some point.
One of Mr. Straszheim's recurring themes is that the state of the economy isn't a simple black or white.
Sometimes, like now, it's gray.
This somewhat-ambiguous assessment moves one Alliance portfolio manager to ask: "So, what is this -- a Stealth recession?"
Another challenges Merrill Lynch's bond recommendation last year.
"We're not running that ad campaign any more," Mr. Straszheim snaps in a rare show of irritation.
He adds, "I think it was a fairly decent call."
Explaining his change of mind, Mr. Straszheim says later, "It's hard to pin this on one factor."
He says the economy, and especially the employment numbers, look much better than he expected; interest rates have generally declined; inflation hasn't run amok.
"Our business is constantly looking at all these things," he says.
His new forecast calls for "a soft landing."
And it may be right, judging from last week's report that inflation-adjusted gross national product rose at a 2.5% annual rate in the third quarter.
Mr. Shilling understands Mr. Straszheim's problems.
"There's unbelievable pressure on economists to forecast these numbers," he says. "
You make a forecast, and then you become its prisoner."
It is indeed hard to back away from a widely publicized forecast, and Mr. Straszheim is fidgeting with the handcuffs on this trip.
His approach to the recantation is direct but low-key.
"For some time, we had forecast negative third- and fourth-quarter growth.
We pulled that forecast," he begins matter-of-factly in a meeting with Piper, Jaffray & Hopwood Inc. officials in Minneapolis, the first stop.
Crane Co. said it holds an 8.9% stake in Milton Roy Corp., an analytical-instruments maker, and may seek control of the company.
Crane, a maker of engineered products for aerospace, construction, defense and other uses, made the disclosure in a Securities and Exchange Commission filing.
In the filing, Crane said that in the past it considered seeking control of Milton Roy, of St. Petersburg, Fla., through a merger or tender offer and that it expects to continue to evaluate an acquisition from time to time.
Crane officials didn't return phone calls seeking comment.
Crane holds 504,200 Milton Roy shares, including 254,200 bought from Sept. 14 to Thursday for $15.50 to $16.75 each.
In New York Stock Exchange composite trading Friday, Milton Roy shares leaped $2, to $18.375 each, while Crane sank $1.125, to $21.125 a share.
John M. McNamara, chief financial officer of Milton Roy, said the company has no comment on Crane's filing.
Milton Roy recently fended off unsolicited overtures from Thermo Electron Corp., a Waltham, Mass., maker of biomedical products.
Milton Roy disclosed in May that it was approached for a possible acquisition by Thermo Electron, which agreed to purchase Milton Roy's liquid-chromatography line for $22 million in February.
Thermo Electron acquired some 6% of Milton Roy's common stock before throwing in the towel and reducing its stake in early September.
Gabelli Group began raising its Milton Roy stake in July, and holds 14.6%, according to a recent SEC filing.
It hasn't made merger overtures to the board.
Earlier this month, Milton Roy signed a letter of intent to acquire Automated Custom Systems Inc., Orange, Calif., and its sister operation, Environmental Testing Co., in Aurora, Colo.
The companies are automotive-emissions-testing concerns.
Under the terms, Milton Roy will pay an initial $4 million for the operations and additional payments during the next four years based on the earnings performance of the businesses.
In the nine months, Milton Roy earned $6.6 million, or $1.18 a share, on sales of $94.3 million.
Last week the British displayed unusual political immaturity.
The Chancellor of the Exchequer, Nigel Lawson, resigned because Prime Minister Thatcher would not fire her trusted adviser Sir Alan Walters.
The opposition Labor Party leader, Neil Kinnock, in a display of the male chauvinism typical of the British lower class, denounced Mrs. Thatcher for having an independent mind and refusing to heed the men in her Cabinet.
The British press, making a mountain out of a molehill, precipitated an unnecessary economic crisis by portraying Mrs. Thatcher as an autocrat who had thrown economic policy into confusion by driving a respected figure from her government.
Behind the silly posturing lies a real dispute.
Mr. Lawson and his European-minded colleagues want the British pound formally tied to the West German mark.
Sir Alan considers this an ill-advised and costly policy.
As there is an effort to "anchor the dollar" either to gold or other currencies, the dispute is worth examining.
Until his resignation, Mr. Lawson had been conducting British monetary policy as if the pound were tied to the mark.
When Mrs. Thatcher cut the top tax rate to 40%, Mr. Lawson flooded the country with money to prevent the pound from rising against the mark.
As a result, he reignited the inflation that Mrs. Thatcher, through a long and costly effort, had subdued.
With inflation surging, the pound began falling against the mark.
To keep the exchange rate pegged, Mr. Lawson tightened monetary policy and pushed interest rates up to 15%.
This doubled the mortgage interest rates of the many new homeowners that Mrs. Thatcher's policies had created, producing widespread disaffection and pushing Labor ahead in the polls.
Instead of realizing his mistake in letting the exchange rate dominate both British economic policy and Mrs. Thatcher's political fortune, Mr. Lawson pushed for tying the pound formally to the mark by entering the European Monetary System, which subordinates all member currencies to German monetary policy.
This put Mrs. Thatcher in a bind.
The concept of European integration is one of those grand schemes that appeal to intellectuals, the media and the imagination, but are full of practical pitfalls.
If the pound had been tied to the mark, the British would have been unable to cut their exorbitant tax rates.
The reason is simple.
When a country cuts tax rates, it makes itself more attractive to investors and drives up the value of its currency.
It was fear of disturbing EMS exchange-rate relationships that caused the Chirac government in France to be timid about cutting tax rates.
Edouard Balladur, the finance minister at the time, was sold on the tax-cut policy but was concerned that his government would be criticized as anti-European for disturbing the linked European currency relationship.
The price of attracting capital -- whether one's own or that of foreigners -- is a trade deficit.
To avoid this deficit Mr. Lawson inflated the pound in order to prevent its rise.
This misguided policy could not prevent a British trade deficit.
Consequently, Mr. Lawson saddled Mrs. Thatcher with a record trade deficit, renewed inflation and high interest rates -- three political failures in a row.
Little wonder that Mrs. Thatcher's opponents were so anxious to keep Mr. Lawson in office.
It is extraordinary that the British Treasury thought it could prevent a trade deficit by inflating the pound.
The British balance-of-payments statistics show that after the top tax rate was cut to 40%, the flow abroad of British capital slowed, to 50 billion pounds ($79 billion at the current rate) in 1988 from 93 billion pounds in 1986.
This change in the British capital account required an offsetting change in the trade account, a change that could not be prevented by pegging the currency.
Nigel Lawson was a victim of the immense confusion in thought that has been characteristic of Western financial circles during the 1980s.
The most important governments have ignored the role of low tax rates in attracting real capital investment, instead emphasizing financial flows in response to high interest rates.
This has led them in a fruitless and destructive policy circle.
First comes monetary expansion to drive down the currency's value that was pushed up by tax-rate reduction.
Then, when the currency falls, interest rates are raised to attract financial flows in order to stabilize the exchange rate.
This policy is totally mindless, and Sir Alan is correct to point out its deficiencies.
Britain and all of Europe need to reconsider the prospects for European integration in light of the possible reunification and neutralization of Germany.
A unified Germany that remained within the Western alliance would give Germany such an overshadowing position that all other members of a unified Europe would become vassals of the German state.
Unless the Soviet Union collapses, German reunification is likely to require Germany's neutralization.
The implications for Britain, France and the rest of Europe of having their currencies tied to the economic policy of a neutral country need considering before we judge Mr. Lawson's resignation to be unfortunate.
In the least, we must recognize the futility of trying to use exchange-rate intervention to offset the effects of tax-rate reduction on capital flows.
Mr. Roberts was assistant Treasury secretary under President Reagan.
Joseph P. Jordan, 52 years old, becomes president, chief executive officer and a director of the bank company.
Mr. Jordan, formerly president and chief executive of Fishkill National Bank in Beacon, N.Y., succeeds Donald Broderick, who died at 52 in an automobile accident.
Personal spending, which fueled the economy's growth in the third quarter, was clearly slowing by the end of the period, raising questions about the economy's strength as the year ends.
Personal spending grew 0.2% in September to a $3.526 trillion annual rate, the Commerce Department said.
It was the smallest monthly increase in a year.
At the same time, personal income was held down by the effects of Hurricane Hugo, which tore through parts of North and South Carolina in late September.
The department said personal income rose 0.3% in September to a $4.469 trillion rate but would have climbed 0.6% had it not been for the storm.
Among the economic effects of the hurricane was a sharp drop in rental income.
The figures came a day after the government released a report showing that consumer spending propelled U.S. economic expansion in the third quarter while -- on an inflation-adjusted basis -- business investment slowed, government spending declined, and exports were flat.
But the new statistics show that by September, the burst in spending seemed to be tapering off.
Many economists expect the weakness to continue.
"I think the consumer has pretty well played himself out," said David Littman, senior economist at Manufacturers National Bank of Detroit.
"I don't think there's a lot in the wings" in other sectors of the economy to keep growth above 1%, he said.
In the third quarter, the economy grew at a moderate 2.5% annual rate.
In August, personal income rose 0.3% and spending grew 0.9%.
Analysts have attributed much of the summer's spurt in spending to bargain car prices at the end of the model year.
Car sales slackened in September after the 1990 models were introduced.
According to the Commerce Department report, spending on durable goods -- items expected to last at least three years, including cars -- declined by $6.2 billion.
The nation's savings rate was unchanged in September at 4.9% of after-tax income, far below the 5.6% it reached in July.
All the figures are adjusted for seasonal variations.
Here is the Commerce Department's latest report on personal income.
The figures are at seasonally adjusted annual rates in trillions of dollars.
CRA Ltd. said it agreed to sell a 40% stake in its Howick coal mine in the state of New South Wales to Mitsubishi Development Pty. of Japan.
The price wasn't disclosed.
The agreement is subject to government approval.
RA acquired the Howick coal mine Oct. 20 when it bought British Petroleum Co.'s Australian coal interests for $275 million.
CRA said then that it was looking for a partner for the mine, which produces more than three million metric tons of coal a year.
CRA is 49%-owned by RTZ Corp. of Britain.
Control Data Corp., which just months ago was hemorrhaging financially, thinks it will be healthy enough soon to consider repurchasing public debt.
Moreover, the company, whose go-it-alone approach nearly proved fatal, now sees alliances with others as the way back to prosperity in what it calls "the data solutions" business.
"I'm not saying everything is hunky-dory, but we have completed the transition," Robert M. Price, chairman and chief executive, said in an interview.
"Transition" is a reference to the company's five-year restructuring effort.
During that time, Control Data had losses of more than $1 billion.
Now, following asset sales that shrank revenue by more than one-third this year alone, Control Data is flush with cash.
So its senior executives are talking openly about possibly buying back some of the company's $172.5 million in subordinated convertible debentures next year.
"We'd like to continue to reduce debt," President Lawrence Perlman said.
Noting that the company is offering to buy back $154.2 million in senior notes paying 12 3/4%, he said the response will help determine future debt-reduction efforts.
The offer was automatically triggered by the recent sale of Control Data's Imprimis disk-drive business to Seagate Technology Inc.
Mr. Perlman, who is also acting chief financial officer and the odds-on favorite to become the next chief executive, said the company is achieving "modest positive cash flow from operations, and we expect that to continue into 1990."
He said the company has no intention of tapping its short-term bank lines "for a good part of 1990."
Sometime next year, Control Data will "develop a new bank relationship," Mr. Perlman said.
In recent months a group of lenders, led by Bank of America, has extended Control Data up to $90 million in revolving loans through January, as well as $115 million in standby letters of credit.
Loan covenants require that the company achieve specified levels of operating earnings and meet a rolling four-quarter profitability test.
Last week Control Data reported third-quarter earnings of $9.8 million, or 23 cents a share, on revenue of $763 million.
Through the first nine months, the company had a loss of $484 million, largely reflecting the closing of its supercomputer unit.
While a few assets are still being shopped -- including the sports and entertainment ticketing portion of the company's Ticketron unit -- Mr. Price said future restructuring would be a question of strategy.
"We don't need the cash."
Ticketron's automated wagering business, which operates lotteries in a half dozen states, is not for sale, the company said.
Rather, Mr. Perlman said, Control Data intends to bid for the coming Minnesota lottery contract and is seeking new applications for the technology overseas, where "there is great interest in games of skill."
He wouldn't elaborate.
Control Data's semiconductor business, VTC Inc., continues to lose money, the executives acknowledged, but they said they consider some of the technology vital to national defense and so are reluctant to dispose of it.
The company's strategy for keeping its computer products business profitable -- it recently achieved profitability after several quarters of losses -- calls for a narrow focus and a lid on expenses.
Partly, costs will be held down through strategic technology alliances, management said.
Control Data recently announced an agreement with MIPS Computer Systems Inc. to jointly develop machines with simplified operating software.
James E. Ousley, computer products group president, said such arrangements could help slash Control Data's computer research and development costs in half by the end of 1990.
He disclosed that before Control Data scrapped its ETA Systems Inc. supercomputer business this past spring, those costs were running at nearly 35% of group revenue.
At the same time four of six design projects were spiked, he said.
Asked how the company hopes to expand its computer hardware business, Mr. Ousley said it sees good opportunities in systems integration.
"We think we're getting only 10% of the integration dollars our customers are spending," he said.
"We're in environments that are going to spend a lot of money on that."
Control Data mainframes are designed for numerically intensive computing users, such as the scientific, engineering and academic communities.
Utilities management is a major commercial niche.
Reviewing the company's scrape with disaster, Mr. Price conceded it had tried to do too much on its own.
"Absolutely," he said.
But while its stock is selling at about half Control Data's estimated breakup value, neither Messrs. Perlman nor Price said he spends much time considering the possibility of a hostile takeover.
"We've been listed as a candidate for so long it's not worth worrying about," said Mr. Price.
Well, the arrogant East Coast media have spoken again ("Going for the Green," editorial, Oct. 17).
Having resided in the great state of California for the past seven years, I find it hard to ignore our environmental problems when I start my commute to work with eyes tearing and head aching from the polluted air; when I try to enjoy the beaches and come home covered with tar and oil; when I hear of numerous deaths related to irresponsible processing of cheese and use of chemicals in fruit growing.
Perhaps it's entertaining for those like you to discount the concerns of environmentalists, suggesting that their save-the-earth initiatives are "whacky" and referring to so many citizens as "la-la activists."
Strange that we don't hear similar criticisms of the East Coast activists who seek to clean up Boston Harbor or rid their beaches of medical waste.
While there are no easy low-cost solutions, simply ignoring our problems will result in their severity increasing and spreading throughout the state, the nation and the world.
If nothing else, such initiatives as these will provide an awareness to citizens and lawmakers and encourage appropriate corrective action.
Before your next California-bashing editorial, please spend more time out here witnessing the situation -- it just may change your view.
John Barry Ventura, Calif.
I realize you were just looking for something snotty to say about California and its environmental movement, but picking Frank Lloyd Wright to say it for you was a bad call.
Wright's organic architecture demonstrated a keen sensitivity to the environment decades before it became fashionable among "la-la activists."
Indeed, Wright said all his life that the greatest lessons he learned were derived from the study of nature.
Obviously, it's lost on you that about 75% of the American people these days (and in fact the president of the United States) consider themselves environmentalists.
As for California being a state run by liberal environmental loonies, let's not forget where Ronald Reagan came from.
Perhaps Mr. Reagan, who claimed that air pollution is caused by trees, is the man you should be quoting to back up your position that economics is more important than the Earth.
But it was Frank Lloyd Wright who said, "Is this not Anti-Christ?
The Moloch that knows no God but more?"
Robert Borden Santa Monica, Calif.
Your editorial was commendable and neatly matched by the readers' comments in letters to the editor, "Alar: Scaring on the Side of Caution."
The illogic and inaccuracy of John H. Adams's comments for the National Resources Defense Council fully justifies your characterization of California's Greens in particular as "la-la activists."
We may all hope that California's voters will heed the scientific realities that their own university's renowned Prof. Tom Jukes provides them and ignore the charlatanry profferred by their "wealthy Hollywood weepers."
I have a different approach to offer, not only to Californians, but to all Americans.
In a free country, the law should restrict citizens as little as is consistent with good manners and public safety.
Would-be naysayers should have the burden of proving reasonable necessity when they urge a prohibition for enactment into law.
W. Brown Morton Jr. Warsaw, Va.
The 170 airlines in the International Air Transport Association last year posted group net profit of $2.5 billion on revenue of $125.1 billion.
According to the association's annual report, scheduled to be released today in Warsaw, IATA members haven't posted such a strong performance since the late 1970s.
Revenue last year increased by more than 11% over 1988, and net income nearly tripled from restated year-earlier net of $900 million.
The group attributed the strong results to the favorable economic climate, rising demand for air travel and improved average yield (revenue received per ton of traffic transported a kilometer).
Systemwide, IATA airlines carried 632 million passengers last year, 2% more than in 1987.
But passenger-kilometers, the distance flown while carrying people, increased 5.3% in 1988.
The association said that lack of airport and air space capacity is the biggest problem facing the airline industry.
The KGB has abolished a unit known for persecuting dissidents, the government newspaper Izvestia said.
The newspaper quoted KGB chairman Vladimir A. Kryuchkov as saying the definition of anti-Soviet crimes had narrowed, the laws had changed and people no longer have to fear a simple slip of the tongue.
Mr. Kryuchkov was quoted as saying that in place of the infamous 5th Directorate a new unit would work "to foil the conspiracies of foreign intelligence services to create and use organized anti-government groups in our country."
Czechoslovakia has restricted consumer-goods exports to neighbor countries because of "massive buying out of food" by tourists from Poland, Hungary and the Soviet Union, the Rude Pravo daily said.
Rising inflation in Poland and Hungary makes Czechoslovak food, clothing and shoes relatively cheap for visitors from these countries.
The paper gave no details of what the restrictions would entail but said the measures were necessary to protect the domestic market.
West Germany's biggest union, IG Metall, said it is ready to back demands for more pay and shorter hours with strikes against the nation's automotive, steel and engineering industries.
Its chairman told the union to prepare for the worst in next year's confrontation with employers over a new three-year wage deal.
A major goal is to cut the working week to 35 hours from the present 37.
Last week came news of alarm in Venice over a plan to tap gas fields off the city's coast.
Now comes word from a scientist that over the next century Venice will sink nearly three times faster than the present rate because of the "greenhouse effect."
"Global warming means higher tides which will lower Venice by another 23 inches in the next 100 years," Giovanni Cecconi of the the New Venice Consortium said.
The consortium of scientists and companies was set up by Italy to help preserve the fabled city of canals.
Venice has sunk 10 inches in this century.
West Germany's Quelle said it will establish a mail-order operation with two local partners in the Soviet Union next year.
Saying this is a first for a Western company, West Germany's largest mail-order group said the newly established Moscow-based Intermoda company is scheduled to begin operations in February 1990.
Intermoda will initially only send the textile and clothing section of the Quelle catalog, translated into Russian, to Soviet customers who have access to convertible currency.
The European Community Commission has imposed provisional anti-dumping duties on imports of South Korean small-screen color-television sets.
Saying that a surge in low-priced imports had damaged EC producers' profits and led to job losses, the commission imposed a duty of 10.2% on TVs made by Daewoo, a duty of 12.3% on Goldstar Co., 13% on Samsung and 19.6% on TVs made by other South Korean producers.
The commission said that EC television producers lost "important market shares" and suffered an "unsustainable" pressure on prices because of the Korean companies' marketing and pricing policies, which it said were "in clear violation" of international trade rules.
In other news concerning South Korea's television industry, Samsung signed an agreement with Soyuz, the external-trade organization of the Soviet Union, to swap Korean television sets and videocassette recorders for pig iron from the Soviet Union.
South Korea and the Soviet Union have no diplomatic relations but exchanged trade offices earlier this year.
Sri Lanka, where more than 15,000 people have died in six years of ethnic turmoil, said it will ban sex and violence from state-owned television next year.
"Many programs we have now come from the West and are not suitable to our culture," a government minister said.
A star attraction on the national network is the U.S.'s "Dynasty." . . .
A poll of South Koreans showed overwhelming opposition to efforts to curb dog-meat consumption just because it offends foreigners.
Broad Inc. said it doubled its regular quarterly dividend to five cents a share from 2.5 cents on common, and to 4.5 cents a share 2.25 cents on Class B stock, payable Nov. 10 to holders of record Nov. 6.
The financial services company emerged from the restructuring of Kaufman & Broad, Inc., which spun off its home-building subsidiary into Kaufman & Broad Home Corp. earlier this year and changed its name to Broad Inc.
For the 10-month fiscal year ended Sept. 30, Chairman Eli Broad said he expected earnings results to approximate analysts' estimates, which the company said have been revised upward to 80 cents a share.
This would compare with an estimated loss of 3 cents a share for the comparable 10 months last year, which included restructuring costs.
If this battle were a movie, the producers would be fighting over two scripts with nothing but an opening scene in common.
In the opener, Sony Corp. would agree to buy Columbia Pictures Entertainment Inc. in a transaction valued at close to $5 billion.
Shortly after that, Sony would offer to buy Guber-Peters Entertainment Co. for $200 million and offer its co-chairmen, Peter Guber and Jon Peters, the chance to run Columbia.
Mr. Peters would fly to New York with the intention of telling Warner Communications Inc. Chairman Steven J. Ross that Guber-Peters planned to end its five-year contract to produce movies exclusively for Warner.
That's where the two scripts would diverge.
In affidavits filed in Los Angeles Superior Court in connection with the $1 billion breach-of-contract suit Warner brought against Sony for hiring the two producers, Mr. Guber and Mr. Peters tell one story.
Warner tells another.
In the affidavits, Mr. Peters says he was "shocked" when Mr. Ross refused a meeting and made it clear he would stop them.
Mr. Peters claims he reminded Mr. Ross that Robert Daly and Terry Semel, the top executives of the Warner Brothers studio, had "repeatedly agreed that we had every right to accept" an offer such as Sony's.
In response, Mr. Peters says, Mr. Ross referred to his colleagues at Warner with an "obscenity" and said: "Tell them that they don't have a job.
You can take them with you."
Warner denies Mr. Ross ever said any such thing, and, in fact, denies virtually everything Mr. Guber and Mr. Peters say in their affidavits.
Tomorrow, Warner will file another batch of documents contending that "the essence of everything these guys are saying is basically lies," says Warner's chief outside counsel, Stuart Rabinowitz.
Thursday, a judge is scheduled to rule on Warner's motion seeking to block the Guber-Peters duo from going to Columbia.
The battery of legal documents filed in the past week in connection with the suit provide a peek into the inner workings of this Hollywood dogfight.
But they also make it clear that the first thing a judge will have to decide is which, if any, version of events in this morass is fiction, and which fact.
The matter may never even be tried in court.
Warner says that what it really wants is for the producers to fulfill their contractual obligations, but the bitterness of this battle and the accusations flying on both sides make it unlikely that the decade-long relationship between Warner and its two most prolific producers can ever be repaired.
Warner, which is in the process of merging with Time Warner Inc., says it is willing to settle the matter out of court.
So far, however, Sony hasn't been willing to meet its considerable financial demands.
Mr. Guber and Mr. Peters don't have much to gain from a protracted battle.
Sony, for its part, could decide that the cost of a Warner settlement or court fight is too high, choosing instead to find someone else to run Columbia, although that too would be costly given the financial arrangement already guaranteed to Mr. Guber and Mr. Peters.
In that case, Mr. Guber and Mr. Peters might not suffer financially, but they would be left without their dream job of running a studio and with a considerably scarred relationship with Warner.
At the center of any court fight will be the differing interpretations of the written contract between Warner and the two producers, but other murkier issues will play a big role.
Sony and the Guber-Peters team are hanging much of their case on Warner's willingness last year to release the producers from another contract and on an oral agreement they say allowed them to terminate the current written contract if the opportunity to run a major studio came up.
Warner denies such an agreement was made, and disputes the Guber-Peters version of virtually every telephone call and meeting the two sides had on the matter.
Just how rancorous the relationship has become is clear from the differing versions of the two sides' current business dealings.
Mr. Guber and Mr. Peters say in their affidavits that Warner already is taking steps to freeze them out of their projects at Warner, notably the Sylvester Stallone film "Tango and Cash."
Mr. Peters says in his affidavit that the movie's staff was told last week that Warner was "taking over" the picture, and another producer would be giving all of the orders.
Over his objections, Mr. Peters says, the film's release date was moved up "by many months" to December, and plans for a soundtrack "worth millions of dollars" were dropped.
Hubert de la Bouillaire, an editor on the film, backs Mr. Peters in a separate sworn declaration.
Mr. de la Bouillaire says Warner Brothers production president Mark Canton called him Oct. 19 and said Mr. Peters is "off the picture.
If he calls you up, just tell him everything is fine."
The editor also says the new producer on the film, Bruce Baird, told editors to screen the picture without telling stars Sylvester Stallone and Kurt Russell or Mr. Peters.
"The less they know, the easier it is for us.
If someone asks, just lie and tell them it will be done," Mr. de la Bouillaire says Mr. Baird told them.
That, says Warner's Mr. Rabinowitz, is "a total 100% lie."
The movie, he says, is in its post-production stages of "cleaning up the film."
He says Mr. Peters and Mr. Guber, as the contractual producers with consultation rights, have been invited to screenings and to give their input on the film.
Dozens of Guber-Peters staffers are still working on the Warner lot and consulting on various projects on a "daily basis," the attorney says.
Mr. Guber, in his affidavit, says that when he advised Warner President Terry Semel of the Sony offer at lunch on Sept. 25, Mr. Semel "hugged and congratulated me, and expressed joy that we had finally realized our long-term ambition of running and having an equity position in a major entertainment company."
Mr. Guber says he brought to lunch a release document Warner had agreed to in 1988, when he and Mr. Peters made an aborted bid to buy part of MGM/UA Entertainment Co. to run the MGM studio.
Mr. Guber says he had crossed out "MGM" with a red pen and written in "Columbia," giving the document to Mr. Semel.
"Mr. Semel said absolutely nothing to indicate Warner would have any objection to our assuming management positions at Columbia," Mr. Guber says.
Mr. Semel, in his affidavit, doesn't mention any hugging or congratulating.
He says he told Mr. Guber he couldn't sign any documents and that "the deal, although apparently a good one for him and Mr. Peters, would have a very negative impact on Warner."
He said he would contact Mr. Ross and Warner Brothers Chairman Robert Daly and that, in a conference call, the three agreed they couldn't let the producers out of their contract.
Mr. Ross, in his own affidavit, says he and Mr. Daly instructed Mr. Semel to tell the producers Warner wouldn't terminate their agreement.
Mr. Guber says that Mr. Semel did convey that information and that Mr. Semel said Mr. Ross was "crazy because of the Time deal," meaning, Mr. Guber says, that Mr. Ross "did not want to communicate to his new merger partner, Time Inc., that Warner's agreements provided for our departure under these circumstances."
Mr. Guber also says in his affidavit that Mr. Daly "told us that even if Sony did not want us, Warner's relationship with us already was irreparably damaged, that there was no way `to put the egg together,' and that it would sue Sony for tons of money."
Moreover, Mr. Guber claims, Mr. Semel told him that Mr. Ross probably wouldn't object "if it were anybody other than Sony.
But Sony is a problem."
The Guber-Peters side has said Warner is particularly concerned about the prospect of a huge Japanese company controlling important segments of the U.S. entertainment business.
Some in Hollywood suggest Mr. Guber and Mr. Peters took encouragement from Warner studio executives such as Mr. Semel and Mr. Canton too literally.
According to this theory, Warner executives, hoping to strengthen their relationships with the producers, encouraged Mr. Guber and Mr. Peters in their ambitions to build a major entertainment company.
But the Warner executives in their affidavits deny ever telling the producers they could get out of their written contract.
Mr. Rabinowitz, the Warner attorney, says the studio still wants the producers to come back and fulfill their contract.
"They are like a mini-studio; they have 50 projects in development for Warner," he says.
But Mr. Guber indicates in his affidavit that not all of the projects will be used.
For example, he says that since 1985, he and Mr. Peters have developed over 85 movie projects, and Warner has "passed" or chosen not to produce at least 76.
As for the projects remaining at Warner, Mr. Guber says, "Mr. Semel informed me that Warner's producers have already started a `feeding frenzy' for our projects.
E.W. Scripps Co. said it has acquired a Georgia cable television company and a Massachusetts publishing firm.
Terms on both deals weren't disclosed.
The media company said it purchased Cable USA Inc., a privately held cable television system in Carroll County, Ga., a suburb of Atlanta.
The system is still under construction and will serve a market of 7,600 homes.
The company also has acquired Sundance Publishers and Distributors Inc., a family owned producer and distributor of educational materials in Littleton, Mass.
Despite politicians' hand-wringing about the federal budget, the government ended fiscal 1989 with a $152.08 billion deficit, about the same as the two previous years.
Even White House budget director Richard Darman had trouble finding a silver lining in the report.
"I suppose you could say the good news is that the deficits are not heading up," he said, "but you can't be satisfied with deficits at this level and we're not."
The federal deficit was $155.15 billion in 1988 and $149.69 billion in 1987.
The 1989 deficit would have been nearly $10 billion larger had the government been able to spend as much as Congress intended on cleaning up the thrift industry before the year ended on Sept. 30.
Because the Resolution Trust Corp. couldn't spend the money fast enough, the savings-and-loan outlays were pushed into fiscal 1990.
Nevertheless, the 1989 deficit still exceeded the $136 billion target set by the Gramm-Rudman deficit-reduction law by $16 billion, a reminder of that law's shortcomings.
The law sets a deficit target of $100 billion for fiscal 1990.
A partisan fight over cutting capital-gains taxes has slowed the progress of 1990 deficit-reduction legislation almost to a halt, triggering across-the-board spending cuts under the Gramm-Rudman law.
The White House and the Democratic leadership in Congress blame each other for turning capital-gains taxes into such a divisive issue this year.
Neither side showed any sign of retreating.
Meeting with reporters Friday, Mr. Darman again said he would rather live with across-the-board spending cuts than accept a deficit-reduction bill like the one passed by the House, which would increase spending in future years.
Underscoring the size of the deficits of the past few years, the Treasury report showed that for the first time interest paid on the public debt -- $240.86 billion -- exceeded spending on Social Security, the single largest government program.
In all, federal outlays amounted to $1.143 trillion in 1989, up 7.5% from the previous year, the Treasury said.
Federal revenues rose 9% to $990.79 billion.
The Treasury said a surge in tax receipts noted earlier in the year didn't turn out to be quite as strong as it first appeared.
The Treasury marked up its forecast by $17 million in July, but that proved to be about $5 billion too optimistic.
The government ran a deficit of $6.16 billion in September, compared with a surplus of $10.17 billion in September 1988.
Outlays for the month totaled $105.39 billion, up from $87.57 billion a year earlier.
The increase reflects spending on the S&L rescue as well as payroll and Social Security checks normally issued in October that were issued in September this year because Oct. 1 fell on a Sunday.
Revenues were $99.23 billion, up from $97.74 billion a year earlier.
CMS Energy Corp. said it would begin paying a 10-cent-a-share quarterly dividend, the company's first since 1984.
Consumers Power Co., now the main unit of CMS Energy, ran into financial problems over its $4.2 billion Midland nuclear plant, which was abandoned as a nuclear facility in 1984 because of construction delays and high costs.
CMS is nearly done converting the Midland plant to a gas-fired cogeneration facility at a cost of $600 million.
CMS management said Thursday that they planned to recommend paying a modest dividend when the board of directors met Friday.
The dividend will be paid Nov. 22 to shares of record Nov. 7.
The company suffered a loss of $270 million in 1985, but its financial situation has been improving since then.
Humana Inc. said it expects to receive about $27 million in federal income-tax refunds and interest from a court ruling on a tax dispute.
The health-care company said it expects the refund to be included in the first quarter ending Nov. 30.
The refund is about $9 million.
Accrued interest on the refund was about $18 million as of Oct. 25.
The refund stems from a court ruling that found certain payments by Humana subsidiaries to its insurance subsidiary during fiscal 1977 through 1979 were deductible as premiums for liability insurance.
Polly Peck International Inc.'s agreement to acquire 51% of Sansui Electric Co. proves that foreign companies can acquire Japanese companies -- if the alternative for the Japanese company is extinction.
Polly Peck, a fast-growing British conglomerate, will pay 15.6 billion yen ($110 million) for 39 million new shares of Sansui, a well-known maker of high-fidelity audio equipment that failed to adjust to changing market conditions.
Japanese government officials, eager to rebut foreign criticism of Japanese investments overseas, hailed the transaction as proof foreigners can make similar investments in Japan.
Polly Peck's chairman, Asil Nadir, echoed the official Japanese view of the accord, which was announced Friday.
"The myths that Japan is not open to concerns from outside has, I think, been demolished at a stroke," Mr. Nadir said.
But analysts say Sansui is a special case.
It expects to post a loss of 6.4 billion yen for the year ending tomorrow and its liabilities currently exceed its assets by about 13.8 billion yen. "
If you find sound, healthy companies in Japan, they are not for sale," said George Watanabe, a management-consultant at Tokyo-based Asia Advisory Services Inc.
Statistics on acquisitions by foreigners vary in detail, because unlike Sansui, which is listed on the Tokyo and Osaka stock exchanges, most of the Japanese companies acquired by foreigners are privately held.
But by all accounts foreign companies have bought only a relative handful of Japanese companies this year, while Japanese companies have acquired hundreds of foreign companies.
Nor do analysts expect the Sansui deal to touch off a fresh wave of foreign purchases.
If the strong yen and the high stock prices of Japanese companies weren't deterrents enough, webs of cross-shareholdings between friendly Japanese companies and fiercely independent Japanese corporate attitudes repel most would-be acquirers.
Usually when a Japanese company is ready to sell, it has few alternatives remaining, and the grim demeanors of Sansui's directors at a joint news conference here left little doubt that this was not the company's finest hour.
Sansui was once one of Japan's premier makers of expensive, high-quality stereo gear for audiophiles.
But in recent years, the market has moved toward less expensive "mini-component" sets, miniaturized amplifiers and receivers and software players that could be stacked on top of each other.
Some of Sansui's fellow audio-specialty companies, such as Aiwa Co. and Pioneer Electric Corp., responded to the challenge by quickly bringing out mini-component products of their own, by moving heavily into the booming compact disk businesses or by diversifying into other consumer-electronics fields, including laser disks or portable cassette players.
Sansui was late into the mini-component business and failed to branch into other new businesses.
As the yen soared in recent years, Sansui's deepening financial problems became a vicious circle.
While competitors moved production offshore in response to the sagging competitiveness of Japanese factories, Sansui lacked the money to build new plants in Southeast Asia.
"Our company has not been able to cope very effectively with" changes in the marketplace, said Ryosuke Ito, Sansui's president.
But even a Japanese company that looks like a dog may turn out to be a good investment for a foreign concern, some management consultants maintain.
Yoshihisa Murasawa, a management consultant for Booz-Allen & Hamilton (Japan) Inc., said his firm will likely be recommending acquisitions of Japanese companies more often to foreign clients in the future.
"Attitudes {toward being acquired} are still negative, but they're becoming more positive," Mr. Murasawa said.
"In some industries, like pharmaceuticals, acquisitions make sense."
Whether Polly Peck's acquisition makes sense remains to be seen, but at the news conference, Mr. Nadir brimmed with self-confidence that he can turn Sansui around.
Sansui, he said, is a perfect fit for Polly Peck's electronics operations, which make televisions, videocassette recorders, microwaves and other products on an "original equipment maker" basis for sale under other companies' brand names.
He said Polly Peck will greatly expand Sansui's product line, using Sansui's engineers to design the new products, and will move Sansui's production of most products other than sophisticated audio gear offshore into Polly Peck's own factories.
"Whatever capital it (Sansui) needs so it can compete and become a totally global entity capable of competing with the best in the world, that capital will be injected," Mr. Nadir said.
And while Polly Peck isn't jettisoning the existent top-management structure of Sansui, it is bringing in a former Toshiba Corp. executive as executive vice president and chief operating officer.
Such risk taking is an everyday matter for the brash Mr. Nadir, who is 25% owner of Polly Peck as well as its chairman.
He took Polly Peck, once a small fabric wholesaler, and used it at as a base to build a conglomerate that has been doubling its profits annually since 1980.
In September, it announced plans to acquire the tropical-fruit business of RJR Nabisco Inc.'s Del Monte foods unit for #557 million ($878 million).
Last month, Polly Peck posted a 38% jump in pretax profit for the first half to #54.8 million from #39.8 million on a 63% rise in sales.
Joann S. Lublin in London contributed to this article.
The bolstered cellular agreement between BellSouth Corp. and LIN Broadcasting Corp. carries heightened risks and could fail to fend off McCaw Cellular Communications Inc., the rival suitor for LIN.
Moreover, the amended pact shows how McCaw's persistence has pushed LIN and BellSouth into a corner, forcing huge debt on the proposed new company.
The debt, estimated at $4.7 billion, could mortgage the cellular company's future earning power in order to placate some LIN holders in the short term.
The plan still calls for LIN to combine its cellular telephone properties with BellSouth's and to spin off its broadcasting operations.
But under new terms of the agreement, announced Friday, LIN holders would receive a special cash dividend of $42 a share, representing a payout of about $2.23 billion, shortly before the proposed merger.
LIN said it expects to borrow the money to pay the dividend, but commitments from banks still haven't been obtained.
Under previous terms, holders would have received a dividend of only $20 a share.
In addition, New York-based LIN would exercise its right to buy out for $1.9 billion the 55% equity interest of its partner, Metromedia Co., in a New York cellular franchise.
That money also would have to be borrowed.
In effect, McCaw has forced LIN's hand by bidding $1.9 billion for the stake earlier this month.
"We're taking on more debt than we would have liked to," acknowledged Michael Plouf, LIN's vice president and treasurer.
Although he expressed confidence that the proposed new company's cash flow would be sufficient to cover interest payments on the debt, he estimated that the company wouldn't be profitable until 1994 or later.
Analyst estimate the value of the BellSouth proposal at about $115 to $125 a share.
They value McCaw's bid at $112 to $118 a share.
The previous BellSouth pact was valued at about $98 to $110 a share.
McCaw, the largest provider of cellular telephone service in the U.S., already owns about 9.4% of LIN's stock.
In response to BellSouth's amended pact, the Kirkland, Wash., company extended its own offer to buy 22 million LIN shares for $125 apiece, which would give McCaw a 50.3% controlling interest.
Over the weekend, McCaw continued to call for an auction of LIN.
Analysts said they expect McCaw to escalate the bidding again.
"This game isn't over yet," said Joel D. Gross, a vice president at Donaldson, Lufkin & Jenrette Securities Corp.
"At some point, it will become non-economical for one company.
But I don't think we're at that point yet."
Under its revised proposal, Atlanta-based BellSouth would have a 50% interest in the new cellular company and would be responsible for half of its debt.
To sweeten the pact further -- and to ease concerns of institutional investors -- BellSouth added a provision designed to give extra protection to holders if the regional Bell company ever decides to buy the rest of the new cellular company.
The provision, described as "back-end" protection, would require BellSouth to pay a price equivalent to what an outside party might have to pay.
McCaw's bid also has a similar clause.
Only McCaw's proposal requires the company to begin an auction process in June 1994 for remaining shares at third-party prices.
To mollify shareholders concerned about the long-term value of the company under the BellSouth-LIN agreement, BellSouth also agreed to pay as much as $10 a share, or $540 million, if, after five years, the trading value of the new cellular company isn't as high as the value that shareholders would have realized from the McCaw offer.
"We're very pleased with the new deal.
We didn't expect BellSouth to be so responsive," said Frederick A. Moran, president of Moran Asset Management Inc., which holds 500,000 LIN shares.
BellSouth's "back-end protection was flawed previously.
We think this is a superior deal to McCaw's.
We're surprised.
We didn't think a sleeping {Bell} mentality would be willing to take on dilution."
But Kenneth Leon, a telecommunications analyst with Bear, Stearns & Co., finds the BellSouth proposal still flawed because the company doesn't have to wait five years to begin buying more LIN shares.
"How many shares will be around in 1995?" he asked.
"There's nothing preventing BellSouth from buying up shares in the meanwhile."
BellSouth's revised proposal surprised many industry analysts, especially because of the company's willingness to accept some dilution of future earnings.
William O. McCoy, president of the company's BellSouth Enterprises Inc. unit, said the revised agreement with LIN would dilute BellSouth earnings by about 9% in both 1990 and 1991 and by significantly less thereafter.
Indeed, BellSouth's cellular operations were among the first in the country to become profitable.
For 1988, BellSouth earned $1.7 billion, or $3.51 a share, on revenue of $13.6 billion.
Analysts were predicting 1990 BellSouth earnings in the range of $3.90 a share, or $1.9 billion, but now those estimates are being scaled back.
In composite trading Friday on the New York Stock Exchange, BellSouth shares fell 87.5 cents to $52.125.
In national over-the-counter trading, LIN shares soared $4.625 to closed at $112.625, while McCaw fell $2.50 a share to $37.75.
The proposed BellSouth-LIN cellular company, including the newly acquired Metromedia stake, would give the new entity 55 million potential customers, including about 35 million in the nation's top 10 markets.
Mr. Leon of Bear Stearns speculated that McCaw, in an attempt to buy time, might consider filing an antitrust suit against BellSouth with the Justice Department and U.S. District Judge Harold Greene, who oversees enforcement of the consent decree that broke up the Bell system in 1984.
Indeed, McCaw seemed to hint at that option in a brief statement.
Urging LIN directors to conduct "a fair auction on a level playing field," McCaw asked how well the public interest would be served "with the Bell operating companies controlling over 94% of all cellular {potential customers} in the nation's top 10 markets.
Market makers in Nasdaq over-the-counter stocks are adding their voices to the swelling chorus of complaints about program trading.
Their motivation, however, has a strong practical aspect: Program trading is hazardous to their paychecks.
The most controversial form of program trading, stock-index arbitrage, is "making it tough for traders to make money," declares Robert Antolini, head of OTC trading at Donaldson, Lufkin & Jenrette.
Stock-index arbitrage -- the computer-guided buying and selling of stocks with offsetting trades in stock-index futures to profit from fleeting price discrepancies -- affects the OTC market directly through the 31 stocks included in Standard & Poor's 500-stock index.
The S&P 500 is often used in arbitrage strategies.
The portion of OTC volume attributable to program trading isn't known, as it is on the New York Stock Exchange, where it amounted to more than 13% in September.
Estimates from traders put it at less than 5% of Nasdaq's average daily volume of roughly 133 million shares.
Other market-maker gripes: Program trading also causes the Nasdaq Composite Index to lose ground against other segments of the stock market.
Because of program trading it is more difficult to trade many OTC stocks without sharp price moves, a condition known as illiquidity.
Moreover, the price volatility that is amplified by program trading is undercutting efforts to woo individual investors back to an OTC market that sorely misses them.
Some of these problems are neither new nor unique to the OTC market.
But the big, often tumultuous slide in stock prices this month has turned some of those who have been profiting from the practice against it.
Peter DaPuzzo, head of retail equity trading at Shearson Lehman Hutton, acknowledges that he wasn't troubled by program trading when it began in the pre-crash bull market because it added liquidity and people were pleased to see stock prices rising.
"We weren't as concerned until they became sell programs," says Mr. DaPuzzo, who now thinks it adds unnecessary volatility.
Shearson Lehman, however, executes program trades for clients.
Merrill Lynch, Goldman Sachs and Kidder Peabody, in addition to Shearson, do program-trade OTC stocks.
Shearson, Merrill Lynch and Goldman Sachs say they do so only for customers, however.
Kidder Peabody does program trading for its own as well as clients' accounts.
Of course, there were sell programs in past years, too, but they seem to hurt market makers more painfully these days.
That's largely because of defensive measures they adopted after the 1987 crash, when individual investors fled the market and trading activity dwindled.
Market makers, to cut costs, slashed inventories of stocks they keep on hand to sell investors when other holders aren't selling.
And to protect their reduced capital investment from eroding further, market makers became quicker to lower price quotes when sell programs are in progress.
On days when prices are tumbling, they must be willing to buy shares from sellers when no one else will.
In such an environment, market makers can suffer huge losses both on trades made that day at steadily dropping prices and in the value of their inventories of shares.
"It makes no sense for us to put money at risk when you know you're going to lose," says Mr. Antolini, of Donaldson Lufkin.
But this skittishness, Mr. Antolini says, is creating liquidity problems in certain OTC stocks.
"It's harder to sell stocks when the sell programs come in because some market makers don't want to {take the orders}.
No one has big positions and no one wants to take big risks."
Joseph Hardiman, president of the National Association of Securities Dealers, which oversees trading on Nasdaq, agrees that program trading is hurting the market's efforts to bring back small investors.
But, he observes, while makers suffer losses when program trading drags the market down, they also make money when program trading pushes the prices higher.
"Sometimes {traders} lose sight of that," he says.
The OTC stocks in the S&P 500 include Nasdaq's biggest, such as Apple Computer, MCI Communications, Tele-Communications and Liz Claiborne.
These big stocks greatly influence the Nasdaq Composite Index.
When the computers say "sell," the composite tumbles as well as the Dow Jones Industrial Average.
The problem, market makers say, is that while the industrial average and the S&P 500 usually recover as buy programs kick in, the Nasdaq Composite frequently is left behind.
Eight trading days after Oct. 12, the day before the stock market plunge, for instance, the Nasdaq Composite had fallen 4.3%, compared with 3.3% for the S&P 500, 3.5% for the New York Stock Exchange Composite Index and 3.6% for the industrial average.
This gap eventually closes, but slowly.
Three days later, as of Friday's close, the Nasdaq Composite was down 6%, compared with 5.9% for the industrial average, 5.7% for the S&P 500 and 5.8% for the Big Board Composite.
The main reason for this lag is that individual investors own 65% of the OTC market's capitalization, according to Mr. Hardiman, much more than on the Big Board.
Such investors tend to be more cautious than institutional investors are about re-entering the market after massive selloffs, market makers say.
Friday's Market Activity
The Nasdaq Composite Index tumbled 5.39, or 1.2% to 452.76 on Friday.
For the week, the index dropped 3.8%.
Weakness in big technology stocks hurt the composite as well as the Nasdaq 100 Index, which fell 1.4%, or 6.43, on Friday, to 437.68.
The Nasdaq Financial Index lost about 1%, or 3.95, to 448.80.
Friday's trading volume totaled 132.8 million shares.
The average daily share turnover for October is almost 148 million shares.
LIN Broadcasting surged 4 5/8 to 112 5/8; LIN and BellSouth sweetened their merger agreement in an attempt to keep shareholders from tendering their shares to McCaw Cellular Communications.
McCaw, which dropped 2 1/2 to 37 3/4, has offered $125 a share for a majority of LIN's shares.
The revised LIN-BellSouth agreement boosts the dollar amount of the special dividend LIN promises to pay shareholders.
LIN now plans to dole out $42 a share in cash, up from the earlier $20 amount.
Intel eased 1/8 to 31 7/8.
The semiconductor concern said the interruption in shipment of its 80486 computer chip will be brief and have little impact on the company's earnings.
The stock fell 7/8 Thursday amid concerns over problems discovered with the chip.
Intel told analysts that the company will resume shipments of the chips within two to three weeks.
Weisfield's rocketed 9 1/2 to 39 after the jewelry store operator said it is in preliminary discussions, with a party it wouldn't identify, regarding the possible acquisition of the company.
Starpointe Savings Bank rose 3 to 20 after the Federal Deposit Insurance Corp. approved Dime Savings Bank of New York's $21-a-share acquisition of Starpointe.
Kirschner Medical fell 4 to 15.
The company said its third-quarter earnings will probably be lower than the 16 cents a share it reported last year, despite a rise in the company's revenue.
Kirschner earned $376,000 on revenue of $14.5 million in the 1988 quarter.
The company blamed a number of factors for the earnings decline, including softer sales of joint-implants.
London share prices closed sharply lower Friday in active trading after Chancellor of the Exchequer Nigel Lawson's resignation slapped the market and Wall Street's rapid initial sell-off knocked it down.
London shares were depressed initially by overnight losses in New York and by the drop in sterling after Mr. Lawson's resignation.
It showed some early resilience after central bank support firmed sterling, but the weight of Wall Street late in London trading, and signs of further weakness in the British pound, proved a hefty load to bear.
New York stocks recovered some of their losses after the London market closed.
The Financial Times 100-share index shed 47.3 points to close at 2082.1, down 4.5% from the previous Friday and 6.8% from Oct. 13, when Wall Street's plunge helped spark the current weakness in London.
The 30-share index settled 42.0 points lower at 1678.5.
Volume was 840.8 million shares, up from 443.6 million Thursday and the week's most active session.
Dealers said the turnover, largely confined to the 100-share index stocks, partly reflected the flurry of activity typical at the close of a two-week trading account and the start of a new account.
But they said Friday's focus on the top-tier stocks telegraphed active overseas selling and showed the broad-based fears over the status of the U.K. economy and Britain's currency in the wake of the upheaval in Prime Minister Margaret Thatcher's cabinet.
A senior dealer with Warburg Securities noted British Gas, the most active blue-chip stock at 20 million shares traded, was affected by the political implications of Mr. Lawson's departure and Mrs. Thatcher's cabinet shuffle.
He attributed the unusually high volume to broad-based selling on fears that the Thatcher government may be in turmoil and Britain's Labor Party positioned to regain control of the government and renew efforts at nationalization.
British Gas shed 8.5 pence a share to close at 185 pence ($2.90).
Other dealers added that the blue-chip stocks in general were hit by profit-taking over concerns that London shares will continue posting declines and the uncertainty over sterling given that Mr. Lawson's successor, John Major, had only been in the job one day.
Besides British Gas, British Steel skidded 1.74 to 123.5 on turnover of 11 million shares.
British Petroleum fell 5 to 286 on 14 million shares traded.
Dealers said the multinational oil company was pressured by recent brokerage recommendations urging investors to switch into Shell Trading & Transport.
Shell eased 1 to 416 on turnover of 4.8 million shares.
Among the other actively traded blue-chip issues, Imperial Chemical Industries dropped 11 to #10.86, Hanson skidded 9.5 to 200.5, and British Telecom fell 10 to 250.
In Tokyo, stocks closed lower but above intraday lows in active trading.
The Nikkei index was pressured down by profit-taking triggered by sharp advances made through this week and fell 151.20 points to 35527.29.
In early trading in Tokyo Monday, the Nikkei index fell 148.85 points to 35378.44.
On Friday, the Tokyo stock price index of first section issues was down 15.82 at 2681.76.
First-section volume was estimated at 1.3 billion shares, up from 886 million shares Thursday.
An official at Wako Securities said brokerages' excessive expectations about recent advances in Tokyu Group shares and real estate issues were dashed Friday.
Dealers placed heavy buy orders in the morning to start the first trading day for November transactions.
But they failed to sell these stocks to client investors, who were cautious about the sharp gains these issues made this week, the Wako official said.
Fund managers said Friday's profittaking was a natural result of the week's "abnormal fever" in buying real estate, shipbuilding, steel and construction shares.
Frankfurt prices closed lower again Friday, the fourth decline in the past five days and the culmination of a week that saw the DAX index lose 4%.
The DAX dropped 19.69 points Friday to 1462.93.
Traders said the continued turbulence in other markets, coupled with the drop in London following the Lawson resignation, were responsible.
Traders said that selling pressure wasn't enormous and that the DAX dropped Friday more on a lack of any substantial buying interest.
They said contributing to the downward drift was the fact that many professional traders had chosen to square positions ahead of the weekend.
"It's the whole uncertainty about what's happening around us," said Valentin Von Korff, a trader at Credit Suisse First Boston in Frankfurt.
"If you take away the outside influences, the market itself looks very cheap.
What's happening here isn't justified by the fundamentals."
Traders said the market remains extremely nervous because of the wild swings seen on the New York Stock Exchange last week.
That's leaving small investors with cold feet, they said, and prompting institutions to take a reserved stance on the sidelines as well, at least until the market in New York settles down somewhat.
Elsewhere, share prices closed lower in Paris, Zurich, Amsterdam, Brussels and Stockholm, and were mixed in Milan.
The British shakeup was widely cited for the declines.
Share prices also closed lower in Sydney, Hong Kong, Singapore, Taipei, Manila, Wellington and Seoul.
Concern about declines in other markets, especially New York, caused selling pressure.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
Last week's best and worst performing stocks among those issues that make up 80% of the world's stock market capitalization (in local currency)
Source: Morgan Stanley Capital Intl.
APARTHEID FOES STAGED a massive anti-government rally in South Africa.
More than 70,000 people filled a soccer stadium on the outskirts of the black township of Soweto and welcomed freed leaders of the outlawed African National Congress.
It was considered South Africa's largest opposition rally.
Walter Sisulu, the ANC's former secretary general who served 26 years in prison before being released two weeks ago, urged peace, negotiation and discipline.
President de Klerk's government permitted the rally, and security forces didn't interfere.
Pretoria's approval of the demonstration and the ANC's conciliatory tone appeared aimed at setting up negotiations to give blacks political rights.
CONGRESSIONAL LEADERS BACKED Bush's criticism of Nicaragua's Ortega.
While lawmakers haven't raised the possibility of renewing military aid to the Contras following Ortega's weekend threat to end a truce, Senate Majority Leader Mitchell said on NBC-TV that Ortega had made "a very unwise move.
" Minority Leader Dole plans to offer a resolution tomorrow denouncing the Nicaraguan president, whose remarks came during a celebration in Costa Rica marking regional moves to democracy.
Ortega cited renewed attacks by the U.S.backed rebels.
Lawmakers must decide next month whether the Contras will get so-called humanitarian aid under a bipartisan agreement reached in March.
Spain's Socialist Party claimed victory in nationwide elections, saying it had retained its parliamentary majority by one seat.
With all the votes counted, a government spokesman said Prime Minister Gonzalez's party won 176 seats in the 350-seat Cortes, or lower house of parliament.
The Socialists held 184 seats going into the balloting.
Thousands of East Germans attended public rallies organized by the Communist leadership and demanded free speech, controls on the security forces and an end to official privileges.
The gatherings in East Berlin and elsewhere were viewed as part of a government effort to stop activists from staging protests to press their demands.
Dissidents in Czechoslovakia said the nation's pro-democracy movement was growing despite the government's move to crush a protest Saturday in Prague's Wenceslas Square.
More than 10,000 demonstrators had called for free elections and the resignation of Communist Party leader Milos Jakes.
Police detained more than 350 people.
Federal investigators have determined a metallurgical flaw that developed during the making of an engine disk led to the July crash of a United Airlines jetliner in Sioux City, Iowa, killing 112 people.
Congress sent to Bush an $8.5 billion military construction bill that cuts spending for new installations by 16%.
The measure also moves more than $450 million in the Pentagon budget to home-state projects from foreign bases.
U.S. and Soviet officials are to open a new round of talks today aimed at reducing chemical-weapons arsenals amid superpower differences over whether to stop making the gases.
The talks in New York are the first since Bush and Soviet Foreign Minister Shevardnadze unveiled proposals in September to scrap existing weapons.
Afghan guerrillas bombarded Kabul in a weekend assault that Western diplomats called one of the biggest offensives since the Soviet Union completed a troop withdrawal in February.
The rebels also reportedly tightened a blockade on roads leading to the capital, and government forces shelled a guerrilla-held area in western Afghanistan.
Lebanon's Christian leader convened an emergency meeting of his cabinet after indications that he might dissolve Parliament in an attempt to scuttle an Arab-sponsored peace plan.
Gen. Michel Aoun rejected the pact because it fails to provide a timetable for a Syrian troop pullout from Lebanon.
Authorities in Hawaii said the wreckage of a missing commuter plane with 20 people aboard was spotted in a remote valley on the island of Molokai.
There wasn't any evidence of survivors.
The plane failed to reach Molokai's airport Saturday while on a flight from the neighboring island of Maui.
The Oakland Athletics won baseball's World Series, defeating the San Francisco Giants in a four-game sweep.
An earthquake Oct. 17 in Northern California had caused a 10-day delay midway through the championship contest, which ended Saturday at San Francisco's Candlestick Park.
Died: Rudolf von Bennigsen-Foerder, 63, chairman of Veba AG of West Germany, in Duesseldorf, of pneumonia.
The West German machinery and plant equipment industry's orders rose an inflation-adjusted 1% in September from a year earlier despite a sharp drop in foreign orders, the German Association of Machinery Makers said.
Before adjustment for inflation, the association said, orders were up a nominal 5%.
While domestic orders climbed an adjusted 8% and a nominal 11% in September, foreign orders declined 4% after inflation and 1% on a nominal basis.
In the third quarter, orders rose a real 5% and a nominal 9%.
Domestic orders were up a real 11% and a nominal 14%, while foreign orders rose a real 1% and a nominal 5%.
When Michael S. Perry took the podium at a recent cosmetics industry event, more than 500 executives packing the room snapped to attention.
Mr. Perry, who runs Unilever Group's world-wide personal-care business, paused to scan the crowd.
"I see we have about half the audience working for us," he said, tongue in cheek.
"The other half, we may have before long."
Members of the audience gasped or laughed nervously; their industry has been unsettled recently by acquisitions.
First Unilever, the Anglo-Dutch packaged-goods giant, spent $2 billion to acquire brands such as Faberge and Elizabeth Arden.
It now holds the No. 3 position at U.S. department-store cosmetic counters.
Then Procter & Gamble Co. agreed to buy Noxell Corp. for $1.3 billion.
That acquisition, to be completed by year end, will include the Cover Girl and Clarion makeup lines, making P&G the top marketer of cosmetics in mass-market outlets.
It's not so much the idea of acquisitions that has agitated the cosmetics industry as the companies doing the acquiring: P&G and Unilever bring with them great experience with mundane products like soap and toilet paper, sparking disdain in the glitzy cosmetics trade; but they also bring mammoth marketing clout, sparking fear.
Though it is far from certain that companies best known for selling Promise margarine and Tide detergent will succeed in cosmetics, there's little doubt they will shake up the industry.
For now, both companies are keeping quiet about their specific plans.
But industry watchers expect them to blend the methodical marketing strategies they use for more mundane products with the more intuitive approach typical of cosmetics companies.
Likely changes include more emphasis on research, soaring advertising budgets and aggressive pricing.
But some cosmetics-industry executives wonder whether techniques honed in packaged goods will translate to the cosmetics business.
Estee Lauder Inc., Revlon Inc. and other cosmetics houses traditionally have considered themselves fashion enterprises whose product development is guided by the creative intuition of their executives.
Cosmetics companies roll out new makeup colors several times a year, and since most products can be easily copied by competitors, they're loath to test them with consumers.
"Just because upscale cosmetics look like packaged goods and smell like packaged goods, it doesn't mean they are packaged goods," says Leonard Lauder, chief executive of Estee Lauder.
"They're really fashion items wrapped up in little jars."
In contrast to the more artistic nature of traditional cosmetics houses, Unilever and P&G are the habitats of organization men in gray-flannel suits.
Both companies are conservative marketers that rely on extensive market research.
P&G, in particular, rarely rolls out a product nationally before extensive test-marketing.
Both can be extremely aggressive at pricing such products as soaps and diapers -- to the extent that some industry consultants predict cents-off coupons for mascara could result from their entry into the field.
P&G already has shown it can meld some traditional packaged-goods techniques with the image-making of the cosmetics trade in the mass-market end of the business.
Consider Oil of Olay, which P&G acquired as part of Richardson-Vicks International in 1985.
The moisturizer, introduced in 1962, had a dowdy image.
"Oil of Olay brought with it the baggage of being used basically by older women who had already aged," says David Williams, a consultant with New England Consulting Group.
P&G set out to reposition the brand by broadening the product line to include facial cleansers and moisturizers for sensitive skin.
It also redesigned Oil of Olay's packaging, stamping the traditional pink boxes with gold lines to create a more opulent look.
Moreover, P&G shifted its ad campaign from one targeting older women to one featuring a woman in her mid-30s vowing "not to grow old gracefully."
The company says sales have soared.
Goliaths like Unilever and P&G have enormous financial advantages over smaller rivals.
Next year, Noxell plans to roll out a perfume called Navy, says George L. Bunting Jr., chairman of Noxell.
Without P&G's backing, Noxell might not have been able to spend the estimated $5 million to $7 million needed to accomplish that without scrimping on its existing brands.
Packaged-goods companies "will make it tougher for smaller people to remain competitive," Mr. Bunting says.
Further consolidations in the industry could follow.
Rumors that Unilever is interested in acquiring Schering-Plough Corp.'s Maybelline unit are widespread.
Unilever won't comment; Schering, however, denies the brand is for sale.
The presence of Unilever and P&G is likely to increase the impact of advertising on cosmetics.
While the two are among the world's biggest advertisers, most makers of upscale cosmetics spend relatively little on national ads.
Instead, they focus on events in department stores and pour their promotional budgets into gifts that go along with purchases.
Estee Lauder, for example, spends only an estimated 5% of sales on advertising in the U.S., and Mr. Lauder says he has no plans to change his strategy.
The most dramatic changes, however, probably will come in new-product development.
Nearly 70% of cosmetics sales come through mass-distribution outlets such as drug stores and supermarkets, according to Andrew Shore, an analyst at Shearson Lehman Hutton Inc.
That figure has been inching up for several years.
As the trend continues, demand for mass-market items that are high quality but only mid-priced -- particularly skin-care products -- is expected to increase.
This fall, for example, L'Oreal Group, ordinarily a high-end line, rolled out a drug-store line of skin-care products called Plenitude, which retail for $5 to $15.
The packaged-goods marketers may try filling that gap with a spate of new products.
Unlike the old-line cosmetics houses, Unilever and P&G both have enormous research and development bases to draw on for new products.
P&G, in fact, is noted for gaining market leadership by introducing products that offer a technical edge over the competition.
Sales of its Tide detergent soared earlier this year, for example, after P&G introduced a version that includes a bleach safe for all colors and fabrics.
That's led industry executives to speculate that future product development will be driven more by technological innovation than by fashion whims -- especially among mass-market brands.
"There will be more emphasis on quality," says Guy Peyrelongue, chief executive of Cosmair Inc., the U.S. licensee of L'Oreal.
"You'll see fewer gimmicks."
But success for Unilever and P&G is far from guaranteed, as shown by the many consumer-product companies that have tried and failed to master the quirky beauty business.
In the 1970s, several pharmaceutical and packaged-goods companies, including Colgate-Palmolive Co., Eli Lilly & Co., Pfizer Inc. and Schering-Plough acquired cosmetics companies.
Industry consultants say only Schering-Plough, which makes the mass-market Maybelline, has maintained a meaningful business.
Colgate, which acquired Helena Rubenstein in 1973, sold the brand seven years later after the brand languished.
Unilever already has experienced some disappointment.
The mass-market Aziza brand, which it acquired in 1987 along with Chesebrough-Pond's Inc., has lost share, according to industry analysts.
The ritzy world of department-store cosmetics retailing, where Unilever is concentrating its efforts, may prove even more treacherous.
In this niche, makeup colors change seasonally because they are linked to ready-to-wear fashions.
Because brand loyalty is weak and most cosmetics purchases are unplanned, careful training of store sales staffs by cosmetics companies is important.
And cultivating a luxury image strong enough to persuade consumers to pay more than $15 for lipstick or eye makeup requires a subtle touch that packaged-goods companies have yet to demonstrate on their own.
There may be a truce in the long war of nerves between the White House and Congress over how this country conducts secret intelligence operations abroad.
After years of mistrust born of Watergate, past misdeeds of the Central Intelligence Agency, and the Iran-Contra scandal, President Bush and the Senate Intelligence Committee appear ready -- for now, at least -- to trust each other when it comes to setting policy on covert activities.
If that attitude lasts, it could infuse covert action planning with a level of care and confidence that hasn't been seen in years.
Over the past week, the president has agreed to keep the committee informed, usually in advance, of covert actions and to put key intelligence decisions in writing.
That wasn't always the way the Reagan administration handled such matters.
Mr. Bush has pledged as well to respect the 14-year-old executive order barring U.S. agents from assassinating foreign leaders or helping others to do so.
Congress never fully trusted former CIA chief William Casey and National Security Adviser John Poindexter to honor the ban.
Despite objections by the CIA, Mr. Bush also has agreed to the establishment of an inspector general at the CIA who would be independent of the CIA director.
In return, the Senate panel has dropped efforts to enact legislation requiring the administration to inform it within 48 hours of the launching of any covert activity.
It also has removed a ban on CIA use of a contingency fund for covert acts and has agreed to wipe away some tortured and legalistic restrictions on coup planning put in place to ensure that the CIA didn't get back in the assassination game.
"We've finally been able to convince them that Casey and {Oliver} North don't work here anymore," says one administration official.
The new understanding didn't just spring to life in a spontaneous eruption of sweetness and light.
It emerged after a rancorous display of old-style intelligence politics that followed this month's failed coup attempt in Panama.
The White House used television appearances and leaks to argue that congressionally imposed restrictions on covert actions made U.S. support for such coups difficult.
Mr. Bush even disclosed privately that one Reagan-era deal with Congress required him to notify the odious Panamanian dictator, Manuel Noriega, if the U.S. learned of a coup plot that might endanger his life.
The president also hinted he might veto this year's intelligence authorization bill if it is too restrictive.
Intelligence Committee Chairman David Boren (D., Okla.) and Vice Chairman William Cohen (R., Maine), for their part, angrily accused the White House of selectively leaking classified documents and trying unfairly to shift the blame to Congress for the bungled attempt to topple Gen. Noriega.
The White House got the better of the exchange but took care not to press its advantage to the kind of constitutional confrontation sought by conservative Republicans who don't want any congressional oversight of intelligence activities.
Instead, Mr. Bush and his aides made it clear they respected Congress's role and felt they could work with the conservative Mr. Boren and the moderate Mr. Cohen to iron out their differences.
The senators responded in kind.
Sen. Boren happily told reporters that there had been "a meeting of the minds" with the White House, and that the committee had given Mr. Bush "a clean slate," free of the impediments imposed during the Reagan years.
Sen. Cohen said the relationship has reverted to its pre-Reagan character.
There still are some details to be nailed down.
Mr. Bush is reserving the right in "rare" instances to keep Congress in the dark, asserting a constitutional prerogative the committee doesn't recognize.
And a pending Justice Department interpretation of the assassination ban could raise questions that would have to be settled.
Moreover, both sides may face political critics.
Some conservatives will accuse the president of promising Congress too much.
And they continue anonymously attacking CIA Director William Webster for being too accommodating to the committee.
At the same time, some congressional liberals will accuse Sens. Boren and Cohen of wimping out, and they will warn that the lawmakers' concessions raise the specter of more internationally embarrassing covert operations like the mining of Nicaraguan harbors and the Iran arms sales.
But if the cooperative attitude holds and there is greater consultation on covert activities, the country could be entering an era when such hare-brained schemes are scrapped before they get off the drawing boards, while risky but well-planned secret operations can be undertaken without fear that a panicky Congress will balk.
Several of the New York Stock Exchange's own listed companies, led by giant Contel Corp., are joining for the first time to complain about program trading and the exchange's role in it.
Claiming program trading has turned the Big Board into a "gambling casino," Contel Chairman Charles Wohlstetter said that he and at least 20 other corporate executives are forming an unprecedented alliance.
The group, Mr. Wohlstetter said in an interview, wants to end the market's wild price swings that critics blame on computer-aided program-trading strategies.
The group will complain to Washington, to the heads of program-trading firms and to the heads of the Big Board itself, he said.
"They should call {the exchange} Trump East," charged Mr. Wohlstetter, the 79-year-old founder of Contel who's also a former investment banker and stock trader.
"What is the mission of the financial community --
to help some scavengers or schemers, or help corporate America?"
Contel is a $6 billion telephone and electronics company.
Pressure has been building on the Big Board in the past two weeks to do something about market volatility, which many investors say is caused by program trading.
The market's Friday-the-13th plunge of 190 points in the Dow Jones Industrial Average, and the Big Board's understated response to it, galvanized some longstanding dissatisfaction among companies listed on the exchange.
Last month, program trading accounted for a record 13.8% of average daily Big Board volume.
Mr. Wohlstetter, for example, said he wrote to Big Board Chairman John J. Phelan Jr. about program trading after the 190-point Dow plunge, and as in previous queries, "what I get back is gobbledygook."
He said he's upset that Mr. Phelan, trying to calm investors after the plunge, said that investors would simply have to get used to the market's big price swings.
The Big Board "is partly to blame {for the price swings}, because they're cowards," said Mr. Wohlstetter.
"Their powerful members manage them."
The focus of the outcry has been stock-index arbitrage, which accounts for about half the program trading that goes on.
Index arbitragers argue that their trading is healthy because it links markets, but critics say such trading accelerates market movements and increases the chance for a crash.
The Big Board has refused to be drawn into a public debate about program trading.
Richard Grasso, Big Board president, last week said only that the exchange is concerned about all its constituents.
Privately, exchange officials worry that without a hospitable system for program trading at the Big Board, billions of dollars in trading will simply migrate to overseas exchanges such as London's.
It is partly for this reason that the exchange last week began trading in its own stock "basket" product that allows big investors to buy or sell all 500 stocks in the Standard & Poor's index in a single trade.
One intended customer of the new basket product is index arbitragers, according to the exchange.
Investors have complained for some time about program trading, particularly index arbitrage, to little avail.
But according to some Big Board traders, an organized campaign from exchange-listed companies might make the exchange finally consider big changes.
"They won't fight the listed companies.
Now the assault is on," said one top trader.
The Big Board can't ban stock-index futures, of course, but it could ban use of its high-speed electronic trading system for program trading or at least encourage securities firms to back off.
The exchange put a bit of a damper on program trading when, last year, it simply started to publish monthly statistics of each firm's program-trading volume.
Contel's Mr. Wohlstetter said the group of Big Board companies isn't ready to go public yet with its effort, and that he doesn't plan to be the leader once it is public.
However, he said he planned to spend the weekend making calls to gather additional support.
Among those Mr. Wohlstetter said he has been talking to are Sanford Weill of Primerica Corp., which is the parent of Smith Barney, Harris Upham & Co.; GTE Corp.'s James Johnson, and ITT Corp.'s Rand Araskog.
None of these chief executives were available for comment.
Among the targets of the Big Board companies' campaign will be some corporate pension funds that use program-trading strategies to maximize returns on their investments.
For Contel's part, the company a month ago informed each of its money managers that it would drop them if they give business to program-trading firms.
It was just those kinds of ultimatums that last week succeeded in turning up the heat in the debate.
Kemper Corp.'s Kemper Financial Services unit said it cut off Bear Stearns, Morgan Stanley, Oppenheimer and General Electric Co.'s Kidder, Peabody & Co. unit.
All of the firms except Kidder, which is the second-biggest program trader on Wall Street, quickly announced pull-backs from index arbitrage.
Kidder officials stand by their aggressive use of program trading.
Chief Executive Officer Michael Carpenter said that despite the outcry even by some of Kidder's own brokers, he believes index arbitrage doesn't have a "negative impact on the market as a whole.
" However, pressure on Kidder's parent, GE, could change Kidder's policy.
GE Chairman John Welch has been "besieged with phone calls" complaining about his unit's program trading, according to a person close to him.
Margaret Thatcher's instinctive response to the latest upheaval in her government is to promise business as usual.
That may be the last thing she needs.
As the air clears from last week's storm of resignations and reshufflings, the government faces a daunting job of rebuilding confidence in its policies.
The prime minister and her new chancellor of the exchequer, the untested John Major, need to haul the country through something like a recession to bring down inflation and set the economy moving again.
Mrs. Thatcher has to come to terms with European economic integration, beginning with the European Monetary System, which Britain is committed to joining fully someday.
Finally, the government has to convince a rattled financial community -- and voters -- it is proceeding coherently toward its goals.
It sounds like the work of a decade, but the deadline is late 1991, when Mrs. Thatcher is expected to call another national election.
What's worrying her supporters is that the economic cycle may be out of kilter with the political timetable.
She could end up seeking a fourth term in an economy sick with inflation, high interest rates and a heavy trade deficit.
Though Mrs. Thatcher has pulled through other crises, supporters wonder if her steely, autocratic ways are the right formula today.
"There's a rising fear that perhaps Mrs. Thatcher's style of management has become a political liability," says Bill Martin, senior economist at London brokers UBS-Phillips & Drew.
The prime minister's insistence on keeping a private coterie of advisers -- including an economic guru who openly criticized former Chancellor of the Exchequer Nigel Lawson -- confused the financial community.
Last week, the strategy of playing the two experts off each other blew up: Mr. Lawson quit in exasperation and Sir Alan Walters, the adviser, announced his resignation within an hour.
The confusion could be costly.
Currency traders, suspecting Mr. Major won't defend the pound strenuously, sent the British currency sharply lower Friday against the dollar and West German mark.
Analysts expect further jitters this week.
A continuing slide in the pound could force the government to push through another rise in the base rate, currently 15%.
That could shove a weak economy into recession.
Economists have been anticipating a slump for months, but they now say it will be deeper and longer than they had thought.
Britain's economy "is developing rapidly toward no-growth," says J. Paul Horne, international economist with Smith Barney, Harris Upham Co. in Paris.
A mild slowdown probably would have run its course by early 1991, economists say, while the grueling downturn now expected could stretch into 1992.
Recovery could be hampered if Britain's major trading partners in Europe, which are enjoying robust economic activity, cool off as expected in late 1990 and 1991.
That would leave Mrs. Thatcher little room for maneuver.
For the Tories to win the next election, voters will need to sense economic improvement for about a year beforehand.
Though Mrs. Thatcher doesn't need to call an election until June 1992, she would prefer doing so in late 1991.
"If the economy shows no sign of turning around in about year's time, she will be very vulnerable," says John Barnes, a lecturer at the London School of Economics.
There's an equally pressing deadline for the government to define its monetary and economic ties to the rest of the European Community.
It has sent mixed signals about its willingness to take part in the exchange-rate mechanism of the European Monetary System, which links the major EC currencies.
At a June EC summit, Mrs. Thatcher appeared to ease her opposition to full EMS membership, saying Britain would join once its inflation rate fell and the EC liberalized capital movements.
Since then, the government has left observers wondering if it ever meant to join.
Sir Alan assailed the monetary arrangement as "half-baked" in an article being published in an American economics journal.
That produced little reaction from his boss, reinforcing speculation the government would use its two conditions as a pretext for avoiding full EMS membership.
Despite the departure of Mr. Lawson and Sir Alan, the tug-of-war over the EMS could continue.
Sir Geoffrey Howe, deputy prime minister and a Lawson ally on the EMS, has signaled he will continue pressing for early membership.
Of immediate concern is whether the Thatcher government will continue Mr. Lawson's policy of tracking the monetary policies of the West German Bundesbank and responding in kind when the Frankfurt authorities move interest rates.
Mrs. Thatcher "doesn't like taking orders from foreigners," says Tim Congdon, economist with Gerrard & National Holding PLC.
As Conservatives rally around Mrs. Thatcher during the crisis, many harbor hopes last week's debacle will prompt change.
"We won't have any more of this wayward behavior," says Sir Peter Hordern, a backbench Tory member of Parliament.
"The party is fed up with sackings of good people."
It's an unrealistic expectation.
As long as a decade ago, Mrs. Thatcher declared she didn't want debate in her cabinet; she wanted strong government.
Over the weekend, she said she didn't intend to change her style and denied she is authoritarian.
"Nonsense," she told an interviewer yesterday on London Weekend Television.
"I am staying my own sweet, reasonable self.
Joseph L. Dionne, chairman and chief executive officer of McGraw-Hill Inc., was elected to the board of directors of this electronics manufacturer.
He succeeds the retiring James W. Wilcock.
Base Data
Computers that once were the state of the art, The marvels bought three years ago, Are now obsolete.
As we queasily start The search for replacements, we know The new one we purchase in hopes it will do, Despite every wonder that's stated, Means more speed, more graphics, more memory, too, But also more quickly out- dated!
-- Bern Sharfman.
Curdling Confession
I know when dividends are due; When bonds should be retired; But what gets by me every time Is has the milk expired?
-- Ralph Shaffer.
Daffynition
Tithing: Obedience to one-tenth Commandment.
-- Len Elliott.
Wives May Not Benefit When Men Do Chores
WHEN HUSBANDS take on more housework, they tend to substitute for chores done by the kids rather than by the wife.
Rand Corp. researchers Linda Waite and Frances Goldscheider analyzed a large sample of married women with at least one child at home between the ages of six and 18.
The women indicated which family member usually did various household chores and the approximate share each did.
Not unexpectedly, wives, whether working or non-working, did by far the most -- about 80% of the shopping, laundry and cooking, and about two-thirds of housecleaning, washing dishes, child care and family paper work.
Only for yardwork and home maintenance did women do less than half.
But the researchers found that while children's household tasks eased the mother's burden appreciably, the husband's helping hand "appears to lighten the children's load almost on a one-for-one basis and to reduce the wife's responsibility only modestly."
This pattern was particularly evident among more highly educated couples.
In these families, husbands took on 80% more chores than in couples with only grammar school education.
But the kids with highly educated parents did 68% less housework than those in less-educated families.
"It is clear," Ms. Waite says, "that most of the effect of increasing education has been to shift who is helping the wife/mother.
Her share decreases, but only slightly."
Nursing Home Patients Apt to Be Private Payers
FAR FEWER elderly nursing home residents bankrupt themselves than was previously believed, two recent studies declare.
State governments place very low ceilings on how much property people may own or how much income they may keep if they want welfare help on medical bills.
Conventional wisdom has long held that anywhere from one-fourth to one-half of all elderly long-term care patients are obliged to spend themselves into poverty before qualifying for Medicaid assistance.
But separate reports from Joshua Weiner and Denise Spence of the Brookings Institution and Korbin Liu of the Urban Institute find that "a surprisingly small proportion" -- only about 10% -- of residents start out as private payers but "spend down" to Medicaid levels in a single nursing home stay before they die or are discharged.
(Another one-third are already on Medicaid when they enter the nursing homes, a considerably higher proportion than the analysts anticipated.)
But a remarkably high percentage -- over half -- are private payers throughout their stay, even a fairly lengthy one.
About one-third pay out of their own pockets, while the rest are covered throughout by Medicare, private insurers or the Veterans Administration.
Both reports are based on several thousand patients sampled in a 1985 nationwide government survey.
The Brookings and Urban Institute authors caution, however, that most nursing home stays are of comparatively short duration, and reaching the Medicaid level is more likely with an unusually long stay or repeated stays.
Moreover, they note, those who manage to pay their own way often do so only by selling their homes, using up life savings or drawing heavily on children and other relatives.
Reagan Era Young Hold Liberal Views
THE REAGAN generation young men and women reaching political maturity during Ronald Reagan's presidency -- are firmly liberal on race and gender, according to NORC, the social science research center at the University of Chicago.
Many political analysts have speculated that the Reagan years would produce a staunchly conservative younger generation.
NORC's most recent opinion surveys find the youngest adults indeed somewhat more pro-Reagan and pro-Republican than other adults.
But, says chief investigator Tom Smith, this "does not translate into support for conservatism in general or into conservative positions on feminist and civil rights issues."
Answers to a dozen questions in the 1986, 1987, 1988 and 1989 national surveys reveal that men and women in the 18 to 24 age bracket are considerably more liberal on race and gender than were the 18 to 24 year olds in NORC's polling in the early 1970s and early 1980s.
They were also as liberal or more liberal than any other age group in the 1986 through 1989 surveys.
For example, 66% of the 18 to 24 year olds in the four latest surveys favored an "open housing" law prohibiting homeowners from refusing on racial grounds to sell to prospective buyers.
That compares with 58% of the similar age group in the 1980 through 1982 surveys and 55% in the 1972 through 1975 surveys.
Asked whether they agreed or disagreed with the claim that men are emotionally better suited to politics than women, 70% of the Reagan generation disagreed, compared with under 60% of younger men and women in the earlier years.
Odds and Ends
SEPARATED and divorced men and women are far more likely to be smokers than married persons, the Centers for Disease Control discovers. . . .
Graduate students are taking longer than ever to get their doctor of philosophy degrees, the National Research Council says.
It estimates the time between college graduation and the awarding of a Ph. D. has lengthened by 30% over the past 20 years, with the average gap now ranging from about 7.4 years in the physical sciences to 16.2 years in education.
October was an edgy month for the practitioners of glasnost, the official Soviet policy of allowing more candor from the nation's media.
For one of the superstars of glasnost, Vitaly Korotich, editor of the trail-blazing weekly Ogonyok, Friday, Oct. 20 was a somersaulting day that turned from tension to elation.
He had been summoned to the Central Committee of the Soviet Communist Party, after he finished his lunch at the Savoy Hotel, an unlikely prelude to a bureaucratic brow-beating: Eight-foot-tall Rubenesquely naked ladies float on their canvases toward a ceiling teeming with cherubs, all surrounded by gilt laid on with a pastry chef's trowel and supported by marble corinthian columns whose capitals are fluting fountains of gold.
Why had Mr. Korotich been called?
"I told my driver," he said, "that he was taking my butt to the Central Committee so they can . . ." whack, whack, whack his hand made vigorous spanking gestures on his left palm. "
They feel the need from time to time to `educate' me."
And indeed, as he later reported, that was the import of the meeting.
Anxious allies of President Mikhail Gorbachev are cautioning media leaders to take it easy, to be careful not to do anything that could be used by Mr. Gorbachev's opponents.
The government is nervous.
According to Mr. Korotich, who was present, Mr. Gorbachev's publicized tongue-lashing of the press on Oct. 13 was more of a plea: "Be careful boys; use good judgment.
We're standing in gasoline, so don't smoke!"
U.S. and northern European diplomats confirm Mr. Korotich's assessment that glasnost is in no immediate danger.
In fact, a very high-ranking Soviet official told an American official at a diplomatic dinner that no change in the policy was contemplated.
The day after that conversation at the residence of the U.S. ambassador, the Brezhnevite editor of Pravda, Victor Afnasjev, was replaced by a college classmate of Mr. Gorbachev's.
Brezhnevite holdovers have more to fear from Mr. Gorbachev than the verbal spanking he gave to the press.
At the end of the very week in which Mr. Korotich was called to the Central Committee, Ogonyok was again demonstrating its independence by printing a poll that showed that 35% of the Soviet population, a plurality, believed that Mr. Gorbachev's economic reforms, perestroika, would result in only insignificant change.
A good measurement of the popularity of ice-breaker journals like Ogonyok is circulation.
When Mr. Korotich took it over in 1986, it sold 250,000 copies; today it sells 3.4 million.
Pravda, meanwhile, has retained only 57% of its 1986 readership.
Glasnost has made celebrities of men like Mr. Korotich.
Prevented by the Communist Party from getting on its slate of nominees for the new Supreme Soviet, he stood as an independent candidate for Congress from his native Ukraine and won with 84% of the vote.
The same evening that he was summoned for a warning from the Party, he was cheered by thousands of his supporters at a rally of what can only be called the Korotich party.
But as astounding as the changes that have already occurred are, there is a fragility to glasnost.
Censorship isn't a Marxist invention.
The czars were no civil libertarians.
As late as the 1890s, the Russian government prevented any coverage of famines.
It even directed newspapers not to publish anything that might stain the honor of the Turkish sultan's wives.
So glasnost is not a value woven with steel threads into the fabric of Russian society.
It is an admirable public relations program initiated by a single political leader during a four-year blink of history.
It is public relations of the highest sophistication, that recognizes that credibility is enhanced by honesty -- up to a point.
What is that point?
Will Ogonyok begin a series of reports analyzing the failures of perestroika?
"I'd be destroying myself," replies Mr. Korotich, who then asks, "What would that accomplish?
" His answer reveals his vulnerability -- it also draws the line that Soviet society must cross to enter the normal dialogue of Western culture.
It is the line beyond which the press can report not only on the bankruptcy of factories but on the failures of even admirable leaders.
Mr. Ayers is editor and publisher of the Anniston, Ala., Star.
A state trial judge in Illinois gave preliminary approval to a proposed settlement of a suit against a Bank of New York Co. unit, Irving Trust Co., over the interest rates on Irving's former One Wall Street Account money-market deposit accounts.
Judge Albert Green, in Cook County Circuit Court in Chicago, also recognized the suit, filed last May by Robert and Cynthia Langendorf, as a class action covering thousands of Irving customers.
The plaintiffs accused Irving of paying less interest than promised in a marketing brochure.
Irving maintained -- and still does -- that its actions were proper under its account agreements with customers.
Under the proposed settlement, customers with valid claims -- to be submitted by Dec. 15 -- will receive "valuable bank services," such as credit cards with reduced finance charges, for two years.
Larry Drury, attorney for the plaintiffs, valued the settlement at between $6 million and $8 million.
A Bank of New York spokesman in Manhattan, Owen Brady, said, "That's the maximum, outside figure.
Federal Reserve critics used to complain of "stop and go" monetary policies.
They claimed that the Fed would first give a green light to the economy by making credit readily available and then turn on the red and bring growth to a screeching halt.
But under Alan Greenspan that has changed.
A supremely cautious man, the Fed chairman is forever blinking yellow.
Indeed, his caution has become legendary within the government.
He fusses endlessly over economic statistics, dissecting them in dozens of ways, probing for hours in search of potential problems.
After thoroughly digesting reams of information, he often concludes that more data are needed, and when he finally decides to act, his movements sometimes seem excrutiatingly small.
Such caution was evident after the recent Friday-the-13th stock market plunge.
Some Bush administration officials urged Mr. Greenspan to make an immediate public announcement of his plans to provide ample credit to the markets.
But he refused, claiming that he wanted to see what happened Monday morning before making any public statement.
Mr. Greenspan's decision to keep quiet also prompted a near-mutiny within the Fed's ranks.
A "senior Fed official" spoke on Saturday after the market swoon to both the Washington Post and the New York Times, saying the Fed was prepared to provide as much credit as the markets needed.
The statement angered Chairman Greenspan, but it was greeted with applause by the Bush administration and the financial markets.
And, while the mutinous Fed member hasn't gone public, some Fed governors, most notably Vice Chairman Manuel Johnson, are known to have disagreed with the chairman's decision to remain silent.
Ironically, the anonymous official's comments have earned some plaudits for Mr. Greenspan, who is mistakenly seen as the source.
At a hearing last week, Democratic Sen. Chris Dodd of Connecticut told Treasury Secretary Nicholas Brady that "Chairman Greenspan's" announcement over the Oct. 13 weekend was a "very important statement."
Mr. Brady hesitantly replied that he wasn't sure whether Mr. Greenspan "made a statement himself, or whether that was a newspaper report."
The Fed chairman's caution was apparent again on the Monday morning after the market's plunge, when the central bank took only modest steps to aid the markets.
A surprisingly small amount of reserves was added to the banking system.
And, by the end of that week, the key federal funds interest rate, which is largely controlled by the Fed, had settled at 8.75%, barely changed from the level of just under 9% that prevailed the previous week.
Bush administration officials appear increasingly concerned that Mr. Greenspan is cautious to a fault.
Signs of growing weakness in the economy, paired with indications that inflation is staying well under control, have caused them to wonder why the Fed chairman is so grudging in reducing rates.
Those concerns aren't expressed in public.
In fact, the administration and the Fed have been going out of their way in the past two weeks to dispel any impression that they are at odds, fearing stories about an administration-Fed split added to the stock market's jitters.
Still, the split is there.
The administration's concerns are understandable.
The economy is showing signs of weakness, particularly among manufacturers.
Exports, which played a key role in fueling growth over the last two years, seem to have stalled.
Factory payrolls and production fell in September, and the auto industry and housing are in a severe crunch.
But Mr. Greenspan remains reluctant to loosen policy, partly because he faces a phalanx of presidents of regional Fed banks who oppose credit easing.
In addition, the chairman has a wary eye aimed a year or two down the road.
Inflation may be stable at the moment, running at about 4.5%.
But if the Fed eases too soon, Mr. Greenspan fears, prices may begin to accelerate again next year.
Moreover, if the Fed holds tight, it may be able gradually to reduce inflation, moving toward the zero-inflation goal that the Fed chairman embraced in testimony to Congress last week.
So far, Mr. Greenspan's cautious approach to policy has served both him and the nation well.
His hand on the monetary tiller seems one reason why the economy next month seems highly likely to begin an unprecedented eighth year of peacetime growth without a recession.
"We've gotten through two stock market crashes, and we've gone through an election without any major problems," says David Hale, an economist of Kemper Financial Services.
"I think you have to give Greenspan a good rating."
But such caution is no guarantee against mistakes.
The Fed's reluctance to ease credit now could be laying the groundwork for a new recession, perhaps starting early next year.
If that happens, Chairman Greenspan could well become an open target.
Already, Congress is toying with legislation to curb the Fed's independence.
If the economy turns down, such proposals could gain strong momentum.
The following issues were recently filed with the Securities and Exchange Commission:
ECI Environmental Inc., initial offering of 1.1 million shares, of which ECI will sell 990,000 and co-founders will sell 110,000 shares, via Oppenheimer & Co.
Fastenal Co., proposed offering of 400,000 common shares by holders, via Robert W. Baird & Co. and William Blair & Co.
First Capital Holdings Corp., proposed offering of $275 million of floating rate senior notes, via Shearson Lehman Hutton Inc.
Industrial Funding Corp., initial offering of common stock, via Alex. Brown & Sons Inc. and Piper Jaffray & Hopwood.
Parametric Technology Corp., initial offering of 1.7 million common shares, of which 1,365,226 shares will be sold by the company and 334,774 shares by holders, via Alex Brown & Sons, Hambrecht & Quist and Wessels, Arnold & Henderson.
Union Camp Corp., shelf offering of up to $250 million of debt securities.
Spencer J. Volk, president and chief operating officer of this consumer and industrial products company, was elected a director.
Mr. Volk, 55 years old, succeeds Duncan Dwight, who retired in September.
In an age of specialization, the federal judiciary is one of the last bastions of the generalist.
A judge must jump from murder to antitrust cases, from arson to securities fraud, without missing a beat.
But even on the federal bench, specialization is creeping in, and it has become a subject of sharp controversy on the newest federal appeals court.
The Court of Appeals for the Federal Circuit was created in 1982 to serve, among other things, as the court of last resort for most patent disputes.
Previously, patent cases moved through the court system to one of the 12 circuit appeals courts.
There, judges who saw few such cases and had no experience in the field grappled with some of the most technical and complex disputes imaginable.
A new specialty court was sought by patent experts, who believed that the generalists had botched too many important, multimillion-dollar cases.
Some patent lawyers had hoped that such a specialty court would be filled with experts in the field.
But the Reagan administration thought otherwise, and so may the Bush administration.
Since 1984, the president has filled four vacancies in the Federal Circuit court with non-patent lawyers.
Now only three of the 12 judges -- Pauline Newman, Chief Judge Howard T. Markey, 68, and Giles Rich, 85 -- have patent-law backgrounds.
The latter two and Judge Daniel M. Friedman, 73, are approaching senior status or retirement.
Three seats currently are vacant and three others are likely to be filled within a few years, so patent lawyers and research-based industries are making a new push for specialists to be added to the court.
Several organizations, including the Industrial Biotechnical Association and the Pharmaceutical Manufacturers Association, have asked the White House and Justice Department to name candidates with both patent and scientific backgrounds.
The associations would like the court to include between three and six judges with specialized training.
Some of the associations have recommended Dr. Alan D. Lourie, 54, a former patent agent with a doctorate in organic chemistry who now is associate general counsel with SmithKline Beckman Corp. in Philadelphia.
Dr. Lourie says the Justice Department interviewed him last July.
Their effort has received a lukewarm response from the Justice Department.
"We do not feel that seats are reserved (for patent lawyers)," says Justice spokesman David Runkel, who declines to say how soon a candidate will be named.
"But we will take it into consideration."
The Justice Department's view is shared by other lawyers and at least one member of the court, Judge H. Robert Mayer, a former civil litigator who served at the claims court trial level before he was appointed to the Federal Circuit two years ago.
"I believe that any good lawyer should be able to figure out and understand patent law," Judge Mayer says, adding that "it's the responsibility of highly paid lawyers (who argue before the court) to make us understand (complex patent litigation)."
Yet some lawyers point to Eli Lilly & Co. vs. Medtronic, Inc., the patent infringement case the Supreme Court this month agreed to review, as an example of poor legal reasoning by judges who lack patent litigation experience.
(Judge Mayer was not on the three-member panel.)
In the Lilly case, the appeals court broadly construed a federal statute to grant Medtronic, a medical device manufacturer, an exemption to infringe a patent under certain circumstances.
If the Supreme Court holds in Medtronic's favor, the decision will have billion-dollar consequences for the manufacturers of medical devices, color and food additives and all other non-drug products that required Food & Drug Administration approval.
Lisa Raines, a lawyer and director of government relations for the Industrial Biotechnical Association, contends that a judge well-versed in patent law and the concerns of research-based industries would have ruled otherwise.
And Judge Newman, a former patent lawyer, wrote in her dissent when the court denied a motion for a rehearing of the case by the full court, "The panel's judicial legislation has affected an important high-technological industry, without regard to the consequences for research and innovation or the public interest."
Says Ms. Raines, "(The judgment) confirms our concern that the absence of patent lawyers on the court could prove troublesome.
Friday, October 27, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 8 3/4% high, 8 11/16% low, 8 5/8% near closing bid, 8 11/16% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.50% 30 to 44 days; 8.25% 45 to 65 days; 8.375% 66 to 89 days; 8% 90 to 119 days; 7.875% 120 to 149 days; 7.75% 150 to 179 days; 7.50% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.575% 30 days; 8.475% 60 days; 8.40% 90 days.
CERTIFICATES OF DEPOSIT: 8.09% one month; 8.04% two months; 8.03% three months; 7.96% six months; 7.92% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market: 8.55% one month; 8.50% three months; 8.40% six months.
BANKERS ACCEPTANCES: 8.52% 30 days; 8.35% 60 days; 8.33% 90 days; 8.17% 120 days; 8.08% 150 days; 8% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 5/8% to 8 1/2% two months; 8 11/16% to 8 9/16% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 7/16% to 8 5/16% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 11/16% three months; 8 7/16% six months; 8 3/8% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS: Results of the Monday, October 23, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.52% 13 weeks; 7.50% 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac):
Posted yields on 30-year mortgage commitments for delivery within 30 days.
9.80%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae):
Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.75%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.65%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
THE FINANCIAL ACCOUNTING STANDARDS BOARD'S coming rule on disclosure involving financial instruments will be effective for financial statements with fiscal years ending after June 15, 1990.
The date was misstated in Friday's edition.
Kidder, Peabody & Co. is trying to struggle back.
Only a few months ago, the 124-year-old securities firm seemed to be on the verge of a meltdown, racked by internal squabbles and defections.
Its relationship with parent General Electric Co. had been frayed since a big Kidder insider-trading scandal two years ago.
Chief executives and presidents had come and gone.
Now, the firm says it's at a turning point.
By the end of this year, 63-year-old Chairman Silas Cathcart -- the former chairman of Illinois Tool Works who was derided as a "tool-and-die man" when GE brought him in to clean up Kidder in 1987 -- retires to his Lake Forest, Ill., home, possibly to build a shopping mall on some land he owns.
"I've done what I came to do" at Kidder, he says.
And that means 42-year-old Michael Carpenter, president and chief executive since January, will for the first time take complete control of Kidder and try to make good on some grandiose plans.
Mr. Carpenter says he will return Kidder to prominence as a great investment bank.
Wall Street is understandably skeptical.
Through the first nine months of the year, Kidder ranks a distant 10th among underwriters of U.S. stocks and bonds, with a 2.8% market share, up slightly from 2.5% in the year-earlier period, according to Securities Data Co.
It's quite a fall from the early 1980s, when Kidder still was counted as an investment-banking powerhouse.
Gary S. Goldstein, president of the Whitney Group, an executive search firm, said: "I'd like to see (Kidder) succeed.
But they have to attract good senior bankers who can bring in the business from day one."
In 1988, Kidder eked out a $46 million profit, mainly because of severe cost cutting.
Its 1,400-member brokerage operation reported an estimated $5 million loss last year, although Kidder expects it to turn a profit this year.
In fact, Kidder is a minor player in just about every business it does except computer-driven program trading; in that controversial business, only Morgan Stanley & Co. rivals Kidder.
But even that niche is under attack, as several Wall Street firms pulled back from program trading last week under pressure from big investors.
Mr. Carpenter, a former consulting-firm executive who has a love for "task forces," says he has done a "complete rethink" of Kidder in recent months.
There have been a dizzying parade of studies of the firm's operations.
More than 20 new managing directors and senior vice presidents have been hired since January.
The firm's brokerage force has been trimmed and its mergers-and-acquisitions staff increased to a record 55 people.
Mr. Carpenter says that when he assumes full control, Kidder will finally tap the resources of GE.
One of GE's goals when it bought 80% of Kidder in 1986 was to take advantage of "syngeries" between Kidder and General Electric Capital Corp., GE's corporate-finance unit, which has $42 billion in assets.
The leveraged buy-out group of GE Capital now reports to Mr. Carpenter.
So far, instead of teaming up, GE Capital staffers and Kidder investment bankers have bickered.
Yet, says Mr. Carpenter, "We've really started to exploit the synergy between GE Capital and Kidder Peabody."
The units have worked on 37 investment banking deals this year, he says, though not all of them have panned out.
"We've had a good relationship with GE, which is the first time you could say that -- uh, let me withdraw that.
It's been a steadily improving relationship," says Mr. Carpenter.
Still, without many actual deals to show off, Kidder is left to stress that it finally has "a team" in place, and that everyone works harder.
A month ago, the firm started serving dinner at about 7:30 each night; about 50 to 60 of the 350 people in the investment banking operation have consistently been around that late.
"We are working significantly longer and harder than has been the case in the past," says Scott C. Newquist, Kidder's head of investment banking since June.
Everywhere, Kidder stresses the "always working" theme.
A new in-house magazine, Kidder World -- which will focus on the firm's synergy strategy, says Mr. Carpenter -- confides that on weekends Mr. Newquist "often gets value-added ideas while flying his single-engine Cessna Centurion on the way to Nantucket."
The firm's new head of mergers and acquisitions under Mr. Newquist, B.J. Megargel, talks of the opportunity to "rebuild a franchise" at Kidder.
"The Kidder name is one of only six or seven that every CEO recognizes as a viable alternative" when considering a merger deal, he says.
Now, according to a Kidder World story about Mr. Megargel, all the firm has to do is "position ourselves more in the deal flow."
With investment banking as Kidder's "lead business," where do Kidder's 42-branch brokerage network and its 1,400 brokers fit in?
Mr. Carpenter this month sold off Kidder's eight brokerage offices in Florida and Puerto Rico to Merrill Lynch & Co., refueling speculation that Kidder is getting out of the brokerage business entirely.
Mr. Carpenter denies the speculation.
To answer the brokerage question, Kidder, in typical fashion, completed a task-force study.
The result: Kidder will focus on rich individual investors and small companies, much closer to the clientele of Goldman, Sachs & Co. than a serve-the-world firm like Merrill Lynch or Shearson Lehman Hutton Inc.
Mr. Carpenter notes that these types of investors also are "sophisticated" enough not to complain about Kidder's aggressive use of program trading.
As part of the upscale push, Kidder is putting brokers through a 20-week training course, turning them into "investment counselors" with knowledge of corporate finance.
They will get "new and improved tools to sell, particularly to the affluent investor," says brokerage chief Charles V. Sheehan.
Theoretically, the brokers will then be able to funnel "leads" on corporate finance opportunities to Kidder's investment bankers, possibly easing the longstanding tension between the two camps.
However, skeptics caution that this kind of cross-pollination between brokers and investment bankers looks great on paper, but doesn't always happen.
Kidder competitors aren't outwardly hostile to the firm, as many are to a tough competitor like Drexel Burnham Lambert Inc. that doesn't have Kidder's long history.
However, competitors say that Kidder's hiring binge involving executive-level staffers, some with multiple-year contract guarantees, could backfire unless there are results.
The departing Mr. Cathcart says he has no worries about Kidder's future.
Mr. Cathcart, who will return to the Quaker Oats Co. board of directors, in addition to his personal ventures, is credited with bringing some basic budgeting and planning discipline to traditionally free-wheeling Kidder.
He also improved the firm's compliance procedures for trading.
Mr. Cathcart says he has had "a lot of fun" at Kidder, adding the crack about his being a "tool-and-die man" never bothered him.
"It was an absolutely marvelous line and one I used many times," he says.
Smiling broadly when he talks about Mr. Carpenter, Mr. Cathcart says the new Kidder chief is "going to be recognized shortly as one of the real leaders in the investment-banking business."
In coming years, Mr. Cathcart says, Kidder is "gonna hum."
Or, as Mr. Carpenter, again drawing on his consulting-firm background, puts it: "We're ready to implement at this point.
UNDER A PROPOSAL by Democrats to expand Individual Retirement Accounts, a $2,000 contribution by a taxpayer in the 33% bracket would save $330 on his taxes.
The savings was given incorrectly in Friday's edition.
In what could prove a major addition to the Philippines' foreign-investment portfolio, a Taiwanese company signed a $180 million construction contract to build the centerpiece of a planned petrochemical complex.
Taiwan's USI Far East Corp., a petrochemical company, initialed the agreement with an unidentified Japanese contractor to build a naphtha cracker, according to Alson Lee, who heads the Philippine company set up to build and operate the complex.
Mr. Lee, president of Luzon Petrochemical Corp., said the contract was signed Wednesday in Tokyo with USI Far East officials.
Contract details, however, haven't been made public.
The complex is to be located in Batangas, about 70 miles south of Manila.
USI Far East will hold a 60% stake in Luzon Petrochemical, according to papers signed with the Philippine government's Board of Investments.
The proposed petrochemical plant would use naphtha to manufacture the petrochemicals propylene and ethylene and their resin derivatives, polypropylene and polyethylene.
These are the raw materials used in making plastics.
The contract signing represented a major step in the long-planned petrochemical project.
At an estimated $360 million, the project would represent the single largest foreign investment in the Philippines since President Corazon Aquino took office in February 1986.
It also is considered critical to the country's efforts to both attract other investment from Taiwan and raise heavy industry capabilities.
The project has been in and out of the pipeline for more than a decade.
However, workers can't break ground until legal maneuvers to block the complex are resolved, moves which caused the signing to remain questionable up to the last moment.
As previously reported, a member of the Philippines' House of Representatives has sued to stop the plant.
The legislator, Enrique Garcia, had actively backed the plant, but at the original site in his constituency northwest of Manila.
The country's Supreme Court dismissed the suit, but Mr. Garcia late last month filed for a reconsideration.
In addition, President Aquino has yet to sign into law a bill removing a stiff 48% tax on naphtha, the principal raw material to be used in the cracker.
However, at a news conference Thursday, Mrs. Aquino backed the project and said her government was attempting to soothe the feelings of residents at the original site, adjacent to the government's major petroleum refinery in Bataan province.
"We have tried our best to tell the people in Bataan that maybe this time it will not go to them, but certainly we will do our best to encourage other investors to go to their province," Mrs. Aquino told Manila-based foreign correspondents.
The project appeared to be on the rocks earlier this month when the other major partner in the project, China General Plastics Corp., backed out.
China General Plastics, another Taiwanese petrochemical manufacturer, was to have a 40% stake in Luzon Petrochemical.
However, Mr. Lee said that USI Far East is confident other investors will take up the slack.
He said USI Far East has applied to both the Asian Development Bank and the World Bank's International Finance Corp. for financing that could include equity stakes.
Three new issues begin trading on the New York Stock Exchange today, and one began trading on the Nasdaq/National Market System last week.
On the Big Board, Crawford & Co., Atlanta, (CFD) begins trading today.
Crawford evaluates health care plans, manages medical and disability aspects of worker's compensation injuries and is involved in claims adjustments for insurance companies.
Also beginning trading today on the Big Board are El Paso Refinery Limited Partnership, El Paso, Texas, (ELP) and Franklin Multi-Income Trust, San Mateo, Calif., (FMI).
El Paso owns and operates a petroleum refinery.
Franklin is a closed-end management investment company.
On the Nasdaq over-the-counter system, Allied Capital Corp., Washington, D.C., (ALII) began trading last Thursday.
Allied Capital is a closed-end management investment company that will operate as a business development concern.
THE YALE POLITICAL UNION doesn't pay an honorarium to speakers.
In Thursday's edition, it was incorrectly indicated that the union had paid a fee to former House Speaker Jim Wright.
President Bush insists it would be a great tool for curbing the budget deficit and slicing the lard out of government programs.
He wants it now.
Not so fast, says Rep. Mickey Edwards of Oklahoma, a fellow Republican.
"I consider it one of the stupidest ideas of the 20th century," he says.
It's the line-item veto, a procedure that would allow the president to kill individual items in a big spending bill passed by Congress without vetoing the entire bill.
Whatever one thinks of the idea, it's far more than the budgetary gimmick it may seem at first glance.
Rather, it's a device that could send shock waves through the president's entire relationship with Democrats and Republicans alike in Congress, fundamentally enhance the power of the presidency and transform the way the government does its business.
President Bush badly wants a line-item veto and has long called for a law giving it to the president.
Now the White House is declaring that he might not rely on Congress -- which hasn't shown any willingness to surrender such authority -- to pass the line-item veto law he seeks.
White House spokesmen last week said Mr. Bush is considering simply declaring that the Constitution gives him the power, exercising a line-item veto and inviting a court challenge to decide whether he has the right.
Although that may sound like an arcane maneuver of little interest outside Washington, it would set off a political earthquake.
"The ramifications are enormous," says Rep. Don Edwards, a California Democrat who is a senior member of the House Judiciary Committee.
"It's a real face-to-face arm wrestling challenge to Congress."
White House aides know it's a step that can't be taken lightly -- and for that reason, the president may back down from launching a test case this year.
Some senior advisers argue that with further fights over a capital-gains tax cut and a budget-reduction bill looming, Mr. Bush already has enough pending confrontations with Congress.
They prefer to put off the line-item veto until at least next year.
Still, Mr. Bush and some other aides are strongly drawn to the idea of trying out a line-item veto.
The issue arose last week when Vice President Dan Quayle told an audience in Chicago that Mr. Bush was looking for a test case.
White House Press Secretary Marlin Fitzwater confirmed that Mr. Bush was interested in the idea, but cautioned that there wasn't a firm decision to try it.
Mr. Bush, former President Reagan and a host of conservative activists have been arguing that a line-item veto would go a long way in restoring discipline to the budget process.
They maintain that a president needs the ability to surgically remove pork-barrel spending projects that are attached to big omnibus spending bills.
Those bills can't easily be vetoed in their entirety because they often are needed to keep the government operating.
Conservatives note that 43 governors have the line-item veto to use on state budgets.
More provocatively, some conservative legal theorists have begun arguing that Mr. Bush doesn't need to wait for a law giving him the veto because the power already is implicit in the Constitution.
They base their argument on a clause buried in Article I, Section 7, of the Constitution that states: "Every order, resolution, or vote to which the concurrence of the Senate and House of Representatives may be necessary (except on a question of adjournment) shall be presented to the President of the United States; and before the same shall take effect, shall be approved by him or . . . disapproved by him. . . ."
This clause, they argue, is designed to go beyond an earlier clause specifying that the president can veto a "bill," and is broad enough to allow him to strike out items and riders within bills.
Senate Minority Leader Robert Dole (R., Kan.), for one, accepts this argument and earlier this year publicly urged Mr. Bush "to use the line-item veto and allow the courts to decide whether or not it is constitutional."
There's little doubt that such a move would be immediately challenged in court -- and that it would quickly make its way to the Supreme Court to be ultimately resolved.
"It's a major issue, and they wouldn't want to leave it at a lower level," says Stephen Glazier, a New York attorney whose writings have been instrumental in pushing the idea that a president already has a line-item veto.
Rep. Edwards, the California Democrat, is one who pledges that he would immediately challenge Mr. Bush in the courts, arguing a line-item veto would expand a president's powers far beyond anything the framers of the Constitution had in mind.
"It puts this president in the legislative business," he declares.
"That's not what our fathers had in mind."
In addition to giving a president powers to rewrite spending bills meant to be written in Congress, Rep. Edwards argues, a line-item veto would allow the chief executive to blackmail lawmakers.
He notes that, as a lawmaker from the San Francisco area, he fights each year to preserve federal funds for the Bay Area Rapid Transit system.
If a president had a line-item veto and wanted to force him to support a controversial foreign-policy initiative, Rep. Edwards says, the president could call and declare that he would single-handedly kill the BART funds unless the congressman "shapes up" on the foreign-policy issue.
Proponents maintain that a president would choose to use a line-item veto more judiciously than that.
But there may be another problem with the device: Despite all the political angst it would cause, it mightn't be effective in cutting the deficit.
Big chunks of the government budget, like the entitlement programs of Social Security and Medicare, wouldn't be affected.
Governors have found that they have to use the device sparingly to maintain political comity.
And it isn't even clear that some pork-barrel projects can be hit with a line-item veto because they tend to be listed in informal conference reports accompanying spending bills rather than in the official bills themselves.
Still, proponents contend that the veto would have what Mr. Glazier calls an important "chilling effect" on all manner of appropriations bills.
Lawmakers, they say, would avoid putting many spending projects into legislation in the first place for fear of the embarrassment of having them singled out for a line-item veto later.
Whatever the outcome of a test case, President Bush would have to move cautiously becase the very attempt would "antagonize not just Democrats but Republicans," says Louis Fisher, a scholar at the Congressional Research Service who specializes in executive-legislative relations.
Republicans have as much interest as Democrats in "the way the system works," he notes.
Indeed, although a majority of Republican lawmakers favor a line-item veto, some, ranging from liberal Oregon Sen. Mark Hatfield to conservative Rep. Edwards are opposed.
Rep. Edwards voices the traditional conservative view that it's a mistake to put too much power in the hands of a single person.
Conservatives pushing for a line-item veto now, he notes, may regret it later: "Sometime, you're going to have a Democratic president again" who'll use his expanded powers against those very same conservatives.
"Every order, resolution, or vote to which the concurrence of the Senate and House of Representatives may be necessary (except on a question of adjournment) shall be presented to the President of the United States; and before the same shall take effect, shall be approved by him, or being disapproved by him, shall be repassed by two-thirds of the Senate and House of Representatives, according to the rules and limitations prescribed in the case of a bill."
This hasn't been Kellogg Co.'s year.
The oat-bran craze has cost the world's largest cereal maker market share.
The company's president quit suddenly.
And now Kellogg is indefinitely suspending work on what was to be a $1 billion cereal plant.
The company said it was delaying construction because of current market conditions.
But the Memphis, Tenn., facility wasn't to begin turning out product until 1993, so the decision may reveal a more pessimistic long-term outlook as well.
Kellogg, which hasn't been as successful in capitalizing on the public's health-oriented desire for oat bran as rival General Mills Inc., has been losing share in the $6 billion ready-to-eat cereal market.
Kellogg's current share is believed to be slightly under 40% while General Mills' share is about 27%.
Led by its oat-based Cheerios line, General Mills has gained an estimated 2% share so far this year, mostly at the expense of Kellogg.
Each share point is worth about $60 million in sales.
Analysts say much of Kellogg's erosion has been in such core brands as Corn Flakes, Rice Krispies and Frosted Flakes, which represent nearly one-third of its sales volume.
Kellogg is so anxious to turn around Corn Flakes sales that it soon will begin selling boxes for as little as 99 cents, trade sources say.
"Cheerios and Honey Nut Cheerios have eaten away sales normally going to Kellogg's corn-based lines simply because they are made of oats," says Merrill Lynch food analyst William Maguire.
"They are not a happy group of people at Battle Creek right now."
Kellogg is based in Battle Creek, Mich., a city that calls itself the breakfast capital of the world.
Another analyst, John C. Maxwell Jr. of Wheat, First Securities in Richmond, Va., recently went to a "sell" recommendation on Kellogg stock, which closed Friday at $71.75, down 75 cents, in New York Stock Exchange composite trading.
"I don't think Kellogg can get back to 40% this year," he said.
"Kellogg's main problem is life style.
People are reading the boxes and deciding they want something that's `healthy' for you -- oats, bran."
Mr. Maxwell said he wouldn't be surprised if, over the next two years or so, General Mills' share increased to 30% or more.
In announcing the plant delay, Kellogg Chairman William E. LaMothe said, "Cereal volume growth in the U.S. has not met our expectations for 1989."
He said construction wouldn't resume until market conditions warrant it.
Kellogg indicated that it has room to grow without adding facilities.
The company has five other U.S. plants, including a modern facility at its Battle Creek headquarters known as Building 100, which is to add bran-processing and rice-processing capacity next year.
General Mills, meanwhile, finds itself constrained from boosting sales further because its plants are operating at capacity.
A large plant in Covington, Ga., is to come on line next year.
A Kellogg officer, who asked not to be named, said the Memphis project was "pulled in for a reconsideration of costs," an indication that the ambitious plans might be scaled back in any future construction.
Initial cost estimates for the plant, which was to have been built in phases, ranged from $1 billion to $1.2 billion.
A company spokesman said it was "possible, but highly unlikely," that the plant might never be built.
"As we regain our leadership level where we have been, and as we continue to put new products into the marketplace and need additional capacity, we will look at resuming our involvement with our plan," he said.
The new facility was to have been the world's most advanced cereal manufacturing plant, and Kellogg's largest construction project.
The company had retained the Fluor Daniel unit of Fluor Corp. as general contractor.
But in recent weeks, construction-industry sources reported that early preparation work was slowing at the 185-acre site.
Subcontractors said they were told that equipment orders would be delayed.
Fluor Daniel already has reassigned most of its work crew, the sources said.
Last Friday's announcement was the first official word that the project was in trouble and that the company's plans for a surge in market share may have been overly optimistic.
Until recently, Kellogg had been telling its sales force and Wall Street that by 1992 it intended to achieve a 50% share of market, measured in dollar volume.
Although he called current market conditions "highly competitive," Mr. LaMothe, Kellogg's chairman and chief executive officer, forecast an earnings increase for the full year.
Last year, the company earned $480.4 million, or $3.90 a share, on sales of $4.3 billion.
As expected, Kellogg reported lower third-quarter earnings.
Net fell 16% to $123.1 million, or $1.02 a share, from $145.7 million, or $1.18 a share.
Sales rose 4.8% to $1.20 billion from $1.14 billion.
The company had a one-time charge of $14.8 million in the latest quarter covering the disposition of certain assets.
The company wouldn't elaborate, citing competitive reasons.
PARKER HANNIFIN Corp., which is selling three automotive replacement parts divisions, said it will retain its Automotive Connectors and Cliff Impact divisions.
The divisions that Parker Hannifin is retaining weren't mentioned in Thursday's edition.
The following were among Friday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
Sun Microsystems Inc. -- $125 million of 6 3/8% convertible subordinated debentures due Oct. 15, 1999, priced at 84.90 to yield 7.51%.
The debentures are convertible into common stock at $25 a share, representing a 24% conversion premium over Thursday's closing price.
Rated single-B-1 by Moody's Investors Service Inc. and single-B-plus by Standard & Poor's Corp., the issue will be sold through underwriters led by Goldman, Sachs & Co.
Hertz Corp. -- $100 million of senior notes due Nov. 1, 2009, priced at par to yield 9%.
The issue, which is puttable back to the company in 1999, was priced at a spread of 110 basis points above the Treasury's 10-year note.
Rated single-A-3 by Moody's and triple-B by S&P, the issue will be sold through underwriters led by Merrill Lynch Capital Markets.
Canadian Imperial Bank of Commerce (Canada) -- 10 billion yen of 5.7% bonds due Nov. 17, 1992, priced at 101 1/4 to yield 5.75% less full fees, via LTCB International Ltd.
Fees 1 3/8.
The Singapore and Kuala Lumpur stock exchanges are bracing for a turbulent separation, following Malaysian Finance Minister Daim Zainuddin's long-awaited announcement that the exchanges will sever ties.
On Friday, Datuk Daim added spice to an otherwise unremarkable address on Malaysia's proposed budget for 1990 by ordering the Kuala Lumpur Stock Exchange "to take appropriate action immediately" to cut its links with the Stock Exchange of Singapore.
The delisting of Malaysian-based companies from the Singapore exchange may not be a smooth process, analysts say.
Though the split has long been expected, the exchanges aren't fully prepared to go their separate ways.
The finance minister's order wasn't sparked by a single event and doesn't indicate a souring in relations between the neighboring countries.
Rather, the two closely linked exchanges have been drifting apart for some years, with a nearly five-year-old moratorium on new dual listings, separate and different listing requirements, differing trading and settlement guidelines and diverging national-policy aims.
QUANTUM CHEMICAL Corp.'s plant in Morris, Ill., is expected to resume production in early 1990.
The year was misstated in Friday's editions.
Italy's trade deficit narrowed to 2.007 trillion lire ($1.49 billion) in September from 2.616 trillion lire a year earlier, the state statistical office Istat said.
The deficit was 466 billion lire in August.
For the first nine months, the trade deficit was 14.933 trillion lire, compared with 10.485 trillion lire in the year-earlier period.
Istat said the statistics are provisional and aren't seasonally adjusted.
Imports rose 11% to 18.443 trillion lire in September from a year earlier, while exports rose 17% to 16.436 trillion lire.
In the nine months, imports rose 20% to 155.039 trillion lire, while exports grew 18% to 140.106 trillion lire.
Import values are calculated on a cost, insurance and freight (c.i.f.) basis, while exports are accounted for on a free-on-board (f.o.b.) basis.
As competition heats up in Spain's crowded bank market, Banco Exterior de Espana is seeking to shed its image of a state-owned bank and move into new activities.
Under the direction of its new chairman, Francisco Luzon, Spain's seventh largest bank is undergoing a tough restructuring that analysts say may be the first step toward the bank's privatization.
The state-owned industrial holding company Instituto Nacional de Industria and the Bank of Spain jointly hold a 13.94% stake in Banco Exterior.
The government directly owns 51.4% and Factorex, a financial services company, holds 8.42%.
The rest is listed on Spanish stock exchanges.
Some analysts are concerned, however, that Banco Exterior may have waited too long to diversify from its traditional export-related activities.
Catching up with commercial competitors in retail banking and financial services, they argue, will be difficult, particularly if market conditions turn sour.
If that proves true, analysts say Banco Exterior could be a prime partner -- or even a takeover target -- for either a Spanish or foreign bank seeking to increase its market share after 1992, when the European Community plans to dismantle financial barriers.
With 700 branches in Spain and 12 banking subsidiaries, five branches and 12 representative offices abroad, the Banco Exterior group has a lot to offer a potential suitor.
Mr. Luzon and his team, however, say they aren't interested in a merger.
Instead, they are working to transform Banco Exterior into an efficient bank by the end of 1992.
"I want this to be a model of the way a public-owned company should be run," Mr. Luzon says.
Banco Exterior was created in 1929 to provide subsidized credits for Spanish exports.
The market for export financing was liberalized in the mid-1980s, however, forcing the bank to face competition.
At the same time, many of Spain's traditional export markets in Latin America and other developing areas faced a sharp decline in economic growth.
As a result, the volume of Banco Exterior's export credit portfolio plunged from 824 billion pesatas ($7.04 billion) as of Dec. 31, 1986, to its current 522 billion pesetas.
The other two main pillars of Banco Exterior's traditional business -- wholesale banking and foreign currency trading -- also began to crumble under the weight of heavy competition and changing client needs.
The bank was hamstrung in its efforts to face the challenges of a changing market by its links to the government, analysts say.
Until Mr. Luzon took the helm last November, Banco Exterior was run by politicians who lacked either the skills or the will to introduce innovative changes.
But Mr. Luzon has moved swiftly to streamline bureaucracy, cut costs, increase capital and build up new areas of business.
"We've got a lot to do," he acknowledged.
"We've got to move quickly."
In Mr. Luzon's first year, the bank eliminated 800 jobs.
Now it says it'll trim another 1,200 jobs over the next three to four years.
The bank employs 8,000 people in Spain and 2,000 abroad.
To strengthen its capital base, Banco Exterior this year issued $105 million in subordinated debt, launched two rights issues and sold stock held in its treasury to small investors.
The bank is now aggressively marketing retail services at its domestic branches.
Last year's drop in export credit was partially offset by a 15% surge in lending to individuals and small and medium-sized companies.
Though Spain has an excess of banks, analysts say the country still has one of the most profitable markets in Europe, which will aid Banco Exterior with the tough tasks it faces ahead.
Expansion plans also include acquisitions in growing foreign markets.
The bank says it's interested in purchasing banks in Morocco, Portugal and Puerto Rico.
But the bank's retail activities in Latin America are likely to be cut back.
Banco Exterior was one of the last banks to create a brokerage house before the four Spanish stock exchanges underwent sweeping changes in July.
The late start may be a handicap for the bank as Spain continues to open up its market to foreign competition.
But Mr. Luzon contends that the experienced team he brought with him from Banco Bilbao Vizcaya, where he was formerly director general, will whip the bank's capital market division into shape by the end of 1992.
The bank also says it'll use its international network to channel investment from London, Frankfurt, Zurich and Paris into the Spanish stock exchanges.
General Motors Corp.'s general counsel hopes to cut the number of outside law firms the auto maker uses from about 700 to 200 within two years.
Harry J. Pearce, named general counsel in May 1987, says the reduction is a cost-cutting measure and an effort to let the No. 1 auto maker's 134-lawyer in-house legal department take on matters it is better equipped and trained to handle.
GM trimmed about 40 firms from its approved local counsel list, Mr. Pearce says.
The move is consistent with a trend for corporate legal staffs to do more work in-house, instead of farming it out to law firms.
Mr. Pearce set up GM's first in-house litigation group in May with four lawyers, all former assistant U.S. attorneys with extensive trial experience.
He intends to add to the litigation staff.
Among the types of cases the in-house litigators handle are disputes involving companies doing business with GM and product-related actions, including one in which a driver is suing GM for damages resulting from an accident.
Mr. Pearce has also encouraged his staff to work more closely with GM's technical staffs to help prevent future litigation.
GM lawyers have been working with technicians to develop more uniform welding procedures -- the way a vehicle is welded has a lot to do with its durability.
The lawyers also monitor suits to identify specific automobile parts that cause the biggest legal problems.
Mr. Pearce says law firms with the best chance of retaining or winning business with GM will be those providing the highest-quality service at the best cost -- echoing similar directives from GM's auto operations to suppliers.
This doesn't necessarily mean larger firms have an advantage; Mr. Pearce said GM works with a number of smaller firms it regards highly.
Mr. Pearce has shaken up GM's legal staff by eliminating all titles and establishing several new functions, including a special-projects group that has made films on safety and drunk driving.
FEDERAL PROSECUTORS are concluding fewer criminal cases with trials.
That's a finding of a new study of the Justice Department by researchers at Syracuse University.
David Burnham, one of the authors, says fewer trials probably means a growing number of plea bargains.
In 1980, 18% of federal prosecutions concluded at trial; in 1987, only 9% did.
The study covered 11 major U.S. attorneys' offices -- including those in Manhattan and Brooklyn, N.Y., and New Jersey -- from 1980 to 1987.
The Justice Department rejected the implication that its prosecutors are currently more willing to plea bargain.
"Our felony caseloads have been consistent for 20 years," with about 15% of all prosecutions going to trial, a department spokeswoman said.
The discrepancy is somewhat perplexing in that the Syracuse researchers said they based their conclusions on government statistics.
"One possible explanation for this decline" in taking cases to trial, says Mr. Burnham, "is that the number of defendants being charged with crimes by all U.S. attorneys has substantially increased."
In 1980, the study says, prosecutors surveyed filed charges against 25 defendants for each 100,000 people aged 18 years and older.
In 1987, prosecutors filed against 35 defendants for every 100,000 adults.
Another finding from the study: Prosecutors set significantly different priorities.
The Manhattan U.S. attorney's office stressed criminal cases from 1980 to 1987, averaging 43 for every 100,000 adults.
But the New Jersey U.S. attorney averaged 16.
On the civil side, the Manhattan prosecutor filed an average of only 11 cases for every 100,000 adults during the same period; the San Francisco U.S. attorney averaged 79.
The study is to provide reporters, academic experts and others raw data on which to base further inquiries.
IMELDA MARCOS asks for dismissal, says she was kidnapped.
The former first lady of the Philippines, asked a federal court in Manhattan to dismiss an indictment against her, claiming among other things, that she was abducted from her homeland.
Mrs. Marcos and her late husband, former Philippines President Ferdinand Marcos, were charged with embezzling more than $100 million from that country and then fraudulently concealing much of the money through purchases of prime real estate in Manhattan.
Mrs. Marcos's attorneys asked federal Judge John F. Keenan to give them access to all U.S. documents about her alleged abduction.
The U.S. attorney's office, in documents it filed in response, said Mrs. Marcos was making the "fanciful -- and factually unsupported -- claim that she was kidnapped into this country" in order to obtain classified material in the case.
The office also said Mrs. Marcos and her husband weren't brought to the U.S. against their will after Mr. Marcos was ousted as president.
The prosecutor quoted statements from the Marcoses in which they said they were in this country at the invitation of President Reagan and that they were enjoying the hospitality of the U.S.
Lawyers for Mrs. Marcos say that because she was taken to the U.S. against her wishes, the federal court lacks jurisdiction in the case.
THE FEDERAL COURT of appeals in Manhattan ruled that the dismissal of a 1980 indictment against former Bank of Crete owner George Koskotas should be reconsidered.
The indictment, which was sealed and apparently forgotten by investigators until 1987, charges Mr. Koskotas and three others with tax fraud and other violations.
He made numerous trips to the U.S. in the early 1980s, but wasn't arrested until 1987 when he showed up as a guest of then-Vice President George Bush at a government function.
A federal judge in Manhattan threw out the indictment, finding that the seven-year delay violated the defendant's constitutional right to a speedy trial.
The appeals court, however, said the judge didn't adequately consider whether the delay would actually hurt the chances of a fair trial.
Mr. Koskotas is fighting extradition proceedings that would return him to Greece, where he is charged with embezzling more than $250 million from the Bank of Crete.
His attorney couldn't be reached for comment.
PRO BONO VOLUNTARISM: In an effort to stave off a plan that would require all lawyers in New York state to provide twenty hours of free legal aid a year, the state bar recommended an alternative program to increase voluntary participation in pro bono programs.
The state bar association's policy making body, the House of Delegate, voted Saturday to ask Chief Judge Sol Wachtler to give the bar's voluntary program three years to prove its effectiveness before considering mandatory pro bono.
"We believe our suggested plan is more likely to improve the availability of quality legal service to the poor than is the proposed mandatory pro bono plan and will achieve that objective without the divisiveness, distraction, administrative burdens and possible failure that we fear would accompany an attempt to impose a mandatory plan," said Justin L. Vigdor of Rochester, who headed the bar's pro bono study committee.
DALLAS AND HOUSTON law firms merge: Jackson & Walker, a 130-lawyer firm in Dallas and Datson & Scofield, a 70-lawyer firm in Houston said they have agreed in principle to merge.
The consolidated firm, which would rank among the 10 largest in Texas, would operate under the name Jackson & Walker.
The merger must be formally approved by the partners of both firms but is expected to be completed by year end.
Jackson & Walker has an office in Fort Worth, Texas, and Dotson & Scofield has an office in New Orleans.
PILING ON?
Piggybacking on government assertions that General Electric Co. may have covered up fraudulent billings to the Pentagon, two shareholders have filed a civil racketeering suit against the company.
The suit was filed by plaintiffs' securities lawyer Richard D. Greenfield in U.S. District Court in Philadelphia.
He seeks damages from the company's 15 directors on grounds that they either "participated in or condoned the illegal acts . . . or utterly failed to carry out their duties as directors."
GE is defending itself against government criminal charges of fraud and false claims in connection with a logistics-computer contract for the Army.
The trial begins today in federal court in Philadelphia.
The government's assertions of the cover-up were made in last minute pretrial motions.
GE, which vehemently denies the government's allegations, denounced Mr. Greenfield's suit.
"It is a cheap-shot suit -- procedurally defective and thoroughly fallacious -- which was hurriedly filed by a contingency-fee lawyer as a result of newspaper reports," said a GE spokeswoman.
She added that the company was considering bringing sanctions against Mr. Greenfield for making "grossly inaccurate and unsupported allegations.
The head of the nation's largest car-dealers group is telling dealers to "just say no" when auto makers pressure them to stockpile cars on their lots.
In an open letter that will run today in the trade journal Automotive News, Ron Tonkin, president of the National Car Dealers Association, says dealers should cut their inventories to no more than half the level traditionally considered desirable.
Mr. Tonkin, who has been feuding with the Big Three since he took office earlier this year, said that with half of the nation's dealers losing money or breaking even, it was time for "emergency action."
U.S. car dealers had an average of 59 days' supply of cars in their lots at the end of September, according to Ward's Automotive Reports.
But Mr. Tonkin said dealers should slash stocks to between 15 and 30 days to reduce the costs of financing inventory.
His message is getting a chilly reception in Detroit, where the Big Three auto makers are already being forced to close plants because of soft sales and reduced dealer orders.
Even before Mr. Tonkin's broadside, some large dealers said they were cutting inventories.
Ford Motor Co. and Chrysler Corp. representatives criticized Mr. Tonkin's plan as unworkable.
It "is going to sound neat to the dealer except when his 15-day car supply doesn't include the bright red one that the lady wants to buy and she goes up the street to buy one," a Chrysler spokesman said.
Southern Co.'s Gulf Power Co. unit may plead guilty this week to charges that it illegally steered company money to politicians through outside vendors, according to individuals close to an investigation of the utility holding company.
The tentative settlement between Gulf Power, a Pensacola, Fla., electric company, and federal prosecutors would mark the end of one part of a wide-ranging inquiry of Southern Co. in the past year.
A grand jury has been investigating whether officials at Southern Co. conspired to cover up their accounting for spare parts to evade federal income taxes.
The grand jury has also been investigating whether Gulf Power executives violated the federal Utility Holding Company Act, which prohibits certain utilities from making political contributions.
The individuals said Gulf Power and federal prosecutors are considering a settlement under which the company would plead guilty to two felony charges and pay fines totaling between $500,000 and $1.5 million.
Under one count, Gulf Power would plead guilty to conspiring to violate the Utility Holding Company Act.
Under the second count, the company would plead guilty to conspiring to evade taxes.
The guilty pleas would be made solely by Gulf Power, the individuals said.
No employee or vendor would be involved.
A spokesman for Southern Co. would say only that discussions are continuing between Gulf Power and federal prosecutors.
"We have no further developments to report," he said.
Officials at Gulf Power couldn't be reached for comment.
And prosecutors declined to comment.
While Southern Co. has been reluctant to discuss the grand jury investigations, Edward L. Addison, chief executive officer, has said the company is prepared to defend its tax and acccounting practices if any charges are brought against it.
Morever, Mr. Addison has said Southern Co. and its units don't condone illegal political contributions.
Neither Mr. Addison nor any other Southern Co. official has been charged with any wrongdoing in connection with the current inquiries.
The probe of Southern Co. has attracted considerable attention this year because of several events that have befallen the company, including the death of a Gulf Power executive in a plane crash and the disappearance of a company vendor who was to be a key grand jury witness.
Witnesses have said the grand jury has asked numerous questions about Jacob F. "Jake" Horton, the senior vice president of Gulf Power who died in the plane crash in April.
Mr. Horton oversaw Gulf Power's governmental-affairs efforts.
On the morning of the crash, he had been put on notice that an audit committee was recommending his dismissal because of invoicing irregularities in a company audit.
Investigators have been trying to determine whether the crash was an accident, sabotage or suicide.
Gulf Power said in May that an internal audit had disclosed that at least one vendor had used false invoices to fund political causes.
But the company said the political contributions had been made more than five years ago.
Exxon Corp. is resigning from the National Wildlife Federation's corporate advisory panel, saying the conservation group has been unfairly critical of the Exxon Valdez oil spill along the Alaskan coast.
The federation said Friday that it regrets the resignation, but issued a stinging response that called Exxon a "corporate pariah" that should keep an open dialogue with environmentalists.
The federation, with 5.8 million members nationwide, has been one of the sharpest critics of Exxon's handling of the 11 million gallon tanker spill and has accused the company of repeatedly ignoring requests to meet and discuss it.
The March 24 oil spill soiled hundreds of miles of shoreline along Alaska's southern coast and wreaked havoc with wildlife and the fishing industry.
Exxon's Exxon USA unit was one of the charter members of the Corporate Conservation Council, a panel of executives formed in 1982 by the National Wildlife Federation to foster "frank and open discussions" between industry and the federation's leaders.
In a letter to the federation, Raymond Campion, Exxon's environmental coordinator, said: "Recent public actions by you regarding the Valdez oil spill have failed to demonstrate any sense of objectivity or fairness."
The federation was among the plaintiffs in a lawsuit filed in August against Exxon seeking full payment of environmental recovery costs from the spill.
First Tennessee National Corp. said it would take a $4 million charge in the fourth quarter, as a result of plans to expand its systems operation.
The banking company said it reached an agreement in principle with International Business Machines Corp. on a systems operations contract calling for IBM to operate First Tennessee's computer and telecommunications functions.
Further, under the agreement, First Tennesse would continue to develop the software that creates customer products and sevices.
"Because personal computers will soon be on the desks of all of our tellers, and customer service and loan representatives, information will be instantly available to help customers with product decisions and provide them with information about their accounts," according to John Kelley, executive vice president and corporate services group manager at First Tennessee.
However, about 120 employees will be affected by the agreement.
First Tennessee, assisted by IBM, said it will attempt to place the employees within the company, IBM or other companies in Memphis.
The process will take as many as six months to complete, the company said.
The agreement is subject to the banking company's board approval, which is expected next month.
The Treasury Department said the U.S. trade deficit may worsen next year, after two years of significant improvement.
In its report to Congress on international economic policies, the Treasury said that any improvement in the broadest measure of trade, known as the current account, "is likely at best to be very modest," and "the possibility of deterioration in the current account next year cannot be excluded."
The statement was the U.S. government's first acknowledgement of what other groups, such as the International Monetary Fund, have been predicting for months.
Continued strength in the dollar was cited as one reason the trade position may deteriorate.
The Treasury's report, which is required annually by a provision of the 1988 trade act, again took South Korea to task for its exchange-rate policies.
"We believe that there have continued to be indications of exchange-rate `manipulation'" during the past six months, it said, citing the lack of market forces in South Korea's exchange-rate system and the use of capital and interest-rate controls to manipulate exchange rates.
The Treasury expressed pleasure, however, with the government of Taiwan, which was cited for exchange-rate manipulation in last year's report.
The Treasury said Taiwan has liberalized its exchange rate system in the past year.
The fiscal 1989 budget deficit figure came out Friday.
It was down a little.
The next time you hear a Member of Congress moan about the deficit, consider what Congress did Friday.
The Senate, 84-6, voted to increase to $124,000 the ceiling on insured mortgages from the FHA, which lost $4.2 billion in loan defaults last year.
Then, by voice vote, the Senate voted a pork-barrel bill, approved Thursday by the House, for domestic military construction.
Compare the Bush request to what the Senators gave themselves:
For construction in West Virginia, Mr. Bush requested $4.5 million; Congress gave Senator Byrd's state $21.5 million.
Senator Byrd is chairman of the Appropriations Committee.
For Iowa, a $1.8 million request became $12 million for Senator Grassley, ranking minority member of a military construction subcommittee.
Rep. Jamie Whitten of Mississippi and chairman of House Appropriations turned a $20 million Bush request for his state into a $49.7 million bequest.
Senator Sasser of Tennessee is chairman of the Appropriations subcommittee on military construction; Mr. Bush's $87 million request for Tennessee increased to $109 million.
In a remark someone should remember this time next year, Senator Sasser said, "I think we've seen the peak of military construction spending for many years to come."
Tell us about spending restraint.
Tell us about the HUD scandals.
Tell us what measure, short of house arrest, will get this Congress under control.
Costa Rica reached an agreement with its creditor banks that is expected to cut that government's $1.8 billion in bank debt by as much as 60%.
The agreement was announced by Costa Rican President Oscar Arias Friday, as President Bush and other leaders from the Western Hemisphere gathered in the Central American nation for a celebration of democracy.
Costa Rica had been negotiating with the U.S. and other banks for three years, but the debt plan was rushed to completion in order to be announced at the meeting.
The government had fallen $300 million behind in interest payments.
Treasury Secretary Nicholas Brady called the agreement "an important step forward in the strengthened debt strategy," noting that it will "when implemented, provide significant reduction in the level of debt and debt service owed by Costa Rica."
Under the plan, Costa Rica will buy back roughly 60% of its bank debt outstanding at a deeply discounted price, according to officials involved in the agreement.
The remainder of the debt will be exchanged for new Costa Rican bonds with a 6 1/4% interest rate.
The International Monetary Fund and the World Bank are expected to provide approximately $180 million to help support the deal, and additional funds are expected from Japan.
Treasury officials say the Costa Rican agreement demonstrates that the Brady debt plan can benefit small debtor countries as well as big debtors, such as Mexico.
The Treasury said it plans to sell $2 billion of 51-day cash-management bills today, raising all new cash.
The bills will be dated Oct. 31 and will mature Dec. 21,
No non-competitive tenders will be accepted.
Tenders, available in minimum denominations of $1 million, must be received by noon EST today at Federal Reserve Banks or branches.
The Treasury also announced details of this week's unusual bill auction, which has been changed to accommodate the expiration of the federal debt ceiling at midnight tomorrow.
The 13-week and 27-week bills will be issued tomorrow rather than Thursday, Nov. 2, as originally planned.
The three-month bills will still mature Feb. 1, 1990, and the six-month bills on May 3, 1990.
The Treasury also said noncompetitive tenders will be considered timely if postmarked no later than Sunday, Oct. 29, and received no later than tomorrow.
The Treasury said it won't be able to honor reinvestment requests from holders of bills maturing Nov. 2 held in the Treasury's book-entry system.
The department will make payment for bills maturing on Nov. 2 to all investors who have requested reinvestment of their bills on that date, as well as to all account holders who have previously requested payment.
American Pioneer Inc. said it agreed in principle to sell its American Pioneer Life Insurance Co. subsidiary to Harcourt Brace Jovanovich Inc.'s HBJ Insurance Cos. for $27 million.
American Pioneer, parent of American Pioneer Savings Bank, said the sale will add capital and reduce the level of investments in subsidiaries for the thrift holding company.
Recently, the boards of both the parent company and the thrift also voted to suspend dividends on preferred shares of both companies and convert all preferred into common shares.
The company said the move was necessary to meet capital requirements.
The transaction is subject to execution of a definitive purchase agreement and approval by various regulatory agencies, including the insurance departments of the states of Florida and Indiana, the company said.
In the second quarter, American Pioneer reported a loss of $7.3 million, compared with net income of $1.1 million a year earlier.
The banking operation had a loss of $8.7 million in the second quarter, largely because of problem real-estate loans, while the insurance operations earned $884,000.
October employment data -- also could turn out to be the most confusing.
On the surface, the overall unemployment rate is expected to be little changed from September's 5.3%.
But the actual head count of non-farm employment payroll jobs is likely to be muddied by the impact of Hurricane Hugo, strikes, and less-than-perfect seasonal adjustments, economists said.
The consensus view calls for an overall job gain of 155,000 compared with September's 209,000 increase.
But the important factory-jobs segment, which last month plunged by 103,000 positions and raised recession fears, is most likely to be skewed by the month's unusual events.
Several other reports come before Friday's jobs data, including: the September leading indicators index, new-home sales and October agricultural prices reports due out tomorrow; the October purchasing managers' index and September construction spending and manufacturers' orders on Wednesday; and October chain-store sales on Thursday.
Friday brings the final count on October auto sales.
"The employment report is going to be difficult to interpret," said Michael Englund, economist with MMS International, a unit of McGraw-Hill Inc., New York.
Mr. Englund added that next month's data isn't likely to be much better, because it will be distorted by San Francisco's earthquake.
What's more, he believes seasonal swings in the auto industry this year aren't occurring at the same time as in the past, because of production and pricing differences that are curbing the accuracy of seasonal adjustments built into the employment data.
Wednesday's report from the purchasing agents will be watched to see if the index maintains a level below 50%, as it has for the past couple of months.
A reading of less than 50% indicates an economy that is generally contracting while a reading above 50% indicates an economy that's expanding.
Samuel D. Kahan, chief financial economist at Kleinwort Benson Government Securities Inc., Chicago, said that the purchasers' report is valuable because it often presents the first inkling of economic data for the month.
But he added: "Some people use the purchasers' index as a leading indicator, some use it as a coincident indicator.
But the thing it's supposed to measure -- manufacturing strength -- it missed altogether last month."
David Wyss, chief financial economist at Data Resources Inc., Boston, said that the purchasers' index "does miss occasionally," adding: "When it misses one month it tends to miss the next month, too."
The consensus view on September leading indicators calls for a gain of 0.3%, the same as in August.
Economists said greatly increased consumer optimism, a larger money supply and higher stock prices helped lift the index.
All orders-related components, such as consumer-goods orders and building permits, are thought to have been weaker.
Data Resources' Mr. Wyss added that he will be keeping a closer eye than ususal on October chain-store sales.
Usually, October "isn't a very interesting month {for retail figures} because school clothes have been bought and people are waiting for December to buy Christmas presents," he said.
But Mr. Wyss said he will watch the numbers to get an inkling of whether consumers' general buying habits may slack off as much as their auto-buying apparently has.
He noted that higher gasoline prices will help buoy the October totals.
Seasonal factors are also expected to have taken their toll on September new-home sales, which are believed to have fallen sharply from August's 755,000 units.
Construction spending is believed to have slipped about 0.5% from August levels, although economists noted the rate probably will pick up in the months ahead in response to hurricane and earthquake damage.
Factory owners are buying new machinery at a good rate this fall, machine tool makers say, but sluggish sales of new cars and trucks raise questions about fourth-quarter demand from the important automotive industry.
September orders for machine tools rebounded from the summer doldrums, but remained 7.7% below year-earlier levels, according to figures from NMTBA -- the Association for Manufacturing Technology.
Domestic machine tool plants received $303 million of orders last month, up 33% from August's $227.1 million, but still below the $328.2 million of September 1988, NMTBA said.
Machine tools are complex machines ranging from lathes to metal-forming presses that are used to shape most metal parts.
"Overall demand still is very respectable," says Christopher C. Cole, group vice president at Cincinnati Milacron Inc., the nation's largest machine tool producer.
"The outlook is positive for the intermediate to long term."
September orders for all U.S. producers, in fact, were slightly above the monthly average for 1988, a good year for the industry.
"Aerospace orders are very good," Mr. Cole says.
"And export business is still good.
While some automotive programs have been delayed, they haven't been canceled."
"September was one of the biggest order months in our history," says James R. Roberts, vice president, world-wide sales and marketing, for Giddings & Lewis Inc., Fond du Lac, Wis.
At a recent meeting of manufacturing executives, "everybody I talked with was very positive," he says.
Most say they plan to spend more on factory equipment in 1990 than in 1989.
But sales of North American-made 1990-model cars are running at an annual rate of only six million, down from 7.1 million a year earlier.
And truck sales also are off more than 20%.
Auto makers, who began deferring some equipment purchases last spring, can be expected to remain cautious about spending if their sales don't pick up, machine tool builders say.
Machine tool executives are hopeful, however, that recent developments in Eastern Europe will expand markets for U.S.-made machine tools in that region.
There is demand for state-of-the-art machine tools in the Soviet Union and in other Eastern European countries as those nations strive to improve the efficiency of their ailing factories as well as the quality of their goods.
However, there's a continuing dispute between machine tool makers and the Defense Department over whether sophisticated U.S. machine tools would increase the Soviet Union's military might.
"The Commerce Department says go, and the Defense Department says stop," complains one machine tool producer.
If that controversy continues, U.S. machine tool makers say, West German and other foreign producers are likely to grab most of the sales in Eastern Europe.
September orders for machining centers, lathes, milling machines, grinders, boring mills and other machines that shape metal by cutting totaled $192.9 million, down 28% from $266.5 million a year earlier, but a 23% increase from August's $156.3 million, NMTBA said.
Orders last month for metal-forming presses and other machinery to form metal with pressure surged to $110.1 million, a 78% rise from $61.7 million a year earlier and a 55% gain from $70.9 million in August.
Today's presses are large and costly machines, and a few orders can produce a high total for one month that doesn't necessarily indicate a trend.
Machine tool shipments last month were $281.2 million, a 24% rise from a year earlier and a 25% increase from August.
Shipments have run well ahead of 1988 all year, as machine tool builders produce against relatively good backlogs.
U.S. producers had a $2.15 billion backlog of unfilled orders at the end of September.
That was up 2.8% from a year earlier, even though orders for the first nine months of 1989 were down 19% from the comparable 1988 period.
$2,057,750,000.
$675,400,000.
$1,048,500,000.
$588,350,000.
In Bombay stock market circles, the buzzword is "mega."
At least 40 companies are coming to the capital market to raise $6 billion, an amount never thought possible in India.
"When they talk mega-issues, they're truly talking mega," says S.A. Dave, chairman of the Securities and Exchange Board of India.
"The capital market is booming."
But the mega-issues are raising megaquestions about the rapidly evolving Indian capital market.
One is whether there is enough money to fund the new issues without depressing stock trading.
Moreover, in the relatively unregulated Indian stock markets, investors frequently don't know what they are getting when they subscribe to an issue.
A prospectus in India doesn't always tell a potential investor much.
Some of the large amounts are being raised by small firms.
In addition, once money is raised, investors usually have no way of knowing how it is spent.
Some analysts are concerned that the mega-issues, in such an unregulated environment, could lead to a mega-crash.
"The rate of failures will be much more than the rate of successes in the mega-projects," says G.S. Patel, a former chairman of the giant, government-run mutual fund, the Unit Trust of India.
"They're going to have mega-problems."
The Indian stock markets have been on a five-year high, with dips and corrections, since Prime Minister Rajiv Gandhi started liberalizing industry.
But the last stock market boom, in 1986, seems small compared with the current rush to market.
The $6 billion that some 40 companies are looking to raise in the year ending March 31 compares with only $2.7 billion raised on the capital market in the previous fiscal year.
In fiscal 1984, before Mr. Gandhi came to power, only $810 million was raised.
This year's biggest issue, $570 million of convertible debentures by engineering company Larsen & Toubro Ltd., is the largest in Indian history.
And it isn't the only giant issue: together, the top four issues will raise $1.3 billion.
Convertible debentures -- bonds that can later be converted into equity shares -- are the most popular instrument this year, though many companies are also selling nonconvertible bonds or equity shares.
These mega-issues are being propelled by two factors, economic and political.
In the past, the socialist policies of the government strictly limited the size of new steel mills, petrochemical plants, car factories and other industrial concerns to conserve resources and restrict the profits businessmen could make.
As a result, industry operated out of small, expensive, highly inefficient industrial units.
When Mr. Gandhi came to power, he ushered in new rules for business.
He said industry should build plants on the same scale as those outside India and benefit from economies of scale.
If the output was too great for the domestic market, he said, companies should export.
India's overregulated businessmen had to be persuaded, but they have started to think big.
Some of the projects being funded by the new issues are the first fruits of Mr. Gandhi's policy, and they require more capital than the smaller industrial units built in the past.
The industrial revolution has produced an explosion in the capital market, which is a far cheaper source of funds than government-controlled banks, where interest rates for prime borrowers are around 16%.
The second factor spurring mega-issues is political.
Mr. Gandhi has called general elections for November, and many businessmen fear that he and his Congress (I) Party will lose.
Some companies are raising money in anticipation of a government less predictable than Mr. Gandhi's, and possibly more restrictive.
The buoyant Bombay rumor mill also says that some of the money raised in the current spate of issues will be used as campaign donations before the elections.
No one admits to anything, but India's industrialists have a history of making under-the-table campaign donations.
So far, the mega-issues are a hit with investors.
Earlier this year, Tata Iron & Steel Co.'s offer of $355 million of convertible debentures was oversubscribed.
Essar Gujarat Ltd., a marine construction company, had similar success with a slightly smaller issue.
Larsen & Toubro started accepting applications for its giant issue earlier this month; bankers and analysts expect it to be oversubscribed.
Still to come are big issues by Bindal Agro Chem Ltd., a petrochemical and agrochemical company, and Usha Rectifier Corp. (India), a semiconductor maker.
While many investors are selling parts of their portfolios to buy the new issues, prices on India's 16 stock exchanges are holding up so far.
"I don't think it will lead to any chaos in the secondary market," says Mr. Patel, "only a sagging tendency."
Says M.J. Pherwani, chairman of the Unit Trust of India: The "markets are headed for growth unheard of and unseen before."
But with growth come growing pains, and never has this been clearer on the Indian capital market than now.
In the past, the government controlled the markets indirectly, through its tight grip on industry itself.
Various ministries decided the products businessmen could produce and how much; and government-owned banks controlled the financing of projects and monitored whether companies came through on promised plans.
The government has been content with this far-reaching, subtle form of control, exercised on a case-by-case basis with no clear rules or guidelines.
But now, with large amounts being raised from investors, the government's dawdling on regulation and disclosure requirements has a more dangerous aspect.
The Securities and Exchange Board of India was set up earlier this year, along the lines of the U.S. Securities and Exchange Commission, but New Delhi hasn't pushed the legislation to make it operational.
Mr. Dave, its head, acts cheery and patient, but he makes no bones about the need to get to work.
"Mega or non-mega, we feel the prospectus standards need to be considerably improved," he says.
"Disclosures are very poor in India."
He says the big questions -- "Do you really need this much money to put up these investments? Have you told investors what is happening in your sector? What about your track record? -- "aren't asked of companies coming to market.
Instead, he says, most investors have to rely on the rumor-happy Indian press.
An example is the biggest offering of them all, Larsen & Toubro's $570 million bond issue.
The engineering company was acquired in a takeover earlier this year by the giant Reliance textile group.
Although Larsen & Toubro hadn't raised money from the public in 38 years, its new owners frequently raise funds on the local market.
(Reliance floated a $357 million petrochemical company in 1988 that was, at the time, the largest public issue in Indian history.)
The media has raised questions about Larsen & Toubro's issue, pointing out that it exceeds the company's annual sales and its market capitalization.
Even stranger is the case of Usha Rectifier, a semiconductor company with 1988 sales of $28 million that's raising $270 million to build an iron plant.
Once the money is raised, it isn't always certain how it is used.
Larsen & Toubro, for example, says it's raising $570 million to use as supplier credit on large engineering jobs.
Unlike other companies, it hasn't pin-pointed specific projects for the funds.
And even when specific projects are described in prospectuses, the money often is used elsewhere, according to analysts.
"Someone must monitor where the funds are deployed," says Mr. Dave.
Mr. Patel agrees: "There is no proper monitoring and screening of the use of these funds.
They're trying to plug the various loopholes, but they're totally unprepared for this."
Because of the large amounts of money being raised, the loose disclosure requirements and the casual monitoring of how the money is used, some analysts fear that there could be a few mega-crashes, which could hurt market confidence far more than the small bankruptcies that followed the boom of 1986.
The government insists that such a possibility is low.
It says that despite loose regulation of the market itself, its longstanding regulation of industry will prevent such crashes.
T.T. Ram Mohan contributed to this article.
Lion Nathan Ltd., a New Zealand brewing and retail concern, said Friday that Bond Corp. Holdings Ltd. is "committed" to a transaction whereby Lion Nathan would acquire 50% of Bond's Australian brewing assets.
Lion Nathan issued a statement saying it is applying to Australia's National Companies & Securities Commission, the nation's corporate watchdog agency, for a modification to takeover regulations "similar to that obtained by" S.A. Brewing Holdings Ltd.
SA Brewing, an Australian brewer, last Thursday was given approval to acquire an option for up to 20% of Bell Resources Ltd., a unit of Bond Corp.
Bell Resources is acquiring Bond's brewing businesses for 2.5 billion Australian dollars (US$1.9 billion).
S.A. brewing would make a takeover offer for all of Bell Resources if it exercises the option, according to the commission.
Bond Corp., a brewing, property, media and resources company, is selling many of its assets to reduce its debts.
"Lion Nathan has a concluded contract with Bond and Bell Resources," said Douglas Myers, chief executive of Lion Nathan.
Finnair, Finland's state-owned airline, joined the wave of global airline alliances and signed a wide-ranging cooperation agreement with archrival Scandinavian Airlines System.
Under the accord, Finnair agreed to coordinate flights, marketing and other functions with SAS, the 50%-state-owned airline of Denmark, Norway and Sweden.
The pact also calls for coordination between Finnair and Switzerland's national carrier, Swissair, with which SAS entered a similar alliance last month.
Finnair and SAS said they plan to swap stakes in each other.
Neither disclosed details pending board meetings next month.
Officials hinted, however, that SAS would take a stake of at least 6% in Finnair, valued at about $40 million at current market prices.
Finnair would receive SAS shares valued at the same amount, officials said.
General Motors Corp. and Ford Motor Co. are now going head to head in the markets for shares of Jaguar PLC, as GM got early clearance from the Federal Trade Commission to boost its stake in the British luxury car maker.
GM confirmed Friday that it received permission late Thursday from U.S. antitrust regulators to increase its Jaguar holdings past the $15 million level.
Ford got a similar go-ahead earlier in October, and on Friday, Jaguar announced that the No. 2 U.S. auto maker had raised its stake to 13.2%, or 24.2 million shares, from 12.4% earlier in the week.
A spokesman for GM, the No. 1 auto maker, declined to say how many Jaguar shares that company owns.
In late trading Friday, Jaguar shares bucked the downward tide in London's stock market and rose five pence to 725 pence ($11.44).
Trading volume was a moderately heavy 3.1 million shares.
In the U.S., Jaguar's American depositary receipts were among the most active issues Friday in national over-the-counter trading where they closed at $11.625 each, up 62.5 cents.
Analysts expect that the two U.S. auto giants will move quickly to buy up 15% stakes in Jaguar, setting up a potential bidding war for the prestigious Jaguar brand.
British government restrictions prevent any single shareholder from going beyond 15% before the end of 1990 without government permission.
The British government, which owned Jaguar until 1984, still holds a controlling "golden share" in the company.
With the golden share as protection, Jaguar officials have rebuffed Ford's overtures, and moved instead to forge an alliance with GM.
Jaguar officials have indicated they are close to wrapping up a friendly alliance with GM that would preserve Jaguar's independence, but no deal has been announced.
Ford, on the other hand, has said it's willing to bid for all of Jaguar, despite the objections of Jaguar chairman Sir John Egan.
Analysts continued to speculate late last week that Ford may try to force the issue by calling for a special shareholder's meeting and urging that the government and Jaguar holders remove the barriers to a full bidding contest before December 1990.
But a Ford spokeswoman in Dearborn said Friday the company hasn't requested such a meeting yet.
Individuals close to the situation believe Ford officials will seek a meeting this week with Sir John to outline their proposal for a full bid.
Any discussions with Ford could postpone the Jaguar-GM deal, headed for completion within the next two weeks.
The GM agreement is expected to retain Jaguar's independence by involving an eventual 30% stake for the U.S. auto giant as well as joint manufacturing and marketing ventures.
Jaguar and GM hope to win Jaguar shareholders approval for the accord partly by structuring it in a way that wouldn't preclude a full Ford bid once the golden share expires.
"There's either a minority {stake} package capable of getting Jaguar shareholder approval or there isn't," said one knowledgeable individual. "
If there isn't, {the deal} won't be put forward" to shareholders.
Union sentiment also could influence shareholder reaction to a Jaguar-GM accord.
GM's U.K. unit holds crucial talks today with union officials about its consideration of an Ellesmere Port site for its first major engine plant in Britain.
One auto-industry union leader said, "If they try to build it somewhere else {in Europe} besides the U.K., they are going to be in big trouble" with unionists over any Jaguar deal.
These are the last words Abbie Hoffman ever uttered, more or less, before he killed himself.
And You Are There, sort of:
ABBIE: "I'm OK, Jack.
I'm OK."
(listening) "Yeah.
I'm out of bed.
I got my feet on the floor.
Yeah.
Two feet.
I'll see you Wednesday? . . . Thursday."
He listens impassively.
ABBIE (cont'd.): "I'll always be with you, Jack.
Don't worry."
Abbie lies back and leaves the frame empty.
Of course that wasn't the actual conversation the late anti-war activist, protest leader and founder of the Yippies ever had with his brother.
It's a script pieced together from interviews by CBS News for a re-enactment, a dramatic rendering by an actor of Mr. Hoffman's ultimately unsuccessful struggle with depression.
The segment is soon to be broadcast on the CBS News series "Saturday Night With Connie Chung," thus further blurring the distinction between fiction and reality in TV news.
It is the New Journalism come to television.
Ms. Chung's program is just one of several network shows (and many more in syndication) that rely on the controversial technique of reconstructing events, using actors who are supposed to resemble real people, living and dead.
Ms. Chung's, however, is said to be the only network news program in history to employ casting directors.
Abbie Hoffman in this case is to be played by Hollywood actor Paul Lieber, who isn't new to the character.
He was Mr. Hoffman in a 1979 Los Angeles production of a play called "The Chicago Conspiracy Trial."
Television news, of course, has always been part show-biz.
Broadcasters have a healthy appreciation of the role entertainment values play in captivating an audience.
But, as CBS Broadcast Group president Howard Stringer puts it, the network now needs to "broaden the horizons of nonfiction television, and that includes some experimentation."
Since its premiere Sept. 16, the show on which Ms. Chung appears has used an actor to portray the Rev. Vernon Johns, a civil-rights leader, and one to play a teenage drug dealer.
It has depicted the bombing of Pan Am flight 103 over the Scottish town of Lockerbie.
On Oct. 21, it did a rendition of the kidnapping and imprisonment of Associated Press correspondent Terry Anderson, who was abducted in March 1985 and is believed to be held in Lebanon.
The production had actors playing Mr. Anderson and former hostages David Jacobsen, the Rev. Benjamin Weir and Father Lawrence Jenco.
ABC News has similarly branched out into entertainment gimmickry.
"Prime Time Live," a new show this season featuring Sam Donaldson and Diane Sawyer, has a studio audience that applauds and that one night (to the embarrassment of the network) waved at the camera like the crowd on "Let's Make a Deal."
(ABC stops short of using an "applause" sign and a comic to warm up the audience.
The stars do that themselves.)
NBC News has produced three episodes of an occasional series produced by Sid Feders called "Yesterday, Today and Tomorrow," starring Maria Shriver, Chuck Scarborough and Mary Alice Williams, that also gives work to actors.
Call it a fad.
Or call it the wave of the future.
NBC's re-creations are produced by Cosgrove-Meurer Productions, which also makes the successful prime-time NBC Entertainment series "Unsolved Mysteries."
The marriage of news and theater, if not exactly inevitable, has been consummated nonetheless.
News programs, particularly if they score well in the ratings, appeal to the networks' cost-conscious corporate parents because they are so much less expensive to produce than an entertainment show is -- somewhere between $400,000 and $500,000 for a one-hour program.
Entertainment shows tend to cost twice that.
Re-enactments have been used successfully for several seasons on such syndicated "tabloid TV" shows as "A Current Affair," which is produced by the Fox Broadcasting Co. unit of Rupert Murdoch's News Corp.
That show, whose host is Ms. Chung's husband, Maury Povich, has a particular penchant for grisly murders and stories having to do with sex -- the Robert Chambers murder case, the Rob Lowe tapes, what have you.
Gerald Stone, the executive producer of "A Current Affair," says, "We have opened eyes to being a little less conservative and more imaginative in how to present the news."
Nowhere have eyes been opened wider than at CBS News.
At 555 W. 57th St. in Manhattan, one floor below the offices of "60 Minutes," the most successful prime-time news program ever, actors wait in the reception area to audition for "Saturday Night With Connie Chung."
CBS News sends scripts to agents, who pass them along to clients.
The network deals a lot with unknowns, including Scott Wentworth, who portrayed Mr. Anderson, and Bill Alton as Father Jenco, but the network has some big names to contend with, too.
James Earl Jones is cast to play the Rev. Mr. Johns.
Ned Beatty may portray former California Gov. Pat Brown in a forthcoming epsiode on Caryl Chessman, the last man to be executed in California, in 1960.
"Saturday Night" has cast actors to appear in future stories ranging from the abortion rights of teen-agers to a Nov. 4 segment on a man named Willie Bosket, who calls himself a "monster" and is reputed to be the toughest prisoner in New York.
CBS News, which as recently as two years ago fired hundreds of its employees in budget cutbacks, now hires featured actors beginning at $2,700 a week.
That isn't much compared with what Bill Cosby makes, or even Connie Chung for that matter (who is paid $1.6 million a year and who recently did a guest shot of her own on the sitcom "Murphy Brown").
But the money isn't peanuts either, particularly for a news program.
CBS News is also re-enacting the 1979 Three Mile Island nuclear accident in Middletown, Pa., with something less than a cast of thousands.
It is combing the town of 10,000 for about 200 extras.
On Oct. 20, the town's mayor, Robert Reid, made an announcement on behalf of CBS during half-time at the Middletown High School football game asking for volunteers.
"There was a roll of laughter through the stands," says Joe Sukle, the editor of the weekly Press and Journal in Middletown.
"They're filming right now at the bank down the street, and they want shots of people getting out of cars and kids on skateboards.
They are approaching everyone on the street and asking if they want to be in a docudrama."
Mr. Sukle says he wouldn't dream of participating himself:
"No way.
I think re-enactments stink."
Though a re-enactment may have the flavor, Hollywood on the Hudson it isn't.
Some producers seem tentative about the technique, squeamish even.
So the results, while not news, aren't exactly theater either, at least not good theater.
And some people do think that acting out scripts isn't worthy of CBS News, which once lent prestige to the network and set standards for the industry.
In his review of "Saturday Night With Connie Chung," Tom Shales, the TV critic of the Washington Post and generally an admirer of CBS, wrote that while the show is "impressive, . . . one has to wonder if this is the proper direction for a network news division to take."
Re-creating events has, in general, upset news traditionalists, including former CBS News President Richard S. Salant and former NBC News President Reuven Frank, former CBS News anchorman Walter Cronkite and the new dean of the Columbia University Graduate School of Journalism, Joan Konner.
Says she: "Once you add dramatizations, it's no longer news, it's drama, and that has no place on a network news broadcast. . . .
They should never be on.
Never."
Criticism of the Abbie Hoffman segment is particularly scathing among people who knew and loved the man.
That includes his companion of 15 years, Johanna Lawrenson, as well as his former wife, Anita.
Both women say they also find it distasteful that CBS News is apparently concentrating on Mr. Hoffman's problems as a manic-depressive.
"This is dangerous and misrepresents Abbie's life," says Ms. Lawrenson, who has had an advance look at the 36-page script.
"It's a sensational piece about someone who is not here to defend himself."
Mrs. Hoffman says that dramatization "makes the truth flexible.
It takes one person's account and gives it authenticity."
CBS News interviewed Jack Hoffman and his sister, Phyllis, as well as Mr. Hoffman's landlord in Solebury Township, Pa.
Also Jonathan Silvers, who collaborated with Mr. Hoffman on two books.
Mr. Silvers says, "I wanted to be interviewed to get Abbie's story out, and maybe talking about the illness will do some good."
The executive producer of "Saturday Night With Connie Chung," Andrew Lack, declines to discuss re-creactions as a practice or his show, in particular.
"I don't talk about my work," he says.
The president of CBS News, David W. Burke, didn't return numerous telephone calls.
One person close to the process says it would not be in the best interest of CBS News to comment on a "work in progress," such as the Hoffman re-creation, but says CBS News is "aware" of the concerns of Ms. Lawrenson and Mr. Hoffman's former wife.
Neither woman was invited by CBS News to participate in a round-table discussion about Mr. Hoffman that is to follow the re-enactment.
Mr. Lieber, the actor who plays Mr. Hoffman, says he was concerned at first that the script would "misrepresent an astute political mind, one that I admired," but that his concerns were allayed.
The producers, he says, did a good job of depicting someone "who had done so much, but who was also a manic-depressive.
Dentsu Inc., the world's largest advertising agency on the strength of its dominance in the Japanese market, is setting its sights on overseas expansion.
Last year, Dentsu started HDM, a joint network with U.S. ad agency Young & Rubicam and Eurocom of France.
A few months ago, Dentsu acquired 69% of Australian agency Fortune Communication Holdings Ltd. for 5.9 million Australian dollars (US$4.6 million).
Dentsu has U.S. subsidiaries, but they keep low profiles.
Now, the giant marketing company, which holds 25% of Japan's 4.4 trillion yen ($30.96 billion) advertising industry, is considering the acquisition of an advertising network in the U.S. or Europe.
What is driving Dentsu's international expansion largely is the need to keep up with its Japanese clients as they grow in the U.S. and Europe.
"If we don't do something . . . we won't be able to catch up with demand," says a Dentsu spokesman.
"Our president said acquisition is an effective method."
Last year, Dentsu's foreign business accounted for less than 10% of total billings, but the company is aiming at 20% in the near future.
So far, it appears cautious about taking the big step.
For example, the spokesman says Dentsu has been approached by banks and securities companies a number of times to invest in the troubled British marketing group Saatchi & Saatchi PLC.
But he said Dentsu hasn't looked seriously at Saatchi.
Though Dentsu says it has no concrete acquisition plans or deadlines, it is laying the groundwork for international growth.
It is setting up a special team in charge of international markets and training workers to do business abroad.
For the year ended March 31, Dentsu sales rose 19% to $8.9 billion from $7.5 billion, and net income jumped 59% to $102 million from $64 million.
Dentsu's billings last year were larger than those of Young & Rubicam, the world's second-largest ad agency, according to a survey by the publication Advertising Age.
But success overseas in unfamiliar markets could be trickier than for other industries such as manufacturers.
On its own, Dentsu's muscle in Japan may count for little in major foreign markets when seeking non-Japanese clients.
Thus, an acquisition may prove the necessary course.
But Japanese agencies are cautious about expanding abroad because client relationships are different.
Japanese agencies do business with rival clients in the same industry, a practice "that would be unacceptable by traditional Western conflict rules," says Roy Warman, the London chief executive of Saatchi & Saatchi's communications division.
Although acquiring a foreign company would expand Japanese advertising agencies' business to foreign clients, many clients would also be Japanese companies expanding overseas, says the Dentsu spokesman.
But the different business system would make it hard for Dentsu to provide these Japanese companies the same kind of services they do in Japan.
Ciba-Geigy AG, the big Swiss chemicals company, said that it agreed in a letter of intent with Corning Inc. to acquire Corning's 50% share of Ciba Corning Diagnostics Corp., based in Medfield, Mass.
Ciba Corning, which had been a 50-50 venture between Basel-based Ciba-Geigy and Corning, has annual sales of about $300 million, the announcement said.
Terms of the transaction weren't disclosed.
Ciba Corning makes clinical diagnostics systems and related products for the medical-care industry.
The announcement said the acquisition should be completed by December after a definitive agreement is completed and regulatory approval is received.
Ciba-Geigy intends to develop the Ciba Corning unit into a "substantial business," making the unit an "integral part" of Ciba-Geigy's "comprehensive disease management concept.
The NBC network canceled its first new series of the fall TV season, killing Mel Brooks's wacky hotel comedy "The Nutt House."
The show, one of five new NBC series, is the second casualty of the three networks so far this fall.
Last week CBS Inc. canceled "The People Next Door."
NBC's comedy had aired Wednesdays at 9:30 p.m. and in five outings had drawn an average of only 13.2% of homes, lagging behind the Jamie Lee Curtis comedy "Anything But Love" on ABC and CBS's one-hour drama "Jake and the Fatman."
NBC, a unit of General Electric Co., hasn't decided on a permanent replacement for the canceled series.
John Labatt Ltd. said it plans a private placement of 150 million Canadian dollars (US$127.5 million) in preferred shares, to be completed around Nov. 1.
Proceeds will be used to reduce short-term debt at the beer and food concern, said Robert Vaux, vice president, finance.
The preferred shares will carry a floating annual dividend equal to 72% of the 30-day bankers' acceptance rate until Dec. 31, 1994.
Thereafter, the rate will be renegotiated.
Mr. Vaux said that if no agreement is reached, other buyers will be sought by bid or auction.
The shares are redeemable after the end of 1994.
Mr. Vaux said the share issue is part of a strategy to strengthen Labatt's balance sheet in anticipation of acquisitions to be made during the next 12 to 18 months.
Labatt's has no takeover bids outstanding currently, he said.
Lead underwriter to the issue is Toronto Dominion Securities Inc.
Texas Instruments Inc., once a pioneer in portable computer technology, today will make a bid to reassert itself in that business by unveiling three small personal computers.
The announcements are scheduled to be made in Temple, Texas, and include a so-called "notebook" PC that weighs less than seven pounds, has a built-in hard disk drive and is powered by Intel Corp.'s 286 microprocessor.
That introduction comes only two weeks after Compaq Computer Corp., believing it had a lead of three to six months on competitors, introduced the first U.S. notebook computer with such features.
Despite the inevitable comparison with Compaq, however, Texas Instruments' new notebook won't be a direct competitor.
While Compaq sells its machines to businesses through computer retailers, Texas Instruments will be selling most of its machines to the industrial market and to value-added resellers and original-equipment manufacturers.
The introductions also mark Texas Instruments' plunge back into a technology it has all but ignored for the past several years.
Although the Dallas-based computer giant introduced the first portable data terminal in 1971 -- a 38-pound monster -- and the world's first microprocessor-based portable in 1976, the only portable machines it has introduced since the first part of the decade have been "dumb" terminals with limited on-board processing ability.
It stopped selling a standard personal computer a while ago.
Now that is about to change, as Texas Instruments begins marketing two 14-pound laptop PCs with 20 megabyte and 40 megabyte hard drives.
The laptops are not revolutionary and, indeed, are tardy in a market first opened by GRiD Systems Corp., now a unit of Tandy Corp., almost two years ago.
But the notebook, with the more advanced microprocessor and hard disk, is more innovative.
Weighing 6.7 pounds with battery, the notebook measures 8.2 by 11.7 inches, has a 20-megabyte hard disk drive and boasts a backlit screen that is 22% larger than Compaq's.
Its keyboard, according to industry consultants, is better than Compaq's, but its battery life of two to three hours is shorter.
It doesn't have an internal floppy disk drive, although a snap-on drive can be purchased separately.
Its greatest drawback may be its 3-inch thickness, big enough for one consultant to describe it as "clunky."
List prices on the heavier Texas Instrument laptops will be $4,999 for the TI Model 25, with a 20 megabyte disk drive, and $5,599 for the 40-megabyte Model 45.
The notebook, the TI Model 12, will be priced at $4,199.
Shearson Lehman Hutton Inc. said it applied to Taiwanese securities officials for permission to open brokerage offices in Taipei.
Shearson's application is the first since the Taiwan Securities and Exchange Commission announced June 21 that it would allow foreign brokerage firms to do business in that country.
Taiwan officials are expected to review the Shearson application later this year.
Under current rules, investors in Taiwan can buy overseas stocks only through the purchase of mutual funds issued by local and foreign investment trusts.
The new rules will allow investors to buy foreign stocks directly.
A spokesman for Shearson said the brokerage service will be directed at individual investors who want to buy foreign and domestic stocks.
"It's an attractive market with good growth opportunities," he added.
Retailers in the West and parts of the South are entering the critical Christmas shopping season with more momentum than those in other regions.
In a new report, the International Council of Shopping Centers said sales of general merchandise in the West for the first seven months of 1989 rose 6.6% above year-earlier levels.
Sales increased a more modest 4.8% in the South and 4.4% in the Midwest.
But sales in the oil-patch state of Texas surged 12.9% and sales in South Carolina jumped 10.6% in the period, the New York trade group said.
In the Northeast, however, sales declined 0.4% in the period, with sales in New England falling 2.6%.
The numbers show that "we don't have a monolithic economy," said Isaac Lagnado, council research director.
"There are a lot of have and have-not markets."
Sales nationally rose 3.9% through July, the latest month for which the figures are available, the council said.
The Northern California earthquake and Hurricane Hugo are likely to temporarily damp sales growth in the West and South Carolina.
But Mr. Lagnado predicted the regional trends would continue through Christmas.
"The big mo is as much of a factor in retailing as in politics," he said.
The Christmas quarter is important to retailers because it represents roughly a third of their sales and nearly half of their profits.
The council's report is based on data the trade group buys from the U.S. Census Bureau.
The information on 125 metropolitan markets is supplied by retailers such as Sears, Roebuck & Co. and K mart Corp. as well as closely held concerns such as R.H. Macy & Co.
The council plans to release its regional reports monthly.
Mr. Lagnado said strength in employment appears to have the biggest impact on sales growth.
El Paso, Austin and Fort Worth, the three strongest retail markets in the nation, are all located in Texas, where employment grew a relatively strong 2%.
Massachusetts, which has lost jobs in the computer and defense-related industries, was the weakest link in bleak New England.
The results reflect a reversal in the fortunes of the regions during the past two years.
In 1987, the West had the slowest sales growth, and the South and the Midwest were first and second respectively, according to the council.
Mr. Lagnado said that although retailers probably won't ever recover sales lost because of the California quake and Hurricane Hugo, they could see some benefits later on.
Stores such as Sears that sell big-ticket durable goods might actually get a boost as consumers rush to replace items lost in the disasters, he said.
Kerr-McGee Corp. said it will spend $42 million to purchase land and relocate its ammonium perchlorate storage facility to Clark County, Nev., from Henderson, Nev.
The company said it will move the storage and cross-blending operations to a site 23 miles northeast of Las Vegas to distance the operations from residential areas.
Ammonium perchlorate is an oxidizer that is mixed with a propellant to make rocket fuel used in the space shuttle and military rockets.
In May 1988, an ammonium perchlorate plant in Henderson owned by an American Pacific Corp. unit was leveled by a series of explosions.
After the explosion, Kerr-McGee temporarily shut down its facility just south of Las Vegas for a safety inspection.
American Pacific and Kerr-McGee are the only two U.S. manufacturers of ammonium perchlorate.
When the plant was destroyed, "I think everyone got concerned that the same thing would happen at our plant," a KerrMcGee spokeswoman said.
That prompted Kerr-McGee to consider moving the potentially volatile storage facilities and cross-blending operations away from town.
Kerr-McGee said it has purchased 3,350 acres from the federal government in Clark County and plans to begin construction early next year.
The new facility is expected to begin operations in early 1991.
The Henderson plant will continue its other chemical operations, the company said.
This maker of electronic devices said it replaced all five incumbent directors at a special meeting called by Milton B. Hollander, whose High Technology Holding Co. of Stamford, Conn. acquired most of its 49.4% stake in Newport in August.
Elected as directors were Mr. Hollander, Frederick Ezekiel, Frederick Ross, Arthur B. Crozier and Rose Pothier.
Removed from office were George Pratt, Robert E. Davis, Norman Gray, John Virtue, corporate secretary, and Barrett B. Weekes, chairman, president and chief executive officer.
Newport officials didn't respond Friday to requests to discuss the changes at the company but earlier, Mr. Weekes had said Mr. Hollander wanted to have his own team on the board.
Shiseido Co., Japan's leading cosmetics producer, said it had net income of 5.64 billion yen ($39.7 million) in its first half, which ended Sept. 30.
Exact comparisons with the previous year were unavailable because of a change in the company's fiscal calendar.
The Tokyo-based company had net of 3.73 billion yen in the previous reporting period, which was the four months ended March 31.
Sales in the first half came to 159.92 billion yen, compared with 104.79 billion yen in the four-month period.
Shiseido predicted that sales for the year ending next March 31 will be 318 billion yen, compared with 340.83 billion yen in the year ended Nov. 30, 1988.
It said it expects net to rise to 11 billion yen from 8.22 billion yen.
Bruce W. Wilkinson, president and chief executive officer, was named to the additional post of chairman of this architectural and design services concern.
Mr. Wilkinson, 45 years old, succeeds Thomas A. Bullock, 66, who is retiring as chairman but will continue as a director and chairman of the executive committee.
Merger and acquisition activity in the third quarter exceeded the year-earlier pace, said Merrill Lynch & Co.'s W.T. Grimm & Co. unit in Schaumburg, Ill.
A total of 672 transactions were announced during the latest quarter, up 13% from the year-earlier period's 597, Grimm said.
Transactions in which prices were disclosed totaled $71.9 billion, up 36% from $52.9 billion a year earlier, the company added.
Grimm counted 16 transactions valued at $1 billion or more in the latest period, twice as many as a year earlier.
The largest was the $12 billion merger creating Bristol-Myers Squibb Co.
In the first nine months, 1,977 transactions were announced, up 15% from 1,716 in the year-earlier period.
Transactions in which prices were disclosed totaled $188.1 billion, up 15% from $163.2 billion a year earlier.
Citing current stock market conditions and the trend away from highly leveraged transactions, Grimm said it wasn't certain that the total value of transactions for the year will exceed the record $247 billion in 1988.
MEDICINE SHOPPE INTERNATIONAL Inc. declared a 3-for-2 stock split, and substantially boosted the dividend payout.
The franchiser of pharmacies said the added shares will be distributed Dec. 4 to stock of record Nov. 13.
The company also changed its dividend policy, under which holders had received an annual 10 cents-a-share payment, by declaring a four-cents-a-share dividend, to be paid quarterly on post-split shares.
NBI Inc. said that it cannot pay the Oct. 31 dividend on its Series A convertible preferred stock, allowing the stock's holder to convert the shares into as much as 27.7% of NBI's shares outstanding.
NBI said that it has the funds to pay the dividend, but that it doesn't have the surplus or profit required under Delaware law for payment of the dividend.
All the preferred stock is held by the Yukon Office Supply Stock Ownership Plan.
Under terms of the stock, the Yukon ESOP can demand that the stock be redeemed for $4,090,000 on Nov. 30, but NBI said it is legally prohibited from making the redemption.
Failure to pay the dividend allows Yukon to convert all or some of its shares into NBI common after Nov. 30, at a conversion price based on NBI's closing stock price.
NBI, a maker of word-processing systems, said it can't predict if any of the preferred stock will be converted.
NBI also said it has hired Prudential-Bache Securities Inc. as its financial adviser and investment banker to help it restructure financially and improve its balance sheet.
Insurers may see claims resulting from the San Francisco earthquake totaling nearly $1 billion -- far less than the claims they face from Hurricane Hugo -- but the recent spate of catastrophes should jolt property insurance rates in coming months.
The property claims service division of the American Insurance Services Group estimated insured losses from the earthquake at $960 million.
This estimate doesn't include claims under workers' compensation, life, health disability and liability insurance and damage to infrastructure such as bridges, highways and public buildings.
The estimated earthquake losses are low compared with the $4 billion in claims that insurers face from Hurricane Hugo, which ripped through the Caribbean and the Carolinas last month.
That's because only about 30% of California homes and businesses had earthquake insurance to cover the losses.
However, insurance brokers and executives say that the combination of the Bay area earthquake, Hugo and last week's explosion at the Phillips Petroleum Co.'s refinery in Pasadena, Texas, will cause property insurance and reinsurance rates to jump.
Other insurance rates such as casualty insurance, which would cover liability claims, aren't likely to firm right away, says Alice Cornish, an industry analyst with Northington Research in Avon, Conn.
She believes the impact of losses from these catastrophes isn't likely to halt the growth of the industry's surplus capital next year.
Property reinsurance rates are likely to climb first, analysts and brokers believe.
"The reinsurance market has been bloodied by disasters" in the U.S. as well as in Great Britain and Europe, says Thomas Rosencrants, director of research at Interstate/Johnson Lane Inc. in Atlanta.
Insurers typically retain a small percentage of the risks they underwrite and pass on the rest of the losses.
Insurers buy this insurance protection for themselves by giving up a portion of the premiums they collect on a policy to another firm -- a reinsurance company, which, in turn, accepts a portion of any losses resulting from this policy.
Insurers, such as Cigna Corp., Transamerica Corp, and Aetna Life & Casualty Co., buy reinsurance from other U.S.-based companies and Lloyd's of London for one catastrophe at a time.
After Hugo hit, many insurers exhausted their reinsurance coverage and had to tap reinsurers to replace that coverage in case there were any other major disasters before the end of the year.
After the earthquake two weeks ago, brokers say companies scrambled to replace reinsurance coverages again and Lloyd's syndicates turned to the London market excess lines for protection of their own.
James Snedeker, senior vice president of Gill & Roeser Inc., a New York-based reinsurance broker, says insurers who took big losses this fall and had purchased little reinsurance in recent years will be asked to pay some pretty hefty rates if they want to buy reinsurance for 1990.
However, companies with few catastrophe losses this year and already big buyers of reinsurance are likely to see their rates remain flat, or perhaps even decline slightly.
Many companies will be negotiating their 1990 reinsurance contracts in the next few weeks.
"It's a seller's market," said Mr. Snedeker of the reinsurance market right now.
But some large insurers, such as State Farm Mutual Automobile Insurance Co., don't purchase reinsurance, but fund their own program.
A few years ago, State Farm, the nation's largest home insurer, stopped buying reinsurance because no one carrier could provide all the coverage that it needed and the company found it cheaper to self-reinsure.
The $472 million of losses State Farm expects from Hugo and an additional $300 million from the earthquake are less than 5% of State Farm's $16.7 billion total net worth.
Since few insurers have announced what amount of losses they expect to see from the earthquake, it's impossible to get a clear picture of the quake's impact on fourth-quarter earnings, said Herbert Goodfriend at Prudential-Bache Securities Corp.
Transamerica expects an after-tax charge of less than $3 million against fourth-quarter net; Hartford Insurance Group, a unit of ITT Corp., expects a $15 million or 10 cents after-tax charge; and Fireman's Fund Corp. expects a charge of no more than $50 million before taxes and after using its reinsurance.
Sharp Corp., Tokyo, said net income in its first half rose 59% to 18.32 billion yen ($128.9 million) from 11.53 billion yen a year earlier.
The consumer electronics, home appliances and information-processing concern said revenue in the six months ended Sept. 30 rose 8.9% to 517.85 billion yen from 475.6 billion yen.
Sales of information-processing products and electric parts increased a strong 22% to 236.23 billion yen from 194.24 billion yen and accounted for 46% of total sales.
In audio equipment, sales rose 13% to 44.3 billion yen from 39.19 billion yen.
Sales of electric appliances were flat, and sales of electronic equipment declined slightly.
Sharp projected sales for the current year ending March 31 at 1.6 trillion yen, a 7% increase the previous fiscal year.
It said it expects net to rise 45% to 380 billion yen.
Sun Microsystems Inc., a computer maker, announced the effectiveness of its registration statement for $125 million of 6 3/8% convertible subordinated debentures due Oct. 15, 1999.
The company said the debentures are being issued at an issue price of $849 for each $1,000 principal amount and are convertible at any time prior to maturity at a conversion price of $25 a share.
The debentures are available through Goldman, Sachs & Co.
Nelson Holdings International Ltd. shareholders approved a 1-for-10 consolidation of the company's common stock at a special meeting.
At the same time, shareholders approved the adoption of a rights plan and a super-majority voting approval requirement.
They also approved the relocation of the company's registered office to Toronto from Vancouver and a name change to NHI Nelson Holdings International Ltd.
Following the consolidation, the entertainment company, which has film and television operations in Beverly Hills, Calif., will have about 4.1 million shares outstanding.
The number of authorized common shares will remain at 100 million.
Under the rights plan, holders will have one right for each common share held, with each right entitling the purchase of one common share for 100 Canadian dollars.
The rights plan would be triggered if a person or group acquires 20% or more of the common shares outstanding without making an offer to all shareholders.
Under the super-majority amendment, certain mergers and other transactions would require approval of holders of 80% of the company's common shares outstanding.
Wilfred American Educational Corp. said a federal grand jury in Boston indicted the operator of cosmetology and business schools for mail fraud.
The charges in the 12-count indictment, which stem from events that allegedly occurred in late 1984 and early 1985, involve enrollment procedures of six students and the preparation of certain reports, Wilfred said.
No individuals were charged in the indictment.
Wilfred American said it will "vigorously defend" itself against the charges and added that the charges relate to procedures that it has since changed.
Eight admissions representatives at two of Wilfred's former Massachusetts schools previously pleaded guilty to charges of aiding, abetting and counseling students to submit false financial-aid applications.
Wilfred closed its Massachusetts schools earlier this year.
In New York Stock Exchange composite trading Friday, Wilfred fell 6.25 cents to 93.75 cents a share.
Rally's Inc. said it filed suit in U.S. District Court in Delaware against a group led by Burt Sugarman, seeking to block the investors from buying more shares.
Rally's, a Louisville, Ky., fast-food chain, alleges that the three investors, who are directors of the company, broke securities laws because they didn't disclose their intentions to acquire a big Rally's stake.
The group, led by Giant Group Ltd. and its chairman, Mr. Sugarman, owns about 45.2% of Rally's.
In the Securities and Exchange Commission filings, the group has said it may seek control of Rally's.
Mr. Sugarman called the lawsuit "not nice" and said his group will continue to push for control of the company and the removal of certain directors.
He asserts that some directors, who have joined forces with company founder James Patterson, have ties to Wendy's, a competing hamburger chain.
The Patterson group, which controls about 42% of Rally's shares, also may seek control.
Rally's also said it formed a committee of three directors, who aren't associated with either the Patterson or Sugarman groups, to analyze the situation.
Leaseway Transportation Corp. said it will restructure $192.5 million of certain subordinated debentures to reduce its debt obligations and interest expense.
The 13.25% subordinated debentures due 2002 were issued in August 1987 as part of the $690 million financing for a leveraged buy-out of the company.
Leaseway provides transportation services for manufacturers, distributors and retailers.
Leaseway said it has begun discussions with certain institutional debt holders to review the proposed private placement transaction, which would exchange the debt for new subordinated debt instruments and equity securities.
Specific terms are subject to review and a final agreement with debt holders, the company said.
But the proposed transaction calls for an exchange of the debt for new debentures of lower face value and reduced cash interest.
Also, debt holders would be offered an equity position in Leaseway, which in total would represent a controlling interest in the company.
Drexel Burnham Lambert Inc. is the adviser on the transaction.
Company officials said Leaseway fulfilled payment requirements of its debt obligations since the leveraged buy-out, but "our performance since the {buy-out} makes it imperative to implement actions that will further improve our cash flow.
Nicaraguan President Daniel Ortega may have accomplished over the weekend what his U.S. antagonists have failed to do: revive a constituency for the Contra rebels.
Lawmakers haven't publicly raised the possibility of renewing military aid to the Contras, and President Bush parried the question at a news conference here Saturday, saying only that "if there's an all-out military offensive, that's going to change the equation 180 degrees."
But Mr. Ortega's threat over the weekend to end a 19-month cease-fire with the rebels seeking to topple him, effectively elevated the Contras as a policy priority just as they were slipping from the agendas of their most ardent supporters.
Senate Majority Leader George Mitchell (D., Maine) said yesterday on NBC-TV's "Meet the Press" that Mr. Ortega's threat was "a very unwise move, particularly the timing of it."
The threat came during a two-day celebration in Costa Rica to highlight Central America's progress toward democracy in the region, attended by President Bush, Canadian Prime Minister Brian Mulroney and 14 other Western Hemisphere leaders.
Mr. Bush returned to Washington Saturday night.
Mr. Ortega announced on Friday that he would end the cease-fire this week in response to the periodic Contra assaults against his army.
Saturday, he amended his remarks to say that he would continue to abide by the cease-fire if the U.S. ends its financial support for the Contras.
He asked that the remaining U.S. humanitarian aid be diverted to disarming and demobilizing the rebels.
Not only did Mr. Ortega's comments come in the midst of what was intended as a showcase for the region, it came as Nicaragua is under special international scrutiny in anticipation of its planned February elections.
Outside observers are gathering in Nicaragua to monitor the registration and treatment of opposition candidates.
And important U.S. lawmakers must decide at the end of November if the Contras are to receive the rest of the $49 million in so-called humanitarian assistance under a bipartisan agreement reached with the Bush administration in March.
The humanitarian assistance, which pays for supplies such as food and clothing for the rebels amassed along the Nicaraguan border with Honduras, replaced the military aid cut off by Congress in February 1988.
While few lawmakers anticipated that the humanitarian aid would be cut off next month, Mr. Ortega's threat practically guarantees that the humanitarian aid will be continued.
Senate Minority Leader Robert Dole (R., Kan.) said yesterday on "Meet the Press": "I would hope after his {Mr. Ortega's} act yesterday or the day before, we'd have unanimous support for quick action on remaining humanitarian aid."
Sen. Dole also said he hoped for unanimous support for a resolution he plans to offer tomorrow denouncing the Nicaraguan leader.
While renewing military aid had been considered out of the question, rejected by Congress and de-emphasized by the Bush administration, Mr. Ortega's statement provides Contra supporters with the opportunity to press the administration on the issue.
"The administration should now state that if the {February} election is voided by the Sandinistas . . . they should call for military aid," said former Assistant Secretary of State Elliott Abrams.
"In these circumstances, I think they'd win."
Sen. Mitchell said that congressional Democrats intend to honor the March agreement to give non-lethal support to the Contras through the February elections, although he added that the agreement requires that the Contras not initiate any military action.
Mr. Ortega's threat to breach the cease-fire comes as U.S. officials were acknowledging that the Contras have at times violated it themselves.
Secretary of State James Baker, who accompanied President Bush to Costa Rica, told reporters Friday: "I have no reason to deny reports that some Contras ambushed some Sandinista soldiers."
Mr. Baker's assistant for inter-American affairs, Bernard Aronson, while maintaining that the Sandinistas had also broken the cease-fire, acknowledged: "It's never very clear who starts what."
He added that the U.S. has cut off aid to some rebel units when it was determined that those units broke the cease-fire.
In addition to undermining arguments in favor of ending Contra aid, Mr. Ortega's remarks also played to the suspicions of some U.S. officials and conservatives outside the government that he is searching for ways to manipulate or void the February elections.
Administration officials traveling with President Bush in Costa Rica interpreted Mr. Ortega's wavering as a sign that he isn't responding to the military attacks so much as he is searching for ways to strengthen his hand prior to the elections.
Mr. Abrams said that Mr. Ortega is seeking to demobilize the Contras prior to the elections to remove any pressure to hold fair elections.
"My sense is what they have in mind is an excuse for clamping down on campaigning" by creating an atmosphere of a military emergency, he said.
Milton Petrie, chairman of Petrie Stores Corp., said he has agreed to sell his 15.2% stake in Deb Shops Corp. to Petrie Stores.
In a Securities and Exchange Commission filing, Mr. Petrie said that on Oct. 26 Petrie Stores agreed to purchase Mr. Petrie's 2,331,100 Deb Shops shares.
The transaction will take place tomorrow.
The filing said Petrie Stores of Secaucus, N.J., is purchasing Mr. Petrie's Deb Shops stake as an investment.
Although Petrie Stores has considered seeking to acquire the remaining equity of Deb Stores, it has no current intention to pursue such a possibility, the filing said.
Philadelphia-based Deb Shops said it saw little significance in Mr. Petrie selling his stock to Petrie Stores.
"We didn't look at it and say, `Oh my God, something is going to happen,'" said Stanley Uhr, vice president and corporate counsel.
Mr. Uhr said that Mr. Petrie or his company have been accumulating Deb Shops stock for several years, each time issuing a similar regulatory statement.
He said no discussions currently are taking place between the two companies.
Nikon Corp. said unconsolidated pretax profit increased 70% to 12.12 billion yen ($85.3 million) in the first half ended Sept. 30, from 7.12 billion yen a year ago.
The Tokyo camera maker said net income more than doubled to 5.85 billion yen, or 16.08 a share, from 2.63 billion yen, or 7.24 yen a share.
Nikon said sales rose despite the adverse effect of Japan's unpopular consumption tax, introduced in April.
Increasing personal spending and capital investment are fueling growth, the company said.
Rising export sales also contributed to strong growth, Nikon added.
Total sales gained 20% to 122.36 billion yen from 102.01 billion yen.
Exports made up 46.2% of the latest year's total, up from 39.8% a year ago.
Camera sales showed the strongest gains, rising 37% to 50.59 billion yen.
Nikon forecast sales for the year ending March 31 will rise 9.6% to 240 billion yen.
Pretax profit is expected to increase 18% to 22 billion yen and net income is expected to rise 53% to 10.5 billion yen.
Presidio Oil Co. said it signed a definitive agreement to acquire Gulf Canada Resources Ltd.'s U.S. unit for $163 million.
Presidio, a Denver oil and gas concern, said it will acquire the properties and operations of Home Petroleum Corp., which includes two regional gas-gathering systems and proved reserves of about nine million barrels of oil and 72 billion cubic feet of natural gas.
Presidio said the properties are generally situated in Wyoming, North Dakota, Texas, Oklahoma and Louisiana.
Gulf Canada, Calgary, said the transaction is part of its plan to sell non-strategic assets and focus operations on Canada, Indonesia and other international areas.
A spokesman for Gulf Canada, which is controlled by Toronto's Reichmann family, said the properties account for about 6% of the company's assets and produce about 5,000 barrels of oil and 35 million cubic feet of gas a day.
He said Gulf Canada will likely report an extraordinary gain from the sale in the fourth quarter, but he wouldn't offer a specific estimate.
The transaction is expected to close by Nov. 30.
NEC Corp., a Tokyo-based computer and electronics concern, said net income rose 18% to 29.66 billion yen ($208.7 million) in the fiscal first half, ended Sept. 30, from 25.12 billion yen a year earlier.
Sales rose 7.4% to 1.255 trillion yen from 1.168 trillion yen.
NEC said first-half computer sales totaled 555.5 billion yen, up 11% from 500.26 billion yen a year earlier.
Sales of electrical devices rose 13% to 283.8 billion yen from 251.8 billion yen.
It said sales of home electronic products advanced 3.7% to 44.92 billion yen from 43.34 billion yen.
In the period just ended, computers accounted for 44% of total sales, NEC said, and electrical devices made up 23%.
NEC forecast sales for the year ending next March 31 of 2.74 trillion yen, an increase of 27% from the previous fiscal year.
It said net income will rise 25% to 69 billion yen.
Montedison S.p.A. definitively agreed to buy all of the publicly held shares of Erbamont N.V. for $37 each.
Montedison now owns about 72% of Erbamont's shares outstanding.
The companies said the accord was unanimously approved by a special committee of Erbamont directors unaffiliated with Montedison.
Under the pact, Montedision will make a $37-a-share tender offer for Erbamont stock outstanding.
The tender offer will be followed by the sale of all of Erbamont's assets, subject to all of its liabilities, to Montedison.
Erbamont will then be liquidated, with any remaining Erbamont holders receiving a distribution of $37 a share.
The companies said the transaction is being structured this way because the laws of the Netherlands Antilles, under which Erbamont is organized, don't provide for merger transactions.
A unit of DPC Acquisition Partners launched a $10-a-share tender offer for the shares outstanding of Dataproducts Corp., and said it would seek to liquidate the computer-printer maker "as soon as possible," even if a merger isn't consummated.
DPC Acquisition is controlled by Crescott Investment Associates, Wilson Investment Group, Kernel Corp. and Catalyst Partners.
The investor group owns 1,534,600 Dataproducts common shares, or a 7.6% stake.
The offer is based on several conditions, including obtaining financing.
DPC Acquisition said it had received the reasonable assurance of Chase Manhattan Bank N.A. that the financing can be obtained.
In a filing with the Securities and Exchange Commission, DPC Acquisition said it expects it will need about $215 million to buy the shares and pay related fees and expenses.
DPC Acquisition added that it has not begun discussions with financing sources, and said it expected to repay the amounts borrowed through proceeds of the liquidation.
Dataproducts officials declined to comment, and said they had not yet seen a suit filed in federal court by DPC Acquisition that seeks to nullify a standstill agreement between DPC Acquisition and Dataproducts.
Earlier this year, DPC Acquisition made a $15-a-share offer for Dataproducts, which the Dataproducts board said it rejected because the $283.7 million offer was not fully financed.
Dataproducts has since started a restructuring, and has said it is not for sale.
Jayark Corp. agreed to pay $4 million in cash, $2 million of 12% convertible debentures, and 1.6 million common shares to acquire closely held Kofcoh Imports Inc.
In over-the-counter trading Friday, Jayark was quoted at 87.5 cents bid, down 15.625 cents.
At the market price, the transaction has a total indicated value of $7.4 million.
Kofcoh is a New York holding company for Rosalco Inc., which imports furniture and other items.
David L. Koffman, president and chief executive officer of Jayark, holds about 40% of Kofcoh, Jayark said.
Jayark, New York, distributes and rents audio-visual equipment and prints promotional ads for retailers.
In the quarter ended July 31, Jayark had an average of 5.6 million shares outstanding.
The transaction is subject to approval by a panel of disinterested directors, the company said, adding that shareholder approval isn't needed.
Ajinomoto Co., a Tokyo-based food-processing concern, said net income in its first half rose 8.9% to 8.2 billion yen ($57.7 million) from 7.54 billion yen a year earlier.
Sales in the six months ended Sept. 30 were up 4.5% to 229.03 billion yen from 219.27 billion yen.
Sales were higher in all of the company's business categories, with the biggest growth coming in sales of foodstuffs such as margarine, coffee and frozen food, which rose 6.3%.
Oils and fats also did well, posting a 5.3% sales increase.
Sales in the category that includes pharmaceuticals, amino acids and chemicals rose 4.7%.
Ajinomoto predicted sales in the current fiscal year ending next March 31 of 480 billion yen, compared with 460.05 billion yen in fiscal 1989.
It said it expects full-year net of 16 billion yen, compared with 15 billion yen in the latest year.
The New York Mercantile Exchange, the world's chief oil futures marketplace, is at a critical juncture.
Several longtime observers of the commodities industry think the fortunes of the Merc over the next decade will be determined to a large extent by how well its new natural gas futures contract does and how successful its new president is in raising the level of compliance by floor traders with exchange and Commodity Futures Trading Commission rules.
If the exchange falters in these moves, they say, it might once again fall behind its chief New York competitor, the Commodity Exchange.
On Friday, the Merc's board announced that it had approved Sabine Pipe Line Co.'s Henry Hub in Erath, La., as the delivery site for its long-awaited natural gas futures contract.
It also said that it would start trading the contract as soon as the CFTC approved it.
The CFTC has 90 days to respond to such applications.
The Merc first started working on developing this contract in 1984.
Only three weeks earlier, the Merc had turned to one of its own executives, 40-year-old R. Patrick Thompson, to replace Rosemary T. McFadden as president.
Mr. Thompson is believed to have a mandate from the board of directors to help improve the Merc's tarnished reputation as an exchange whose floor traders don't follow the rules very well.
Ms. McFadden had been forced out in July in a bitter power struggle with Z. Lou Guttman, chairman and a longtime floor trader on the exchange.
Mr. Guttman told one person familiar with the New York exchanges during the search for a replacement that he was looking for a president who would be "responsive to the needs of the membership and the board."
Mr. Thompson first came to the exchange in 1981 and has been executive vice president since March 1988.
He previously held posts of senior vice president of compliance and senior vice president and general counsel.
By contrast, the Comex in July imported a highly regarded outsider, Arnold F. Staloff, as its president.
Mr. Staloff, 44, was a senior officer of the Philadelphia Stock Exchange and is considered a specialist in new financial products.
Mr. Thompson isn't bereft of experience with new products, however.
For the past two years, he said, he and the exchange's research department have been working on the new natural gas contract, seeking a good delivery site and studying the natural gas market.
"Our members are eager to begin trading this contract, so we expect no difficulty in attracting locals to the natural gas pit," he said.
The educational effort of teaching companies in the natural gas industry how to use the futures to hedge would have to continue for another a year or two, he added.
The Merc's extremely successful contracts in crude oil, gasoline and heating oil have made it the largest futures exchange in New York, and third behind the Chicago Board of Trade and Chicago Mercantile Exchange.
In a recent interview, Mr. Thompson said the biggest problem facing all commodity exchanges was one of image.
Earlier this year, the U.S. attorney indicted 45 floor traders and one clerk at the two big Chicago exchanges.
Federal authorities in New York started investigating exchanges in May, though no indictments have been handed down there.
So far they have issued scores of subpoenas, some of which went to members of the New York Merc.
Mr. Thompson will have to face some of the consequences of those subpoenas.
In a recent General Accounting Office study, the Merc was found to have been the most lax in enforcing exchange rules.
It levied the smallest number of suspensions of traders and fines of the four largest commodity exchanges studied over the past five years.
It also had both the fewest, and least experienced, investigators per million contracts traded.
The Merc received considerable criticism in 1987 when it was discovered that its compliance director, Kevin P. Conway, who then was responsible for policing the exchange's busy oil and metal pits, "was engaged in other personal business activities on Exchange time," including out-of-state trips, according to a New York Merc report prepared last year.
Mr. Conway is no longer at the exchange.
"We had a management breakdown in 1987 in terms of compliance," Mr. Thompson says.
"We recognized the problem and took care of it."
He says that even if the natural gas contract boosts volume at the exchange strongly, the 1990 business plan calls for having adequate compliance people to ensure that exchange rules are being followed.
For years the five New York exchanges have been talking about cooperating in various aspects of their business in order to improve the efficiency of their operations.
Periodically, there has even been talk of mergers between one or more exchanges.
So far there is little to show for such efforts.
Mr. Thompson believes the case for working together is stronger now than ever.
"The cost of competition has become extremely high," he says.
"We must find ways to save money for the futures commission merchants who do business on our exchanges."
He thinks that progress in cooperation can be made in areas where no vested interests have built up.
One of those areas is the development of a hand-held electronic device that would permit floor traders to enter trades as they make them.
The GAO has recommended the creation of a system to record trade data so that an independent, verifiable audit trail can be established to prevent customer fraud.
The Merc is now cooperating with the Comex in developing such a device to provide such an audit trail.
The Chicago exchanges also are working on such a device.
Another major electronics problem faces Mr. Thompson -- the creation of a 24-hour trading system that can be used outside normal trading hours.
In January, the New York Merc signed a letter of intent with the Chicago Merc as a preliminary step to joining their electronic system called Globex.
But in May, the Chicago Merc said it was looking into creating a common system with the Chicago Board of Trade, and it suspended negotiations with the New York Merc.
Mr. Thompson says his exchange isn't waiting for the results of the Chicago exchanges' cooperation.
It recently began a pilot program to test an electronic trading system called ATS/2, the automated trading system created by the International Commodities Clearing House.
Looking ahead to commodity markets this week:
Copper
Michael Frawley, metals trader for PaineWebber Inc. in New York, said there is good technical support between $1.10 and $1.12 a pound for December copper, which ended Friday at $1.1580 a pound, up 1.6 cents.
He views the $1.10 to $1.12 range as a buying opportunity and considers the market oversold.
"I think the market could pop up to the $1.22 to $1.25 level without too much difficulty," he said.
But he said it won't climb further and he expects it to remain in a trading range between $1.10 and $1.25.
He noted that the equity markets will set the tone for the industrial metals this week and traders should keep an eye on Wall Street.
William O'Neill, research director for Elders Futures Inc. in New York, said for a rally to occur, there must be demand from the Far East.
He added that talk of strike settlements at producing mines has been fully discounted.
However, to resume the bull trend, according to Mr. O'Neill, copper would have to close over $1.19.
He said there are two reports this week that might affect prices: the purchasing managers report on Wednesday and the unemployment report on Friday.
Precious Metals
Friday's strong price gains confirmed a turnaround in the precious metals markets, according to PaineWebber's Mr. Frawley.
"Most traders will be looking to buy {on} pullbacks," he said.
He thought the moves in the metals last week were most influenced by the uncertainty in the equity and other financial markets.
According to Mr. Frawley, floor traders say there is good support for December gold in the $374 to $375 per ounce area, around $5.20 an ounce for December silver and in the $485 to $490 an ounce range for January platinum.
William O'Neill, research director for Elders Futures Inc. in New York, said the price action for all of last week is the best he has seen on a weekly basis in more than a year.
He said last week's activity in gold could portend a move to $390 an ounce for the December contract.
He also said traders should keep an eye on the stock market, because "if the stock market rallies, that could spell trouble for the precious metals."
He said traders should be on the lookout for how metals producers react to this rally.
"I expect to see some selling, but will they kill this one as they have every rally in the recent past" by selling and locking in prices for their production?
He noted that for the first time in months there was some light investor interest in the metals.
Grains And Soybeans
Prices this week will likely be dominated by reports on the progress of the corn and soybean harvest as well as by speculation about more purchases of U.S. crops by the Soviet Union.
In recent weeks, warm and dry weather has sped the Midwest harvest and that is permitting farmers to rebuild the stockpiles that were cut by the 1988 drought.
If the weather allowed farmers to work in their fields over the weekend, many Midwest grain elevators will probably sell futures contracts today at the Chicago Board of Trade in order to hedge their weekend purchases from farmers.
That selling of futures contracts by elevators is what helps keep downward pressure on crop prices during the harvest.
Traders will also watch for whether the Soviet Union continues its traditional fall buying of U.S. grain.
So far this month, the Soviets have bought about 7.2 million metric tons of U.S. corn.
There may be some activity in soybean prices this week as investors try to get rid of the contract for November delivery.
Investors usually don't want to take physical delivery of a contract, preferring instead to profit from its price swings and then end any obligation to take delivery or make delivery as it nears expiration.
Employees of the Globe and Mail, a Thomson Corp. newspaper in Toronto, voted to accept a tentative contract agreement Saturday, averting a strike at Canada's leading daily.
Under the terms of the three-year contract, similar to one reached at Torstar Corp.'s Toronto Star newspaper earlier this month, the 500 Globe and Mail workers will see a raise of 8% in the contract's first year and 7% in each of the following two years.
Lorne Slotnick, vice chairman of the Southern Ontario Newspaper Guild, the union representing the workers, said Thomson made significant concessions in the final round of talks.
In addition to wage increases, the union negotiated improved vacation plans, benefit packages and pension plans, Mr. Slotnick said.
He said more than 70% of the bargaining unit voted in favor of the agreement.
Wall Street is just about ready to line the bird cage with paper stocks.
For three years, a healthy economy and the export-boosting effects of a weak dollar propelled sales and earnings of the big paper companies to record levels.
As the good times rolled they more than doubled their prices for pulp, a raw material used in all sorts of paper, to $830 a metric ton this past spring from $380 a ton at the start of 1986.
But now the companies are getting into trouble because they undertook a record expansion program while they were raising prices sharply.
Third-quarter profits fell at several companies.
"Put your money in a good utility or bank stock, not a paper company," advises George Adler of Smith Barney.
Other analysts are nearly as pessimistic.
Gary Palmero of Oppenheimer & Co. expects a 30% decline in earnings between now and 1991 for "commodity-oriented" paper companies, which account for the majority of the industry.
Robert Schneider of Duff & Phelps sees paper-company stock prices falling 10% to 15% in 1990, perhaps 25% if there's a recession.
Paper companies concede that business has been off recently.
But they attribute much of the weakness to customer inventory reductions.
Generally they maintain that, barring a recession and a further strengthening of the dollar against foreign currencies, the industry isn't headed for a prolonged slump.
"It won't be an earthshaking drop," a Weyerhaeuser spokesman says.
Last week Mr. Adler lowered his rating from hold to "avoid" on Boise Cascade, Champion International, Great Northern Nekoosa, International Paper, Louisiana Pacific and Weyerhaeuser.
Oppenheimer's Mr. Palmero, meanwhile, is steering clear of Gaylord Container, Stone Container and Federal Paper Board.
Mr. Schneider is cool to Georgia Pacific and Abitibi-Price.
Lawrence Ross of PaineWebber would avoid Union Camp.
The companies in question believe the analysts are too pessimistic.
Great Northern Nekoosa said, "The odds of the dire predictions about us being right are small."
International Paper emphasizes that it is better positioned than most companies for the coming overcapacity because its individual mills can make more than one grade of paper.
A Boise-Cascade spokesman referred to a speech by Chairman John Fery, in which he said that markets generally are stable, although some risk of further price deterioration exists.
Stone Container Chairman Roger Stone said that, unlike for some other paper products, demand for Stone's principal commodity, unbleached containerboard, remains strong.
He expects the price for that product to rise even more next year.
Gaylord Container said analysts are skeptical of it because it's carrying a lot of debt.
Champion International said, "We've gotten our costs down and we're better positioned for any cyclical downturn than we've ever been."
Louisiana Pacific and Georgia Pacific said a number of other analysts are recommending them because of their strong wood-products business.
Federal Paper Board said, "We're not as exposed as the popular perception of us."
The company explained that its main product, bleached paperboard, which goes into some advertising materials and white boxes, historically doesn't have sharp price swings.
Because the stock prices of some paper companies already reflect an expected profit slump, PaineWebber's Mr. Ross says he thinks that next year the share prices of some companies may fall at most only 5% to 10%.
A company such as Federal Paper Board may be overly discounted and looks "tempting" to him, he says, though he isn't yet recommending the shares.
Wall Street isn't avoiding everything connected with paper.
Mr. Palmero recommends Temple-Inland, explaining that it is "virtually the sole major paper company not undergoing a major capacity expansion," and thus should be able to lower long-term debt substantially next year.
A Temple-Inland spokesman said the company expects record earnings in 1989, and "we're still pretty bullish" on 1990.
The analysts say their gloomy forecasts have a flip side.
Some take a warm view of consumer-oriented paper companies, which buy pulp from the commodity producers and should benefit from the expected declines in pulp prices.
Estimates on how much pulp prices will fall next year currently run between $150 and $250 a metric ton.
Analysts agree that the price drop should especially benefit the two big tissue makers, Scott Paper and Kimberly-Clark.
A spokesman for Scott says that assuming the price of pulp continues to soften, "We should do well.
Shoney's Inc. said it will report a write-off of $2.5 million, or seven cents a share, for its fourth quarter ended yesterday.
The restaurant operator cited transaction costs from its 1988 recapitalization as a result of a $160 million restructuring of its bank debt.
The write-off will be reported as an extraordinary item in the company's 1989 operating results.
In addition, the effective interest rate on the $410 million of total remaining bank debt after the restructuring is 10.66%.
The combined effect of these changes is expected to save the company about $4 million in interest expenses next year, or six cents a share.
Shoney's said the latest restructuring affected bank indebtedness that was incurred to finance $585 million of the company's $728 million recapitalization that took place in
The company has made payments of $175 million against the original $585 million of bank debt incurred in connection with the recapitalization.
These payments consisted of $54 million in scheduled payments and $121 million in prepayments, funded by $82.8 million from operating cash flow, zero-coupon subordinated debt and assets sales.
ABB Asea Brown Boveri B.V. said it signed a contract for the largest-ever power plant order in the Netherlands.
ABB said the contract, signed with the Dutch utility N.V. Energieproduktiebedrijf UNA, is valued in excess of $200 million.
The accord is for a turbogenerator plant at the coal-fired power station Hemweg in Amsterdam.
ABB Asea Brown Boveri is the Dutch unit of the Swedish-Swiss electrical engineering group ABB Asea Brown Boveri AG.
ABB said a significant portion of the order will be placed with Dutch subcontractors, adding that a group has been set up for this purpose.
The Dutch utility firm serves the Amsterdam and Utrecht areas.
The planned turbogenerator plant is expected to go into operation in 1994.
Nissan Motor Co. expects net income to reach 120 billion yen (U.S. $857 million) in its current fiscal year, up from 114.6 billion yen in the previous year, Yutaka Kume, president, said.
Mr. Kume made the earnings projection for fiscal 1990, ending next March 31, in an interview with U.S. automotive writers attending the Tokyo Motor Show.
The executive said that the anticipated earnings increase is fairly modest because Nissan is spending heavily to bolster its dealership network in Japan and because of currency-exchange fluctuations.
During the next decade, Mr. Kume said, Nissan plans to boost overseas vehicle production sufficiently to account for a majority of sales outside Japan.
Last year, Mr. Kume said, Nissan exported slightly over one million vehicles, and produced 570,000 cars and trucks at its factories in North America, Europe and Australia.
But by 1992, he added, Nissan will build one million vehicles a year outside Japan, or sufficient to equal exports.
"By the end of the 1990s," he said, "we want to be producing roughly two vehicles overseas for every vehicle that we export from Japan."
That will involve a substantial increase in overseas manufacturing capacity, he acknowledged, but didn't provide specific details.
National Intergroup Inc. said it expects to report a charge of $5.3 million related to the sale of its aluminum unit's extrusion division for the third quarter.
The company said it has agreed to sell the extrusion division for $15 million to R.D. Werner Co., a closely held firm based in Greenville, Pa.
The charge is offset by an after-tax gain of about $30 million in the quarter from the previously announced pact to sell National Aluminum's rolling division.
National Intergroup in the year-ago third quarter earned $22.5 million, or 97 cents a share, including a gain of $18 million from the sale of a steel tube company.
Revenue was $778.6 million.
The company also said it continues to explore all options concerning the possible sale of National Aluminum's 54.5% stake in an aluminum smelter in Hawesville, Ky.
The sale of the extrusion division is subject to audit adjustments for working capital changes through the closing.
The agreement also provides for potential payments of additional proceeds to National Aluminum over the next two years, depending on the plant's shipping levels.
The extrusion unit produces bare and painted custom extrusions for building products and construction industries.
In fiscal 1989, it had sales of about $40 million and an operating loss of $1.5 million.
The municipal bond market is bracing for tough times through the end of the year as it struggles to absorb an oversupply of bonds and two of its best customers turn into sellers.
Commercial banks and property/casualty insurers, which together own about 36% of all municipal bonds, have been dumping their securities for weeks.
Last week, traders said, there were three institutional sellers for every buyer.
"Every day we're getting new bid lists" from would-be sellers, one trader said.
"Most dealers cannot continue to absorb this supply."
As a result, yields on long-term muni bonds now stand at about 95% of long-term Treasury yields, the highest such level in more than two years.
"There is incredible negative psychology building in the market," said Donna Avedisian, a vice president at Merrill Lynch & Co.
"People are very concerned about who is going to step up to the plate and buy municipal bonds in the absence of institutional buyers."
The yield on a group of 25 revenue bonds compiled by the Bond Buyer, a trade publication, now exceeds 7.50%.
At this week's New York City bond sale, traders expect yields on the 20-year New York bonds to nearly match the 7.9% yield on 30-year Treasury bonds.
For an investor in the 28% federal tax bracket, 7.9% tax-free is the same as 10.38% on a taxable investment.
That's a taxable-equivalent yield nearly three percentage points more than the current yield on 30-year Treasury bonds.
How quickly things change.
This past summer, investors' appetite for municipal bonds seemed insatiable.
Individuals eager for tax-free income drove up bond prices, making state and local government debt one of the best-performing types of fixed-income investments during the period.
But while analysts say that municipal bonds still offer good value, you wouldn't know it by the way institutional investors are rushing to dump their holdings.
Bond market analysts say the institutional selling was triggered by several factors.
Big banks such as Chemical Bank and Chase Manhattan, which have been taking heavy charges to expand their Third World loan-loss reserves, aren't looking for tax-exempt income.
"We don't need the shelter of tax-free bonds," said a spokeswoman at Chemical.
In recent weeks, traders said, Chemical has sold more than $1 billion of tax-free bonds.
The spokeswoman confirmed that the bank has significantly reduced its muni holdings, but couldn't immediately confirm the amount.
Insurance companies are rushing to sell before the end of the year, when some of their tax benefits associated with municipal bonds will be phased out.
There is speculation that property/casualty firms will sell even more munis as they scramble to raise cash to pay claims related to Hurricane Hugo and the Northern California earthquake.
Fundamental factors are at work as well.
Muni bond holders are worried about the impact of a slowing economy on tax revenue, at a time when many state and local governments already face budget deficits and huge spending needs.
The recent natural disasters, and the need of many other cities to rebuild crumbling infrastructure, suggests that supply of new issues will continue to rise sharply -- even as demand tapers off.
"There is just so much going on that it's difficult to pick just one factor that's driving the market," said Ronald Ian Heller, vice president at First Chicago Capital Markets Inc., a subsidiary of First Chicago Corp.
Some of the recent selling could actually be considered a positive sign.
Mutual funds, for example, are said to be selling existing municipal bonds to raise cash to buy new issues.
Because municipal bonds yields have risen at a time when interest rates generally have fallen, some portfolio managers are assuming that bonds bought now will appreciate in value as the municipal bond market rebounds.
Ms. Avedisian believes that the mutual funds are selling muni bonds that have a negative convexity -- those that have appreciated in price slowly relative to the decline in interest rates.
Such bonds, she says, are those that are nearing their call date.
But traders said the market's tone could pick up this week if New York City's $787 million bond offering goes well.
The offering will include $729 million of 20-year tax-exempt bonds and $57.8 million of taxable bonds.
A few weeks ago, New York sold $750 million of tax-exempts.
New York City bonds have been beaten down for three straight weeks.
On Friday, some issues fell nearly one point, or close to $10 for each $1,000 face amount.
The sell-off in New York City bonds was triggered by concerns about the city's financial health and political uncertainty in view of the impending mayoral election.
The city's economy is growing weaker and expenditures are rising as tax revenue is falling.
"The city has issued so much supply recently that some people are getting a little concerned.
They'd like to see some other names in their portfolios," said Michael S. Appelbaum, first vice president at Shearson Lehman Hutton.
But he thinks investors may be overreacting to the market's problems.
Overall, he says, municipal prices are "very cheap" and represent an "excellent buying opportunity."
Friday's Market Activity
Treasury bonds fell sharply on confusion about this week's Treasury debt auction and rumors that a major Japanese investor was unloading large amounts of long-term bonds.
The Treasury's benchmark 30-year bond ended at a price of 102 2/32, down nearly 5/8 point from Thursday, or about $6.25 for each $1,000 face amount.
The issue's yield rose to 7.93% from 7.88%.
Late Thursday, the Treasury said it needed to raise $17 billion quickly and would do so by issuing new securities this week.
Credit market analysts expected the Treasury to cancel today's three-month and six-month sale and to sell $17 billion of cash management bills.
Instead, the Treasury announced it would sell $2 billion of 51-day cash management bills today and said that the weekly sale of $15.6 billion of three-month and six-month bills will take place today, as usual, but the sale will settle tomorrow instead of Thursday.
By moving the settlement date ahead, the Treasury can raise money under the $2.87 trillion debt ceiling that is in effect through tomorrow, after which it reverts to $2.8 trillion.
The market also was hurt by rumors that Nippon Kangyo Kakumaru, a Japanese brokerage firm, was unloading some of the 30-year bonds it recently purchased.
One dealer said the talk was that the firm sold about $500 million of bellwether 30-year bonds.
The firm is thought to have purchased up to $3 billion of 30-year bonds in a buying spree on Wednesday and the previous Thursday.
Dealers say the firm apparently has wanted to publicize its recent buying and subsequent selling of 30-year bonds by using Cantor Fitzgerald Securities Corp. as a broker.
Cantor provides price quotes to Telerate Systems Inc., a widely used electronic system.
Nippon Kangyo's moves puzzled traders and created confusion among potential investors, many of whom decided to stay out of the market.
As a result of its large-scale buying, some analysts now say that liquidity, or the ability to easily buy and sell, has been constrained in the benchmark Treasury bond issue.
In other markets:
-- The junk bonds of RJR Nabisco Inc. rallied Friday on news that the company is selling its candy bar brands to Nestle Foods Corp. for $370 million.
The sale price, which was above Wall Street expectations, sent many RJR securities up by one point.
"It shows that there are buyers of high-quality assets at high prices in today's market," said Robert Long, managing director and head of the high-yield research department at First Boston Corp.
Many of the RJR securities, which had been trading near their 52-week lows earlier in the session, bounced back after the company's announcement that it agreed to sell its Baby Ruth, Butterfinger and Pearson candy businesses to Nestle Foods, a unit of the Swiss-based food concern.
The sale, expected to close before the end of the year, also includes a manufacturing plant in Franklin Park, Ill.
RJR's subordinated discount debentures of 2001, which traded as low as 45 Friday, finished the day at 46 7/8.
Other RJR securities also closed higher.
RJR Holdings Capital Corp.'s 14.7% convertible pay-in-kind securities maturing in 2009 closed 1/2 higher at 86 1/2 after trading as low as 85 1/4.
Most other junk bond issues finished a quarter-point lower on rumors that Campeau Corp. was filing for protection from creditors under Chapter 11 of the Bankruptcy Code.
A spokesman for Campeau called the rumors "ridiculous."
Most investment-grade bonds fell 3/8 to 1/2 point.
-- Mortgage securities fell 7/32 to 8/32 but held up better than intermediate Treasurys.
Dealers said some defensive investors were buyers of mortgages, as were dealers seeking collateral for REMICs priced earlier last week.
Among major issues, Government National Mortgage Association 9% securities for November delivery ended at 98 12/32, down 8/32 point for a yield of about 9.35% to a 12-year average life assumption.
The premium the elderly pay for coverage of doctor's bills under Part B of the Medicare health insurance plan will rise to $29 a month in 1990 from $27.90, the Department of Health and Human Services said.
In addition, a second Part B premium to cover the cost of the new program of insurance against catastrophic illness will rise to $4.90 a month from $4, if Congress doesn't change the program.
The House has voted to repeal most of the Catastrophic Coverage Act of 1988, however, which would end the monthly catastrophic-care premium, as well as an unpopular income surtax paid by about 40% of the wealthier Medicare beneficiaries.
Under a less-sweeping Senate plan, the catastrophic-care monthly premium would continue, rising to $4.90 next year, but the surtax would be abolished.
Medicare Part B pays 80% of a beneficiary's allowable doctor's bills after an annual deductible of $75.
The Catastrophic Coverage Act would add a stop-loss provision next year to limit the maximum beneficiaries must pay for doctors.
Both the House and Senate bills to reduce the cost and coverage of the catastrophic-care plan would eliminate the cap on doctor's bills.
If the House prevails in its efforts to kill the catastrophic-care plan, the monthly Part B premium will be $29 next year.
If the Senate plan prevails, the premium will be $33.90, with the additional $4.90 going to pay for expanded hospital coverage under Part A of Medicare.
Most of Part A's costs are paid by a payroll tax on workers and employers.
Lockheed Corp. said it will trim its Aeronautical Systems work force in California and Georgia by several hundred workers, reflecting the defense industry's decline.
The Lockheed unit has 24,000 workers; it expects to make the cuts through a combination of furloughs, attrition and retirements.
The reductions should be complete by the end of the year, a spokesman said, adding that the exact number to be cut hasn't been determined.
Lockheed reported a $32 million third-quarter net loss, largely because of cost overruns on fixed-price military contracts.
Noting that other defense contractors are complaining of losses on such contracts, analysts say taxpayers have been getting illusionary bargains on weapons systems in recent years.
Defense contractors "cannot continue to get contracts on that basis," said Howard Rubel, an analyst with C.J. Lawrence, Morgan Grenfell Inc. in New York.
"The pain is too great.
Jim Pattison Industries Ltd., one of a group of closely held companies owned by entrepreneur James Pattison, said it "intends to seek control" of 30%-owned Innopac Inc., a Toronto packaging concern.
Jim Pattison Industries, a holding company with annual sales of about C$1.9 billion, largely from car dealerships and grocery stores, didn't elaborate on the statement, and a company official declined further comment.
The company said it currently holds about 4.2 million of Innopac's 13.8 million common shares outstanding, which have an aggregate market value of about 137.8 million Canadian dollars (US$117.3 million).
Separately, Innopac reported a fourth-quarter loss of about C$2.6 million, or 18 Canadian cents a share, reflecting inventory write-downs.
The results made net income for the year ended Aug. 31 C$2.7 million, or 20 Canadian cents a share, down from C$9.7 million, or 70 Canadian cents a share last year.
Revenue was C$291.6 million, up from C$252 million in 1988.
Martin Fabi, Innopac's president and chief executive, said Innopac viewed Mr. Pattison's decision to seek control as a "very positive" move.
"I'm happy that he feels positively about our company," he said.
Mr. Fabi wouldn't say directly whether Mr. Pattison has disclosed potential terms for his planned bid for control.
Among other things, Innopac is involved in recycling polystyrene foam products that are often used by fast food chains, such as McDonald's Corp., for food packaging.
A joint venture involving units of Innopac and Mobil Corp. earlier this year opened the first U.S. polystyrene recycling plant, in Leominster, Mass.
PROGRAM TRADING is being curbed by more securities firms, but big institutional investors are expected to continue the practice, further roiling the stock market.
Bowing to criticism, Bear Stearns, Morgan Stanley and Oppenheimer joined PaineWebber in suspending stock-index arbitrage trading for their own accounts.
Still, stock-index funds are expected to continue launching big programs through the market.
Several Big Board firms are organizing to complain about program trading and the exchange's role in it.
The effort is being led by Contel.
Personal spending rose 0.2% in September, the smallest gain in a year.
The slowdown raises questions about the economy's strength because spending fueled much of the third-quarter GNP growth.
Meanwhile, personal income edged up 0.3%.
Factory owners are buying new machinery at a healthy rate this fall, machine-tool makers say.
But weak car sales raise questions about future demand from the auto sector.
Southern's Gulf Power unit may plead guilty this week to charges it illegally steered company money to politicians through third parties.
The tentative pact would resolve part of a broad investigation of the Atlanta-based company in the past year.
LIN Broadcasting and BellSouth sweetened their plan to merge cellular phone operations, offering LIN holders a special $42-a-share payout.
But the new pact will force huge debt on the new firm and could still fail to thwart rival suitor McCaw Cellular.
Unisys posted a $648.2 million loss for the third quarter as it moved quickly to take write-offs for various problems and prepare for a turnaround.
But some analysts wonder how strong the recovery will be.
RJR Nabisco agreed to sell three candy businesses to Nestle for $370 million.
The accord helps RJR pay off debt and boosts Nestle's 7% share of the U.S. candy market to 12%.
GM and Ford are expected to go head to head in the markets to buy up rival 15% stakes in Jaguar.
GM confirmed it received U.S. antitrust clearance to boost its holding.
Sansui Electric agreed to sell a 51% stake to Polly Peck of Britain for $110 million.
Still, analysts said the accord doesn't suggest Japan is opening up to more foreign takeovers.
Kellogg suspended work on a $1 billion cereal plant, indicating a pessimistic outlook by the cereal maker, which has been losing market share.
Insurers could see claims totaling nearly $1 billion from the San Francisco earthquake, far less than the $4 billion from Hurricane Hugo.
Nashua strengthened its poison-pill plan after announcing a Dutch firm is seeking to buy up to 25% of the New Hampshire copier company.
Mobil is cutting back its U.S. oil and gas exploration and production group by up to 15% as part of a restructuring of the business.
Markets --
Stocks: Volume 170,330,000 shares.
Dow Jones industrials 2596.72, off 17.01; transportation 1190.43, off 14.76; utilities 215.86, up 0.19.
Bonds: Shearson Lehman Hutton Treasury index 3406.31, off
Commodities: Dow Jones futures index 129.49, up 0.27; spot index 130.80, off 0.24.
Dollar: 141.65 yen, off 0.45; 1.8300 marks, off 0.0100.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
Thomas Jefferson sold Congress on the idea of the decimal system for currency, thus saving Americans the headaches of pounds, shillings and pence.
But he struck out with the decimal system of metric weights and measures the French had invented.
Instead, Congress opted for the inches, feet and yards the colonists had brought with them.
Americans didn't dislike metrics; they simply ignored them.
Scientists felt differently.
In 1807, the Swiss mathematician who headed the U.S. Coast and Geodetic Survey made an "iron meter" that he had brought from Europe the standard of measure.
By the end of the century scientists had embraced the system.
Businessmen took their cue from the engineers.
When Congress finally passed the Metric Conversion Act in 1975, industry was far ahead.
Because the law made compliance voluntary, it inspired little more than jokes.
(The press had a field day with questions about what would happen to "six-footer," "yardstick" and "inchworm.")
Today, though the public is barely aware, much of U.S. industry, particularly companies manufacturing or selling overseas, have made metrics routine.
General Motors, for example, uses metric terms for its automobile bodies and power trains.
(In auto advertising, however, items such as wheelbases are still described in inches.)
Farm-machine makers such as Caterpillar and Deere work in the metric system.
The liquor industry went metric 10 years ago.
The Pentagon has led the charge, particularly as military alliances spread world-wide.
New weapons systems will be around until the next century, notes John Tascher, the Defense Department's metric coordinator.
Still, like the auto makers, when dealing with Mr. Everyman the Pentagon sticks to the tried and true.
Soldiers and sailors are still measured in inches and pounds.
Whittle Communications L.P., which for months has fought a public relations battle with education leaders, said it has signed 500 schools in 24 states to subscribe to the controversial Channel One news program and its sister programs.
Channel One, a satellite-delivered daily program supported by advertising, is scheduled to be launched next March.
Whittle said its field staff signed up the 500 schools in 238 school districts after only eight weeks and company executives now expect to reach their start-up goal of 1,000 schools before the end of this year.
Christopher Whittle, chairman of the Knoxville, Tenn., media company that is 50% owned by Time Warner Inc., said that by December 1990 he expects to have Channel One installed in about 8,000 schools with a potential audience of six million.
Installation of the TV system, which includes providing free 19-inch TV sets in classrooms, begins in January.
"What we've done in eight weeks shows we won't have enormous difficulties getting to the place we want to be," said Mr. Whittle.
He said his sales force is signing up schools at the rate of 25 a day.
In California and New York, state officials have opposed Channel One.
Mr. Whittle said private and parochial schools in both states will be canvassed to see if they are interested in getting the programs.
Subscribing schools get the 12-minute daily Channel One news program, whose four 30-second TV ads during each show have drawn protests from educators.
Subscribers also get the Classroom Channel, which will feature ad-free educational programming similar to some public-TV shows, and the Educator's Channel, which will offer instructional programming for teachers and school administrators and will be supported by advertising.
Whittle has met some resistance.
The Educational Network, as Mr. Whittle has named the three programs, has been offered to 1,290 school districts and Whittle continues to negotiate with 919 districts.
About 10% of the school districts approached have rejected the network.
Mr. Whittle said that so far, three of the six schools that carried the program in a five-week test last spring have subscribed to the program.
One of the test schools, Withrow High School in Cincinnati, rejected the project.
John Bruner, associate director of communications for Cincinnati Public Schools, said Channel One was rejected because students watching the program didn't fare particularly better on a 28-question current events quiz than a control school without the program and school absences were almost unchanged during the period when the program was being aired.
"The number of correct responses was 45% on the test and school absences didn't change much," said Mr. Bruner.
"The pilot program was received well (by teachers and students), but there wasn't reason enough to sign up.
We even invited the public to stop by and see the program, but there wasn't much interest."
Advertisers are showing interest.
Last month, Whittle announced it had sold $150 million in advertising time on the network to national advertisers.
Mr. Whittle Friday said several more advertisers have been added.
Whittle is spending $150 million initially to launch the network.
Installation of satellite dishes, TVs and videocassette equipment will cost the company about $20,000 per school, Mr. Whittle said.
The following U.S. Treasury, corporate and municipal offerings are tentatively scheduled for sale this week, according to Dow Jones Capital Markets Report:
$15.6 billion of three-month and six-month bills.
$2 billion of 51-day cash management bills.
Associated Natural Gas Corp. -- 1.4 million common shares, via Dillon Read & Co.
B & H Crude Carriers Ltd. -- Four million common shares, via Salomon Brothers Inc.
Chemical Banking Corp. -- 14 million common shares, via Goldman, Sachs & Co.
Chemex Pharmaceuticals Inc. -- 1.2 million units consisting of two shares of common stock and one common warrant, via PaineWebber Inc.
Comcast Corp. -- $150 million convertible debentures, via Merrill Lynch Capital Markets.
Energy Service Co. -- 9.5 million common shares, via Alex.
Brown & Sons Inc.
Harmonia Bancorp Inc. -- 4,750,000 common shares, via Shearson Lehman Hutton Inc.
Healthsource Inc. -- Two million common shares, via Kidder, Peabody & Co.
Immune Response Corp. -- Three million common shares, via Merrill Lynch.
Marsam Pharmaceuticals Inc. -- 1.3 million common shares, via Smith Barney Harris Upham & Co.
Potash Corp. of Saskatchewan Inc. -- 13 million common shares, via Merrill Lynch.
Municipal
New Jersey Wastewater Treatment Trust -- $75,075,000 of various bonds, including $40.86 million Wastewater Treatment insured bonds, Series 1989A, and $34,215,000 Wastewater Treatment bonds, Series 1989B, via competitive bid.
Eastern Municipal Water District, Calif. -- $56,565,000 of 1989 certificates of participation (treatment plant projects), via competitive bid.
California Health Facilities Financing Authority -- $114 million of health facility revenue bonds (Catholic Healthcare West), Series 1989A, via a First Boston Corp. group.
Detroit -- $130 million of distributable state aid bonds, via a Chemical Securities Inc. group.
Maryland Community Development Administration, Department of Housing and Community Development -- $80 million of single-family program bonds, 1989 4th and 5th Series, via a Merrill Lynch group.
Matagorda County Navigation District No. 1, Texas -- $70,315,000 of pollution control revenue Alternative Minimum Tax (AMT) bonds (South Texas Project Units No. 1 and 2), via a Goldman Sachs group.
New York City -- $786,860,000 of bonds, Fiscal 1990 Series C and D, including $729.04 million tax-exempt bonds and $57.82 million taxable bonds, via a Goldman Sachs group.
Santa Ana Redevelopment Agency -- $107 million of tax allocation bonds, 1989 Series A-D, via a Donaldson Lufkin & Jenrette Securities Corp. group.
Pending Shelby County, Tenn. -- $80 million of refunding bonds, Series 1989, via a First Tennessee Bank group.
Hewlett-Packard Co. said it raised its stake in Octel Communications Corp. to 8.5% of the common shares outstanding.
In a Securities and Exchange Commission filing, Hewlett-Packard said it now holds 1,384,119 Octel common shares, including 100,000 shares bought from Aug. 26 to Oct. 20 for $23.31 to $24.25 a share.
Hewlett-Packard, a Palo Alto, Calif., computer company, said it acquired the stock "to develop and maintain a strategic partnership in which each company remains independent while working together to market and sell their products."
Octel said the purchase was expected.
Hewlett-Packard affirmed it doesn't plan to obtain control of Octel, a Milpitas, Calif., maker of voice-processing systems.
According to the filing, Hewlett-Packard acquired 730,070 common shares from Octel as a result of an Aug. 10, 1988, stock purchase agreement.
That accord also called for Hewlett-Packard to buy 730,070 Octel shares in the open market within 18 months.
In addition, Hewlett-Packard acquired a two-year option to buy an extra 10%, of which half may be sold directly to Hewlett-Packard by Octel.
Following is a weekly listing of unadited net asset values of publicly traded investment fund shares, reported by the companies as of Friday's close.
Also shown is the closing listed market price or a dealer-to-dealer asked price of each fund's shares, with the percentage of difference.
Closed End Bond Funds
Flexible Portfolio Funds
Specialized Equity and Convertible Funds
a-Ex-dividend.
b-As of Thursday's close.
c-Translated at Commercial Rand exchange rate.
e-In Canadian dollars.
f-As of Wednesday's close.
z-Not available.
Wham! Bam!
Twice in two weeks the unraveling of the on-again, off-again UAL buy-out slammed the stock market.
Now, stock prices seem to be in a general retreat.
Since peaking at 2791.41 on Oct. 9, the Dow Jones Industrial Average has lost 194.69 points, or 7%, closing Friday at 2596.72, down 17.01.
The number of issues falling on the New York Stock Exchange each day is eclipsing the number of gainers.
And the number of stocks hitting new lows far outstrips the number setting new highs.
But why should an iffy $6.79 billion leveraged buy-out deal shake the foundations of the entire stock market?
Opinions vary about how important the UAL deal was to the market's health, but analysts generally agree that the market gyrations created as the UAL plan crumbled revealed a fundamental change in investor psychology.
"If this had happened a few months ago when the atmosphere was still very positive it wouldn't have been greeted with anything like the impact it has had over the past two weeks," says Dennis Jarrett, a market strategist at Kidder Peabody.
There are, of course, analysts who view the near-panic that briefly swept through investors on Oct. 13 and again on Oct. 24 as momentary lapses of good judgment that have only temporarily undermined a healthy stock market.
Sure, price action is volatile and that's scary, but all-in-all stocks are still a good place to be, they suggest.
The reaction to the UAL debacle "is mindless," says John Connolly, chief market strategist at Dean Witter.
"UAL is a small deal as far as the overall market is concerned.
The only way you can make it a big deal is to draw linkages that just don't make sense."
He suggests, for example, that investors may have assumed that just because UAL couldn't get financing, no leveraged buy-outs can get financing.
Carried even further, some investors assumed that since leveraged buy-outs are the only thing propping up stock prices, the market would collapse if no more LBOs could be done.
"There will still be deals," argues Mr. Connolly.
"There may not be as many and the buyers may not get away with some of the things they've done in the past, but deals won't disappear."
He forecasts that the emphasis in mergers and acquisitions may soon return to what he calls "strategic deals, in which somebody is taking over a company not to milk the cash flow, but because it's a good fit."
And even without deals, Mr. Connolly figures the market would remain healthy.
He notes, for instance, that there hasn't been a merger or acquisition among the 30 stocks in the Dow Jones Industrial Average since 1986, yet that average only three weeks ago hit a record high.
"Those stocks are up because their earnings are up and their dividends are up," he says.
Even the volatility created by stock index arbitrage and other computer-driven trading strategies isn't entirely bad, in Mr. Connolly's view.
For the long-term investor who picks stocks carefully, the price volatility can provide welcome buying opportunities as short-term players scramble frantically to sell stocks in a matter of minutes.
"Who can make the better decision, the guy who has 10 seconds to decide what to do or the guy with all the time in the world?" he says.
"What on earth does the UAL deal have to do with the price of Walmart, which I was able to buy on Oct. 16 at a very attractive price?"
Kidder Peabody's Mr. Jarrett also sees some benefits to the stock market's recent drop.
"We've run into a market that was beginning to run out of steam and get frothy," he says.
"The balloon had been blown up so big that when somebody came along with a pin -- in this case the UAL deal -- we got a little pop."
The pop sobered up investors who had been getting a little too ebullient, says Mr. Jarrett.
"It provided an excuse for people to get back to reality and to look at the economic data, especially the third-quarter economic numbers, and to realize that we can't continue to gloss over what is going on in the junk bond market."
But he figures that at current levels the stock market is comfortably valued, even with the economy obviously slowing.
"Just because we've got some realism back in the market doesn't mean it's going lower from here," he says.
"The bottom line is that it's healthy to have this kind of sideways activity, especially after a 30% gain in stock values over the past 12 months."
He's now estimating that after a period of consolidation, the Dow Jones Industrial Average will once again forge new highs.
Maybe, maybe not.
Abby Joseph Cohen, a market strategist at Drexel Burnham Lambert, isn't nearly so sanguine about the market's chances of surging to new highs anytime soon.
Her view is that stock prices have three major props: merger and buy-out proposals, earnings and the economic outlook.
At current levels of economic activity and earnings, stocks are fairly valued, she says.
But any chance for prices to surge above fair value lies in the speculation that accompanies a vigorous merger and buy-out business, and UAL has obviously put a damper on that.
"Stocks aren't cheap anymore, there have been some judicial and legislative changes in the merger area and all of this changes the arithmetic of deals," she says.
"I'm not saying they've stopped altogether, but future deals are going to be structured differently and bids probably won't be as high."
But that's not the only problem for stocks.
The other two props -- earnings and the economic outlook -- are troubling, too.
"M&A is getting all the headlines right now, but these other things have been building up more gradually," she says.
Third-quarter earnings have been generally disappointing and with economic data showing a clear slowing, the outlook for earnings in the fourth quarter and all of 1990 is getting worse.
"There are a lot more downward than upward revisions and it looks like people are questioning corporate profits as a means of support for stock prices," she says.
With all this, can stock prices hold their own?
"The question is unanswerable at this point," she says.
"It depends on what happens.
If the economy slips into a recession, then this isn't a level that's going to hold."
Friday's Market Activity
Stock prices tumbled for a third consecutive day as earnings disappointments, a sluggish economy and a fragile junk bond market continued to weigh on investors.
The Dow Jones Industrial Average fell 17.01 points to 2596.72 in active trading.
Volume on the New York Stock Exchange totaled 170,330,000 shares.
Declining issues on the Big Board were far ahead of gainers, 1,108 to 416.
For the week the Dow Jones Industrial Average sank 92.42 points, or 3.4%.
Oil stocks escaped the brunt of Friday's selling and several were able to post gains, including Chevron, which rose 5/8 to 66 3/8 in Big Board composite trading of 2.4 million shares.
The stock's advance reflected ongoing speculation that Pennzoil is accumulating a stake in the company, according to Dow Jones Professional Investor Report.
Both companies declined to comment on the rumors, but several industry analysts told the Professional Investor Report they believed it was plausible that Pennzoil may be buying Chevron shares as a prelude to pushing for a restructuring of the company.
USX gained 1/2 to 33 3/8 on a report in Business Week magazine that investor Carl Icahn is said to have raised his stake in the oil and steel company to just about 15%.
Earlier this month, Mr. Icahn boosted his USX stake to 13.4%.
Elsewhere in the oil sector, Exxon rallied 7/8 to 45 3/4; Amoco rose 1/8 to 47; Texaco was unchanged at 51 3/4, and Atlantic Richfield fell 1 5/8 to 99 1/2.
Mobil, which said it plans to cut its exploration and production work force by about 8% in a restructuring, dropped 5/8 to 56 1/8.
The precious metals sector outgained other Dow Jones industry groups by a wide margin for the second consecutive session.
Hecla Mining rose 5/8 to 14; Battle Mountain Gold climbed 3/4 to 16 3/4; Homestake Mining rose 1 1/8 to 16 7/8; Lac Minerals added 5/8 to 11; Placer Dome went up 7/8 to 16 3/4, and ASA Ltd. jumped 3 5/8 to 49 5/8.
Gold mining stocks traded on the American Stock Exchange also showed strength.
Echo Bay Mines rose 5/8 to 15 7/8; Pegasus Gold advanced 1 1/2 to 12, and Corona Class A gained 1/2 to 7 1/2.
Unisys dropped 3/4 to 16 1/4 after posting a third-quarter loss of $4.25 a share, including restructuring charges, but other important technology issues were mixed.
Compaq Computer, which had lost 8 5/8 Thursday following a disappointing quarterly report, gained 5/8 to 100 5/8.
International Business Machines dropped 7/8 to 99 7/8.
Digital Equipment tacked on 1 1/8 to 89 1/8, and Hewlett-Packard fell 3/8 to 49 3/8.
Dividend-related trading swelled volume in Merrill Lynch, which closed unchanged at 28 3/8 as 2.7 million shares changed hands.
The stock has a 3.5% dividend yield and goes ex-dividend today.
Erbamont advanced 1 1/8 to 36 1/2 on 1.9 million shares.
Montedison, which owns about 72% of the company's common stock, agreed to buy the rest for $37 a share.
Himont, another majority-owned unit of Montedison, added 1 1/4 to 47 1/8.
Milton Roy jumped 2 to 18 3/8.
Crane said it holds an 8.9% stake in the company and may seek control.
Crane dropped 1 1/8 to 21 1/8.
Comprehensive Care, which terminated its agreement to merge with First Hospital, dropped 7/8 to 3 7/8.
The company's decision was made after First Hospital failed to obtain financing for its offer.
Federal investigators have identified the problem in last July's crash of a United Airlines flight in Iowa: a structural flaw that developed during the making of a titanium engine disk.
For several months, officials at the Federal Aviation Administration and the National Transportation Safety Board have suspected that a metallurgical flaw in the disk led to a crack that ultimately caused the tail engine to break apart in flight.
The explosion sent shards of metal flying, severing the DC-10's hydraulic or control systems, and led to the crash that killed 112 people.
But investigators could confirm their theory only after the recent retrieval of a big chunk of Flight 232's tail engine from a cornfield near the Sioux City Airport in Iowa.
The safety board will begin four days of hearings on the accident tomorrow in Sioux City.
Among the issues the board will examine is whether United Airlines, a unit of UAL Corp., should have been able to detect the cracks through maintenance checks.
The engine involved was a CF6-6 made by General Electric Co.
Anthony Broderick, the FAA's acting executive director for regulatory standards and compliance, said that recent tests of the failed engine disk indicate that a flaw -- known as "hard alpha" -- occurred in the titanium during its production almost 20 years ago.
He said there wasn't any way to detect the flaw at that time, and that the process has since been changed to decrease the chance that such flaws would occur.
The FAA already has ordered that all 232 disks made by the old process be removed from the planes and subjected to an ultrasonic test in a water-submersion chamber.
Such tests make the FAA confident that a Sioux City-type accident "won't happen again," said Mr. Broderick.
A spokesman for GE said that the company has been working with the FAA all along on this issue and "will comply fully with the required inspections."
But he also pointed out that the recalls will have no impact on GE's engine production.
The CF6-6 series engines aren't being manufactured any more; they are only being used in the DC-10 Series 10 planes currently in service, he said.
A frozen mountaintop in Tibet may offer an important clue about whether the Earth is warming perilously.
Researchers at Ohio State University and Lanzhou Institute of Glaciology and Geocryology in China have analyzed samples of glacial ice in Tibet and say temperatures there have been significantly higher on average over the past half-century than in any similar period in the past 10,000 years.
The ice samples are an important piece of evidence supporting theories that the Earth has warmed considerably in recent times, largely because of pollutants in the air, and will warm far more in the century ahead.
A substantial warming would melt some of the Earth's polar ice caps, raising the level of the oceans and causing widespread flooding of heavily populated coastal areas.
"If you can use data to reconstruct what happened in the past, you have much more confidence in predictions for the future," said Lonnie Thompson, a research scientist at Ohio State who dug for and analyzed the ice samples.
To compare temperatures over the past 10,000 years, researchers analyzed the changes in concentrations of two forms of oxygen.
These measurements can indicate temperature changes, researchers said, because the rates of evaporation of these oxygen atoms differ as temperatures change.
Analysis of ice from the Dunde ice cap, a glacial plateau in Tibet 17,000 feet above sea level, show that average temperatures were higher in 1937-87 than in any other 50-year period since before the last Ice Age, Mr. Thompson said.
Some climate models project that interior regions of Asia would be among the first to heat up in a global warming because they are far from oceans, which moderate temperature changes.
But the ice-core samples aren't definitive proof that the so-called greenhouse effect will lead to further substantial global heating, Mr. Thompson acknowledged.
According to greenhouse theories, increased carbon dioxide emissions, largely caused by burning of fossil fuels, will cause the Earth to warm up because carbon dioxide prevents heat from escaping into space.
Skeptics say that if that's the case, temperatures should have risen fairly uniformly over the past century, reflecting the increase in carbon dioxide.
Instead, the Dunde ice-core record shows increasing temperatures from 1900 through the early 1950s, decreasing temperatures from the late 1950s through the mid-1970s, then higher temperatures again through last year.
Other temperature data show similar unexplained swings.
"Climate varies drastically due to natural causes," said Mr. Thompson.
But he said ice samples from Peru, Greenland and Antarctica all show substantial signs of warming.
Telxon Corp. said its vice president for manufacturing resigned and its Houston work force has been trimmed by 40 people, or about 15%.
The maker of hand-held computers and computer systems said the personnel changes were needed to improve the efficiency of its manufacturing operation.
The company said it hasn't named a successor to Ronald Bufton, the vice president who resigned.
Its Houston work force now totals 230.
CNW Corp. said the final step in the acquisition of the company has been completed with the merger of CNW with a subsidiary of Chicago & North Western Holdings Corp.
As reported, CNW agreed to be acquired by a group of investors led by Blackstone Capital Partners Limited Partnership for $50 a share, or about $950 million.
Congress sent to President Bush an $8.5 billion military construction bill that cuts spending for new installations by 16% while revamping the Pentagon budget to move more than $450 million from foreign bases to home-state projects.
The fiscal 1990 measure builds on a pattern set earlier this year by House and Senate defense authorizing committees, and -- at a time of retrenchment for the military and concern about the U.S.'s standing in the world economy -- overseas spending is most vulnerable.
Total Pentagon requests for installations in West Germany, Japan, South Korea, the United Kingdom and the Philippines, for example, are cut by almost two-thirds, while lawmakers added to the military budget for construction in all but a dozen states at home.
The result is that instead of the Pentagon's proposed split of 60-40 between domestic and foreign bases, the reduced funding is distributed by a ratio of approximately 70-30.
The extra margin for bases in the U.S. enhances the power of the appropriations committees; meanwhile, lawmakers used their positions to garner as much as six times what the Pentagon had requested for their individual states.
House Appropriations Committee Chairman Jamie Whitten (D., Miss.) helped secure $49.7 million for his state, or more than double the Pentagon's budget.
West Virginia, home of Senate Appropriations Committee Chairman Robert Byrd, would receive $21.5 million -- four times the military's request.
Tennessee and North Carolina, home states of the two Democratic chairmen of the House and Senate military construction subcommittees, receive $243.2 million, or 25% above the Pentagon's request.
Though spending for Iowa and Oregon was far less, their increases above Pentagon requests -- 640% and 430%, respectively -- were much greater because of the influence of Republicans at critical junctures.
The swift passage of the bill, which cleared the Senate and House on simple voice votes last week, contrasts with the problems still facing a more cumbersome $66.8 billion measure funding housing, environmental, space and veterans programs.
By an 84-6 margin, the Senate approved the bulk of the spending Friday, but the bill was then sent back to the House to resolve the question of how to address budget limits on credit allocations for the Federal Housing Administration.
The House Democratic leadership could seek to waive these restrictions, but the underlying bill is already under attack for excesses elsewhere.
Appropriations committees have used an assortment of devices to disguise as much as $1 billion in spending, and as critics have awakened to these devices, the bill can seem like a wounded caribou trying to make it past ice and wolves to reach safer winter grazing.
Much of the excess spending will be pushed into fiscal 1991, and in some cases is temporarily parked in slow-spending accounts in anticipation of being transferred to faster-spending areas after the budget scorekeeping is completed.
For example, a House-Senate conference ostensibly increased the National Aeronautics and Space Administration budget for construction of facilities to nearly $592 million, or more than $200 million above what either chamber had previously approved.
Part of the increase would provide $90 million toward ensuring construction of a costly solid rocket-motor facility in Mr. Whitten's Mississippi.
But as much as $177 million, or nearly 30% of the account, is marked for potential transfers to research, management and flight accounts that are spent out at a faster clip.
The bill's managers face criticism, too, for the unusual number of conditions openly imposed on where funds will be spent.
Conservatives, embarrassed by Republican influence-peddling scandals at the Department of Housing and Urban Development, have used the issue in an effort to shift blame onto a Democratic-controlled Congress.
HUD Secretary Jack Kemp backed an unsuccessful effort to strike such language last week, but received little support from the White House budget office, which wants to protect space-station funding in the bill and has tended to turn its eyes from pork-barrel amendments.
Within discretionary funds for community development grants, more than $3.7 million is allocated to six projects in Michigan, home state of a subcommittee chairman, Rep. Bob Traxler.
House Speaker Thomas Foley won $510,000 for a project in his district in Washington state, and $1.3 million, earmarked by Sen. Daniel Inouye, amounts to a business subsidy under the title "Hawaiian sugar mills job retention."
The powerful Democrat had first wanted to add language relaxing environmental restrictions on two mills on the Hamakua coast that are threatening to close.
When this plan met resistance, it was agreed instead to take money from HUD to subsidize needed improvements in two settling ponds for the mills, which employ an estimated 1,500 workers, according to Mr. Inouye's office.
Dennis Farney's Oct. 13 page-one article "River of Despair," about the poverty along the Mississippi, fanned childhood memories of when my parents were sharecroppers in southeastern Arkansas, only a few miles from the river.
Although we were white, the same economic factors affected us as affects the black people Mr. Farney writes about.
Fortunately, an aunt with a college degree bought a small farm and moved us 50 miles north to good schools and an environment that opened the world of opportunity for me as an eight-year-old.
Though I've been blessed with academic degrees and some success in the materialistic world, I've never forgotten or lost contact with those memories of the 1930s.
Most of the land in that and other parts of the Delta are now owned by second, third or fourth generations of the same families.
These are the families who used -- and sometime abused -- their sharecroppers, people who had no encouragement and little access to an education or training for a better life.
Following World War II, when one family with mechanized equipment could farm crops formerly requiring 20 families, the surplus people were dumped into the mainstream of society with no Social Security, no skills in the workplace, no hope for their future except welfare.
And today, many of their children, grandchildren and great-grandchildren remain on welfare.
In the meantime, the landowners continue receiving generous subsidies that began during New Deal days.
Or those who choose not to farm can lease their lands and crop allotments for handsome sums.
Farmers in the Midwest and other areas have suffered, but those along the Mississippi continue to prosper with holdings that were built with the sweat of men and women living in economic slavery.
And when they were no longer needed, they were turned loose unprepared to build lives of their own.
Denton Harris
Chairman
Metro Bank
Atlanta
Because the cycle of poverty along the lower Mississippi goes back so many generations, breaking this cycle will be next to impossible.
Sadly, the cycle appears not as waves but as a downward spiral.
Yet the evidence that we have not hit bottom is found in the fact that we are not yet helping ourselves.
The people of the Delta are waiting for that big factory to open, river traffic to increase, government spending to fund job-training programs or public schools to educate apathetic students.
Because we refuse to face the tough answers, the questions continue as fodder for the commissions and committees, for the media and politicians.
Coffee-shop chatter does not lend itself to solving the problems of racism, teen pregnancy or lack of parental support or guidance.
Does the Delta deserve government help in attracting industry when the majority of residents, black and white, do not realize racism alienates potential employers?
Should we focus on the region's infant-mortality rate when the vocal right-wingers and the school boards, mayors and legislators prohibit schools from teaching the two ways (abstinence or contraceptives) of decreasing teen pregnancy?
Delta problems are difficult, not impossible, to solve -- I am just not convinced that we are ready to solve them yet.
Leslie Falls Humphries
Little Rock, Ark.
I would like to issue a challenge to corporate America.
The next time expansion plans are mentioned at the old company and somebody says, "Aw heck, guys, nobody can do it like Japan or South Korea," I wish you would butt in and say, "Hold it, fellas, why don't we compare prices and use our own little Third World country.
We would even save on freight."
There is no mystery why the Delta originated "Singin' the Blues."
Eugene S. Clarke IV
Hollandale, Miss.
Your story is an insult to the citizens of the Mississippi Delta.
Many of the problems you presented exist in every part of this country.
Poverty is only two blocks from President Bush's residence.
For years, we tried to ignore the problem of poverty, and now that it has gotten out of hand it's a new crusade for the media and our Democratic Congress.
Nobody should have to live in such poor conditions as in "Sugar Ditch," but when you travel to Washington, Boston, Chicago or New York, the same problems exist.
The only difference is, in those cities the poor are housed in high-rise-project apartments each consisting of one room, with rusty pipes called plumbing, rodents and cockroaches everywhere and nonworking elevators -- and with the building patrolled by gangs and drug dealers.
Many middle-class people would love free food, Medicaid insurance, utilities and rent.
Then maybe I could stay home and have seven children and watch Oprah Winfrey, like Beulah in the article, instead of having one child and working constantly just to stay above water, like so many families in this country.
Dee Ann Wilson
Greenville, Miss.
Mobil Corp. is in the midst of cutting back its exploration and production group, which finds and develops oil and gas reserves in the U.S., by as much as 15% as part of a new restructuring of that sector of its business.
Management advised employees Friday that it was going to reduce employment in production operations of the group by 8%, or 400 people.
The exploration side of the unit has recently undergone a similar overhaul, during which it also lost as many as 400 employees, a company spokesman said in response to questions.
Mobil Exploration & Producing U.S. Inc., the group involved, currently has a work force of somewhat less than 5,000.
A few years ago, Mobil restructured the entire company during an industrywide shakeout.
But since then U.S. oil production has declined and Mobil wants to focus its oil-finding efforts overseas.
Mobil alluded to the work-force cuts last week when it took a $40 million charge as part of its third-quarter earnings and attributed it to a restructuring.
Mobil officials said that it is unlikely any additional charges related to this move will be taken in future quarters.
On Wednesday, Mobil will begin offering separation packages and voluntary retirement in its U.S. production operation.
Mobil officials said they have been studying ways of streamlining these operations since early this year.
During the coming months, layers of management will be peeled away and regional offices will become more autonomous.
For greater efficiency, employees at those locations will be reorganized into teams responsible for managing the properties under their jurisdiction, Mobil said.
"The main feature of the new organization is that each local manager will have both the authority and accountability for profitable and technically sound operations," said Charles E. Spruell, president of the Mobil unit.
Field offices at New Orleans; Houston; Denver; Midland, Tex.; Bakersfield, Calif.; Oklahoma City; and Liberal, Kan., will be maintained.
But the staffs at some of those locations will be slashed while at others the work force will be increased.
For instance, employment in Denver will be reduced to 105 from 430.
But on the West Coast, where profitable oil production is more likely than in the midcontinent region, the Bakersfield, Calif., office staff of 130 will grow by 175 to 305.
The reorganization will "focus on the value and potential of assets," Mr. Spruell said.
Wanted: An investment that's as simple and secure as a certificate of deposit but offers a return worth getting excited about.
With $150 billion of CDs maturing this month, a lot of people have been scouring the financial landscape for just such an investment.
In April, when many of them bought their CDs, six-month certificates were yielding more than 9%; investors willing to look could find double-digit yields at some banks and thrifts.
Now, the nationwide average yield on a six-month CD is just under 8%, and 8.5% is about the best around.
But investors looking for alternatives aren't finding it easy.
Yields on most fixed-income securities are lower than several months ago.
And the stock market's recent gyrations are a painful reminder of the dangers there.
"If you're looking for a significantly higher yield with the same level of risk as a CD, you're not going to find it," says Washington financial planner Dennis M. Gurtz.
There are, however, some alternatives that income-oriented investors should consider, investment advisers say.
Short-term municipal bonds, bond funds and tax-deferred annuities are some of the choices they mention -- and not just as a way to get a higher return.
In particular, advisers say, investors may want to look at securities that reduce the risk that CD holders are confronting right now, of having to reinvest the proceeds of maturing short-term certificates at lower rates.
A mix of CDs and other holdings may make the most sense.
"People should remember their money isn't all or nothing -- they don't need to be shopping for the one interest-rate-type investment and putting all their money in it," says Bethesda, Md., adviser Karen Schaeffer.
Here's a look at some of the alternatives:
SHORT-TERM MUNICIPALS:
Investors with a heavy tax load should take out their calculators.
Yields on municipal bonds can be higher than after-tax yields on CDs for maturities of perhaps one to five years.
That's because municipal-bond interest is exempt from federal income tax -- and from state and local taxes too, for in-state investors.
For an investor paying tax at a 33% rate, a seemingly puny 6% yield on a one-year muni is equivalent to a taxable 9%.
Rates approach 6.5% on five-year municipals.
Some of the more cautious CD holders might like "pre-refunded" municipals.
These securities get top credit ratings because the issuers have put aside U.S. bonds that will be sold to pay off holders when the municipals are retired.
"It's a no-brainer: You don't have to worry about diversification; you don't have to worry about quality," says Steven J. Hueglin, executive vice president of the New York bond firm of Gabriele, Hueglin & Cashman Inc.
Consider a "laddered" bond portfolio, with issues maturing in, say, 1992, 1993 and 1994, advises Malcolm A. Makin, a Westerly, R.I., financial planner.
The idea is to have money rolling over each year at prevailing interest rates.
BOND FUNDS:
Bond mutual funds offer diversification and are easy to buy and sell.
That makes them a reasonable option for investors who will accept some risk of price fluctuation in order to make a bet that interest rates will decline over the next year or so.
Buyers can look forward to double-digit annual returns if they are right.
But they will have disappointing returns or even losses if interest rates rise instead.
Bond resale prices, and thus fund share prices, move in the opposite direction from rates.
The price movements get bigger as the maturity of the securities lengthens.
Consider, for instance, two bond funds from Vanguard Group of Investment Cos. that were both yielding 8.6% on a recent day.
The Short Term Bond Fund, with an average maturity of 2 1/2 years, would deliver a total return for one year of about 10.6% if rates drop one percentage point and a one-year return of about 6.6% if rates rise by the same amount.
But, in the same circumstances, the returns would be a more extreme 14.6% and 2.6% for the Vanguard Bond Market Fund, with its 12 1/2-year average maturity.
"You get equity-like returns" from bonds if you guess right on rates, says James E. Wilson, a Columbia, S.C., planner.
If interest rates don't change, bond fund investors' returns will be about equal to the funds' current yields.
DEFERRED ANNUITIES:
These insurance company contracts feature some of the same tax benefits and restrictions as non-deductible individual retirement accounts: Investment gains are compounded without tax consequences until money is withdrawn, but a 10% penalty tax is imposed on withdrawals made before age 59 1/2.
Aimed specifically at CD holders are so-called CD-type annuities, or certificates of annuity.
An interest rate is guaranteed for between one and seven years, after which holders get 30 days to choose another guarantee period or to switch to another insurer's contract without the surrender charges that are common to annuities.
Some current rates exceed those on CDs.
For instance, a CD-type annuity from North American Co. for Life & Health Insurance, Chicago, offers 8.8% interest for one year or a 9% rate for two years.
Annuities are rarely a good idea at age 35 because of the withdrawal restrictions.
But at age 55, "they may be a great deal," says Mr. Wilson, the Columbia, S.C., planner.
MONEY MARKET FUNDS:
That's right, money market mutual funds.
The conventional wisdom is to go into money funds when rates are rising and shift out at times such as the present, when rates seem headed down.
With average maturities of a month or so, money funds offer fixed share prices and floating returns that track market interest rates, with a slight lag.
Still, today's highest-yielding money funds may beat CDs over the next year even if rates fall, says Guy Witman, an editor of the Bond Market Advisor newsletter in Atlanta.
That's because top-yielding funds currently offer yields almost 1 1/2 percentage points above the average CD yield.
Mr. Witman likes the Dreyfus Worldwide Dollar Money Market Fund, with a seven-day compound yield just under 9.5%.
A new fund, its operating expenses are being temporarily subsidized by the sponsor.
Try combining a money fund and an intermediate-term bond fund as a low-risk bet on falling rates, suggests Back Bay Advisors Inc., a mutual fund unit of New England Insurance Co.
If rates unexpectedly rise, the increasing return on the money fund will partly offset the lower-than-expected return from the bond fund.
Federal drug regulators, concerned over British reports that diabetics have died after shifting from animal to human-based insulin, say they are considering a study to see if similar deaths have occurred here.
The United Kingdom reports came from Dr. Patrick Toseland, head of clinical chemistry at Guy's Hospital in London.
In a telephone interview Friday, Dr. Toseland said the number of sudden, unexplained deaths of diabetics he had seen this year was 17 compared with just two in 1985.
At least six of the deaths occurred among relatively young diabetics who had switched from animal to human insulin within the past year, he said.
Dr. Solomon Sobel, director of metabolism and endrocrine drug products for the U.S. Food and Drug Administration, said FDA officials have discussed Dr. Toseland's findings "fairly intensively."
While there have been no reports of similar sudden unexplained deaths among diabetics in the U.S., Dr. Sobel said the FDA plans to examine Dr. Toseland's evidence and is considering its own study here.
Dr. Toseland, a toxicologist, said he was preparing an article for a British forensic medical journal raising the possibility that the deaths may have occurred after human insulin blunted critical warning signs indicating hypoglycemia, or low blood sugar, which can kill diabetics.
The usual warning signs of hypoglycemia include sweating, anxiety and cramps.
With proper warning, diabetics can easily raise their blood sugar to safe levels by eating sugar or sugary food.
"The anecdotal data certainly shows that some of the people were not aware of the rapid onset of hypoglycemia," Dr. Toseland said.
At the U.S. National Institutes of Health, Dr. Robert E. Silverman, chief of the diabetes program branch, said no evidence of unexpected deaths from hypoglycemia had shown up in a study of 1,500 diabetics that has been under way at NIH for five years.
However, he said officials conducting the study hadn't been looking for signs of problems related to hypoglycemia unawareness.
"We are now monitoring for it much more closely," he said.
"We do know there are slight differences in the way human and animal insulins drive down blood sugar," Dr. Sobel said.
The human-based drug starts the blood sugar dropping sooner and drives it down faster, he said.
"But we don't believe there is enough of a difference to be clinically significant," Dr. Sobel said.
Reports of Dr. Toseland's findings in the British press have triggered widespread concern among diabetics there.
Both the British Diabetic Association and the Committee on Safety in Medicines -- Britain's equivalent of the U.S. FDA -- recently issued statements noting the lack of hard scientific evidence to support Dr. Toseland's findings.
On Friday, the American Diabetes Association issued a similar statement urging the six million U.S. diabetics not to overreact to the British report.
"A loss of the warning symptoms of hypoglycemia is a complex problem that is very unlikely to be due simply to the type of insulin used," the American association said.
The FDA already requires drug manufacturers to include warnings with insulin products that symptoms of hypoglycemia are less pronounced with human insulin than with animal-based products.
Eli Lilly & Co., the Indianapolis-based drug manufacturer, dominates the U.S. human insulin market with its product known as Humulin.
Lilly is building plants to make the insulin in Indianapolis and Fagershein, France.
In its latest annual report, Lilly said Humulin sales have shown "excellent growth."
Lilly officials said they had seen reports of hypoglycemic unawareness among some patients making the shift from animal to human insulin, but didn't know if the problem had caused any deaths.
Dr. Leigh Thompson, a Lilly group vice president, said the company's clinical trials of both its animal and human-based insulins indicated no difference in the level of hypoglycemia between users of either product.
Dr. Toseland said most of the British diabetics who died had been taking a human-based insulin made by Novo/Nordisk, a Danish manufacturer.
None of the diabetics were using Lilly's insulin.
SharesBase Corp. said it will reduce its 221-person work force by about 25%, effective tomorrow, in an effort to stem continuing losses.
The company, which makes data base systems and software, said it expects to report a loss for the third quarter ended Sept. 30.
Defense intellectuals have complained for years that the Pentagon cannot determine priorities because it has no strategy.
Last April, the new defense secretary, Richard Cheney, acknowledged that, "given an ideal world, we'd have a nice, neat, orderly process.
We'd do the strategy and then we'd come around and do the budget.
This city doesn't work that way."
With a five-year defense plan costing more than $1.6 trillion, it's about time we put together a defense strategy that works in Washington.
This won't happen until strategists come down from their ivory tower and learn to work in the real world of limited budgets and uncertain futures.
As it is, we identify national goals and the threats to these goals, we shape a strategy to counter these threats, we determine the forces needed to execute the strategy, before finally forging the budgets needed to build and maintain the forces.
These procedures consume millions of man-hours of labor and produce tons of paper, and each year, their end product -- the Five Year Defense Plan -- promptly melts away.
The graph on the left shows how this happens (see accompanying illustration -- WSJ Oct. 30, 1989).
Compare the past eight five-year plans with actual appropriations.
The Pentagon's strategists produce budgets that simply cannot be executed because they assume a defense strategy depends only on goals and threats.
Strategy, however, is about possibilities, not hopes and dreams.
By ignoring costs, U.S. strategists abdicate their responsibility for hard decisions.
That puts the real strategic decisions in the hands of others: bean counters, budgeteers, and pork-barrelers.
These people have different agendas.
And as a result -- as the recent vote by the House to undo Mr. Cheney's program terminations suggests -- the preservation of jobs is becoming the real goal of defense "strategy."
How can we turn this situation around?
Reform starts in the Pentagon.
Strategists should consider the impact of budget uncertainties at the beginning of the planning process.
They ought to examine how a range of optimistic to pessimistic budget scenarios would change the defense program.
They would then develop priorities by identifying the least painful program cuts as they moved from higher to lower budgets.
They would also identify the best way to add programs, should the budget come in at higher levels.
This kind of contingency analysis is common in war planning and business planning.
There is no reason that it can not be done for defense planning.
Two steps are necessary to translate this idea into action.
Step 1 cleans up our books.
Our five-year plan contains three accounting devices -- negative money, an above guidance management reserve and optimistic inflation estimates -- which understate the spending the Pentagon has committed itself to by almost $100 billion.
Negative money was invented in 1988 to make the 1990-94 Five Year Defense Plan conform to the numbers in President Reagan's final budget submission to Congress.
That plan exceeded the numbers contained in his budget message by $45 billion.
To make the books balance, as is required by law, somebody invented a new budget line item that simply subtracted $45 billion.
It is known in the Pentagon as the "negative wedge."
The Pentagon argues that the negative wedge is the net effect of $22 billion in the as-yet unidentified procurement reductions that it intends to find in future years and $23 billion in an "above guidance" management reserve that accounts for undefined programs that will materialize in the future.
The 1990 plan also assumes inflation will decline to 1.7% by 1994.
Most forecasters, including those in the Congressional Budget Office, assume inflation will be in excess of 4% in each of those five years.
At that rate, the defense plan is underfunded by $48 billion.
By adding the negative wedge and recalculating the remaining program using a more probable inflation estimate, we arrive at a baseline program costing $1.7 trillion between 1990 and 1994.
Step 2 examines how four progressively lower budget scenarios would change the baseline and how these changes would affect our national security.
The graph on the right (which assumes a 4% rate of inflation), places these scenarios in the context of recent appropriations (see accompanying illustration -- WSJ Oct. 30, 1989).
Note how the baseline program assumes a sharp increase in future appropriations.
Step 2 will answer the question: What happens if these increases do not materialize?
Scenario 1, known as the "Constant Dollar Freeze," reimburses the Pentagon for inflation only -- it slopes upward at 4% per year.
This scenario has been the rough position of the U.S. Senate since 1985, and it reduces the baseline by $106 billion between 1990 and 1994.
Scenario 3, the "Current Dollar Freeze," has been the approximate position of the House of Representatives for about four years.
It freezes the budget at its current level, and forces the Pentagon to eat the effects of inflation until 1994.
This reduces the baseline by $229 billion.
Scenario 2 extends the recent compromises between the House and the Senate; it splits the difference between Scenarios 1 and 3, by increasing the budget at 2% per year.
It reduces the baseline by $169 billion.
Finally, Scenario 4 reduces the budget by 2% per year for the next five years -- a total reduction of $287 billion.
This can be thought of as a pessimistic prediction, perhaps driven by the sequestering effects of the Gramm-Rudman deficit reduction law or possibly a relaxation of tensions with the Soviet Union.
The strategic planners in the Joint Chiefs of Staff would construct the most effective defense program for each scenario, maximizing strengths and minimizing weaknesses.
They would conclude their efforts by producing a comprehensive net assessment for each plan -- including the assumptions made, an analysis of its deficiencies and limitations, the impact on national security, and the best strategy for working around these limitations.
This exercise would reveal the true cost of a particular program by forcing the strategists to make hard decisions.
If, for example, they choose to keep the B-2 Stealth bomber, they would have to sacrifice more and more other programs -- such as carrier battlegroups or army divisions -- as they moved toward lower budget levels.
These trade-offs would evolve priorities by revealing when the cost of the B-2 became prohibitive.
Some may be tempted to argue that the idea of a strategic review merely resurrects the infamous Zero-Based Budgeting (ZBB) concept of the Carter administration.
But ZBB did not involve the strategic planners in the Joint Chiefs of Staff, and therefore degenerated into a bean-counting drill driven by budget politics.
Anyway, ZBB's procedures were so cumbersome that everyone involved was crushed under a burden of marginalia.
A strategic review is fundamentally different.
It would be run by the joint chiefs under simple directions: Produce the best possible force for each budget scenario and provide the Secretary of Defense with a comprehensive net assessment of how that force could be used to achieve U.S. goals.
It might be feared that even thinking about lower budgets will hurt national security because the door will be opened to opportunistic budget cutting by an irresponsible Congress.
This argument plays well in the atmosphere of gaming and mistrust permeating the Pentagon and Congress, and unfortunately, there is some truth to it.
But in the end, it must be rejected for logical as well as moral reasons.
To say that the Pentagon should act irresponsibly because acting responsibly will provoke Congress into acting irresponsibly leads to the conclusion that the Pentagon should deliberately exaggerate its needs in the national interest; in other words, that it is justified in committing a crime -- lying to Congress -- because it is morally superior.
Strategy is not a game between the Pentagon and Congress; it is the art of the possible in a world where constraints force us to choose between unpleasant or imperfect alternatives.
If we want meaningful priorities, we must understand the trade-offs they imply before we make commitments.
Strategy is not a separate event in an idealized sequence of discrete events; it is a way of thinking that neutralizes threats to our interests in a manner consistent with our financial, cultural and physical limitations.
Mr. Spinney is a permanent Pentagon official.
This is a condensed version of an essay that will appear in the January issue of the Naval Institute Proceedings.
The views expressed do not reflect the official policy of the Department of Defense.
Although bullish dollar sentiment has fizzled, many currency analysts say a massive sell-off probably won't occur in the near future.
While Wall Street's tough times and lower U.S. interest rates continue to undermine the dollar, weakness in the pound and the yen is expected to offset those factors.
"By default," the dollar probably will be able to hold up pretty well in coming days, says Francoise Soares-Kemp, a foreign-exchange adviser at Credit Suisse.
"We're close to the bottom" of the near-term ranges, she contends.
In late Friday afternoon New York trading, the dollar was at 1.8300 marks and 141.65 yen, off from late Thursday's 1.8400 marks and 142.10 yen.
The pound strengthened to $1.5795 from $1.5765.
In Tokyo Monday, the U.S. currency opened for trading at 141.70 yen, down from Friday's Tokyo close of 142.75 yen.
The dollar began Friday on a firm note, gaining against all major currencies in Tokyo dealings and early European trading despite reports that the Bank of Japan was seen unloading dollars around 142.70 yen.
The rise came as traders continued to dump the pound after the sudden resignation Thursday of British Chancellor of the Exchequer Nigel Lawson.
But once the pound steadied with help from purchases by the Bank of England and the Federal Reserve Bank of New York, the dollar was dragged down, traders say, by the stock-market slump that left the Dow Jones Industrial Average with a loss of 17.01 points.
With the stock market wobbly and dollar buyers discouraged by signs of U.S. economic weakness and the recent decline in U.S. interest rates that has diminished the attractiveness of dollar-denominated investments, traders say the dollar is still in a precarious position.
"They'll be looking at levels to sell the dollar," says James Scalfaro, a foreign-exchange marketing representative at Bank of Montreal.
While some analysts say the dollar eventually could test support at 1.75 marks and 135 yen, Mr. Scalfaro and others don't see the currency decisively sliding under support at 1.80 marks and 140 yen soon.
Predictions for limited dollar losses are based largely on the pound's weak state after Mr. Lawson's resignation and the yen's inability to strengthen substantially when there are dollar retreats.
With the pound and the yen lagging behind other major currencies, "you don't have a confirmation" that a sharp dollar downturn is in the works, says Mike Malpede, senior currency analyst at Refco Inc. in Chicago.
As far as the pound goes, some traders say a slide toward support at $1.5500 may be a favorable development for the dollar this week.
While the pound has attempted to stabilize, currency analysts say it is in critical condition.
Sterling plunged about four cents Thursday and hit the week's low of $1.5765 when Mr. Lawson resigned from his six-year post because of a policy squabble with other cabinet members.
He was succeeded by John Major, who Friday expressed a desire for a firm pound and supported the relatively high British interest rates that he said "are working exactly as intended" in reducing inflation.
But the market remains uneasy about Mr. Major's policy strategy and the prospects for the pound, currency analysts contend.
Although the Bank of England's tight monetary policy has fueled worries that Britain's slowing economy is headed for a recession, it is widely believed that Mr. Lawson's willingness to prop up the pound with interest-rate increases helped stem pound selling in recent weeks.
If there are any signs that Mr. Major will be less inclined to use interest-rate boosts to rescue the pound from another plunge, that currency is expected to fall sharply.
"It's fair to say there are more risks for the pound under Major than there were under Lawson," says Malcolm Roberts, a director of international bond market research at Salomon Brothers in London.
"There's very little upside to sterling," Mr. Roberts says, but he adds that near-term losses may be small because the selling wave that followed Mr. Major's appointment apparently has run its course.
But some other analysts have a stormier forecast for the pound, particularly because Britain's inflation is hovering at a relatively lofty annual rate of about 7.6% and the nation is burdened with a struggling government and large current account and trade deficits.
The pound likely will fall in coming days and may trade as low as 2.60 marks within the next year, says Nigel Rendell, an international economist at James Capel & Co. in London.
The pound was at 2.8896 marks late Friday, off sharply from 2.9511 in New York trading a week earlier.
If the pound falls closer to 2.80 marks, the Bank of England may raise Britain's base lending rate by one percentage point to 16%, says Mr. Rendell.
But such an increase, he says, could be viewed by the market as "too little too late."
The Bank of England indicated its desire to leave its monetary policy unchanged Friday by declining to raise the official 15% discount-borrowing rate that it charges discount houses, analysts say.
Pound concerns aside, the lack of strong buying interest in the yen is another boon for the dollar, many traders say.
The dollar has a "natural base of support" around 140 yen because the Japanese currency hasn't been purchased heavily in recent weeks, says Ms. Soares-Kemp of Credit Suisse.
The yen's softness, she says, apparently stems from Japanese investors' interest in buying dollars against the yen to purchase U.S. bond issues and persistent worries about this year's upheaval in the Japanese government.
On New York's Commodity Exchange Friday, gold for current delivery jumped $5.80, to $378.30 an ounce, the highest settlement since July 12.
Estimated volume was a heavy seven million ounces.
In early trading in Hong Kong Monday, gold was quoted at $378.87 an ounce.
We are deeply disturbed that a recent editorial stated that the "Americans With Disabilities Act of 1989" was "crafted primarily by Democratic Senators Kennedy and Harkin" with a premise "based on the presumption that most Americans are hostile to the disabled. . . ."
Perhaps even more offensive is the statement, "It is surprising that George Bush and the White House inner circle would ally themselves with this crabby philosophy."
This legislation was not drafted by a handful of Democratic "do-gooders."
Quite the contrary -- it results from years of work by members of the National Council on the Handicapped, all appointed by President Reagan.
You depict the bill as something Democratic leaders "hoodwinked" the administration into endorsing.
The opposite is true: It's the product of many meetings with administration officials, Senate staffers, advocates, and business and transportation officials.
Many congressmen are citing the compromise on the "Americans With Disabilities Act of 1989" as a model for bipartisan deliberations.
Most National Council members are themselves disabled or are parents of children with disabilities.
We know firsthand the discrimination addressed by the act: to be told there's no place for your child in school; to spend lonely hours at home because there is no transportation for someone in a wheelchair; to be denied employment because you are disabled.
Your editorial mockingly entitles this legislation the "Lawyers' Employment Act."
For the 43 million people with disabilities and their families, this legislation is the "Emancipation Proclamation."
Sandra Swift Parrino
Chairperson
National Council on the Handicapped
A group of investors led by Giant Group Ltd. and its chairman, Burt Sugarman, said it filed with federal antitrust regulators for clearance to buy more than 50% of the stock of Rally's Inc., a fast-food company based in Louisville, Ky.
Rally's operates and franchises about 160 fast-food restaurants throughout the U.S.
The company went public earlier this month, offering 1,745,000 shares of common stock at $15 a share.
Giant has interests in cement making and newsprint.
The investor group includes Restaurant Investment Partnership, a California general partnership, and three Rally's directors: Mr. Sugarman, James M. Trotter III and William E. Trotter II.
The group currently holds 3,027,330 Rally's shares, or 45.2% of its commmon shares outstanding.
Giant Group owned 22% of Rally's shares before the initial public offering.
A second group of three company directors, aligned with Rally's founder James Patterson, also is seeking control of the fast-food chain.
It is estimated that the Patterson group controls more than 40% of Rally's stock.
Rally officials weren't available to comment late yesterday.
For the year ended July 2, Rally had net income of $2.4 million, or 34 cents a share, on revenue of $52.9 million.
Companies listed below reported quarterly profit substantially different from the average of analysts' estimates.
The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share.
Estimated and actual results involving losses are omitted.
The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days.
Otherwise, actual profit is compared with the 300-day estimate.
DPC Acquisition Partners, a hostile suitor for Dataproducts Corp., filed a petition in federal district court in Los Angeles seeking to have its standstill agreement with the computer printer maker declared void, and it proceeded with a $10-a-share tender offer for the company.
The offer would give the transaction an indicated value of $189 million, based on the 18.9 million shares the group doesn't already own.
DPC holds about 7.8% of Dataproducts' shares.
Lawyers representing DPC declined to elaborate, saying they didn't have a final copy of the filing.
Jack Davis, Dataproducts' chairman, said he hadn't yet seen the filing and couldn't comment.
DPC made a $15-a-share bid for the company in May, but Dataproducts management considered the $283.7 million proposal unacceptable.
Dataproducts had sought a buyer for several months, but it is now in the midst of a restructuring plan and management says the company is no longer for sale.
Appalachian Power Co., a subsidiary of American Electric Power Co., said it will redeem on Dec. 1 the entire $44.2 million of its 12 7/8% first mortgage bonds due 2013.
The redemption price will be 109.66% of the principal amount of the bonds, plus accrued interest to the date of redemption.
The European Community's consumer price index rose a provisional 0.6% in September from August and was up 5.3% from September 1988, according to Eurostat, the EC's statistical agency.
The month-to-month rise in the index was the largest since April, Eurostat said.
Efforts by the Hong Kong Futures Exchange to introduce a new interest-rate futures contract continue to hit snags, despite the support the proposed instrument enjoys in the colony's financial community.
Hong Kong financial institutions have been waiting for interest-rate futures for a long time.
The contract was first proposed more than two years ago, but shortly afterward, the colony's markets were hit hard by the October 1987 global stock crash.
The subsequent drive to reform Hong Kong's markets also has embroiled the interest-rate futures contract.
The Securities and Futures Commission, a government watchdog set up after the 1987 crash to try to restore confidence and order to Hong Kong's markets, had been expected to give the contract conditional approval last week.
But regulators this week said futures-exchange officials still have a way to go before they answer all the remaining detailed questions about the contract.
The exchange had forecast that the contract would begin trading by December.
But securities regulators now say privately that it isn't likely to start until the first quarter of next year.
Analysts and financial officials in the British colony consider the new contract essential to the revival of the Hong Kong Futures Exchange, which has never fully recovered from the October 1987 crash.
Many believe that without a healthy futures exchange, Hong Kong's aspirations to be recognized as an international financial center will suffer.
In addition, local banks say the new contract is important in helping them offset their Hong Kong-dollar exposure.
The contract will be based on the three-month Hong Kong interbank offered rate, or Hibor.
It is almost a carbon copy of the Chicago Mercantile Exchange's Eurodollar contract, which is based on the three-month Eurodollar rate, the rate paid on U.S.-dollar deposits in London banks.
If the contract is as successful as some expect, it may do much to restore confidence in futures trading in Hong Kong.
"The contract is definitely important to the exchange," says Robert Gilmore, executive director of the Securities and Futures Commission.
Two years ago, the futures exchange was the envy of other would-be futures centers.
After only 17 months, its main contract, based on the Hang Seng index, had grown to be the second-largest stock-index-futures contract in the world.
{A futures contract is an agreement to buy or sell a commodity or financial instrument at a set price on a specified date.
In the case of stock-index and interest-rate futures, the instruments are given an underlying cash value and are settled in cash.}
But in the week following the 1987 stock crash, the exchange verged on collapse, and the stock and futures markets in Hong Kong were closed for four days.
Only a government-sponsored bailout kept the crisis from swallowing the exchange.
Trading in Hang Seng index futures remains crippled by the experience.
Volume for the entire month of September totaled only 21,687 contracts, compared with a daily average of 27,000 in the month before the 1987 crash.
Despite the thin trading, and after two painful years of restructuring, the futures market has shown itself to be resilient in two recent tests.
While Asian markets struggled to cope with the uncertainty caused by the Oct. 13 plunge in New York stock prices, futures trading in Hong Kong was relatively heavy and went smoothly.
That was also the case in the days following the June 4 massacre in Beijing, which caused a sharp drop in Hong Kong stock prices.
"There was no problem at all," says Douglas Ford, chief executive officer of the futures exchange.
Most important to the contract's success is the commitment of Hong Kong's big financial institutions, especially the two leaders, Hongkong & Shanghai Banking Corp. and the local subsidiary of Britain's Standard Chartered Bank PLC.
The two big banks were instrumental in designing the new contract.
"If those two banks are there, then the balance of the banking institutions will be there," says Mr. Gilmore, the Securities and Futures Commission official.
Colony banks have a major stake in how interest rates move because of their enormous Hong Kong-dollar exposure.
Even though the currency is pegged to the U.S. dollar, with a fixed exchange rate of HK$7.8 to the American currency, the U.S. and Hong Kong economies don't always move in lock step, making it difficult to predict where interest rates in the colony will go.
In early 1988, when the three-month Eurodollar rate was between 7% and 8%, the three-month Hibor rate was as low as 1%.
Just a few months ago, the three-month Eurodollar rate was around 9.5%, while three-month Hibor hit highs above 11%.
The Hibor contract "solves quite a bit of the problem of interest-rate risk in the interbank market," says Eric Cheng, a director of James Capel (Far East) Ltd., the Hong Kong arm of the British brokerage firm.
Despite the initial support expected, trading in the contract is likely to start slowly.
The wounds from the 1987 crash haven't yet healed, and not all claims against the exchange clearinghouse -- by those who bet the Hang Seng index would fall -- have been settled.
Companies and financial institutions familiar with Hong Kong remain wary of trading in its futures market.
And Mr. Gilmore cautions that there may be limits on how much the contract can grow because the Hong Kong dollar isn't a widely traded currency.
He says the contract will be considered a success if it starts trading 500 to 1,000 lots a day.
Exchange officials also point out that Hibor futures were designed for institutions and corporations, not for the type of small individual investors who were very active in Hang Seng index futures and defaulted in the 1987 crash.
Mr. Cheng says the low margin required for trading futures attracted a lot of small investors before the 1987 crash who didn't realize that their risk was virtually unlimited.
"You're not going to get your taxi drivers and amahs and all that," says Rory Nicholas, a director for securities company Elders Bullion & Futures Ltd.
That should help to inspire confidence, Mr. Gilmore says.
But many bankers remain nervous, especially as the start-up of the contract continues to be delayed.
Two of Japan's largest paper manufacturers, Oji Paper Co. and Jujo Paper Co., posted unconsolidated pretax profit gains from a year earlier for the first half ended Sept. 30, on continuing robust domestic demand for paper products.
Oji Paper, the nation's largest in terms of sales, said its pretax profit rose 1.5% to 23.11 billion yen (US$163.3 million) from 22.76 billion yen.
Sales jumped 12.2% to 232.12 billion yen from 206.87 billion yen.
Net income increased 6.7% to 12.43 billion yen from 11.66 billion yen.
Per-share net rose to 20.48 yen from 19.51 yen.
Oji Paper's sales strength was evident in overall paper products sales, including newsprints, printing and wrapping papers, which rose to 221.61 billion yen in the first half from 200.70 billion yen a year earlier.
Pulp, processed and miscellaneous paper sales also surged.
For the full fiscal year ending next March, Oji predicted that total sales of 477.00 billion yen, up from 420.68 billion yen in the previous fiscal year.
Pretax profit is seen at 45.00 billion yen, down from 47.17 billion yen, while net income is estimated at 23.500 billion yen, up from 23.031 billion yen.
The company didn't provide an explanation for the softer pretax profit performance and officials couldn't be reached for comment.
Jujo Paper said its pretax profit rose 0.3% to 13.05 billion yen from 13.02 billion yen.
Sales rose 8.5% to 195.19 billion yen from 179.916 billion yen.
Net income surged 10% to 7.12 billion yen from 6.47 billion yen.
Per-share net rose to 14.95 yen from 14.44 yen.
General paper product sales, including newsprints and other papers, accounting for the bulk of sales, rose to 157.78 billion yen from 143.88 billion yen.
Jujo Paper predicted that for the full fiscal year ending next March 31, sales will total 400.0 billion yen, up from 366.89 billion yen.
Pretax profit was estimated at 23.0 billion yen, down from 25.51 billion yen, while net income was estimated at 12 billion yen, up from 11.95 billion yen.
Unocal Corp.'s decision to put its Norwegian oil and gas interests up for sale earlier this week is another step in the company's strategic review of its properties, and shows that few of them are sacred cows.
The company declined to estimate the value of the Norwegian holding.
But Eugene L. Nowak, an analyst at Dean Witter Reynolds Inc., forecast that the sale will bring in "$200 million or substantially more."
The proposed transaction is the latest in a redeployment of assets by the Los Angeles-based oil company that has included the $200 million sale of its headquarters property and the pending sale of half of its Chicago refinery and related marketing operations to Petroleos de Venezuela S.A.
Mr. Nowak said he attaches particular importance to the proposed sale because it suggests that the company is willing to sell oil and gas assets that aren't part of its major strategic strengths.
Unocal said it expects to complete the sale of its Unocal Norge A/S unit by next March or April.
In addition to an 18% stake in the Veslefrikk offshore field, the Norwegian unit has interests ranging from 10% to 25% in three other Norwegian oil and gas production licenses.
In 1986, Unocal sold a 7.5% stake in the Veslefrikk field to Deutsche Erdolversorgungs G.m.b.H., a West German oil company, for an undisclosed amount.
In 1987, it sold a 2.5% stake in the Veslefrikk field to the Swedish national oil company, resulting in a $7 million after-tax gain.
However, those sales were early in the field's history, before production equipment was installed.
The field is currently being developed and is slated to start production by the end of the year.
It's expected to produce about 62,000 barrels per day.
A company spokesman said the Veslefrikk field's gross reserves were estimated in 1987 at 229 million barrels.
However, he added that that estimate, made before extensive development drilling, currently is being reappraised.
The spokesman said Unocal has had "considerable interest" from prospective buyers.
The company has retained J. Henry Schroder Wagg & Co. as financial adviser and agent for the sale.
France's unemployment rate was steady at a seasonally adjusted 9.5% in September, the Social Affairs Ministry said.
In September, the number of jobless rose 0.1% from the previous month to 2.5 million on a seasonally adjusted basis.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
Tenneco Credit Corp. -- $150 million of 9 1/4% senior notes due Nov. 1, 1996, priced at 99.625 to yield 9.324%.
The noncallable issue was priced at a spread of 144 basis points above the Treasury's seven-year note.
Rated Baa-2 by Moody's Investors Service Inc. and triple-B-plus by Standard & Poor's Corp., the issue will be sold through underwriters led by Merrill Lynch Capital Markets.
Tenneco Credit is a unit of Tenneco Inc.
Allegany Health System -- three-part issue of $156.7 million of revenue bonds, tentatively priced through a Morgan Stanley & Co. group.
The offering includes a new issue of $53 million of Tampa, Fla., Series 1989 revenue bonds for St. Joseph's Hospital Inc., due 1996-2000, 2005 and 2023.
The bonds are tentatively priced to yield from 6.90% in 1996 to 7.55% in 2023.
The other two portions of the deal are remarketings of outstanding debt rather than new issues.
The bonds are rated single-A by Moody's and single-A-plus by S&P, according to the lead underwriter.
City and County of Honolulu -- $75 million of general obligation bonds, 1989 Series B, due 1993-2009, through a Bear, Stearns & Co. group.
The bonds, rated double-A by Moody's and S&P, were priced to yield from 6.20% in 1993 to 7.10% in 2008 and 2009.
Federal National Mortgage Association -- $500 million of Remic mortgage securities being offered in 12 classes by Shearson Lehman Hutton Inc.
The offering, Series 1989-89, backed by Fannie Mae 9% securities, brings Fannie Mae's 1989 Remic issuance to $33.2 billion and its total Remic volume to $45.3 billion since the program began in April 1987.
Pricing terms weren't available.
Kyushu Electric Power Co. (Japan) -- $200 million of 8 7/8% bonds due Nov. 28, 1996, priced at 101 7/8 to yield 8 7/8% less full fees, via Yamaichi International Europe Ltd.
Fees 1 7/8.
Toshiba Corp. (Japan) -- $1.2 billion of bonds due Nov. 16, 1993, with equity-purchase warrants, indicating a 3 3/4% coupon at par, via Nomura International Ltd.
Each $5,000 bond carries a warrant exercisable Dec. 1, 1989, through Nov. 9, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Nov. 2.
Credit Lyonnais Australia Ltd. (French parent) -- 50 million Australian dollars of 16 1/4% bonds due Nov. 30, 1992, priced at 102 to yield 16.03% less full fees, via Hambros Bank Ltd.
Guarantee by Credit Lyonnais.
Fees 1 1/2.
World Bank (agency) -- #100 million of 10 7/8% bonds due Aug. 15, 1994, offered at 96.95 to yield 11.71%, via Baring Brothers & Co.
Tap on outstanding #100 million issue.
Also issued were 10 billion yen of bonds due Dec. 5, 1994, priced at 101 1/2, with coupon paid in Australian dollars, via LTCB International Ltd.
Interest during first year paid semiannually at 7.51%.
Thereafter, interest paid annually at 7.65%.
The World Bank also offered 100 million Swiss francs of 6% bonds due Nov. 16, 1999, priced at 101 1/4 to yield 5.83% via Credit Suisse.
Option by borrower to increase issue amount to 150 million francs.
Mandom Corp. (Japan) -- 80 million Swiss francs of privately placed convertible notes due March 31, 1994, with fixed 0.25% coupon at par, via Nomura Bank Switzerland.
Put March 31, 1992, at a fixed 107 3/4 to yield 3.43%.
Each 50,000 Swiss franc note convertible Dec. 4, 1989, through March 17, 1994, at a 5% premium over closing share price Nov. 1, when terms are fixed.
Nippon Air Brake Co. (Japan) -- 140 million Swiss francs of privately placed convertible notes due March 31, 1994, with fixed 0.25% coupon at par, via Yamaichi Bank (Switzerland).
Put March 31, 1992, at fixed 107 13/16 to yield 3.43%.
Each 50,000 Swiss franc note convertible Nov. 27, 1989, through March 17, 1994, at a 5% premium over closing share price Nov. 1, when terms are fixed.
Credit Suisse Finance Gibraltar Ltd. (Swiss parent) -- 100 billion lire of 12 5/8% bonds due June 30, 1993, priced at 101.45 to yield 12.75% less full fees, via Banca Nazionale del Lavaro.
Guarantee by Credit Suisse.
Fees 1 5/8.
Maryland National Bank -- $267 million of securities backed by home-equity lines of credit through Merrill Lynch Capital Markets.
The bank is a subsidiary of Baltimore-based MNC Financial Inc.
The securities were priced to float monthly at 20 basis points above the 30-day commercial paper rate.
The issue, formally titled MNB Home Equity Loan Asset Backed Certificates, Series 1989, will represent interest in a trust fund of home equity revolving credit line loans originated by the retail finance division of Maryland National Bank and secured primarily by second deeds of trust or second mortgages on single to four-family residential properties.
The securities are rated triple-A by Moody's and Duff & Phelps Inc.
They are expected to have an average life of 3.16 years.
Maryland National Bank's retail finance division will continue to service the loans.
First National Bank of Chicago will act as trustee, and the transaction will be supported by an 8% letter of credit issued by Dai-Ichi Kangyo Bank Ltd., Chicago branch.
Province of Nova Scotia -- $250 million of 8 1/4% debentures due Nov. 15, 2019, priced at 99.775 to yield 8.28%.
The noncallable issue, which can be put back to the province in 2001, was priced at a spread of 41 basis points above the Treasury's 10-year note.
Rated single-A-2 by Moody's and single-A-minus by S&P, the issue will be sold through underwriters led by Merrill Lynch Capital Markets.
Bausch & Lomb Inc. said it plans to introduce next year a new line of sunglasses containing melanin, the pigment that protects against damage from ultraviolet rays.
The optical products company has signed a licensing agreement with Photoprotective Technologies Inc., a closely held firm in San Antonio, Texas, which has developed a method to incorporate the synthetic melanin into plastic lenses.
Terms weren't disclosed.
Security Pacific Corp. has set its sights on buying its second bank holding company this year.
Security said it signed a letter of intent to purchase La Jolla Bancorp, agreeing to pay $15 of its own stock for each share of La Jolla.
Based on the current number of La Jolla shares, that gives the transaction a value of $104 million.
La Jolla is the parent company of La Jolla Bank & Trust Co., which has 12 branches in San Diego County.
As of Sept. 30, the bank had assets of $511 million and deposits of $469 million, Security Pacific said.
Earlier this month, Security Pacific, which is among the 10 largest bank holding companies in the U.S., completed the acquisition of San Diego-based Southwest Bancorp.
South Africa's current account surplus swelled to a seasonally adjusted annual rate of between five billion and six billion rand ($1.9 billion and $2.28 billion) in the third quarter, Reserve Bank Governor Chris Stals said.
The surplus was two billion rand in the second quarter and 2.7 billion rand in the first quarter.
He said this improvement means it is still possible to reach the targeted current account surplus of four billion rand for 1989.
Moscom Corp. said its board approved the repurchase of as many as 300,000 common shares when market conditions are suitable.
The maker of telecommunications management systems had 6,420,268 shares outstanding as of Sept. 30.
In over-the-counter trading yesterday, Moscom closed at $4.375, up 37.5 cents.
Service Corp. International said it expects to report net income of 15 cents a share for the third quarter.
The company said it expects to release third-quarter results in mid-November.
The funeral home and cemetery operator changed from a fiscal year to a calendar year in December.
In the comparable year-ago quarter, the second quarter ended Oct. 31, Service Corp. had a loss of about $12.5 million, or 26 cents a share, on revenue of $175.4 million.
Results for that quarter included a $30 million, or 40 cents a share, write-down associated with the consolidation of a facility.
Your Sept. 25 criticism of credit-card foreign-exchange charges is unwarranted.
I have just returned from France, and the net exchange rate charged on my Visa account was more favorable than I obtained for traveler's checks in any of the several banks where I converted them.
Vincent Jolivet Kenmore, Wash.
The state-controlled French metals group Pechiney S.A. said it has signed a preliminary accord to sell its Paris headquarters to Groupement Foncier Francais and Nouveaux Constructeurs for 2.76 billion francs ($443 million).
The sale, which Pechiney had been eager to make for several months, is still subject to certain unspecified conditions and is expected to be completed during the first quarter of 1990, the group.
Hong Kong's main measure of consumer prices rose 10% in September from a year earlier, the government said.
The Consumer Price Index "A", which measures price changes for the 50% of urban households that spend between 2,000 Hong Kong dollars (US$256.18) and HK$6,499 a month, edged up 1.5% in September from August.
Index "B", which monitors price changes for the 30% of urban households that spend between HK$6,500 and HK$9,999 a month, rose 9.9% last month from a year earlier and was up 1.3% from the preceding month.
September's Hang Seng Consumer Price Index, which measures price changes for the 10% of urban households spending HK$10,000 and HK$24,999 a month, was up 11% from a year ago and up 1.3% from August.
The main factors for the September increase from the previous month were higher prices for services, food and housing.
Prices fell marginally for fuel and electricity.
West German and French authorities have cleared Dresdner Bank AG's takeover of a majority stake in Banque Internationale de Placement (BIP), Dresdner Bank said.
The approval, which had been expected, permits West Germany's second-largest bank to acquire shares of the French investment bank.
In a first step, Dresdner Bank will buy 32.99% of BIP for 1,015 French francs ($162) a share, or 528 million francs ($84.7 million).
Dresdner Bank said it will also buy all shares tendered by shareholders on the Paris Stock Exchange at the same price from today through Nov. 17.
In addition, the bank has an option to buy a 30.84% stake in BIP from Societe Generale after Jan. 1, 1990 at 1,015 francs a share.
Furukawa Electric Co., one of Japan's leading electric wire and cable manufacturers, said unconsolidated pretax profit in the fiscal first half ended Sept. 30 fell 5.3% to 6.11 billion yen ($43.1 million) from 6.45 billion yen a year earlier.
Sales increased 11.9% to 279.39 billion yen from 249.68 billion yen.
Net fell 1% to 3.23 billion yen from 3.26 billion yen.
Pershare net fell to 4.97 yen from 5.40 yen.
The growing sales sustained by domestic demand failed to counter rising material metal costs and declining profitability in overseas construction, Furukawa said.
Rolled copper product sales were major contributors to overall sales growth.
Sales by category rose 24% to 35.23 billion yen, reflecting increased production in automobile, airconditioner and electric machine industries, which are major users of wire and cable products.
Sales for electric wires and cables rose 13.2% to 153.93 billion yen.
West Germany's cost-of-living index rose a preliminary 0.3% in October from September and was up 3.3% from a year earlier, the Federal Statistics Office in Wiesbaden said.
The increase follows a monthly rise of 0.2% in September from August.
Preliminary cost-of-living data for the current month are calculated based on inflation data from the four largest West German states -- Baden-Wuerttemberg, North Rhine-Westphalia, Bavaria and Hesse.
The Philippine government awarded Finland's Outokumpu Oy the contract to upgrade the facilities of Philippine Associated Smelting & Refining Corp., according to documents from National Development Corp., one of Philippine company's owners.
The project costs $46.8 million, and is intended to boost the company's production capacity by 25% to 34,500 metric tons of copper cathode a year.
Outokumpu is a mining, trading and construction concern.
September sales at major Japanese retail stores rose 9.4% from a year earlier to 1.388 trillion yen ($9.81 billion), marking the fifth-consecutive monthly increase, the Ministry of International Trade and Industry announced.
According to the ministry, retail sales at major department stores were up 12% to 745.7 billion yen, while sales at supermarkets rose 6.7% to 642 billion yen.
September's growth followed a 8.7% rise in July and an 8% increase in August, showing continued expansion at high year-on-year levels.
A ministry official said the growth leads to the conclusion the adverse effects of a consumption tax introduced in April have diminished.
Shell Canada Ltd. said it plans to build a lubricants blending and packaging plant at Brockville, Ontario, with start-up scheduled for 1992.
A spokesman said the plant, which will replace older lubricant and grease manufacturing plants in Montreal and Toronto, will cost about 50 million Canadian dollars (US$42.5 million) to build.
Brockville is about 100 miles east of Toronto.
Shell Canada, an oil and gas producer and marketer, is a unit of Royal Dutch/Shell Group, an Anglo-Dutch concern.
When the going gets tough, it's tough to trade stocks in continental Europe.
That's the troubling conclusion reached by many international investors and money managers angry at the malfunctions on Continental stock exchanges during last week's global market turbulence.
They say the recent market volatility has underscored the shortcomings of the way many European exchanges trade stocks.
The weaknesses of Continental exchanges are driving some fund managers to switch business to stocks traded on London's stock exchange, which quotes firm trading prices for about 350 blue-chip issues from 12 major countries.
"I'm not saying London covered itself in glory, but the events of the past week have certainly exposed Europe's weaknesses," says Stewart Gilchrist, a director of Scottish Amicable Investment Managers in Glasgow, Scotland, which manages about #6 billion ($9.63 billion) in institutional money.
He says the problems on European exchanges included market-system breakdowns, delayed execution of buy and sell orders and trading suspensions.
"The events strengthen London's hand in becoming the center for trading European stocks," Mr. Gilchrist says.
Unable to unload a large block of a French blue-chip company's shares in Paris for two days last week, a frustrated Scottish Amicable fund manager finally tossed down her phone in disgust and called James Capel & Co., a London brokerage firm.
The firm did the trade in seconds on the London stock exchange's SEAQ automated-quotation system.
On so-called Manic Monday, Oct. 16, stock prices plunged across Europe and trading problems erupted.
London had some problems, too.
The London exchange's electronic price-reporting system provided only indicative, or non-firm, prices for about 40 minutes on Manic Monday.
Some dealers say other traders weren't picking up their phones.
But London's problems were nothing compared with the Continent's.
In Brussels, which recently spent millions of dollars on a computer-assisted trading system, disgusted traders watched helplessly as a software failure before opening on Manic Monday prevented trading for two days.
For 48 hours, no one had any idea precisely how much his securities were worth.
By Wednesday, frustrated Belgian brokers reopened the market by using the time-honored method of quoting stocks with chalk on a blackboard.
The Belgian computer system finally was repaired and restarted on Tuesday of this week, with the aid of Toronto Stock Exchange officials who developed the system.
In Frankfurt, which only has a two-hour daily stock-trading session even in the best of times, stocks didn't open for the first 45 minutes because of order imbalances that brokers blame on a wave of sell orders from small investors.
As banks processed six-foot telexes of sell orders, the crush led to Manic Monday's worst decline: German stocks ended down 13%.
Exchange officials extended trading hours, 75 minutes on Monday and 65 minutes on Tuesday, to clear up order backlogs.
In France, more than half the top 25 blue-chip stocks -- including such giants as BSN and Elf Aquitaine -- didn't open until Wall Street rallied late in the European trading day, traders say.
The rally transformed some big sell orders into big buy orders, solving an order-imbalance problem.
But by that time, many big institutions had switched business to London.
"Belgium was closed for two days, France closed for a couple of hours, Germany was stuck.
It was a nightmare," says Susan Noble, an investment manager at Robert Fleming Holdings Ltd.'s International Investment Management unit in London.
"It's very worrying that these markets can't cope."
On Manic Monday, the volume of German shares traded in London more than tripled to 2.2 million, and the volume of French shares rose 48%.
(By comparison, German domestic stock volume in Frankfurt only doubled that day.)
The switch to the London market during such turbulent times is significant.
For one thing, the size of the affected market is enormous -- the European stock markets account for some 22.5% of global stock market capitalization, with an estimated value of $2.175 trillion, according to Morgan Stanley Capital International.
The Continental markets alone contribute about 14.3% of estimated world market capitalization of $9.671 trillion.
Though the widely traded shares that are quoted in London account for only a small portion of those totals, they still are the most closely watched stocks and are often viewed as a barometer for the local markets generally.
The switch to London underscores the fact that despite the economic restructuring associated with European Community efforts to develop a single market by 1992, European stock trading remains a highly fragmented and very localized activity.
Against this backdrop, one thing that doesn't seem likely to result from 1992 is a single European stock market.
Rather, there increasingly is a group of international brokerage and trading firms that operate in most European financial centers -- including European giants such as Barclays Bank PLC and Deutsche Bank, as well as Merrill Lynch & Co. and Shearson Lehman Hutton Inc. of the U.S. and Japan's Nomura Securities Co.
These firms, which often have acquired a local brokerage firm, are calling the shots when it comes to deciding in which market to transact a trade.
And senior officials of two U.S. securities houses say they switched trades in European stocks to the London market last week when they couldn't unwind positions on the Continent.
Meantime, brokers on the Continent are worried, too, mostly by the potential loss of business.
"I would be much happier if this volume {in German stocks} were in Frankfurt rather than London," says Dieter Bauernfeind, head of international equity sales at Dresdner Bank in Frankfurt.
He acknowledges that spreads "were too wide and volumes too light" in the extreme conditions on Manic Monday.
Already the Germans appear to be acting; at a special meeting on the day of the decline, directors of the Frankfurt Stock Exchange voted to extend their trading hours, although they haven't decided when or by how much.
A Frankfurt exchange official, acknowledging the brokers' anxieties, says the market still feels it "functioned OK during this crash."
The Dutch, who had some trading problems because of insufficient computer capacity, say new equipment to solve the problems ought to be installed within a month.
Says a spokeswoman for the Brussels Bourse: "Nobody around here will tell you they are happy the system didn't work.
But it's just one of those things that happened.
Investors can be assured now that this kind of problem can never occur again."
But for others, the pledges echo the promises made after the 1987 stock crash, when similar problems led many markets to develop the new systems that performed so badly last week.
"They all said they invested huge amounts of money.
But they either didn't buy the right machines or they wasted it," says Fleming's Ms. Noble.
Canadian steel production totaled 290,541 metric tons in the week ended Oct. 21, a 5.1% increase from 276,334 tons the previous week but a 7.2% decline from 313,125 tons a year earlier, Statistics Canada said.
The federal agency said that in the year through Oct. 21 production totaled 12,573,758 tons, up 7.1% from 11,742,368 tons.
Trinova Corp. said it will resume buying back as many as three million of its common shares under a program announced two years ago.
Trinova, which had 34.2 million common shares outstanding Sept. 30, had repurchased 29,700 shares since October 1987 before this latest announcement.
The company said it isn't making a commitment to purchase a specific number of shares.
In New York Stock Exchange composite trading yesterday, Trinova closed at $32.125, up 12.5 cents.
Calgene Inc. and Gustafson Inc. said they plan a joint project to develop biological products to control such plant diseases as aflatoxin, a potent cancer-causing agent.
Under the plan, the companies will use Calgene's patented technology to encapsulate microbes such as Bacillus subtilis, a bacterium, to enhance their biological activity against plant diseases.
Calgene, an agricultural biotechnology concern, said initial work will concentrate on a proprietary strain of Bacillus subtilis which has shown promise for controlling aflatoxin.
The strain was discovered by Morinaga & Co. and licensed to Gustafson, a unit of Uniroyal Chemical Co.
Aflatoxin is released by molds during grain and seed storage.
The recent appearance of aflatoxin in such foods as corn and peanut butter has sparked public concern and consumer scrutiny of food handling and storage procedures.
European Community employers fear that the EC Commission's plans for a "charter of fundamental social rights" is a danger to industrial competitiveness.
"We don't want Brussels deciding conditions for workers unless they are necessary and useful," said Zygmunt Tyszkiewicz, secretary general of the employers' confederation Unice.
Unice -- an acronym for the Union of Industrial and Employers' Confederations of Europe -- fears that the charter will force EC countries to adopt a single pattern in labor relations.
Workers and management, Mr. Tyszkiewicz said, would lose the "flexibility and diversity" that has so far allowed them to adapt to local conditions and traditions.
The British government also strongly opposes the charter in its current form.
It argues, as does Unice, that labor relations are best left to be regulated at the national level.
France will propose a slightly watered-down version of the charter to be discussed by EC social-affairs ministers on Monday, officials said.
But the cosmetic changes aren't expected to win over Britain.
"We still have serious differences with the text," a British official said, because it provides for a "regulation of the labor market."
Mr. Tyszkiewicz said the charter would put poorer EC countries such as Spain, Greece and Portugal at a disadvantage.
It would force these countries to introduce minimum standards for pay and working hours, and provide for collective bargaining and worker "participation" in major corporate decisions.
This, he warned, would prevent these countries from bridging the difference with their richer EC brethren.
Indeed, lower wages -- in Greece, they are a third of the EC average -- aren't enough to offset higher transport costs and lower productivity in the southern countries.
Increasing labor costs, Mr. Tyszkiewicz argued, would only put the countries at a further disadvantage in competing in the barrier-free EC market planned for after 1992.
But the Unice official said that producing a charter acceptable to both Britain and European industry isn't an unattainable goal.
The charter would just have to be restricted to a list of workers' fundamental rights, without seeking to impose any norms.
A key provision in the current version of the charter would give the commission a mandate to produce an "action program" detailing on what points EC member states would be required to comply with the goals set out in the charter.
This provision lies at the heart of the British and Unice fears of "social engineering" by the commission.
One possible political solution, an EC official said, would be for the commission to present the action program in late November, before the adoption of the charter at a summit of EC governments on Dec. 8 and 9.
This would leave Britain free to adopt the charter after having rebutted the action program.
The charter was approved by the EC Commission on Sept. 21.
France's Socialist government, which currently holds the council's rotating presidency, is committed to having the charter adopted by all 12 EC states before the end of 1989 -- the bicentennial of the French revolution and its "Universal Declaration of Human Rights.
Bruno DeGol, chairman of DeGol Brothers Lumber, Gallitzin, Pa., was named a director of this bank-holding company, expanding the board to 11 members.
Sam Ramirez and his men are late.
They pile out of their truck and furiously begin twisting together steel pipes linking a giant storage tank to the Sharpshooter, a freshly drilled oil well two miles deep.
If they finish today, the Sharpshooter can pump tomorrow.
One roustabout, hanging by his hands from a ladder, bounces his weight on a three-foot wrench to loosen a stuck fitting.
"We've been putting in long hours," Mr. Ramirez says -- six-day weeks and 13-hour days for the last two months.
A year ago, when almost nothing was happening amid these desolate dunes, "you'd spend two days working and two days in the yard," he recalls.
After a three-year nightmare of uncertain oil prices, draconian budget cuts and sweeping layoffs, fear is finally leaving the oil patch.
Independent drillers are gingerly sinking bits into the Earth's crust again.
Some in Big Oil are easing the grip on their wallets.
Investment capital is creeping back, and oil properties are fetching more.
Oil-tool prices are even edging up.
What happened?
In broadest terms, stability has quietly settled into international oil markets.
Mideast politics have calmed down and the squabbling within the Organization of Petroleum Exporting Countries seems under control for now.
"The fundamentals of supply and demand once again are setting oil prices," says Victor Burk, an Arthur Andersen & Co. oil expert.
After years of wild swings, oil prices over the last 12 months have settled at around $15 to $20 a barrel.
That isn't the $40 that delighted producers a decade ago or the $10 that pleased users a year ago.
But it is high enough to prod the search for future supplies, low enough to promote consumption and, most important, steady enough for both producers and users to believe in.
Not that oil suddenly is a sure thing again.
The current equilibrium is fragile and depends on steady, strong demand and continued relative harmony within OPEC, producer of more than 40% of the non-Communist world's crude.
A recession or new OPEC blowup could put oil markets right back in the soup.
Also, the new stirrings are faint, and some question their extent.
Drilling activity is still far below eight years ago, there's no hiring surge and some companies continue to shrink.
With all this, even the most wary oil men agree something has changed.
"It doesn't appear to be getting worse.
That in itself has got to cause people to feel a little more optimistic," says Glenn Cox, the president of Phillips Petroleum Co.
Though modest, the change reaches beyond the oil patch, too.
The same roller-coaster prices that halted U.S. oil exploration and drove many veteran oil men and companies out of the business also played havoc with the nation's inflation rate, the trade deficit and oil users' corporate and personal budgets.
Now, at least some predictability has returned, for everyone from economists to motorists.
Corporate planners can plan again.
"Management doesn't want surprises," notes Jack Zaves, who, as fuel-services director at American Airlines, buys some 2.4 billion gallons of jet fuel a year.
Prices had been so unstable that two years ago Mr. Zaves gave up on long-term forecasts.
And consumers "should be comfortable," adds W. Henson Moore, U.S. deputy secretary of energy.
"I don't see anything on the horizon that could lead to a precipitous rise in the price."
The catalyst for all this has been OPEC.
About a year ago, it ended an on-again, off-again internal production war that had put prices on a roller coaster and pitched oil towns from Houston to Caracas into recession.
Saudi Arabia, OPEC's kingpin, abandoned a policy of flooding the market to punish quota-cheaters.
About the same time, the Iran-Iraq war, which was roiling oil markets, ended.
In addition, global petroleum demand has been climbing.
It is projected to keep growing by a million barrels a day, or up to 2% annually, for years to come.
For OPEC, that's ideal.
The resulting firm prices and stability "will allow both producers and consumers to plan confidently," says Saudi Arabian Oil Minister Hisham Nazer.
OPEC Secretary-General Subroto explains: Consumers offer security of markets, while OPEC provides security of supply.
"This is an opportune time to find mutual ways {to prevent} price shocks from happening again," he says.
To promote this balance, OPEC now is finally confronting a long-simmering internal problem.
At its November meeting, it will try to revise its quotas to satisfy Persian Gulf members that can produce far more oil than their allotments.
Being held well below capacity greatly irritates them, and has led to widespread cheating.
OPEC has repeatedly raised its self-imposed production ceiling to legitimize some of that unauthorized output.
Oil ministers now hope to solve the issue for good through an Iranian proposal that gives a larger share of output to countries with surplus capacity and reduces the shares of those that can't produce more anyway.
But "if they walk out without any effort to resolve their problem, production could increase to 23 million or 24 million barrels a day, making for a very troublesome first quarter," warns Nordine Ait-Laoussine, a consultant and former Algerian OPEC delegate.
That would send prices plummeting from what some gun-shy U.S. oil executives still regard as too low a level.
Patrick J. Early, president of Amoco Corp.'s oil-production unit, says that despite recent stability, he plans continued tightening of costs and exploration spending.
The view of some others in Big Oil, he maintains, "is very much {similar to} Amoco's outlook."
Just this week Mobil Corp. disclosed new cutbacks in its domestic exploration and production operations.
Out here on the Querecho Plains of New Mexico, however, the mood is more upbeat; trucks rumble along the dusty roads and burly men in hard hats sweat and swear through the afternoon sun.
Santa Fe Energy Co., a unit of Santa Fe Southern Pacific Co., bought from Amoco the rights that allowed it to drill the Sharpshooter.
A mile and a half away looms the 150-foot-tall rig of the Sniper, due to be pumping by December.
"Talk is that everybody is going to drill more wells," says foreman Tommy Folsom.
Santa Fe aims to drill about 30 wells in this area in 1989 and double that next year.
It is more aggressive than most, but it isn't the only company with a new attitude, as it found when it went looking for a partner for the Sharpshooter.
"We went to six companies over two days pitching the prospect," says Tim Parker, a Santa Fe exploration manager.
"Five were interested."
Mitchell Energy & Development Corp. became the partner, ponying up more than half of the $600,000 in drilling and start-up costs.
Mitchell will get a half-interest in the oil.
"A kind of no-mistakes mentality" had been stifling activity, says Don Covey, Mitchell's oil exploration chief.
Now "everybody is a lot more optimistic."
One attraction for oil operators here and in other fields is the bargain-basement cost of drilling and equipment, reflecting service companies' hunger for work.
Kadane Oil Co., a small Texas independent, is currently drilling two wells itself and putting money into three others.
One of its wells, in southwestern Oklahoma, is a "rank wildcat," a risky well where oil previously hasn't been found.
"At this price, $18 plus or minus, and with costs being significantly less than they were several years ago, the economics are pretty good," says George Kadane, head of the company.
"If you know you've got stability in price, you can do things you wouldn't do with the volatility of the past few years."
The activity is enough to move some oil-service prices back up a little.
Some drill-bit prices have risen 5% in the past month.
In the Gulf of Mexico, a boat to deliver supplies to offshore rigs now costs around $3,000 a day, up nearly 60% since June.
Some service boats recently were auctioned for about $1.7 million each, up from less than $1 million two years ago.
At the bottom of the slump, Schlumberger Inc. was discounting 75% on an electronic evaluation of a well; now it discounts about 50%, drillers say.
Still, there is money to be made.
Most oil companies, when they set exploration and production budgets for this year, forecast revenue of $15 for each barrel of crude produced.
Prices have averaged more than $2 a barrel higher than that -- not a windfall, but at least a pleasant bonus for them.
So, according to a Dun & Bradstreet Corp. survey, companies that had been refusing to spend even their very conservative budgets may loosen up before year end.
It says 40% of those surveyed report that 1989 exploration spending will exceed 1988's.
Funds for drilling may inch up more next year if oil prices stay stable.
Texaco, thinking in terms of $18-to-$19 oil for 1990, may raise spending, especially for low-risk prospects, an official says.
Outside investors, scarce since '86, are edging back.
Although "it's still difficult to raise money for a pure wildcat program," says William Thomas, a Texas Commerce Bank official in Houston, "institutions are starting to see there are cycles to these things, and this one is beginning to turn."
Wall Street generally likes the industry again.
The appetite for oil-service stocks has been especially strong, although some got hit yesterday when Shearson Lehman Hutton cut its short-term investment ratings on them.
Contractors such as Parker Drilling Co. are raising cash again through stock offerings, and for the first time in years, two oil-service companies recently went public.
(They are Grace Energy Corp. of Dallas and Marine Drilling Co. of Houston.)
Most oil companies are still reluctant to add to the office and professional staffs they slashed so deeply.
But a few new spots are opening.
Arthur Andersen, the accounting firm, has increased its energy staff 10% in a year.
Out in the oil fields, if activity picks up much more, shortages could appear because so many roughnecks, roustabouts and others left after the crash.
Already "it's hard to get people.
They're so busy," says one Santa Fe drilling foreman here.
For most field workers, it's about time.
Mr. Ramirez, who arrived late at the Sharpshooter with his crew because he had started early in the morning setting up tanks at another site, just got the first raise he can remember in eight years, to $8.50 an hour from $8.
Norman Young, a "mud-logger" at the Sniper well, has worked all but about nine days of this year.
Last year, "I was off a straight month, then one time for two to three weeks and another two to three weeks," he says.
Butch McCarty, who sells oil-field equipment for Davis Tool Co., is also busy.
A native of the area, he is back now after riding the oil-field boom to the top, then surviving the bust running an Oklahoma City convenience store.
"First year I came back there wasn't any work," he says.
"I think it's on the way back now.
But it won't be a boom again.
No major booms, no major setbacks," he predicts.
Business has been good enough that he just took a spur-of-the-moment weekend trip to the mountain area of Cloudcroft, something "I haven't done in years."
The figures confirm that there certainly isn't any drilling boom.
Only 14,505 wells, including 4,900 dry holes, were drilled for oil and natural gas in the U.S. in the first nine months of the year, down 22.4% from the like 1988 period.
But that was off less than at midyear, when completions lagged by 27.1%.
And the number of rigs active in the U.S. is inching up.
According to Baker Hughes Inc., 992 rotary rigs were at work in the U.S. last week, up from the year-ago count of 933.
(In 1981, before the bust, the rig count was above 4,000.)
Global offshore-rig use shows a similar upward trend.
Some equipment going to work is almost new.
Grace Energy just two weeks ago hauled a rig here 500 miles from Caspar, Wyo., to drill the Bilbrey well, a 15,000-foot, $1-million-plus natural gas well.
The rig was built around 1980, but has drilled only two wells, the last in 1982.
Until now it had sat idle.
For Zel Herring, owner and a cook at the Sandhills Luncheon Cafe, a tin building in midtown, all this has made for a very good year.
After 11:30 a.m. or so "we have them standing and waiting," she says, as she whips out orders for hamburgers and the daily special (grilled roast beef, cheese and jalapeno pepper sandwich on whole wheat, potato salad, baked beans and pudding, plus coffee or iced tea.
Price: $4.50).
Mike Huber, a roustabout, is even making it in his new career as an entrepreneur.
He started Arrow Roustabouts Inc. a year ago with a loan from a friend, since repaid, and now employs 15.
He got three trucks and a backhoe cheap.
"I want to add one more truck," Mr. Huber says.
I sense that it's going to continue to grow.
That's the word.
The word is out.
Eight people, including a supervisor of Security Pacific National Bank's central vault, were arrested in an investigation of an alleged drug money-laundering operation.
The U.S. Attorney's office filed a criminal complaint against six bank employees charging them with conspiracy in the scheme, which apparently was capable of handling millions of dollars a week by funneling cash through fictitious bank accounts.
Two other men also were charged with participating in the operation.
The arrests capped a four-month investigation by the Internal Revenue Service, the U.S. Attorney's office and a Security Pacific internal investigation team.
Walter S. Fisher, executive vice president and general auditor of the bank's parent, Security Pacific Corp., said no bank funds were at risk during the investigation.
Arrested were Jose O. Lopez, 27 years old, of Whittier, Calif., the vault supervisor; Carlos O. Huerta, 29, of La Puente; Luis A. Arroyo, 36, of Los Angeles; Ignacio Rojas Jr., 32, of Baldwin Park; Doris Moreno, 37, of Bell Gardens; and Ana L. Azucena, 27, of Huntington Park.
Geno M. Apicella, 27, of Los Angeles, and Terrell N. Madison, 27, of Hawthorne, were also charged with participating in the conspiracy.
Each defendant faces a possible sentence of 20 years in prison and $250,000 in fines.
The defendants couldn't immediately be reached for comment.
S.A. Brewing Holdings Ltd. began laying the groundwork to launch a rival offer for Bond Corp. Holdings Ltd.'s Australian brewing operations.
Such an offer could torpedo a plan by Lion Nathan Ltd. of New Zealand to acquire half the brewing interests.
But it would probably increase the amount of cash that debt-ridden Bond Corp. would earn from the transaction.
Australia's National Companies and Securities Commission said it will allow S.A. Brewing to acquire an option on as much as 20% of Bell Resources Ltd., a unit of Bond Corp. that is in the process of acquiring Bond Corp.'s brewing businesses for 2.5 billion Australian dollars (US$1.93 billion).
S.A. Brewing, which is 20%-owned by Elders IXL Ltd., Australia's largest brewer, will make a takeover offer for all of Bell Resources if it exercises the option, the corporate regulators said in a statement.
Bond Corp., a brewing, property, media and resources concern controlled by financier Alan Bond, is selling many of its assets to reduce an A$6.9 billion debt.
Contrary to what might be expected based on the headline on John R. Dorfman's recent Money Matters article ("Pros Hit Theorists Right Where It Hurts" Oct. 3), I was able to stand proudly before my undergraduate finance students and proclaim that the findings of your yearlong experiment on stock picking is completely consistent with what they have been taught in the classroom.
In particular, I do not find the fact that your group of pros' monthly selections of four stocks outperforms the market in general to be inconsistent with market efficiency.
Mr. Dorfman states that an investor who invested $100,000 a year ago in the first four stocks selected by your pros and then sold those one month later, purchasing the four new pro picks, and repeated this process for the year would have accumulated $166,537, excluding account dividends, taxes and commissions.
In contrast, an investor holding the Dow Jones portfolio over the year would have accumulated only $127,446.
Accepted theories of asset pricing offer a perfectly legitimate explanation.
Accepted theories state that investors require higher returns on riskier investments.
Thus, rather than seeing the excess returns to the pro-selected portfolio as being abnormal, I see those returns as simply compensations for taking on added risk.
I believe the risk for each individual stock selected by your pros is very large.
If you asked me to select a stock with the highest expected return, I would select a stock with the greatest amount of undiversifiable risk, as I am sure your pros do.
Your hypothetical investor is simply being compensated for taking on this added risk.
Moreover, your hypothetical investor has forsaken the gains to be had in reducing risk by diversifying his portfolio.
A four-stock portfolio is still exposed to a great deal of unnecessary risk.
This means the returns can vary a great deal.
Mr. Dorfman provides confirming evidence of this phenomenon when he reports that your staff of dart throwers would have accumulated only $112,383 by randomly selecting four new stocks to be held in a portfolio each month.
Scott E. Hein Texas Tech University Lubbock, Texas Your Investment Dartboard article misses the target.
The fact that stock pickers have bested a randomly selected portfolio in eight of 12 months has no bearing on the efficient-market theory.
What matters is that the stocks recommended by your pros tend to be substantially riskier than a diversified portfolio.
For example, your pickers' recommendations for the coming month are, on average, 22.5% riskier than holding the market portfolio according to Value Line's Beta estimates.
James Morgan's pick for October -- Dynascan -- is a substantial 35% riskier than the market portfolio; his lauded Thermo Electron pick is 40% riskier.
Eric C. Meltzer
Peter W. Likins, president of Lehigh University, Bethlehem, Pa., was elected a director of this maker of industrial motion-control parts and systems.
His appointment expands the board to 13 members.
California Thefts Make Travel Agents Jittery
BEING A TRAVEL agent used to be pretty glamorous.
Now it's getting downright dangerous.
In recent months, more than 25 agencies have been robbed, compared with only a handful all last year, according to police and travel-agency groups.
Most of the cases have been in California, where one agent was stabbed and another was shot and killed.
Los Angeles police say the thieves seem to be part of a crime network that knows how to convert blank tickets into real ones.
Already, the stolen tickets have been used for flights all over the world.
So far, the thieves have stolen 3,632 blank tickets, according to Airline Reporting Corp., a ticket processing center.
Police say the robberies are usually pulled off by two to five men, who walk into the agencies near closing or lunch time, when few employees are there.
"They looked like ordinary vacationers at first," says Willy LLerena, owner of Travel Air Service in Monte Bello, Calif., describing five men who entered his agency last June.
But then, he says, they put two loaded pistols to his temple and demanded he open the safe.
When he initially refused, he says, they stabbed him in the back and made off with $2,000 and 280 blank tickets.
"They said they wanted to show me how serious they were," he says.
As word of the crime spree has spread, many agents have started changing their open-door policies.
At El Monte Travel Center in El Monte, Calif., customers now can get in only through a buzzer and lock system.
"It's hard to deal with clients this way in a service business," says Ralph "Bud" Conner, owner of the agency, which was robbed of 180 blank tickets and $850 last month.
"But we're just too nervous."
The robberies also have set off a controversy involving the airlines.
Agents say airlines, which track ticket numbers of all stolen tickets, should be doing more to catch the thieves by confiscating the tickets when they're used.
"They have the most sophisticated computers in the world," says Mr. LLerena.
"They ought to be able to do this."
But airlines say it would be too expensive and cause too many delays if they started using computerized scanners to check tickets at the gate.
Texans Get Reasonable Car Rental Insurance
CONSUMER advocates have long claimed that car rental companies charge too much for car rental insurance.
Now, a new law in Texas seems to be providing the proof.
The law -- the first of its kind -- requires car rental companies in Texas to charge only "reasonable" rates for collision-damage waiver insurance.
Specifically, the law says the rates must closely reflect what the company's actual expenses have been to replace damaged cars.
Before the law went into effect last month, car rental companies were charging as much as $12 a day for the waiver in Texas.
Now, they're charging as little $3 a day.
"If they're telling the truth now, then they've been charging 300% more than what is reasonable," says Steve Gardner, an assistant state attorney general in Texas.
A spokesman for Hertz Corp. acknowledges, "The waiver isn't a source of protection for consumers, but a source of revenue."
But Hertz points out that at least it's now charging only $3.95 a day in Texas, while some competitors are charging $6.99.
The state attorney general's office is investigating rental car agencies charging noticeably higher prices.
Flight Attendants Lag Before Jets Even Land
IF YOUR FLIGHT attendant seems a little weary, it may be because he or she has been working 20 straight hours.
A recent study for the Federal Aviation Administration found that major airlines sometimes make flight attendants work 16 hours or more straight -- despite union contracts at some airlines limiting duty time to 14 hours.
Some flight attendants on charter planes are putting in 20-hour work days, the study found.
This happens because the FAA doesn't have any rules on duty time for flight attendants; by contrast, it strictly restricts duty time for pilots and air traffic controllers, usually to a maximum of 10 consecutive hours.
"As far as the FAA is concerned," says Matt Finucane, air safety director at the Association of Flight Attendants, "flight attendants can work an unlimited number of hours."
Experts say such long hours for attendants pose a safety risk.
For instance, tired flight attendants might not react quickly enough during an emergency evacuation.
"At the end of their day, they are zombies," says John Galipault, president of the Aviation Safety Institute, a public-interest group in Worthington, Ohio.
"They have to work such long hours and then we expect them to be heroes if there's an evacuation."
In response to the study, the FAA says it is considering changing its policy -- or lack of it -- on flight attendants.
The agency may not have much choice: A congressional bill has been introduced that would force the agency to limit flight attendant duty time to 14 hours on U.S. flights and 16 hours on international trips.
Odds and Ends
GOLF HAS BECOME the latest diversion for travelers stuck at some airports.
Simulated golf games, in which players hit golf balls into nets, have been installed at airports in Denver and Pittsburgh. . . .
The average cost for breakfast at a "decent" hotel restaurant in New York is $17.12, according to Corporate Travel magazine.
The cheapest, among 100 cities surveyed, was $5.11 in El Paso, Texas.
Mark Q. Huggins was named executive vice president and chief financial officer.
Mr. Huggins, 39 years old, formerly was controller and chief accounting officer at Harte-Hanks Communications Inc.
Management Co. manages entertainers and produces, markets and finances entertainment.
Why do you continually ignore the salubrious effects of indexing the basis of capital gains for inflation?
Why do you maintain the House-passed capital-gains plan is a "temporary" reduction when it is not?
I think the reason is that you are confusing tax "rates" with tax "payments."
Your Sept. 29 page-one story on the House-passed capital-gains plan is a good example.
You lead readers to believe that the House reduced the capital-gains tax for two years only.
You virtually ignore the tax-reducing power of indexation, which in many cases is more substantial than a lower rate.
The monetary tax benefit of indexation for all gains in excess of inflation can be measured using the following equation: tax rate, times inflation rate, times basis for the gain.
Depending on the size of the gain and the rate of inflation, indexation can mean a lower tax payment than using the 19.6% rate without indexation.
But in any event -- and this is the important point -- tax "payments" on capital gains will be lower with indexation than under current law, even though the tax "rate" is the same under both systems.
As you can see, the capital-gains reduction plan adopted by the House would not be temporary, but permanent.
I hope that you begin talking about the plan's permanent and, in my view, most beneficial feature -- indexation.
Rep. Robert K. Dornan (R., Calif.) Washington
That the motivation for the two-year reduction to 19.6% is budgetary does not mean it is not in the public interest.
The reduction eases the burden on portfolio changes and frees capital to seek more productive or more appropriate uses.
But what is really significant is the indexation of capital gains after 1991.
To argue that this is "not likely" to affect the economy in positive ways is contrary both to recent experience with capital-gains tax cuts and to common sense.
A large part of the long-term appreciation of assets reflects inflation, and the taxation of inflation-created capital gains is confiscation.
Does the Journal really believe that people ignore the prospect of having a substantial part of their capital confiscated when they decide whether to save or how to invest?
Under current law, it is not financially rational to forgo consumption.
Real, aftertax returns from financial assets are on the order of 1% or 2% a year.
The capital-gains tax reform is a step toward correcting one of the gravest structural weaknesses of the U.S. economy, the closely connected phenomena of low savings rates, weak capital formation and high capital costs.
J. Sigurd Nielsen Richmond, Va.
Isaac Hersly, 41 years old, was elected president and chief operating officer of this designer and marketer of graphics, video, cable and other television-related equipment.
He succeeds Alfred O.P. Leubert, 66, who continues as chairman and chief executive officer.
Mr. Hersly formerly was group vice president of marketing and product planning for Chyron and president of the telesystems and video products division.
W.R. Grace & Co. said it formed a new horticultural-products company by combining its soil-nutrients and fertilizers business with Sierra Chemical Co., Milpitas, Calif.
Grace, a maker of specialty chemicals that already owned about 30% of closely held Sierra, said it owns a 49% stake in the new company.
Grace said it didn't invest any additional capital in the venture, which will be known as Grace-Sierra Horticultural Products Co.
The business is expected to have sales of about $100 million in 1990, Grace said.
The new company's product lines will be aimed at nurseries, greenhouses and the lawn and garden industry.
The Financial Accounting Standards Board said it will soon issue a rule requiring disclosure about the financial risk of certain financial instruments.
But the chief rule-making body for accountants backed off one part of its original proposal made earlier this year that would have required a breakdown of certain balance-sheet items related to off-balance sheet instruments.
The balance-sheet detail was opposed by many banks and thrifts that felt the cost of supplying such data wasn't worth the value of the disclosures.
Under the initial proposal, for example, banks would have been required to disclose that portion of allowances for loan losses that reflects specific letters of credit for which customers had defaulted.
The final rule won't require such a breakdown of the allowances for loan losses, which appears on the balance sheet.
The FASB rule will cover such financial instruments as interest rate swaps, financial guarantees, foward interest rate contracts, loan contracts, loan commitments and options written on securites held.
It will require companies to spell out in more detail collateral polices and concentrations of credit risk for all financial instruments.
The rule will require companies with financial instruments that have off-balance sheet risks to disclose data about the value and terms of the instruments, any accounting loss that would occur if the outside party involved in the instrument failed to perform, and the company's policy for requiring collateral or other security for the instrument.
Scott Miller, an FASB project manager, said that a final rule will be issued before year end.
But he noted that the initial effective date of the earlier proposal had been delayed by six months.
Poughkeepsie Savings Bank said a plan to sell its South Carolina branch offices to First Citizens Bank, of Columbia, S.C., fell through.
Poughkeepsie also expects to post a one-time charge of $8.3 million, resulting in a net loss for the third quarter.
The charge represents a write-down of the goodwill associated with Poughkeepsie's investment in the banks it is trying to sell and its North Carolina branches as well.
The thrift announced the plan Aug. 21.
Among other reasons, high fees regulators imposed on certain transfers of thrift deposits to commercial banks "substantially altered the economics of the transaction for both parties," Poughkeepsie said.
Additionally, the bank is increasing its loan-loss reserves for the third quarter by $8.5 million before taxes.
In the year-earlier third quarter, Poughkeepsie Savings had net income of $2.8 million, or 77 cents a share.
Poughkeepsie said it is continuing to try to sell itself, under a June agreement with a dissident-shareholder group.
The bank also said its effort would continue past the Nov. 1 deadline set in that agreement and that the litigation between the two sides might resume as a result.
The thrift and the holders had suspended their lawsuits as part of the agreement.
Joe Frank Sanderson Jr. was elected president and chief executive officer of this poultry producer.
Joe Frank Sanderson, who is currently chairman, chief executive and treasurer, will remain chairman.
The current president and chief operating officer, J. Odell Johnson, was elected to the new position of vice chairman of the board.
Kinder-Care Inc. was dropped from the consumer services industry group of the Dow Jones Equity Market index because the company split itself in a restructuring.
It was succeeded in the group by Fuqua Industries Inc.
Both moves are effective today.
A potentially safer whooping cough vaccine made by novel genetic engineering techniques was described by a team of Italian, U.S. and Japanese scientists.
The team reported they managed to induce bacteria to produce a non-toxic version of the poisons produced by the bacterium that causes whooping cough.
Laboratory tests showed that non-toxic versions of the poisons are capable of inducing an immunity to whooping cough, the researchers reported in this week's issue of the journal Science.
The current vaccine for whooping cough, or pertussis, is part of the "DPT" (for diphtheria, pertussis, tetanus) shot given most infants and young children.
The vaccine is effective in preventing a disease that still afflicts about 60 million children a year world-wide, causing an estimated one million deaths.
The vaccine, however, causes allergic reactions that can be fatal.
The reactions stem from the fact that the vaccine contains multiple copies of the whole Bordetella pertussis bacterium, which causes whooping cough.
This bacterium produces a toxin that, if used as a vaccine, can induce immunity to whooping cough.
Unfortunately, the toxin is also poisonous.
The Italian-led scientific team said they had succeeded in getting bacteria to produce a non-toxic version of the pertussis toxin, which could be used as a safe vaccine.
The researchers reported they have been able to pluck the five genes that produced the toxin out of the pertussis bacterium.
It turned out that although it took all five genes to produce the toxin, only one was responsible for the toxin's virulence.
Ordinarily in genetic engineering each of these genes, minus the one that caused the virulence, would have been transferred to another bacterium, called E. coli, which would then produce a nonvirulent version of the toxin.
The researchers said they did this, but the toxin didn't induce immunity to whooping cough.
The scientists then took the five toxin genes and triggered a mutation in the one gene that caused virulence.
Then, using a new technique (called homologous recombination) for introducing genes into cells, they transferred all five genes to bacteria closely related to the pertussis organism.
These bacterial "cousins" ordinarily don't make the toxin.
But the genes were accompanied by a piece of DNA, called a promoter, that turns the genes on.
The new bacteria recipients of the genes began producing pertussis toxin which, because of the mutant virulence gene, was no longer toxic.
Experiments showed that the new, non-virulent toxin is capable of inducing immunity, according to the researchers from the Selavo Research Center in Siena, Italy, the Medical College of Wisconsin in Milwaukee and the Japanese National Institutes of Health.
Carl E. Pissocra, president and chief executive officer of Bank One, Dover, has been named regional president, a new post at the bank-holding company.
Mr. Pissocra, 56 years old, will be responsible for the company's 10 banks in the Eastern region.
Dan J. Hartwell, 41, executive vice president of Bank One, Dover, was named president and chief executive of the Dover bank, succeeding Mr. Pissocra.
No one was named to succeed Mr. Hartwell.
At a time when foreign banks are pouring vast resources and personnel into West Germany's financial center, the opening of a three-man office on a Frankfurt side street shouldn't attract much attention.
Unless, of course, it happens to be run by the Rothschilds.
After an 88-year absence from the birthplace of the family banking empire, the return of the Rothschild group to Frankfurt was greeted by the glare of television lights, curious reporters and a mayoral reception in Town Hall.
Like other foreign banks establishing a presence here, the family describes its move as a calculated decision to set up a financial services outlet in Europe's largest economy ahead of the integration of European Community markets after 1992.
Yet the Rothschilds don't deny an emotional element to the decision.
In 1796, Mayer Amschel Rothschild founded Bankhaus M.A. Rothschild & Sons and later sent his four sons to London, Paris, Vienna and Naples to begin the bank's expansion during the early 19th century.
The original bank in Frankfurt closed in 1901 after the death of Wilhelm Carl von Rothschild, and the family's banking activities focused on London and Paris.
Baron Elie de Rothschild, the family's elder spokesman, explains that by the end of the 19th century, Berlin had replaced Frankfurt as Germany's financial center.
Yet the chief reason for the closure, he says, was rooted in a family tradition that wouldn't allow a bank to bear the Rothschild name without a Rothschild in its management.
"At the time we had only daughters," explains the 72-year-old patriarch, "so we had to close the bank."
Much of the family's mystique remained.
Although its palatial residence was destroyed by bombs during World War II, the Rothschilds' place in Frankfurt's history is still recalled by the city park and a street bearing the Rothschild name.
The family's long absence is understandable.
The family was in Allied countries during both World War I and the long period of economic strife of the 1920s.
During the Third Reich, the Rothschilds were a target of Nazi propaganda against Jewish financiers.
The persecution pursued the Rothschilds across Europe as the Nazis grabbed countries, confiscating the family's property in the process.
American journalist William L. Shirer, in his book "The Rise and Fall of the Third Reich," wrote of how in Vienna he had witnessed "squads of {Nazi} SS men carting off silver, tapestries, paintings and other loot from the Rothschild palace."
In the immediate postwar years, the Rothschilds concentrated on rebuilding their other European operations, delaying their return to Frankfurt.
"For a member of the Rothschild family, the return to Frankfurt is a very meaningful event, although it might not mean as much to German banking as it means to us," says Baron David de Rothschild, Elie's younger cousin and a partner in Rothschild & Cie. Banque in Paris.
Indeed, the competition isn't greatly concerned.
"It would be surprising if they didn't come to Frankfurt in time for 1992, and they bring an interesting tradition.
But the market really isn't going to be stood on its head," said a banker at one of Frankfurt's Big Three banks.
The return of the Rothschilds is modest.
The new representative office, with one manager and two assistants -- none a member of the Rothschild family -- will carry out no banking operations of its own.
Instead, it is to seek out corporate financing business and sell investment products on behalf of the family's mainstay banking units: N M Rothschild & Sons Ltd. in London, Rothschild & Cie. in Paris and Rothschild Bank AG in Zurich.
The constraints don't bother the office's 54-year-old manager, Erich Stromeyer.
He left his job as general manager of Shearson Lehman Hutton Holdings Inc.'s Frankfurt office because, he says, "When the Rothschilds called, I couldn't resist."
Each Rothschild bank is linked by family ties and cross-ownership.
In March, N M Rothschild in London and Rothschild Bank in Zurich showed assets of #4.1 billion ($6.51 billion) and 1.26 billion Swiss francs ($774 million), respectively.
The Paris bank doesn't publish that figure.
In Europe, the Rothschilds banks are focusing on mergers and acquisitions as European industry restructures ahead of 1992.
Yet the group's limited resources makes it a niche player.
"Obviously, there are quantitative limitations on the assistance we can provide," concedes Baron David de Rothschild, "but we feel we have some cards to play."
Among them, he says, is the family's traditional ties to old wealth and decision-makers in banking and industry throughout Europe and beyond.
The Rothschilds hope to use a long history in private banking and an aura of exclusivity to attract private and institutional investors.
As at the Zurich bank, the minimum investment for individuals will be high: about a million German marks ($538,000), three times what many other West German investment banks require.
"But we do make exceptions," says a smiling Baron Elie de Rothschild, "especially if they are very young and have very rich parents.
As program trading comes under renewed attack for causing stock market gyrations, a few people on Wall Street say it is time to consider extreme measures.
The real answer to curbing wild swings in stock prices, they say, might be to curb or even abolish stock-index futures.
A stock-index future is a contract to buy or sell the market value of a basket of stocks, such as the Standard & Poor's 500-stock index.
Since stock futures were created in 1982, trading on the Chicago Mercantile Exchange and other exchanges has boomed to the point where trading in stock-index futures rivals that in the stocks themselves.
The conventional view, as voiced by Goldman, Sachs & Co. partner Fischer Black, is that stocks and "derivatives" such as futures and options "form a single market, and that derivatives make it a more liquid market."
But increasingly, people are questioning that view, and the critics include some of the country's most successful investors.
Warren Buffett has been on record as opposing stock-index futures since their inception in 1982.
And Mario Gabelli, another star in the investing world, says, "My gut says the negatives of futures and synthetics far outweigh the benefits."
Like others, Mr. Gabelli says that if futures cause investors to lose confidence in stocks, they will move away from stocks -- as many have already done.
And those who remain, he says "will demand a higher return and over time raise the cost of capital to companies."
Essentially, the critics of stock-index futures fall into two camps.
One group says the futures contribute to stock market volatility; the other contends that futures are a sideshow of speculation that detracts from the stock market's basic function of raising capital.
"Before futures," says New York investor Michael Harkins, "you actually had to pay attention to whether the thing you were buying had any intrinsic value."
While it was once expected that futures would mimic stock prices, traders now routinely check the futures markets in Chicago before they buy or sell stocks.
When Chicago futures prices jump up or down, the New York Stock Exchange follows.
On Tuesday, for instance, the Dow Jones Industrial Average plunged 80 points in little more than an hour.
Then, in the space of a 20-minute coffee break, the average rallied almost all of the way back.
Paul Lesutis, who manages more than $3 billion of investments at Provident Capital Management Inc., blames futures markets for leading the way.
"The fundamentals don't change in an hour," he says.
"I think they should close down the futures exchange and then we could get back to investing."
Index arbitrage -- the rapid-fire buying and selling of stocks offset with opposite trades in futures -- is frequently blamed for adding to stock market volatility.
Although index arbitrage is said to add liquidity to markets, John Bachmann, managing partner of Edward D. Jones, says too much liquidity isn't a good thing
"The kind of instant liquidity that is implied by index futures is that you can buy a portfolio over two years and get out in one day.
It's too disruptive," he says.
"It isn't investing."
But stock-index futures have plenty of support.
Defenders say futures make markets more efficient and provide ways for investors to reduce risks.
They note that stocks experienced volatile swings long before futures.
And, defenders say, few people complain about futures when stock prices are rising.
Louis Margolis, managing director in charge of equity options and futures at Salomon Inc., says that trading baskets of stocks began in the 1970s, a decade before the advent of futures.
Futures, he says, merely cut down on trading costs.
He says "blaming futures is like blaming the messenger."
Since stock-index arbitrage merely narrows the gap between prices in the futures and stock markets, it can't add to volatility, he says.
Futures "don't need defending," says Andrew Yemma, a spokesman for the Chicago Mercantile Exchange, which trades the S&P 500, by far the largest stock-index futures contract.
Despite the current outcry over stock market volatility, few people expect stock futures to disappear.
For one thing, the Chicago futures exchanges have political and financial clout -- including many friends in Congress.
And traders say that futures have become an accepted part of the financial landscape.
"All life is about change -- either you adapt or die," says one Chicago futures trader.
"If futures aren't permitted here, we'll take it to Australia or Tokyo."
Average daily volume in S&P 500 futures last year was 44,877 contracts.
Based on yesterday's closing price of the S&P, the average value of one day's trading amounts to $7.6 billion.
By contrast, average dollar volume on the Big Board last year was $5.3 billion.
Many investment managers say futures are useful as a way to hedge portfolios.
If managers fear that the overall stock market will fall, but want to continue owning stocks, they can hold on to specific stocks and sell a corresponding amount of futures contracts.
Average daily volume in S&P 500 futures last year was 44,877 contracts.
Based on yesterday's closing price of the S&P, the average value of one day's trading amounts to $7.6 billion.
By contrast, average dollar volume on the Big Board last year was $5.3 billion.
Many investment managers say futures are useful as a way to hedge portfolios.
If managers fear that the overall stock market will fall, but want to continue owning stocks, they can hold on to specific stocks and sell a corresponding amount of futures contracts.
And although criticism of futures generally comes from Wall Street, one Chicago futures trader notes that brokerage firms rely on futures as hedging tools when they buy and sell big blocks of stocks from institutions.
One reason futures are said to add volatility is that -- unlike in stocks -- people can speculate in futures with little money down.
Margin requirements for speculators on the Chicago Mercantile Exchange are currently about 7%.
"For $10 million, you can move $100 million of stocks," a specialist on the Big Board gripes.
"That gives futures traders a lot more power."
By contrast, an investor in stocks must put up 50% in cash.
Some critics say futures encourage people to think of stocks as a single commodity, rather than as investments in individual businesses.
Thus, they say, futures inhibit the basic purpose of the stock market: to accurately price securities so that capital and investment flows where it's needed most.
The S&P 500 index futures "transferred the identity of 500 stocks into one unit-making them a simple commodity to trade," says George Kegler, senior vice president at A. Webster Dougherty in Philadelphia.
"It took away the need to know the bad third-quarter report of IBM, for example," Mr. Kegler says.
Of course, portfolio trading -- the increasingly common practice of buying or selling baskets of actual stocks -- also treats stocks as homogenous commodities.
"There is a class of investor that wants to be exposed" to the whole market, says Sandip Bhagat, assistant vice president at Travelers Investment Management Co.
The S&P futures are merely a "cheaper and quicker" way to get access to all 500 stocks, he says.
The Big Board yesterday began trading in its own basket trading vehicle representing the S&P 500 stocks.
But owning index futures isn't the same as owning the underlying stocks.
Stockholders, as a group, can win, because they own a share of corporate earnings, which can grow and boost stock prices.
Futures, on the other hand, are a zero sum game -- a market for making side bets about the direction of stock prices.
"You don't own anything," says Stephen Boesel, a money manager for T. Rowe Price in Baltimore.
"You're making a pure bet on the market.
The European Community Commission challenged an agreement on routes and fares between France's two largest airlines on antitrust grounds.
Meeting in Strasbourg Wednesday, the commission voted, as expected, to formally object to the accord between Air France, the state-owned airline, and state-controlled domestic carrier Air Inter.
An EC spokesman said the two companies will be notified so they can begin negotiations with Brussels on how to modify the pact.
At issue is an accord dating back to March in which Air France gained access to five domestic French routes under Air Inter's flight numbers and the domestic airline got to fly to five cities outside of France under the flag of Air France.
The two shared results from this route swap, and followed rules on ticket pricing.
The EC Commission decided that such an accord doesn't benefit consumers enough to merit an exemption from antitrust law.
The airlines presented it as offering consumers more choice and better flight connections.
An Air France spokeswoman said, "we're absolutely ready to study all solutions."
An Air Inter spokesman said, "Because they {the EC} have doubts, we will work again on the text and the contents of the accord.
A state appellate court reinstated the 1987 convictions of Pymm Thermometer Corp. and two of its executives on charges of assault for exposing workers to toxic mercury vapors.
The indictment charged that Pymm operated a machine to crush broken thermometers and recover the mercury in an illegal workroom.
The charges said that one worker suffered permanent brain damage from mercury exposure.
The judge handling the case in state Supreme Court, a trial court, had tossed out the jury verdicts, ruling that the matter should have been handled under federal Occupational Safety and Health Administration rules.
But the Appellate Division of State Supreme Court held that federal law didn't pre-empt the states from such a prosecution.
Elizabeth Holtzman, district attorney for Brooklyn, N.Y., said, "The appellate division has agreed with our view that despite federal worker-safety laws, state prosecutors have the power to protect working people."
Lawyers for the company and executives couldn't be reached for comment.
The executives face five to 15 years in prison and fines of $5,000 or double the profit made by failing to comply with the rules.
The company could be fined a maximum of $10,000, or double the profit.
General Motors Corp. wants to buy as much as 15% of Jaguar PLC, marking its first salvo in a possible full-scale battle against Ford Motor Co. for control of the British car maker.
GM sought U.S. antitrust clearance last week to purchase more than $15 million worth of Jaguar shares but doesn't own any yet, according to GM officials here and at the company's Detroit headquarters.
The No. 1 U.S. auto maker then wrote Jaguar that it intends "to go to that 15%" level once it wins the U.S. clearance to go beyond $15 million, a Jaguar spokesman said yesterday.
The GM move follows Tuesday's declaration by Ford, which holds an unwelcome 12.45% stake in Jaguar, that it is prepared to bid for the entire company.
GM is close to completing a friendly deal with Jaguar that is likely to involve an eventual 30% stake and joint manufacturing ventures.
Speculative investors, betting on an imminent clash between Ford and GM, pushed up Jaguar's share price five pence (eight U.S. cents) to a near-record 720 pence ($11.60) in late trading on London's stock exchange yesterday.
Since Tuesday, the shares have gained nearly 4%.
But an all-out bidding war between the world's top auto giants for Britain's leading luxury-car maker seems unlikely.
"We will not go over a certain level," said David N. McCammon, Ford's vice president for finance, at a news conference yesterday in Dearborn, Mich.
"There's some price at which we'd stop bidding."
He wouldn't specify what it was.
And powerful political pressures may convince the Conservative government to keep its so-called golden share, which limits any individual holding to 15%, until the restriction expires on Dec. 31, 1990.
"I really don't see the government doing something that Jaguar doesn't want over the next 14 months," said Kenneth Warren, a Conservative member of Parliament and chairman of the Select Committee on Trade and Industry in Britain's House of Commons.
"The golden share is a single share, but it is the magic share."
The government retained the single share after selling its stake in Jaguar in 1984 -- part of a nationalistic practice of protecting former government-owned enterprises to deflect criticism of privatization.
The 15% restriction covers any would-be suitor, British or foreign.
Ford is willing to bid for 100% of Jaguar's shares if both the government and Jaguar shareholders agree to relax the anti-takeover barrier prematurely.
As Jaguar's biggest holder and Britain's biggest car maker, Ford could turn up the heat by convening a special shareholders' meeting and urging holders to drop the limits early.
Ford might succeed because many shareholders are speculators keen for a full bid or institutional investors unhappy over Jaguar management's handling of its current financial difficulties.
The government probably wouldn't give in readily to a hostile foray by Ford, however.
It has relinquished a golden share only once before -- during British Petroleum Co.'s #2.5 billion ($4 billion) takeover of Britoil PLC in 1988.
In wooing British lawmakers, GM has pointed out that its willingness to settle for a minority stake would keep Jaguar British-owned and independent.
This week, the U.S. auto giant paid for 10 House of Commons members and two House of Lords members to fly to Detroit and tour its operations there.
While the visit was unrelated to Jaguar, GM Chairman Roger Smith answered the legislators' questions about it over lunch Tuesday.
He said Jaguar "shouldn't be smothered by anyone else," recalled one participant.
Politics also influences the government's thinking on the anti-takeover restriction.
The Conservatives don't dare jeopardize marginal Tory seats in Coventry, where Jaguar has headquarters, nor can the government easily back down on promised protection for a privatized company while it proceeds with controversial plans to privatize most of Britain's water and electricity industries.
Prime Minister Margaret Thatcher might, however, be receptive to any request by Jaguar Chairman Sir John Egan for the restriction's early removal to let GM amass more than 15% or mount a friendly suitor bid against Ford.
In the end, Sir John -- rather than the government or Jaguar shareholders -- may hold the key that unlocks the golden share.
Swedish rolling-steel and ball-bearing group AB SKF said its pretax profit rose 78% to 1.78 billion kronor ($278 million) in the first nine months from one billion kronor ($156 million) in the corresponding period a year earlier.
SKF said sales increased 17% to 18.46 billion kronor from 15.72 billion.
Earnings per share were 10.35 kronor compared with 5.80 kronor.
SKF said demand for the group's main product, rolling bearings, remained favorable in Europe, which accounts for slightly more than two-thirds of group sales.
Latin American markets continued their recovery after a weak start to the year, SKF said.
The company said the situation in the U.S. is still uncertain as reduced production in the country's automotive industry has resulted in weakened demand for rolling bearings.
Analysts said SKF's results for the first nine months lived up to market expectations as brokerage firms had predicted a pretax profit of 1.74 billion to 1.86 billion kronor.
The three business areas engaged in rolling bearing operations continued to show favorable sales development.
Sales of rolling bearings increased 19% to 15.7 billion kronor from 13.2 billion kronor in the corresponding period the previous year.
We read with interest Robert Tomsho's Sept. 28 page-one article on Robert Redford ("The Sundance Kid Gets Little Respect Around Sundance").
Misunderstanding conversations with us, Mr. Tomsho argued that Mr. Redford's environmental views are at odds with Utah residents.
This may have been true 10 years ago, but times have changed, even in Utah.
Mr. Redford no longer stands out as an extremist.
He has not changed, but those around him have.
Many of his views on the protection of wilderness areas, rivers and canyons are now embraced by mainstream, conservative Utahans.
Recently, some 60 environmental and outdoor groups representing such divergent points of view as the Sierra Club, the League of Women Voters and the National Rifle Association joined together to request a reassessment of the environmentally unsound Central Utah Project.
While Utah is not yet a haven for environmentalism, public views toward the environment have significantly improved.
In one of the most conservative, Republican states in the entire nation, the greening of Robert Redford's neighbors is the real story that Mr. Tomsho missed.
Sammye Meadows Sam Rushforth Gary Bryner Heber City, Utah
If Mr. Redford wanted to be accepted by the people of Utah, he should have taken an advisory role instead of one of forcing his personal preferences.
Furthermore, his actions imply that it is too damaging or costly for society to provide jobs through power-plant construction, coal mining or to build roads for public safety because of the adverse impact on the environment, but it is just fine and dandy for him to transform a mountain high in the Wasatch Range into a ski resort.
It astounds me he can rationalize his self-righteous and greedy actions in Utah.
An excellent environmental actor he is.
David Vranian M.B.A. Student University of Colorado Boulder, Colo.
Mr. Redford, like it or not, is like a braking system on a runaway truck, kind of slowing it down into control.
He's rich, famous and intelligent, and has the time to do something that not even the federal government will do.
Mr. Redford is slowing down a mindless, speeding maniac known as the progress of mankind.
Personally, I'm glad there are people like him around to slow down the profit takers, and those who are in such a blind hurry for something that may appear to benefit them in the immediate future, not caring about the long-range implications.
Ron Dyer
When President Bush travels to Costa Rica today, he'll go with little of the fanfare that accompanies many of his foreign travels.
But the two-day trip still has managed to fuel controversy over his administration's policies in Central America.
Some conservatives say Mr. Bush shouldn't make the trip, during which he will participate in Costa Rica's celebration of 100 years of democracy.
These critics object to Mr. Bush's participation in a meeting that includes Nicaraguan President Daniel Ortega among the guests.
In addition, they argue he won't help Washington's standing in the region by trumpeting the U.S. commitment to democracy less than a month after his administration played an ineffectual role in the failed coup attempt in Panama.
"I believe it will do more damage than good because it will legitimize people like Daniel Ortega," says Curtin Windsor, who served as U.S. ambassador to Costa Rica during the Reagan administration.
Mr. Windsor, among other analysts connected to the conservative Heritage Foundation, fears the gathering of 18 leaders, mostly from Central American nations, will force Mr. Bush "to explain and redeem himself" in the wake of charges that the U.S. failed to do enough to aid the removal of Panamanian dictator Manuel Noriega.
At the same time, liberal and moderate Democrats note the irony of Mr. Bush's joining a celebration of Costa Rican democracy at a time his administration has sought sharp cuts in U.S. aid to the tiny country.
The administration proposed only $57 million in so-called economic support funds for Costa Rica this year, down from the $90 million the U.S. provided last year.
The administration said improvements in Costa Rica's economic condition warrant the cut in aid, which the country uses mainly to make payments on its $4.5 billion foreign debt.
But Costa Rican officials argue that the recent drop in coffee prices, combined with the country's continuing struggle to reinvigorate its economy, make the support as necessary as ever.
"We are crossing the river and we need a little more help to get to the other side," said Rodrigo Sotela, an economic affairs specialist at the Costa Rican Embassy in Washington.
Democrats argue that Costa Rica deserves more assistance for the same reason that Mr. Bush is attending the celebration this weekend: to reward the country for its stability in a region wracked with turmoil and for its efforts to promote peace in Nicaragua.
However, peace efforts by Costa Rican President Oscar Arias haven't always helped the country's cause in Washington.
Mr. Arias's long-time refusal to support the U.S.'s campaign against leftist Nicaragua earned him the ire of the Reagan White House.
And more recently, he insisted on signing a five-nation agreement intended to disarm Nicaragua's U.S.-backed Contra rebels faster than the Bush administration would prefer.
"I think Bush's going there is a helpful sign," said Sen. Terry Sanford (D., N.C.) a member of the Foreign Relations Committee who pushed to provide Costa Rica about the same amount of aid as it received last year.
Lawmakers in both houses support the higher level.
Administration officials defend Mr. Bush's decision to make the trip.
While they acknowledge the president will attend several meals and a working session also attended by Mr. Ortega, they insist that Mr. Bush won't be extending the Nicaraguan leader any special courtesies.
The administration also made clear its continuing distate for the leftist Nicaraguan government in recent days, endorsing a package of electoral aid to the Nicaraguan opposition, renewing the U.S. trade embargo against the country and continuing to complain that the country supports rebel groups in the region.
Officials also insist Mr. Bush will use the trip to highlight his own initiatives for pushing democracy in the region, fighting illegal drugs and assisting the less developed countries.
"Let me say there is a symbolic component to this trip," Secretary of State James Baker told reporters Wednesday.
"There won't be any formal resolutions or communiques, I don't think.
But we still see this as an opportunity to discuss many, many very important issues.
In 1987, the Presidents Commission of the NCAA, which oversees most U.S. intercollegiate sports, contracted with the Washington-based American Institutes for Research to do a survey on the college experiences of what the body chooses to call student-athletes.
A brief "executive summary" was issued last April, and attracted some, but not much, attention.
More-detailed reports followed, and attracted even less notice.
I suspect I may be one of the few people to have read them all.
The sixth and last report now is out, and it puts the effort in perspective.
Titled "Comments From Students," it focuses on the real shame of college sports: what happens to young athletes once they enter academe.
It's little less than a cry for help from those who make the costly show possible.
The previous five reports were mainly statistical, but clear enough in outline.
They showed that participants in Division I football and men's basketball, the big-time "revenue sports," entered school with poorer high-school grades and test scores than "minor-sport" jocks and students who participated in other extracurricular activities, and they got lower grades once they got there, at least partly because of the athletic demands placed on them.
The football and basketball players spent more time on their sports in season than they did on class attendance and homework combined (30 hours a week versus 25.3).
Almost half (49.8%) reported suffering "mental abuse" from coaches, and almost one-quarter (24.8%) said they had been pressured to ignore injuries.
But even those numbers don't describe the situation as well as the athletes do in their own words.
The composite portrait that emerges isn't of a pampered jock marking time until he can land a seven-figure pro contract -- he's part of a tiny minority.
Rather, it's of a kid (we're talking about 17 to 22 year olds here) having a tough time making the best of what will probably be his one shot at college.
The pertinent question, coming at the end of a lengthy, confidential questionnaire, was this: "Are there things about your college life you would like to tell us that we didn't ask about?"
Of the almost 3,000 athletes surveyed, 1,240 took the time to respond.
Here are a few of their answers: -- "They say that I am a student-athlete, but really I'm an athlete-student.
They lied to me on the recruiting trip.
Football is the No. 1 thing here".
-- Junior football player.
-- "Being a student-athlete at college is a lot different from high school.
First, the sport you play is no longer a game -- it becomes a job.
Your coaches demand a lot more out of you even though some of them are not willing to take the time to watch you progress.
You become expendable.
Your interest is not taken to heart because people only care about your performance".
-- Freshman basketball player.
-- "The coaches should have a more personal and sympathetic attitude toward the athletes -- not treat us like pieces of meat.
They always say to get a degree first, but they don't allow us time or to skip practice to study for a test.
They just want to get their job done at any cost to the athlete".
-- Freshman football player.
-- "The pressure put on us to win at all times has resulted in physical violence, such as punching and slapping by coaches.
Some days the coaches make you feel as though you are part of a large herd of animals.
In other words, they treat you like a piece of meat".
-- Sophomore football player.
-- "Playing intercollegiate sports doesn't give you a lot of time to spend with others.
We are almost left out of {campus} social activities.
This mostly happens because we go from football in the fall to lifting in the winter to football again in the spring".
-- Freshman football player.
-- "You talk about free time -- .what free time?
Time to relax and enjoy ourselves is always taken up by something to do with football (meetings, lifting weights, conditioning or films).
There is no recovery period -- it's go, go, go.
ABUSE to our bodies is overwhelming.
With our schedule, it's hard to sleep well knowing what is going to happen the next day".
-- Junior football player.
-- "Physical exhaustion and depression are common in my life and in some of my teammates' lives".
-- Football player, class unspecified.
-- "More often than not, college athletes go through college never really experiencing collegiate life to the fullest.
One has to establish one's own identity away from athletics and make athletics only a part, not a whole, of the student-athlete's life".
-- Sophomore basketball player.
-- "Somehow, and I don't know how, the game needs to be played for fun again, and not for the big bowl revenues or lucrative TV contracts".
-- Graduate-student football player.
There have been rumblings that, at long last, changes may be in the works.
The Knight Foundation, of Akron, Ohio, has established a national commission to look into college-sports reform, and the NCAA Presidents Commission earlier this month recommended cutting spring football practice in half, moving the start of basketball practice back by a month and reducing maximum schedules in that sport to 25 games from 28.
The key word in that paragraph, though, is "may."
NCAA Executive Director Richard Schultz, in accepting a place on the Knight Commission, urged that the panel take a "balanced" view, which looks for all the world like a plea not to rock the boat too much, and the presidents' recommendations could face considerable opposition at the NCAA's full convention in January, which will vote on them.
I read that one unnamed athletics director predicted that the basketball-cutback proposal could fail because of "real world" (i.e., economic) considerations.
But the "real world" also includes the unpleasant truth that colleges are cheating the athletes they have wooed and won.
If they won't change their ways voluntarily, maybe somebody bigger -- Congress -- should make them.
They want late-night shuttles to the biology labs.
They want a 24-hour library.
And like college radicals everywhere, they are talking about a demonstration -- where protesters would gather quietly near the science building and raise their hands, classroom style.
Such is the fiber of the wool that woolly intellectuals let fly at gatherings of Harvard University's new Society of Nerds and Geeks, or SONG.
SONGsters are mad as heck about campus anti-intellectualism and they aren't going to take it anymore, at least not without trying a few really neat ideas first.
"We could have called ourselves the Academic Intellectual Society, but then everyone would have said, `Oh, you mean the nerd-and-geek club,'" Leonid Fridman, SONG's graduate-student adviser, told 19 attendees at the club's inaugural meeting earlier this month.
Membership has since swelled to between 20 and 25.
Some people may think of nerds as calculator-toting, socially awkward individuals with shirt-pocket liners for their pencils and a preoccupation with computers and matters numerical.
Geeks, by at least one definition, are chicken-mutilating circus freaks.
But SONG founder Jeremy Kahn, a Harvard junior, thinks of nerds and geeks more as "nonconformists," albeit with a studious bent.
One of the group's first projects is a "procrastination hot line" that students could call when they have an urge to delay studying.
The club plans to show nerdy movies, such as "Real Genius," in which physics whizzes pop corn with lasers; and naturally, the "Revenge of the Nerds," a tale of college males with runny noses and ill-fitting pants.
One of its "more ambitious goals" is to get Jaime Escalante, the Los Angeles high-school mathematics teacher featured in the film "Stand and Deliver," to come to Harvard for a guest lecture.
Nerds and geeks sometimes find themselves a bit isolated at Harvard.
So Mr. Kahn says high priority is being given to creating a computerized matchmaking service "where instead of being matched for eye color, you could be matched for similar intellectual interests."
For instance?
"I'm a math major, but I want to know about psychobiology.
Hopefully, I'd find someone in psychobiology who wanted to know more about mathematics."
It could work.
Meanwhile, finding a volunteer to write the computer program isn't a problem.
Dime Savings Bank of New York was cleared by the Federal Deposit Insurance Corp. to acquire Starpointe Savings Bank of Somerset, N.J., the banks said.
Starpointe holders, who approved the plan last April, will receive $21 in cash a share, or a total $63 million.
The FDIC cleared the move yesterday, and the banks must wait at least 30 days before closing the purchase.
A closing date hasn't been set.
AEP INDUSTRIES Inc. directors authorized a 3-for-2 split of the common, payable Dec. 7 to stock of record Nov. 22.
The split was aimed at boosting the stock's liquidity, said Brendan Barba, chairman of the Moonachie, N.J., maker of plastic film products.
After the split, the company will have more than 4.7 million shares outstanding.
In national over-the-counter trading yesterday, AEP shares closed at $21.25, down 50 cents.
CRESTMONT FEDERAL SAVINGS & LOAN ASSOCIATION (Edison, N.J.) --
Lawrence B. Seidman, 41 years old, was named chairman of this savings and loan institution.
He will succeed Charles L. Harrington, chairman and chief executive officer, who retired last month.
Crestmont is conducting a search for a chief executive.
Mr. Seidman, a director of Crestmont since July, is general partner of Seidman Financial Associates, which owns 9.89% of Crestmont.
William J. Russo was named senior vice president, public affairs and advertising, for this financial and travel services concern's American Express Bank Ltd. subsidiary.
Mr. Russo, 38 years old, previously was first vice president, public affairs and advertising, at the banking unit.
Environmental concerns are beginning to have as much influence in oil-industry spending plans as the price of crude does.
In the wake of the Exxon Valdez spill in March, new governmental drilling bans are sharply curtailing exploration in promising locations offshore and in Alaska.
At the same time, moves toward tighter air-quality standards are spurring interest in lighter or alternative fuels that don't pollute as much as fuel refined from "heavy" crudes, generally high in sulfur.
Over the years, the world's stream of oil has been growing heavier.
So the scramble is on for lighter crudes globally, and for natural gas in the U.S.
Recently Saudi Arabia and Venezuela, traditional heavy-crude producers, have boasted of new finds of light, low-sulfur oil by their national oil companies.
Venezuela has also earmarked $200 million in new money for light-crude exploration.
And some oil companies are trying to lock in future supplies.
Typical is Ente Nazionale Idrocarburi, Italy's state-owned energy company, which not long ago acquired through its AGIP oil subsidiary a 5% share in the consortium accounting for half of Nigeria's oil output.
AGIP already has an oil stake in Libya.
Both countries produce high-quality, low-sulfur crudes especially suited to making high-octane motor fuel at minimum refining cost.
Franco Reviglio, ENI chairman, looks for sweeping structural change in the oil industry -- he calls it a "revolution" requiring huge investments -- as a result of environmental issues.
He made a special trip to examine U.S. environmental trends because they are often followed in Europe.
ENI needs to know what's coming as it prepares to spend some $1.3 billion on upgrading its refineries, he says.
Oil companies world-wide will have "to spend a lot of money for the cleaner fuels that will be required," says John H. Lichtblau, the president of the Petroleum Industry Research Foundation.
It will go for work ranging from refinery modification to changes in the distribution system, including the way service stations pump fuel into cars.
In the U.S., the search for oil had been headed toward environmentally sensitive areas believed to have vast reserves.
Alaska's Arctic National Wildlife Refuge alone is thought to hide more than three billion barrels of oil.
Until the tanker spill, Big Oil was slowly convincing authorities it could safely produce from such places.
Now the wildlife refuge has been closed to the industry, possibly for years.
Similarly, a group of companies led by Chevron Corp. has been unable to pump oil found off the California coast in the early 1980s.
A huge production system built in the sea off Santa Barbara and ashore is sitting idle.
But the push for cleaner fuels is increasing the attractiveness of natural gas.
More than half the domestic drilling now under way is for gas, partly on the assumption that demand will rise for a fuel that is cleaner to burn than either oil or coal.
Activity has revived in the largest U.S. gas-producing regions, such as the Gulf of Mexico.
Santa Fe International Corp., which is owned by Kuwait (and isn't related to Santa Fe Southern Pacific's unit), is stepping up development of a well off Texas' Matagorda Island where it found gas in 1987.
"We could have sat on it longer, but the impetus is to get the gas to the marketplace," says Richard Poole, senior scout for Santa Fe International.
"We're trying to get it on line as soon as possible now."
This month, Exxon Corp. announced plans for a 400-day project drilling for gas about five miles underground in the Anadarko Basin of western Oklahoma -- the deepest drilling project in the U.S.
Exxon will use a Parker Drilling Co. rig built in 1981 that can go down 9 1/2 miles.
As the Soviet Union grapples with its worsening economy, leading reformers have drawn up a blueprint for change designed to push the nation much closer to a free-market system.
The proposals go far beyond the current and rather confused policies of perestroika, Mikhail Gorbachev's restructuring of the economy.
They lay out a clear timetable and methodology for liberalizing the system of setting prices, breaking up huge industrial monopolies and putting unprofitable state-owned companies out of business.
They also address such taboo subjects as the likelihood of unemployment and high inflation, and recommend ways to soften the social consequences.
While many solutions to the nation's economic troubles are being discussed, the blueprint is attracting widespread attention here because of its comprehensiveness and presumed high-level authorship.
Although it was published unsigned in the latest edition of the weekly Ekonomicheskaya Gazeta, Soviet sources say the article was written by Leonid Abalkin and a small group of colleagues.
Mr. Abalkin, head of the Academy of Science's Institute of Economics, was recently appointed deputy chairman of the Soviet government and head of a state commission on economic reform.
"It's clearly a manifesto for the next stage of perestroika," said one analyst.
The economic ideas in the document are much bolder than current policies.
For example, the proposed overhaul of prices -- an extremely sensitive political topic -- is far more precise than the vague plans announced by Mr. Gorbachev in 1987 and later dropped.
But the proposals also display political savvy, couching some of the most controversial ideas in cautious language so as not to alienate powerful conservatives in the government who stand to lose out if they are implemented.
Seeking a middle path between opponents of change and radicals who demand overnight solutions, the article advocates what it calls a "radical-moderate approach."
The document is to be discussed at a conference of leading economists late this month, and will probably be presented to the Soviet Parliament for consideration this year.
As policy-makers draw up proposals for the next five-year plan, which starts in 1991, the blueprint represents a powerful first shot in what is likely to be a fierce battle over economic reform.
The authors make a gloomy assessment of the economy and concede that "quick and easy paths to success simply don't exist."
Instead, they map out a strategy in several phases from now until 1995.
Most of the measures would probably only start to have an effect on beleaguered Soviet consumers in two to three years at the earliest.
The key steps advocated include: -- PROPERTY.
Rigid ideological restrictions on property ownership should be abandoned.
The document proposes breaking up the monolithic system of state-owned enterprises and farms and allowing a big private sector to flourish, helped by tough anti-monopoly legislation.
The economy would be thrown open to numerous types of ownership between now and 1992, including factories leased by workers or owned by shareholders, cooperatives and joint ventures.
Some forms of private property would be sanctioned.
Such moves would greatly reduce the power of government ministries, who now jealously guard their turf and are seen as one of the major obstacles blocking economic reform.
-- FINANCES.
Emergency measures would be introduced to ease the country's financial crisis, notably its $200 billion budget deficit.
By the end of next year, all loss-making state enterprises would be put out of business or handed over to workers who would buy or lease them or turn them into cooperatives.
Similar steps would be taken to liquidate unprofitable state and collective farms by the end of 1991.
A unified system of taxation should be introduced rapidly.
To mop up some of the 300 billion rubles in circulation, the government should encourage home ownership, including issuing bonds that guarantee holders the right to purchase an apartment.
-- LABOR.
A genuine market for labor and wages would replace the present rigid, centralized system.
Departing from decades of Soviet dogma, the new system would lead to big differences in pay between workers and almost certainly to unemployment.
To cushion the blows, the government would introduce a minimum wage and unemployment benefits.
-- PRICES.
The entire system of centrally set prices would be overhauled, and free-market prices introduced for most wholesale trade and some retail trade.
Consumers would still be able to buy some food and household goods at subsidized prices, but luxury and imported items, including food, would be sold at market prices.
Wholesale prices would be divided into three categories: raw materials sold at fixed prices close to world levels; government-set procurement prices for a small number of key products; and free prices for everything else to be determined by contracts between suppliers and purchasers.
Inflation-adjusted social benefits would ensure that the poor and elderly don't suffer unduly.
-- FOREIGN TRADE.
The current liberalization and decentralization of foreign trade would be taken much further.
Soviet companies would face fewer obstacles for exports and could even invest their hard currency abroad.
Foreigners would receive greater incentives to invest in the U.S.S.R.
Alongside the current non-convertible ruble, a second currency would be introduced that could be freely exchanged for dollars and other Western currencies.
A domestic foreign exchange market would be set up as part of an overhaul of the nation's banking system.
The blueprint is at its vaguest when referring to the fate of the two powerful economic institutions that seem likely to oppose such sweeping plans: the State Planning Committee, known as Gosplan, and the State Committee for Material Supply, or Gossnab.
But it hints strongly that both organizations would increasingly lose their clout as the changes, particularly the introduction of wholesale trade and the breakup of state monopolies, take effect.
Ready, Willing and Unable I always lift the hood When my car doesn't start; If gadgets at home don't work I coolly take them apart.
I'll admit there's nothing wrong That I ever do find, But it's nice when people say I appear mechanically inclined.
-- Joshua Adams.
Flick Shock
At the movies today In detail you see What the prof wouldn't show In Physiology Three.
-- Robert Gordon.
Candid Comment
Don't worry; people will learn to read as long as there are TV program listings.
-- John Drybred.
Albert Engelken and Robert Thomson had never met, though for 38 years their lives had been intertwined in a way peculiar to the sports world.
Mr. Engelken, now a transit-association executive in Washington, D.C., and Mr. Thomson, a paper-products salesman in Montvale, N.J., hadn't even talked to each other.
But one recent day, they became much closer.
Mr. Engelken, a rabid baseball fan, pores over the sports pages to chart the exploits of "my favorite and not-so-favorite teams and players."
He often groans, he says, at the "clutter" of sports stories about drugs, alcohol, gambling and some player's lament "about the miserly millions he is offered to play the game."
His morning paper, the Washington Post, even carries a sports column called "Jurisprudence" that recounts the latest arrests and convictions of players and team managers.
Like many sports buffs, Mr. Engelken has turned cynic.
But his is a story about a hero in an era of sports anti-heroes, and about what Babe Ruth, Mr. Engelken reminds us, once called "the only real game in the world."
To Mr. Engelken, it is also a story "about love, because I'm blessed to have a wife who still thinks her slightly eccentric husband's 50th birthday deserves the ultimate present."
To understand what Mr. Engelken means, one must go back to a sunny October afternoon in 1951 at New York's Polo Grounds stadium, where, it can be argued, the most dramatic moment in baseball history was played out.
It was the ninth inning of the third game of a three-game playoff between the Brooklyn Dodgers and the New York Giants (the predecessor to the San Francisco Giants scheduled to play in tonight's world series).
Baseball fans throughout New York had sweated out a long summer with their teams, and now it had come to this: a battle between the two for the National League pennant -- down to the last inning of the last game, no less.
Some 34,320 fans jammed the stands, and shouted at the top of their lungs.
Mr. Engelken was doing the same across the Hudson River in New Jersey, where, with his nose pressed against the front window of the Passaic-Clifton National Bank, he watched the duel on a television set the bank set up for the event.
The playoff series had riveted the 12-year-old Giants fan.
"The Giants struck first, winning the opener, 3-1, on a two-run homer off Dodger right-hander Ralph Branca," Mr. Engelken recalls with precision today.
"The Giants got swamped in the second game, 100, and trailed 4-1 going into the bottom of the ninth of the third and deciding game.
The Giants scored once and had runners on second {Whitey Lockman} and third {Clint Hartung} as Bobby Thomson advanced to the plate."
The rest, as they say, is history.
Mr. Thomson, a tall, Scottish-born, right-hand hitter, stepped into the batter's box.
"Thomson took a called strike," Mr. Engelken recounts.
The tension mounted as Ralph Branca, again on the mound, stared down the batter.
He wound up and let loose a fastball.
The pitch sailed toward Bobby Thomson high and inside and then, with a crack of the bat, was sent rocketing back into the lower leftfield stands.
"Giants fans went into euphoria," says Mr. Engelken.
And Bobby Thomson was made a legend.
The same Bobby Thomson, it turns out, who sells those paper-goods today.
There can't be an older baseball fan alive who doesn't clearly remember that Bobby Thomson homer, who can't tell you where he was when he heard the famous Russ Hodges radio broadcast -- the one that concluded with Mr. Hodges shouting, over and over, "The Giants win the pennant, the Giants win the pennant!"
Mr. Engelken and Mr. Thomson drifted in different directions in the subsequent years, and the Polo Grounds, located under Coogan's Bluff in upper Manhattan, was replaced by a public-housing project.
Mr. Thomson played outfield and third base until 1960, posting a lifetime .270 batting average and chalking up 264 home runs before retiring and going into paper-goods sales.
Mr. Engelken moved south to Washington, but he took with him enduring memories of the homer of 1951.
When his wife, Betsy, came down the aisle on their wedding day in 1966, Mr. Engelken -- no slouch on the romantic front -- gave her the ultimate compliment: "You look prettier than Bobby Thomson's home run."
The couple's first dog, Homer, was named after the Great Event, though unwitting friends assumed he was the namesake of the poet.
And when Mr. Engelken's sister, Martha, who was born two days before the home run, reached her 25th birthday, Mr. Engelken wrote his sports hero to tell him of the coincidence of events.
Mr. Thomson sent off a card to Martha: "It doesn't seem like 25 years since I hit that home run to celebrate your birth," it read.
Martha was pleased, but nowhere near as much as Mr. Engelken.
The family license plate reads "ENG 23," the first three letters of the family name and -- no surprise here -- Bobby Thomson's uniform number.
And on Mr. Engelken's 40th birthday, his wife bought a book detailing the big homer and sent it off to Mr. Thomson to be autographed.
"What could have been better?" asks Mr. Engelken.
Betsy Engelken asked the same question earlier this year, when her husband was about to turn 50.
She had an idea.
On her husband's 50th birthday (after an auspicious 23 years of marriage, it should be noted), Betsy, Al and their college-bound son set out for New York to visit Fordham University.
Mrs. Engelken had scheduled a stop on the New Jersey Turnpike to, she told her husband, pick up some papers for a neighbor.
The papers would be handed over at a bank of telephone booths just off Exit 10.
"It sounded like something out of Ian Fleming," Mr. Engelken recalls.
At the appointed exit, the family pulled over, and Mrs. Engelken went to get her papers.
Mr. Engelken turned off the motor and rolled down the window.
In a matter of minutes, she was back, with a tall, silver-haired man in tow.
She crouched down by the car window and addressed her husband with her favorite nickname:
"Bertie," she said, "Happy 50th Birthday.
This is Bobby Thomson."
"And there he was," recalls Mr. Engelken.
"The hero of my youth, the one person in history I'd most like to meet.
Keep your Thomas Jeffersons, or St. Augustines or Michelangelos; I'd take baseball's Flying Scot without hesitation."
They talked of the home run.
"I thought it was in the upper deck," said Bobby Thomson, now 66 years old.
They talked of the aftermath.
"I never thought it would become so momentous," Bobby remarked.
Mr. Engelken, says his wife, "was overwhelmed by the whole thing.
It was worth it, just for the look on Albert's face."
The two men spent an hour at Exit 10, rehashing the event, "fulfilling the lifelong dream of a young boy now turned 50," Mr. Engelken says.
His hero signed photographs of the homer and diplomatically called Ralph Branca "a very fine pitcher."
And when Mr. Engelken asked him why he took time off from work for somebody he didn't even know, Bobby Thomson replied: "You know, Albert, if you have the chance in life to make somebody this happy, you have an obligation to do it."
In an interview, Mr. Thomson, who is married and has three grown children, says he has few ties to baseball these days, other than playing old-timers games now and again.
But his fans, to his constant amazement, never let him forget the famous four-bagger.
His mail regularly recalls "my one event," and has been growing in recent years.
In response to the letters, Mr. Thomson usually sends an autographed photo with a polite note, and rarely arranges a rendezvous.
But when Betsy Engelken wrote him, saying she could stop near his New Jersey home, it seemed different.
"What a good feeling it would be for me to do that," he says he thought.
When the Engelken family got back from its trip up north, Mr. Engelken wrote it all down, just to make sure no detail was missed.
"On the way home," his notes recall, "it took concentrated effort to keep that car pointed south.
My mind was miles north at a place called Coogan's Bluff, where a real sports hero had captured the imagination of a kid who never fully grew up and is all the richer for it.
"Take heart, sports fans," he wrote.
"Real heroes exist.
You might not find one in the `Jurisprudence' column.
But who knows?
You might meet up with him at that bank of telephone booths just off Exit 10 of the New Jersey Turnpike.
Southam Inc. said its unprofitable weekly newspaper, The Financial Times of Canada, is up for sale.
Analysts said the announcement, the latest in a series of divestitures and restructuring moves, is aimed at improving Southam's earnings before the expiration in June of a standstill pact with Torstar Corp.
When that agreement expires, Torstar will be free to increase its 22.4% stake in Southam, or to make an offer for the whole company.
Descendants of the Southam family hold an additional 22.6% stake in the Toronto-based company, Canada's largest newspaper publisher.
The newspaper could fetch between 15 million and 20 million Canadian dollars (US$12.8 million to $17.1 million), said one analyst, who asked not to be identified.
A spokesman for Southam declined to comment on the price the company is seeking or on estimates of the paper's annual losses, which most analysts place at between C$4 million and C$7 million.
Yesterday, Southam reported third-quarter earnings of C$10.8 million on revenue of C$395.4 million, down from C$14.6 million on revenue of C$389.6 million in the year-ago quarter.
"To be profitable, the paper requires more circulation and building circulation is an expensive undertaking," said John Macfarlane, the paper's publisher.
Southam said the level of future investment required by the paper would have restricted its options in other areas.
The acquisition of the Financial Times of Canada is "well within reach for any number of media companies, both public and private," said James Cole, an analyst with Toronto-based BBN James Capel Inc.
Possible bidders include Christopher Ondaatje, a Toronto financier and vice chairman of Hees International Bancorp Inc., a holding company controlled by Toronto's Bronfman family.
Mr. Ondaatje sold his stake in Pagurian Corp. to Hees earlier this year and is said to be seeking a media acquisition.
Mr. Ondaatje couldn't be reached for comment, but Roy Mac-Laren, chairman of CB Media, a closely held concern that publishes two business magazines, said his company would take a close look at the newspaper.
Mr. Cole said the sale of the 77-year Financial Times, which Southam has owned since 1961, is consistent with Southam's strategy of cutting costs to obtain maximum profits from its operations while disposing of "chronically under-performing" assets.
Southam agreed to sell its 47% stake in Selkirk Communications Ltd., a broadcasting concern, to Maclean Hunter Ltd. for about C$285 million last year.
This year, it has moved to cut costs in its newspaper division through layoffs and asset sales, while reaching joint venture and acquisition agreements in other areas.
The Financial Times of Canada has no links to the British daily newspaper, The Financial Times.
Norton Co. said net income for the third quarter fell 6% to $20.6 million, or 98 cents a share, from $22 million, or $1.03 a share.
Operating profit for the abrasives, engineering materials and petroleum services concern was $19.2 million, or 91 cents a share, up 3% from $18.7 million, or 87 cents a share.
The company had a tax credit of $1.4 million.
In the year-earlier quarter, the tax credit was $3.3 million.
Sales rose 8% to $368.5 million from $340.7 million.
Operating profit in the company's abrasives segment rose 16% while operating profit in the engineering materials segment rose 2%.
However, the company's petroleum services segment, while profitable, was hurt by high financing costs associated with the company's buy-out of a 50% stake in Eastman Christensen Co. from Texas Eastern Corp. last June.
Norton and Texas Eastern had each held a 50% stake in Eastman in a joint venture.
Norton announced earlier this month that it was exploring the possible sale of all or part of Eastman Christensen.
For the nine months, Norton had net of $81.2 million, or $3.87 a share, and a tax credit of $4.4 million.
In the year-earlier period, the company had net of $77.2 million, or $3.68 a share, and a tax credit of $7.7 million.
Norton had operating profit of $76.8 million, or $3.66 a share, up 11% from $69.5 million, or $3.31 a share.
Sales rose 8% to $1.15 billion from $1.06 billion.
Y.J. Park and her family scrimped for four years to buy a tiny apartment here, but found that the closer they got to saving the $40,000 they originally needed, the more the price rose.
By this month, it had more than doubled.
Now the 33-year-old housewife, whose husband earns a modest salary as an assistant professor of economics, is saving harder than ever.
"I am determined to get an apartment in three years," she says.
"It's all I think about or talk about."
For the Parks and millions of other young Koreans, the long-cherished dream of home ownership has become a cruel illusion.
For the government, it has become a highly volatile political issue.
Last May, a government panel released a report on the extent and causes of the problem.
During the past 15 years, the report showed, housing prices increased nearly fivefold.
The report laid the blame on speculators, who it said had pushed land prices up ninefold.
The panel found that since 1987, real-estate prices rose nearly 50% in a speculative fever fueled by economic prosperity, the 1988 Seoul Olympics and the government's pledge to rapidly develop Korea's southwest.
The result is that those rich enough to own any real estate at all have boosted their holdings substantially.
For those with no holdings, the prospects of buying a home are ever slimmer.
In 1987, a quarter of the population owned 91% of the nation's 71,895 square kilometers of private land, the report said, and 10% of the population owned 65% of the land devoted to housing.
Meanwhile, the government's Land Bureau reports that only about a third of Korean families own their own homes.
Rents have soared along with house prices.
Former National Assemblyman Hong Sa-Duk, now a radio commentator, says the problem is intolerable for many people.
"I'm afraid of a popular revolt if this situation isn't corrected," he adds.
In fact, during the past three months there have been several demonstrations at the office complex where the Land Bureau is housed, and at the National Assembly, demanding the government put a stop to real-estate speculation.
President Roh Tae Woo's administration has been studying the real-estate crisis for the past year with an eye to partial land redistribution.
Last week, the government took three bills to the National Assembly.
The proposed legislation is aimed at rectifying some of the inequities in the current land-ownership system.
Highlights of the bills, as currently framed, are: -- A restriction on the amount of real estate one family can own, to 660 square meters in the nation's six largest cities, but more in smaller cities and rural areas.
The government will penalize offenders, but won't confiscate property.
-- A tax of between 3% and 6% on property holdings that exceed the governmentset ceiling.
-- Taxes of between 15% and 50% a year on "excessive" profits from the resale of property, or the sale of idle land to the government.
The government defines excessive profits as those above the average realized for other similar-sized properties in an area.
-- Grace periods ranging from two to five years before the full scope of the penalties takes effect.
The administration says the measures would stem rampant property speculation, free more land for the government's ambitious housing-construction program, designed to build two million apartments by 1992 -- and, perhaps, boost the popular standing of President Roh.
But opposition legislators and others calling for help for South Korea's renters say the proposed changes don't go far enough to make it possible for ordinary people to buy a home.
Some want lower limits on house sizes; others insist on progressively higher taxation for larger homes and lots.
The Citizens Coalition for Economic Justice, a public-interest group leading the charge for radical reform, wants restrictions on landholdings, high taxation of capital gains, and drastic revamping of the value-assessment system on which property taxes are based.
But others, large landowners, real-estate developers and business leaders, say the government's proposals are intolerable.
Led by the Federation of Korean Industries, the critics are lobbying for the government to weaken its proposed restrictions and penalties.
Government officials who are urging real-estate reforms balk at the arguments of business leaders and chafe at their pressure.
"There is no violation of the capitalistic principle of private property in what we are doing," says Lee Kyu Hwang, director of the government's Land Bureau, which drafted the bills.
But, he adds, the constitution empowers the government to impose some controls, to mitigate the shortage of land.
The land available for housing construction stands at about 46.2 square meters a person -- 18% lower than in Taiwan and only about half that of Japan.
Mr. Lee estimates that about 10,000 property speculators are operating in South Korea.
The chief culprits, he says, are big companies and business groups that buy huge amounts of land "not for their corporate use, but for resale at huge profit."
One research institute calculated that as much as 67% of corporate-owned land is held by 403 companies -- and that as little as 1.5% of that is used for business.
The government's Office of Bank Supervision and Examination told the National Assembly this month that in the first half of 1989, the nation's 30 largest business groups bought real estate valued at $1.5 billion.
The Ministry of Finance, as a result, has proposed a series of measures that would restrict business investment in real estate even more tightly than restrictions aimed at individuals.
Under those measures, financial institutions would be restricted from owning any more real estate than they need for their business operations.
Banks, investment and credit firms would be permitted to own land equivalent in value to 50% of their capital -- currently the proportion is 75%.
The maximum allowable property holdings for insurance companies would be reduced to 10% of their total asset value, down from 15% currently.
But Mrs. Park acknowledges that even if the policies work to slow or stop speculation, apartment prices are unlikely to go down.
At best, she realizes, they will rise more slowly -- more slowly, she hopes, than her family's income.
CAMBREX Corp., Bayonne, N.J., declared its initial quarterly of five cents a share, payable Dec. 1 to stock of record Nov. 10.
The maker of specialty chemicals has about 5.9 million shares outstanding.
The company said the move recognizes its strong financial position.
Although profits were "squeezed" in 1989, mainly as a result of higher raw-material costs, the company said it is confident about future earnings and cash flow for 1990 and beyond.
In national over-the-counter trading yesterday, Cambrex shares rose 50 cents to close at $13 a share.
The Justice Department said it is seeking to join a private lawsuit challenging a Pittsburgh suburb's zoning ordinance that sharply restricts the locations available to group homes for the handicapped.
This would be the department's first suit challenging a local zoning ordinance under 1988 amendments to the Fair Housing Act.
Under those amendments, which took effect in March of this year, the federal government can intervene in private housing-discrimination lawsuits.
The ordinance, in Moon Township, prohibits locating a group home for the handicapped within a mile of another such facility.
In papers filed with the federal district court in Pittsburgh, the Justice Department alleged that the ordinance, by limiting the number of group homes that can be established in the township, makes housing unavailable on account of handicap.
The private suit was brought by three mentally retarded people who live in a group home in Moon.
Greg Smith, Moon Township manager, said the ordinance is intended to prevent the concentration of group homes for the mentally retarded from changing "the character and flavor of the neighborhood."
He said the ordinance also will benefit the mentally retarded.
"Our intent is to spread them out" to insure they are well integrated into the community, he said.
Energetic and concrete action has been taken in Colombia during the past 60 days against the mafiosi of the drug trade, but it has not been sufficiently effective, because, unfortunately, it came too late.
Ten years ago, the newspaper El Espectador, of which my brother Guillermo was editor, began warning of the rise of the drug mafias and of their leaders' aspirations to control Colombian politics, especially the Congress.
Then, when it would have been easier to resist them, nothing was done and my brother was murdered by the drug mafias three years ago.
The most ruthless dictatorships have not censored their press more brutally than the drug mafias censor Colombia's.
The censorship is enforced through terrorism and assassination.
In the past 10 years about 50 journalists have been silenced forever, murdered.
Within the past two months a bomb exploded in the offices of the El Espectador in Bogota, destroying a major part of its installations and equipment.
And only last week the newspaper Vanguardia Liberal in the city of Bucaramanga was bombed, and its installations destroyed.
Journalists and their families are constantly threatened as are the newspaper distribution outlets.
Distribution centers are bombed, and advertisers are intimidated.
Censorship is imposed by terrorism.
If the Colombian media accept this new and hideous censorship there is little doubt that the drug mafia's terrorism someday will extend to all the newspapers published in the free world.
The solidarity of the uncensored media world-wide against drug terrorism is the only way press freedom can survive.
The American people and their government also woke up too late to the menace drugs posed to the moral structure of their country.
Even now, the American attack upon this tremendous problem is timid in relation to the magnitude of the threat.
I can attest that a recent Colombian visitor to the U.S. was offered drugs three times in the few blocks' walk between Grand Central Terminal and the Waldorf Astoria Hotel in midtown Manhattan.
Colombia alone -- its government, its people, its newspapers -- does not have the capacity to fight this battle successfully.
All drug-consuming countries must jointly decide to combat and punish the consumers and distributors of drugs.
The U.S., as the major drug consumer, should lead this joint effort.
Reduction, if not the total cessation, of drug consumption is the requirement for victory.
Much is being done in Colombia to fight the drug cartel mafia.
Luxurious homes and ranches have been raided by the military authorities, and sophisticated and powerful communications equipment have been seized.
More than 300 planes and helicopters have been impounded at airports, and a large number of vehicles and launches has been confiscated.
The military has also captured enormous arsenals of powerful and sophisticated weapons, explosives and other war-like materiel.
Much has been accomplished and public opinion decisively supports the government and the army -- but, on the other hand, none of the key drug barons have been captured.
There has been a lot of talk that a large portion of the Colombian economy is sustained by the laundering of drug money.
In my opinion, this is not true.
Laundered drug money has served only to increase, unrealistically, the price of real estate, creating serious problems for low-income people who aspire to own their own homes.
Drug money has also gone to buy expensive cars, airplanes, launches and nightclubs where drugs are consumed.
But most of the drug money is kept in investments and in financial institutions outside Colombia.
In fact, the cooperation of those financial institutions is essential to the success of the drug battle.
What is of much more importance to the Colombian economy than the supposed benefits of laundered drug money is higher prices for Colombia's legitimate products.
The price of coffee has gone down almost 45% since the beginning of the year, to the lowest level (after inflation) since the Great Depression.
Market conditions point to even lower prices next year.
The 27-year-old coffee cartel had to be formally dissolved this summer.
As a result, Colombia will earn $500 million less from its coffee this year than last.
Our coffee growers face reductions in their income, and this tempts them to contemplate substituting coca crops for coffee.
U.S. interests occasionally try to impose barriers to the import of another important Colombian export -- cut flowers -- into the American market.
A just price and an open market for what Colombian produces and exports should be the policy of the U.S.
I take advantage of this opportunity given to me by The Wall Street Journal to make a plea to the millions of readers of this newspaper, to become soldiers dedicated to the fight against the use of drugs.
Each gram of cocaine consumed is a deadly bullet against those in our country and in the rest of the world who fight this terrible scourge.
A crusade of NO to the consumption of drugs is imperative.
Mr. Cano is president of El Espectador, a newspaper founded by his grandfather.
It has more drug users than Boston has people.
Thirty-four thousand of its children live in foster homes, while 50,000 residents have no homes at all.
Its tax base is shrinking, a $1 billion budget deficit looms, and the city faces contract negotiations with all major municipal unions next year.
This is New York City.
When the dust and dirt settle in an extra-nasty mayoral race, the man most likely to gain custody of all this is a career politician named David Dinkins.
Running the nation's largest and most ornery city may be no treat, but at least Mr. Dinkins knows what to expect from it.
As the campaign hits the home stretch, however, voters still have very little idea what they can expect from him.
After 25 years in city politics, David Dinkins remains an enigma.
The soft-spoken, silver-haired Manhattan borough president -- the first black man to win the Democratic nomination for mayor here -- doesn't have a single prominent political enemy.
While he is widely described as a man with deep convictions, he has few major political programs that he can call his own.
Asked about his greatest achievement in public life, he first speaks about the quality of his staff.
Now, as election day nears, even some supporters wonder what he will do if he wins the mayoralty on Nov. 7.
They wonder whether he can be firm with his longtime allies, including union leaders and political cronies who may seek a place at the trough.
They wonder whether he has the economic know-how to steer the city through a possible fiscal crisis, and they wonder who will be advising him.
Will he, if he wins, be in the thrall of the most liberal of his allies, who advocate such policies as rent control for commercial buildings, or will he tilt toward the real-estate interests that have funneled money into his campaign?
After his decisive primary victory over Mayor Edward I. Koch in September, Mr. Dinkins coasted, until recently, on a quite-comfortable lead over his Republican opponent, Rudolph Giuliani, the former crime buster who has proved a something of a bust as a candidate.
But Mr. Dinkins has stumbled in the past two weeks over his campaign's payments to a black activist who is a convicted kidnapper, and over his handling of a stock sale to his son.
Polls also have recorded some slippage in Mr. Dinkins's support among Jewish voters, and citywide projections now put his lead at between four and 20 percentage points.
In an interview with reporters and editors of The Wall Street Journal, Mr. Dinkins appears quite confident of victory and of his ability to handle the mayoralty.
"A lot of people think I will give away the store, but I can assure you I will not," he says.
"I am aware we have real budgetary problems."
The city is full of aging bridges, water mains and roadways that are in need of billions of dollars worth of repair.
Renewed efforts to fight drugs and crime will be costly.
But city officials say tax revenues are lagging.
And after a decade of explosive job growth on Wall Street, a period of contraction is under way.
Mr. Koch already has announced he will drop 3,200 jobs from the city payroll, but that won't be enough.
New York State Comptroller Edward Regan predicts a $1.3 billion budget gap for the city's next fiscal year, a gap that could grow if there is a recession.
If elected, Mr. Dinkins will probably have no choice but to raise taxes on overburdened businesses or cut spending in already under-serviced neighborhoods.
"He is going to face a mess," says City Council President Andrew Stein.
"His supporters are not venal, but their solution to everything will be to spend more money, and he won't have any money."
By and large, Mr. Dinkins has finessed the touchy question of whose ox he would gore.
Instead of focusing on the financial future, Mr. Dinkins has sold himself as a unifier for a city recently touched by racial violence and as a soothing antidote to 12 years of commotion generated by Mayor Koch.
"The thing about the Dinkins candidacy is that it offers hope to a broad range of people," says Meyer Frucher, a real-estate executive and former aide to Gov. Mario Cuomo.
"It is a feel-good candidacy."
No doubt, Mr. Dinkins has been a calming influence.
He is an avuncular figure who remembers the birthdays of colleagues' children, opens doors for women, and almost never has a bad word to say about anybody.
More important, he emerged as a peacemaker last summer after the Central Park rape of a white jogger -- in which a group of Harlem teens was charged -- and the racial murder of a black teen-ager in the white Brooklyn neighborhood of Bensonhurst.
Rather than scaring off white voters, as many predicted he would, Mr. Dinkins attracted many whites precisely because of his reputation for having a cool head.
(Keeping cool is a Dinkins priority: On humid days this summer, he was known to change his double-breasted suits as many as four times a day.)
But even in his front-runner campaign, he has shown signs of the indecisiveness and confusion that some say has plagued his tenure as Manhattan borough president -- and might hinder him as mayor.
Over the last few weeks, he has frittered away roughly half of what was once a 33-point lead in the polls over Mr. Giuliani.
A story about how he mishandled the sale to his son of his stock in a media company controlled by his political patron Percy Sutton was allowed to fester a full week before Mr. Dinkins faced the media.
He has canceled numerous campaign appointments and was largely inaccessible to the media until the stock story broke.
His campaign was caught flat-footed amid allegations it paid almost $10,000 for what it said was a "get-out-the-vote" effort by black activist Sonny Carson, a convicted kidnapper who later said publicly that he is "anti-white."
Critics have said the payment looked like an attempt by the Dinkins camp to get Mr. Carson to stop leading confrontational demonstrations protesting the Bensonhurst murder -- protests the campaign may have feared could cause some white voters to turn from a black candidate.
Mr. Dinkins also has failed to allay Jewish voters' fears about his association with the Rev. Jesse Jackson, despite the fact that few local non-Jewish politicians have been as vocal for Jewish causes in the past 20 years as Mr. Dinkins has.
These campaign problems have echoed difficulties Mr. Dinkins has run into before.
A former U.S. Marine, Mr. Dinkins got off to a quick start in politics, joining a local Democratic political club in the 1950s, linking up with black urban leaders such as Charles Rangel, Basil Paterson and Mr. Sutton, and getting himself elected to the state assembly in 1965.
But his chance to become deputy mayor under Mayor Abraham Beame, a plan boosted by Mr. Sutton, was squandered because of Mr. Dinkins's failure -- still largely unexplained -- to file income tax returns for four years running.
"I always thought of this as a thing that could always be done tomorrow," he said at the time.
Later, Mr. Dinkins became more deeply indebted to Mr. Sutton and other city pols, including then-City Council President Paul O'Dwyer, when they helped him get appointed city clerk, a largely ceremonial post responsible for the city's marriage bureau, among other things.
(Mr. O'Dwyer is now one of the lawyers for Mr. Sutton's media company.)
The debt rose further in 1977 when Mr. Sutton resigned his position as Manhattan borough president to run for mayor.
Mr. Sutton recalls: "When I left, I sat down with Charlie {Rangel}, Basil {Paterson} and David, and David said, 'Who will run for borough president?' And I said, 'You will.'"
David Garth, Mayor Koch's longtime media adviser, says of Mr. Dinkins, "He really is the personification of the patronage system.
But the guy is so personally decent, people tend to forget that."
Mr. Dinkins lost twice by wide margins before finally getting elected borough president in 1985.
But by most accounts, he made little of the post and was best known among city politicians for his problems making up his mind on matters before the city's Board of Estimate, the body that votes on crucial budget and land-use matters.
Colleagues today recall with some humor how meetings would crawl into the early morning hours as Mr. Dinkins would march his staff out of board meetings and into his private office to discuss, en masse, certain controversial proposals.
"He taught me how to drink herbal tea instead of coffee at 3 a.m., I'll give him that," says Deputy Mayor Robert Esnard.
Often, Mr. Dinkins's procrastination prevented him from having a say in the way things turned out, critics claim.
On the campaign stump, he often points out that he was the only Board of Estimate member to vote against a controversial real-estate project at Manhattan's Columbus Circle.
But board members say he took so long to decide how to vote that by the time he decided, it was too late to try to draw other members to his position.
Says one city official: "Everybody else had brought in the wagons and made their deal.
He would have got a lot more done if he made up his mind faster."
One Board member, Bronx Borough President Ferdinand Ferrer, was said to be so impatient with Mr. Dinkins's behavior at many meetings that he withheld his support for Mr. Dinkins's mayoral effort until late in the primary campaign.
"I had some problem from time to time on the length of time he would take to make up his mind," Mr. Ferrer admits, but he maintains that he didn't delay his support of Mr. Dinkins and that he backs the Democratic candidate enthusiastically.
Mr. Dinkins's campaign manager and former chief of staff, Bill Lynch, denies that the Manhattan borough president has taken too long to decide important issues.
"We didn't rubber-stamp everything that came to us," Mr. Lynch says.
On some occasions when Mr. Dinkins has discussed the issues during the campaign, he has run into a familiar kind of trouble.
Some supporters were stunned this summer when Mr. Dinkins suggested weakening the law forbidding public employees to go on strike.
He withdrew the remark.
When he later sided with striking hospital workers, some allies cringed a little more, concerned that Mr. Dinkins was setting the wrong tone for coming contract negotiations with city employees.
Then, two days before receiving an endorsement from environmental groups, Mr. Dinkins promised he would issue a three-year moratorium on construction of garbage-incinerator plants.
That announcement was roundly criticized by Mayor Koch -- who has endorsed Mr. Dinkins -- because the city faces a garbage crisis and has already spent $5 million planning for an incinerator that would be scrapped under Mr. Dinkins's proposal.
While his public statements have at times been confusing, Mr. Dinkins's position papers have more consistently reflected anti-development sentiment.
He favors a form of commercial rent control, which the financial community believes would make it more difficult to attract investment in the city.
In the midst of a labor shortage, he proposes linking city subsidies to businesses to their record of hiring New York City residents.
With an untrained local labor pool, many experts believe, that policy could drive businesses from the city.
And he favors a more cooperative approach toward the neighboring states of New Jersey and Connecticut in the battle over companies thinking of moving employees out of New York City.
Many economic-development officials say the Koch administration's aggressive approach helped save 5,000 Chase Manhattan Bank jobs from moving across the Hudson.
But Mr. Dinkins's economic planks don't seem to bother the business community, where he draws significant support.
Steven Spinola, president of the Real Estate Board of New York, an industry organization, says Mr. Dinkins's "economic development program is shortsighted, but when it comes down to it, he can be reasonable."
Mr. Dinkins's inner circle of advisers appears to include both ideologues and pragmatists, leaving voters with little clue as to who will be more influential.
The key man seems to be the campaign manager, Mr. Lynch.
A disheveled, roly-poly son of a Long Island potato farmer, Mr. Lynch is a veteran union organizer who worked on the presidential campaigns of Sen. Edward Kennedy and Mr. Jackson.
But as the Dinkins campaign hit tough times this month, Andrew Cuomo, the politically seasoned son of the New York governor, is also said to have taken a more active role on strategy.
Another close ally is Ruth Messinger, a Manhattan city councilwoman, some of whose programs, such as commercial rent control, have made their way into Mr. Dinkins's position papers.
If she remains influential with Mr. Dinkins, as some suggest she will, his mayoralty may take on a more anti-development flavor.
But Lincoln Center President Nathan Leventhal, who would head a Dinkins transition team, is more mainstream, as is real-estate executive Anthony Gliedman, another insider.
Mr. Dinkins also has said he would receive economic advice from a board that would include American Express Co. chairman James D. Robinson III, investment banker Felix Rohatyn, leveraged-buy-out specialist Reginald Lewis and attorney Joseph Flom.
Some business leaders and others also believe that Mr. Dinkins would place significant responsibility in the hands of a deputy mayor with a strong administrative background.
Names of possible deputies that have surfaced include former mayoral candidate Richard Ravitch, former schools chancellor Frank Macchiarola and Messrs. Leventhal and Gliedman.
Then there are Mr. Dinkins's old-time Harlem colleagues, such as U.S. Rep. Rangel, former Deputy Mayor Paterson and Mr. Sutton.
Having attained positions of real influence or wealth, these men constitute the Old Guard of New York City black politics; they are less confrontational than the younger, more activist black political community that has been based largely in Brooklyn.
(Part of Mr. Dinkins's strength is his ability to win the support of both the Brooklyn and Harlem factions.)
"We know there are potholes for the city out there," says Mr. Paterson, Mr. Dinkins's former law partner.
"If any of us think we're going to sidetrack David's determination to be the best possible mayor because of his obligations to us, we are making a sad mistake."
Adds Ms. Messinger, who is expected to win the borough president's job Mr. Dinkins is vacating, "You have to remember David is a pragmatist."
But Mr. Dinkins's sense of pragmatism often comes across more as an insider's determination not to upset the political apple cart.
He is taken aback in an interview when asked whether, as mayor, he plans on reforming the political "fiefdoms" that perpetuate the monumental ineffectiveness of New York's school system.
"I will sit down and talk some of the problems out, but take on the political system? Uh-uh," he says with a shake of the head.
Despite many doubts about his candidacy, white New Yorkers -- who gave Mr. Dinkins 30% of their votes in the primary -- aren't expected to desert in sufficient numbers to turn the election to Mr. Giuliani.
The former U.S. attorney, who prosecuted targets ranging from Mafia dons to Wall Street executives, has succeeded in raising questions about Mr. Dinkins's ethical standards, but so far has failed to generate excitement about his own candidacy.
As a Republican in an overwhelmingly Democratic city, Mr. Giuliani has an inherent handicap.
As a first-time candidate, he has been slow to learn the nuances of New York City politicking.
Mr. Giuliani is finding that Mr. Dinkins, in his many years in public life, has built up considerable good will that so far has led many voters to overlook certain failings.
"The bottom line is that he is a very genuine and decent guy," says Malcolm Hoenlein, a Jewish community leader.
"In the end, I think David will be judged for being David.
Toni Johnson pulls a tape measure across the front of what was once a stately Victorian home.
A deep trench now runs along its north wall, exposed when the house lurched two feet off its foundation during last week's earthquake.
A side porch was ripped away.
The chimney is a pile of bricks on the front lawn.
The remainder of the house leans precariously against a sturdy oak tree.
The petite, 29-year-old Ms. Johnson, dressed in jeans and a sweatshirt as she slogs through the steady afternoon rain, is a claims adjuster with Aetna Life & Casualty.
She has been on the move almost incessantly since last Thursday, when an army of adjusters, employed by major insurers, invaded the San Francisco area to help policyholders sift through the rubble and restore some order to their lives.
Equipped with cellular telephones, laptop computers, calculators and a pack of blank checks, they parcel out money so their clients can find temporary living quarters, buy food, replace lost clothing, repair broken water heaters, and replaster walls.
Some of the funds will used to demolish unstable buildings and clear sites for future construction.
Many adjusters are authorized to write checks for amounts up to $100,000 on the spot.
They don't flinch at writing them.
"That's my job -- get {policyholders} what they're entitled to," says Bill Schaeffer, a claims supervisor who flew in from Aetna's Bridgeport, Conn., office.
The Victorian house that Ms. Johnson is inspecting has been deemed unsafe by town officials.
But she asks a workman toting the bricks from the lawn to give her a boost through an open first-floor window.
Once inside, she spends nearly four hours measuring and diagramming each room in the 80-year-old house, gathering enough information to estimate what it would cost to rebuild it.
She snaps photos of the buckled floors and the plaster that has fallen away from the walls.
While she works inside, a tenant returns with several friends to collect furniture and clothing.
One of the friends sweeps broken dishes and shattered glass from a countertop and starts to pack what can be salvaged from the kitchen.
Others grab books, records, photo albums, sofas and chairs, working frantically in the fear that an aftershock will jolt the house again.
The owners, William and Margie Hammack, are luckier than many others.
A few years ago, Mrs. Hammack insisted on buying earthquake insurance for this house, which had been converted into apartments.
Only about 20% of California home and business owners carried earthquake coverage.
The Hammacks' own home, also in Los Gatos, suffered comparatively minor damage.
Ms. Johnson, who works out of Aetna's office in Walnut Creek, an East Bay suburb, is awed by the earthquake's destructive force.
"It really brings you down to a human level," she says.
"It's hard to accept all the suffering people are going through, but you have to.
If you don't, you can't do your job."
For Aetna and other insurers, the San Francisco earthquake hit when resources in the field already were stretched.
Most companies still are trying to sort through the wreckage caused by Hurricane Hugo in the Carolinas last month.
Aetna, which has nearly 3,000 adjusters, had deployed about 750 of them in Charlotte, Columbia, and Charleston.
Adjusters who had been working on the East Coast say the insurer will still be processing claims from that storm through December.
It could take six to nine months to handle the earthquake-related claims.
When the earthquake rocked northern California last week, Aetna senior claims executives from the San Francisco area were at the company's Hartford, Conn., headquarters for additional training on how to handle major catastrophes, including earthquakes.
Since commercial airline flights were disrupted, the company chartered three planes to fly these executives back to the West Coast and bring along portable computers, cellular phones and some claims adjusters.
Because of the difficulty of assessing the damages caused by the earthquake, Aetna pulled together a team of its most experienced claims adjusters from around the country.
Even so, few had ever dealt with an earthquake.
Some adjusters, like Alan Singer of San Diego, had been working in Charleston for nearly four weeks.
He returned home last Thursday, packed a bag with fresh clothes and reported for duty Friday in Walnut Creek.
Offices were set up in San Francisco and San Jose.
In a few instances, Aetna knew it would probably be shelling out big bucks, even before a client called or faxed in a claim.
For example, officials at Walnut Creek office learned that the Amfac Hotel near the San Francisco airport, which is insured by Aetna, was badly damaged when they saw it on network television news.
"The secret to being a good adjuster is counting," says Gerardo Rodriguez, an Aetna adjuster from Santa Ana.
"You have to count everything."
Adjusters must count the number of bathrooms, balconies, fireplaces, chimneys, microwaves and dishwashers.
But they must also assign a price to each of these items as well as to floors, wallcoverings, roofing and siding, to come up with a total value for a house.
To do that, they must think in terms of sheetrock by the square foot, carpeting by the square yard, wallpaper by the roll, molding by the linear foot.
Using a calculator and a unit-price guide for such jobs as painting, plumbing and roofing in each major region of the country, adjusters can figure out the value of a home in today's market and what it would cost to rebuild it.
Sometimes repairs are out of the question.
When Aetna adjuster Bill Schaeffer visited a retired couple in Oakland last Thursday, he found them living in a mobile home parked in front of their yard.
The house itself, located about 50 yards from the collapsed section of double-decker highway Interstate 880, was pushed about four feet off its foundation and then collapsed into its basement.
The next day, Mr. Schaeffer presented the couple with a check for $151,000 to help them build a new home in the same neighborhood.
He also is working with a real-estate agent to help find them an apartment to rent while their home is being built.
Many of the adjusters employed by Aetna and other insurers have some experience with construction work or carpentry.
But such skills were alien to Toni Johnson.
Four years ago, she was managing a film-processing shop and was totally bored.
A friend mentioned that she might want to look into a position at Aetna, if she was interested in a job that would constantly challenge her.
She signed up, starting as an "inside" adjuster, who settles minor claims and does a lot of work by phone.
A year later, she moved to the commercial property claims division.
She spent a month at an Aetna school in Gettysburg, Pa., learning all about the construction trade, including masonry, plumbing and electrical wiring.
That was followed by three months at the Aetna Institute in Hartford, where she was immersed in learning how to read and interpret policies.
Her new line of work has some perils.
Recently, a contractor saved her from falling three stories as she investigated what remained of an old Victorian house torched by an arsonist.
"I owe that contractor.
I really do," she says.
As Ms. Johnson stands outside the Hammack house after winding up her chores there, the house begins to creak and sway.
The ground shakes underneath her.
It is an aftershock, one of about 2,000 since the earthquake, and it makes her uneasy.
The next day, as she prepares a $10,000 check for the Hammacks, which will cover the cost of demolishing the house and clearing away the debris, she jumps at the slightest noise.
On further reflection, she admits that venturing inside the Hammacks' house the previous day wasn't "such a great idea."
During her second meeting with the Hammacks, Ms. Johnson reviews exactly what their policy covers.
They would like to retrieve some appliances on the second floor, but wonder if it's safe to venture inside.
Ms. Johnson tells them that, if the appliances can't be salvaged, their policy covers the replacement cost.
Mr. Hammack is eager to know what Aetna will pay for the house, which has to come down.
"When will I get that check for a million dollars?" he jokes.
The adjuster hadn't completed all the calculations, but says: "We're talking policy limits."
In this case, that's about $250,000.
It suddenly dawns on Mr. Hammack that rebuilding the house in Los Gatos, an affluent community in Santa Clara County, may cost more than Aetna's policy will pay.
"We can lose money on this," he says.
"And you didn't want me to buy earthquake insurance," says Mrs. Hammack, reaching across the table and gently tapping his hand.
Earthquake insurance costs about $2 to $4 annually for every $1,000 of value, and high deductibles mean it generally pays only when there is a catastrophe.
So, many Californians believe they can get by without it.
Even Ms. Johnson herself made that assumption.
"I always knew that the 'Big One' was coming, but not during my lifetime," she says.
Now she says she's thinking of contacting her own insurance agent.
For Ms. Johnson, dealing with the earthquake has been more than just a work experience.
She lives in Oakland, a community hit hard by the earthquake.
She didn't have hot water for five days.
The apartment she shares with a 12-year-old daughter and her sister was rattled, books and crystal hit the floor, but nothing was severely damaged.
Her sister, Cynthia, wishes Toni had a different job.
"We worry about her out there," Cynthia says.
Last Sunday, Ms. Johnson finally got a chance to water her plants, but stopped abruptly.
"I realized I couldn't waste this water when there are people in Watsonville who don't have fresh water to drink."
She hasn't played any music since the earthquake hit, out of respect for those who died on Interstate 880 where the roadway collapsed.
The Federal Communications Commission allowed American Telephone & Telegraph Co. to continue offering discount phone services for large-business customers and said it would soon re-examine its regulation of the long-distance market.
The FCC moves were good news for AT&T, which has been striving since the breakup of the phone system for greater latitude in pricing and reduced regulation.
Alfred Sikes, the new FCC chairman, championed deregulation of AT&T at his last job as head of a Commerce Department telecommunications agency.
But it has been an open question whether Mr. Sikes, an extraordinarily cautious man, would continue pushing deregulation at the FCC in the face of what is likely to be great political pressure.
"It means that Sikes is serious about the deregulation of long distance," said Jack Grubman, a telecommunications analyst at PaineWebber Inc., who attended the FCC meeting.
"All the commissioners were in amazing agreement {to re-examine regulation} for only having been together for a few months."
The FCC took three specific actions regarding AT&T.
By a 4-0 vote, it allowed AT&T to continue offering special discount packages to big customers, called Tariff 12, rejecting appeals by AT&T competitors that the discounts were illegal.
Then by a separate 4-0 vote, it chose the narrowest possible grounds to strike down a different discount plan, called Tariff 15, that AT&T offered to Holiday Corp.
AT&T gave a 5% to 10% discount to the Memphis, Tenn., company that oversees Holiday Inns, in response to a similar discount offered to Holiday Corp. by MCI Communications Corp.
The agency said that because MCI's offer had expired AT&T couldn't continue to offer its discount plan.
But the agency specifically didn't rule whether AT&T had the right to match offers by competitors if that means giving discounts not generally available to other phone users.
Indeed, Joe Nacchio, AT&T's vice president for business-communications services, said AT&T offered a similar Tariff 15 discount to Resort Condominium International, of Indianapolis, to meet another MCI bid.
The FCC "didn't say I couldn't do it again," he said.
Apart from those two actions, Mr. Sikes and the three other commissioners said they expect to re-examine how AT&T is regulated since competition has increased.
Richard Firestone, chief of the FCC's common-carrier bureau, said he expected the agency to propose new rules next year.
AT&T applauded the FCC's actions.
"The time is long overdue to take a look at the fierce competition in the long-distance business and the rules governing it," the New York telecommunications firm said in a statement.
But MCI, of Washington, was displeased with the FCC decision concerning Tariff 12, arguing that "AT&T cannot be allowed to flaunt FCC rules."
United Telecommunications Inc.'s US Sprint unit said it was "obviously disappointed" with the FCC decision on Tariff 12.
US Sprint said was it will petition the FCC decision in federal court.
"We believe that the court will find it unlawful," said a US Sprint spokesman.
Separately, AT&T filed a countersuit against MCI accusing it of misleading consumers through allegedly "false and deceptive" advertising.
The AT&T action was the most recent blow in a nasty fight.
Earlier this month, MCI sued AT&T in federal district court, claiming that AT&T's ads are false.
AT&T assembled three of its top executives in Washington, all visibly angry, to try to refute MCI's charges.
"MCI has made hawks out of the upper echelon of AT&T," said PaineWebber's Mr. Grubman, who said he expected AT&T to become increasingly aggressive in dealing with its longtime nemesis.
Julie Amparano Lopez in Philadelphia also contributed to this article.
Billions of investors' dollars are pouring out of the nation's junk-bond mutual funds, undermining a pillar of support in the already reeling junk market.
Last week alone, an eye-popping $1.6 billion flowed out of the junk funds, or nearly 5% of their total assets, according to estimates by Dalbar Financial Services Inc., a Boston research firm.
In the past two months the nation's 88 junk funds have lost a total of about $6 billion -- more than 15% of assets -- through sales or transfers of junk-fund shares, Dalbar says.
It made the estimates based on data collected from more than a dozen big junk funds.
Interviews with three major fund groups -- Fidelity Investments, Vanguard Group Inc. and T. Rowe Price Associates Inc. -- confirm the trend.
Their junk funds combined have had net outflows totaling nearly $500 million, or about 13% of their junk fund assets, in the past two months.
Some fund managers say negative publicity has exacerbated investors' concern about recent declines in junk-bond prices.
"People have been seeing headline after headline after headline and saying: `I can't take it anymore -- I'm getting out,'" says Kurt Brouwer of Brouwer & Janachowski, a San Francisco investment adviser.
The withdrawals could spell trouble for the $200 billion junk market.
If the heavy outflows continue, fund managers will face increasing pressure to sell off some of their junk to pay departing investors in the weeks ahead.
Such selling could erode prices of high-yield junk bonds, already weakened by a rash of corporate credit problems.
Mutual fund groups haven't lost control of much of the outgoing money, says Louis Harvey, Dalbar's president.
Mutual fund officials say that investors have transferred most of it into their money market accounts, and to a lesser extent, government-bond funds.
So the impact on the $950 billion mutual fund industry as a whole probably will be slight.
But tremors are likely in the junk-bond market, which has helped to finance the takeover boom of recent years.
Mutual funds are the among the largest holders of junk, accounting for more than a quarter of the entire high-yield, high-risk market.
The 88 mutual funds investing solely in junk bonds hold assets of about $32 billion.
Other funds hold a smattering of junk bonds, too.
The $1.5 billion Fidelity High Income Fund has had a net outflow of about $150 million in the past two months.
About $60 million streamed out last week alone, double the level of the week following last month's Campeau Corp. credit squeeze.
About 98% of the outflow was transferred to other Fidelity funds, says Neal Litvack, a Fidelity vice president, marketing, with most going into money market funds.
"You get a news item, it hits, you have strong redemptions that day and for two days following -- then go back to normal," says Mr. Litvack.
The fund, with a cash cushion of more than 10%, has "met all the redemptions without having to sell one thing," Mr. Litvack says.
He adds: "Our fund has had {positive} net sales every month for the last three years -- until this month."
Vanguard's $1 billion High Yield Bond Portfolio has seen $161 million flow out since early September; $14 million of that seeped out Friday Oct. 13 alone.
Still, two-thirds of the outflow has been steered into other Vanguard portfolios, says Brian Mattes, a vice president.
The fund now holds a cash position of about 15%.
At the $932 million T. Rowe Price High Yield Fund, investors yanked out about $182 million in the past two months.
Those withdrawals, most of which were transferred to other T. Rowe Price funds, followed little change in the fund's sales picture this year through August.
"The last two months have been the whole ball game," says Steven Norwitz, a vice president.
Junk-fund holders have barely broken even this year, as fat interest payments barely managed to offset declining prices.
Through Oct. 19, high-yield funds had an average 0.85% total return (the price change plus dividends on fund shares), according to Lipper Analytical Services Inc.
That's even less than the 4.35% total return of the Merrill Lynch High-Yield Index.
Fidelity's junk fund has fallen 2.08% this year through Oct. 19, Lipper says; the Vanguard fund rose 1.84%; and the T. Rowe Price fund edged up 0.66%.
People who remain in junk funds now could get hit again, some analysts and fund specialists say.
Many funds in recent weeks and months have been selling their highest-quality junk issues, such as RJR Nabisco, to raise cash to meet expected redemptions.
Funds might be forced to accept lower prices if they expand their selling to the securities of less-creditworthy borrowers.
And then, asset values of the funds could plunge more than they have so far.
Says Michael Hirsch, chief investment officer of Republic National Bank and manager of the FundTrust Group in New York: "It's a time bomb just waiting to go off.
The surprise resignation yesterday of British Chancellor of the Exchequer Nigel Lawson sent sterling into a tailspin against the dollar by creating uncertainties about the direction of the British economy.
The U.S. unit also firmed against other currencies on the back of sterling's tumble, as market participants switched out of pounds.
The pound also dropped precipitously against the mark, falling below the key 2.90-mark level to 2.8956 marks from 2.9622 marks late Wednesday.
Mr. Lawson's resignation shocked many analysts, despite the recent recurring speculation of a rift between the chancellor and Prime Minister Margaret Thatcher.
Indeed, only hours earlier, Mrs. Thatcher had called Mr. Lawson's economic policies "sound" and said she has "always supported" him.
"There was a general feeling that we'd seen the worst," said Patrick Foley, deputy chief economic adviser for Lloyds Bank in London.
"The resignation came as a great surprise."
Graham Beale, manager of foreign-exchange operations at Hong Kong & Shanghai Banking Corp. in New York, added that Mrs. Thatcher's comments reinforced the market's growing confidence about sterling and compounded the unit's later decline.
"The market was caught totally the wrong way. . . .
Everyone was extremely long on sterling," Mr. Beale said.
In late New York trading yesterday, the dollar was quoted at 1.8400 marks, up from 1.8353 marks late Wednesday, and at 142.10 yen, up from 141.52 yen late Wednesday.
Sterling was quoted at $1.5765, sharply down from $1.6145 late Wednesday.
In Tokyo Friday, the U.S. currency opened for trading at 142.02 yen, up from Thursday's Tokyo close of 141.90 yen.
Few analysts had much good to say about the pound's near-term prospects, despite the fact that most don't anticipate a shift in Mrs. Thatcher's economic policies.
Mr. Foley of Lloyds noted that Mr. Lawson's replacement, John Major, the British foreign minister, will take time to establish his credibility and, in the meantime, sterling could trend downward in volatile trade.
But Mr. Foley predicted few economic policy changes ahead, commenting that Mr. Major shares "a very similar view of the world" with Mr. Lawson.
Bob Chandross, chief economist at Lloyds Bank in New York, also noted that the pound's sharp decline is pegged more to uncertainty in the market than a vision of altered United Kingdom economic policies.
Unless Mr. Lawson's resignation leads to a change in British interest-rate policy -- Mrs. Thatcher's administration firmly supports high interest rates to keep inflation in check -- or posturing toward full inclusion in the European Monetary System's exchange-rate mechanism, Mr. Lawson's withdrawal will have little long-term impact on exchange rates, Mr. Chandross concluded.
Also announcing his resignation Thursday was Alan Walters, Mrs. Thatcher's economic adviser and Mr. Lawson's nemesis.
The pound, which had been trading at about $1.6143 in New York prior to Mr. Lawson's announcement, sank more than two cents to $1.5930, prompting the Federal Reserve Bank to buy pounds for dollars.
The Fed's move, however, only proved a stopgap to the pound's slide and the Fed intervened for a second time at around $1.5825, according to New York traders.
Meanwhile, dollar trading was relatively uninspired throughout the session, according to dealers, who noted that Thursday's release of the preliminary report on the U.S. third-quarter gross national product was something of a nonevent.
U.S. GNP rose at an annual rate of 2.5% in the third quarter.
The implicit price deflator, a measure of inflation, was down to a 2.9% annual rate of increase in the quarter from a 4.6% rate of gain in the second quarter.
In Europe, the dollar ended lower in dull trading.
The market closed prior to Mr. Lawson's announcement.
On the Commodity Exchange in New York, gold for current delivery rose $3.40 to $372.50 an ounce in heavy trading.
The close was the highest since August 3.
Estimated volume was five million ounces.
In early trading in Hong Kong Friday, gold was quoted at $370.85 an ounce.
The following issues were recently filed with the Securities and Exchange Commission:
Anheuser-Busch Cos., shelf offering of $575 million of debt securities.
Coca-Cola Bottling Co. Consolidated, shelf offering of $200 million of debt securities, via Salomon Brothers Inc. and Goldman, Sachs & Co.
First Brands Corp., proposed offering of 6,475,000 common shares, of which 1,475,000 common shares will be sold by the company and five million shares by holders, via First Boston Corp. and Credit Suisse First Boston Ltd.
Home Nutritional Services Inc., a wholly owned subsidiary of Healthdyne Inc., proposed initial offering of four million common shares, of which 1.8 million will be sold by Home Nutritional Services and 2.2 million will be sold by Healthdyne, via Smith Barney, Harris Upham & Co.
Parametric Technology Corp., initial public offering of 1.7 million common shares, of which 1,365,226 will be offered by the company and 334,774 will be offered by holders, via Alex. Brown & Sons Inc., Hambrecht & Quist Inc. and Wessels, Arnold & Henderson.
SynOptics Communications Inc., proposed public offering of 1.5 million common shares, of which 1,003,884 shares are to be sold by the company and 496,116 shares are to be sold by holders, via Morgan Stanley & Co. and Hambrecht & Quist.
On an office wall of the Senate intelligence committee hangs a quote from Chairman David Boren, "Don't hold your ticket 'til the show's over."
He once used that line in a closed-door meeting on Panama, meaning don't shrink from taking action against Manuel Noriega.
So how did a good senator like this end up approving a policy that required the U.S. to warn Mr. Noriega of any coup plot against him?
"I agree, it's ridiculous," says Mr. Boren, and indeed by now ridiculous may be the only way to describe how the U.S. decides to take -- or rather, not to take -- covert action.
George Bush disclosed the policy last week by reading it to GOP senators, perhaps as a way of shifting blame for the Panama fiasco to Congress.
But the broader truth is more complicated -- and dismaying.
The policy was contained in an exchange of letters last October between the Senate intelligence committee and the CIA and National Security Council.
Staff lawyers for both sides were busy agreeing with one another about what the U.S. could not do to oust the Panamanian thug.
They simply got carried away with interpreting what the executive order banning assassinations really meant.
Mr. Boren himself didn't discover the warn-your-enemy nuance until Mr. Bush told him privately at the White House last week.
It's ironic that David Boren should be in the center of this mire.
A former Oklahoma governor, he's a thoughtful defender of presidential powers in foreign policy.
He's a rare Democratic hawk.
He's the senator most like Arthur Vandenberg, the GOP senator from Michigan who worked to forge a bipartisan foreign policy in the 1940s.
"Vandenberg and Rayburn are heroes of mine," Mr. Boren says, referring as well to Sam Rayburn, the Democratic House speaker who cooperated with President Eisenhower.
"They allowed this country to be credible.
I really want to see that happen again."
If this were 1949, Mr. Boren might even succeed.
But in 1989 most senators have other ideas.
Last July, his committee rejected a Reagan administration plan to support a coup in Panama.
Ohio Democrat Howard Metzenbaum refused to support any plan that might get people hurt, a charming notion for a great power.
Maine Republican William Cohen said the plan might violate the assassination ban.
So the administration dropped it.
By October, when the committee rejected a much more modest covert proposal, even the administration was agreeing little should be done.
Mr. Boren doesn't think all this influenced the failed coup this month, but he does concede that Congress has made mistakes.
"In the aftermath of Vietnam, in the aftermath of Iran-Contra, I can understand some people might think that if they plan a coup, they have to bring their lawyers," he says.
But even Mr. Boren defends congressional oversight.
Writing in the Harvard International Review, he says that his committee approves covert operations only when there's a "consensus."
So what does consensus mean?
"It doesn't mean unanimous," he insists, though he implies it means a bipartisan majority.
"The sustainability of U.S. foreign policy is essential," he explains.
"Why was containment so successful?
Because it had bipartisan support."
Mr. Boren is confusing consensus on general principles with agreement on specific actions.
Elliott Abrams, a veteran of intelligence committee debates, doubts that even Grenada or the Libyan raid would have taken place if "consensus" had been required.
Vandenberg and Rayburn were wise enough to leave specific operations to presidents; modern senators, Mr. Boren notwithstanding, are less modest.
The result is that the Senate committee has what amounts to veto power over every covert action.
"I wouldn't say it's quite a veto," Mr. Boren demurs.
But wouldn't a president who acted despite Senate objections be taking grave political risks?
"He would," agrees the chairman.
"But that is something the president ought to know before he goes ahead."
Mr. Boren even spies a silver lining.
He figures the episode will help "clarify any ambiguities" between the committee and administration.
He points to a letter on his desk, his second in a week from President Bush, saying that they "don't disagree."
More broadly, Mr. Boren hopes that Panama will shock Washington out of its fear of using military power.
"Maybe this will jolt us out of the post-Vietnam syndrome that we never are prepared to use force," he says.
Maybe -- if every senator shared the principles of Mr. Boren.
But it's just as plausible to argue that if even David Boren can get mired in this sort of mess, the problem goes beyond legal interpretation.
Maybe the problem is a political system that won't act without an "exchange of letters," that insists on running foreign policy by committee, that treats a president as just another guy at the table.
The reply of the Metzenbaums and Cohens is that we can't abolish these oversight committees because we've seen too many abuses of executive power.
But Panama illustrates that their substitute is a system that produces an absurd gridlock.
The lawyers are now in charge of our national security.
In Panama, the U.S. interests at stake were happily minor; the only people killed were foreigners hapless enough to trust American will.
Americans may not be so lucky the next time.
I was impressed by the perceptiveness of your Sept. 12 story "Rural Enterprise: Tough Row To Hoe."
We lived in rural areas many years, but now live in St. Louis County, Mo.
This morning as I drove the 13 miles to my law office and endured the routine heavy traffic during that twice-daily journey, I thought of how fortunate it was that we made the decision to be residents of an expanding community with so many opportunities and where so much is happening.
The presence of so many people, cars and competing businesses is evidence of a healthy economy in a place where people want to live.
I thought back to our time in small, sparsely populated communities.
I remembered how hard it was for an outsider to become accepted by long-established, stake-holding residents, and what pitfalls awaited an original thinker in societies that were long accustomed to unchanging, "safe" ways of thought and action.
I remembered being fired at age 44, with five children at home, when my views and actions were deemed unsettling by a timid, small-town employer.
How difficult it is for a thinking person to live among societies rooted in the past.
Now, I revel in the freedom, culture, activity and diversity of this great metropolitan area with its traffic jams and perpetual road-building projects.
Yet when my youngest child died two years ago, I buried him in the church cemetery of a small Missouri town.
So after all, even the bitterest critic of rural exclusivity harbors a continuing yearning for those scarce, rural virtues thought to exist amid fields, forests and country lanes.
Ronald Edwin Parsons Ballwin, Mo.
Finnish government officials are negotiating with creditors of Waertsilae Marine Oy, a major shipyard that filed for bankruptcy protection this week, amid confusion and mounting doubts that collapse of the nation's entire shipbuilding industry can be averted.
At stake are almost 10,000 jobs in an industry that has been the mainstay of Finland's post-war economic revival.
Shipbuilding became a point of pride as Finnish shipyards remained profitable long after rivals collapsed all over Europe.
But if, as many now fear, Waertsilae Marine joins the ranks of failed shipyards it might turn out to be remembered most as a blemish on Finland's international reputation.
The shipyard's 6.5 billion Finnish markka ($1.54 billion) backlog includes about 20 ships ordered by big international shippers, including three for Carnival Cruise Lines Inc.
Miami-based Carnival said the first of the three ships is scheduled to be delivered next month, just in time for the winter tourist season in the Caribbean.
The second ship is scheduled to be delivered in fall 1990 and the third in fall 1991.
One analyst said the first ship probably will be delivered close to schedule, but that Carnival may have to pay up to 25% more to get the second and third ships.
All the ships are covered by loan guarantees from a state export financing agency, even though it's not clear whether they will actually be built.
Bankers worry that if the government makes good a threat to withdraw its guarantee commitments, shippers will counter with a hail of lawsuits.
State loan guarantees are rarely a source of controversy.
However, some bankers cited possible parallels between the Waertsilae Marine case and the collapse of Norway's state-owned Kongsberg Vappenfabrikk AS two years ago.
In that case, international banks and investors incurred big losses because they incorrectly believed the company's debt carried implicit state guarantees.
Doubts about the quality of state credit guarantees could reduce the competitive strength of Finnish companies in world markets where financing often is the key to winning orders, analysts warn.
Moreover, state-owned Finnish companies lacking formal state guarantees could face greater difficulty raising funds in international financial markets, bankers say.
The decision by a majority of state-appointed Waertsilae Marine directors Monday to file for bankruptcy was an abrupt about-face from previous government policy.
In August, the government played a major part in a sweeping restructuring of the troubled shipyard.
At the time 71%-controlled by Oy Waertsilae, a conglomerate, the shipbuilding unit faced potential losses estimated at one billion markka and was on the brink of liquidation.
Under the rescue plan, Waertsilae sold 51% of its stake to a group of banks and pension funds.
The government, in turn, guaranteed financing to complete the order backlog and took control of the board.
Government officials were expected to combine Waertsilae Marine with two other struggling firms, and thus ensure Finland's survival as a shipbuilding nation.
The government spent most of last year attempting to carry out such a plan but was thwarted when the parent Waertsilae concern pulled out at the last minute.
After the restructuring of Waertsilae Marine and bolstered by state loan guarantees, two big bank creditors, Union Bank of Finland and state-controlled Postipankki, resumed lending the shipyard working capital.
But the bankers got cold feet recently as government officials complained they had been misled about the shipyard's actual financial condition, and hinted the credit guarantees might be withdrawn.
People familiar with Monday's board meeting said it was the state's refusal to explicitly reaffirm the credit guarantees that led Union Bank and Postipankki to halt lending to Waertsilae Marine.
Then, in a boardroom showdown, state-appointed directors voted to file for bankruptcy, apparently under instructions from Finland's Industry Minister Ilkka Suominen.
Analysts say Mr. Suominen had grown increasingly worried about the state's potential financial exposure as Waertsilae Marine's losses ballooned to more than double the figure estimated in August.
Noting that Sweden wound up wasting state subsidies of about 35 billion Swedish kronor ($5.47 billion) during the 1970s in a vain attempt to salvage its shipbuilding industry, one analyst suggested that Mr. Suominen may have decided to cut Finland's losses once and for all.
Senior ministry officials huddled with creditors during the week in an attempt to agree on some form of restructuring that would keep Waertsilae Marine operating.
The talks may drag on for weeks before any concrete result is announced, people familiar with them said.
One solution would be to sell the shipyard to an outsider.
But there appear to be few, if any, suitors.
Indeed, the potential losses make any rescue scheme unlikely unless the politicians once again change tack and agree to pick up the bill, analysts said.
Meantime, shippers with vessels on order from Waertsilae Marine will remain in limbo.
Turner Broadcasting System Inc. said it expects to report an extraordinary loss of about $122 million in the fourth quarter due to early retirement of debt.
The cable programmer said the loss will consist primarily of prepayment penalties, and unamortized issue discount and costs related to its just-completed $1.6 billion refinancing of its long-term debt and some preferred stock in one of its subsidiaries.
A Turner spokesman wouldn't speculate on the extent of the charge's effect on the quarter's earnings, but said the company continues to expect to report a net loss for 1989.
The company said the repayment or redemption of the long-term debt, and the outstanding Class A cumulative exchangeable preferred stock of Cable News Network, was made possible by an offering of about $750 million of debentures and notes and $900 million in bank borrowings.
The offering included $550 million of 12% senior subordinated debentures due 2001 and $200 million of zero coupon liquid yield option notes due 2004.
The notes were priced to yield 8% and are convertible into the company's Class B common stock at a price which represents a 15% premium over the market price on Oct. 10, 1989.
In addition, the company called its 12 7/8% senior subordinated notes due 1994, with an aggregate principal amount of $200 million, for redemption on Dec. 15.
As a result of the refinancing, the company said the interest on the debt will fall to slightly more than 11% from slightly more than 14%.
In American Stock Exchange composite trading, Turner's Class A stock closed at $50.50, down 37.5 cents.
General Motors Corp. said it will temporarily idle its Arlington, Texas, assembly plant for one week beginning Monday because of slow sales.
The closing will affect about 3,000 workers and eliminate production of 700 cars.
The assembly plant builds the Cadillac DeVille, Chevrolet Caprice and Oldsmobile Cutlass Ciera Wagon.
In addition, GM's Truck & Bus Group said slow sales are forcing it to close its Detroit assembly plant the week beginning Monday.
The plant builds chassis for recreational vehicles and about 450 workers will be affected by the closing.
The No. 1 auto maker scheduled overtime this week at its Janesville, Wis., assembly plant, manufacturer of the Chevrolet Cavalier.
The nine major U.S. auto makers plan to build 147,121 vehicles this week, down 9.6% from the 162,767 a year ago, but 2.5% higher than last week's 143,534.
Ford Motor Co. slated overtime again this week at its Wixom, Mich.; Wayne, Mich.; Kansas City, Mo., and Norfolk, Va., assembly plants.
They build the Lincoln Town Car, Continental and Mark VII, the Ford Escort and full-sized pickup trucks.
Chrysler Corp. scheduled overtime this week at its St. Louis Assembly Plant No. 2, Newark, Del., and Sterling Heights, Mich., assembly plants.
They build extended minivans and the Dodge Spirit, Acclaim, Shadow and Sundance.
d-Percentage change is greater than 999%.
e-Estimated.
f-Includes Chevrolet Prizm and Toyota Corolla.
r-Revised.
x-Year-to-date 1988 figure includes Volkswagen domestic-production through July.
The surprise resignations of two top economic government officials heaped more uncertainty on London's financial markets, which already have been laboring under worries about Britain's ailing economy.
"The last thing markets like is uncertainty," said Ian Harwood, chief economist at S.G. Warburg & Co., of the resignations of Chancellor of the Exchequer Nigel Lawson and chief economic adviser Sir Alan Walters.
"I think you'll see share prices go down, and sterling now is under something of a cloud."
The pound immediately began to take a buffetting after the resignations were announced.
In late New York trading, sterling stood at $1.5765, down from $1.6145 late Wednesday.
The British economy is hardly the picture of health these days.
At 15%, base interest rates are the highest in eight years, and the 7.6% annual inflation rate is by far the highest in the European Community.
Unions are pressing demands for wage increases of more than 10% despite general belief that economic growth next year will be less than 2%.
Increasingly, the financial markets are reflecting the gloom.
The Financial Times 100-share index has dropped about 12% from its 1989 high of 2423.9 on Sept. 8.
Yesterday, even before the resignations were announced, the index dove 32.5 points to close at 2129.4.
"We are expecting a recession," says Donald Franklin, chief economist at Schroders investment bank.
"The only question is, how deep is it going to be?
The outlook for corporate earnings is fairly bleak.
It's quite likely we're going to get repeats" of the mid-October market shocks.
Red ink already has begun to flow in the wake of the U.S.-U.K. market breaks of Oct. 13 and Oct. 16.
London-based LIT Holdings, the largest financer of traders in the Chicago options and futures markets, said yesterday it will incur a second-half loss as a result of the market plunge.
The company, which also will omit its second-half dividend, didn't specify the size.
But company insiders estimated that the loss could approach the equivalent of $10 million.
Christopher Castleman, LIT chief executive, said in an interview that the loss stemmed from the default of three options traders who had bet on a price rise in UAL Corp. shares before Oct. 13.
The price plummeted after a proposed leveraged buy-out of the airline fell through.
LIT Holdings shares plummeted 36 pence to close at 54 pence (85 cents), a 40% drop, on London's stock exchange.
Denizens of London's financial district are cushioning themselves for heavy blows.
"A lot more of our customers are staying until our 10 p.m. closing time," says Christopher Brown, managing director of Corney & Barrow Restaurants Ltd., which runs five tony wine bars in the district.
"There's a strong sense among the martini set that there's more {bad news} to come," asserts Roger Yates, chief investment officer at Morgan Grenfell Asset Management.
"People in the stock market were very much Thatcher's children -- very young and wealthy optimists.
Now it's dawning on them that they can be non-wealthy."
The malaise has created a nostalgic longing for the uncomplicated days of the mid-1980s, before a rash of securities-firm mergers on the eve of the industry's deregulation in 1986.
"People come to us saying they'd like to be back where they were a few years ago, in a more collegial atmosphere, with less tension," says Stephen Waterhouse, managing director of Hanover Partners Ltd., a financial district head-hunting firm.
But after trading losses in the mid-October market jolts here, many people will be lucky to have jobs at all, executives predict.
The industry, which currently employs about 25,000 people in London, has shed about 2,500 jobs over the past two years.
"I can see cuts of at least 20% more," says the head of the London office of a major U.S. firm.
The mergers and acquisitions market has been a saving grace for the industry, but uncertainties are beginning to mount even there.
Intra-European takeovers are expected to continue at their brisk pace.
But investment bankers say that stock market uncertainties in the U.S. may cause many European companies to mark time before bidding for American companies, in the hope that share prices will come down.
"If prices in the States go down, industrial buyers in Europe have the opportunity of getting reasonable prices in the U.S.," says Francois von Hurter, chief of Continential M&A at Credit Suisse First Boston Ltd.
But he adds: "Everybody and his sister have opened up M&A shops.
It's difficult to see that there's going to be enough business to go around.
About eight firms will get the lion's share.
At the others, there are going to be a lot of disappointments, after all those promises and all that big money that's been paid to people."
It all adds up to a cold winter here.
Says Allen D. Wheat, head of trading at Bankers Trust Co.: "People are just plain scared."
One person who is past worrying about London's blues is Christopher Hartley.
Last summer, he chucked his 10-year career as a London stockbroker and headed for the mountains.
He didn't stop until he got to Jackson Hole, Wyo.
"I'm glad to be out," said the 32-year-old Mr. Hartley in a phone interview.
"The percentage of your day spent twiddling your thumbs got greater, and the work day kept getting longer.
What am I doing in Jackson Hole?
Not a great deal.
My wife and I will stay through the skiing season, or until the money runs out -- whichever comes first.
But unlike London, out here I've never heard anybody blow a car horn in anger.
SYDNEY-Qintex Australia Ltd., under pressure from bank lenders, has called in accounting firm Peat Marwick Hungerfords to help oversee asset sales and restructure the resorts and media company.
Analysts said the move could presage even harsher action by the banks.
But any move by the banks to take over Qintex Australia's management could threaten its ability to operate its national television network under Australian broadcast license rules.
That, in turn, could substantially reduce the value of the television assets.
The appointment of Peat Marwick, which has a unit that specializes in advising troubled companies, came about as a result of a round of meetings held by Qintex Australia Chairman Christopher Skase with bank creditors.
Yesterday, Mr. Skase said the company is "solvent and with the continued support of its bankers is able to meet its financial commitments."
Qintex Australia is a unit of Qintex Ltd.
The Qintex group's problems began in earnest in March, when Mr. Skase agreed to buy MGM/UA Communications Co.
But the transaction faltered in September, when Qintex Australia was forced to increase its offer to US$1.5 billion following a counterbid from Rupert Murdoch; the deal fell apart altogether earlier this month.
Qintex Australia owes creditors around A$1.2 billion.
Last Friday, Qintex Entertainment Inc., its 43%-owned U.S. TV production and distribution affiliate, filed for Chapter 11 protection.
The government is sharpening its newest weapon against white-collar defendants: the power to prevent them from paying their legal bills.
And defense lawyers are warning that they won't stick around if they don't get paid.
The issue has come to a boil in Newark, N.J., where federal prosecutors have warned lawyers for Eddie Antar that if the founder and former chairman of Crazy Eddie Inc. is indicted, the government may move to seize the money that Mr. Antar is using to pay legal fees.
The warning by the U.S. attorney's office follows two decisions by the U.S. Supreme Court last June.
In those cases, the high court ruled that federal law gives prosecutors broad authority to seize assets of people accused of racketeering and drug-related crimes, including fees paid to lawyers before an indictment.
If the government succeeds in seizing Mr. Antar's assets, he could be left without top-flight legal representation, because his attorneys are likely to quit, according to individuals familiar with the case.
A seizure also would make the case the largest -- and one of the first -- in which lawyers' fees have been confiscated in a prosecution unrelated to drugs.
"The people who suffer in the short run are defendants, but the people who suffer in the long run are all of the people, because there won't be a vigorous private bar to defend the Bill of Rights," says Gerald Lefcourt, a criminal defense attorney who says he has turned down a number of cases to avoid possible fee seizures.
Mr. Antar is being investigated by a federal grand jury in Newark, where prosecutors have told him that they may soon seek an indictment on racketeering and securities fraud charges.
Under the Racketeer Influenced and Corrupt Organizations law, or RICO, the government has the authority to seek to freeze or seize a defendant's assets before trial.
According to individuals familiar with Mr. Antar's case, prosecutors issued their warning this week after one of Mr. Antar's attorneys asked whether legal fees might be subject to seizure.
In a letter, prosecutors told Mr. Antar's lawyers that because of the recent Supreme Court rulings, they could expect that any fees collected from Mr. Antar may be seized.
Prosecutors have told Mr. Antar's attorneys that they believe Mr. Antar's allegedly ill-gotten gains are so great that any money he has used to pay attorneys derives from illegal activities.
Therefore, they said, the money can be taken from the lawyers even after they are paid.
Justin Feldman and Jack Arseneault, attorneys for Mr. Antar, both declined to comment on the matter.
In Newark, U.S. Attorney Samuel A. Alito said, "I don't think there's any legal reason to limit forfeiture of attorney's fees to drug cases."
Mr. Alito said his office "just responded to an attorney's question about whether we would go after attorney's fees, and that is different from actually doing it, although we reserve that right."
Mr. Antar was charged last month in a civil suit filed in federal court in Newark by the Securities and Exchange Commission.
In that suit, the SEC accused Mr. Antar of engaging in a "massive financial fraud" to overstate the earnings of Crazy Eddie, Edison, N.J., over a three-year period.
Through his lawyers, Mr. Antar has denied allegations in the SEC suit and in civil suits previously filed by shareholders against Mr. Antar and others.
The SEC has alleged that Mr. Antar aimed to pump up the company's stock price through false financial statements in order to sell his stake and reap huge profits.
Mr. Antar, the SEC said, made more than $60 million from the sale of his shares between 1985 and 1987.
The Justice Department has emphasized that the government's fee-forfeiture power is to be used sparingly.
According to department policy, prosecutors must make a strong showing that lawyers' fees came from assets tainted by illegal profits before any attempts at seizure are made.
Still, criminal defense lawyers worry that defendants are being deprived of their Sixth Amendment right to counsel and a fair trial if the government can seize lawyers' fees.
They also worry that if the government applies asset-forfeiture laws broadly, the best defense lawyers will be unwilling to take criminal cases unless they are assured of being paid.
The stock market correction of Oct. 13, 1989, was a grim reminder of the Oct. 19, 1987 market collapse.
Since, like earthquakes, stock market disturbances will always be with us, it is prudent to take all possible precautions against another such market collapse.
In general, markets function well and adjust smoothly to changing economic and financial circumstances.
But there are times when they seize up, and panicky sellers cannot find buyers.
That's just what happened in the October 1987 crash.
As the market tumbled, disorderly market conditions prevailed: The margins between buying bids and selling bids widened; trading in many stocks was suspended; orders took unduly long to be executed; and many specialists stopped trading altogether.
These failures in turn contributed to the fall in the market averages: Uncertainty extracted an extra risk premium and margin-calls triggered additional selling pressures.
The situation was like that of a skier who is thrown slightly off balance by an unexpected bump on the slope.
His skis spread farther and farther apart -- just as buy-sell spreads widen during a financial panic -- and soon he is out of control.
Unable to stop his accelerating descent, he crashes.
After the 1987 crash, and as a result of the recommendations of many studies, "circuit breakers" were devised to allow market participants to regroup and restore orderly market conditions.
It's doubtful, though, whether circuit breakers do any real good.
In the additional time they provide even more order imbalances might pile up, as would-be sellers finally get their broker on the phone.
Instead, an appropriate institution should be charged with the job of preventing chaos in the market: the Federal Reserve.
The availability of timely assistance -- of a backstop -- can help markets retain their resilience.
The Fed already buys and sells foreign exchange to prevent disorderly conditions in foreign-exchange markets.
The Fed has assumed a similar responsibility in the market for government securities.
The stock market is the only major market without a market-maker of unchallenged liquidity or a buyer of last resort.
This does not mean that the Federal Reserve does not already play an important indirect role in the stock market.
In 1987, it pumped billions into the markets through open market operations and the discount window.
It lent money to banks and encouraged them to make funds available to brokerage houses.
They, in turn, lent money to their customers -- who were supposed to recognize the opportunity to make a profit in the turmoil and buy shares.
The Fed also has the power to set margin requirements.
But wouldn't it be more efficient and effective to supply such support to the stock market directly?
Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole.
The stock market is certainly not too big for the Fed to handle.
The foreign-exchange and government securities markets are vastly larger.
Daily trading volume in the New York foreign exchange market is $130 billion.
The daily volume for Treasury Securities is about $110 billion.
The combined value of daily equity trading on the New York Exchange, the American Stock Exchange and the NASDAQ over-the-counter market ranges between $7 billion and $10 billion.
The $13 billion the Fed injected into the money markets after the 1987 crash is more than enough to buy all the stocks traded on a typical day.
More carefully targeted intervention might actually reduce the need for government action.
And taking more direct action has the advantage of avoiding sharp increases in the money supply, such as happened in October 1987.
The Fed's stock market role ought not to be very ambitious.
It should seek only to maintain the functioning of markets -- not to prop up the Dow Jones or New York Stock Exchange averages at a particular level.
The Fed should guard against systemic risk, but not against the risks inherent in individual stocks.
It would be inappropriate for the government or the central bank to buy or sell IBM or General Motors shares.
Instead, the Fed could buy the broad market composites in the futures market.
The increased demand would normalize trading and stabilize prices.
Stabilizing the derivative markets would tend to stabilize the primary market.
The Fed would eliminate the cause of the potential panic rather than attempting to treat the symptom -- the liquidity of the banks.
Disorderly market conditions could be observed quite frequently in foreign exchange markets in the 1960s and 1970s.
But since the member countries of the International Monetary Fund agreed to the "Guidelines to Floating" in 1974, such difficulties have been avoided.
I cannot recall any disorder in currency markets since the 1974 guidelines were adopted.
Thus, the mere existence of a market-stabilizing agency helps to avoid panic in emergencies.
The old saying advises: "If it ain't broke, don't fix it."
But this could be a case where we all might go broke if it isn't fixed.
Mr. Heller, now at VISA International, was a governor of the Federal Reserve Board from 1986 until earlier this year.
This is adapted from a speech to the Commonwealth Club in San Francisco.
Bank of England Governor Robin Leigh-Pemberton urged banks to be cautious in financing leveraged buy-outs.
"Caution should . . . be the rule of the day," said Mr. Leigh-Pemberton in a speech to the Association of Corporate Treasurers' annual dinner.
"It would be damaging to industry and to the financial sector in general, to say nothing of banks, if prudence does not guide the financing of leveraged transactions."
His remarks were distributed to the press before Chancellor of the Exchequer Nigel Lawson announced his resignation last evening.
Bank of England officials said the central bank had no comment on Mr. Lawson's resignation.
Mr. Leigh-Pemberton reiterated that the exposure of United Kingdom banks to leveraged deals haven't yet reached "worrying levels."
However, in light of the risks involved in such transactions, banks should satisfy themselves that they have the skills to participate in this market and clear policy guidelines on acceptable levels of exposure to such transactions, he said.
In other comments, he said takeovers may not always be the most efficient way of securing a change of corporate direction or strategy.
"A similar result could sometimes be achieved, at less cost, by changing managements," he said.
Intel Corp.'s most powerful computer chip has flaws that could delay several computer makers' marketing efforts, but the "bugs" aren't expected to hurt Intel and most computer makers.
Computer experts familiar with the flaws, found in Intel's 80486 chip, say the defects don't affect the average user and are likely to be cleared up before most computers using the chip as their "brains" appear on the market sometime next year.
Intel said that last week a customer discovered two flaws in its 80486 microprocessor chip's "floating-point unit", a set of circuits that do certain calculations.
On Friday, Intel began notifying customers about the bugs which cause the chip to give wrong answers for some mathematical calculations.
But while International Business Machines Corp. and Compaq Computer Corp. say the bugs will delay products, most big computer makers said the flaws don't affect them.
"Bugs like this are just a normal part of product development," said Richard Archuleta, director of Hewlett-Packard Co.'s advanced systems development.
Hewlett announced last week that it planned to ship a computer based on the 486 chip early next year.
"These bugs don't affect our schedule at all," he said.
Likewise, AST Research Inc. and Sun Microsystems Inc. said the bugs won't delay their development of 486-based machines.
"We haven't modified our schedules in any way," said a Sun spokesman.
To switch to another vendor's chips, "would definitely not be an option," he said.
Nonetheless, concern about the chip may have been responsible for a decline of 87.5 cents in Intel's stock to $32 a share yesterday in over-the-counter trading, on volume of 3,609,800 shares, and partly responsible for a drop in Compaq's stock in New York Stock Exchange composite trading on Wednesday.
Yesterday, Compaq plunged further, closing at $100 a share, off $8.625 a share, on volume of 2,633,700 shares.
Most of Compaq's decline is being attributed to a third-quarter earnings report that came in at the low end of analysts' expectations.
Intel said it had corrected the problems and would start producing bugless chips next week.
"We should not be seeing any more," said Bill Rash, Intel's director for the 486 chip.
What's more, the bugs only emerge on esoteric applications such as computer-aided design and scientific calculations, he said, and then very seldom.
"These errata do not affect business programs," he said.
The bugs will cause problems in "specific and rare circumstances that will not occur in typical applications" such as word-processing and spreadsheets, said Michael Slater, editor of the Microprocessor Report, an industry newsletter.
Sun, Hewlett-Packard and others say Intel isn't wholly to blame for the snafu.
The real culprits, they said, are computer makers such as IBM that have jumped the gun to unveil 486-based products.
"The reason this is getting so much visibility is that some started shipping and announced early availability," said Hewlett-Packard's Mr. Archuleta.
"You can do that but you're taking a risk.
Those companies are paying the price for taking the risk."
In late September, IBM began shipping a plug-in card that converts its PS/2 model 70-A21 from a 80386 machine to an 80486 machine.
An IBM spokeswoman said the company told customers Monday about the bugs and temporarily stopped shipping the product.
IBM has no plans to recall its add-on cards, the spokeswoman said, and could probably circumvent the bugs without long product delays.
"We don't look at this as a major problem for us," she said.
Compaq, which said it discovered the bugs, still plans to announce new 486 products on Nov. 6.
Because of the glitch, however, the company said it doesn't know when its machine will be commercially available.
That's a break from Compaq tradition, because the company doesn't announce products until they're actually at the dealers.
The problem is being ballyhooed, experts say, because the 486 is Intel's future flagship.
Intel's microprocessors are the chips of choice in many of today's personal computers and the 80486 microprocessor is the spearhead of the company's bid to guard that spot in the next generation of machines.
"Although these sorts of bugs are not at all uncommon, the 486 is an extremely high-profile product," said Mr. Slater, the newsletter editor.
Intel's 80486 chip is the Corvette of Intel's microprocessors, a super-fast, super-expensive chip that only the most power-hungry computer users are likely to buy for at least several years.
Unveiled last April, the chip crams 1.2 million transistors on a sliver of silicon, more than four times as many as on Intel's earlier model, 80386.
Intel clocks the chip's speed at 15 million instructions per second, or MIPs.
That's four times as fast as the 386.
Machines using the 486 are expected to challenge higher-priced work stations and minicomputers in applications such as so-called servers, which connect groups of computers together, and in computer-aided design.
But while the chip's speed in processing power is dazzling, it's real strength lies in its software inheritance.
The 486 is the descendant of a long series of Intel chips that began dominating the market ever since IBM picked the 16-bit 8088 chip for its first personal computer.
(A 16-bit microprocessor processes 16 pieces of data at a time and is slower than newer, 32-bit chips.)
Since then, Intel has cornered a large part of the market with successive generations of 16-bit and 32-bit chips, all of which can run software written for previous models.
That's what will keep computer makers coming in spite of the irritation of bugs.
Big personal computer makers and many makers of engineering workstations are developing 486-based machines, which are expected to reach the market early next year.
Of the big computer makers, only Apple Computer Co. bases its machines on Motorola chips instead.
"The 486 is going to have a big impact on the industry," said Hewlett-Packard's Mr. Archuleta.
"It's going to be the leading edge technology in personal computers for the next few years.
This bug is not going to have any affect on that at all."
Andy Zipser in Dallas contributed to this article.
Bethlehem Steel Corp. has agreed in principle to form a joint venture with the world's second-largest steelmaker, Usinor-Sacilor of France, to modernize a portion of Bethlehem's ailing BethForge division.
The venture, which involves adding sophisticated equipment to make cast-iron mill rolls, is part of a two-pronged effort to shore up a division that has posted continuing operating losses for several years.
The other element includes consolidating BethForge's press-forge operations.
The entire division employs about 850 workers.
While the joint venture affects only a small part of Bethlehem's operations, it is significant because it marks the first time the nation's No. 2 steelmaker has joined forces with a foreign partner.
Wall Street analysts have criticized Bethlehem for not following its major competitors in linking with a foreign company to share costs and provide technology to modernize old facilities or build new ones.
"We think it's a step in the right direction for Bethlehem," said Felix Bello, WEFA Group's international steel analyst.
"It's important to share the risk and even more so when the market has already peaked."
He said the move could be the beginning of a broader relationship between the two companies, one that could open up new markets for Bethlehem.
Bethlehem had little choice but to go with a European steelmaker, because its competitors already have tapped the Japanese and South Korean industry leaders, analysts noted.
Under terms of the agreement, Usinor's Chavanne-Ketin unit and Bethlehem would establish a modernized facility to make cast-iron mill rolls at the company's cast-iron shop here.
Terms for the venture, which would be jointly owned by both companies, weren't disclosed.
The Usinor unit has agreed to provide technology and expertise to install a so-called spin caster by early next fall.
The caster improves the metallurgical quality of the iron mill rolls, which are basically huge rolling pins used to flatten or shape steel products.
Bethlehem is also working with the United Steelworkers union to consolidate BethForge's two machine shops and four heat-treatment facilities of the press-forge operations.
Once the consolidation is complete, Bethlehem plans to concentrate its forgings business on nuclear fabrication, hardened steel and large-diameter steel rolls for rolling mills and selected custom-die applications.
Bethlehem said earlier this year that it planned to restructure the BethForge division to improve its cost structure.
In the second quarter, Bethlehem posted a $50 million charge related to its plans to realign the division.
If you're still wondering about the causes of the slump in the junk-bond market, consider the case of Columbia Savings & Loan.
The California thrift has just announced a $226 million third-quarter loss.
How did this happen?
Well, when Congress in its recent S&L bailout mandated that the thrifts sell off all their junk-bond holdings by 1994, it not only artificially increased the supply of these bonds in the market but also eliminated one of the few profitable investments thrifts have made.
But there is a grimly ironic twist to the Columbia loss.
As followers of the debate over a capital-gains tax cut know, there is much talk in Congress and indeed all over Washington about the need to "encourage" long-term investment and discourage the financial sector's presumed obsession with the short term.
Now, we regard this as a largely phony issue, but the "long term" is nonetheless a big salon topic all around the Beltway.
It turns out that Columbia had this huge loss in large part because the new congressionally mandated rules forced it to adjust the book value of its soon-to-be-sold junk bonds to the lower of either their cost or market value.
They could no longer be classified as what Columbia regarded them, namely long-term investments.
Congress's ham-handed treatment of the existing structure of junk-bond holdings reminds us of a story in the Journal earlier this year about the Baby Bell companies' desire to have the court-ordered bans lifted on offering information services.
The issue of seeking relief from Congress was raised to Delbert Staley, the chairman of Nynex.
Mr. Staley replied: "Legislation tends to be compromised.
I believe we have to take a shot at getting as much done as we can through the court, through Justice and through state and federal regulatory agencies.
I see Congress as a last resort."
Healthy thrifts such as Columbia or the junk-bond market itself should have been so lucky.
The reality of life in modern America is that if you want to wreck something that works, let it fall into the hands of Congress.
Exxon Corp. said it will move its headquarters from Manhattan to Dallas.
Most of the 300 employees at the oil company's midtown headquarters building -- including much of senior management -- were unaware of the plan until informed at a morning meeting by Chairman Lawrence G. Rawl.
The shift won't affect operations.
As part of its restructuring several years ago, Exxon moved most of those out of the city and sold its 53-floor Rockefeller Center skyscraper to a Japanese company.
But the pullout is an embarrassment to New York City officials, coming at a time of high office building vacancy rates and departures by other major companies.
Mobil Corp. is in the process of vacating its headquarters here, and huge operations like J.C. Penney & Co. and Trans World Airlines have recently left.
New York authorities, informed yesterday about the move, reacted with concern and even some anger to the idea of the nation's third-largest corporation leaving without giving them an opportunity to accommodate it.
"We are dismayed, but there's nothing we can do about it now," said Stanley Grayson, New York City deputy mayor for finance and economic development.
Meanwhile, Dallas welcomed the move.
City officials there had been were aware that a large company was moving in, but negotiations had all been conducted through a law firm and under the code name "Everglades."
"When we were told it was Exxon, it was beyond all expectations; what a coup," said Tom Lewis, senior vice president of Dallas Partnership, the economic development affiliate of the city's Chamber of Commerce.
Dallas, its economy based on oil and real estate, has been in a slump.
Exxon said it will build a new headquarters on a 132-acre tract in the 10-year-old Las Colinas complex in the suburb of Irving.
Until the building is completed, Exxon will rent part of an existing office tower.
Las Colinas, once a huge Texas ranch, is a sprawling complex of office buildings, homes and recreational facilities that its developers have been struggling to populate in recent years.
Exxon officials said it will cost less to run its headquarters at Las Colinas than in New York.
The company won't say how much it will save, but during at its interim location, sources say it will likely pay rent of $10 to $15 per square foot.
Owners of the building in New York say they will be asking $50 per square foot for rent to fill the space that Exxon is vacating.
In Texas, taxes and development costs are also lower, they said.
Plus, one Exxon official said, by eliminating the typically long New York commutes between office and home, management will expect employees to work 40 hours a week in Dallas, rather than a 35-hour work week in New York.
Canadian production of market pulp rose 1% in September from a year earlier as the industry operated at 87% of capacity.
The Canadian Pulp and Paper Association, an industry group, said Canadian mills produced 532,000 metric tons of market pulp in September, compared with 527,000 metric tons a year earlier.
Market pulp is wood pulp sold on the open market to producers of paper and other products.
The statistics exclude pulp consumed at the producing mill or shipped to another mill that is affiliated with the producing mill.
Canada is the world's largest producer of market pulp.
The September 87% operating rate compared with a rate of 101% in August but was unchanged from a year earlier.
In the first nine months of this year output was 5,377,000 metric tons, down from 5,441,000 metric tons a year earlier.
IMA Holdings Corp. completed its $3 billion acquisition of American Medical International Inc., purchasing 63 million shares, or 86%, of the Los Angeles-based health-care services concern for $26.50 a share.
The price also includes assumption of about $1.4 billion in debt.
IMA is a group that includes First Boston Corp. and the Pritzker family of Chicago through the leveraged buy-out fund Harry Gray Melvyn Klein & Partners.
Harry J. Gray and Melvyn N. Klein, along with five other IMA designees, were named to join American Medical's 10-member board.
The completion of the merger agreement follows months of twists and turns.
In January, American Medical brought in a new chief executive officer, Richard A. Gilleland, 45, who will remain as chairman, president and chief executive.
A few days later, American Medical announced sharply lower earnings, taking charges of $24 million for insurance reserves and canceled real estate leases.
In March, American Medical received a $24-a-share offer to take the company private from an investor group including large holder M. Lee Pearce.
It also was considering a restructuring to help boost the stock price.
A group including several members of the the Bass family of Texas urged the company to take some steps to maximize shareholder value.
The following month, the company put itself up for sale.
It received more offers, but the auction was surprisingly won by IMA, which bid $28 a share and asked Mr. Gilleland to stay on as an equity participant.
He indicated that some assets might be sold off to service the debt.
Then, after extending its offer four times waiting for a congressional tax ruling, IMA early this month lowered its offer to $26.50 a share amid turbulence in the junk bond market.
American Medical accepted the offer, meanwhile indicating it had heard from two other suitors.
But they never materialized and IMA completed the purchase yesterday.
Other new board members include John S. Harrison and Mark A. Adley of First Boston, James F. Lyons, William S. Goldberg and Harold S. Handelsman.
Treasury Secretary Nicholas Brady said that Congress should grant the Securities and Exchange Commission the power to close the stock markets in periods of crisis.
In testimony to the Senate securities subcommittee, Mr. Brady disputed the view of SEC Chairman Richard Breeden, who told a House panel Wednesday that he doesn't want the ability to halt the markets.
Mr. Breeden contended that discretionary power could have an impact on the markets if rumors were to circulate about when the exchanges might be closed.
He added that the president already has the power to close the markets in an emergency.
But Mr. Brady argued that the SEC is closer to the markets and in a better position to understand when the exchanges are under such stress that they should be closed.
Separately, Mr. Brady said he asked the Working Group on Financial Markets to determine whether futures margins are too low.
He noted that some minimum margin requirements have been reduced to levels below those before the 1987 crash.
"This raises questions whether futures and equity margin requirements are consistent at these levels and whether futures margins are adequate," Mr. Brady said.
Margins are the amount of money an investor needs to put up to buy or sell a futures contract.
Margins on the futures exchanges typically are raised and lowered according to market volatility.
The Chicago Mercantile Exchange margins for the Standard & Poor's 500 stock-index futures stood at $10,000 a contract for speculators and $5,000 for hedgers before Oct. 16, 1987; that day the hedging margin was raised to $7,500.
Margins were raised or lowered about a dozen times since the crash Oct. 19, 1987.
Currently, they stand at $12,000 for speculators, who are typically individuals and non-member traders, and $6,000 for hedgers, which are usually institutions and have offsetting positions in the underlying stocks.
Mr. Brady also said he expects the leveraged buy-out phenomenon to "end under (its) own weight."
Asked whether there is anything Congress should do to curb the LBO boom, Mr. Brady responded, "I think the LBO phenomenon, (while) it won't stop completely, will be a thing of the past."
Before taking any action, he advised the panel to "see what the market has produced as a cure."
Mr. Brady also agreed with senators' concerns about recent stock-market volatility, and said he realizes that the gyrations are scaring investors from investing in stocks.
But he added that individuals still are participating in the equity market indirectly through mutual funds and pension funds.
The former Wall Street executive refused to offer an opinion on the controversy surrounding program trading, which has recently become a larger part of the trading in the market and has been blamed for accelerating the drop two weeks ago.
"I do not have a view of whether we should do anything about program trading at this time," he said.
But Mr. Brady endorsed the market-revision bill that both houses of Congress will try to push through this session.
That bill, proposed by the SEC last year, would require brokerage firms to disclose the financial positions of their holding companies, mandate large traders' reporting of program or block trades, and improve clearing and settlement of trades between the futures and stock markets.
The bill also would give the SEC the power to close the markets, a discretion that former SEC Chairman David Ruder wanted but Mr. Breeden doesn't.
Mr. Brady and senators agreed to have their staffs meet within the next week to start fine-tuning the bill.
The Senate Agriculture Committee is responding to trading abuses in the futures markets with a far-reaching bill that would become the Futures Trading Practices Act of 1989.
The proposed legislation has a laudable goal: to assure the integrity of the U.S. futures markets.
However, as is common with sweeping legislation, the proposal contains many provisions that could destroy important parts of the system it sets out to preserve.
The complex bill, introduced by Sens. Patrick Leahy (D., Vt.), Richard Lugar (R., Ind.), and Bob Kerrey (D., Neb.), covers a wide range of provisions that would affect the funding and authority of the Commodity Futures Trading Commission and would profoundly change the way the industry is regulated.
These include provisions relating to the technology and systems that must be employed by exchanges, oversight and disciplinary procedures for exchange trading practices, the relationship between commodity brokerage firms and floor traders, and exchange governance.
The bill also elevates even minor rule infractions to felonies and provides for recovery of punitive damages in civil lawsuits and arbitration cases without any showing of willful misconduct.
Many aspects of the bill are salutary, providing appropriate public safeguards that can and should be instituted throughout the industry.
Indeed, some of the bill's requirements, including broad representation on the exchanges' boards of directors and strong measures to prevent conflicts of interest, already have been put in place by the Coffee, Sugar & Cocoa Exchange and other futures exchanges.
Other aspects of the bill, however, are either structured in ways that create unnecessary burdens for the industry or actually are harmful to the exchanges, the industry and ultimately the general public.
One of the most prominent features is the requirement that in three years all exchanges have in place a system that records all trades by a source independent of the executing broker.
The New York futures exchanges have been working together to develop a trade recording system much like the one called for in the bill.
We would be delighted to have such a system in place today.
But is it realistic for Congress to mandate by a rigid deadline a system that has not yet been subjected to feasibility studies?
What if the system doesn't work?
What if the only system that does work is so expensive that, at best, only the largest exchanges can afford it?
Cost is a key consideration because of the global sweep of the financial markets.
The U.S. futures exchanges compete world-wide as never before.
Today, trading in almost any commodity can be diverted from U.S. markets with just a few strokes of a keyboard.
All foreign markets are aggressively courting U.S. business.
In fact, several London markets already offer lower costs for trading in the same or very similar contracts.
The U.S. exchanges need both market integrity and cost-efficiency; long-term growth depends on it.
The Senate bill contains many provisions that will increase the costs of trading.
The most arbitrary of these is the imposition of "service fees," which will directly widen the cost spread between U.S. and foreign markets.
Other provisions have a more subtle, but nonetheless real and detrimental effect on the international position of U.S. exchanges.
These include the extension of liability into areas beyond those established by judicial precedent and the expansion of liability to include punitive damages.
In addition to increasing costs as a result of greater financial exposure for members, these measures could have other, far-reaching repercussions.
One section of the bill would make all commodity brokerage firms and floor brokers liable for damages without willful misconduct.
Nowhere in the federal securities law is simple negligence or inadvertent action a source of liability under similar circumstances.
It is only logical to assume that the enactment of this provision will lead to increased litigation.
In an already low-profitmargin business, commodity brokerage firms may well decide to eliminate the risk and expense of dealing with the retail public, depriving the private individual of access to the markets.
Another measure makes commodity brokerage firms liable for violations committed by independent floor brokers who execute trades for them.
This untried concept would expose these firms to potentially astronomical punitive damages.
Faced with the virtually impossible task of supervising the execution of each trade, many commodity brokerage firms are likely to stop doing business with independents and instead hire their own salaried floor brokers.
This would force out of business many of the individuals and small firms that function as floor brokers.
A consequence of their departure could be a serious diminution of market liquidity.
Finally, under the bill, a number of legitimate, longstanding business practices would be arbitrarily banned, unless the CFTC were to take specific and timely action to permit them to continue.
In other words, regulation will occur through inaction and happenstance, rather than through a normal deliberative procedure.
The affected practices include the placing of oral orders, which is the way most public customer orders are placed, and trading between affiliated brokers, even though in some cases trading with affiliates may be the only way to obtain the best execution for a client.
Also precluded would be dual trading, whereby a broker trades for customers as well as his own account, a practice that provides needed liquidity to the markets.
All U.S. futures exchanges agree that these and other trading practices require proper regulation and supervision.
Nonetheless, each has too much potential value to the system to be banned by legislative fiat before the CFTC carefully considers all the consequences of a ban and what the regulatory alternatives are.
The markets are complex, as is the environment in which they function.
When problems surface, the temptation becomes strong to summarily overhaul a market system that has served for more than 100 years.
That temptation must be put aside to permit careful consideration of all the implications, positive and negative, of the proposed resolutions to those problems, and to avoid creating a marketplace where no one trades.
Mr. Nastro is chairman of the Coffee, Sugar & Cocoa Exchange in New York and director of commodity administration at Shearson Lehman Hutton.
Initial claims for state unemployment benefits fell to a seasonally adjusted 332,000 for the week ended Oct. 14 from 396,000 the previous week, the Labor Department said.
The number of people receiving state benefits in the week ended Oct. 7 fell to a seasonally adjusted 2,202,000, or 2.1% of those covered by unemployment insurance, from 2,205,000 the previous week, when the insured unemployment rate was 2.2%.
Counting all state and federal benefit programs, the number of people receiving unemployment benefits in the week ended Oct. 7 fell to 1,784,400 from 1,810,700 a week earlier.
These figures aren't seasonally adjusted.
On the hungry streets of Naguib Mahfouz's Cairo, life is nasty, brutish and wickedly entertaining.
Zaita the "cripple-maker" rearranges the limbs of aspiring beggars -- and takes a cut of every cent they cadge.
Hassan Kamel Ali is a card shark and dope dealer who has a simple creed: "I live in this world, assuming that there is no morality, God or police."
For the killer and thief, Said Mahran, fame flows from the barrel of a gun.
"One man said you act as a stimulant," a prostitute tells him, "a diversion to relieve people's boredom."
Mr. Mahfouz's Cairo also has Sufi sheiks and saintly wives who look to God, not crime, for their salvation.
But it is his portrait of Cairo low-life -- of charlatans and opium addicts, of streets filled with "dust, vegetable litter, and animal dung" -- that made his reputation, and won him the Nobel Prize in 1988.
Three novels, "The Beginning and the End" (412 pages, $19.95), "The Thief and the Dogs" (158 pages, $16.95), and "Wedding Song" (174 pages, $16.95), recently published by Doubleday offer an uneven sample of the 77-year-old Mr. Mahfouz's talent.
But they do show the range of a restless intellect whose 30-odd novels span five decades and include work of social realism, protest and allegory.
They also chart the evolution of a city that has grown tenfold in the author's lifetime, from a colonial outpost of fez-wearing pashas to a Third World slum choking on its own refuse.
"Soon it'll be so crowded," a narrator complains, "that people will start eating each other."
"The Beginning and the End," easily the best of the three, belongs to Mr. Mahfouz's "realistic" period and it is the one for which he is most renowned.
Published in 1949, it follows the decline of a Cairo family with the saga-like sweep and rich detail that critics often compare to Dickens, Balzac and Galsworthy.
A minor bureaucrat dies suddenly, dooming his family to poverty and eventual disgrace.
His daughter turns to dressmaking, then to peddling herself for a few piasters.
One son sacrifices his own career so that his avaricious brother can succeed, while another helps support the family with money siphoned from crime.
The real tragedy, though, lies not in the family's circumstances but in its concern for appearances.
Mourning for the father is overshadowed by the shame of burying him in a pauper's grave.
The family moves to another house at night to conceal shabby belongings from neighbors.
And the successful son wishes his embarrassing siblings dead.
As a critique of middle-class mores, the story is heavy-handed.
But its unsentimental sketches of Cairo life are vintage Mahfouz.
We see, smell and hear slums filled with "the echoes of hawkers advertising their wares interspersed with abusive language, rattling coughs and the sound of people gathering spittle in their throats and spewing into the street."
And we meet engaging crooks, such as Hassan "the Head," famed for his head-butting fights, his whoring and his hashish.
"`God has not yet ordained that I should have earnings,' he tells his worried mother."
Hassan comes to a bad end, but so does almost everyone else in the book.
If the setting is exotic, the prose is closer to Balzac's "Pere Goriot" than it is to "Arabian Nights."
Mr. Mahfouz began writing when there was no novelistic tradition in Arabic, and he modeled his work on Western classics.
In one sense, this limits him; unlike a writer such as Gabriel Garcia Marquez, who has a distinctive Latin voice, Mr. Mahfouz's style offers little that can be labeled "Egyptian."
But the familiarity of his style also makes his work accessible, as the streets of Cairo come alive for the Western reader as vividly as Dickens's London or Dostoevski's St. Petersburg.
"The Thief and the Dogs," written in 1961, is a taut, psychological drama, reminiscent of "Crime and Punishment."
Its antihero, Said Mahran, is an Egyptian Raskolnikov who seeks nobility in robbing and killing.
"I am the hope and the dream, the redemption of cowards," he says in one of many interior monologues.
Later, he recalls the words of his Marxist mentor: "The people! Theft! The holy fire!"
Said's story reflects the souring of socialism under Nasser, whose dictatorial rule replaced the monarchy overthrown in 1952.
By 1961, Mr. Mahfouz's idealism had vanished or become twisted, as it has in Said.
His giddy dream of redeeming a life of "badly aimed bullets" by punishing the "real robbers" -- the rich "dogs" who prey on the poor -- leads only to the death of innocents, and eventually to his own.
Cairo's spirited squalor also has gone gray.
Here, the city is dark and laden with symbolism: Said has left his jail cell only to enter the larger prison of Cairo society.
While the theme is compelling, the plot and characters are not.
We never care about Said or the "hypocrites" he hunts.
"The Thief and the Dogs" is a pioneering work, the first stream-of-consciousness novel in Arabic, but it is likely to disappoint Western readers.
The 1981 novel "Wedding Song" also is experimental, and another badly aimed bullet.
The story of a playwright's stage debut unfolds in first-person monologues, in the manner of Faulkner's "The Sound and the Fury."
But the device obscures more than it illuminates.
Buried in the work is a meditation on the morality of art, and on the struggle for integrity in an unfair world.
But again, the themes get tangled in Mr. Mahfouz's elliptical storytelling.
The indirectness of his later work reflects both an appetite for new genres and the hazards of art in the Arab world.
Mr. Mahfouz has been pilloried and censored for questioning Islam and advocating peace with Israel.
Veiling his message has helped him endure.
Art, says the playwright in "Wedding Song," is "the surrogate for the action that an idealist like me is unable to take."
"Wedding Song" gives glimpses of a Cairo that has become so much harsher since his youth, when, as he once said, "the poorest person was able to find his daily bread and without great difficulty."
The clutter of the 1940s remains, but its color has drained away, and the will to overcome has been defeated.
Cars can't move because of overflowing sewers.
Characters complain ceaselessly about food queues, prices and corruption.
And the ubiquitous opium addict is now a cynical and selfish man who gripes: "Only government ministers can afford it these days!"
Having lost their faith in God, in social reform and in opium, Cairenes are left with nothing but their sense of humor.
Mr. Horwitz is a Journal staff reporter covering the Middle East.
Norwood Partners Limited Partnership of Boston said it may make a tender offer for some or all of Phoenix Technologies Ltd.'s common shares.
Norwood, Mass.-based Phoenix, a once-high-flying maker of software for personal computers, has had substantial losses in the past two quarters.
Its stock, which was as high as $18.75 a share, has been trading under $4 a share recently.
Yesterday it closed at $4.375 a share, up $1.125, in national over-the-counter trading.
In a Securities and Exchange Commission filing, Norwood said it's part of a group that holds 525,546 Phoenix Technologies common shares, or a 5.3% stake.
Norwood has made "no detailed plans," but it has engaged in talks with other shareholders, the filing said.
Phoenix declined to comment.
Norwood is controlled by Daniel L. Barnett and Paul A. Reese, both officers of Boston-based Oasis Capital Management Inc., a small Boston money management firm.
Also involved in the group is Robert F. Angelo, formerly Phoenix's senior vice president, field operations, who left Phoenix at the beginning of October.
Mr. Angelo was described in the filing as a consultant to Oasis.
Weirton Steel Corp. said it reached a tentative agreement on a 48-month labor contract with the Independent Steelworkers Union covering production and maintenance employees.
The agreement, subject to approval of union members, would cover about 6,000 workers.
The tentative agreement provides for wage increases of 85 cents an hour retroactive to Sept. 25, 1989, and for increases of 19 cents, 70 cents and 35 cents an hour effective Jan. 1, 1991, 1992 and 1993, respectively.
It also provides for benefit adjustments, including a partial restoration of vacations and holidays, as well as work-rule changes to increase productivity.
Ground zero of the HUD scandal is the Secretary's "discretionary fund," a honey pot used to fund projects that weren't approved through normal HUD channels.
Jack Kemp wants to abolish it.
Instead, Congress's idea of reform is to increase this slush fund by $28.4 million.
And transfer control of much of it to Capitol Hill.
The HUD scandals will simply continue, but under new mismanagement.
After one of the most amazing debates we've ever seen on the cable channel C-SPAN, the House voted 250 to 170 on Wednesday to order $28.4 million in spending for a New Jersey arts center, a Michigan library and 38 other pet projects out of the same discretionary fund that was supposed to have been so abused during Sam Pierce's tenure.
HUD has no paper work whatsoever on 30 of the projects, none of the others has been approved and not a single congressional hearing has been held on any of them.
However, four are in the Michigan district of Rep. Bob Traxler, the chairman of the House subcommittee that writes the HUD spending bill.
Of course, this kind of blatant congressional pork-barreling is called "constituent service" by Members, while the same kind of noncompetitive favoritism at HUD is labeled "influence peddling."
Unlike those awful Republican consultants, Members don't profit directly from HUD projects.
They merely collect campaign contributions from developers that help keep them in office.
The 40 pet projects were discovered buried in the appropriations bill for HUD and some other agencies after it returned from a conference committee that was called to resolve differences between the House and Senate versions.
Conference committees are breeding grounds for mischief.
They are often closed to the public and no minutes are taken.
Members find it easy to doctor legislation by slipping in special provisions that could never survive in the cold light of day.
In this case, the Members outdid themselves.
They transferred some $28 million from the Community Development Block Grant program designated largely for low- and moderate-income projects and funneled it into such items as: -- $1.2 million for a performing-arts center in Newark, -- $1.3 million for "job retention" in Hawaiian sugar mills. -- $400,000 for a collapsing utility tunnel in Salisbury, -- $500,000 for "equipment and landscaping to deter crime and aid police surveillance" at a Michigan park. -- $450,000 for "integrated urban data based in seven cities." No other details. -- $390,000 for a library and recreation center at Mackinac Island, Mich.
Rep. Traxler recently purchased an unimproved building lot on the island.
This is slightly adapted from remarks Oct. 7 by former Secretary of State George P. Shultz to an alumni gathering at the Stanford Business School, where he has returned to the faculty:
I was struck a couple of years ago by the drug-interdiction effort in the Bahamas.
We had intercepted during the year an estimated $5 billion street value of cocaine.
I don't know how much got through.
Nobody has any credible estimate.
The GNP of the Bahamas is probably somewhere between one and two billion dollars.
So you get an idea of the leverage there and elsewhere that our market for drugs has brought about.
I welcome the emphasis that is now being put on the drug problem.
The efforts to get to the people who are addicted, try to rehabilitate them; if they cannot be rehabilitated, at least to contain them; to educate people, to strongly discourage use of drugs by people who are casual users and first users, to stop this process among the young -- all of these things I think are extremely important.
But, I have to tell you that it seems to me that the conceptual base of the current program is flawed and the program is not likely to work.
The conceptual base -- a criminal-justice approach -- is the same that I have worked through before, in the Nixon administration when I was budget director and secretary of the treasury with jurisdiction over the Customs.
We designed a comprehensive program, and we worked hard on it.
In the Reagan administration we designed a comprehensive program; we worked very hard on it.
Our international efforts were far greater than ever before.
You're looking at a guy whose motorcade was attacked in Bolivia by the drug terrorists, so I'm personally a veteran of this war.
What we have before us now is essentially the same program but with more resources plowed into all of the efforts to enforce and control.
These efforts wind up creating a market where the price vastly exceeds the cost.
With these incentives, demand creates its own supply and a criminal network along with it.
It seems to me we're not really going to get anywhere until we can take the criminality out of the drug business and the incentives for criminality out of it.
Frankly, the only way I can think of to accomplish this is to make it possible for addicts to buy drugs at some regulated place at a price that approximates their cost.
When you do that you wipe out the criminal incentives, including, I might say, the incentive that the drug pushers have to go around and get kids addicted, so that they create a market for themselves.
They won't have that incentive because they won't have that market.
So I think the conceptual base needs to be thought out in a different way.
If I am catching your attention, then read a bold and informative article in this September's issue of Science by Ethan Nadelmann on this subject.
We need at least to consider and examine forms of controlled legalization of drugs.
I find it very difficult to say that.
Sometimes at a reception or cocktail party I advance these views and people head for somebody else.
They don't even want to talk to you.
I know that I'm shouting into the breeze here as far as what we're doing now.
But I feel that if somebody doesn't get up and start talking about this now, the next time around, when we have the next iteration of these programs, it will still be true that everyone is scared to talk about it.
No politician wants to say what I just said, not for a minute.
The U.S. economy grew at a moderate 2.5% annual rate in the third quarter, the same pace as the second quarter, despite the worst trade performance in six years, the Commerce Department reported.
Personal spending, buoyed by a burst of automobile buying, was the main catalyst to the economy's expansion.
But trade, one of the economy's main forces in the past few years, showed a sharp deterioration.
Imports of goods and services soared, while exports were flat.
Some economists found the mixture ominous.
"For the past two years, the foreign trade sector has been a major contributor to economic growth.
You can't rely now solely on consumer spending to sustain the economy on a solid growth path," said Norman Robertson, chief economist at Mellon Bank in Pittsburgh.
Although the economy showed no change of pace from the second quarter, many analysts expect it to slow considerably in the fourth quarter as demand for autos falls, partly because of higher prices on models introduced last month.
Many economists think the rise in the value of the U.S. dollar this year will further crimp progress in trade, because it makes exports more expensive and imports cheaper.
And business investment -- which slowed in the third quarter, according to yesterday's report -- is expected to continue to be sluggish.
A sharp reduction in inflation was by far the brightest spot in the report on the real gross national product -- the inflation-adjusted market value of all the goods and services the economy produced.
An inflation gauge that measures the quarterly change in prices of an array of goods and services slowed its growth to a 2.9% annual rate in the third quarter from 5% in the second.
Much of the moderation came from declining energy prices, which have since turned up a bit, analysts said.
Consequently, Michael Darby, undersecretary for economic affairs at the Commerce Department, said inflation probably will edge up from the third-quarter rate in the final three months of 1989.
But he said he believes the second quarter's 5% rate "will prove to have been this year's peak quarterly inflation rate."
Generally, the Bush administration expressed satisfaction with the economy's progress as it heads into its eighth year of sustained growth next month.
Treasury Secretary Nicholas Brady called the 2.5% pace "good, solid growth," although he said he expects the expansion to slow in the fourth quarter.
He added: "Inflation is lower than I think people expected it to be, and I think that's good news."
But administration officials were concerned over the bleak trade report, which showed the deficit in the country's trade of goods and services swelling to a $74 billion annual rate in the third quarter from a $51 billion rate in the second quarter.
Mr. Darby called it a "disappointment" but predicted exports will pick up again.
"We were unprepared for the deterioration in net exports," said Daniel Van Dyke, vice president of U.S. forecasting at Bank of America in San Francisco.
"I can't believe it will continue," he added, noting that the economies of the country's major trading partners are strong and prices of U.S. products are still competitive.
Some analysts also were disturbed by a pickup in the growth of business inventories.
While a buildup of these stocks adds to GNP, it can hurt the economy because a pileup of unsold goods can lead to production cuts and layoffs.
According to the report, inventories outside the farm sector grew at an annual rate of $24.6 billion in the third quarter, up from a $19.5 billion pace in the second quarter.
Manufacturers' stocks fattened at an $18.4 billion annual rate, up from $8.3 billion.
"That suggests there is a little more inventory overhang than some people expected," said Edward Boss, senior financial economist at Continental Bank in Chicago.
"I don't think it's anything that's going to cause a downturn in economic activity.
But it will slow production."
Devastation from Hurricane Hugo, which slammed into the Southeast coast in late September, diminished personal income by about $4 billion, the department said, but it called the effect on the roughly $5 trillion economy "negligible."
Except for the loss from the hurricane, all the figures were adjusted for seasonal factors and inflation.
Here are some of the major components of the gross national product expressed in seasonally adjusted annual rates in billions of constant (1982) dollars:
In the third quarter, the implicit price deflator fell to 2.9% of the 1982 average, from 4.6% in the previous quarter.
Northrop Corp. received a $93.5 million contract by the U.S. Air Force for production tooling and test equipment for the Tacit Rainbow defense-suppression missile.
The contract provides additional equipment for Northrop, the prime contractor on the missile, and also supports a 1990 purchase of 90 missiles for follow-on flight tests.
General Motors Corp.'s Chevrolet division said it is offering $750 cash incentives on all 1990 models of its full-size Blazer and Suburban truck lines.
Chevrolet already has cash incentives on the 1989 models of these vehicles.
Hudson's Bay Co. announced terms of a previously proposed rights issue that is expected to raise about 396 million Canadian dollars (US$337 million) net of expenses.
Proceeds of the offering will be used to redeem C$264 million of preferred shares and to reduce short-term debt, the company said.
Canada's largest department store operator said the rights offering will entitle holders of its ordinary shares, except residents in the U.S. and Britain, to subscribe for two additional shares for every five shares held at a price of C$31.25 a share.
The record date is Nov. 9.
The company has about 31 million ordinary shares outstanding.
On the Toronto Stock Exchange, Hudson's Bay shares closed at C$35, up 12.5 cents.
Hudson's Bay said that Woodbridge Co., which currently holds about 77% of the ordinary shares, will subscribe for all the shares to which it is entitled and for any shares that aren't otherwise taken up.
Woodbridge is a holding company owned by Toronto's Thomson family.
Hudson's Bay said it will redeem 9.5 million Series H preferred shares on Oct. 31 at a price of C$27.75 each.
The move was approved at a special shareholders' meeting yesterday.
Gary Lukassen, chief financial officer, said redemption of the preferred shares, originally issued at C$25 each, will eliminate dividend payments of C$17.9 million annually.
Iverson Technology Corp. was one of the fastest-growing small companies in America -- until last year.
The McLean, Va., company modifies computers to keep sensitive military data out of unfriendly hands.
From 1984 to 1987, its earnings soared six-fold, to $3.8 million, on a seven-fold increase in revenue, to $44.1 million.
But in 1988, it ran into a buzz saw: a Defense Department spending freeze.
Iverson's earnings plunged 70% to $1.2 million.
The troubles continued in this year's first half, when profit plunged 81% to $302,000.
Iverson Technology is one of many small defense contractors besieged by the slowdown in defense spending.
Unlike larger contractors with a broad enough base to weather the downturn easily, these companies are suffering big drops in business as once-lucrative specialty niches in the massive military market erode or even disappear.
Companies that only recently were thriving find themselves scrambling to survive.
As their varied strategies suggest, there is more than one way to respond to a disaster -- though it's too soon to tell whether the changes will pay off.
For many companies, the instinctive first response is to cut costs.
Others are trying to find specialty defense work spared by the slowdown or new niches created by budget-cutting.
More venturesome businesses are applying their skills in commercial fields.
ERC International Inc., which provides professional and technical services to the military, is refining its defense niche, not retreating from it.
After quadrupling annual earnings over four years to $6.8 million in 1988, the Fairfax, Va., company, posted a 23% drop in earnings for this year's first half.
In the belief that development of advanced military technology will remain a top Defense Department priority, ERC last year acquired W.J. Schafer Associates, a technical and scientific analysis company with contracts under the Strategic Defense Initiative.
While the SDI anti-missile program recently awarded W.J. Schafer two contracts totaling $13.4 million, ERC's chairman and founder, Jack Aalseth, says he bought the company "more for its technology than its customer."
UNC Inc., an Annapolis, Md., contractor that earned $23.8 million on revenue of $400.4 million in 1988, has gone even further in realigning its military business.
As orders for its aircraft and submarine parts dwindled, three years of steady growth ended with a 69% drop in income in this year's first half.
The company hit on a new strategy: If the Defense Department is so intent on saving money, why not make money off that trend?
Among the company's current efforts: repairing old parts at 25% of the cost of replacing them.
UNC also is selling new parts, if needed, directly to the military instead of through a prime contractor.
At as little as one-third of the government's cost, the company is running a program to train Army helicopter pilots.
It is also taking over the maintenance of certain Navy aircraft with 40% fewer people than the military used.
In another approach, tiny Iverson Technology is trying to resume its growth by braving the new world of commercial products.
Donald Iverson, chairman, says he hopes the company can eventually get up to half of its revenue from commercial markets.
For now, he says, "we're looking at buying some small companies with niche markets in the personal-computer business."
Earlier this month, Mr. Iverson agreed to buy exclusive rights to a software system developed by Visher Systems Inc., Salt Lake City.
The product automates an array of functions performed at small to medium-size printing companies.
Mr. Iverson says there are 5,000 potential customers for the software in the Washington, D.C., area alone.
QuesTech Inc., Falls Church, Va., also has acquired some companies outside the military market.
Moreover, it's trying to transfer its skill at designing military equipment to commercial ventures.
A partnership with a Williamsburg, Va., unit of Shell Oil Co. recently patented a process for producing plastic food containers that won't melt in microwave ovens.
"We're trying to take the imagination and talent of our engineers and come up with new processes for industry," says Vincent Salvatori, QuesTech's chief executive.
"It is an effort to branch out from the government, which is very difficult for a defense contractor."
Mr. Salvatori should know.
Instead of helping his company in the defense spending slowdown, Dynamic Engineering Inc., a troubled subsidiary that makes wind tunnels for the space industry, contributed to much of QuesTech's $3.3 million loss on $55.6 million in revenue last year.
In January, Mr. Salvatori sold the unit.
"It was our first acquisition," he says, "and it was a mistake."
Some companies are cutting costs and hoping for the best.
Telos Corp., a Santa Monica, Calif., provider of software-development and hardware-maintenance services to the military, enjoyed steady growth until this year.
Following a tripling of earnings, to $3.9 million, on a doubling of revenue, to $116 million, over four years, earnings in the company's fiscal first quarter, which ended June 30, plunged 90% to $45,000.
A one-time write-off for booking nonexistent revenue was partly to blame, but so were lower profits from a stingier contract with the Army and delays in getting paid.
Telos responded by combining three of its five divisions to reduce expenses and "bring more focus to potentially fewer bidding opportunities," says Lin Conger, Telos chairman and controlling shareholder.
"It's evident we're entering a more competitive era," he says.
TransTechnology Corp., a Sherman Oaks, Calif., defense contractor that earned $9.2 million on revenue of $235.2 million in 1988, provides a more dramatic example of cost-cutting.
The company not only merged three military-electronics manufacturing operations, but also closed an unrelated plant that makes ordnance devices used in fighter planes and missiles.
The closing contributed to a $3.4 million loss in the fiscal first quarter ended July 31 -- its first quarterly loss since 1974.
"Our ordnance business has been hurt very badly by the slowdown," says Arch Scurlock, TransTechnology's chairman.
"I wouldn't say we're out of the business.
But we're not making as many {pyrotechnic devices} as we used to.
The growing crowd of Japanese investors buying up foreign companies aren't all strait-laced businessmen in dark suits.
Yasumichi Morishita, whose art gallery last month became a major shareholder in Christies International PLC, the London auction house, is one man who doesn't fit the mold.
In Japan, he's known in racy weekly magazines as the "King of Shady Money."
If nothing else, the 57-year-old's past has its share of dents.
Nearly 20 years ago, Mr. Morishita, founder and chairman of Aichi Corp., a finance company, received a 10-month suspended sentence from a Tokyo court for violating a money-lending law and an income tax law.
He was convicted of charging interest rates much higher than what the law permitted, and attempting to evade income taxes by using a double accounting system.
He's had other brushes with the law.
He was arrested, though not indicted, on at least three other occasions in the '60s and '70s: for assault and unlawful confinement, for fraud and forgery of private documents, and for extortion.
Christies says it has had no contact with Mr. Morishita since the stock purchase, but that it's happy to deal with him.
"We like to make our own judgments" about Mr. Morishita, says Christopher Davidge, Christies' group managing director.
"People have a different reputation country by country."
Mr. Morishita is a leading figure among Japan's 38,000 "machikin," which lend to small companies, and "sarakin," which lend to individuals.
Many of these financiers lend freely, often without demanding collateral.
But the interest rates they charge are often near Japan's 54.75% legal limit, says Kenji Utsunomiya, a lawyer specializing in loan troubles.
Aichi is a machikin, Mr. Utsunomiya says, and "one of the nasty ones."
In describing that business in general, he says that when the client can't repay the loan, some machikin "clutch on like hyenas" and even take over the client's company.
Last month, Mr. Morishita's new gallery, Aska International Ltd., purchased 6.4% of Christies for #33 million ($53.3 million).
Acquired from Carisbrook Holdings U.K. Ltd., a company owned by Australian financier Robert Holmes a Court, the stake was apparently the first of its kind for Aska, an entity separate from Aichi.
And the acquisition, which made Aska one of Christies' top five shareholders, left many people wondering who this man was and what his intentions were.
"We're an investor," Mr. Morishita says, sitting back in his purple gallery filled with some 20 Monets and Renoirs.
"In the long run, the {stock} prices will go up."
It's not clear whether Aska plans to buy more shares.
But Christies, Mr. Morishita insists, is happy to see him become a long-term stockholder.
Mr. Morishita considers himself a connoisseur of art.
In 30 years of collecting impressionist and Japanese paintings, he has acquired 600 items, he says, enough to persuade him to start a museum next year.
He says he spent $300 million on his art business this year.
A week ago, his gallery racked up a $23 million tab at a Sotheby's auction in New York buying seven works, including a Picasso.
"He makes snap judgments," says Kiyotaka Kori, the art gallery's manager and Mr. Morishita's secretary for more than seven years.
Mr. Morishita's main business certainly appears to be thriving, although he won't disclose numbers.
According to Teikoku Data Bank Ltd., which tracks company earnings, Aichi's revenue rose 15% to 49.3 billion yen ($348.4 million) in the year ended February.
Revenue doubled from two years ago.
That is, if the company reported results correctly.
The Asahi Shimbun, a Japanese daily, last month reported that Aichi revised its tax calculations after being challenged for allegedly failing to report all of its income to tax authorities over a two-year period.
The Tokyo Regional Taxation Office declines to comment, and Mr. Kori, the tycoon's secretary, says the problem simply resulted from a difference of opinion over what was considered income.
The small, wiry Mr. Morishita comes across as an outspoken man of the world.
Stretching his arms in his silky white shirt and squeaking his black shoes, he lectures a visitor about the way to sell American real estate and boasts about his friendship with Margaret Thatcher's son.
But when asked what exactly he does in business, he immediately takes offense.
"Are you stupid?" he snaps.
"You should know what questions to ask to get people to answer."
Not many people know the details of Mr. Morishita's business, but it's a source of rumors about shady dealings.
When a small company goes belly-up, for instance, the gossipy weekly magazines are often quick to link the demise with Aichi.
Mr. Morishita scoffs at those stories, as well as the ones connecting him to the Japanese mob.
He says he has never even dined with gangsters.
The seventh child of a store owner in Aichi prefecture, Mr. Morishita started out in the textile business.
From there, he set up his finance company and rapidly expanded from lending to investment in real estate to building golf courses.
He spends most weekends flying his helicopter to one of his nine courses, he says, two of which were designed by Jack Nicklaus.
He also owns courses in the U.S. and France.
The gruff financier recently started socializing in upper-class circles.
Although he says he wasn't keen on going, last year he attended a New York gala where his daughter made her debut.
He also leads an opulent life style.
Even in Denenchofu, one of Tokyo's richest neighborhoods, Mr. Morishita's splashy brick manor -- one of some 10 houses he owns -- outshines the neighbors'.
A lavish white portico with a stained-glass window towers over the brick wall surrounding his property.
Although Mr. Morishita says little about his business, he offers one rule to success: Never gamble too far.
"I quit after one try, whether I win or lose," he says.
"I'm done in two minutes."
Mr. Morishita says he intends to expand his business to many other areas at home and abroad.
He'll be there wherever there's money to be made, laughs Mr. Kori, the secretary.
"Who knows," he says, "if he heard that soybeans make money today, he might be flying out to Chicago tomorrow.
WHO'S NEWS:
Arthur Price resigned as president and chief executive officer of MTM Enterprises Inc., a Studio-City, Calif., entertainment concern.
He co-founded the company with Grant Tinker and Mary Tyler Moore in 1969.
MTM is a unit of British-based TVS Entertainment PLC, whose chief executive officer, James Gatward, will oversee the company until a successor is named.
As expected, First Interstate Bancorp reported a net loss of $15.5 million for its third quarter because of hemorrhaging at its First Interstate Bank of Arizona unit.
The Los Angeles-based bank holding company disclosed last Friday that it had taken a huge $350 million provision for loan losses at the Arizona bank, the result of the state's worsening real-estate market.
In yesterday's report, First Interstate said its bank in Texas also reported a loss of $23.5 million for the quarter.
But it said that its consumer banks in Oregon, California, Nevada and Washington performed well during the quarter and that nonperforming assets at these banks declined by 14% over the year-ago period.
Private-sector union contracts signed in the third quarter granted slightly lower wage increases than those signed in the second quarter, but wage increases still are running above last year's levels.
The Labor Department said wage settlements in the third quarter called for average annual wage increases of 3.6% in the first year and 3.0% over the life of the contracts.
The last time parties to these settlements negotiated wage increases, mostly in 1986 or 1987, wages increased an average of 2.4% a year over the life of the contracts.
If this pattern continues, the Labor Department said, 1989 will be the first year that the measure has shown an increase since 1981 when the department started comparing expiring contracts with those that replaced them.
This reflects the restoration of wage cuts in the steel and other industries as well as higher wages granted nurses who work in health-care facilities.
Settlements reached in the first nine months of 1989 called for wage increases averaging 3.7% in the first contract year and 3.1% annually over the life of the contracts, the department said.
For all of 1988, union contracts provided for 2.5% wage increases in the first year and 2.4% over the life of the contracts.
In the second quarter, contracts called for increases of 3.9% in the first year and 3.4% over the life of the contracts.
The figures exclude lump-sum payments and cost-of-living adjustments, so the actual wage increases may have been bigger.
About 35% of the workers covered by contracts signed in the first nine months of year get lump-sum payments; about 15% are covered by cost-of-living clauses.
Unions covered by one or other provisions generally settled for lower percentage wage increases.
The Labor Department said wage increases in manufacturing industries continue to be smaller than those in other industries.
For all six million workers under major collective bargaining agreements, regardless of when they were signed, wage increases in the first nine months of 1989 averaged 2.5% -- including cost-of-living adjustments.
An enormous turtle has succeeded where the government has failed: He has made speaking Filipino respectable.
The 6 1/2-foot-tall turtle, Pong Pagong, is a character who stars in the children's television show "Batibot."
He speaks only in Filipino.
"Batibot," which started in 1983 as a hybrid of the U.S. program "Sesame Street," has developed into a distinctly Philippine effort.
Radio programs and books have followed the daily television show.
In the process, "Batibot," an archaic Filipino word meaning "strong" or "enduring," has become a powerful advocate of the use of the Filipino language.
"It impresses on ordinary, young Filipinos that there's nothing to feel inferior about in using their own language," says Randy David, a sociologist and host of a popular television talk show.
"When we started the program six years ago, the use of Filipino was deemed unwise by the predominantly middle class," says Lydia Brown, the program's creator.
Now, she says, "it's no longer an issue."
The success of "Batibot" stands in marked contrast to many academic and government attempts to promote Filipino as a national language.
Filipino -- once known as Pilipino -- is predominantly Tagalog, the Malay-based language spoken in a part of the country's principal island of Luzon.
Resistance to a national language comes primarily from members of the country's elite, who generally prefer English.
But while better-off Filipinos are quick to cite the logic in using a language as widespread as English, they are often slow to reveal that they are prejudiced against Filipino, say advocates of the native language.
"For the middle and upper-middle class {Filipino} is declasse," says Bien Lumbera, a Philippine-studies professor at Quezon City's University of the Philippines.
There's also resentment.
Other opponents of Filipino come from non-Tagalog regions.
They argue that their own languages should have equal weight, although recent surveys indicate that the majority of the country's population understands Filipino more than any other language.
(There are seven major languages and more than 70 dialects in the country.)
What tongue to speak is an emotional mine field in the Philippines.
It is entrenched in the country's colonial bonds to the U.S., in Philippine class structure, in the regional loyalties of its people and in its island geography.
As they did when the Philippines was a colony of the U.S., teachers for the most part teach in English, even though it is a foreign language for most Philippine children.
As a result, they often speak one language at home, another at school.
Mrs. Brown calls the modern-day cultural ambivalence to Filipino a "language schizophrenia."
The issue has been simmering for years.
It doesn't take much to provoke an intense debate.
When President Corazon Aquino, whose command of Filipino is spotty, announced last year that the language would be used in official communications, there was an uproar from many legislators, who continue to conduct debates mostly in English.
But many proponents of Filipino see resistance to the language finally crumbling.
They believe the media, including "Batibot," have played a crucial role.
According to chief scriptwriter Rene Villanueva, "Batibot" doesn't set out to advance the cause of Filipino.
"It's not as if we're teaching language per se," he says, "We're just using it."
These days, "Batibot" is produced in a converted lumberyard on a shoestring budget of $3,000 a one-hour segment.
It is shown weekdays on two of the country's five networks.
With an audience totaling more than 400,000, "Batibot" consistently ranks in the country's top-four most-watched daytime programs.
But advertising revenue is inadequate.
Periodically, there are threats that the program will fold.
"Batibot" lacks the polish of "Sesame Street."
Sound stages echo.
Acting sometimes falls flat.
There are only two large puppets in the program: Pong Pagong and a monkey named Kiko Matsing.
But the production is the equal of any local program.
And the show's creativity makes up for any technological deficiencies.
The program isn't afraid to tackle controversial topics such as nuclear weapons and the environment.
Not that the language war is won, even on "Batibot."
During one recent episode, all the advertisements were in English.
CMS ENERGY Corp. said management would recommend to its board today that its common stock dividend be reinstated at a "modest level" later this year.
The Dearborn, Mich., energy company stopped paying a dividend in the third quarter of 1984 because of troubles at its Midland nuclear plant.
In addition, CMS reported third-quarter net of $68.2 million, or 83 cents a share, up from $66.8 million, or 81 cents a share, a year ago.
HEALTHDYNE Inc., Atlanta, said its subsidiary, Home Nutritional Services Inc., registered with the Securities and Exchange Commission an initial public offering of four million shares of common.
The in-home health care services provider said it will sell 1.8 million of the new shares, while Home Nutritional Services will sell the remaining 2.2 million.
The company estimates the offering price at between $14 and $16 a share.
The company said it expects to use the proceeds to repay certain bank debt and for general corporate purposes, including establishing new operating centers and possible acquisitions.
Home Nutritional currently has 10 million shares outstanding.
It will have 11.8 million shares outstanding after the offering, with Healthdyne owning about 65% of the total.
Black & Decker Corp. said it agreed to sell its Bostik chemical adhesives unit to Orkem S.A., a French chemical company, for $345 million.
Bostik is the first Emhart Corp. unit to be sold as part of the power-tool manufacturer's effort to reduce debt and consolidate operations after it acquired Emhart earlier this year.
Black & Decker said it plans to put other Emhart units on the block in the future, with the goal of raising $1 billion in net proceeds.
Black & Decker rescued Emhart from the takeover bid of Topper Limited Partnership last March by agreeing to acquire the maker of door locks and gardening tools for about $2.8 billion.
The move significantly expanded Black & Decker's product line, but also significantly increased its debt load.
The acquisition boosted Black & Decker's ratio of debt to total capital to more than 80%.
Company officials have said they plan to reduce that ratio to less than 50% over the next 2 1/2 years.
Earlier this year, Black & Decker put three Emhart businesses on the auction block: the information and electronics segment, the Dynapert electrical assembly business and Mallory Capacitors.
The three units had combined 1988 sales of about $904 million.
The three units contributed about a third of Emhart's total sales.
In addition, Black & Decker had said it would sell two other undisclosed Emhart operations if it received the right price.
Bostic is one of the previously unnamed units, and the first of the five to be sold.
The company is still negotiating the sales of the other four units and expects to announce agreements by the end of the year.
The five units generated sales of about $1.3 billion in 1988, almost half of Emhart's $2.3 billion revenue.
Bostic posted 1988 sales of $255 million.
"Our divestiture program is on schedule, and we remain confident that we will achieve our stated goal of over $1 billion in net proceeds," said Nolan D. Archibald, Black & Decker's president and chief executive officer, in a statement.
The sales are an attempt to quell investor concern about Black & Decker's increased debt burden from the Emhart purchase.
The company's stock plunged when it first announced that it planned to acquire Emhart.
The company maintains that it doesn't expect Emhart to contribute to earnings for about another 12 months.
In composite trading on the New York Stock Exchange, Black & Decker closed at $19.75 yesterday, down 25 cents.
The company didn't announce the sale until after the close of the market.
Dick Darman, call your office.
Embedded in the "budget" being concocted by the House-Senate conference committee is something that looks, smells and waddles like a duck.
It's a nuisance tax on mergers.
Congress has decided to raise $40 million by charging companies $20,000 for the honor of filing the required papers under the Hart-Scott-Rodino law.
Ever since the bad days of Big is Bad antitrust enforcement, this law has required that anyone proposing a merger must make a filing describing the effects on all relevant markets.
The Hart-Scott filing is then reviewed and any antitrust concerns usually met.
Typically, Hart-Scott is used now to give managers of target firms early news of a bid and a chance to use regulatory review as a delaying tactic.
The $20,000 tax would be a small cost in a multibillion-dollar deal, but a serious drag on thousands of small, friendly deals.
One especially dangerous aspect to the new tax would be that the proceeds will be used to increase the budgets of the antitrust division at Justice and the Federal Trade Commission.
This amounts to a bounty for regulators -- the more regulating the more they get to keep.
Also, as former Reagan antitrust chief Charles Rule has noted, this would "establish the precedent that the government may charge parties for the privilege of being sued regardless of whether the government prevails."
Yet another opportunity for President Bush to respond, "Read my lips.
Line-item veto.
Michael Grobstein, 46 years old, was named vice chairman for planning, marketing and industry services, a new post.
Mr. Grobstein had been a vice chairman of Ernst & Whinney, an accounting firm that merged with rival Arthur Young in July to form Ernst & Young, a major accounting, tax and management consulting firm.
Mr. Grobstein's appointment formalizes a role he has been performing since the merger, a spokeswoman said.
Cie. de Navigation Mixte Chairman Marc Fournier said his board unanimously rejected as too low the $1.77 billion bid by Cie. Financiere de Paribas to bring its stake in Navigation Mixte to 66.7%.
At a news conference, Mr. Fournier accused Paribas of planning to pay for the takeover by selling parts of the company, whose interests include insurance, banking, tuna canning, sugar and orange juice.
The chairman said his board members, including representatives of West German insurance giant Allianz AG and French banks Credit Lyonnais and Societe Generale, hold nearly 50% of Navigation Mixte's capital.
Mr. Fournier said that as Navigation Mixte chairman, he is prohibited by takeover regulations from organizing his own defense or doing anything besides managing current company business.
But sources said he will be urging his allies to boost their stakes in Navigation Mixte, which is being traded in London and is to resume trading in Paris Tuesday.
At the same time, he is expected to seek legal and regulatory means of blocking or delaying Paribas's bid.
For the moment, the sources said, he has decided against seeking a white knight or organizing a counterbid for Paribas.
Mr. Fournier said Navigation Mixte's 1989 unconsolidated, or parent-company, profit is likely to be 4.7 billion francs ($754.4 million), up from 633.8 million francs last year.
That is due mostly to payments from Allianz for most of the 50% stake it has agreed to acquire in Navigation Mixte's insurance business.
Mr. Fournier said the exceptional gain would mean nearly twice as high a dividend this year as last.
If holders avoid tendering to Paribas, he added, they can expect strong dividends again next year.
Analysts noted that over the past 20 years, Mr. Fournier has built his company through astute stock-market activity and has warded off at least three takeover attempts.
This time, however, some analysts think he could face a real battle.
"Without some unexpected "coup de theatre", I don't see what will block the Paribas bid," said Philippe de Cholet, analyst at the brokerage Cholet-Dupont & Cie.
Mr. de Cholet said Mr. Fournier's biggest hope was to somehow persuade regulatory authorities to block the bid.
Paribas still needs the go-ahead from the Commission des Operations de Bourse, a government regulatory agency, but analysts said that is considered likely.
Mr. Fournier also noted that Navigation Mixte joined Paribas's core of shareholders when Paribas was denationalized in 1987, and said it now holds just under 5% of Paribas's shares.
Once he realized that Paribas's intentions weren't friendly, he said, but before the bid was launched, he sought approval to boost his Paribas stake above 10%.
The petition is still pending, but Mr. Fournier downplayed the likelihood of his organizing a takeover bid of his own for the much-larger Paribas.
One big question now is the likely role of Mr. Fournier's allies.
Mr. Fournier said the large institutions that hold nearly 50% of Navigation Mixte's capital all strongly support him, but some analysts said they aren't so sure.
Allianz, for example, has said in official comments so far that it will remain neutral.
Paribas is Allianz's lead French bank.
Paribas said Monday that it intends to bid to boost its stake in Navigation Mixte to 66.7%, from the 18.7% it already owns.
The purchase of the additional 48% stake is expected to cost more than 11 billion francs ($1.77 billion).
Paribas says it will offer 1,850 francs ($296.95) each for Navigation Mixte shares that enjoy full dividend rights, and 1,800 francs each for a block of shares issued July 1, which will receive only partial dividends this year.
Alternatively, it is to offer three Paribas shares for one Navigation Mixte share.
The Paribas offer values Navigation Mixte at about 23 billion francs, depending on how many of Navigation Mixte's warrants are converted into shares during the takeover battle.
BLOCKBUSTER ENTERTAINMENT CORP. said it raised $92 million from an offering of liquid yield option notes.
The gross proceeds from the sale of the notes, which will be due on Nov. 1, 2004, will be used to reduce existing debt and for general corporate purposes, the company said.
The debt reduction is expected to save the Fort Lauderdale, Fla. home video concern about $2 million a year in interest expense.
The zero-coupon subordinated notes have no periodic interest payments.
Each note is being offered at $308.32 per $1,000 principal amount at maturity, representing an 8% yield to maturity.
In addition, each note can be converted into Blockbuster Entertainment common stock at a rate of 13.851 shares per note.
Merrill Lynch Capital Markets Inc. is the sole underwriter for the offering.
The notes will have a principal amount of $300 million at maturity.
Blockbuster shares closed yesterday at $18.75, down $1.125, in New York Stock Exchange trading.
The 1986 Tax Reform Act has nearly eliminated the number of large, profitable corporations that don't pay federal income tax, according to Citizens for Tax Justice, a nonprofit, labor-funded research and lobbying group.
In a study of 250 of the nation's richest companies, the group found that only seven managed to avoid paying federal income taxes last year compared with 40 in 1986, the last year the old tax rules were in effect, and 16 in 1987, when some of the new tax provisions went into effect.
Moreover, 41 companies that paid no federal income tax from 1981 through 1985 -- despite billions of dollars of profits -- ended up paying an average of 27.9% of their income in federal taxes in 1988.
The report, released yesterday, comes as Congress is considering a number of special tax breaks only three years after the sweeping tax-revision legislation abolished or curtailed many loopholes.
In the corporate realm, the 1986 law abolished the investment-tax credit, scaled back use of an accounting method that allowed large contractors to defer taxes until a project was completed and strengthened the so-called alternative minimum tax, a levy to ensure all money-making businesses pay some federal tax.
The combination of lower rates and fewer loopholes has meant that the so-called average effective tax rate -- the rate actually paid -- of the 250 corporations surveyed reached 26.5% in 1988, compared with 14.3% in the years from 1981 through 1985, according to the study.
In addition, corporations are now shouldering a bigger share of the tax burden, as the authors of the 1986 law hoped.
Corporate taxes paid for almost 12% of federal spending in 1988 -- excluding Social Security -- compared with less than 8% in the first half of the 1980s, the study found.
"Tax reform is working," the study said.
"Under the new tax-reform law, the days of widespread, wholesale corporate tax avoidance have come to an end."
Still, Kroger Co., Pinnacle West Capital Corp., CSX Corp., Illinois Power Co., Media General Inc., Santa Fe Southern Pacific Corp. and Gulf States Utilities Co., didn't pay any federal income tax last year although they garnered a total of $1.2 billion in profits, the group said.
In fact, six of those companies received refunds, which totaled $120 million.
The lobbying group used publicly available information to calculate each company's domestic profits and its federal income tax payments.
This is the fifth year Citizens for Tax Justice has released a study on corporate tax bills.
Earlier reports, which revealed that as many as 73 companies were avoiding income tax legally, have been credited with helping galvanize efforts to overhaul the tax code.
But even though companies are paying more taxes, many are still paying less than the statutory rate, the report said.
And 45 companies paid effective tax rates of below 10% of their income.
"While the overall picture is very encouraging, significant corporate tax avoidance continues," the study said.
Glenn Hall contributed to this article.
F. Gil Troutman, 46 years old, was named chief executive officer.
He retains his titles of president and chief operating officer and succeeds as chief executive Howard O. Painter Jr., who remains chairman of the board.
DSP makes electronic instrumentation and data acquisition systems.
In search of buyers for upscale department-store chains such as Bloomingdale's and Saks Fifth Avenue, investment bankers are turning to -- who else? The Japanese.
But so far Japan's cash-rich retailers are proving to be cautious shoppers.
"We have the money to buy.
But operating a U.S. department-store chain would be very difficult," says Motoyuki Homma, managing director of the international division at Mitsukoshi Ltd., one of Japan's leading department stores.
Japanese retail executives say the main reason they are reluctant to jump into the fray in the U.S. is that -- unlike manufacturing -- retailing is extremely sensitive to local cultures and life styles.
The Japanese have watched the Europeans and Canadians stumble in the U.S. market, and they fret that business practices that have won them huge profits at home won't translate into success in the U.S.
Japanese department stores are also wary of attracting negative publicity.
After Sony Corp.'s recent headline-grabbing acquisition of Columbia Pictures, many say it makes good political sense to lie low.
"It's a question of timing," says Mayumi Takayama, managing director of international operations at Isetan Co., a Tokyo department store.
Still, for those with a long-term eye on the vast U.S. retail market, this is a tempting time to look for bargains.
Britain's B.A.T Industries PLC is trying to unwind its U.S. retailing operations, which include such well-known stores as Saks Fifth Avenue, Marshall Field's, Breuners and Ivey's.
And debt-ridden Campeau Corp. of Toronto is giving up the 17-store Bloomingdale's group.
"Every department store in Japan is taking a look," says Mike Allen, a retail analyst at Barclay's de Zoete Wedd Securities (Japan) Ltd.
Mr. Allen, however, doesn't think that Japan is about to embark on a major buying binge.
Nonetheless, speculation heated up yesterday when Tokyu Department Store Co. confirmed a report in Nihon Keizai Shimbun, Japan's leading business daily, that Tokyu is talking with Campeau about buying Bloomingdale's.
Tokyu, however, said no agreement had been reached.
Nor is Tokyu the only Japanese retailer interested in Bloomingdale's, which bankers in Tokyo estimate could cost between $1 billion and $1.5 billion.
Seven Japanese department-store groups were approached by investment bankers representing Bloomingdale's chairman, Marvin Traub, and more than half are seeking additional information on the group, bankers say.
What Mr. Traub is hoping to put together, investment bankers say, is a management-led group to buy the New York department-store group that he heads from Campeau's Federated Department Stores subsidiary.
Federated ran into a cash crunch after it was acquired last year by Campeau, which relied heavily on debt to finance the transaction.
Paying off that debt put such a squeeze on Campeau and its stores that Federated decided to sell off the jewels of its retailing empire, including Bloomingdale's.
Hoping to avoid another takeover, Mr. Traub retained Blackstone Group and Drexel Burnham Lambert Inc. to help him find partners for a management-led buy-out.
Ideally, investment bankers say, he wants to get backing from a Japanese department store and a European department store to forge a global retailing network.
"When you look at the economics, Traub needs a Japanese and a European partner to make it work," says one investment banker who follows the retail industry.
"Looking only at a narrow American strategy isn't where it's at."
Persuading tradition-bound Japanese retailers to get involved in the turmoils of the U.S. retailing industry isn't likely to be so easy, analysts say.
Up until now, most stores have followed the same basic overseas strategy:
First they set up overseas merchandising offices to import items and track new fashion trends.
Then they opened small gift shops mostly aimed at Japanese tourists.
Reluctant to advance further on their own, some stores have settled for tie-ups with famous specialty shops.
Last March, Isetan invested 1.5 billion yen ($10.6 million) in a venture with Barney's Inc., an up-scale New York specialty clothier.
The first Barney's shop is scheduled to open in Japan next year.
And Mitsukoshi recently increased its equity stake in Tiffany & Co. to 13%.
Through the longstanding relationship between the two companies, Mitsukoshi has opened 22 Tiffany shops in its stores and arcades in Japan.
Plans are under way to open a Tiffany's in Hawaii to cater to Japanese tourists; it will be run mostly by Mitsukoshi.
Some industry observers say that Mitsukoshi's classy image makes it a possible match for Saks Fifth Avenue.
Company officials say they are studying various proposals but won't discuss details.
Takashimaya Co., Japan's oldest department store, is another name that keeps popping up as a potential fit with Saks.
Eiji Nakazato, a Takashimaya general manager, admits that his company's image is similar to Saks's and that there is some interest in the idea.
But he stops there.
"We'd like to do business in America," he says.
"But it looks tough."
Marcus W. Brauchli contributed to this article.
Compiled by William Mathewson
The Vatican was in the red last year.
It said the regular 1988 deficit amounted to $43.5 million, based on revenue of $74.4 million and expenses of $117.9 million.
But it said extraordinary expenditures for its radio station and restoration of buildings increased the deficit to $57.2 million.
A statement from the council of cardinals said Catholics had responded generously to an appeal last year to give more money after 1987's record $63 million deficit.
The statement said a 5% jump in the "Peter's Pence" collection -- the annual offering from Catholics to the pope -- helped cover the deficit.
Council member Cardinal Gerald Carter of Toronto told Vatican Radio: "Now that we say we covered our deficit this year, people are going to relax and say well that's fine, the Holy See is out of the hole.
But we're . . . going to be in the exact same situation next year."
Former President Richard Nixon is to visit China at the invitation of the government beginning Saturday, the Foreign Ministry announced.
According to Mr. Nixon's office, "This is solely a fact-finding trip.
There will be no sightseeing, no shopping and no social events."
Mr. Nixon's office said the former president "expects to have one-on-one discussions with the major Chinese leaders" and will give his assessment of those leaders to President Bush upon his return.
A poll conducted in 12 of 16 NATO countries shows that the Dutch appear to be the strongest supporters of the alliance.
The poll, conducted for the Dutch daily De Telegraaf by Gallup International said 81% of Dutch people supported NATO.
Canada was the second most pro-NATO country with 78% supporting the alliance, followed by the U.S. with 75%, Britain with 71%, Belgium with 69% and West Germany with 63%.
All other countries registered support below 50%.
The Israeli Manufacturers' Association filed a police complaint against an Arab pasta maker for using the four colors of the outlawed Palestinian flag on spaghetti packages.
"We asked police to investigate why they are allowed to distribute the flag in this way.
It should be considered against the law," said Danny Leish, a spokesman for the association.
The spaghetti is made by the Al Ghazel Macaroni Co. in Bethlehem and is marketed in a package decorated with green, black, red and white stripes.
British postal authorities say they have uncovered a large-scale scheme where unscrupulous stamp dealers chemically removed stamp cancellations, regummed the stamps and sold them to U.S. collectors or, in large lots, to British businesses.
The scheme allegedly cost the post office #10 million ($16.1) in revenue in the past 12 months.
Dealers bought the used stamps cheaply from charities, including the Guide Dogs for the Blind Association.
The charities regularly sell used stamps, which they collect from children and other donors, to raise funds.
Akio Tanii, president of Japan's Matsushita Electric Industrial Co., presented the U.S. consul general in Osaka with a $1 million check to help San Francisco's earthquake victims.
The company's U.S. subsidiary, Matsushita Electric Corp. of America, had donated over $35,000 worth of Matsushita-made flashlights and batteries to residents shortly after the disaster, a company spokesman said.
Several other Japanese companies and regional governments have sent aid to San Francisco.
Sumitomo Bank donated $500,000, Tokyo prefecture $15,000 and the city of Osaka $10,000.
Chinese officials are trying to use the Canton Trade Fair to lure back overseas traders after the bloody crackdown on dissent.
But attendance is down from previous years.
What's more, a Hong Kong textile trader says, some Chinese exporters from state-run enterprises are protesting the crackdown by dragging their feet on soliciting new business.
"They are angry about the government . . . so they hold back the goods," he said.
This autumn's edition of the biannual fair will run through Oct. 31.
Inside the 156,000-square-yard glass exhibition complex, products ranging from clothing to AK-47 machine guns are on display.
Fair officials say that 21,000 guests visited during the first five days, a 10% drop from the spring exhibition.
But China's official Xinhua News Agency reported that the number of foreign businessmen was greater than the previous fair -- without providing statistics.
In another sign of glasnost, Alexander Solzhenitsyn's long-banned chronicle of Soviet repression, "The Gulag Archipelago," is now recommended reading in one 11th-grade Moscow history class. . . .
British customs officers said they'd arrested eight men sneaking 111 rare snakes into Britain -- including one man who strapped a pair of boa constrictors under his armpits.
A customs official said the arrests followed a "Snake Day" at Utrecht University in the Netherlands, an event used by some collectors as an opportunity to obtain rare snakes.
Di Giorgio Corp. said it's continuing talks with potential buyers of certain units, but has reached no agreement on any deals.
Di Giorgio, a food wholesaler and building products maker, is seeking alternatives to an unsolicited $32-a-share tender offer of DIG Acquisition Corp., a unit of Rose Partners Limited Partnership.
DIG is the vehicle being used to pursue to acquisition.
Robert Mellor, Di Giorgio's executive vice president, said the company stands to reap more money through the sale of individual units to others than by accepting DIG's offer.
Some lousy earnings reports whacked the stock market, but bond prices fell only slightly and the dollar rose a little against most major currencies.
The Dow Jones Industrial Average tumbled 39.55 points, to 2613.73, in active trading.
Long-term Treasury bonds ended slightly higher.
The dollar rose modestly against the mark and the yen, but soared against the pound following the resignation of Britain's chancellor of the Exchequer, Nigel Lawson.
Analysts have complained that third-quarter corporate earnings haven't been very good, but the effect hit home particularly hard yesterday.
Compaq Computer nose-dived $8.625 a share, to $100, and pulled other technology issues lower after reporting lower-than-expected earnings after the stock market closed Wednesday.
Later yesterday the nation's major auto makers added to the gloom when they each reported their core auto operations were net losers in the third quarter.
The less-than-robust third-quarter results came amid renewed concern about the volatility of stock prices and the role of computer-aided program trading.
Taken together, the worries prompted a broad sell-off of stocks.
The number of stocks on the New York Stock Exchange that fell in price yesterday exceeded 1,000, a key measure of underlying sentiment among technical analysts.
Although the government said the economy grew an estimated 2.5% in the third quarter, in line with expectations, analysts are increasingly predicting much more sluggish growth -- and therefore more corporate earnings disappointments -- for the fourth quarter.
"There are a lot more downward revisions of earnings forecasts than upward revisions," said Abby Joseph Cohen, a market strategist at Drexel Burnham Lambert.
"People are questioning corporate profits as a pillar of support for the equity market."
The bond market was unmoved by the economic statistics.
While bond investors would have preferred growth to be a little slower, they were cheered by inflation measures in the data that showed prices rising at a modest annual rate of 2.9%.
That is another small encouragement for the Federal Reserve to lower interest rates in coming weeks, they reasoned.
In major market activity:
Stock prices fell sharply in active trading.
Volume on the New York Stock Exchange totaled 175.2 million shares.
Declining issues on the Big Board outstripped gainers 1,141 to 406.
Bond prices were barely higher.
The Treasury's benchmark 30-year rose fractionally.
Yield on the issue was 7.88%.
The dollar rose modestly against most major currencies.
In late New York trading the dollar was at 1.8400 marks and 142.10 yen compared with 1.8353 marks and 141.52 yen Wednesday.
The dollar soared against the pound, which was at $1.5765 compared with $1.6145 Wednesday.
The House joined the Senate in making federal reparations for Japanese-Americans held in World War II internment camps a legal entitlement requiring the Treasury Department to meet expedited payments of an estimated $1.25 billion during the next several years.
The 249-166 roll call came as the chamber approved a compromise bill allocating $17.2 billion to the departments of State, Justice, and Commerce in fiscal 1990 and imposing increased fees on business interests making filings with the government.
An estimated $40 million would come annually from a new $20,000 charge on pre-merger notifications to the Justice Department, and Securities and Exchange Commission filing fees would rise by 25% to fund a $26 million increase in the agency's budget.
Yesterday's vote on Japanese-American reparations ensures final enactment of the entitlement provision, which abandons earlier efforts to find offsetting cuts but is seen as a more realistic path to expediting compensation first authorized in 1988.
"The only way to reduce the costs is to say we don't want to pay the bill," said Rep. Neal Smith (D., Iowa), who taunted President Bush's party to back up his campaign promise of supporting the claims of $20,000 per individual.
"Read my lips," said Mr. Smith.
"If you're for paying the claims . . . I don't know how anyone can oppose this."
No payments would be made this year, but beginning in fiscal 1991, the bill commits the government to annual payments of as much as $500 million until the total liability of $1.25 billion is met.
The issue has assumed some of the character of past civil-rights debates and reopens old regional divisions in the Democratic majority.
As much as Republicans led the opposition, among the 53 Democrats voting against treating the payments as an entitlement, 42 came from the 13 states in the Old Dixiecrat South and its borders.
The odd mix of departments in the underlying bill makes it one of the more eclectic of the annual appropriations measures, and it is a lightning rod for a running battle over the fate of the Legal Services Corp.
The measure provides $321 million to maintain services but would sharply curb the power of the current board until successors are agreed to by the Bush administration.
The conservative bent of the incumbent appointees, named by former President Reagan, has divided Republicans.
And on back-to-back roll calls, 206-199 and 223-178, the Appropriations Committee leadership turned back efforts to weaken or strip the proposed restrictions first added by Sen. Warren Rudman (R., N.H.)
The estimated $40 million from the new pre-merger notification fee would be divided between the Justice Department's Antitrust Division and the Federal Trade Commission, which both face serious cuts if the income isn't realized.
The Federal Bureau of Investigation is slated to receive $30 million by charging for fingerprint services in civil cases, and the judiciary will rely on another $32 million from bankruptcy charges, including a 33% increase in the current filing fee.
The $17.2 billion total for the bill doesn't include an estimated $1.2 billion in supplemental anti-drug funds approved by the House-Senate conference yesterday, and the rush of money is already provoking jealousy among states competing for assistance.
The House agreed to defer for a year a scheduled 50% increase in the required state matching funds for law-enforcement grants but, by a 287-123 margin, the chamber stripped a Senate initiative to raise the minimum grant for smaller states, such as New Hampshire and Delaware, to $1.6 million from $500,000.
Few are more powerful in the competition for funds than the appropriations committees themselves -- including the three authors of the Gramm-Rudman-Hollings deficit-reduction law.
When a House-Senate conference on yesterday's bill rescinded $11.8 million in unexpended funds for a Fort Worth, Texas, economic development project backed by former Speaker James Wright, Sen. Phil Gramm (R., Texas) insisted last week that the money be preserved.
The measure includes $2 million secured by Mr. Rudman for a marine-research project at the University of New Hampshire, and Sen. Ernest Hollings (D., S.C.) used his power to add $10 million for an advanced technology initiative in the Commerce Department.
This was in addition to a more parochial $4.5 million authorization for a health center in South Carolina upheld by a 273-121 vote in the House last night.
The Big Three U.S. auto makers posted losses in their core North American automotive businesses for the third quarter, and expectations of continued slow vehicle sales and price wars are casting a pall over the fourth period.
The strongest sign of the Big Three's woes came from Ford Motor Co., which said it had a loss in its U.S. automotive business for the first time since 1982.
Ford predicted fourth-quarter net income will fall below the year-earlier level, partly because of a likely $500 million charge from the sale of its steel operations.
The bleak automotive results were offset by strong earnings from some non-automotive operations.
Still, the combined profit of Ford, Chrysler Corp. and General Motors Corp. fell 44% to $1.02 billion from $1.83 billion a year earlier, excluding a one-time gain of $309 million at Chrysler from the sale of Mitsubishi Motors Corp. stock.
The last time all three companies reported North American automotive losses was in the recession year of 1982.
Yesterday's announcements helped spark a midday wave of program selling in the stock market.
GM's common closed at $44.375 a share, down 50 cents, Ford fell 37.5 cents to end at $47.50, and Chrysler eased 37.5 cents to $22.25, all in New York Stock Exchange composite trading.
The market's pessimism reflects the gloomy outlook in Detroit.
As Japanese auto makers gained market share, the Big Three, with GM in the lead, slashed North American production and launched a retail discounting blitz.
The price war peaked in the third quarter as Big Three factory discounts climbed to more than $1,000 a vehicle, according to industry officials.
GM probably had the "heaviest incentives," said Robert S. Miller, Chrysler's chief financial officer.
"We all did what we had to do to stay within sight of them."
But the costly efforts did little to slow Japanese market gains, and domestic car sales have plunged 19% since the Big Three ended many of their programs Sept. 30.
GM, Ford and Chrysler have already cut fourth-quarter U.S. output plans an estimated 15% from 1988 levels.
If sales don't pick up, the cuts will go deeper and incentives will sprout again.
Ford, which has long boasted of its ability to weather a downturn, saw earnings take a beating.
The No. 2 auto maker blamed incentive costs and reduced production -- both the result of a substantially weaker U.S. market -- for a 44% drop in net to $477.1 million, or $1.03 a share, on revenue of $20.24 billion.
Nearly all the decline came in Ford's U.S. automotive operations.
The Dearborn, Mich., auto maker ran a loss of $37 million on assembling and marketing cars in the U.S., a deterioration of $378 million in that line from the 1988 quarter.
Ford managed to show a profit for the quarter primarily because of earnings from overseas auto operations and financial services.
A year earlier, Ford reported record net of $856.3 million, or $1.78 a share, on revenue of $20.38 billion.
In the latest nine months, Ford earned $3.52 billion, or $7.51 a share, compared with $4.14 billion, or $8.53 a share.
The U.S. automotive loss was a sharp reversal for a company that had reeled off 12 consecutive quarters of improved earnings until the 1989 second quarter.
But David N. McCammon, vice president, finance, insisted that cost-cutting and tight production capacity will make results "better in this downturn than in prior downturns," when Ford had net losses.
Still, Mr. McCammon said Ford expects the U.S. economy to weaken through the end of 1990, causing weaker sales and production.
As a result, fourth-quarter profit will come in below 1988 results, although the drop won't be as sharp as the 44% third-quarter decline, he said.
Part of the drop will come from an anticipated charge of as much as $500 million from the proposed sale of its Rouge Steel unit.
In the 1988 fourth quarter, Ford had net of $1.16 billion, or $2.42 a share.
Chrysler's operating profit fell to a scant $22 million, or 10 cents a share, its lowest quarterly total in seven years.
Its $309 million, or $1.32 a share, gain from the sale of 75 million Mitsubishi shares made net $331 million, or $1.42 a share.
Sales were flat at $7.88 billion.
The results include record quarterly earnings of $76 million from Chrysler Financial Corp.
A year earlier, Chrysler's net was $113 million, or 50 cents a share.
Mr. Miller said costs of incentives caused a "moderate" loss in the Highland Park, Mich., company's North American car and truck business.
He said the loss wasn't "that much different" from Ford's $37 million loss on U.S. automotive operations, but he declined to be specific.
Mr. Miller said Chrysler spent an average of $1,000 a vehicle on its incentive programs in the third quarter, compared with about $450 a vehicle a year earlier -- a "high-water mark" at the time.
He said Chrysler "is no longer sure" of its forecast for industry car and truck sales of 14.2 million in the 1990 model year.
Consumers, he said, are balking at higher prices on 1990 cars, especially after seeing the incentive-reduced prices on 1989 models.
In the nine months, net was $1.02 billion, or $4.38 a share, including the gain from the Mitsubishi stock sale, compared with $617 million, or $2.77 a share, after a charge of $93 million, or 42 cents a share, for plant closings in the 1988 period.
Sales rose 8.4% to $27.95 billion from $25.78 billion.
Heavy losses in North American auto operations sent GM's net tumbling to $516.9 million from a record $859.2 million.
Detroit-based GM doesn't issue separate quarterly earnings for the North American automotive business.
But analysts estimated that GM had a loss of as much as $300 million on domestic vehicle operations.
An 8.5% drop in North American factory sales of cars and trucks cut into revenue, and rebates to dealers and customers more than offset gains from price increases on 1990 model vehicles delivered during the period, a GM spokesman said.
But GM's results also illustrate the increasing diversity of its operations.
In one breakdown, GM attributed half of its net to its two big technology units, Electronic Data Systems Corp. and GM Hughes Electronics Corp.
Meanwhile, GM said overseas auto operations are on track to exceed last year's record full-year net of $2.7 billion.
The diversified operations helped GM build its cash reserves, exclusive of its financial subsidiary, to $5.5 billion as of Sept. 30, a 22% increase from a year earlier.
This cushion could come in handy if GM has to trim fourth-quarter North American production schedules more than the already scheduled 9.5%.
Under the circumstances, it won't be easy for GM to exceed its record 1988 fourth-quarter net of $1.4 billion, the spokesman acknowledged.
That means it's unlikely the company will surpass last year's $4.9 billion full-year profit, even though net for the first nine months was up 1.9% to $3.52 billion on revenue of $95.57 billion.
It earned $3.46 billion on revenue of $91.21 billion in the 1988 nine months.
There are two versions of "Measure for Measure" on stage at the Alley Theater here.
One is a strong, vigorous portrayal of Shakespeare's play; the other is director Gregory Boyd's overlay of present-day punk rock decadence on old Vienna.
"Measure for Measure" is one of Shakespeare's "problem" plays, so named because it does not fit neatly into a category such as tragedy, comedy or history.
Its ambiguity and uneasy mixture of the serious and the comic is no doubt one reason why it is very much in vogue with directors just now.
Last season, Hartford Stage director Mark Lamos mounted a production at Lincoln Center, and currently two other productions -- one just closed at the Old Globe in San Diego and another now at the Seattle Rep -- overlap with Mr. Boyd's.
In the play, the Duke of Vienna despairs over the licentiousness of his subjects and turns over the rule of the city to the puritanical Angelo, hoping he can set things right.
When Angelo hears that the young man Claudio has made his fiancee pregnant before he could marry her, Angelo summarily condemns Claudio to death.
When, however, Claudio's sister, Isabella, a novitiate in a convent, goes to Angelo to plead her brother's case, the obdurate ruler immediately falls in love with her and, in a supreme act of hypocrisy, demands that Isabella yield up her virtue to him in exchange for her brother's life.
Meanwhile, the Duke, who set the original scheme in motion, appears on the scene disguised as a friar and becomes involved in a series of intrigues that has everyone fearing the worst possible outcome until the Duke arranges a last minute reprieve for all concerned.
For the Alley production, scene designer Peter David Gould has arranged a stark but extremely effective set featuring a rectangular platform of white-washed boards that extends into the audience.
When the action requires, a prison cell, consisting of an enlarged wire cage, rolls forward on iron wheels on the platform.
In the play's major scenes Mr. Boyd demonstrates that he has a firm grasp of the Shakespearean dynamic.
When Isabella (Ellen Lauren) confronts her brother Claudio (Matt Loney) in his cell, explaining the price she has been asked to secure his freedom; when Isabella and the disguised Duke (Philip Kerr) conspire to trick Angelo; and when Mariana (Annalee Jefferies), a woman wronged by Angelo, confronts him with his past misdeeds, the performers bring the dramatic high points to life with intense energy and intelligence.
At such moments Mr. Boyd makes it clear that he has the capacity to be a superior interpreter of Shakespeare.
When, however, he decides to be modern, or more accurately, when he decides to be trendy, the results are far less satisfactory.
Mr. Boyd is of the directorial school that believes one must find modern parallels or metaphors to make Shakespeare accessible to today's audiences.
It's a valid approach, but it puts a heavy burden on the director to show an uncommon degree of imagination and taste.
In his "Measure," Mr. Boyd has "modernized" the pimps and prostitutes of Vienna whom Angelo is supposed to bring under control by converting them into transvestites, punk rockers and heavy metal types, with a strong emphasis on leather, chains and porno-inspired costumes.
Loud rock music accompanies all the scene changes, even those in the convent.
When Claudio is arrested, he is brought on stage nude except for the manacles on his wrists and ankles.
When the opportunist Lucio (Jack Stehlin) visits the convent to inform Isabella of her brother's fate, Lucio not only slaps the mother superior on her rear, but brings along a voluptuous companion (Jill Powell), not in Shakespeare's script, to undulate lasciviously.
Meanwhile, the pimp Pompey (Glen Allen Pruett), dressed in black leather and a prominent codpiece, indulges in enough obscene gestures and pelvic thrusts to launch a space probe.
The problem here is not in the concept but in its lack of discrimination.
The inclusion at one point, for example, of a list of glitzy modern-day malefactors, ranging from Jim Bakker and Leona Helmsley to Zsa Zsa Gabor, is a bid for a cheap laugh unworthy of Mr. Boyd's ability.
Despite the excesses, however, the scorecard for the production has many more pluses than minuses.
What's more, it represents an important step for the Alley Theater.
"Measure for Measure" is Mr. Boyd's first directorial assignment as the theater's new artistic director.
He succeeded Pat Brown, who was fired by the Alley board 18 months ago.
Her dismissal angered many in the regional theater establishment and led Peter Zeisler, head of Theatre Communications Group, to write an editorial in American Theatre magazine condemning the board.
None of this backlash could change the fact that Ms. Brown's regime was remarkably undistinguished and unimaginative.
Now the Alley has moved ahead on both artistic and financial fronts.
Not only is Mr. Boyd giving the theater a new sense of adventure and excitement on stage, the balance sheet is the best the theater has had in 10 years.
As opposed to the $1.4 million deficit of the 1987-88 season, the 1988-89 year concluded with a $200,000 surplus and a $500,000 cash reserve.
Admittedly last season's runaway hit, "Steel Magnolias," helped a lot, but so did cost cutting and other measures insisted on by the board.
Only time will tell if Mr. Boyd can restore to the Alley the acclaim it received when its founder, Nina Vance, was at the height of her powers.
But it is clear he is going to give it a shot.
Democratic leaders have bottled up President Bush's capital-gains tax cut in the Senate and may be able to prevent a vote on the issue indefinitely.
Senate Majority Leader George Mitchell (D., Maine) said he intends to use Senate procedures to force advocates of the tax cut to come up with at least 60 votes before they can address the issue.
And neither Democrats nor Republicans are predicting that the capital-gains forces can produce enough votes.
"The 60-vote requirement will be there and they don't have the 60 votes," Sen. Mitchell said.
"They don't have the votes to get it passed."
Sen. Bob Packwood (R., Ore.), the leading Republican proponent of the tax cut, didn't disagree.
"I'm not sure what's going to happen," he said.
Previously he had said he would be able to find the requisite 60 votes eventually.
Sen. Packwood has offered his capital-gains-cut package as an amendment to a bill, now pending in the Senate, that would authorize aid to Poland and Hungary.
Democrats are holding up a vote on the amendment by threatening a filibuster, or extended debate.
For a cloture vote to stop the filibuster, Republicans must muster at least 60 votes.
Yesterday, Sen. Packwood acknowledged, "We don't have the votes for cloture today."
The Republicans show no sign of relenting.
GOP leaders continued to press for a vote on the amendment to the Eastern Europe aid measure.
And they threatened to try to amend any other revenue bill in the Senate with the capital-gains provision.
"This is serious business; we're serious about a capital-gains reduction," said Kansas Sen. Robert Dole, the Senate's Republican leader.
"The strategy is `Let's vote.' "
The Republicans contend that they can garner a majority in the 100-member Senate for a capital-gains tax cut.
They accuse the Democrats of unfairly using Senate rules to erect a 60-vote hurdle.
Democrats counter that the Republicans have often used the same rules to suit their own ends.
The two sides also traded accusations about the cost of the Packwood plan.
Democrats asserted that the proposal, which also would create a new type of individual retirement account, was fraught with budget gimmickry that would lose billions of dollars in the long run.
Republicans countered that long-range revenue estimates were unreliable.
The Packwood proposal would reduce the tax depending on how long an asset was held.
It also would create a new IRA that would shield from taxation the appreciation on investments made for a wide variety of purposes, including retirement, medical expenses, first-home purchases and tuition.
A White House spokesman said President Bush is "generally supportive" of the Packwood plan.
Marsh & McLennan Cos. said it agreed to acquire the rest of Gradmann & Holler, a leading West German insurance brokerage firm in which it has held a 15% stake for 15 years.
The transaction, for cash and stock, would represent the biggest European takeover since 1980 for New York-based Marsh & McLennan, the world's largest insurance broker.
It's also the first major sign of the long-awaited consolidation in the European insurance industry as the European Community Commission moves toward a single market by 1992.
Protective barriers will start coming down within the insurance industry next summer, when big industrial companies will be able to buy insurance from carriers in any other EC country for the first time.
That's why "we have been working hard to develop a single, more unified presence in Europe," said A.J.C. Smith, Marsh & McLennan's president, at a London news conference yesterday.
Analysts speculated that Marsh & McLennan would spend between 250 million marks ($136.4 million) and 350 million marks for the rest of Gradmann & Holler, or roughly 25 to 30 times the private firm's estimated earnings.
"This is paying a big price to maintain their virility as the world's leading insurance broker," said Philip Olsen, an analyst at Kitcat & Aitken, a U.K. brokerage firm.
Earlier this year, New York Life Insurance Co. agreed to acquire Windsor Group Ltd., a first step toward establishing a presence in the European market ahead of 1992.
But most U.S. insurers haven't rushed to change the way they do business in Europe because they believe the European market will still be dominated by a handful of domestic companies.
Under the proposed combination, Marsh & McLennan would gain a majority stake in Gradmann & Holler that would increase over time to the rest of the remaining 85%.
The three managing general partners would receive a "significant" number of Marsh & McLennan shares, said Walther L. Kiep, a partner who would also join Marsh & McLennan's board.
Mr. Kiep said he sought the combination because "all our large clients in Germany are becoming European companies or multinational companies and they expect an insurance broker" to serve them as well in Paris as in Germany.
Beatrice E. Garcia in Philadelphia contributed to this article.
WASHINGTON --
United Technologies Corp. won an $18 million Army contract for helicopter modifications and spare parts.
The company will modify one UH-60A Blackhawk transport helicopter to the prototype MH-60K configuration for use by military special forces.
Ingalls Shipbuilding Inc., a division of Litton Industries Inc., was given a $15.5 million extension on a contract for shipyard services.
Furukawa Electric Co. said it plans to increase production of computer memory devices on a large scale in the U.S. and Japan.
As part of the move, its affiliated U.S. company, International Components Technology Corp., purchased a Mexican plant formerly belonging to KSI Disc Products Inc.
The price wasn't disclosed.
Together with two existing plants in the U.S., Furukawa said it will expand its current local monthly production of memory disks to 1.4 million sheets from 800,000.
In Japan, Furukawa said it will raise production at a plant outside Tokyo to 300,000 sheets monthly from 100,000.
Furukawa said the U.S. market is strengthening as related computer technology gains in sophistication and quality.
PRIMERICA Corp., New York, raised its quarterly 14% to eight cents a share, from seven cents, payable Nov. 24 to stock of record Nov. 6.
The financial services company, which has about 98.8 million shares outstanding, noted its "continued confidence in the ongoing strength of the operations.
Compaq Computer Corp. said that its net income rose 51% in the third quarter, bolstered by unusual gains from its investment in a disk-drive maker and reflecting continued growth in its European operations.
The computer maker said net jumped to $87 million, or $2.02 a share, from $58 million, or $1.40 a share, a year earlier.
Sales increased 36% to $683 million from $502 million.
The latest quarter's results, however, included a pretax gain of $13.7 million, or 20 cents a share, in the carrying value of the company's investment in Conner Peripherals Inc. and a $7.6 million gain, or 11 cents a share, from the sale of one million Conner shares.
Net for the nine months was $254 million, or $5.94 a share, up 56% from $163 million, or $4.06 a share, a year earlier.
Sales rose 50% to $2.1 billion from $1.4 billion.
Net for the year-earlier nine months also included a gain of $9.7 million, or 15 cents a share, in the carrying value of the Conner investment.
Michael Swavely, president of Compaq's North America division, attributed the company's third-quarter performance to continued increases in international sales, which accounted for 43% of the company's sales, a 74% increase from a year earlier.
"Over the next couple of years we would not be surprised to see Europe and international {sales} represent 50% of the company's revenues," he said.
During the third quarter, Compaq purchased a former Wang Laboratories manufacturing facility in Stirling, Scotland, which will be used for international service and repair operations.
Mr. Swavely said the new space will allow Compaq to increase the manufacturing capacity of its plant in Erskine, Scotland.
In New York Stock Exchange composite trading yesterday, Compaq shares fell $1.625 to $108.625.
Wilson H. Taylor, president and chief executive officer of this insurance and financial services concern, was elected to the additional post of chairman.
Mr. Taylor, 45 years old, succeeds Robert D. Kilpatrick, 64, who is retiring, as reported earlier.
Mr. Kilpatrick will remain a director.
Diversified Investment Group Inc. said it agreed to be acquired by Star States Corp. for stock valued at $13.75 a share, or about $24.4 million.
Diversified, the holding company for Fidelity Federal Savings & Loan Association, said the agreement also gives Star States the option to acquire 588,300 of Diversified's 1,774,326 shares outstanding "under certain circumstances."
The acquisition would give Wilmington, Del.-based Star States access to the Pennsylvania market.
The agreement is subject to regulatory approval and resolution of lawsuits brought by certain Diversified holders in connection with the proposed merger.
Chandler Insurance Co. said it expects to report third-quarter net income jumped 97% to $2.8 million, or 51 cents a share.
In the year-earlier quarter, the automobile and trucking insurer had earnings of $1.4 million, or 48 cents a share on a restated basis, on revenue of $16.5 million.
In an interview, W. Brent LeGere, chairman and chief executive officer, said he expects revenue in the latest quarter to total about $28 million.
The earnings-per-share figures reflect a 25% stock dividend in June 1989.
Mr. LeGere attributed the earnings increase to growth in the company's longhaul trucking insurance lines and the ability to keep premium rates firm.
Calgon Carbon Corp. said it will build a $40 million plant for producing granular activated carbon.
The maker of water-treatment chemicals and equipment said it will select the plant site early next year, and production is expected to begin in 1991.
Call Jim Wright's office in downtown Fort Worth, Texas, these days and the receptionist still answers the phone, "Speaker Wright's office."
The former congressman, who resigned as speaker of the House after an investigation of his financial dealings, is ensconced in his district office, maintained by taxpayers on a $200,000 allowance.
He is negotiating a rich book contract to boot.
One of the hottest tickets on Washington's social calendar this fall was a charity benefit honoring former Congressman Tony Coelho, who landed a million-dollar job on Wall Street after resigning over a controversial junk-bond investment last summer.
Michael Deaver, the former White House aide, has become the most recent addition to the teeming ranks of fallen politicians and officials earning their way as lobbyists and consultants here.
Mr. Deaver has reopened a public-relations business.
Surviving scandal has become a rite of political passage at a time when a glut of scandal has blunted this town's sensibility.
Let the president demand strict new ethics rules: With four sitting House members accused of sexual misdeeds, amid the unfolding HUD scandal and after the Wright debacle, "people are slightly dulled by scandal," says political humorist Art Buchwald.
"It now takes something really weird to inspire public outrage."
Not all the scandal-tripped have enjoyed soft landings.
But many have.
"These people bounce back more resiliently than regular people," says Washington writer Suzanne Garment, who is working on a history of post-Watergate scandal.
Given their own penchant for book writing, it is surprising that none of the masters of scandal survival have yet published a guide to the art.
For there is an emerging protocol -- indeed, an etiquette -- to it.
Among the rules:
Pretend Nothing Happened
As if he were still in his old job, Mr. Wright, by resigning with his title instead of being forced from his job, by law enjoys a $120,000 annual office expense allowance, three paid staffers, up to $67,000 for stationery and telephones and continued use of the franking privilege.
Not to mention a generous federal pension.
There is also a busy schedule of speaking engagements at $10,000 a pop, at tony places including the Yale Political Union.
"He's as busy as he was as speaker," reports Mr. Wright's administrative aide, Larry Shannon.
Atone
On the edge of fashionable Georgetown, in a chic office with a river view and a number of corporate clients whom he won't name, Mr. Deaver is trying to reclaim his reputation as one of the savviest image makers in town.
There are few mementos of his days as White House deputy chief of staff and confidant of Ronald and Nancy Reagan.
The former $3 million-a-year lobbyist now frequents shelters for the homeless and devotes a third of his time counseling other recovering alcoholics.
"I feel better than I ever have in my life," he says.
Mr. Deaver confessed to his alcoholism during his trial on perjury charges.
He is also a recovering workaholic, relaxing with his family and creating topiary, or garden-shrub sculpture, a fashionable pursuit for which he developed a passion during his three-year legal ordeal.
One sign of Mr. Deaver's renaissance: an appearance on ABC's "Nightline" for a show on pack journalism.
Host Ted Koppel introduced him as "the media master of the Reagan Administration," with nary a mention of Mr. Deaver's conviction in 1987 on perjury charges.
Finding God
"When someone says, 'I've turned to God,' everybody lays off," observes Frank Mankiewicz, an old Washington hand and former aide to Robert Kennedy.
Thus have Charles Colson and Jeb Magruder launched successful post-Watergate careers at the pulpit.
But it doesn't always work so smoothly.
After allegations surfaced in a 1985 divorce contest that he had beaten his wife, SEC enforcement chief John Fedders retreated to a Trappist monastery in rural Virginia.
He is now in solo law practice in Washington, but his fees have been meager and he failed in efforts to win a chunk of his ex-wife's royalties on her tell-all book.
From time to time he returns to the monastery for prayer, meditation and pro bono legal work.
Mr. Fedders is philosophical about his travails.
"This whole experience has been an opportunity for internal growth," he says.
He sees a psychoanalyst five mornings a week.
"I've surrendered to the circumstances," Mr. Fedders says.
"The word surrender has a precise psychoanalytic meaning.
My universe has changed.
I'm enjoying my life and who I am today.
The aspect of being a mega-lawyer isn't as important."
Don't Linger
"The best thing you can do is get off the screen," says Mr. Buchwald.
Nobody proved that more masterfully than Mr. Coelho, the former Democratic majority whip.
Declaring that there was life after Congress, he resigned almost immediately after media reports questioned the propriety of a 1986 junk-bond investment, before any official investigations took hold.
Among the glitterati who turned out in bipartisan black-tie force to benefit the Coelho Epilepsy Fund last month were Sen. Robert Dole, Rep. Newt Gingrich, and other kingpins of Congress.
Dan Rather served as emcee.
From his new, million-dollar-a-year perch on Wall Street as a managing director of Wertheim Schroder & Co., Mr. Coelho reports that many of his former colleagues have contacted him to find out how they, too, can pursue investment banking careers.
It Helps to Be Male
Male scandal victims invariably fare better.
Anne Burford, the former EPA chief who resigned under fire in 1983 during a flap with Congress, was kayoed in the confrontation, even though she was never charged with official wrondgoing.
She worked part-time as a consultant and wrote a book, but never restarted her high-powered legal career.
It didn't help when, in 1986, she was charged (and then cleared) on allegations of public drunkenness.
"I cut my losses and ran," she says, from her new home in Colorado, where she is busy remodeling.
Mrs. Burford remains bitter over the overwhelming legal expenses involved in clearing her name.
"My husband was instantly impoverished by the very act of marrying me," she says.
Another former EPA official, Rita Lavelle, is still struggling after her conviction in 1983 on perjury charges.
"There's nothing she could do to bring herself back to where she was," says her lawyer, James Bierbower.
"You could say she survived, but it wasn't easy on her."
No book contracts have been dangled before Deborah Gore Dean, the reigning queen of the HUD scandal.
Donna Rice of Gary Hart fame failed to obtain a book contract and lost her modeling contract for "No Excuses" jeans.
Fawn Hall, Oliver North's former secretary, has yet to launch a hoped-for television news career, according to her lawyer.
Rita Jenrette, the former wife of Abscam-indicted Rep. John Jenrette, has yet to hit it big in Hollywood, although with roles in such movies as "Zombie Island Massacre" and "Aunt Ida's Bikini Shop," she is doing a lot better than her former husband.
He was back in jail over the summer on shoplifting charges.
Be the Star
Central figures -- such as Richard Nixon -- usually fare better than those with supporting roles.
Richard Secord, the retired Air Force general felled in the Iran-Contra scandal, is all but ruined -- forced to sell his Virginia home and pull his kids out of college, according to a recent fund-raising appeal sent out on his behalf.
Yet his co-defendant in the case -- also a former military officer by the name of Oliver North -- has been busily and profitably burnishing his involvement in the affair.
What accounts for the difference?
During the televised Iran-Contra hearings, Mr. North came off as a patriot from central casting.
Mr. Secord's performance was decidedly less inspiring.
Mr. North remains in heavy demand as a speaker, for fees reported in the $20,000 range.
Even in the wake of Hurricane Hugo 750 people turned out in a remote Virginia town in September for a "family tribute" to Mr. North given by two dozen conservative members of Congress.
If Sex Is Involved, All Bets Are Off
Sex scandals make people look careless and silly, and one of the worst sins in Washington is to be laughed at.
"You can be wicked, but not foolish," says Mr. Mankiewicz.
Nevertheless, Rep. Gerry Studds of Massachusetts was handily re-elected because of the candor with which he handled revelations that he had sex with a male congressional page in 1983.
Former Rep. Robert Bauman, a Maryland Republican who lost his seat in 1980 after he was caught soliciting sex from a 16-year-old boy, has never regained his professional footing as a lawyer.
Mr. Bauman, a conservative, says he was deserted by the right wing.
"Conservatives shoot their own," he says.
If the political establishment is reluctant to forgive sexual misadventures, the private sector sometimes will.
John Tower was accused of womanizing and boozing during his unsuccessful bid to win confirmation as secretary of defense earlier this year.
Now he is writing a book, serving on an elite foreign policy advisory board and consulting for an array of corporate clients, including British publishing mogul Robert Maxwell.
Become a Lobbyist
When all else fails, Gucci Gulch -- the fabled halls of the Capitol inhabited by lobbyists and their imported shoes -- offers a welcome environment for fallen officials.
Former Rep. Fernand St Germain, brought down by the savings-and-loan crisis, now represents -- you guessed it -- savings-and-loans associations.
Some become pseudo-lobbyists.
John Mack promptly quit his job last spring as an aide to Speaker Wright amid public outrage over Mr. Mack's violent attack on a young woman when he was 19 years old.
After a few weeks in seclusion, Mr. Mack opened a consulting firm, but not to enable him to directly lobby; that would require him to disclose his clients by registering as a lobbyist.
Still, Mr. Mack says he talks to "30 members of Congress a week."
Misery Loves Company
Other scandal survivors are sometimes the best source of solace.
Raymond Donovan, the New Jersey construction executive who was forced to resign as labor secretary and indicted in 1985, only to be acquitted of fraud charges, often calls other scandal-tossed public figures to offer a sympathetic ear.
Each time a new scandal hits, he says, "it pulls the scabs off your knees."
One of the first people to come to the Deaver home after his troubles erupted was former Nixon aide John Ehrlichman, whom Mr. Deaver scarcely knew.
"He reassured me that the hurricane would end," Mr. Deaver recalls.
Mr. Bauman received an encouraging letter from the recognized master of scandal survival, Richard Nixon.
Says Mr. Bauman: "If things get really tough, I can always auction it off at Sotheby's.
The Canadian government, with a view to becoming more politically active in Latin America, is expected to announce tomorrow its application to join the Organization of American States, a Washington-based regional agency.
The expected Canadian move has been welcomed by the Bush administration even though Canada has opposed such U.S. actions as the trade embargo against Cuba, the invasion of Grenada and the military support for Nicaragua's Contra guerrillas.
Latin American countries have long urged Canada to join the OAS in the hopes that it would be a counterweight to the U.S., which for many years tended to dominate the 32-nation organization.
Even though the U.S. also has supported Canadian membership, it hasn't been a Washington priority.
"The fact that we might not side with the Americans may be a reason why Canada's membership in the OAS hasn't been, over the years, an item high on the U.S. agenda," said Allan Gotlieb, former Canadian ambassador to the U.S.
The Canadian application is expected to be announced in San Jose, Costa Rica, by Canadian Prime Minister Brian Mulroney, who is attending a centenary celebration of Costa Rican democracy.
"Canada has a larger and more beneficial role to play in the hemisphere," Mr. Mulroney said recently.
Some Canadian political commentators have opposed Canada's joining what they see as a U.S.-dominated organization.
"Canada could do plenty of things to get serious about Latin America without running the risk of getting caught in the cross fire" between the U.S. and Latin American members of the OAS, said Jeffrey Simpson, a columnist in Toronto's Globe & Mail newspaper.
Canada, at times, could be an awkward OAS partner for the U.S. if its United Nations voting record is an indication.
In U.N. General Assembly votes last year, Canada voted the same as the U.S. only 63% of the time.
France voted the same as the U.S. 76% of the time, West Germany 79% and Britain 83%.
Larry Birns, director of the Washington-based Council on Hemispheric Affairs, a liberal research group, said that Latin American countries would be "profoundly disappointed" if Canada were to follow the U.S. lead in the OAS.
"Latin Americans see Canada as a non-interventionist power that respects their sovereignty," he said.
The OAS, which tries to promote peace and economic development within the Americas, is attempting to find a settlement of the current Panama political crisis.
Cuba has been suspended from OAS membership, but the organization's members are discussing Cuba's reinstatement.
Robert H. Knight's Oct. 5 editorial-page article bemoaning violence in comedy movies ("Hollywood, You Slay Me") is interesting, but somewhat off-base.
As a fan of older movies from the 1920s on, I do not find modern comedies contain violence, sex and foul language to any greater degree than other recent movies.
Older movies have plenty of violence, though it is portrayed in keeping with the more restrictive social conventions of the time.
For example, one of my favorite movies is the 1949 British comedy "Kind Hearts and Coronets," in which the entire comedy is based on actor Dennis Price's murdering eight titled relatives (all played by Alec Guinness) because they snubbed his mother and stand in the way of his acquiring the family title.
Similarly, one of the most popular comedy genres of the 1930s and '40s was the "murder mystery/comedy."
The "Thin Man" series of movies, as well as many others, based their entire comedic appeal on the star detectives' witty quips and puns as other characters in the movies were murdered.
Further, I think Mr. Knight made a poor choice in picking "A Fish Called Wanda" as an example of the deplorable state of modern comedy movies.
The specific scene he mentions in which pet dogs are crushed is somewhat reminiscent of the continual plights that befall the coyote in the old Warner Bros. "Road Runner" cartoons.
There is no slow-motion close-up, blood-and-guts portrayal of the animal's demise.
Keep in mind that this is the same movie in which a character is flattened by a steamroller only to pop right back up and peer in the window of a Boeing 747 -- from the outside -- as it takes off.
I will be the first to agree that there is much to be found wrong with modern movie making.
Many modern scriptwriters seem to be incapable of writing drama, or anything else, without foul-mouthed cursing.
Sex and violence are routinely included even when they are irrelevant to the script, and high-tech special effects are continually substituted for good plot and character development.
In short, we have a movie and television industry that is either incapable or petrified of making a movie unless it carries a PG-13 or R rating.
Hence copious amounts of gratuitous sex, violence and gutter language are included as a crutch.
However, these faults are not the exclusive property of modern comedies, and I believe Mr. Knight errs when he attempts to link this modern phenomenon too closely to a single category of movie making.
Michael Smith
Rochester Telephone Corp. said it agreed to buy Viroqua Telephone Co. of Viroqua, Wis.
Terms weren't disclosed.
Rochester will exchange shares of its common stock for all shares outstanding of Viroqua Telephone, a family-owned company.
Viroqua serves about 3,000 access lines in western Wisconsin.
The average unemployment rate in the 15 biggest industrialized democracies was steady in August at the 6.1% rate of the two previous months, the Organization for Economic Cooperation and Development (OECD) said.
The August rate was 0.6 percentage point lower than in the like month a year earlier, reflecting the pickup of activity in the 15 countries.
The OECD said that most of the improvement occurred in the second half of last year; since February of this year, unemployment has been steady at around 6.2% of the labor force.
ALAMCO Inc. said its board has approved a 1-for-10 reverse stock split.
The Clarksburg, W.Va., producer of gas and oil, said it wants shareholders to approve the split because it would "enhance the marketability" and trading of the stock.
If approved at a shareholder meeting in December, the number of shares outstanding would decrease to five million from 50 million, and par value would rise to 10 cents from a penny.
Duriron Co. said it has agreed to buy Automax Inc., a Cincinnati maker of control accessories for industrial valves.
Terms weren't disclosed, but Duriron said the deal will be completed through an exchange of stock.
Closely held Automax has annual sales of about $10 million.
Duriron, a maker of pumps, valves and other controls, said the acquisition won't impact its 1989 profit.
Canadian manufacturers recorded a 0.8% decline in August in their backlog of unfilled orders, Statistics Canada, a federal agency, said.
The August drop was the fourth decline in five months.
Most of the August decrease was attributed to lower order backlogs in the primary metal and electric and electronics-product industries.
Manufacturers' shipments rose 0.3% in August following two months of declines.
Inventories fell 0.3% in August.
Burmah Oil PLC, a British independent oil company, said its West German subsidiary Castrol has a 49% share in Explonaft G.m.b.H., a new Polish lubricants company.
The remaining 51% of the joint venture will be controlled by Polish lubricants manufacturers, refiners and technical institutes.
Explonaft will develop application guidelines for lubricants, sell high-quality mineral oils, and offer services in industrial cleaning and related fields.
Burmah, which has a strong market position supplying marine lubricants and metal-working fluids in Poland, described the joint venture as "fairly small."
It didn't provide details of setup costs.
Du Pont Co. reported that third-quarter profit grew a robust 19% from a year ago on the strength of the company's operations in various chemicals and fibers, and in petroleum.
Du Pont also raised its quarterly dividend to $1.20 a share from $1.05, a change that will increase the annualized payout to shareholders by some $140 million.
Du Pont, unlike companies hurt badly by sharp price declines for basic chemicals and plastics, is benefiting from its broad range of businesses.
The profit gain was made despite a weakening in the housing market, for which the company is a supplier, and a strengthening in the dollar, which lowers the value of overseas earnings when they are translated into dollars.
The Wilmington, Del., company reported net of $547 million, or $2.36 a share, which was in line with Wall Street estimates.
In the year-earlier period, the company earned $461 million, or $1.91 a share.
Sales in the latest quarter were $8.59 billion, up 9.4% from $7.85 billion.
The dividend increase was Du Pont's second this year, an affirmation of statements by top executives that they intend to increase rewards to shareholders.
"We haven't benefited the shareholder as much as we need to," said Edgar Woolard Jr., Du Pont's chairman and chief executive officer, in an interview several months before he entered his current position in April.
The largest beneficiary will be Seagram Co., which owns about 23% of Du Pont.
A spokesman for Seagram, the Montreal wine and spirits concern controlled by the Bronfman family, said the company will post additional pretax profit of about $33 million a year because of the additional Du Pont dividends.
Du Pont also announced plans for a 3-for-1 stock split, although the initial higher dividend will be paid on pre-split shares.
Du Pont's stock rose $2.50 a share to close at $117.375 in New York Stock Exchange composite trading yesterday.
Seagram closed at $84.75, up 12.5 cents a share in Big Board trading.
Leading the gains for Du Pont in the latest quarter was its industrial products segment, where profit soared to $155 million from $99 million a year earlier.
The company benefited from continued strong demand and higher selling prices for titanium dioxide, a white pigment used in paints, paper and plastics.
James Fallon, a New Providence, N.J., marketing consultant to the chemicals industry, says Du Pont still holds an edge in making the pigment because the company was "first in with the technology" to lower costs.
He said Du Pont holds about 23% of the world-wide market, the largest single share, at a time when growing uses for the pigment have kept it in tight supply, although others are now adding low-cost production capacity.
Profit climbed to $98 million from $71 million in the petroleum segment, as Du Pont's Conoco Inc. oil company was helped by crude oil prices higher than a year ago and by higher natural gas prices and volume.
In the diversifed businesses segment, which includes herbicides, profit grew to $64 million from $27 million.
A spokesman said herbicide use in some areas of the U.S. was delayed earlier in the year by heavy rains, thus increasing sales in the third quarter.
In the fibers segment, profit rose to $180 million from $155 million, a gain Du Pont attributed to higher demand in the U.S. for most textile products.
Two segments posted lower earnings for the quarter.
Profit from coal fell to $41 million from $58 million, partly because of a miners' strike.
And profit from polymers dropped to $107 million from $122 million amid what Du Pont called lower demand and selling prices in certain packaging and industrial markets.
For the nine months, Du Pont earned $2 billion, or $8.46 a share, up 18% from $1.69 billion, or $7.03 a share, a year earlier.
Sales increased 10% to $26.54 billion from $24.05 billion.
The increased dividend will be paid Dec. 14 to holders of record Nov. 15.
The stock split, which is subject to holder approval, would be paid on a still unspecified date in January to holders of record Dec. 21.
American Medical International Inc. was dropped from the health care providers industry group of the Dow Jones Equity Market Index.
The company is being acquired.
U.S. Healthcare Inc. was added to the health care providers group.
Both moves are effective today.
The Canadian government plans to auction on Tuesday 750 million Canadian dollars (US$639.9 million) of 9.25% bonds due Dec. 1, 1999, the Finance Department said.
Proceeds of the issue will be used for general government purposes.
Finnish conglomerate Nokia Oy AB said it reached an agreement to buy Dutch cable company NKF Kabel B.V. for 420 million Finnish markka ($99.5 million).
Nokia said it will gain control over NKF Kabel by buying 51% of the shares in NKF Holding N.V., which owns NKF Kabel.
Western European leaders who favor speedy economic and monetary union are adding a new argument to their arsenal: the dizzying political changes under way in Eastern Europe.
French President Francois Mitterrand, European Community Commission President Jacques Delors, Spanish Prime Minister Felipe Gonzalez and others have begun linking the rapid changes in the East to the need to speed up changes in the West.
They are stressing that the best way for the West to help the East is to move faster towards Western European economic and monetary unity.
This would make the market-oriented system more attractive to Eastern countries, they argue, and allow greater economic aid and technological know-how to flow from West to East.
"The only response to the challenge being presented to us by the East," Mr. Mitterrand told the European Parliament in Strasbourg yesterday, "is to reinforce and accelerate the union and cohesion of the European Community."
Mr. Mitterrand proposed that a conference be convened next fall to write a new treaty for the EC allowing a European central bank, and that the treaty be ratified by 1992.
Mr. Mitterrand also proposed a separate "Bank for Europe" that would channel development money to the East.
One basis for linking change in the East and change in the West is the notion that integrating 110 million Eastern Europeans with 320 million Western Europeans is primarily the task of Europeans, despite the U.S.'s obvious strategic and economic interest.
Says a European strategist: "The U.S. tends to look at Eastern Europe {not including the Soviet Union} as Europe looks at Latin America: important but far away.
But for us in Western Europe, these are Europeans next door."
A reintegrated Europe implies big changes in 40-year-old military and economic policies.
There is likely to be a natural division of labor, says Francois Heisbourg, director of the International Institute for Strategic Studies in London, with the U.S. more engaged in strategic issues with the Soviet Union, and Western Europe more involved with specific aid measures for the East.
The designation at July's economic summit of major industrialized nations of the EC Commission as coordinator of Western aid to Poland and Hungary was a first step.
In part, this division is dictated by economics: West Germany is a net exporter of capital while the U.S. isn't.
While American aid efforts have been limited by budget problems, yesterday France announced a three-year, four billion French franc ($650 million) aid plan for Poland.
Despite sudden changes in the strategic equation, some Western European leaders, especially British Prime Minister Margaret Thatcher, remain skeptical about European political and economic unity, and are unlikely to let East-West concerns change their minds.
But British analysts are beginning to link the issues.
"We need a Western Ostpolitik," says John Roper, of the Royal Institute of International Affairs in London, referring to West Germany's longstanding policy of a diplomatic opening to the East.
"For Poland and Hungary we need to think about a stick-and-carrot economic approach that would force them to price things realistically in return for removing all our tariff barriers."
He notes that the Marshall Plan of U.S. aid to Europe "didn't just throw money at post-war Europe, it also liberalized and opened up those markets."
The French analysis goes further.
"Most of the West's leaders have finally concluded that we all want perestroika {Soviet leader Mikhail Gorbachev's policy of economic restructuring} to succeed," says Hubert Vedrine, security adviser to Mr. Mitterrand.
"But they haven't yet drawn the operational policy conclusions."
He adds that with communism collapsing and Mr. Gorbachev scrambling to rejuvenate the Soviet economy, "Our interest lies in a controlled transformation, a contained nuclear reaction, so we need to help him, and not just with words."
Managing change, he adds, will require a lot more aid and a prominent role for the EC, especially in dealing with the question of German reunification.
Thierry de Montbrial, director of the French Institutue for International Relations in Paris, says it isn't clear what, exactly, West Germany wants.
Any push for a Gorbachev vision of a "common European home," implying the eventual dissolution of the EC, a Soviet-German partnership and the withdrawal of U.S. forces, "would be a very, very serious problem," he says.
He doubts a Bismarckian super state will emerge that would dominate Europe, but warns of "a risk of profound change in the heart of the European Community from a Germany that is too strong, even if democratic."
He adds: "We, and the rest of the EC have to talk to the Germans, now, frankly and raise these future risks with them."
While many commentators, particularly French ones, worry that hasty and emotional reaction to the changes in the East might lead to dangerous pressures for a denuclearized Europe or the speeded-up withdrawal of American troops, Mr. Roper in London sees a more positive scenario.
"There seems to be a message from Moscow there's a deal on offer," he says.
"They want reassurance we won't try to undermine or destroy the Warsaw Pact. . . .
In return, the U.K. and France could keep their nuclear weapons.
He adds: "Once both sides feel comfortable, it should be that much easier to make more progress toward the economic and social reforms that are now starting in the East.
Kyle Technology Corp. said a Seattle investor has signed a letter of intent to buy the company for about $3.1 million, or $1.20 a share.
The investor, Donald A. Wright, plans to run the company, said a spokesman for Kyle.
The transaction has been approved by Kyle's board, but requires the approval of the company's shareholders.
Kyle manufactures electronic components.
Dominion Textile Inc. holders adopted a shareholder-rights plan at the annual meeting.
The so-called poison pill took effect Aug. 9 pending ratification by holders.
Rights attached to the company's common shares were issued that are triggered if a hostile bidder acquires more than 20% of the shares outstanding.
Once triggered, the rights allow holders to buy additional shares at 50% of the then current market price or, at the board's discretion, to receive securities or assets.
Separately, Dominion Textile posted net income of 4.7 million Canadian dollars ($4 million), or 12 Canadian cents a share, for the fiscal-first quarter ended Sept. 30.
The company had a net loss of C$2.3 million, or 14 Canadian cents a share, a year ago.
Sales were C$348.2 million compared with C$307.2 a year earlier.
Computer Sciences Corp. said it received a U.S. Postal Service contract that will have a value of at least $33 million.
Computer Sciences will perform data processing work for the Postal Service under the three-year contract, which also includes two additional option years for which compensation hasn't yet been fixed.
Computer Sciences said its work will improve mail-processing efficiency.
For its fiscal year ended March 31, Computer Sciences had revenue of $1.3 billion.
Ohbayashi Corp. agreed to buy E.W. Howell Co., the U.S. subsidiary of Selmer-Sande AS, of Norway, for about $7 million.
Howell, a Port Washington, N.Y., construction concern, was established in 1891.
It has three U.S. branches.
Ohbayashi officials said the purchase was undertaken to participate in ventures in and around New York City.
They said Howell is particularly successful there because of its membership cooperation with local unions.
Ohbayashi is Japan's second largest construction company.
Until now, its inability to form membership ties with organized labor has kept it from penetrating the lucrative New York metropolitan area construction market.
The company also hopes the latest acquisition will help secure large construction orders from Japanese concerns with U.S. operations.
Ohbayashi cited industry publications crediting Howell, currently capitalized at $2.2 million, with receiving orders valued at $225 million in 1988.
The Japanese company received orders totaling 12.44 billion yen ($87.9 million) from its U.S. business activities during the fiscal year ended in March.
H. Marshall Schwarz was named chairman and chief executive officer of U.S. Trust Corp., a private-banking firm with assets under management of about $17 billion.
Mr. Schwarz, 52 years old, will succeed Daniel P. Davison Feb. 1, soon after Mr. Davison reaches the company's mandatory retirement age of 65.
Mr. Schwarz, who is president of U.S. Trust, will be succeeded in that post by Jeffrey S. Maurer, 42, who is executive vice president in charge of the company's asset-management group.
U.S. Trust, a 136-year-old institution that is one of the earliest high-net worth banks in the U.S., has faced intensifying competition from other firms that have established, and heavily promoted, private-banking businesses of their own.
As a result, U.S. Trust's earnings have been hurt.
But Mr. Schwarz welcomes the competition in U.S. Trust's flagship businesses, calling it "flattery."
Mr. Schwarz says the competition "broadens the base of opportunity for us."
Other firms "are dealing with the masses.
I don't believe they have the culture" to adequately service high-net-worth individuals, he adds.
U.S. Trust recently introduced certain mutual-fund products, which allow it to serve customers with minimum deposits of $250,000.
Previously, the company advertised at the $2 million level.
"We have always taken smaller accounts, but now we are looking for smaller accounts that will grow," Mr. Schwarz says.
"Our bread and butter is still the $2 million to $20 million account," he says.
The new services allow U.S. Trust to cater to the "new wealth," Mr. Schwarz says.
Quarterly net income this year has risen just over comparable periods in 1988, when year-end net was below the 1987 level.
In this year's third quarter, for example, net was $10.5 million, or $1.05 a share, compared with $10.3 million, or $1.02 a share, a year earlier.
Assets as of Sept. 30 fell to $2.46 billion from about $2.77 billion.
"We will have a reasonably flat year this year," Mr. Schwarz says.
Mr. Schwarz also said costs associated with U.S. Trust's planned move to midtown Manhattan from Wall Street will continue to be a drag on earnings through 1990.
Mr. Schwarz's great-grandfather founded the New York toy store F.A.O. Schwarz, but his family no longer has ties to the company.
Mr. Schwarz's father was a U.S. Trust trustee until 1974.
U.S. Trust also created a four-member office of the chairman, effective Feb. 1.
It will include Messrs. Schwarz and Maurer.
Donald M. Roberts, 54, treasurer, and Frederick S. Wonham, 58, who takes responsibility for the funds-service group, were named vice chairmen and will serve in the office of the chairman.
Mr. Roberts continues as treasurer, and Mr. Wonham remains responsible for the offices of comptroller, planning, marketing and general services.
Frederick B. Taylor, 48, also was named a vice chairman and chief investment officer, a new post.
He previously held similar responsibilities.
Mr. Taylor also was named a director, increasing the board to 22, but is not part of the new office of the chairman.
James E. Bacon, 58, executive vice president, who has directed the funds-service group, will retire.
Sun Microsystems Inc., snapping back to profitability after its first quarterly loss as a public firm, said it earned $5.2 million, or seven cents a share, in the fiscal first quarter.
Sun, a maker of computer workstations, reported sales of $538.5 million for the quarter ended Sept. 29, up 39% from $388.5 million a year earlier.
In the 1988 period, the company earned $20.6 million, or 26 cents a share.
Sun's results were slightly better than expectations.
Earlier this month, the company said it expected to break even for the quarter on sales of $530 million.
In a statement, Scott McNealy, Sun's chief executive officer, said the company's performance was hampered by problems tied to the introduction of a major new family of computers in April.
One of those new computers, called Sparcstation 1, accounted for nearly half of the 28,000 systems Sun shipped in the quarter, he said.
More than two-thirds of the systems shipped, meanwhile, were products introduced in April.
But problems in manufacturing, forecasting demand and getting the bugs out of a new management information system made it extremely difficult for Sun to meet demand for its newest computers well into the summer.
These problems also resulted in Sun reporting a $20.3 million loss for its fourth quarter ended June 30.
Mr. McNealy said the issues that hurt Sun's performance earlier this year are now "largely" behind the firm, and he indicated that Sun's profitability should increase throughout the fiscal year.
Sun also reported a record backlog of orders.
While this indicates continued strong demand for the company's desk-top computers, Sun faces increasing competition from Digital Equipment Corp. and Hewlett-Packard Co.
Recently, analysts have said Sun also is vulnerable to competition from International Business Machines Corp., which plans to introduce a group of workstations early next year, and Next Inc.
C.B. Rogers Jr. was named chief executive officer of this business information concern.
Mr. Rogers, 60 years old, succeeds J.V. White, 64, who will remain chairman and chairman of the executive committee.
Mr. Rogers, who was president and chief operating officer of Equifax, will retain his position as president.
The company said a new chief operating officer won't be appointed.
A merchant bank and investment fund have agreed to co-sponsor a reorganization plan to bring Sharon Steel Corp. out of Chapter 11 proceedings and to acquire the company's steel-related assets in a transaction valued at more than $300 million.
Castle Harlan Inc., a New York merchant bank, and Quantum Fund said they would acquire the assets for a combination of cash and the assumption of certain of Sharon's liabilities.
The balance of the company's assets and liabilities would be transferred to a new company that would be owned by Sharon's creditors.
Quantum said it has agreed to purchase as much as $50 million in equity in the new company, if necessary, for the confirmation of the plan.
Castle Harlan and Quantum said the plan is expected to be filed within 60 days with the U.S. Bankruptcy Court in Pittsburgh.
The agreement is subject to certain conditions, including obtaining financing.
Castle Harlan said that such financing is already being sought and that a formal proposal would be made to Sharon's Chapter 11 trustee and other Sharon creditors over the next few days.
Sharon, based in Farrell, Pa., filed for protection from creditors under the federal Bankruptcy Code in April 1987.
The company had been one of the maninstays of Miami Beach financier Victor Posner's empire.
Mr. Posner resigned as president and chief executive officer of Sharon in April 1988.
He remains chairman, but wields little power at the company.
Quantum Fund, based in New York, is a $2.1 billion investment fund managed by Soros Fund Management.
Quantum is Sharon's largest unsecured creditor.
The Castle Harlan group includes Walter Sieckman, former chief operating officer of Sharon, and Wolfgang Jansen, former executive vice president.
Executives at Sharon declined to comment on the proposal.
The company's trustee, F.E. Agnew, was unavailable for comment.
Two old friends, George Bush and Deng Xiaoping, are trying to limit further damage to U.S.-China ties.
But as Congress prepares a fresh package of sanctions against Beijing, the already-tense relationship could get worse.
The problem for Congress will be to weigh what China is saying to its people against the more conciliatory message it is delivering to the Bush administration.
In a move apparently aimed at heading off new punitive legislation, Mr. Deng sent an indirect signal to Washington via T.D. Lee, a Columbia University physicist who met Mr. Deng and other Chinese leaders in Beijing last month.
When he met with Mr. Bush on his return, Mr. Lee says, he told the president that the Chinese "made statements to me that I regard as a first step toward reconciliation."
The communication Mr. Lee brought represents the softer line the U.S. has been hoping to hear from Chinese officials since the June 4 massacre of pro-democracy demonstrators in Beijing.
The Chinese leader, Mr. Lee informed Mr. Bush, expressed some regret for what had happened in Beijing and conceded that China's officials bore some responsibility.
Mr. Lee says Mr. Deng told him: "We should not mind those who participated in demonstrations, signed anti-government materials and went on hunger strikes."
Mr. Deng added, says Mr. Lee, that "we really made mistakes.
We must not shirk our responsibility and we cannot just blame the demonstrators."
Mr. Lee also reported to the president that, in a separate meeting, Communist Party chief Jiang Zemin said the Chinese leadership "looked kindly on the students who took part in the demonstrations."
Mr. Jiang also pledged that the Chinese Red Cross would publish "very soon" a list of those killed.
And he told the physicist that China's leaders were "very much concerned" about the deaths and had arranged aid for the victims' families.
"I transmitted my conversations to the White House," Prof. Lee says.
But, he adds, "I was not acting as a messenger."
He says that the Chinese never asked him to convey their statements to President Bush, but that the White House spontaneously invited him to do so.
Mr. Lee concedes the statements made to him are far different from others being issued in China, but attributes that to the fact that the situation in China is "very complex."
According to U.S. sources in Beijing, the administration hopes Mr. Deng's fairly conciliatory comments will prod Congress to be cautious about further sanctions against Beijing.
"The president doesn't want to have legislative sanctions," says a U.S. official.
"But he may not have a choice."
Given China's far-from-conciliatory statements to its own people, Mr. Bush may be unable to prevent new sanctions.
Beijing officials have said they will step up the campaign of arrests and intimidation against those who participated in the demonstrations.
Sentences have been stiff.
A university student got eight years for participating in the rallies, sources in Beijing said, while an 18-year-old worker got 10 years.
Nor has Beijing hinted to its citizens that it will publish the identities of those killed.
So far, the victims are officially considered evil-doers, and their families receive no compensation.
A man gunned down by a stray bullet while cycling to work carries, after his death, the official stigma of "counterrevolutionary," his wife says.
What's more, much of China's official rhetoric is hostile to the U.S.
China frequently lambastes the U.S. Embassy for harboring astrophysicist Fang Lizhi, a political dissident who took refuge there after the massacre.
"In the U.S., there are still people who want to crush China and interfere in our internal affairs," Zhu Qizhen, China's new ambassador to the U.S., said as he left for Washington last week.
The House and Senate are to begin soon hashing out an agreement for sanctions legislation.
It will probably be attached to a State Department authorization bill, which Mr. Bush isn't expected to veto.
A congressional staffer involved in drafting the sanctions says they are likely to mirror those Mr. Bush enacted shortly after the massacre.
But as legislative action, they would carry greater weight and would be more difficult to rescind.
Measures already in effect that are expected to be made law include a ban on military sales and exchanges, a suspension of most high-level government contacts and a halt to U.S. trade enhancement programs, such as the Overseas Private Investment Corp. and the Trade Development Program.
Codifying those sanctions could prompt Chinese retaliation.
"If the two sides aren't careful, U.S.-China ties could spin downward, out of control," says a U.S. official in Beijing.
"Bush and Deng are hoping {that} cooler heads prevail.
The amount of blood surgical patients can donate and store before surgery can be increased by the new genetically engineered drug, EPO.
EPO, or erythropoietin, is a protein the human body makes to stimulate the growth of red blood cells.
A genetically engineered version of the human protein developed by Amgen Corp. of Thousand Oaks, Calif., recently has been marketed by the Ortho Pharmaceuticals division of Johnson & Johnson.
A competing version of EPO is being developed by Genetics Institute Inc. in Cambridge, Mass.
The drug is being used primarily to treat anemias.
A new experiment, reported in this week's New England Journal of Medicine, involved giving injections of Amgen's EPO to 23 patients who wanted to store units of their own blood.
The patients began receiving EPO injections about a month before their scheduled surgery.
They then began donating blood twice a week, receiving an EPO injection each time.
If tests indicated a low number of red cells, blood wasn't taken.
The EPO-treated patients donated an average of 5.4 units of blood each compared with only 4.1 units donated by a similar group of surgical patients who received a placebo injection.
The volume of red cells donated by the EPO-treated patients was 41% higher per donor, the research team representing a number of hospitals and blood banks reported.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
TAX SHELTERS CALLED Individual Retirement Accounts, or "IRAs," were created without fanfare on Sept. 2, 1974, but grew beyond expectations as an inducement to personal saving.
That Labor Day, in his first major act after succeeding the resigned Richard Nixon as president, Gerald R. Ford signed the Employee Retirement Income Security Act.
Pension reform was its main thrust.
Labor and business leaders, quoted at the White House Rose Garden rites, hailed its provisions for insuring corporate pension benefits.
IRAs were like stepchildren there.
The IRA's conception is murky.
In 1972, then Treasury Secretary George Shultz, with the key support of Sen. Carl Curtis, sought some form of pensions for the uncovered.
That year a four-man group headed by William Lieber in the Legislation and Regulations division of the Office of the Chief Counsel for the Internal Revenue Service, was assigned the task of designing a plan.
They used the 1962 Keogh Plan, a pension plan created by a New York congressman for the self-employed, as a partial model.
This team initially called its new model Personal Retirement Account, or "PRA."
But it didn't sing.
So they opted for IRA, naming it after Ira Cohen, a brilliant IRS actuary who helped them.
Ira, himself, confirms this account.
IRA rules have been changed over the years.
One in 1981 raised to $2,000 a year from $1,500 the amount a person could put, tax-deductible, into the tax-deferred accounts and widened coverage to people under employer retirement plans.
This caused an explosion of IRA promotions by brokers, banks, mutual funds and others.
But in 1986 Congress sharply reduced the number of people who could qualify for its benefits and IRA tax-deductions slowed their roaring growth.
IRA account assets have grown to about $400 billion from $393 billion last year and just $26 billion in 1981.
The Soviet State Bank announced a 90% devaluation of the ruble against the dollar for private transactions, in an apparent attempt to curb the nation's rapidly growing black market for hard currency.
The measure, which will take effect next Wednesday, will create a two-tier exchange rate.
Commercial transactions will continue to be based on the official rate of about 0.63 rubles to the dollar.
But for Soviet citizens who travel abroad for business or tourism, the rate will jump to 6.26 rubles to the dollar.
Tass news agency said the devaluation also will apply to foreigners' transactions.
But it didn't elaborate, and it remains unclear how far Western tourists and foreigners living in Moscow will be allowed to benefit from the sweeping rate cut.
The current ruble rate has long been out of line with the black market.
As Soviet leader Mikhail Gorbachev has opened up the country to foreign trade, the discrepancy has become ever greater.
Western tourists in the Soviet Union who could exchange a dollar -- albeit illegally -- for about four rubles a year ago are now being offered 15 rubles or more.
Even at such rates, black marketeers have been able to make big profits because of the dire shortage of consumer goods here.
They use dollars to buy Western items such as video recorders and personal computers and then sell them at a huge mark-up.
The going rate for a small personal computer that costs about $2,000 in the West is anywhere from 50,000 to 100,000 rubles.
Even a pack of 20 Western cigarettes can fetch 20 rubles or more.
With more than 300 billion rubles in savings accounts and little to spend them on, Soviet consumers grumble at the exorbitant black-market prices for such goods -- but they buy them anyway.
Moscow has already tacitly admitted that the ruble isn't worth much, announcing in August that it will pay Soviet farmers in hard currency for grain and other produce that they grow in excess of state-plan quotas.
"The absurdity of the official rate should seem obvious to everyone," the afternoon newspaper Izvestia wrote in a brief commentary on the devaluation.
The State Bank's move is part of a drive to iron out exchange-rate discrepancies as Moscow moves toward making the ruble convertible -- a goal that Soviet bankers and economists say is still far away.
Rumors of an impending devaluation have been circulating in Moscow for weeks, but the size of the cut took many Western bankers by surprise.
"It's much bigger than we expected," said one German banker, who asked not to be named.
The next step, which could have a larger effect on businesses, will come early next month, when the Bank for Foreign Economic Affairs is to hold its first auction of foreign currency.
Soviet companies needing Western currencies to buy equipment and supplies abroad will be able to submit bids.
Plans for the auction, which was supposed to take place last spring and become a regular event, have been thwarted by a lack of hard currency.
Soviet firms that hold some are unwilling to part with it, and joint ventures aren't yet allowed to participate.
The Kremlin also has been unwilling to provide hard currency for the auction, using a lot of it instead to finance emergency imports of consumer goods.
If foreign tourists and businesses could sell their currencies freely at the new, better exchange rate, that would enable the State Bank to increase its dollar reserves and would mop up some of the excess rubles in the economy at the same time.
But the amounts they exchange may be limited; most Soviet hotels, for example, demand payment in hard currency from Western visitors.
Unless other rules are changed, the devaluation could cause difficulties for the people it is primarily meant to help: Soviets who travel abroad.
Over the past three years, thousands of people here have made use of looser travel restrictions to get their first taste of life abroad.
But under current rules, they are allowed to change just 200 rubles into dollars and other currencies for each trip.
At the new rate, that would give them about $30 to travel on.
It isn't yet clear whether the 200-ruble limit will be lifted.
If it isn't, the black market for dollars probably will continue to thrive.
International Business Machines Corp. made news this summer when it landed an unusual contract to manage all of Eastman Kodak Co.'s data-processing needs.
But the computer giant appears to have lost a second key contract with Kodak to archrival Digital Equipment Corp.
Kodak yesterday confirmed that it has entered negotiations with Maynard, Mass.-based Digital to manage all of its voice and data communications needs.
Kodak, based in Rochester, N.Y., said IBM also had bid for the business.
IBM is based in Armonk, N.Y.
The loss is a setback to IBM, which pointed to the Kodak contract as an example of its success in systems integration.
That's an emerging business in which computer makers or consultants provide turnkey communications and computing services to major corporations.
A Kodak spokesman declined to disclose the potential value of the contract, which is still in negotiation.
He said that American Telephone & Telegraph, MCI Communications Corp., Rochester Telephone Corp. and IBM itself would likely be Digital's subcontractors on the project.
"When we decided to look outside the company for critical data-processing and communications services, we wanted to get the best vendor for that service," said Paul Allen, the spokesman.
"That's why we went with IBM for data center management . . . and now Digital for voice and data telecommunications.
This year is the 75th anniversary of the Federal Reserve System, and some members of Congress think it's time to take a fresh look at the nation's central bank.
After 75 years there may be a few things that are worth reexamining.
The regional Federal Reserve Bank setup, for instance, may be out of date.
In earlier years it may have seemed reasonable to give Richmond, Va., a bank and allow Los Angeles only a branch of the San Francisco bank, but times have changed.
Maybe the whole regional system is an anachronism; the Fed, after all, is a national central bank.
Some of the would-be reformers, however, want to restore an arrangement we once had -- or, at least, part of it.
In the beginning, the treasury secretary and the comptroller of the currency were both ex officio members of the Federal Reserve Board.
But in 1935, when Congress was trying to find someone or something to blame for the Great Depression, it decided to drop both the secretary and the comptroller from the board.
Carter Glass, a former treasury secretary who was then back in Congress, probably influenced the decision.
He said that when he was on the board he felt that he had a great deal of power and, somehow, he didn't think that was a good thing.
Times have changed.
Rep. Byron Dorgan (D., N.D.) has introduced a bill in Congress, co-sponsored by Rep. Lee Hamilton (D., Ind.), that would put the treasury secretary back on the board.
There is doubt that the change would accomplish much but at least Congress, as in 1935, would be doing something.
So far no one has suggested putting the comptroller back on the board.
Nicholas Brady, the incumbent treasury secretary, is of course aware of the proposal, and he doesn't like it much.
Mr. Dorgen has changed tactics, dropping the seat-for-the-secretary idea.
That may have pleased the secretary, but H. Erich Heinemann, chief economist of the investment firm of Ladenburg, Thalmann & Co., suggests that Mr. Brady may figure he already has all the power he needs.
Like most treasury secretaries, Mr. Brady takes a keen interest in monetary matters, of course.
He was, in fact, taking an especially keen interest in board matters even before he went to the treasury.
After the October 1987 market crash, Mr. Brady as a private citizen headed a presidential commission that tried to decide what went wrong and what should be done about it.
One of the commission's recommendations was that a single agency, probably the Federal Reserve, should coordinate regulation of all financial markets.
This recommendation might have encouraged a turf-hungry bureaucrat to try to expand his power, but so far Federal Reserve Chairman Alan Greenspan hasn't made a pitch for the job.
The Fed has plenty of responsibilities in times of market turmoil and in 1987 and again in 1989 it appears to have handled them well.
Mr. Brady has said he thought government agencies in the latest market drop were better prepared to coordinate their actions, but he has left no doubt that he still likes the ideas the commission advanced nearly two years ago.
In recent weeks, moreover, Mr. Brady has joined other administration officials in trying to urge the Fed toward lower interest rates.
The urging admittedly has been gentle.
In an interview with the Washington Post in early October, the secretary said the Fed may be slightly more interested in curbing inflation than the administration is, while the administration may put slightly more emphasis on spurring economic growth.
At least some economists, of course, would argue that inflation deserves a lot of emphasis.
Earlier this month the St. Louis Fed held a conference to assess the system's first 75 years.
Allan Meltzer, a Carnegie-Mellon University economist, noted that the Fed's record included the longest, most sustained, peacetime inflation in our history, dating from either 1966 or 1967 to 1989.
The inflation-growth argument is an old one, but Mr. Brady, on the board or off, is surely trying to influence Fed policy.
Equally importantly, the treasury secretary has spearheaded the administration effort to bring the U.S. dollar down by shopping avidly for West German marks and Japanese yen.
The treasury can do something on its own, but to have any hope of success it needs help from the Fed.
The central bank has been helping, but apparently not especially eagerly.
The Fed has been intervening in foreign currency markets, all right, but through August, at least, it appeared to be "sterilizing" the intervention.
In other words, it was offsetting purchases of marks and yen by buying dollars in the domestic money market.
Now, sterilized intervention may have some effect.
When traders see the Fed is in the exchange market it may make them tread a little carefully, for fear of what the central bank may do.
But it's generally accepted that sterilized intervention has little or no lasting impact on currency values.
After August the Fed may have stopped sterilizing, but it's hard to see much impact on the dollar.
The dollar is still highly volatile.
The Fed has let interest rates slip slightly, but whether the main reason was dollar intervention, the gloomy reports on manufacturing employment, or the Friday 13 market drop, only Mr. Greenspan and his associates know.
Earlier this year, Martin Feldstein, president of the National Bureau of Economic Research, argued forcefully that a government that wants steady, stable exchange rates might try some steady stable economic policies.
Trying to manage exchange rates to some desired level, he said, "would mean diverting monetary and fiscal policies from their customary roles and thereby risking excessive inflation and unemployment and inadequate capital formation."
The more we think about it, the more we suspect Mr. Brady does indeed have enough power where he already is.
This has been a week of stunning events behind what was once called the Iron Curtain and interesting shifts in official American policy toward Moscow.
It has also been a week when inside-the-beltway Washington has had a high old time gnawing over ex-President Reagan's multimillion-dollar junket in Japan.
The latter may seem oddly irrelevant, if not downright trivial, given the big picture and the way we have handled it in the nation's capital has done nothing to dispel that impression.
In fact, however, Mr. Reagan's casual debasement of the office he so recently held raises issues about which Americans can actually do something.
Our ability to influence the outcome of events in Eastern Europe and the Soviet Union is far more marginal.
Those events continue to move at a rate, and in a direction, which leave informed commentary -- let alone policy -- far in their wake.
Earlier this week, Soviet Foreign Minister Eduard A. Shevardnadze confessed that the U.S.S.R. ignored universal human values by invading Afghanistan and, to put it bluntly, "engaged in a violation of the ABM Treaty" by building its radar station at Krasnoyarsk.
Hungary is no longer a "Socialist Peoples" republic, the Communist Party no longer has automatic delegates in the U.S.S.R.'s Congress of Peoples Deputies and Egon Krenz was not backed unanimously by his fellow party functionaries when he took over as East Germany's new maximum leader.
All of that is just for starters, or so the hundreds of thousands of Eastern Europeans in the streets seem to hope and are certainly demanding.
Of like, though lesser, note, Secretary of State James Baker put the administration four-square behind perestroika and glasnost, and therefore behind Mikhail Gorbachev, in a pair of carefully reasoned speeches over the past week or so.
And, last but not least, President George Bush now views the changes in Eastern Europe as "absolutely extraordinary" and believes that Mr. Krenz "can't turn the clock back" in East Germany because the change is too inexorable," as he told the New York Times's R.W. Apple Jr.
(In other words, after some highly visible dithering and public airing of differences, the administration has come down on the side of those who believe that what we are witnessing from Berlin to Siberia is a good thing to be welcomed, rather than a new thing to be feared or viewed with suspicion.)
All of this is what history will note, assuming that events don't make it seem a bad joke, when the record of this time is put down.
For journalists, however, who write what they fondly view as history's first draft, this has also been a week to give a lot of space and time to Ron and Nancy's sales appearance in Japan on behalf of a communications giant and its controversial founder.
It has been a well-paid transaction, this bartering away of the prestige of the republic's highest office.
The Japanese industrialist has coughed up at least $2 million, the Japanese government has put up just about as much, or so it is reported and at least one estimate puts the total tab at $7 million.
All of which has enabled those of us in Washington who enjoy wallowing in such things to go into high public dudgeon, as Mr. Apple and I did the other night on ABC's "Nightline."
Punching away, we raised what I still think were all the right issues and landed more than one hard blow, but at the end of the affair, there was just the tiniest nagging worry that we had been aiming at the wrong target.
As one of his defenders so aptly put it, President Reagan was simply doing what he had always done before his election (and some would say thereafter as well).
He was performing for pay, and why should anyone expect anything more?
Primarily because there's more to the matter than Ronald Reagan's personal values, or lack of them.
Selling the presidency for a mess of pottage is not so much a devaluation from the norm of public life today as it is a reflection of the disintegration of public standards.
The theme song for the 1980s has been, "Anything Goes," and it has been whistled with gusto from Wall Street to some of the highest peaks of televangelism.
There are those who say that this is nothing new, that America has always suffered from a bad case of schizophrenia when it comes to the dichotomy between what is professed and what is practiced.
There is evidence to support that view.
Eighty-three years ago, William James wrote to H.G. Wells: "The moral flabbiness born of the exclusive worship of the bitch goddess success . . . that, with the squalid cash interpretation put on the word success, is our national disease."
But if it was the national disease in 1906, it is today the national commonplace.
If there is no law against it, do it.
If the law leaves loopholes, use them.
If there is no moral prohibition that expressly forbids it, full speed ahead.
And if you are caught or if people complain, simply argue that "everyone does it" or "no one said I shouldn't " and brazen it out.
As a last recourse, when all else has failed and you are pinned, apologize for having disappointed those who trusted you but deny having actually done anything wrong.
(See, for instance, Jim Bakker's remarks upon being sentenced to prison this Tuesday for defrauding the faithful.)
Consider the troubling dissonance between Mr. Shevardnadze's speech of confession this week and the hang-tough defense of everyone concerned with the Iran-Contra affair.
The Soviet foreign minister publicly concedes that his government "violated norms of behavior" in Afghanistan and just plain lied about the radar station.
We have people in high place still lying through their teeth about Iran-Contra, and that apparently isn't going to change.
For that matter, those long ago identified as liars are still given respectful hearings in the press.
That is the key to the current "national disease."
No one seems willing to hold anyone in public life to a standard higher than the narrowest construction of the law.
The occasional media witch hunt about some politician's private peccadilloes notwithstanding, the general inclination is to offer a version of the old refrain, "Who am I to judge?"
Thus, no standards, no judgment and no values.
"You are mad because he's making so much money," say President Reagan's defenders.
No, we ought to be mad because he has demeaned the office we gave him, enlisting it in the service of private gain, just as we ought to be mad that public officials lie through their teeth, play disingenuous games about their activities or, to steal a phrase, make public service a private trough.
"I'm not going to be stampeded into overreacting to any of this, President Bush told Mr. Apple in this week's interview.
He was referring to the "absolutely extraordinary" events in Eastern Europe, and it is a defensible position.
But there is no defense at all for the ethos of the 1980s.
We didn't stampede into it, we slithered and slipped down the long slope, and now we have as its quintessential symbol a former president huckstering for a foreign poohbah.
Or perhaps that is a fitting symbol for the United States of 1989: Everything for sale; nothing of real value.
Mr. Carter is a political commentator who heads a television production firm.
Cineplex Odeon Corp. directors said the company's chairman and chief executive, Garth Drabinsky, is considering bidding 780.6 million Canadian dollars (US$666 million) to acquire the company.
The board said Mr. Drabinsky and Vice Chairman Myron Gottlieb are negotiating financing before offering C$16.40 a share to acquire all of Cineplex's shares outstanding.
The directors added that the two executives haven't reached a final decision to proceed with a bid and that until an offer is made the board will continue seeking higher offers from other bidders.
The directors said if Messrs. Drabinsky and Gottlieb mail an offer to shareholders by Nov. 22, it will reimburse them a maximum of C$8.5 million for expenses related to a bid.
"We consider that his bid is an acceptable bid," said Sandra Kolber, spokeswoman for the independent directors' committee appointed last May to solicit and review bids for the company in the wake of a dispute between Mr. Drabinsky and Cineplex's major shareholder, MCA Inc.
MCA and Cineplex's other major shareholder, Montreal-based financier Charles Bronfman and his associates, have agreed to tender their holdings to an offer by Mr. Drabinsky unless a higher offer is made by another bidder.
MCA holds half of Cineplex's equity and 33% of its voting rights through restricted voting shares, while Bronfman interests hold about 24% of the company's equity.
Ms. Kolber said the committee had received other bids.
She declined to identify other bidders but said Mr. Drabinsky's offer "is all cash, and it's for all of the company."
Several Cineplex analysts have speculated that outside bids received by the committee were either disappointingly low or for only part of the company.
"All this has really established is that MCA and the Bronfmans have agreed on a price at which they can be bought out," said Jeffery Logsdon, an analyst with Crowell, Weedon in Los Angeles.
"If a bid materializes at that price, shareholders will have every reason to be glad, but the question of financing still remains."
Last April, Mr. Drabinsky and a group of financial backers planned to acquire up to 30.2% of Cineplex for C$17.50 a share from Bronfman associates.
Mr. Drabinsky, who would have had the right to vote those shares for two years, said the purchase, subsequently rejected by regulators, was aimed at consolidating his control of the company.
MCA strongly opposed the Drabinsky group's move.
The directors didn't indicate the source of financing for Mr. Drabinsky's new proposal, but said MCA and the Bronfman associates agreed in principle to buy for $57 million and then lease back to Cineplex its 18-screen theater complex in Universal City, Calif., if Mr. Drabinsky succeeds in an offer.
"This is being done at the suggestion of {Mr. Drabinsky} and to accommodate him, to facilitate his financing arrangements," Ms. Kolber said.
In addition, the directors said if a bid by Mr. Drabinsky is successful, Cineplex expects Rank Organisation PLC to acquire the 51% of Cineplex's Film House unit it doesn't own, and provide Mr. Drabinsky with additional loan financing.
Michael Gifford, Rank's chief executive, said the British theater chain's total involvement "wouldn't exceed $100 million" but declined to give a breakdown between the loan financing and the proposed Film House purchase.
Cineplex shareholders responded coolly to yesterday's announcement.
In trading on the New York Stock Exchange, Cineplex closed at $11, down 25 cents, with more than a million shares changing hands.
On the Toronto Stock Exchange, Cineplex closed at C$12.875, off 37.5 Canadian cents, well below the C$16.40 level.
"Where's the bid?" asked Pierre Panet-Raymond, an analyst and broker with Toronto securities dealer McDermid St. Lawrence Ltd.
Mr. Panet-Raymond said he doesn't think Messrs. Drabinsky and Gottlieb are "anywhere close" to arranging financing and that investors will need a solid offer before the stock begins to rise again.
Mr. Drabinsky couldn't be reached for comment.
Two West German chemical companies announced steps that apparently are designed to boost the chemical industry's standing among environmental groups and the general public.
Hoechst AG's Chairman Wolfgang Hilger said the company wants to have a substitute product to completely replace ozone-damaging chlorofluorocarbons by 1995.
In April, Hoechst, the largest producer of CFCs in West Germany, said it wanted to reduce production of the product by 50% by 1993.
Mr. Hilger said Hoechst will invest 50 million marks ($27.2 million) in a plant to make a substitute product it has developed that it says is unchlorinated.
The company hopes the new plant, likely to be built in Frankfurt, will be able to produce 10,000 tons a year.
This year, Hoechst will produce about 62,000 tons of CFCs in factories in Frankfurt, Spain and Brazil.
Of Hoechst's 40.9 billion marks in group sales in 1988, 200 million marks came from sales of CFCs.
Also, BASF AG, another large chemicals company, said it formed a separate division that will study the environmental impact of plastics and will investigate all possibilities of recycling plastics.
George L. Manzanec, 53 years old, senior vice president of Texas Eastern Corp., was elected a group vice president of this natural-gas-pipeline concern.
Mr. Manzanec, who succeeds retiring Richard C. Dixon, will be responsible for gas supply, regulatory affairs, and marketing and transportation and exchange for Panhandle Eastern Pipe Line Co., Trunkline Gas Co., Texas Eastern Transmission Corp. and Algonquin Gas Transmission Co.
All of the companies are units of Panhandle Eastern Corp., which acquired Texas Eastern Corp. earlier this year.
Adolph Coors Co. said its Coors Brewing Co. unit will test market a new line of bottled water in the West beginning early next year.
The move, which was expected, marks the first time since Prohibition that Coors has sold a non-alcoholic beverage, and marks the company's entry into a crowded, but fast-growing market that generated about $2.2 billion in sales last year.
Coors is hoping to become one of the first companies to distribute bottled water nationwide.
Perrier, sold by Perrier Group of America, a unit of Source Perrier S.A. of Paris, and Evian, sold by a U.S. unit BSN of France, are distributed to urban areas nationally, but are less available in rural communities.
Coors, with its large beer-distribution network, could penetrate more markets.
The company said the water will be called Coors Rocky Mountain Sparkling Water and will come from the same mountain spring as water used in Coors beer.
The company said it will sell the water plain and with lemon-lime and cherry flavors and will package it in 28-ounce bottles and 6.5 ounce bottles as part of six-packs.
The test markets, though not specified, will be in northern California, Arizona and Colorado, some of the hottest bottled-water markets.
Some of America's biggest trading partners gave a quick thumbs-down to a U.S. proposal to liberalize world trade and reduce farm-product subsidies.
In Geneva, where world trade talks are being held under the General Agreement on Tariffs and Trade, or GATT, the European Community called the U.S. proposal "a step backward."
And Japan's minister of agriculture, forestry and fisheries told a committee of Japan's parliament that Washington's proposal was impractical and that Tokyo would continue to heavily subsidize its rice farmers.
The U.S., in a far-reaching plan submitted to the Geneva meeting Tuesday, proposed curbing price support subsidies within 10 years and eliminating export subsidies within five years.
U.S. officials said the plan was flexible, and was intended as a pragmatic approach for gradually removing trade-distorting subsidies.
But the EC reacted defiantly, arguing that the proposal's main aim is to destroy the Common Agricultural Policy, the EC's $28 billion-a-year price support program.
"The American proposal is not an adequate basis for negotiation," the EC said in a statement.
EC officials say they are irked that the U.S. has set a specific timetable and is insisting on the "elimination" of export subsides, not just reduction.
EC Agriculture Commissioner Ray MacSharry said the U.S. plan "calls into question" the agreement reached by world negotiators last April in Geneva seeking "substantial progressive reductions in agricultural support and protection."
U.S. Deputy Trade Representative Jules Katz replied that the proposal was entirely consistent with the April accord.
He said he was surprised by the EC's reaction, calling it "vehement, even frenetic."
The U.S. proposal also was criticized by food-importing developing countries, who said that the U.S. made no special allowances for poor nations.
While many experts argue that food-importing nations would eventually become self-sufficient in a free-market system, the poorest nations are likely to need help in the meantime.
Ambassador Katz said the U.S. was open to discussing particular problems of developing countries.
The U.S. administration said its plan would allow considerable flexibility in determining how and when the free-trade goals would be achieved.
The U.S. argues that its plan would ease the transition to freer agriculture trade by converting certain non-tariff barriers into tariffs that, together with existing tariffs, then would be phased out over 10 years.
But the EC is strongly opposed to converting agricultural supports into tariffs.
The new U.S. package also says countries could temporarily raise tariffs on certain products if they experience an unusually heavy volume of imports.
It would establish procedures to prevent countries from using health and sanitation rules to impede trade arbitrarily.
Seeking to allay European concerns, U.S. Agriculture Secretary Clayton Yeutter said in Washington that the new U.S. plan wouldn't "put farmers out of business" but would encourage them to "grow what the markets desire instead of what the government wants."
The EC, with a population of 320 million, has 8.5 million farmers, while the U.S., with a population of about 245 million, has only two million farmers.
Japan's objections to the U.S. plan center around its desire to stay self-sufficient in rice, a staple food, even though foreign producers are far more efficient.
Bell Atlantic Corp. said it agreed definitively to acquire one of Control Data Corp.'s computer-maintenance businesses.
Terms of the accord weren't disclosed.
Control Data's third-party maintenance unit services products primarily made by Digital Equipment Corp. and International Business Machines Corp.
The unit has 6,000 customers and, according to one analyst, had 1988 revenue of about $85 million.
Under the agreement, which had been widely expected, Bell Atlantic would be buying Control Data's customer base and its approximately 100 U.S. maintenance facilities in about 33 cities.
However, Control Data would continue to provide maintenance services for customers of its Cyber product line.
The unit represents a small portion of Minneapolis-based Control Data's overall computer-servicing business, which last year posted sales of about $400 million.
Earlier this year, the company sold a similar unit in Europe for about $25 million.
Lawrence Perlman, Control Data's president and chief operating officer, said the maintenance business no longer fits into the company's "strategy to be a data solutions company."
Thomas Vassiliades, president of Bell Atlantic's customer services division, said the acquisition would give the company's Sorbus computer-maintenance unit added expertise in "the increasingly sophisticated workstation and high-end mainframe technologies.
Two recent decisions by federal courts cast judges in the odd role of telling authors how they should write history and biography.
These decisions deserve more attention than they have received from scholars, and from journalists as well.
Russell Miller's "Bare-Faced Messiah: The True Story of L. Ron Hubbard" is a biography of the founder of the Church of Scientology.
Mr. Hubbard, who died in 1986, bequeathed the copyrights on his writings to his church, which licensed them to New Era Publications, a Danish corporation.
In 1988 New Era sought a permanent injunction to restrain Henry Holt & Co. from publishing "Bare-Faced Messiah" on the ground that Mr. Miller's quotations from Mr. Hubbard infringed the copyrights.
The publisher argued in response that the "fair use" statute permits quotation "for purposes such as criticism, comment, news reporting, teaching, . . . scholarship, or research."
District Court Judge Pierre Leval denied the injunction on the ground that New Era had failed to make its claim within a reasonable time -- the doctrine lawyers call "laches."
As for the merits, Judge Leval said that Mr. Miller had written "a serious book of responsible historical criticism."
Verbatim quotation, the judge believed, was justified in order to prove points the author had asserted about Mr. Hubbard -- mendacity, bigotry, paranoia and other unlovely traits that could not be persuasively demonstrated without use of Mr. Hubbard's own words.
"The biographer/critic," Judge Leval wrote, "should not be required simply to express . . . conclusions without defending them by example.
" In such circumstances, free-speech interests outweighed the interests of the copyright owner.
But Judge Leval felt constrained by an earlier decision of the Second Circuit Court forbidding a biographer of J.D. Salinger to quote from Mr. Salinger's personal letters.
He distinguished the two cases: In Salinger, Judge Leval noted, the quotations were for the purpose of enlivening the biography rather than of proving points about the subject.
Still the Salinger decision created a strong presumption against fair use of unpublished materials.
Judge Leval reluctantly concluded that a few of Mr. Miller's quotations from Mr. Hubbard's unpublished writings, because they were not necessary to prove historical points, failed the fair-use test and therefore infringed copyright.
But the proper remedy, Judge Leval said, lay in a suit for damages, not in an injunction.
The case went on appeal to the Second Circuit.
In a decision in April of this year, Judge Roger Miner, joined by Judge Frank Altimari, agreed on denying the injunction and did not doubt that "Bare-Faced Messiah" was a serious work but rejected Judge Leval's argument that the public interest in scholarship could outweigh the sanctity of copyright.
"We conclude," the two judges wrote, "that laches is the sole bar to the issuance of an injunction."
Had the suit been filed in time, they said, "Bare-Faced Messiah" would have been suppressed.
This was too much for James Oakes, the court's chief judge.
In a powerful separate opinion, Judge Oakes further distinguished the Salinger case by pointing out that a living person, like Mr. Salinger, had privacy rights that did not apply to a dead man, like Mr. Hubbard.
"I thought that Salinger might by being taken in another factual context come back to haunt us.
This case realizes that concern."
Decisions by the Second Circuit itself, Judge Oakes continued, had recognized that public interest in the subject matter and the indispensability in particular cases of verbatim quotations are vital components of fair use.
And the injunction Judges Miner and Altimari would so readily have granted had New Era sued in time?
Suppression of the book, Judge Oakes observed, would operate as a prior restraint and thus involve the First Amendment.
Moreover, and here Judge Oakes went to the heart of the question, "Responsible biographers and historians constantly use primary sources, letters, diaries, and memoranda.
Indeed, it would be irresponsible to ignore such sources of information."
Now, scholars in fulfilling their responsibility do not claim the right to invade every collection of papers that bears upon their topics of investigation.
And of course they agree that people can impose restrictions on the use of their papers, whether in their own possession or as donated or sold to libraries.
But in the "Bare-Faced Messiah" case the author found most of his material in court records or via the Freedom of Information Act.
And when responsible scholars gain legitimate access to unpublished materials, copyright should not be permitted to deny them use of quotations that help to establish historical points.
Judges Oakes and Leval understand the requirements of historical scholarship.
Judges Miner and Altimari do not appear to have a clue.
Yet at the moment they are the judges who are making the law.
As matters stand, the Salinger ruling, torn from context and broadly construed, is controlling.
If an author quotes "more than minimal amounts" of unpublished copyrighted materials, as the Salinger decision had it, "he deserves to be enjoined."
The courts have not defined "minimal amounts," but publishers, I understand, take it to mean about 50 words.
The "Bare-Faced Messiah" decision strikes a blow against the whole historical enterprise.
A second decision, handed down in August by the Court of Appeals for the Ninth Circuit, is another blow against scholarship.
Janet Malcolm, a professional writer on psychiatric matters, wrote a series of articles for the New Yorker, later published in book form by Knopf under the title "In the Freud Archives."
The articles were largely based on interviews Ms. Malcolm had taped with Jeffrey Masson, a psychoanalyst who had served as projects director of the Freud Archives.
Mr. Masson then brought a libel suit against Ms. Malcolm, the New Yorker and Knopf.
As a public figure, Mr. Masson had to prove malice and, as proof of malice, Mr. Masson contended that defamatory quotations ascribed to him by Ms. Malcolm were in fact fabricated.
The quotes could not be found on the tapes, and the two judges who decided the case for Ms. Malcolm and her publishers conceded that, for the purpose of their decision, "we assume the quotations were deliberately altered."
For all historians and most journalists, this admission would have been sufficient to condemn the Malcolm articles.
But Judge Arthur Alarcon, joined by Judge Cynthia Holcomb Hall, took the astonishing position that it is perfectly OK to fabricate quotations so long as a judge finds that the fabrications do not alter substantive content or are rational interpretations of ambiguous remarks.
In his eloquent dissent, Judge Alex Kozinski observed that when a writer uses quotation marks in reporting what someone has said, the reader assumes that these are the speaker's precise words or at least his words purged of "uh" and "you know" and grammatical error.
While judges have an obligation under the First Amendment to safeguard freedom of the press, "the right to deliberately alter quotations is not, in my view, a concomitant of a free press."
Ms. Malcolm, for example, wrote that Mr. Masson described himself as "the greatest analyst who ever lived."
No such statement appears on the tapes.
The majority cited Mr. Masson's remark "It's me alone . . . against the rest of the analytic world" as warrant for the Malcolm fabrication.
But, as Judge Kozinski noted, the context shows that Mr. Masson's "me alone" remark referred not to his alleged pre-eminence in his profession but to the fact that his position on a particular issue was not shared by anyone else.
Ms. Malcolm had Mr. Masson describing himself as "an intellectual gigolo."
Again, no such statement appears on the tapes.
The majority decision contended that the phrase was a rational interpretation of Mr. Masson's description of himself as a "private asset but a public liability" to Anna Freud and that in any case it was not defamatory.
Judge Kozinski found the derivation entirely strained and writes that "for an academic to refer to himself as an intellectual gigolo is . . . a devastating admission of professional dishonesty."
These were only two of a series of fabrications that had, in Judge Kozinski's words, the cumulative effect of making Mr. Masson "appear more arrogant, less sensitive, shallower, more self-aggrandizing, and less in touch with reality than he appears from his own statements."
As Robert Coles wrote in a review of Ms. Malcolm's book, Mr. Masson emerges "as a grandiose egotist . . . and, in the end, a self-destructive fool.
But it is not Janet Malcolm who calls him such: his own words reveal this psychological profile."
We now know that the words were not always his own.
"There is one sacred rule of journalism," John Hersey has said.
"The writer must not invent."
Should the green light Judges Alarcon and Hall have given to the fabrication of quotations become standard practice, it will notably reduce the value of journalism for historians -- and for citizens.
As Judge Kozinski put it: "To invoke the right to deliberately distort what someone else has said is to assert the right to lie in print. . . .
Masson has lost his case, but the defendants, and the profession to which they belong, have lost far more."
The historical profession will survive these decisions.
Perhaps in time the Supreme Court will correct them.
But writing history is tough enough without judges gratuitously throwing obstacles in the scholar's path.
Mr. Schlesinger is Albert Schweitzer professor of the humanities at the City University of New York and a winner of Pulitzer Prizes in history and biography.
Hale Milgrim, 41 years old, senior vice president, marketing at Elecktra Entertainment Inc., was named president of Capitol Records Inc., a unit of this entertainment concern.
Mr. Milgrim succeeds David Berman, who resigned last month.
Legal controversies in America have a way of assuming a symbolic significance far exceeding what is involved in the particular case.
They speak volumes about the state of our society at a given moment.
It has always been so.
In the 1920s, a young schoolteacher, John T. Scopes, volunteered to be a guinea pig in a test case sponsored by the American Civil Liberties Union to challenge a ban on the teaching of evolution imposed by the Tennessee Legislature.
The result was a world-famous trial exposing profound cultural conflicts in American life between the "smart set," whose spokesman was H.L. Mencken, and the religious fundamentalists, whom Mencken derided as benighted primitives.
Few now recall the actual outcome: Scopes was convicted and fined $100, and his conviction was reversed on appeal because the fine was excessive under Tennessee law.
So it was with the Hiss case a generation later, when Alger Hiss became a lightning rod for the anxieties of the Cold War and conflicting attitudes toward the New Deal he had served.
His trials aroused public passions out of all proportion to the rather banal secrets he allegedly had passed to Soviet intelligence.
And so it seems to be with the case of Elizabeth Morgan, the Washington, D.C., plastic surgeon jailed in a child custody case for refusing to reveal the whereabouts of her daughter.
Dr. Morgan has just emerged from the D.C. jail after more than two years' confinement for contempt of court, a heroine to her many supporters.
To the rest of us, the case is a puzzle.
It is what lawyers call "fact intensive."
It presents no great issue of legal principle, no overriding question of family law or the law of contempt.
Instead, it turns on the disputed and elusive facts of "who did what to whom."
It is difficult, if not impossible, for anyone who has not pored over the thousands of pages of court pleadings and transcripts to have a worthwhile opinion on the underlying merits of the controversy.
Certainly I do not.
So we must look elsewhere for an explanation of the unusual power this case has exerted over the minds of many, not just in Washington but elsewhere in the country and even the world.
I suggest that three themes have come together in the strange case of Dr. Morgan.
The first is that it represents an intense battle in what James Thurber used to caricature as "the war between the sexes."
But although Thurber did so gently and lightheartedly, many of Dr. Morgan's supporters have taken Thurber's memorable title "The Male Animal" quite literally.
The vehemence of the emotions aroused by the case testifies to its symbolic importance in the war that Thurber accepted as an eternal part of the human condition.
A second theme is the undercurrent of social class and race in the public reaction to the Morgan case.
Dr. Morgan is a highly educated white professional who attended some of the "best" schools.
As members of the Black Caucus in Congress asked during the debate on the legislation that freed Dr. Morgan, does anyone seriously believe that if she were an uneducated, black, working-class woman, Congress would have rushed to pass a private relief bill freeing her?
Or that the president would have hurried to sign the bill "out of compassion for her plight"?
To ask those questions is to answer them.
Finally, the case of Dr. Morgan gave Congress an opportunity to act with unaccustomed decisiveness and to engage in one of its favorite pastimes -- bashing the District of Columbia government.
The local government is discredited in the eyes of many residents for a variety of reasons, and congressmen read the same newspapers and watch the same TV newscasts as other people in the area do.
Bashing the D.C. government is risk-free for members of Congress, who do not have to answer to their own constituents for it.
Congress is paralyzed from acting on such great issues of the day as the federal budget deficit.
Yet a bill tailored to the interests of a single individual passed Congress with almost unimaginable speed, before the judicial process had run its course, and, indeed, while the Morgan case was awaiting a ruling by the appellate court.
The Morgan case thus tells us much more about the current state of sex, class, race and politics in our society than it does about the facts of Dr. Morgan's particular situation.
It may stand as a metaphor for how wide and deep the divisions in that society continue to be however we try to deny their existence.
Mr. Rezneck is a lawyer in Washington, D.C.
The National Aeronautics and Space Administration said it awarded General Dynamics Corp. a $64 million contract to launch the Combined Release and Radiation Effects Satellite in June 1990.
CRRES is a joint NASA-Air Force satellite to study the effects of space radiation on micro-electronic components.
NASA said General Dynamics will launch CRRES using an Atlas 1 rocket.
Ronald J. Taylor, 48, was named chairman of this insurance firm's reinsurance brokerage group and its major unit, G.L. Hodson & Son Inc.
Robert G. Hodson, 65, retired as chairman but will remain a consultant.
Stephen A. Crane, 44, senior vice president and chief financial and planning officer of the parent, was named president and chief executive of the brokerage group and the unit, succeeding Mr. Taylor.
The appointments are effective Nov. 1.
Corroon said it will announce a successor to Mr. Crane at a later date.
An investment company said it offered to acquire Arby's Inc., the fast-food operator, for $205 million.
The proposal, however, was immediately rebuffed by Arby's parent, DWG Corp.
"Arby's isn't for sale," said Renee Mottram, senior vice president at DWG.
The new suitor, Stevric Equity Ventures Inc., of Mineola, N.Y., characterized its proposal as the "first truly independent offer which does not pit one interest group against another within the Arby's franchisee community."
In September, DWG, a Miami Beach, Fla., holding company controlled by financeer Victor Posner, rejected an offer from a group of Arby's franchisees to acquire Arby's for $200 million.
Since then, a second group of franchisees has banded together to try to wrestle control of the unit from Mr. Posner.
Arby's is the marketing, franchising and service company for the 2,100 restaurants in the chain.
Stevric's principals, Richard and Steven Buckley, said they led the acquisition group that acquired the Nathan's Famous Inc. restaurant chain and subsequently served as the top officers of the company.
Richard Buckley said Stevric's acquisition of Arby's "would allow seasoned franchisers and food-service operators, with no conflicts of interest, to stabilize franchisee relations and properly refocus the company's energies toward growth.
General Motors Corp.'s big defense and automotive electronics unit, GM Hughes Electronics, said net income fell 22% in the third quarter, reflecting declining military spending and slumping GM vehicle production.
Meanwhile, net at GM's finance arm, General Motors Acceptance Corp., fell 3.1%.
By contrast, Electronic Data Systems Corp., GM's data processing subsidiary, boosted net 16%.
GM closed down $1.875 at $44.875 in New York Stock Exchange trading yesterday.
Earnings for GM common stock, reflecting the performance of GM's core automotive operations, will be disclosed this morning.
GM Class H, which represents a dividend interest in Hughes earnings, closed at $29, up 25 cents in Big Board composite trading.
GM Class E, which represents a dividend interest in EDS profit, fell 75 cents to $52.25 on the Big Board.
The earnings drop at GM Hughes Electronics is a sign of tough times at both the defense operations of Hughes Aircraft Co. and GM's North American automotive operations, which are a primary customer for the Delco Electronics Corp. side of the GM Hughes unit.
Profit at the unit fell to $110.6 million, or 37 cents a share, from $142.4 million, or 45 cents a share, largely because of a $24 million one-time charge associated with Hughes's previously announced plan to reduce employment by at least 6,000 people by year end.
Even excluding the charge, however, net fell 5%.
In addition, GM's North American vehicle production fell 8.4% from a year ago, which hurt Delco Electronic's earnings, a company spokesman said.
That decline was reflected in revenue for the GM Hughes unit, which edged down to $2.58 billion from $2.63 billion.
In the nine months, GM Hughes net fell 6.6% to $486.6 million, or $1.48 a share, from $521 million, or $1.58 a share.
Revenue rose 3.5% to $8.47 billion from $8.18 billion.
At GMAC, net dropped 3.1% to $234.5 million from $241.9 million.
The finance unit attributed the decline to higher borrowing costs compared with a year earlier.
GMAC said its automotive financing and leasing business rose 35% in the U.S., largely because of dealer and customer incentives used to boost sales.
GMAC profits are combined with earnings from the rest of GM's operations and attributed to the company's traditional common stock.
In the first nine months, GMAC's earnings fell 8% to $859.5 million from $930.2 million.
At EDS, third-quarter profit jumped 16% to a record $110.9 million, or 93 cents a share, from $95.9 million, or 79 cents a share.
Revenue rose 12% to $1.37 billion from $1.22 billion.
In the nine months, EDS earned $315.8 million, or $2.62 a share, up 13% from $280.7 million, or $2.30 a share.
Revenue rose 14% to $4.03 billion from $3.54 billion.
Revenue from non-GM accounts was 45% of EDS's total business in the latest nine months, compared with 40% a year earlier.
The company has said it wants to boost non-GM revenue to at least 50% of its total business by the end of 1990.
William C. Ballard Jr., 48 years old, was elected a director of this distilled beverages concern, expanding the board to 11 members.
Alvin W. Trivelpiece, director of Oak Ridge National Laboratory, Oak Ridge, Tenn., was elected a director of this optical-products concern.
Mr. Trivelpiece, 58 years old, succeeds William Bolger, who died in August.
In the bidding war for Public Service Co. of New Hampshire, United Illuminating Co. raised its proposed offer to one it valued at $2.29 billion from $2.19 billion, apparently topping all other bidders.
The bids remain subject to evaluation by the federal bankruptcy court supervising PS of New Hampshire's reorganization.
They are also indirectly subject to approval by the state of New Hampshire, where residents fear soaring rates to pay for the cost of reorganization.
Each of the four parties bidding for PS of New Hampshire proposes a complex financial package to satisfy creditors and shareholders and also proposes a formula to limit rate increases to satisfy the state.
The new round of bidding would seem to complicate the decision making for Judge James Yacos, the bankruptcy judge overseeing the case, because the company's stockholders, unsecured creditors and regulators each are currently backing different plans.
In addition, some of the proposals are so close, that non-financial issues such as timing may play a more important role.
The unsecured creditors agreed in principle to support New Haven, Conn.-based United Illuminating's new bid.
They previously had backed an internal reorganization plan proposed by PS of New Hampshire.
All of the bidders contemplate full payment including interest to secured creditors.
United Illuminating's plan, however, offers more for unsecured creditors.
Geoffrey Kalmus, counsel to the official creditors committee, said that under the United Illuminating plan, unsecured creditors would be paid in full credits and interest of about $855 million, accrued before PS of New Hampshire's Jan. 1988 filing for bankruptcy court protection.
In addition, they would receive some $200 million in payments for interest since then.
Mr. Kalmus said that by next July they would have accrued unpaid interest equal to $350 million.
Other plans generally wouldn't pay unsecured creditors' interest accrued since the filing.
Under United Illuminating's plan, a new holding company would be formed to own the two companies.
It would be 72%-owned by United Illuminating holders and 28%-owned by current holders of PS of New Hampshire preferred and common stock.
PS of New Hampshire preferred holders also would get certain debentures and preferred stock.
United Illuminating said the preferred holders total package would equal about 60% of their claims.
Common shareholders would end up owning about 6.4% of the combined company.
As previously reported, Northeast Utilities, Hartford, Conn., Monday filed a bid it valued at $2.25 billion.
That offer was endorsed by the shareholders committee.
The other bidders, New England Electric System, Westboro, Mass., and PS of New Hampshire, didn't change the value of their bids, although PS of New Hampshire changed its rate proposal.
New England Electric values its offer at $2 billion and PS of New Hampshire values its reorganization plan at $2.2 billion.
The bankruptcy judge has ruled that federal bankruptcy laws could be used to circumvent state regulation.
However, creditors and bidders alike concede that the state plays a major role because it could significantly delay final settlement of a plan it didn't like.
The state has endorsed the New England Electric plan, which promises to limit rate increases to 4.8% annually for seven years.
Northeast Utilities' plan proposes 5.5% annual increases.
PS of New Hampshire amended its plan to call for two years of 5.5% rate increases followed by five years of 4.5% increases.
Fuel cost adjustments could change the effective rate increases, however.
Previously it had proposed seven years of 5.5% increases.
United Illuminating also amended its rate plan.
The new offer assumes just five years of 5.5% rate increases, to be followed by state-approved increases under the usual hearing procedure.
Previously United Illuminating had also called for seven years of 5.5% increases.
The bids and rate proposals generally assume the Seabrook nuclear power plant, which is completed, will go into operation.
Most of the plans have reduced bids in case the plant fails to get a license from the Nuclear Regulatory Commission.
In New York Stock Exchange trading, PS of New Hampshire's 17 1/2 debenture due 2004 closed yesterday at $82.50, up $2.
The utility's stock closed at $4 a share, up 37.5 cents, in composite trading on the Big Board.
In a separate development, PS of New Hampshire gave 60 managers severance agreements that would pay one to three years' salary if their jobs were changed or they were dismissed in the wake of a takeover.
It said the maximum cost of the plan would be $9.7 million.
C. Hyde Tucker will become president and chief executive officer of Bell Atlantic International Inc., a unit of this telecommunications concern, effective Jan. 1.
Mr. Tucker, 56 years old, is currently vice president and chief operating officer of Bell Atlantic's C&P Telephone unit.
Mr. Tucker will succeed Salvatore J. Barbera, 64, who will hold the newly created position of chairman of the international unit until his retirement April 1.
Richard Breeden hadn't noticed that his new desk had just four telephone lines and one phone.
It was, after all, only his second full day as chairman of the Securities and Exchange Commission.
But the lack of lines became painfully apparent.
As the stock market lurched into a 190-point free fall on Oct. 13, Mr. Breeden found himself scurrying around the sixth floor of the SEC -- from his desk, where the New York Stock Exchange was on an open line, to his assistant's office, where the Commodity Futures Trading Commission was connected, to a third room, where a computer monitored market moves.
With other anxious calls pouring in, he recalls, "I'd either have to disconnect the New York Stock Exchange or go out to the secretary's desk."
It won't happen again.
Now there are more lines connected to the chairman's office, and the market-monitoring computer has been moved next to his desk.
It's all part of a new "command center."
The changes in the office layout illustrate Mr. Breeden's stance as the nation's top securities regulator.
Like his predecessor, David Ruder, he was faced with a crisis in the stock markets soon after coming into office.
But unlike Mr. Ruder, who during the 1987 crash damaged himself by saying rather offhandedly that the markets might be closed, Mr. Breeden is turning the market drop to his own advantage, using it to further his agenda for the SEC.
In an interview and in congressional testimony, he repeatedly points to the recent 190-point plunge in the Dow Jones Industrial Average -- the second-largest ever -- as evidence of the need for Congress to give the SEC the ability to better monitor leveraged buy-out loan activity by brokerage firms and to track big trades in the market.
A veteran of another financial crisis, the savings-and-loan bailout, Mr. Breeden wants to have the SEC regulate securities issued by banks and S&Ls.
More broadly, he wants to "modernize" regulation by eliminating barriers between commercial and investment banking and by helping U.S. financial firms compete in the global market.
He believes the tax code encourages the use of debt instead of stock and may fuel leveraged buy-outs, an area the SEC doesn't regulate directly but one where it wields influence both on Wall Street and in Congress.
Also unlike Mr. Ruder, Mr. Breeden appears to be in a position to get somewhere with his agenda.
As a former White House aide who worked closely with Congress, he is savvy in the ways of Washington.
What's more, the coming months likely will offer him the opportunity to obtain his own majority on the five-member commission, enabling him to avoid the dissension that frustrated his predecessor.
But Mr. Breeden, a 39-year-old securities lawyer, has skirted some of the heftier issues facing the financial markets.
For instance, he hasn't stated a clear position on high-risk, high-yield junk bonds, an area of growing concern as turmoil in the junk market spills over into stocks.
He may be waiting to see the results of several pending SEC studies of junk market liquidity and disclosure rules.
He also has kept a close wrap on the names of people under consideration for the crucial post of enforcement director at the commission, a job vacant since the summer.
Mr. Breeden's selection will be scrutinized as an important signal about the strength of his commitment to continuing the SEC's high-profile pursuit of insider trading and market manipulation on Wall Street.
Congress seems likely to let the new chairman have his way for a while.
Members of the Senate Banking Committee know Mr. Breeden from working on the thrift-bailout bill, and the relationship generally remains warm.
Indeed, during Mr. Breeden's confirmation hearing last month, senators asked him to introduce his children three separate times -- more often than they asked about his qualifications for the job.
These days, Mr. Breeden is winning praise in Washington and on Wall Street for his behind-the-scenes role in monitoring the Friday-the-13th market plunge and the following Monday's harrowing morning session.
As a regulator charged with restoring investor confidence, Mr. Breeden avoided making market-jarring comments and worked to gather information critical to Wall Street and to other government agencies.
Not everyone has jumped on the Breeden bandwagon, however.
Some in Washington contend that it's too soon to tell whether Mr. Breeden will help or hinder the SEC.
"I don't think this was a real test," says one congressional aide.
"It was a fairly stressful weekend, but my sense is if you hadn't had Richard Breeden there, it wouldn't have made much of a difference."
For some at the SEC, an agency that covets its independence, Mr. Breeden may be too much of a Washington insider.
They note that he has adorned his office with five photos of George Bush, one of them featuring the First Dog, Millie.
They worry that Mr. Breeden also will roll over when told to do so by the White House.
But Mr. Breeden already has shown an eagerness to run the SEC his way.
During the Monday market rebound, a New York exchange spokesman told Cable News Network viewers that the industrial average had turned down 70 points.
Stunned, Mr. Breeden turned to his market-monitoring computer, which by then was next to his desk.
It showed the DJIA up 30 points.
SEC staffers soon determined that a widely watched stock-market service, Quotron, had miscalculated the industrial average.
Mr. Breeden instructed SEC staffers to inform the network that it was airing the wrong number.
"It was the plunge that didn't happen," he says.
Mr. Breeden also is trying to use a far more catastrophic event -- the California earthquake -- to move another rule change past Congress.
That disaster closed the Pacific Stock Exchange's stock options-trading operation, forcing those options to be switched to other exchanges temporarily.
Though obscure to most investors, the question of whether to list options on more than one exchange has aroused much interest in Congress, mainly because regional exchanges fear the change could bankrupt them.
Congressmen raised the issue yesterday at a hearing.
Mr. Breeden, not missing a chance to press his agenda, cited the earthquake.
That event, he contended, simply shows the "vulnerability" of having listings on only one exchange.
In a corner of the cavernous, new Nippon Convention Center sits Mazda Motor Corp.'s advanced-technology display.
The highlight: a "fragrance control system."
With the touch of a button, drivers can choose from lavender, jasmine, mint or perfume scents, all blown in through the car's air-conditioning system.
The soft, wafting aromas will "improve ride comfort," the display attests, and a proud employee says Mazda hopes to move the system out of the lab and into its cars in a year or two.
Welcome to the 28th Tokyo Motor Show.
Here you can find Mitsubishi Motors Corp. displaying a "live fish transporter," a truck akin to an aquarium on wheels, and Nissan Motor Co. with its "keyless" Boga, whose doors unlock upon recognizing the owner's fingerprints.
Suzuki Motor Co.'s Escudome sport vehicle features a pop-out rear tent and invites drivers to go "back to the nature."
But this biennial event, the world's largest display of cars and trucks, has its serious side, including the first major exhibitions of future engines and vehicle-suspension systems.
It's also the prime showcase for a country whose world dominance in the industry is increasingly acknowledged, and therein lies the draw.
Even the biggest auto shows in the U.S. are largely regional affairs, but the Tokyo show is international.
Virtually every automotive analyst in New York showed up.
Detroit-to-Tokyo flights were booked solid this week as Motor City executives, including Ford Motor Co. Chairman Donald E. Petersen and Chrysler Corp. Vice Chairman Gerald Greenwald, flocked to see the future.
Even the Soviet Union came, for the first time in 24 years, to show off its Lada Niva sedan and its futuristic dark-blue "Kompakt" model.
Here's a firsthand look at what the Japanese hosts sported, and what the foreign visitors saw.
New Technology
The hottest displays were items that insulate passengers from bumps, potholes and other rigors of the road.
These "active suspension systems" electronically sense road conditions and adjust a car's ride.
Existing suspension systems try to absorb bounces, but active suspension provides power to counter the jolts.
Nissan, in a 34-page tract, modestly compares its "hydraulic active suspension" to a cheetah, and equates the various parts to the animal's heart, brain, nerves and blood vessels.
Toyota Motor Corp. grandly touted its system in a car that splits in half to reveal the suspension's inner workings.
Nissan says it will introduce its first system next month on the Infiniti Q45 luxury sedan, and Toyota's Celica coupe will go on sale with the suspension device next spring.
But drivers in the U.S. must wait: The Japanese, for now, are keeping active suspension for domestic use only.
And Detroit's Big Three auto makers say their systems are still under development.
In the engine department, several companies displayed experimental models that within a decade could provide power equal to today's engines and yet take up only half the space, allowing for shorter hoods.
In the so-called two-stroke engines, which are expected to get sharply higher gas mileage, each piston goes up and down only once to provide power.
By contrast, the pistons in conventional four-stroke engines must move up and down twice in each power cycle.
The two-stroke engine displays by Toyota and Fuji Heavy Industries, the maker of Subaru cars, drew plenty of interest from U.S. auto executives, who are rushing to develop two-stroke engines.
Honda Motor Co. shows a more conventional five-cylinder engine in the new Accord Inspire model, which made its debut just this month -- in Japan only.
Honda says the five-cylinder engine provides a compromise between the fuel-economy of a four-cylinder, and the power of a V-6.
It is rumored to be bound for a new model in the luxury Acura line in the U.S., but Honda officials wouldn't comment.
Odd Cars, Funny Names
There's plenty of whimsy here, but it isn't always clear whether it's intentional.
The show's symbol is a woman riding on a snail, not your usual metaphor for speed and agility.
But the sponsors have an explanation: "Through the character associated with a snail," they say, "important values such as harmony with nature and aspirations for the future are sought."
Japanese auto makers are known for coming up with funny names, but this year the practice seems to have reached a new high -- or low.
Honda has a tiny motorcycle called the Monkey, and a slightly larger cousin, the Gorilla.
Mitsubishi has a futuristic delivery truck called the Guppy.
Mazda has the Bongo truck and, under its Autozam nameplate, a "microvan" called the Scrum.
Its buglike Carol minicar is "designed with softness, gentleness and warmheartedness."
But the court jester appears to be Japan's smallest car maker, Daihatsu Motor Co.
One of its futuristic concepts is the bubblelike Sneaker, which seats just one person in front and could hold a small child and bag of groceries in the rear.
Daihatsu also has the Fellow 90, the Leeza Spider and the Hijet Dumbo.
The jokes aren't just on the Japanese, though.
Regie Nationale des Usines Renault, the French auto maker, has a concept car called the Megane.
The name is supposed to connote feminine grandeur, but in Japanese it means "eyeglasses."
Foreign Presence
Foreign auto makers are taking the Tokyo Motor Show more seriously than ever.
AB Volvo invites passers-by to play "the role of the test dummy" by hopping in a car that simulates a crash to show just how its seat-belt tightener works.
Hyundai Motor Co. of South Korea has its first-ever exhibit in Tokyo.
General Motors Corp. is sponsoring its first independent display in 10 years, and it includes a boxy Buick station wagon with wood-grain side panels.
Ford and Chrysler also have exhibits, although theirs are tucked in a separate room with the less-popular automotive parts section.
"We've got to get out of the Detroit mentality and be part of the world mentality," declares Charles M. Jordan, GM's vice president for design, in explaining his pilgrimage to the Tokyo Show.
Even so, traditional American cockiness isn't terribly endangered.
Ford officials, for example, crowed about their first-ever Tokyo Grand Prix racing victory.
True, Ford was declared the winner Sunday, but only after the Honda driver who crossed the finish line first was disqualified because it hit another car and skid momentarily out of bounds.
Mr. Jordan of GM, meanwhile, still criticizes Japanese styling.
"It's hard for the Japanese," he says, "to get a feeling in a car, to get a passion in a car, to get emotion in a car.
Regarding your Sept. 28 Politics & Policy column on the party differences over cutting capital gains or expanding IRAs: Why not compromise now and save the public from the coming infantile congressional political rhetoric that seems to go hand in hand with the process?
The Republicans maintain that a 30% capital-gains exclusion will raise revenue in the short term and spur economic investment, while the Democrats maintain that an increase in the top income-tax rate and expanded IRAs will raise revenue and spur savings.
This is a classic example of the old saying, "The whole is greater than the sum of its parts."
It's ridiculous for a family with taxable income of $50,000 to pay the same 28% incremental tax rate as a family with taxable income of $250,000.
The 33% bracket should apply to all income over the applicable level, not just the 5% rate adjustment amount.
It's equally ridiculous not to provide a capital investment or retirement-savings tax incentive.
Jeffrey T. Schmidlin
PWA Corp. said it plans to sell by spring 1992 all 15 passenger planes it acquired earlier this year in its 248 million Canadian dollar (US$211.6 million) purchase of Wardair Inc.
PWA, which recently merged Wardair's operations with those of PWA-owned Canadian Airlines International Ltd., Canada's second-biggest airline, said the proposed sale is part of a revised five-year plan aimed at streamlining its fleet and shedding debt.
PWA wouldn't estimate the value of Wardair's aircraft, which include 12 Airbus A310-300s and three Boeing 747-100s.
But James Ireland, a Miami-based technical analyst with Avmark Inc., an aircraft evaluation firm, estimated the total "half-life" value of the 15 planes at about $650 million or more.
Mr. Ireland said 11 DC10-30 aircraft that PWA also said it plans to sell, beginning in 1992, have a current half-life value of about $34 million each, or a total $374 million, raising aggregate potential proceeds from the aircraft sale to about $1.02 billion.
Mr. Ireland said current demand for used aircraft is strong, partly because surging orders for new aircraft have lengthened waiting lists.
He predicted that PWA would have little difficulty attracting prospective buyers.
Under its revised fleet plan, PWA said it will also increase its existing fleet of eight Boeing 767-300ER aircraft to 18 by 1994, and add four more Boeing 747-400s by 1994 to the two units that it previously planned to add by next year.
PWA said two of the Boeing 767-300ER aircraft scheduled for delivery in 1990 would be leased out for two to five years.
PWA didn't disclose the expected net cost of the fleet overhaul, but a Toronto-based analyst estimated it at about $450 million (US), excluding replacement costs for the 11 DC10-30 aircraft that PWA plans to sell, and purchase costs for as many as 17 Airbus 320-200 aircraft that PWA previously ordered.
"I don't see this as a debt reduction exercise.
It's focused on streamlining" PWA's fleet in a bid to cut training and aircraft servicing costs, the analyst said.
PWA's long-term debt and capital lease obligations rose to C$1.24 billion at the end of the second quarter, nearly double the year-earlier figure, reflecting debt absorbed under the Wardair purchase.
PWA said it also expects to announce by Tuesday whether it will take delivery of all 17 Airbus 320-200 aircraft it previously ordered.
The first five leased units were to be delivered in 1991.
This British banking and financial-services group's investment-banking arm, Barclays de Zoete Wedd Group, announced the following appointments at its merchant-banking subsidiary Barclays de Zoete Wedd Ltd.
John Padovan, 51 years old, was named a deputy chairman.
Mr. Padovan is currently a director at Barclays de Zoete Wedd Ltd.
Graham Pimlott, 40, was named to the new post of chief executive officer of the merchant-banking corporate-finance division.
Callum McCarthy, 45, was named to the new post of deputy head of the corporate-finance division and a managing director.
Mr. Pimlott and Mr. McCarthy join Barclay's from Kleinwort Benson Ltd. where they served as directors.
The recent bids for United and American Airlines have led Congress to move with supersonic speed to protect incumbent airline managements.
The House is scheduled to vote today on an anti-airline-takeover bill that would block, for up to 50 days, any bid for 15% or more of a U.S. airline, even a straight cash purchase.
Transportation Secretary Sam Skinner, who earlier fueled the anti-takeover fires with his quasi-xenophobic attacks on foreign investment in U.S. carriers, now says the bill would further disturb the jittery capital markets.
Texas Rep. Steve Bartlett, who has 40,000 American Airlines workers in his district, says the bill is "good politics, but bad law."
It is ironic that at a time when America's partial airline deregulation is being emulated by governments from New Zealand to Ethiopia, so many in Congress favor an incumbent-protection program for airlines that would be more appropriate for the Soviet airline, Aeroflot.
Federal Reserve Chairman Alan Greenspan told Congress that the Fed can wipe out inflation without causing a recession, but he said doing so will inflict some short-term pain and will require reducing the federal deficit sharply.
Mr. Greenspan said he and other Fed governors endorse a bill by Rep. Stephen Neal (D., N.C.) that would require the Fed to pursue policies aimed at eliminating inflation within five years.
"Such a deadline is attainable, but it would have costs," Mr. Greenspan told Rep. Neal's monetary policy subcommittee.
The Fed chief opposed a bill-introduced by Reps. Lee Hamilton (D., Ind.) and Byron Dorgan (D., N.D.) -- that, among other things, would require the Fed to disclose all monetary policy moves immediately and increase outside scrutiny of the Fed.
In responding to questions, Mr. Greenspan played down reports of tension between the Fed and the Treasury over exchange-rate policy.
"What seem to be interpreted as great conflicts are relatively minor issues of tactics," he said.
He didn't elaborate.
But the Fed isn't enthusiastic about Treasury efforts to bring down the value of the dollar through intervention in foreign-exchange markets, and the Treasury is frustrated at the Fed's reluctance to cut interest rates to pull down the dollar's value.
Mr. Greenspan said the inflation rate, currently about 4 1/2%, "could be brought down to levels which are close to zero without putting the economy into a recession, but I do suspect that there might be some modest loss of economic output."
In other words, economic growth would be lower and unemployment would be higher for a few years.
But Mr. Greenspan, who has repeatedly said the Fed's goal is to reduce inflation, added that "whatever losses are incurred in the pursuing of price stability would surely be more than made up in increased output thereafter."
He warned that Fed efforts to conquer inflation would fail -- and could produce "a major financial crunch" -- unless they are accompanied by a significant reduction in the federal deficit, which causes the government to borrow heavily.
Rep. Neal's bill originally called on the Fed to reduce the inflation rate by one percentage point a year for five years and to maintain a zero inflation rate thereafter.
He altered the wording to win Mr. Greenspan's endorsement.
Even so, his bill is given little chance of passage.
Reps. Hamilton and Dorgan also have altered their bill, dropping a proposal to add the Treasury secretary to the 12-member Fed committee that makes monetary policy.
Instead, the bill simply calls for twice-a-year meetings between the committee and top administration officials.
Even that met with Mr. Greenspan's disapproval because it might subject the Fed "to a more intensely political perspective" and "could risk bending monetary policy away from long-term strategic goals."
While each of the Hamilton-Dorgan proposals represents only a small step, together they would erode the Fed's independence, Mr. Greenspan said.
Mr. Greenspan also said that although he favors cutting capital-gains taxes as sound economic policy, he would oppose such a move if it would undo the political compromise embodied in the Tax Reform Act of 1986 and result in higher marginal income tax rates.
Sears, Roebuck & Co. signed a contract with Bob Vila, the former host of the popular public television program "This Old House," to star in a half-hour home improvement show sponsored by the giant retailer.
The do-it-yourself show, slated to start airing by June 1990, marks Sears's entry into the burgeoning market of home repair television programs and could bolster sales of its home improvement products.
In recent months, sales of home improvement items have sagged, along with sales of other big ticket durable goods.
The show also signals Mr. Vila's return as a television celebrity.
Earlier this year, public television station WGBH in Boston fired Mr. Vila after a sponsor protested some of his numerous commercial endorsements.
With Mr. Vila as host, "This Old House" became one of the Public Broadcasting Service's top 10 programs, airing weekly on about 300 of the network's stations and seen by an average of 12 million viewers.
But Home Depot Inc., an Atlanta-based home center chain, objected when Mr. Vila started doing commercial endorsements for Rickel Home Centers, a New Jersey building supply company that competes with Home Depot in some markets.
"I'm ecstatic about the change," said Mr. Vila, whose new syndicated program is called "Home Again with Bob Vila."
In an interview, Mr. Vila criticized his old show, which is continuing with a new host.
"Public TV is in fantasy land," he said.
"Last season, we did a story that involved spending $700,000 in converting a two-family house into a bed and breakfast."
In the new show, he said, "we're going to spend $60,000 building a start-up house" for a young couple.
While Sears wouldn't comment on the brouhaha over Mr. Vila's commercial endorsements, it appears to be building a fence around Mr. Vila's affections.
His contract makes him "exclusive" spokesman for Sears's home improvement marketing campaigns.
Ogilvy & Mather in Chicago, a unit of WPP Group PLC, will handle the advertising account and syndication.
The only other endorsement permitted by the contract involves a series of Time-Life home improvement and repair books.
His other agreements to promote products have expired.
Little matter for Mr. Vila, who complains that "public TV never paid me more than $40,000 a year."
He said his compensation under the Sears contract is "a multimillion dollar deal.
Eugene A. Miller, 52 years old, was elected a director of this electric utility company, filling a vacancy.
He is president and chief executive officer of Comerica Inc. in Detroit.
The White House has decided to push for changes in pesticide law that are designed to speed the removal of harmful chemicals from the nation's food supply.
The proposed changes, which are scheduled to be announced today, would apply to pesticides and other substances found on fresh and processed foods, according to federal officials.
Environmental groups have been calling for faster action on dangerous pesticides and may welcome part of the proposal.
But they are already objecting to, among other things, a plan to give more weight to cost-benefit considerations in evaluating pesticides.
"It's a tremendous disappointment," said Janet Hathaway, an attorney with the Natural Resources Defense Council.
"Allowing the EPA to condone continued use of a chemical whenever the benefits outweigh the risks is absolutely anathema to the environmental community."
The Bush administration plans to announce a series of principles and to work with congressional leaders in writing specific legislative proposals that embody them.
The principles would give the Environmental Protection Agency increased authority and flexibility in regulating pesticides, with the aim of enabling the agency to move more quickly.
There already are proposals pending in Congress to overhaul pesticide law.
Moves to accelerate the removal of dangerous pesticides gained new impetus during this year's Alar scare, when the EPA was harshly criticized for failing to yank the possible carcinogen, a growth regulator used to make apples redder and crunchier.
The agency has since acted to remove Alar from the nation's grocery shelves by May 31, 1991, and the apple industry has said that growers already have stopped using the chemical.
In addition, the principles attempt to eliminate the so-called Delaney Paradox.
Under the Delaney clause, which applies to processed food, a chemical is banned if it causes cancer in laboratory animals.
Under other laws applying to pesticide use, however, that same chemical could be allowed to be used on fresh food if it fell within the EPA's tolerance level.
Among other changes, the White House wants to:
-- Give the EPA more flexibility to declare a pesticide an imminent hazard and pull it from the marketplace.
-- Speed up the process for removing a pesticide that isn't an imminent hazard.
-- Bar states from setting more stringent tolerance levels for a pesticide once the federal government has set a standard.
-- Give the EPA added discretion to set "negligible risk" levels for pesticide residues in processed food.
Chemicals that exceed these risk levels would be barred, but those that fall below these levels would be allowed.
-- Allow the EPA to permit the continued use of pesticides that exceed its negligible risk standard if the benefits of doing so outweigh the cost.
Financial markets took a midweek break from their recent wild gyrations with stock prices falling modestly, bond prices posting tiny gains and the dollar almost unchanged.
The Dow Jones Industrial Average lost 5.94 points to 2653.28 in moderate trading.
Long-term Treasury bonds rose slightly despite the arrival on the market of $4.52 billion in 30-year bonds offered by the Resolution Funding Corp. as part of the government's bailout of the savings and loan industry.
The dollar was barely changed against the West German mark and up marginally against the Japanese yen.
Yesterday's sluggish action was in marked contrast to the rearing and plunging of stock prices Tuesday after the proposed buy-out of UAL Corp. once again collapsed.
Traders said the stock market's lurching moves have prompted many investors to head for the sidelines until it regains some semblance of stability.
Although bond prices weren't as volatile on Tuesday trading as stock prices, traders nevertheless said action also was much slower yesterday in the Treasury market.
Bond investors paid close attention to comments by Federal Reserve Chairman Alan Greenspan, who was testifying before a congressional hearing, but weren't able to extract many clues about the future course of the Fed's monetary policy.
Many analysts are expecting the Fed to lower interest rates at least once more before the end of the year.
Investors now are awaiting today's release of the preliminary estimate of third-quarter gross national product.
Economists predict the report will show economic growth of about 2.5% in the third quarter, which would have little effect on financial markets.
But an unexpected deviation either way could roil bond and currency markets.
In major market activity:
Stock prices slipped lower in moderate trading.
Volume on the New York Stock Exchange totaled 155.7 million shares.
But advancing issues on the Big Board were ahead of decliners 784 to 700.
Bond prices inched higher.
The Treasury's benchmark 30-year issue rose less than an eighth of a point, or less than $1.25 for each $1,000 of face amount.
The yield on the issue stood at 7.88%.
The dollar was virtually unchanged.
In late New York trading the U.S. currency was quoted at 1.8353 marks and 141.52 yen, compared with 1.8355 marks and 141.45 yen Tuesday.
A few years ago, I was on a panel of journalists that discussed the "image" of intercollegiate athletics for an audience of campus information directors and others.
We scribblers quickly concurred that not only was the bad rep of big-time college sports richly earned, but also that it could be corrected.
Competition could be maintained -- and stadiums probably would remain full -- if schedules were reduced and the games returned to the students, we said.
Comments from the audience reflected widespread, if wistful, agreement with those conclusions.
As the session broke up, I was approached by a man who identified himself as the alumni director of a Big Ten university.
"I'd love to see sports cut back, and so would a lot of my counterparts at other schools, but everybody's afraid to make the first move," he confided.
"It's like the U.S. and the Russians: Nobody wants to disarm first."
And so our institutions of higher learning lurch from scandal to scandal on gridiron and basketball court, while the casualties mount.
Three new books make the point that one large price of the glittery college-sports show can be the integrity of the schools that stage it.
They are: "A Payroll to Meet: A Story of Greed, Corruption and Football at SMU" (Macmillan, 221 pages, $18.95) by David Whitford; "Big Red Confidential: Inside Nebraska Football" (Contemporary, 231 pages, $17.95) by Armen Keteyian; and "Never Too Young to Die: The Death of Len Bias" (Pantheon, 252 pages, $18.95) by Lewis Cole.
The pick of the group is "Payroll"; it should be required reading for every college president.
It chronicles how, over a period of a dozen years, Southern Methodist University bought its way to football respectability in the Southwest Conference, only to find itself trapped and strangled by the athlete-payoff system it created.
The school was the first, in 1987, to receive the NCAA's "death penalty" -- two years without football -- for repeated rules violations.
Given current headlines about the University of Florida, it may not be the last.
The man who brought the bribe to the Dallas school was Ron Meyer, a flashy sort who came in 1975 to rescue a woebegone program, Mr. Whitford writes.
Mr. Meyer's personal style was illustrated by his pinning a $100 bill to a high-school bulletin board on which other coaches tacked their cards.
One recruiter working with Mr. Meyer was so generous with $10 and $20 bills that prospects sang "Here Comes Santa Claus" when he approached.
Paying players at SMU was no casual operation.
It involved the athletics director, two different football coaching staffs, and school trustees and governors -- just about everybody, it seemed, but Donald Shields, the university's president.
There's a memorable passage in which Mr. Shields, having finally learned of the practice, expresses his outrage to Bill Clements, then a university governor (and now the governor of Texas!) and oil man Edwin Cox, chairman of the board of trustees.
"You stay out of it," author Whitford quotes Mr. Clements as saying.
"Go run the university."
Which was about what Mr. Shields did, and quietly, until he resigned a few years later, pleading ill health, when the stuff hit the fan.
Mr. Whitford drew on voluminous news media coverage of the SMU scandal, and on a university internal investigation.
Mr. Keteyian had to do most of his own digging on University of Nebraska football, which is, to date, high and dry as far as the NCAA is concerned.
Unfortunately, he gets low grades as an investigative reporter, relying heavily on what Chicago's late mayor, Richard J. Daley, called "insinuendo."
Discrepancies go unexplained in "Confidential" (one ex-player claims he received $4,000 to $5,000 for his season football tickets while others said theirs brought only a few hundred dollars), and when Mr. Keteyian can't nail down something, like who really owned a car driven by Husker tailback Doug Dubose, he simply reprints his notes.
There are gratuitous references to supposed romantic liaisons between Husker players and a low-level female university employee.
A serious charge -- that star flanker Irving Fryar "threw" the 1984 Orange Bowl game by intentionally dropping a pass in the end zone -- is included, even though the Nebraska assistant coach quoted denied making it.
Still, the book produces more smoke than a smoldering sofa, along with a few flames, especially concerning the use of steroids.
Dean Steinkuhler, a spectacularly bulked-up former lineman, confesses that he used 'em, and says other Huskers did too.
It's a mystery how this could have escaped the notice of Nebraska coaches.
Probably, it didn't.
"Never Too Young" is a different sort of work, focusing on the 1986 death from cocaine ingestion of Bias, a University of Maryland basketball star ticketed for sure pro stardom.
While the university was no more to blame for that than for the similar fate of any other student, it must bear responsibility for its conduct in the aftermath.
Bias's coach, Lefty Driesell, ordered the room in which Bias died to be cleaned before the police could arrive (the order wasn't carried out), and the school's athletics director issued false information about the academic standing of Bias and other players.
Those, of course, were the responses of people with something to hide.
One wonders how other college athletic officials would behave under the same circumstances.
Tomorrow's "On Sports" column will look at another aspect of the college sports mess.
Mercedes-Benz of North America Inc., a unit of Daimler-Benz AG, paid Massachusetts $9.1 million in taxes, bringing to an end a 10-month-long corporate tax chase.
Officials at the Department of Revenue had dogged the foreign car maker for taxes owed on business transactions and were proceeding to settle the dispute in court.
But "the check arrived in the mail," said Stephen Kidder, Massachusetts Commissioner of Revenue.
Mercedes-Benz, which had said it didn't owe taxes to Massachusetts partly because it sells its cars at a dock in Baltimore and not in Massachusetts, didn't explain its change of heart.
Last month, Mercedes-Benz executives approached state revenue officials complaining about bad press, the commissioner said.
The dispute was the subject of a Wall Street Journal article in August.
The amount covers taxes, interest and penalties owed from 1966, when the state began collecting corporate taxes, to 1985.
Mercedes-Benz also agreed to pay taxes owed for the years 1986 through 1988, Mr. Kidder added.
Under Massachusetts tax laws, corporations must pay 9.5% of estimated profits resulting from business transactions in the state if the company conducts a variety of non-sales activities, including warranties, customer complaints and relations with independent dealerships.
National Convenience Stores Inc., trying to shake the doldrums in the convenience-store business, said it will rearrange the merchandise in all of its stores in the next 18 months to cater better to the neighborhoods around its stores.
As part of the plan, the Houston-based company's 1,100 Stop 'N Go stores will be refocused to target black, Hispanic, upscale or core middle-class customers.
Stores in upper-income neighborhoods, for instance, will carry high-priced wines, publications such as Vanity Fair, gourmet pasta sauces, oat bran cereals and Weight Watchers and Pritikin products.
Stores in Hispanic areas will stock an assortment of Spanish-language magazines, Mexican cooking items and candies.
Stores in the company's core middle-class market will get more frozen and quick-to-prepare foods and a greater selection of bottled water.
V.H. Van Horn, National Convenience president and chief executive officer, said the move reflects the company's realization that the industry's poor performance stems from its failure to give customers what they want -- rather than from increasing competition from gasoline stations and 24-hour grocery stores.
"Convenience store merchandise has not kept pace with current trends in consumer preferences," he said in a speech at the company's annual shareholders meeting.
Analysts and competitors said the move reflects a growing need by the stores to expand their customer base beyond the traditional blue-collar worker who pops into a convenience store for a sandwich, cigarettes, soda or beer.
"There are an increasing number of people out there who are time-poor," said Chris Vroom, retail analyst with Alex. Brown & Sons of Baltimore.
"Those are primarily white-collar workers, a customer segment that has historically proved elusive for convenience stores."
National Convenience's move is likely to be echoed by other chains, though analysts note that Southland Corp., owner of 7-Eleven stores, and Circle K Corp. are too debt-heavy to roll out such an extensive effort.
Still, Southland said that its franchisees have been targeting their merchandise to their customers for years, and that the company has begun to follow suit.
For instance, Southland has expanded its bottled water selection in some stores and added fresh sandwiches in some outlets.
Several months ago, it also added black health and beauty aids displays to many stores, a spokeswoman said.
"We certainly see an increasing trend toward that," she added.
National Convenience said it has tested its new merchandise mix in 100 stores, with favorable results.
Analysts said the company's effort will be helped by its decision last year to put point-of-sale scanners in 200 stores, allowing National Convenience to quickly track items that are selling and those that aren't.
To promote its new strategy, National Convenience said it plans to spend about $12 million on advertising for the year ending June 30, up from about $10 million in fiscal 1989.
Labor Secretary Elizabeth Dole named a mediator to help resolve the lengthy labor dispute between the United Mine Workers and Pittston Co.
W.J. Usery Jr., labor secretary during the Ford administration, was named to mediate talks to settle the six-month strike by the UMW.
Previous talks between Pittston, of Greenwich, Conn., and the union have been sporadic and unsuccessful.
The union called the strike in April after Pittston refused to sign the UMW's national labor pact.
Pittston seeks changes in health and pension benefits, among other things.
No schedule for formal talks was set, but meetings are expected to begin soon.
One day after Delmed Inc. made top management changes and disclosed the end of an important business tie, its stock didn't trade and the company forecast a "significant" drop next year in sales of its core product.
That disclosure came, a Delmed spokeswoman said, after the American Stock Exchange alerted the company that trading wouldn't resume in its stock until additional information about developments was provided.
In addition to the forecast, the company also said it is examining potential cost cuts and reductions in overhead.
The spokeswoman said the exchange would resume trading of Delmed stock today.
Delmed, which makes and sells peritoneal dialysis products used in treating kidney disease, on Tuesday announced the resignations of Robert S. Ehrlich, chairman, president and chief executive officer, and of Leslie I. Shapiro, chief operating officer and chief financial officer.
They were succeeded by executives of Fresenius USA Inc. and its parent, Fresenius AG, which owns about 45% of Delmed.
At the same time, the New Brunswick, N.J., company said negotiations about pricing and volumes of product had collapsed between it and its exclusive distributor in the U.S., National Medical Care Inc.
Following that announcement Tuesday, however, company officials were unavailable to elaborate.
Yesterday, the spokeswoman said sales of Delmed products through the exclusive arrangement with National Medical accounted for 87% of Delmed's 1988 sales of $21.1 million.
The current distribution arrangement ends in March 1990, although Delmed said it will continue to provide some supplies of the peritoneal dialysis products to National Medical, the spokeswoman said.
Nonetheless, "Delmed currently expects that 1990 sales . . . will be significantly below their 1989 level," the company said in a statement.
Delmed said yesterday that Fresenius USA would begin distributing the product and that the company is investigating other possible distribution channels.
In any case, supplies to patients won't be interrupted, the company added.
Fresenius, a West German pharmaceutical concern, has been discussing a transaction in which it would buy Delmed stock for cash to bring its beneficial ownership to between 70% and 80%.
The transaction also would combine Fresenius USA and Delmed.
But the plan now is being "reformulated," Delmed said, declining to provide most of the new terms of the combination.
Said the spokeswoman: "The whole structure has changed.
The value of the company has changed."
Delmed did say that the proposal still would infuse cash into Delmed but less than the $10 million originally expected.
Delmed also would receive the North American rights to certain Fresenius AG products.
Another option for Delmed, the company said, is that it could sell its plant in Ogden, Utah.
It added that no discussions about such a sale are under way.
Brooks Armored Car Service Inc. never wanted to get into money laundering.
But July 5, a thunderstorm in Wilmington, Del., caused Shellpot Creek to rise 15 feet, pouring 1.3 million gallons of water into basement vaults.
The water destroyed about $75 million in currency and caked $4 million of coins with mud, rendering them dangerous to counting machines.
The $75 million in paper money, although moldy, mildewy and smelly, was exchanged through the Federal Reserve Bank of Philadelphia without incident.
But Brooks was unable to reach a coin-cleaning agreement with the government.
"We kind of got caught between bureaucracies," says President William F. Brooks Jr.
The U.S. Mint wouldn't take the coin because it wasn't mutilated, and the Federal Reserve Bank accepts only clean coins, he says.
The Philadelphia Fed says it is merely an "agent" for coins, responsible only for storage and distribution.
"We issue paper money; we destroy paper money," says Jane Hinkle, a Philadelphia Fed spokeswoman.
"The coin is their problem."
A Mint official says the agency offered to clean the coins for its "bare-bones" cost of $17,000 plus certain other expenses.
But Brooks declined, figuring that transporting the mucked up money to Washington would cost the company thousands more.
So Brooks gave the dirty work to Coin Wrap Inc., which came up with an unusual solution.
For eight hours a day for the past two weeks, in aggregates of as much as 27,000 pounds (equaling $20,000 in pennies), Coin Wrap has been pouring money into a cement-mixing truck.
A giant heater, working like a blowtorch, causes the mud to crust and burns off any wrappers.
After clanging around for an hour or so, the shiny, hot money pours out of the cement chute, where a giant vacuum sucks away the dried mud and burnt wrappers.
After cooling, the coins are then rewrapped.
Brooks expects to pay Coin Wrap a total of about $20,000 -- a cost that insurance won't cover.
And while the job is half done, Brooks is still bitter.
In fact, there's only one person involved who's happy, and that's Floyd String, president of Coin Wrap and conceiver of the cement-truck solution.
Not only did his company find $20,000 worth of work, but when the approach was suggested, Mr. String says, Brooks officials "didn't laugh at me or anything.
"Parenthood," this summer's successful and amusing movie about parents and children, apparently was only the beginning.
It seems that every day a new movie opens featuring a child coping with a mother's death, or adoption, or aging parents, or pregnancy.
And why not?
Some of our best and most idiosyncratic film makers -- from Truffaut to Fellini to Woody Allen -- have taken a cue from Chekhov: When it comes to compelling drama, there's no place like home.
Yet too many people working in Hollywood today seem to suffer from the delusion that the drama played out in every home will be interesting to people who live somewhere else.
This is not the case.
Some diaries simply aren't worth snooping in.
Yet there will be people who will sob at "Immediate Family," a limply constructed and offensive movie about adoption.
These are the sensitive souls who can empathize with and even enjoy hearing about other people's troubles, no matter how haltingly or predictably the sad tale is told.
Written by Barbara Benedek, co-author of "The Big Chill," "Immediate Family" takes the position that only rich people living in nice houses should have children.
The film makers have couched this offensive idea in pretty packaging.
Everyone is very nice and good-looking -- the adoptive parents (Glenn Close and James Woods) and the teen-age couple who decide to give up their baby for adoption (Mary Stuart Masterson and Kevin Dillon).
Linda and Michael (Ms. Close and Mr. Woods), who seem to be pushing 40, live in a large and tastefully decorated home in suburban Seattle.
All of their friends have children and they can't, so now they want a child more than anything -- perhaps even more than Michael wanted his fancy convertible or his deluxe stereo equipment.
The idea of a child-as-required-yuppie-possession must be motivating them, since the wealthy offspring of their friends are shown to be rude brats, in therapy by age five.
Having exhausted all modern aids to fertility, Linda and Michael decide to adopt.
The actors wear pained expressions to indicate their genuine longing for a little one -- or maybe they're not-so-subtly commenting on the inadequacy of the script, and Jonathan Kaplan's ("The Accused") dull direction.
Or maybe they are disgusted by the literal-minded musical score; when a character arrives at a major decision her thoughts are revealed by the sound of "I Can See Clearly Now."
The adoption agency insists on introducing the adopting parents to the birth mother, so Linda and Michael pay for pregnant Lucy's (Ms. Masterson) bus ticket from Ohio.
(Why in these movies is the unwed pregnant woman always from Ohio?
I ask this not necessarily as a native Ohioan.)
Lucy, of course, is pretty and smart, though uneducated.
Everyone falls in love with everyone else.
There is some pain, when Lucy has the baby and "didn't know she would feel like this" and wants to keep the baby.
But in the end, everything turns out for the best, in the film makers' warped view.
Like lawyers in the hostile takeover field, the baby goes where the money is.
At the other end of the life cycle is "Dad," Gary David Goldberg's adaptation of the William Wharton novel.
This picture is about a middle-aged son who makes sure that his delayed bond with his father will last by waiting to cement it until just before the old man dies.
The glib emotional style Mr. Goldberg has perfected on television's "Family Ties" doesn't benefit from magnification.
His characters practically scamper through a vast range of human emotions, like travelers doing 10 cities in eight days.
They pause only to register little whimpers of distress and sighs of satisfaction, like tourists cataloging the sights they've seen from the window of a bus.
Not even Jack Lemmon's expert doddering makes this trip worth taking.
So it's entirely possible that "Look Who's Talking" isn't as entertaining as it seems in comparison to the turgid other films opening now.
But by comparison, this fluffy comedy seems like a gem.
It starts with conception, taking the sperm's point of view, then progresses to the baby's point of view.
Bruce Willis's best attribute as an actor is his coy, lazy voice, and that's all you get of him here, speaking for the baby.
Finally, there is one family movie that quite eloquently explores the depth of human emotion -- only its stars are bears.
For the second time, in a movie called "The Bear," French director Jean-Jacques Annaud demonstrates just how powerful pictures can be.
("Quest for Fire" was the first time.)
To be sure, one wonders what kind of man is this, who feels compelled to try to understand the most primitive longing and instinct in a way that requires the most sophisticated appreciation of visual storytelling.
Supposedly, he proposed the movie to his producer, Claude Berri, in four lines:
"An orphan bear cub.
A big solitary bear.
Two hunters in the forest.
The animals' point of view."
But then, even a great many words couldn't summarize the extraordinary pull of this movie about an orphaned bear who adopts a parent.
Video Tip:
One of the best movies about the child-parent thing in recent years was "Raising Arizona," the 1987 Coen brothers' comedy that definitely was not about the folks next door.
Westinghouse Electric Corp., capitalizing on a major restructuring program, expects operating margins of more than 10% and double-digit per-share earnings growth next year, top officers told securities analysts here.
John C. Marous, chairman and chief executive officer, also said the company expects sales from continuing businesses to rise 8.5% annually through the next three years.
In 1988, the company earned $822.8 million, or $5.66 a share, on sales of $12.49 billion.
Since 1983, Westinghouse has shed 70 businesses that it didn't expect to produce 10% operating margins while acquiring 55 businesses.
In the past 20 months alone, Paul E. Lego, president and chief operating officer, said the divestiture of $300 million of slow-growth, low-profit businesses has been more than offset by $600 million in profitable acquisitions.
Westinghouse expects to meet its corporate goals despite a softening in the economy.
Even if the gross national product is either flat or in the growth range of 2% to 2.5%, "we can handle that," Mr. Marous said.
GNP is the total value of the nation's output of goods and services.
A bright spot is the company's power-generation business, which is experiencing a surge of growth for the first time in years.
Mr. Marous said the business will achieve higher sales this year than the company's target goal of 8.5%.
While Westinghouse hasn't had a nuclear power plant order from a U.S. utility in about a decade, excess capacity is beginning to shrink.
Mr. Lego said the company foresees the need for a major boost in new-generation capability throughout the 1990s.
Westinghouse also is well positioned to sell steam turbine and gas turbine plants to independent power producers.
The company's ability to respond to energy needs world-wide will be enhanced through a recently announced venture with Mitsubishi Heavy Industries, Mr. Lego said.
He said the independent power segment could grow to provide as much as 50% of near-term generation capacity, adding: "We expect to supply a significant share of this market."
Westinghouse also expects its international sales to soon grow to 25% of total corporate sales from 20% last year.
The company is negotiating with the Soviets to build a Thermo King truck-refrigeration plant that would produce about 10,000 units annually.
Mr. Marous said Westinghouse would own 70% of the facility.
The deal, which will involve an initial $20 million investment, was struck with a handshake, he added.
Company officials also said that any gain from the sale of Westinghouse's 55% stake in its transmission and distribution venture with the Swiss firm of Asea Brown Boveri will be offset by a restructuring charge in the fourth quarter.
The executives didn't disclose the size of the expected gain.
Capital expenditure in 1990 will rise slightly, Mr. Marous said, from an estimated $470 million this year.
SHORT INTEREST in International Mobile Machines Corp. fell to 3,102,935 shares in the month ended Oct. 13 from 3,420,936 in September.
Because of an error by the National Association of Securities Dealers, the listing appeared incorrectly in the main table and several highlight tables in yesterday's edition.
A proposed conflict-of-interest policy for federally funded biomedical researchers may thwart many high-technology new ventures, say financiers, researchers and university administrators.
The National Institutes of Health policy would require researchers to cut financial ties with health-care businesses -- or lose their government money.
Among other concerns, the agency says researchers with business ties are more likely to falsify findings in order to tout new drugs.
As ties between academia and venture capital have blossomed in recent years, governmental fear of abuse has risen.
But the guidelines could "make it impossible to commercialize research," says Kenneth Smith, associate provost and vice president for research at Massachusetts Institute of Technology.
The NIH is asking grant recipients and others for comments on the proposed guidelines until Dec. 15.
After that, it will make a final decision on the policy.
The guidelines could foil future arrangements similar to the deal behind Lithox Inc., a Salem, Mass., start-up, says Robert Daly, a managing partner of TA Associates, a venture-capital firm.
With $2.3 million, he and other investors launched Lithox last year to market a gallstone cure being developed by researchers of the University of California at San Diego.
The researchers, who are being financed by the Lithox funds, will receive a royalty, or percentage of sales, if their research yields a commercial product.
But because the University of California, like many other universities, shares its royalties with researchers, it may disqualify itself from federal funds under the proposed guidelines, Mr. Daly says.
The high-tech industry is full of the kind of arrangement that the new guidelines would affect.
For instance, Commonwealth BioVentures Inc., a venture-capital concern, last month invested $600,000 to launch Amira Inc., a Worcester, Mass., concern that will produce pharmaceuticals.
Scientists Rima Kaddurah-Daouk and Paul Schimmel conducted the initial research at the Massachusetts Institute of Technology.
While Ms. Kaddurah-Daouk left MIT to head Amira, Prof. Schimmel will continue to work at MIT, serve on Amira's board and own a small equity stake in the company.
The Amira transaction is typical of the way venture-capital firms are approaching the task of commercializing biotechnology research.
While universities develop the basic research, "venture capitalists are the ones best positioned to finance its commercialization," says Gloria W. Doubleday of Commonwealth.
"This is the best way to transfer technology straight off the campuses of universities."
But the new guidelines could prevent scientists like Prof. Schimmel from being involved with start-ups such as Amira, venture capitalists point out.
And if that happens, the entire process of transferring technology to the marketplace could be harmed, they say.
The stakes in the controversy are large.
Last year, venture capitalists spent an estimated $600 million to finance start-up companies in medical and biotechnology businesses, according to the National Venture Capital Association, a trade group.
Many of the deals involved transactions in which scientific institutions or researchers agreed to commercialize their work in return for an equity stake or royalties.
In many of these deals, "venture capitalists had the inside track," says Lawrence Bock of Avalon Ventures, La Jolla, Calif.
Investors were willing to gamble on new technologies because "we had exclusive rights to those technologies," he adds.
But under the proposed guidelines, all federally funded research will have to be reported publicly so that anyone can capitalize on the work.
"Without the exclusivity, most venture capitalists won't have the incentive to invest in such deals," Mr. Bock says.
Last year, for example, Avalon and others invested $14 million in Athena Neurosciences Inc., South San Francisco, Calif., to license and develop technology for delivery of drugs to the brain.
But before Athena was able to get an exclusive license to the technology, the Federal Register published most of the details, "giving all of the company's potential competitors a chance to exploit it," Mr. Bock says.
Athena eventually acquired exclusive rights to the technology and currently is developing it.
But, says Mr. Bock, "It was a close call."
The proposed guidelines could also delay commercialization -- and force small companies to waste scarce capital, entrepreneurs say.
If start-ups can't have early access to research being conducted at institutions, "we have to replicate it ourselves or do without the research," says Ruth Emyanitoff, manager of business development at Applied bioTechnology Inc., a Cambridge, Mass., concern.
Duplicating research is both costly and time-consuming for a start-up, Ms. Emyanitoff says.
For its part, NIH insists that its guidelines "should not stifle research creativity or technology transfer from the research laboratory to commercial use."
Universities such as Harvard and MIT should be able to develop a way to act as brokers for the individual scientists, says Katherine Bick, who oversees the huge NIH grants program as its deputy director for extramural research.
NIH staff members believe the guidelines are essential to prevent the escalation of problems that have already begun to surface in scientific ventures.
Not long ago, scientists holding stock in Spectra Pharmaceutical Services Inc. were accused of falsifying research to boost the stock.
Many officials are also concerned about companies getting a "free ride" on government-sponsored research.
A congressional subcommitee has been investigating the potential abuse from researchers holding stock in companies exploiting their research.
Among other provisions, the NIH guidelines would prohibit researchers and members of their immediate families from holding stock in any company that is affected by the outcome of their research.
Ms. Bick, the NIH administrator, says the business and scientific community is overreacting to what the agency merely meant to be "ideas for discussion."
The predictions of doom are "premature," she says.
But when agencies like the NIH circulate guidelines, they've often already formulated policy, veteran scientists say.
Indeed, institutions already are taking note.
On Sept. 14, Harvard began circulating a conflict-of-interest policy statement that, in effect, would follow the NIH guidelines faithfully.
The University of California at San Francisco is also circulating a memo among its scientific faculty that will restrict contact with the world of business.
In many other institutions, scientists are shunning contacts with venture investors until the NIH policy is settled.
Says Mr. Daly, the venture capitalist: "It doesn't matter whether they call it guidelines or policy.
The damage is already done.
Friday, Oct. 27, 9 p.m.-midnight EDT, on PBS (PBS air dates and times vary, so check local listings): "Show Boat."
New Jersey's Paper Mill Playhouse produced this faithful revival of America's most influential musical, written by Jerome Kern and Oscar Hammerstein and first produced on Broadway in 1927.
Worth watching, although the music has lasted better than the plot or the humor.
Saturday, Oct. 28, 8-10 p.m. EDT, on HBO (repeated Oct. 31, Nov. 5, 8, 14, 16 and 20): "Perfect Witness."
Aidan Quinn, Brian Dennehy and Stockard Channing are excellent in this gripping tale of a reluctant witness in an organized crime prosecution.
It's set in New York, but it resonates with the terrible dynamics of the Latin American drug wars.
Sunday, Oct. 29, 8-11 p.m. EST, on ABC: "The Final Days."
No doubt there is something to irk everyone in this AT&T-sponsored dramatization of Bob Woodward and Carl Bernstein's book about Watergate.
Personally, I'm irked by its combination of ponderousness and timidity, which adds up to an utter lack of drama.
Sunday, Oct. 29, 10-11 p.m. EST, on Showtime (repeated Nov. 2, 6, 11 and 15): "The Strange Case of Dr. Jekyll and Mr. Hyde."
Fans of Anthony Andrews ("Brideshead Revisited") will relish watching him play the title role(s) in the 19th-century Robert Louis Stevenson pre-Freudian drama of schizoid horror.
Monday, Oct. 30, 10-11 p.m. EST, on PBS: "Journey Into Sleep."
I promise you will stay awake through this intriguing documentary about the science of sleep.
Wednesday, Nov. 1, 9-10:30 p.m. EST, on PBS: "Thomas Hart Benton."
Critical opinion is divided about the success of Benton's populist defiance of modernist art.
But no one could disagree that Ken Burns has made a fascinating film about this famous American painter.
Thursday, Nov. 2, 9-10 p.m. EST, on A&E (repeated at 1 a.m. and on Nov. 5): "Third and Oak: The Pool Hall."
A one-acter by the Pulitzer Prize-winning playwright Marsha Norman is the first presentation in a new series called "American Playwrights Theater," sponsored by General Motors.
James Earl Jones and Mario Van Peebles carry out a bitter intergenerational dialogue between two black men.
Thursdays, Nov. 2-23, 10-11 p.m. EST, on PBS: "Taiwan: The Other China."
Judy Woodruff hosts this handsome four-part series about the history, economy, culture and politics of the island home of Chinese democracy and capitalism.
Friday, Nov. 3, 9-11 p.m. EST, on PBS: "Our Town."
Along with "Show Boat," "Great Performances" kicks off its new season with this Lincoln Center production of Thornton Wilder's best known play, in which the role of the small-town Stage Manager is given a hip twist by performance artist Spalding Gray.
Saturday, Nov. 4, 1:30-6 p.m. EST, on NBC: Breeder's Cup Day.
Polished hooves, fancy turf, fat purses -- the horse race of the year.
Sunday, Nov. 5, 10:30 a.m.-1:30 p.m. EST, on ABC: New York City Marathon.
Shiny Nikes, cracked cement, media glory -- the foot race of the year.
Sunday, Nov. 5, 8-9 p.m. EST, on TNT: "Gary Cooper: American Life, American Legend."
I've seen a great many moviestar film portraits, and this one is outstanding.
Sundays, Nov. 5-12, 9-10:30 p.m. EST, on PBS: "Glory Enough for All."
Can "Masterpiece Theatre" make a compelling human story out of the discovery of insulin?
This earthy, amusing film answers with a resounding "yes."
Sunday and Monday, Nov. 5 and 6, 9-11 p.m. EST, on NBC: "Cross of Fire."
The Ku Klux Klan was revived in the 1920s as a national organization aimed at Catholics and Jews as well as blacks.
One reason for its downfall was the murder trial of D.C. Stephenson, an Indiana leader whose reckless career is depicted in this film starring Mel Harris ("thirtysomething") and John Heard.
Tuesday, Nov. 7, 8-9 p.m. EST, on PBS: "Hurricane!"
Has the San Francisco earthquake caused you to forget Hugo?
You'll remember when you see the stunning footage taken from inside a hurricane's eye, in this edition of "NOVA.
Merksamer Jewelers Inc., a fast-growing jewelry store chain, filed for Chapter 11 bankruptcy-law protection from creditors, apparently to speed a management buy-out of the chain.
The filing, made yesterday in U.S. Bankruptcy Court here, follows an agreement by L.J. Hooker Corp., Merksamer's owner, to sell the chain to management for an undisclosed price.
GE Capital Corp., a financial services subsidiary of General Electric Co., is providing Merksamer management with $15 million in financing.
L.J. Hooker, based in Atlanta, filed for Chapter 11 protection in August and has also announced its intention to sell its B. Altman & Co. department store chain.
L.J. Hooker is owned by Hooker Corp., Sydney, Australia, which itself is currently being managed by a court-appointed provisional liquidator.
L.J. Hooker's planned sale of Merksamer is subject to approval by Judge Tina Brozman of U.S. Bankruptcy Court.
Rumors to the effect that the Merksamer chain would file for Chapter 11 arose last week in the jewelry industry.
At that time, Sam Merksamer, president of the chain, angrily denied that his company was about to file.
Mr. Merksamer is leading the buy-out.
According to executives close to the situation, Merksamer filed for Chapter 11 to speed the sale of the chain.
One executive said an accord signed by the unsecured creditors of L.J. Hooker Corp. had frozen in place all of L.J. Hooker's assets.
The Merksamer bankruptcy-law filing appears to supersede that agreement.
"By filing for Chapter 11, the Merksamer chain will only need approval from a bankruptcy judge for the sale, not the hundreds of unsecured creditors," said this executive.
"The cash from the sale will go to L.J. Hooker, but the company itself will belong to Sam Merksamer."
Mr. Merksamer and Sanford Sigoloff, chief executive of L.J. Hooker, were unavailable for comment.
In a statement, Mr. Merksamer described the filing as a "legal technicality," but also said that "our inability to obtain trade credit, combined with a need to ensure that our stores were properly stocked for the Christmas season, necessitated our filing Chapter 11."
The jewelry chain, which is based in Sacramento, Calif., had revenue of $62 million and operating profit of $2.5 million for the year ended June 30.
For all of this year's explosive run-up in stock prices, Renaissance Investment Management Inc.'s computer sat on the sidelines.
Now it's on the fence.
Renaissance, a Cincinnati-based money manager, began buying stocks again this week with half of the $1.8 billion that it oversees for clients, according to people familiar with the firm's revised strategy.
It was the first time since January that Renaissance has thought stocks are worth owning.
Renaissance declined to confirm the move, but its stock purchases were thought to have begun Tuesday, timed to coincide with the maturity this week of Treasury bills owned by the firm.
The other half of its portfolio is expected to remain invested in Treasury bills for the time being.
Wall Street executives said they believed that Renaissance's $900 million buy program was carried out by PaineWebber Inc.
As reported, PaineWebber bought shares Tuesday as part of a customer strategy shift, although the broker's client was said then to have been Japanese.
Yesterday, PaineWebber declined comment.
When it owns stocks, Renaissance's portfolio typically is composed of about 60 large-capitalization issues; to make buy or sell moves, the firm solicits Wall Street brokerage houses a day or so in advance, looking for the best package price to carry out the trades.
The broker winning the business doesn't charge commissions, but instead profits by buying or selling for less than the overall package price.
That puts the broker at risk if it's trying to buy stock in a rising market.
In Tuesday's gyrating session, the Dow Jones Industrial Average fell by 80 points early in the day, but finished with less than a four-point loss.
Renaissance's last portfolio shift, carried out by Goldman, Sachs & Co., was a highly publicized decision last January to sell its entire stock portfolio and buy Treasury bills.
The sell signal, which sent a bearish chill through the stock market, came when Renaissance's computer found that stocks were overpriced compared with bonds and Treasury bills.
At the time, the Dow Jones Industrial Average stood at about 2200.
The Dow average now stands more than 20% higher, while Renaissance's portfolio of Treasurys produced a return of about 6% through the first three quarters of the year.
The computer's miscalculation has been painful for Renaissance.
Almost any money manager holding stocks has turned in better results, while Renaissance has played it safe with Treasury bills.
So why does Renaissance's computer like stocks with the Dow at 2653.28, where it closed yesterday, when it didn't with the Dow at 2200?
"With the decline in stock prices and continued low or stable interest rates, stocks are representing a better value all the time," Renaissance President Frank W. Terrizzi said yesterday.
Three-month T-bill yields have fallen to 7.8% from about 9% at the start of the year.
Stock prices, meanwhile, are about 140 points lower than the peak of 2791.41 reached on the Dow industrial average Oct. 9.
Are those declines enough to signal a partial return to stocks?
Mr. Terrizzi won't say specifically, explaining that if there was such a move, it would take about three days to complete the loose ends of the transaction.
During that time, a buyer with the clout of a Renaissance could end up driving up the price of stocks it was trying to buy if it tipped its hand.
But everything is relative to Mr. Terrizzi, so stocks in his view can become more attractive in comparison with bonds or T-bills, even if shares are more expensive than when they were sold in January.
"Our {computer} model has a certain trigger point," he said.
When the computer says switch, Renaissance switches.
The firm has made 17 previous shifts from one type of asset to another in its 10-year history.
Almost all have involved at least half and often the firm's entire portfolio, as the computer searches for the most undervalued investment category, following a money-management style called tactical asset allocation.
Competing asset-allocation firms march to their own computer models, so some have been partly or fully invested in stocks this year while Renaissance has sat on the sidelines.
As a result, competitors say Renaissance has been looking for any opportunity to return to the stock market, rather than risk losing business by continuing to remain fully invested in Treasury bills.
Mr. Terrizzi confirms some clients have left Renaissance, but no major ones, and the firm has added new accounts.
David Evans, who last week resigned as president and chief executive of Qintex Entertainment Inc. "for personal reasons" just as the company filed for bankruptcy-law protection, has been temporarily reappointed to both positions, the company said.
Qintex Entertainment also said Chief Financial Officer and Treasurer Jonathan Lloyd, 37 years old, would join the nine-member board.
He succeeds Roger Kimmel, who resigned last week saying his participation in evaluating the company's role in buying MGM/UA Communications Co. was no longer necessary.
Mr. Evans will stay until a successor is found, but not later than the end of the year, the company said.
It was the 49-year-old Mr. Evans who had moved into the offices of MGM/UA and run the company during Qintex Australia Ltd.'s aborted bid for the movie company.
After MGM/UA terminated the $1.5 billion merger because of a dispute over a $50 million letter of credit, Qintex Entertainment -- which is 43%-owned by Qintex Australia -- found itself facing problems of its own.
And the relationship between Qintex Entertainment and the Australian company appears to be quickly deteriorating.
On Oct. 19, Qintex Entertainment was about to default on a $5.9 million payment owed to MCA Inc. in connection with the distribution of a television program.
Qintex Entertainment was depending on Qintex Australia to arrange financing.
But early on Oct. 19, the second of two hectic days of board meetings, Mr. Evans said he believed Qintex Australia wouldn't be forthcoming.
He recommended that the company file for protection under Chapter 11 of the U.S. Bankruptcy Code before the MCA deadline, according to a source familiar with the sessions.
But a majority of the board, which includes three members from the Australian company, overrode him.
Mr. Evans resigned.
Later in the day, according to the source, the board reversed itself, decided to file for bankruptcy protection, and asked Mr. Evans to stay on.
Mr. Evans told the board he needed the weekend to think about it.
Mr. Evans couldn't be reached yesterday for comment.
Last Monday, Qintex Australia announced a restructuring plan and said it would sell off assets.
Last week the company indicated it would cut back on the working capital it would supply to Qintex Entertainment.
Separately, a Qintex Entertainment shareholder filed suit in federal court in Los Angeles charging Qintex Australia with misleading shareholders about Qintex Entertainment's financial position.
Qintex Australia said it hadn't seen the suit and couldn't comment.
The Sept. 25 "Tracking Travel" column advises readers to "Charge With Caution When Traveling Abroad" because credit-card companies charge 1% to convert foreign-currency expenditures into dollars.
In fact, this is the best bargain available to someone traveling abroad.
In contrast to the 1% conversion fee charged by Visa, foreign-currency dealers routinely charge 7% or more to convert U.S. dollars into foreign currency.
On top of this, the traveler who converts his dollars into foreign currency before the trip starts will lose interest from the day of conversion.
At the end of the trip, any unspent foreign exchange will have to be converted back into dollars, with another commission due.
The card holder will pay the modest 1% fee only on the amounts actually needed.
Typically, he will be billed only several weeks after the expenditure, and then has another couple of weeks before he has to pay the bill.
In the meantime, the money can continue to earn interest for the card holder -- often more than 1% during that "float" period alone.
Daniel Brigham
Visa U.S.A. Inc.
MGM Grand Inc. has agreed to pay $93 million and nearly 1.8 million common shares to buy 117 acres of land along the Las Vegas, Nev., Strip as a site for its planned movie-studio and theme-park resort.
Of the total purchase price, $50 million cash and $30 million in stock (nearly 1.8 million shares) would be paid to buy the existing 700-room Marina Hotel & Casino from Southwest Securities, a Nevada limited partnership.
The remaining properties to be acquired are the Tropicana Country Club & Golf Course, a facility jointly owned by Ramada Inc., of Phoenix, Ariz., and the Jaffe family, and a small parcel owned by MGM Grand director James D. Aljian.
The purchase price was disclosed in a preliminary prospectus issued in connection with MGM Grand's planned offering of six million common shares.
The luxury airline and casino company, 98.6%-owned by investor Kirk Kerkorian and his Tracinda Corp., earlier this month announced its agreements to acquire the properties, but didn't disclose the purchase price.
The proposed stock offering and issuance of nearly 1.8 million common shares in connection with the land purchase will bring MGM Grand's total shares outstanding to 28.7 million, of which 72% will be owned by Mr. Kerkorian and Tracinda, according to the prospectus.
In over-the-counter trading, MGM Grand was bid at $17.50 a share.
Proceeds from the offering are expected to be used for remodeling the company's Desert Inn resort in Las Vegas, refurbishing certain aircraft of the MGM Grand Air unit, and to acquire the property for the new resort.
The company said it estimates the Desert Inn remodeling will cost about $32 million, and the refurbishment of the three DC-8-62 aircraft, made by McDonnell Douglas Corp., will cost around $24.5 million.
MGM Grand said the latest stock offering won't cover the $600 million or more cost of building the proposed resort and theme park, and added it will need to seek additional financing, either through bank borrowings or debt and equity offerings, at a later date.
Construction is set to begin in early 1991.
The resort will include the MGM Grand Hotel, a multi-spired, castle-like facility that will include 5,000 rooms and 85,000 square feet of casino space.
The facility will be marketed toward families, and room rates will be between $35 and $55 a night, MGM Grand said.
The prospectus didn't include many details about the studio and theme park, although conceptual drawings, released this month, show that it may feature several "themed" areas similar to those found at parks built by Walt Disney Co.
Investors poured $2.8 billion more into money-market mutual funds in the latest week despite further declines in yields.
Assets of the 400 taxable funds tracked by IBC/Donoghue's Money Fund Report jumped to $351.2 billion in the week ended Tuesday, the Holliston, Mass.-based newsletter said.
Assets soared $4.5 billion in the previous week.
Meanwhile, the average yield on taxable funds dropped nearly a tenth of a percentage point, the largest drop since midsummer.
The average seven-day compound yield, which assumes that dividends are reinvested and that current rates continue for a year, fell to 8.47%, its lowest since late last year, from 8.55% the week before, according to Donoghue's.
"Lower yields are just reflecting lower short-term interest rates," said Brenda Malizia Negus, editor of Money Fund Report.
Money funds invest in such things as short-term Treasury securities, commercial paper and certificates of deposit, all of which have been posting lower interest rates since last spring.
Individual investors can still get better yields on money funds than on many other short-term instruments.
The yield on six-month Treasury bills sold at Monday's auction, for example, was just 7.77%.
The average yield on six-month CDs of $50,000 or less at major banks was 7.96% in the week ended Tuesday, according to Banxquote Money Markets, a New York information service.
One way that money fund managers boost yields in a declining rate environment is by extending the maturities of their investments, so they can earn the current higher rates for a longer period.
The average maturity of the taxable funds that Donoghue's follows increased by two days in the latest week to 40 days, its longest since August.
"They're anticipating further declines in rates and they're going to get them, slowly," said Walter Frank, chief economist for the Donoghue Organization, publisher of Money Fund Report.
Average maturity was as short as 29 days at the start of this year, when short-term interest rates were moving steadily upward.
The average seven-day compound yield of the funds reached 9.62% in late April.
The highest-yielding funds are still above 9%.
The top-performing fund in the latest week was Dreyfus Worldwide Dollar, with a seven-day compound yield of 9.45%.
The fund invests heavily in dollar-denominated money-market securities overseas.
It is currently waiving management fees, which contributes to the higher yield.
The average seven-day simple yield of the 400 funds fell to 8.14% from 8.21%, Donoghue's reported.
The average 30-day simple yield slid to 8.22% from 8.26%, and the average 30-day compound yield fell to 8.56% from 8.60%.
Many small investors are facing a double whammy this year: They got hurt by investing in the highly risky junk bond market, and the pain is worse because they did it with borrowed money.
These people invested in "leveraged" junk bond mutual funds, the publicly traded funds that make a habit of taking out loans to buy extra junk.
It's a good strategy in a rising market, where a 25% leveraged portfolio in effect allows investors to have 125% of their money working for them.
The strategy boosts current yield by putting more bonds into the portfolio.
Trouble is, junk bond prices have been weak for months.
Thus, the leverage has amplified the funds' portfolio losses.
And shares of leveraged junk funds this year have been clobbered even harder than the junk bonds they hold.
"That's really where the leverage hurt," says Thomas Herzfeld, a Miami-based investment manager who specializes in closed-end funds.
"Share prices performed even worse than the funds' asset values because fear has taken hold" in the junk market, he says.
Leverage is never a problem for the traditional "open end" mutual funds, which aren't publicly traded and aren't allowed to use leverage at all.
Leverage is used only by some of the closed-end funds.
The usual maneuver is to borrow against the portfolio value or issue preferred stock, using the proceeds to buy additional bonds.
The fallout for investors lately has been painful.
Consider the New America High Income Fund.
With a leveraged position of about 45%, the fund's share price has plunged 28.5% so far this year.
That's worse than the price drop sustained by the bonds in its portfolio, whose total return (bond-price changes plus interest) has amounted to a negative 6.08%.
Such problems may not be over.
Leveraged funds in particular "are still extremely vulnerable, because we're still at the beginning of problems in the junk market," says George Foot, a managing partner at Newgate Management Associates in Northampton, Mass.
Many investors are unaware their funds have borrowed to speculate in such a risky market.
"If someone actually sat down and thought about what they were being sold," says Gerald Perritt, editor of the Mutual Fund Letter in Chicago, they might shy away.
In a typical leverage strategy, a fund tries to capture the spread between what it costs to borrow and the higher return on the bonds it buys with the borrowed money.
If the market surges, holders can make that much more profit; the leverage effectively acts as an interest-free margin account for investors.
But when the market moves against the fund, investors lose more than other junk holders because the market decline is magnified by the amount the fund is leveraged.
Fund managers, for their part, defend their use of leverage.
Carl Ericson, who runs the Colonial Intermediate High Income Fund, says the fund's 25% leverage has jacked up its interest income.
"As long as I am borrowing at 9.9% and each {bond} yields over that, it enhances the yield," he maintains.
Mr. Ericson says he tries to offset the leverage by diversifying the fund's portfolio.
Yet some funds have pulled in their horns.
New America High Income Fund recently said that it plans to reduce its leverage position by buying back $5 million in preferred stock and notes from investors.
The fund made a similar move earlier this year.
"We are trying to increase our flexibility," says Ellen E. Terry, a vice president at Ostrander Capital Management, the fund's investment adviser.
She declined to elaborate and wouldn't disclose the fund's recent purchases, sales or cash position.
Ms. Terry did say the fund's recent performance "illustrates what happens in a leveraged product" when the market doesn't cooperate.
"When the market turns around," she says, "it will give a nice picture" of how leverage can help performance.
Several leveraged funds don't want to cut the amount they borrow because it would slash the income they pay shareholders, fund officials said.
But a few funds have taken other defensive steps.
Some have raised their cash positions to record levels.
High cash positions help buffer a fund when the market falls.
Prospect Street High Income Portfolio, for instance, now holds about 15% in cash and equivalents, nearly quintuple the amount it held earlier this year, says John Frabotta, portfolio co-manager.
He says the fund, which is 40% leveraged, has maintained a "substantial cushion" between its borrowing costs and the yields of the portfolio's bonds.
"I don't want to be in a position to have to sell," Mr. Frabotta says.
Other funds have recently sold weak junk bonds to raise cash.
At the 50%-leveraged Zenith Income Fund, portfolio manager John Bianchi recently dumped Mesa Petroleum, Wickes and Horsehead Industries, among others, to raise his cash position to a record 15%.
"That's a problem because cash isn't earning us very much money," Mr. Bianchi says.
He concedes: "This is the most difficult market that I've been involved in."
Because of the recent junk-market turmoil, the fund is considering investing in other issues instead, including mortgage-backed bonds.
"We're looking at the leverage factor every day," says Robert Moore, president of Bernstein-Macaulay Inc., a Shearson Lehman Hutton Inc. unit and the fund's adviser.
"At some point, if we are unable to cover our leveraged cost -- and at the moment we're right on it -- we're going to have to make a move.
One of the more bizarre garden stories since Eden has been unfolding for four years now, in the private paper-and-crayon fantasies of artist Jennifer Bartlett.
And if she and the Battery Park City Authority have their way, her horticulturally inept plan will soon go public as a real garden "artwork" in the downtown complex.
South Gardens, as the Bartlett scheme is called, will occupy the last 3.5 acres of open space at the southwest tip of Manhattan.
It could cost taxpayers $15 million to install and BPC residents $1 million a year to maintain.
Created by an artist who flaunts her ignorance of plants and gardens, South Gardens, as now planned, will die from congestive garden design.
Ms. Bartlett's previous work, which earned her an international reputation in the non-horticultural art world, often took gardens as its nominal subject.
Mayhap this metaphorical connection made the BPC Fine Arts Committee think she had a literal green thumb.
(Ms. Bartlett would not discuss her garden for this article.)
Last year she boasted to HG magazine: "I'd never looked at a garden in my life."
And she proved no shirking violet in her initial statement to the BPCA, a New York State public benefit corporation: "The only thing I was interested in doing was a very complicated garden, which would cost an enormous amount of money and be very expensive to maintain."
Undeterred, the BPCA hired Ms. Bartlett and another confessed garden ignoramus, the architect Alexander Cooper, who claimed he had never visited, much less built, a garden, and said of the project, "I don't view this as a landscape.
I view this as a building."
The third principal in the South Gardens adventure did have garden experience.
The firm of Bruce Kelly/David Varnell Landscape Architects had created Central Park's Strawberry Fields and Shakespeare Garden.
The BPCA called its team a "stunning" collaboration.
After four years, though, the South Gardens design is 100% uncollaborated Jennifer Bartlett.
She has done little more than recycle her standard motifs -- trees, water, landscape fragments, rudimentary square houses, circles, triangles, rectangles -- and fit them into a grid, as if she were making one of her gridded two-dimensional works for a gallery wall.
But for South Gardens, the grid was to be a 3-D network of masonry or hedge walls with real plants inside them.
In a letter to the BPCA, kelly/varnell called this "arbitrary and amateurish."
The landscape architects were expelled from the garden in July.
All the while, Ms. Bartlett had been busy at her assignment, serene in her sense of self-tilth.
As she put it in a 1987 lecture at the Harvard Graduate School of Design: "I have designed a garden, not knowing the difference between a rhododendron and a tulip."
Moreover, she proclaimed that "landscape architects have been going wrong for the last 20 years" in the design of open space.
And she further stunned her listeners by revealing her secret garden design method: Commissioning a friend to spend "five or six thousand dollars . . . on books that I ultimately cut up."
After that, the layout had been easy.
"I've always relied heavily on the grid and found it never to fail."
Ms. Bartlett told her audience that she absolutely did not believe in compromise or in giving in to the client "because I don't think you can do watered-down versions of things."
(This was never a problem with South Gardens, because the client had long since given in to Ms. Bartlett's every whim.)
Last year the public was afforded a preview of Ms. Bartlett's creation in a tablemodel version, at a BPC exhibition.
The labels were breathy: "Within its sheltering walls is a microcosm of a thousand years in garden design . . . a rose garden, herb garden, serpentine garden, flower fields, an apple orchard . . . organized in a patchwork of 50-by-50-foot squares to form `rooms' . . . here and there are simple architectural forms, a whimsical jet of water, a conceit of topiary or tartan plaid, and chairs of every sort to drag around. . . .
At the core of it all is a love for plants."
Plant lovers who studied the maquette were alarmed.
They looked at the miniature and saw a giant folly.
Ms. Bartlett's little rooms left little room for plants or people.
Kelly/Varnell had put South Gardens' carrying capacity at four people per room, or about 100 humans overall.
This mincemeat of tiny gridlocked squares was inspired by the artist's own digs: "My loft was 50 by 100 feet, so 50 feet by 50 feet seemed like a good garden room."
Inside the grid were 24 of these plant cells jammed full of clutter.
One she made into a topiary rec room, replete with plants shaped into a Barcalounger, TV, piano and chairs.
In another, she requisitioned topiary MX missile cones -- costing $10,000 each -- in heights up to 20 feet.
Another she stuffed with eight "rectilinear hedges" for a topiary geometry lesson in the right-angling of plants.
In the herbal lounge she specified a "plaid knot garden" decor.
She ordered the foyer done in a different plaid planting, and made the landscape architects study a book on tartans.
In one garden roomette she implanted a 43-foot square glass cube meant to show off a plaid tile floor conceit, a "zinc sink," a "huge fishbowl with carp" and a "birdcage with cockatoos."
Next door she put a smaller plaid-floored glass house, where, she suggested, a flat of strawberries might be displayed in the dead of winter.
In another compartment called the Linden Bosque, 62 linden trees were to be crowded together at killing intervals of 10 or 16 feet.
(Lindens need about 36 feet.)
One thing about the Bartlett plan was never in doubt: It would demand the full-time skills of a battalion of topiary barbers, rosarians, orchardists and arborists.
Ms. Bartlett blithely suggested calling upon "semi-skilled garden club workers for maintenance."
Furthermore, she had insisted on paths so narrow (five to eight feet) and hedge corners so square that standard maintenance equipment -- trucks or cherry pickers -- couldn't maneuver.
Then, to make these gardenettes quite literally rooms, Ms. Bartlett had thrown up windowless walls (brick, lattice, hedge) eight to 10 feet tall, casting her interiors into day-long Stygian shade.
It was hard to see how photosynthesis would ever happen in South Gardens without decking the walls in a Christmas-like array of Gro-Lites.
Finally, flouting the BPCA's wishes to continue the popular two-mile riverside Esplanade, prized for its expansive views of New York Harbor, the Statue of Liberty and Ellis Island, Ms. Bartlett threw up yet another wall, this time concrete, this time 10 1/2 feet tall.
She ran it the length of the South Gardens riverfront, blotting out the city's great natural water features, the harbor and the river.
(Within her garden, she has decreed a waterfall, a rill, ponds and other costly, trivial waterworks beside the Hudson.)
While the model was still on view, Manhattan Community Board 1 passed a resolution against South Gardens.
The Parks Council wrote the BPCA that this "too `private' . . . exclusive," complex and expensive "enclosed garden . . . belongs in almost any location but the waterfront."
Lynden B. Miller, the noted public garden designer who restored Central Park's Conservatory Garden, recalls her reaction to the South Gardens model in light of the public garden she was designing for 42nd Street's Bryant Park: "Bryant Park, as designed in 1933, failed as a public space, because it made people feel trapped.
By removing the hedges and some walls, the Bryant Park Restoration is opening it up.
It seems to me the BPCA plan has the potential of making South Gardens a horticultural jail for people and plants."
The three urban horticulture experts with Cornell Cooperative Extension weighed in with a letter to the BPCA that began: "We feel that the garden is horticulturally doomed."
They then addressed the decidedly "questionable safety of . . . a complex garden of endless hiding places.
The 8 ft. hedges which obstruct views in and out of small `rooms' insure . . . that this garden will be a potential breeding ground for crime."
(At Harvard, Ms. Bartlett had declared: "There are going to be problems with safety . . .
I'm not going to address questions of safety!")
Despite the dire assessments of knowledgeable garden professionals, Ms. Bartlett's South Gardens design somehow continues on, seemingly impervious to reason, stalled only by bureaucratic lethargy and logistical complications.
BPCA President and CEO David Emil hopes to negotiate a seawall that could "be significantly more visually permeable."
And by substituting yet another landscape architect, Nicholas Quennell, he insists he can achieve that and other accommodations to gardening reality while still preserving the "artistic vision" of a "truly great artist."
After four years of no progress in this direction, it is doubtful any viable collaboration with Ms. Bartlett will suddenly now be possible.
(Mr. Quennell has said he plans to go with the grid, regardless.)
There is still time, however, for Gov. Mario Cuomo or Fabian Palomino, chairman of the BPCA board, to prevent this topiary "Tilted Arc."
These statesmen might take counsel from William Robinson, author of "The English Flower Garden" -- the gardener's bible since 1883 -- who seems to have had a Jennifer Bartlett in mind when he wrote: "Unhappily, our gardeners for ages have suffered at the hands of the decorative artist when applying his `designs' to the garden. . . .
It is this adapting of absurd `knots' and patterns from old books to any surface where a flower garden has to be made that leads to bad and frivolous design -- wrong in plan and hopeless for the life of plants.
I read the exerpts of Wayne Angell's exchange with a Gosbank representative ("Put the Soviet Economy on Golden Rails," editorial page, Oct. 5) with great interest, since the gold standard is one of my areas of research.
Mr. Angell is incorrect when he states that the Soviet Union's large gold reserves would give it "great power to establish credibility."
During the latter part of the 19th century, Russia was on a gold standard and had gold reserves representing more than 100% of its outstanding currency, but no one outside Russia used rubles.
The Bank of England, on the other hand, had gold reserves that averaged about 30% of its outstanding currency, and Bank of England notes were accepted throughout the world.
The most likely reason for this disparity is that the Bank of England was a private bank with substantial earning assets, and the common-law rights of creditors to collect claims against the bank were well established in Britain.
By contrast, in 19th-century Russia an authoritarian government owned the bank and had the power to revoke payment whenever it chose, much as it would in today's Soviet Union.
The success of the British gold standard was due to independent private banking and common law, rather than the choice of gold for valuing the currency.
It is no coincidence that from 1844 to 1914, when the Bank of England was an independent private bank, the pound was never devalued and payment of gold for pound notes was never suspended, but with the subsequent nationalization of the Bank of England, the pound was devalued with increasing frequency and its use as an international medium of exchange declined.
The Soviet Union should keep these lessons in mind as it seeks to establish the ruble as an international currency.
One way to make the ruble into a major international currency would be to leave reserves of gold and earning assets in a Swiss bank with distributions based on Swiss laws.
Unless the laws determining the noteholder's rights to payment are independent of the issuer of those notes, however, a gold-based ruble would be as unsuccessful for the Soviets as it was for the czars.
Christopher R. Petruzzi
Professor of Taxation
California State University
Fullerton, Calif.
Wednesday, October 25, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 8 3/4% high, 8 11/16% low, 8 3/4% near closing bid, 8 13/16% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.45% 30 to 44 days; 8.20% 45 to 67 days; 8.325% 68 to 89 days; 8% 90 to 119 days; 7.875% 120 to 149 days; 7.75% 150 to 179 days; 7.50% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.55% 30 days; 8.45% 60 days; 8.40% 90 days.
CERTIFICATES OF DEPOSIT: 8.09% one month; 8.09% two months; 8.06% three months; 8% six months; 7.94% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market: 8.53% one month; 8.45% three months; 8.27% six months.
BANKERS ACCEPTANCES: 8.47% 30 days; 8.30% 60 days; 8.27% 90 days; 8.08% 120 days; 7.98% 150 days; 7.90% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 9/16% to 8 7/16% two months; 8 5/8% to 8 1/2% three months; 8 1/2% to 8 3/8% four months; 8 7/16% to 8 5/16% five months; 8 7/16% to 8 5/16% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 5/8% three months; 8 7/16% six months; 8 3/8% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS: Results of the Monday, October 23, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.52% 13 weeks; 7.50% 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days.
9.75%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.68%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.62%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Securities and Exchange Commission Chairman Richard Breeden told a congressional subcommittee that he would consider imposing "circuit breakers" to halt program trading at volatile times.
Mr. Breeden, in his first testimony to Congress since taking the SEC post, said the agency is studying the Friday the 13th market plunge, including how current circuit breakers affected the market that day and the following Monday.
After the study, the SEC would be willing to consider adding new circuit breakers or fine-tuning the current ones, he added.
Circuit breakers, designed to give the markets a breather in cases of sharp price movements, curb trading of futures or stocks at various trigger points.
At certain points during the Friday the 13th drop, circuit breakers kicked in on the futures market, slowing trading at times.
A circuit breaker that would have closed down the New York Stock Exchange wasn't tripped.
Rep. Edward Markey (D., Mass.), chairman of the House Telecommunications and Finance Subcommittee, is pushing the idea of a circuit breaker for computer-driven program trading in hopes that would curb "turmoil" in the marketplace.
He argued that program-trading by roughly 15 big institutions is pushing around the markets and scaring individual investors.
Mr. Breeden didn't reject the proposal.
After the SEC study of the drop is completed, he said, "I'm perfectly happy to work with this committee . . . in identifying whether we need other devices," such as a program-trading curb.
Mr. Breeden backed most of the provisions in a market-reform bill that the SEC brought to the subcommittee last year under then-chairman David Ruder.
The measure is expected to move through this Congress.
But the new chairman vehemently opposed a provision in the bill that would give the agency the right to close the markets at times of stress.
Mr. Breeden contended that uncertainty over when the SEC might act could worsen volatility in the markets.
He argued that the current circuit-breaker system allows investors to know "precisely when and where any trading interruptions will occur and how long they will last."
Mr. Breeden offered strong support for two other provisions in the bill.
One would force brokerage houses to provide the SEC detailed information about loans made by their holding companies.
Such loans often are used to finance leveraged buy-outs, and the agency is worried that a sharp market drop could create capital problems for the firms.
He also backed a rule to require large traders to report transactions on a systematic basis.
That information, he argued, is critical to reconstructing sharp market moves, such as the one nearly two weeks ago.
In a rare package sale of its real estate, K mart Corp., Troy, Mich., has sold 17 of its strip shopping centers to a limited partnership led by New York developer Philip Pilevsky, according to sources familiar with the transaction.
They estimate the value of the transaction at close to $100 million.
K mart officials and Mr. Pilevsky wouldn't comment on the sale.
K mart previously had announced it would report its third consecutive decline in quarterly earnings for the period ended yesterday, the same day the real estate deal was completed.
Analysts are estimating third-quarter earnings will drop between 13% and 20% to about 50 to 55 cents per share, compared with 63 cents per share in the year-ago quarter.
It is unclear what effect the sale of the shopping centers will have on earnings.
K mart developed the centers, which range in size from about 150,000 square feet to just over 250,000 square feet.
Most are anchored by a K mart store.
The retailer reportedly will lease its stores back from the developer, who plans to expand the small centers.
The centers comprise a total of about 1.6 million square feet of retail space.
They are spread around the country and include locations in California, Florida, Washington and Arizona.
Mr. Pilevsky, who heads Philips International Holding Corp., a New York-based real estate company, owns more than a dozen other shopping centers in which K mart is a tenant.
The company is active in office and residential development in New York.
However, nationally, Mr. Pilevsky controls through limited partnerships about 85 shopping centers with about 17 million square feet.
K mart runs 2,200 K mart stores, primarily in leased facilities.
The company typically sells the centers it develops, but has usually sold only one or several at a time.
Motorola is fighting back against junk mail.
So much of the stuff poured into its Austin, Texas, offices that its mail rooms there simply stopped delivering it.
Now, thousands of mailers, catalogs and sales pitches go straight into the trash.
"We just don't have the staff to {deliver} it, nor do we have the space or the time," says a spokesman for the Schaumburg, Ill., electronics company, which has 5,000 employees in the Austin area.
"It's the overload problem and the weight problem we have."
Motorola is in good company.
Businesses across the country are getting fed up with junk mail, and some are saying they just aren't going to take it anymore -- literally.
While no one has tracked how many company mail rooms throw out junk mail, direct-mail advertising firms say the number is growing.
General Motors earlier this year said it wouldn't deliver bulk mail or free magazines in its Flint, Mich., office, while Air Products & Chemicals, Allentown, Pa., says it screens junk mail and often throws out most of a given mass mailing.
Why the revolt?
Anybody with a mailbox can answer that: sheer, overwhelming, mind-numbing volume.
According to the Direct Marketing Association, total direct mail -- to both businesses and consumers -- jumped 50% to 65.4 billion pieces in 1988 from five years earlier.
Though direct mail to businesses isn't broken out separately, the association says it's growing even faster.
The deluge has spurred cost-conscious companies to action, with mail rooms throwing the stuff out rather than taking the time or money to deliver it.
The direct-mail industry, not surprisingly, is fuming at the injustice of it all.
After all, this is the industry that has a hard enough time getting any respect, that is the butt of so many jokes that television's "L.A. Law" portrays direct-mail-mogul David as short, bald, intensely nerdy, and unremittingly boring.
The practice of businesses throwing out junk mail "is a commonly known problem, and it's increasing as companies attempt to put through budget cuts across the board," right down to the mail-room level, says Stephen Belth, a list consultant and chairman of the Direct Marketing Association's business-to-business council.
"But it's like biting the hand that feeds them, because every one of these companies uses direct marketing."
It's almost impossible to track the number of companies trashing junk mail, since the decision is usually made in the mail room -- not the board room.
And the practice often varies from location to location even within a company.
But industry executives say businesses seem especially inclined to dump mailers sent to titles rather than to individual names.
Motorola's Austin operation was one of the first to lose patience, deciding a few years ago to junk any bulk mail that wasn't addressed to an individual.
Magazines aren't delivered at all, even if an individual's name is listed; employees who want their magazines have to pick them up from the mail room or the company library -- and are told to change the subscriptions to their home addresses.
At Air Products, meanwhile, the mailroom staff opens junk mail and often throws it away -- even if addressed to an individual.
"If they get 50 packets of something, they open one, see what it says, throw 48 away and send two to people or departments they think are appropriate," a spokesman says.
Direct marketers were especially alarmed when General Motors -- one of the country's largest companies and a big direct-mail user itself -- entered the junk-mail battle.
As of March 1, its Flint office, with about 2,500 employees, stopped delivering bulk mail and non-subscription magazines.
Employees were told that if they really wanted the publications, they would have to have them sent home instead.
The reason: overload, especially of non-subscription magazines.
Direct-mail executives see GM's stand as an ominous sign -- even if the junk-mail kings did bring it on themselves.
"Why anyone would want to close themselves off {from direct mail}, a priori, doesn't make any sense," says Michael Bronner of Bronner Slosberg Associates, a Boston directmail firm.
"It smacks of big brotherism.
They're going to decide what their employees can or cannot read."
The practice is, however, legal in most cases.
Jack Ellis, a U.S. postal inspector in New York, says the Postal Service's only job is to deliver the mail to the mail room; once it gets there, a company can do with it what it wishes.
The junk-mail titans, ever optimistic, are looking for ways around the problem.
So far, they say, it hasn't had any noticeable effect on response rates.
And before it does, they're trying to cut back on the clutter that created the situation in the first place.
Among other things, the industry is trying to come up with standardized business lists that cut down on duplications.
"We're going to have to mail a lot less and a lot smarter," says Jack Miller, president of Quill Corp., a Lincolnshire, Ill., business-to-business mail-order company.
But then again, mailing less and smarter won't be much help if the mail ends up in the garbage anyway.
New Hyundai Campaign
Hyundai Motor America, fighting quality complaints, declining sales and management turmoil, yesterday unveiled its 1990 ad strategy, tagged "We're Making More Sense Than Ever."
The ad campaign, created by Saatchi & Saatchi's Backer Spielvogel Bates agency, is an extension of the auto company's "Cars That Make Sense" campaign, which emphasized affordability.
TV ads plugging the company's new V-6 Sonata and its souped-up Excel subcompact will begin appearing Monday.
One spot shows a Sonata next to a rival midsized car, and an announcer says, "Listen to what they're saying about the Hyundai Sonata."
As the announcer reads favorable quotes about the model from Motor Trend and Road & Track magazines, the other car, which is white, slowly turns green.
"No wonder the competition's green with envy," the announcer says.
Ad Notes. . . .
ACQUISITION:
EWDB, formed by the merger of Eurocom and Della Femina McNamee WCRS, said it agreed to buy Vizeversa, an agency in Barcelona.
Terms weren't disclosed.
HOLIDAY ADS:
Seagram will run two interactive ads in December magazines promoting its Chivas Regal and Crown Royal brands.
The Chivas ad illustrates -- via a series of pullouts -- the wild reactions from the pool man, gardener and others if not given Chivas for Christmas.
The three-page Crown Royal ad features a black-and-white shot of a boring holiday party -- and a set of colorful stickers with which readers can dress it up.
Both ads were designed by Omnicom's DDB Needham agency.
Senate Democrats who favor cutting the capital-gains tax aren't ready to line up behind the leading Senate proposal.
Their reluctance to support the proposal is another blow to the capital-gains cut, which has had a roller-coaster existence since the beginning of the year, when it was considered dead and then suddenly revived and was passed by the House.
Nevertheless, Oregon Sen. Bob Packwood, the ranking GOP member on the tax-writing Senate Finance Committee, last night introduced his plan as an amendment to a pending measure authorizing U.S. aid for Poland and Hungary.
Senate Majority Leader George Mitchell (D., Maine) was confident he had enough votes to block the maneuver on procedural grounds, perhaps as soon as today.
Mr. Packwood all but conceded defeat, telling Mr. Mitchell: "I sense at this stage you may have the votes."
The two lawmakers sparred in a highly personal fashion, violating usual Senate decorum.
Their tone was good-natured, with Mr. Packwood saying he intended to offer the proposal again and again on future legislation and Sen. Mitchell saying he intended to use procedural means to block it again and again.
Although the proposal, authored by Mr. Packwood and Sen. William Roth (R., Del.), appears to have general backing by Republicans, their votes aren't sufficient to pass it.
And Democrats, who are under increasing pressure from their leaders to reject the gains-tax cut, are finding reasons to say no, at least for now.
A major reason is that they believe the Packwood-Roth plan would lose buckets of revenue over the long run.
The Packwood-Roth proposal would reduce the tax depending on how long an asset was held.
It also would create a new individual retirement account that would shield from taxation the appreciation on investments made for a wide variety of purposes, including retirement, medical expenses, first-home purchases and tuition.
"A number of us are not going to touch capital gains, IRAs or anything else unless it contributes to deficit-reduction," said Sen. Charles Robb (D., Va.), who is one of the 10 to 20 Democrats who the Bush administration believes might favor giving preferential treatment to capital gains.
President Bush has been hearing this kind of opposition first hand during meetings over the past two days with Democratic senators at the White House.
And at a luncheon meeting Tuesday of Democratic senators, there was outspoken opposition to cutting the capital-gains tax this year, according to participants.
The trend is making advocates of the tax cut less optimistic about success.
"There is a one-out-of-three shot of getting it this year," said Sen. David Boren of Oklahoma, a leading Democratic proponent of cutting the capital-gains tax.
He called the battle "uphill."
Other Democrats who favor a capital-gains cut are even more pessimistic.
"There will be no capital-gains bill this year," said Sen. Dale Bumpers (D., Ark.).
"I'm probably not going to vote for any capital-gains proposal.
The IRA portion (of the Packwood-Roth plan) is irresponsible."
Another significant factor in the capitalgains debate is the extent to which it has become a purely political battle between President Bush and Senate Majority Leader Mitchell.
Mr. Mitchell has made clear to his wavering colleagues that the issue is important to him personally.
Today, Sen. Mitchell and other leading Democrats plan to turn up the heat again by holding a news conference to bash the proposal.
Estimates requested by Sen. Mitchell from the Congressional Joint Taxation Committee show that the richest 100 taxpayers got an average benefit from the capital-gains differential of $13 million each in 1985, the last year for which figures are available.
White House officials acknowledged yesterday that Democrats still are reluctant to publicly express support for the Packwood-Roth capital gains proposal because they are loath to buck Sen. Mitchell.
As a result, the officials said they are open to making a variety of deals with Senate Democrats to win their support for a capital-gains tax cut.
Democrats asked in this week for discussions with President Bush have suggested ways of "tinkering" with the Packwood-Roth proposal, suggesting an interest in looking for a modified version they can back, one official said.
In addition, White House aides think that there are numerous other important measures Democrats badly wanted passed -- such as the scaling back of a controversial catastrophic health-care plan for the elderly -- that might provide the president leverage in cutting deals with Democrats.
A capital-gains tax cut might be paired with such measures to help ensure passage.
Other possibilities include a child-care initiative and an increase in the minimum wage.
If they can't secure immediate passage of a capital-gains plan, administration officials also aren't ruling out making a deal with Congress to put off a vote until a firm date in the future, even next year.
But the officials insist that such a deal on a future vote would have to apply to both the House and the Senate.
Gerald F. Seib contributed to this article.
Japanese immigration authorities said they found 658 more Chinese among Vietnamese boat people, bringing the number of Chinese trying to enter Japan by posing as Vietnamese refugees this year to 1,642.
Japan plans to send the Chinese back home and is negotiating with the Chinese government, a Justice Ministry official said.
The Chinese were among 3,372 boat people supposedly from Vietnam who arrived in Japan this year, compared with 219 for all of 1988, the official said.
The 658 Chinese, who have been in a refugee-assistance center, were sent to immigration facilities yesterday pending deportation to China, the official said.
On Sept. 13, Japan began a policy of screening boat people, accepting only those deemed to be political refugees.
Francoise Verne, 52-year-old former deputy director of France's mint, faces prison for her theft of some 67 rare coins from the mint's collections.
Second in command from 1979 to 1984, Mrs. Verne told a Paris court that the "great disorder" that reigned at the agency led her into temptation.
Before an inventory in 1984 that showed the "disappearance" of 944 coins valued at about 2.9 million French francs (about $465,000), there hadn't been any stock-taking since 1868.
Tony Lambert, Mrs. Verne's successor, says the mint's losses from the theft run into the hundreds of thousands of francs.
El Salvador is destroying more than 1.6 million pounds of food that had rotted in government warehouses, government officials said.
The state Supply Regulator Institute is to burn rice, corn and beans that spoiled because of neglect and corruption in the previous Christian Democrat government, a statement from the information service SISAL said.
During the past administration the foodstuffs were first bought by the institute, then sold at low prices to "unscrupulous businessmen" who resold them to the institute at inflated prices, the statement said.
A black-draped cruise liner sailed into Naples yesterday bringing 800 Libyans threatening vengeance if Italy refuses to pay compensation for more than 30 years of colonial rule.
Another 250 Libyans were already in Italy to stage a day of mourning for victims of Italy's colonial rule between 1911 and 1943, when Tripoli says Rome kidnapped 5,000 Libyans and deported them as forced labor.
Libya's revolutionary Committees have threatened attacks on Italians if Rome doesn't pay compensation.
But officials in Rome say the issue was legally resolved by a settlement between Italy and King Idris, deposed by Col. Muammar Gadhafi in 1969.
Canadian Indians are taking five countries to court in a bid to stop low military flights over their homes, the Dutch Defense Ministry said.
Representatives of the Inuit and Cree peoples living in Quebec and Labrador in northeastern Canada told the ministry of the planned action at a meeting, a ministry spokesman said.
They also wanted to prevent a NATO training base being built in the region, he said.
The action, in the Canadian Federal Court, will be against Canada, the Netherlands, West Germany, Britain and the U.S., the ministry spokesman said.
Japan suspended imports of French mushrooms after finding some contaminated by radiation, an official of the Ministry of Health and Welfare said.
Japan has been testing imported food from Europe since the April 1986 Chernobyl accident in the Soviet Union, the spokesman said.
Since then, the ministry has announced 50 bans on food imports from European countries, including Italy, Spain, Turkey, Greece and the Soviet Union.
The Venice city council is battling plans to tap huge gas fields off the coast that it says will speed up the city's slow sinking into its lagoon.
AGIP, the state-owned energy giant, made the announcement about the gas field last month.
Located six miles northeast of Venice, the field contains 875 billion cubic feet of methane gas-one-tenth of Italy's reserves.
Alarmed councilors say the project could jeopardize costly efforts to stop, or slow down, the subsidence that makes Venice subject to regular and destructive flooding.
The council unanimously opposed the idea of AGIP pumping out the methane gas and swiftly appealed to the company and to Prime Minister Giulio Andreotti, who has yet to reply.
AGIP refused to reconsider and says drilling is due to start early next year.
"It's unlikely extracting the gas will cause subsidence," says a spokeswoman.
Thieves stole a 12th century fresco from an abandoned church in Camerino, Italy, by removing the entire wall on which the work had been painted, police said. . . .
West Germany's BMW commissioned the Nuremberg post office to test a prototype battery-powered car.
The vehicle has a top speed of 65 miles an hour and requires recharging from a standard wall socket every 100 miles.
Total Assets Protection Inc., rebounding from its earlier loss, expects to report earnings from operations of about $200,000 for the third quarter, J.C. Matlock, chairman, said.
Net income includes an extraordinary gain of about $100,000 from the reversal of bad debt and interest income.
Revenue was about $4.5 million.
In the 1988 third quarter, the company posted a net loss of $876,706, or 22 cents a share, on revenue of about $5.1 million.
Total Assets plans and designs computer centers, computer security systems and computer backup systems.
Regarding your Oct. 4 page-one article "Bad Blood" on the generic-drug battle: The Epilepsy Institute is not just a patient-advocacy organization.
It is primarily a certified outpatient treatment facility providing comprehensive services to people with epilepsy and their families.
The institute's advocacy efforts are based on the needs of the population it serves and represents.
In 1985, the Medical Tribune reported that a growing number of critics are challenging the FDA bioequivalence-therapeutic-equivalence equation.
"They contend it is based on an assumption that has not yet been proven in valid tests," the Tribune said.
In 1986, some institute patients were reporting breakthrough seizures when they were switched from a specific brand-name medication to a generic one or from one generic manufacturer of a specific product to another.
In addition, neurologists were beginning to report these observations as well.
Call it anecdotal if you will.
But no ethical physician would switch patients who were doing well on a specific medication from a specific manufacturer to prove a point.
We do not depend on pharmaceutical companies for our support.
The institute has governmental service contracts for the provision of direct patient services; collects patient fees; receives money through contributions from individuals, foundations and bequests.
The funds received from pharmaceutical firms are used to offset physician symposiums, and these symposiums do not stress any particular medication or manufacturer.
The Epilepsy Institute's reporting of breakthrough seizures stemmed from concerns about the people we treat and care about daily.
This perhaps was perceived as a "bold" stance, and thus suspicious.
But let us not confuse profits of big business masquerading as concerns for people's health care or for the cost.
For whom is the saving?
Surely not to people with epilepsy who depend on the same levels of medication in their bloodstream daily to maintain seizure control.
Reina Berner
Executive Director
Arnold M. Katz
Parker Hannifin Corp. said it agreed to sell its three automotive parts divisions to a management-led investor group for $80 million.
The buy-out group is headed by Paul R. Lederer, president of Parker's automotive group, and includes several other executives of the three divisions.
The units are the Edelmann, Ideal and Plews divisions.
Net sales for the units for the fiscal year ended June 30 were $135.6 million.
Parker officials said the company is selling the units to focus on its other businesses.
A volcano will erupt next month on the fabled Strip: a 60-foot mountain spewing smoke and flame every five minutes.
The man-made inferno will tower over a man-made lagoon with more than four acres of pools, grottoes and waterfalls.
Visitors, whisked from the Strip on a moving walkway, will glide over a habitat for rare white tigers, which will star in performances by the famed illusionist team of Siegfried & Roy.
Nearby, six dolphins will frolic in a 1.5 million-gallon saltwater aquarium.
At the core of all this stands a hotel.
In the lobby behind its nine-story, orchid-strewn atrium, a 20,000-gallon aquarium will come alive with sharks, stingrays, angelfish, puffers and other creatures of the deep.
And oh, yes.
There's a casino, the financial heart of it all.
This is the Mirage, a $630 million island-fantasy hotel-casino now being completed for opening in November by Golden Nugget Inc.
It's the most stunning example of Las Vegas's concerted effort to transform itself into a world-famous vacation resort for families as well as gamblers.
Las Vegas has seen nothing quite like it before.
Not for 15 years has a big new hotel-casino opened here.
Now the Mirage and Circus Circus Enterprises Inc.'s $290 million Excalibur are going up.
The Excalibur, with a castlelike hotel, jousting tournaments and other Arthurian attractions, will be able to handle up to 30,000 visitors a day when it opens in 1990.
If MGM Grand Inc. proceeds with its plan for an amusement park -- a $700 million movieland resort with a working studio, casino and 5,000-room hotel that would become Las Vegas's biggest -- the investment in the three properties will total some $1.6 billion.
MGM Grand has agreed to buy a 117-acre site for the resort for $93 million in cash plus stock currently valued at nearly $30 million.
Smaller projects swell the figure to at least $2.5 billion.
Still other projects that have been announced but not yet started could put expenditures above $3 billion over the next few years.
Stephen A. Wynn, who owns 29.4% of Golden Nugget's shares, says the Mirage and other projects will help Las Vegas attract a whole new generation of visitors.
"If you create a wonderment, if you create something so exciting that the public dreams of being part of it, then they'll come," he says.
The projects already under construction will increase Las Vegas's supply of hotel rooms by 11,795, or nearly 20%, to 75,500.
By a rule of thumb of 1.5 new jobs for each new hotel room, Clark County will have nearly 18,000 new jobs.
The county at the end of 1988 had 307,000 jobs, 95,400 of them in the tourist industry.
Projects in the talking or blueprint stage would add a further 48,000 rooms.
Hotel-casino operators play down the possibility of a labor shortage.
After all, 40,000 newcomers a year are settling in the Las Vegas Valley.
But Nevada state labor economists think a shortage is probable.
Nobody yet seems to have calculated the total number of slot machines, crap tables or roulette wheels Las Vegas will add to the enormous store that Lady Luck already guards here, much less the ultimate impact of the growth on schools and municipal services.
"Traffic is certainly a concern, as is pollution, water and an adequate labor market," says Frank Sain, executive director of the Las Vegas Convention and Visitors Bureau.
City fathers have managed to push through projects that are crucial for tourist growth, such as the expansion of McCarran International Airport to accommodate the 44% of Las Vegas tourists who fly here.
This year, by one means of transport or another, more than 18 million people will visit the city.
The expansion will set off a marketing war among the big hotel-casinos.
Las Vegas promises, or threatens, to become a giant carnival, with rooms to be had for $45 a day or less, for visitors uninspired solely by gambling.
Amid a riot of jousting knights, circus clowns, gold-leaf centurions and creatures of the wild, lesser competitors will fall.
Caesars World Inc. plans to defend its august reputation by sinking $190 million into its opulent Caesars Palace, next door to the new Mirage, and adding a $100 million shopping area reminiscent of Rodeo Drive.
The Palace, with its marble fountains and toga parties for high rollers, is already well-known for its Caesarean theme.
The Flamingo Hilton, Imperial Palace, Frontier and others are pouring millions of dollars into facelifts, new room towers and casino floor space just to keep up.
Where's this huge amount of investment capital coming from?
Golden Nugget, Drexel Burnham Lambert Inc.'s first casino client, has borrowed on more than $600 million worth of mortgage notes, mostly sold to private investors by Drexel, to build the Mirage.
Other casino owners, Circus Circus among them, are financing their expansion with their own cash and revolving credit lines from local lenders such as First Interstate Bank of Nevada.
Will the investments pay off?
The growth of Las Vegas tourism in recent years persuades lenders that they will.
Casino revenues and hotel occupancy rates are high.
Last year, the tourists left $3 billion with the area's casinos, nearly 10% more than in 1987.
The people with a stake in Nevada's gambling industry believe that they have barely tapped the potentially huge family trade.
"If you build a better mousetrap, it will catch more mice," says Fred Benninger, chairman of MGM Grand.
Ellen Cokely, a tourist from Alton, Ill., seems inclined to agree.
"I'd love it if my daughter had something else to do here," says Ms. Cokely, watching seven-year-old Kristin on the water slide at the Strip's Wet 'n' Wild water park.
"Two generations ago, Dad came to Las Vegas by himself for a little diversion," says Van Heffner, executive vice president of the Nevada Hotel and Motel Association.
"One generation ago, Mom joined Dad.
Now, in the '90s, we're headed toward a total resort environment."
Only a decade or so ago, casino managers balked at in-room TV sets and other fripperies that distracted from gambling.
Casinos today offer bowling alleys, water parks, golf courses, tennis courts, lush swimming pools and other diversions, and more such facilities are being designed.
Despite the new emphasis on the family trade, however, tourists in search of naughtier fun than gambling seem certain to find it, with Las Vegas call girls remaining on the scene.
A serious economic downturn, pessimists observe, could hurt the expansionists.
For now, however, the naysayers' voices are drowned by the roar of cement mixers and the clanging of construction cranes along the Strip.
This is no place for pedestrians, but at 7:30 on a recent morning, when construction choked traffic at the famous Four Corners intersection to one lane, a taxi passenger found it faster to abandon the cab and walk to her destination.
The ferocious competition probably will drive some poorly managed properties into bankruptcy or new ownership.
It has happened before.
The Dunes, the Aladdin and the Riviera were all acquired by the present owners from bankruptcy proceedings spawned by the last recession, in the early 1980s.
Yet that hasn't discouraged investors.
Some have bought big chunks of Strip property for what may turn into another wave of building.
Atlantic City casino owner Donald Trump is scouting the Las Vegas market with an eye toward building an appropriately spectacular place.
Even before the huge new projects began, the Strip's recent expansion squeezed smaller competitors.
Many blue-collar customers of downtown's no-frills gambling spots have been lured to the Strip or to Laughlin, Nev., a Colorado River town catering to snowbirds and the recreational-vehicle crowd.
Hotel expansion and an influx of more-discriminating tourists have hurt motels.
Since 1979, the number of motel rooms has fallen by 17,000.
Many people here expect a room-rate war as the new projects open.
"There's probably going to be some pressure on occupancy and room rates over the next year, but after that you should see the market return to 80%-plus occupancy and regular rates," says Paul Rubeli, casino executive at Ramada Inc., which runs the Tropicana.
Skeptics wonder whether mega-resorts such as the Mirage will be able to squeeze a profit from their cash flow.
The Mirage will cost at least $1 million a day to operate.
Mr. Wynn seems confident that it will produce a healthy profit, but some securities analysts doubt it.
Competitors and analysts say that among large existing properties Bally Manufacturing Corp.'s Bally Grand hotel-casino probably will be hardest hit among major properties.
Bally officials decline to discuss the situation.
Bally bought the former MGM Grand hotel-casino from Kirk Kerkorian four years ago.
Only now is it undergoing a badly needed facelift.
Its parking lot is inconvenient, the MGM lion's-head logo still appears in places, and customers still call it the Grand, rather than the Bally Grand.
It has a "great location, but they're going to have some real problems when everyone around them opens," says Daniel Lee, a Drexel analyst.
Older properties that still have a 1950s image are also vulnerable.
Any hotel-casino without a strong identity will get whacked by the new competition, says Glenn Schaeffer, senior vice president of Circus Circus.
"If you don't know what you are, bigger won't make you better," he says.
"But it'll sure make you poorer."
Circus Circus's flagship casino has become the envy of competitors for its ability to vacuum cash from the pockets of vacationing families.
The Circus Circus lures them with low room rates, inexpensive buffets and entertainment for children at no extra charge.
The company's Excalibur will also appeal to families, of course.
Its castle, Mr. Schaeffer says, will be "the most compelling piece of folk architecture ever built."
Some casino owners have resisted the temptation to add rooms.
Instead, they are spending to reinforce the identity that they believe attracts their customers.
"More rooms aren't the answer for us," says Caesars World chairman Henry Gluck.
While his company's hotel is building a retail complex in Beverly Hills style and redoing existing rooms, it has decreased the number of its rooms.
Some have been combined into suites for the high rollers.
Caesars has made a specialty of catering to high rollers from abroad, who are also being aggressively courted by the Mirage, the Las Vegas Hilton and others.
Other, smaller concerns are also pursuing market niches -- Hawaiian tourists, for example, or the local trade.
"There's still room for boutique properties," says James Barrett, president of MarCor Resorts Inc.
Off the Strip, MarCor is building the Rio, a hotel-casino with a Brazilian theme and only 430 rooms -- all of them suites.
Despite the proliferation of tourist distractions, Las Vegans haven't forgot that gambling is still what the town is all about.
"The days when when the thrust of casinos was all high rollers, with no windows and clocks and lots of red and black decor, are gone," Mr. Sain of the visitors' bureau says.
"But 93% of tourists still come for gambling.
We can't lose sight of that.
NORTH SIDE SAVINGS BANK directors declared an initial dividend of 10 cents a share, payable Dec. 5 to stock of record Nov. 21.
The Floral Park, N.Y., thrift has a strong capital-to-assets ratio, said Vice President Michael D.N. Confer.
At Sept. 30, the thrift, which converted to a stock form of ownership from a mutual form in April 1986, had more than four million shares outstanding.
ARTICLE I, SECTION 7, CLAUSE 2:
Every Bill which shall have passed the House of Representatives and the Senate, shall, before it becomes a Law, be presented to the President of the United States; If he approve he shall sign it, but if not he shall return it, with his Objections to that House in which it shall have originated, who shall enter the Objections at large on their Journal, and proceed to reconsider it.
If after such Reconsideration two thirds of that House shall agree to pass the Bill, it shall be sent, together with the Objections, to the other House, by which it shall likewise be reconsidered, and if approved by two thirds of that House, it shall become a Law. . . .
ARTICLE I, SECTION 7, CLAUSE 3:
Every Order, Resolution, or Vote to which the Concurrence of the Senate and House of Representatives may be necessary (except on a question of Adjournment) shall be presented to the President of the United States; and before the Same shall take Effect, shall be approved by him, or being disapproved by him, shall be repassed by two thirds of the Senate and House of Representatives, according to the Rules and Limitations prescribed in the Case of a Bill.
President Bush told reporters a few months ago that he was looking for the right test case to see whether he already has the line-item veto.
Vice President Quayle and Budget Director Darman said recently they've joined the search.
On Tuesday, the subject came up again when Marlin Fitzwater explained the constitutional argument based on the provisions above to the White House press corps.
President Bush doesn't have any provision in mind, but line-item-veto bait will be like earthworms at midnight in the coming Continuing Resolution.
The harder question is whether anyone yet understands that Mr. Bush's fight for his constitutional prerogatives is about politics as much as it is about law.
We have been persuaded by the constitutional argument for the inherent line-item veto since 1987, when lawyer Stephen Glazier first made the case on this page.
The 1974 budget "reform," passed over President Nixon's veto, took away the presidential impoundment power, thereby introducing monstrous CRs and eviscerating the presidential veto.
Mr. Glazier discovered that the Founders had worried that Congress might take the President out of the loop.
Article I, Section 7, Clause 3 says that whether it's called an "order, resolution or vote" or anything else, Presidents must have the chance to veto.
Labeling an omnibus budget a "bill" can't deprive the President of his power to veto items.
Finding a test case shouldn't be hard, but there is something to be said for picking the best one possible.
The White House had the perfect case, but Congress blinked before it could go to court.
After the HUD and S&L stories broke, some Congressmen began to worry that their influence peddling at executive-branch and independent agencies might some day get them in trouble.
They worried about an Interior Department directive to log all communications with Members or their staffs.
Congress inserted the following into the Interior appropriation: "None of the funds available under this title may be used to prepare reports on contacts between employees of the Dept. of the Interior and Members and committees of Congress and their staff."
The White House warned that this would be an unconstitutional usurpation of its power.
When it threatened to use this provision as the test for a line-item veto, Congress caved.
The fear Congress has of any line-item-veto test led Members to add the single most contorted and ridiculous provision this year, "This section shall be effective only on Oct. 1, 1989."
This means Interior contacts cannot be logged only on one day -- a Sunday that had already passed.
If the White House is looking for another unconstitutional bill, Rep. John Dingell is trying again to raise the Fairness Doctrine from the dead.
President Reagan vetoed this as a First Amendment violation.
The "Fairness" Doctrine's enthusiasts are incumbents in the House who know the rules squelch lively discussions on broadcasts, deterring feisty challengers.
There are also other provisions requiring Congressmen to join treaty-negotiating teams and new restrictions on OMB.
Unconstitutional bills make good legal targets, but the line-item veto is better understood as a political opportunity than as mere fodder for lawyers.
Commenting on the budget mess this week, President Bush said: "The perception out there is that it's the fault of Congress.
And you can look to the leadership and ask them why that is the perception of the American people."
Exactly right.
Now's the time to make the political case that Presidents need the line-item weapon to restore discipline to the budget.
Congress is in no position to naysay Mr. Bush now that we're into Gramm-Rudman's sequestration.
Just this week, the House-Senate conference met -- 231 conferees, divided into 26 different subconferences.
Senator Daniel Inouye agreed to close some bases in Hawaii in exchange for such goodies as $11 million for a parking lot at Walter Reed Hospital.
Conference negotiator Rep. Bill Hefner pulled down $40 million in military bases for North Carolina and graciously allowed Senator James Sasser $70 million for bases in Tennessee.
President Bush should take the Constitution in one hand and a budget ax in the other and get to work.
He should chop out both unconstitutional provisions and budget pork.
Congress may have lost any sense of discipline, but that doesn't mean the country must learn to live forever with this mess.
President Bush has the power to change how Washington works, if only he will use it.
Troubled SCI Television Inc. proposed to restructure much of its $1.3 billion in debt to buy time to sell assets and pay its obligations.
The leveraged buy-out firm of Kohlberg Kravis Roberts & Co., which owns 46% of the common equity of SCI TV, indicated in the debt plan that it would reduce its equity stake to 15%, giving the rest of its stake to bondholders in the restructuring.
KKR also signaled to the company's creditors that Henry Kravis and other KKR directors of SCI TV would resign from the board once the restructuring is completed and forgo their voting rights.
Holders of SCI TV's $507 million of high-yield junk bonds are being asked to forgive a lot of debt in exchange for taking a 39% equity stake in SCI TV.
They immediately termed the proposal inadequate and said the restructuring would not solve the company's problems.
"I think the current plan is sufficiently flawed in a sufficient number of bondholders' eyes that substantial revisions will be required to get it done," says analyst Craig Davis of R.D. Smith & Co. here.
Investors interpreted the KKR move as a desire by the firm to wash its hands of SCI TV.
But a spokesman for KKR says that with only a 15% equity stake, it wouldn't be appropriate for KKR to keep board representation.
KKR already has made about $1 billion of gains from earlier transactions with SCI TV, thus it isn't significantly affected by the company's troubles.
SCI TV, which is controlled by Nashville, Tenn., entrepreneur George Gillett, owns six TV stations, including several CBS Inc. affiliates.
It is having trouble meeting its debt payments because of heavy borrowing in 1987 for a leveraged buy-out.
Through investment banker Drexel Burnham Lambert Inc., SCI TV is offering to exchange three classes of junk bonds for packages of new bonds and equity that investors value at ranges from 20 cents to 70 cents on the dollar.
KKR would give up a 31% equity stake to bondholders, while Mr. Gillett would surrender an 8% stake.
While one big SCI TV investor thinks that's pretty generous, many junkholders had been hoping that KKR and Mr. Gillett would invest new money in SCI TV.
Those investors think SCI TV needs new equity to survive.
SCI TV's debt restructuring plan would defer payment of $153 million of bank debt.
It also would defer interest and principal on junk bonds that have fallen due; the grace period for paying the bill expires Nov. 16.
At the same time, investors estimate the restructuring would cut the company's annual cash interest bill from about $90 million to $85 million.
Yet to pay that interest bill, analysts say SCI TV will only produce about $80 million to $90 million of cash flow a year.
Office Market Weakens In Overbuilt Northeast
THE NORTHEAST office market is feeling serious aftereffects of the giddy overbuilding of the 1980s.
Foreclosures and other signs of financial distress, most often associated with the real estate market in the Southwest, are surfacing in the suburban office market of the once thriving Northeast.
Some projects are now in the hands of lenders, including a 425,000-square-foot office facility in Little Falls, N.J.
The owners of a 32-acre hotel and office complex in King of Prussia, Pa., have advertised for new financing.
Rising office vacancy rates in Fairfield County, Conn., have builders and bankers scrambling to restructure loans.
And in suburban Boston, developers are bracing for cutbacks in the computer industry, a major user of office space.
Many troubled properties haven't been foreclosed on and are hard to identify, says Albert I. Berger, who heads the Secaucus, N.J., office of Helmsley-Spear Inc., a real estate brokerage.
Owners are voluntarily -- and quietly -- turning over properties to lenders through "deeds in lieu of foreclosure."
Often, developers stay on as property manager.
Real estate analyst Lloyd Lynford says the Northeast's distress is masked by relatively low vacancy rates.
But in today's overbuilt market, tenants have many choices and are negotiating low rents that squeeze building owners.
On average, Mr. Lynford says, it now takes three to 3 1/2 years to fill new office space, compared with 2 1/2 years in 1988.
Beverly Hills Comes To Suburban Tokyo
WHY SHOULD the Japanese cross the Pacific to buy American real estate when they can simply recreate it at home?
Tokyu Development Corp. is spending $500 million to build American-style luxury homes in suburban Tokyo with rarely seen back yards, front yards, swimming pools and tennis courts.
The Japanese company hired Richardson Nagy Martin, a Newport Beach, Calif., architectural firm, to design what the Japanese press has dubbed "the Beverly Hills of Tokyo."
Instead of Japan's typical small homes clustered on narrow streets with no sidewalks, the new "One Hundred Hills" development will offer 65 houses on half-acre lots.
That's more than 10 times the usual housing site size.
Buyers with $6 million to spend can select from 11 designs, including a Mediterranean-inspired California style, a traditional Yankee look and designs inspired by Midwestern architect Frank Lloyd Wright.
There are spacious living rooms and baths, plus a master grandparents suite and a foyer for removing shoes to suit Japanese life styles.
Exteriors are faced with brick, wood or stone, but the homes are made of steel-reinforced concrete.
"We were disappointed we couldn't use wood," says architect Walter J. Richardson, "but the Japanese only want stronger materials."
At $1,000 per square foot, the Japanese want the feeling of indestructibility, he explains, not to mention protection from possible earthquake damage.
Housing Developers Try Brand-Name Buildings
RESIDENTIAL builders, faced with a more competitive market, are turning to a traditional consumer marketing technique to establish brand-name identity.
"One of the difficulties people in real estate have is that each product is like starting a new company, or starting a new line in the fashion business," says L. Robert Lieb president of Mountain Development Corp. in West Paterson, N.J.
So he's using "river" in many project names.
"It'll never be like what Bristol-Myers does," he adds, "but it helps establish recognition with the public -- and with banks."
Weingarten-Siegel Group Inc. of Manalapan, N.J., has built Cross Creek Pointe, Allegro Pointe and other Pointes in New Jersey.
Caspi Development Corp of Armonk, N.Y., has developed two apartment buildings called Classic and plans a third.
Developer Steve Caspi says the same brand name indicates consistent quality, "regardless of location, design or amenities."
The leader in real estate brand names is developer Ara Hovnanian.
His entry-price condos are labeled Society Hill.
Beacon Hill is for "move-up" town houses, and Nob Hill, for single-family houses.
Because of standardized designs, Mr. Hovnanian says, "a buyer can visualize Society Hill regardless of where it is."
Quake Not Likely to Jolt The Commercial Market
THE EARTHQUAKE in San Francisco has sent few tremors through the hearts of real estate investors.
"I think there's a disease called buyer's regret, and I'm sure it's running rampant at this moment, but it gets cured in a short period of time," says Kenneth Leventhal, co-managing partner of Kenneth Leventhal & Co., a Los Angeles accounting firm specializing in real estate.
"If I were buying a building in San Francisco now the first thing I'd do is insist on a structural inspection, then I'd delay a little, stall a little."
But like other real estate professionals accustomed to California's quake risks, Mr. Leventhal anticipates little long-term change in the city's commercial real estate market.
Still, local builders are eager to tell the world that most of San Francisco doesn't look like the TV images of destruction.
Planners of the Urban Land Institute real estate conference this week hastily added a panel on the quake's effects.
"The message is we build'em right," says Peter Bedford, a California developer and officer at Urban Land Institute.
"There's seven million square feet of space that's doing great.
HEALTH CLUBS gear up for a graying clientele.
Although their ads picture curvy young people in skimpy outfits, club owners know the future lies with the lumpier over-40 set.
"It's a misconception that physical fitness is something for the young and middle-aged," says Michael Pacholik, sales manager of the LA Fitness club, Diamond Bar, Calif.
About 10% to 15% of members at Atlanta's Holiday Espre Center are elderly, says Gerald Williams, fitness consultant.
"Most want cardiovascular conditioning . . . the No. 1 way of reducing risk of heart disease."
The Association of Quality Clubs, which puts 1988 industry revenue at $5 billion, surveyed the health-conscious over-40 market and found that 43% exercise regularly.
Michael Hays, head of ProBody Fitness, notes an industry "wash" is in progress.
"Clubs need to be run like restaurants where every square foot makes a dollar," he says.
Older people help profits by filling in "downtime."
He adds: "The medical market and the fitness market parallel each other and are going to cross real soon."
People on fixed incomes get a break at Espre; over 55 wins a 45% discount at Anaheim Imperial Health Spa.
"HOT" TOPAZ sparks regulator, jeweler concern over import of irradiated stones.
A committee of gem dealers investigates the source of some "hot" blue topaz stones recently reported by a Hong Kong jewelry manufacturer.
In the U.S., radiation limits are set and monitored by the Nuclear Regulatory Commission, which licenses reactors that process the topaz.
The agency is working on licensing importers but doesn't currently monitor imports.
Topaz, a translucent mineral that is often whitish when taken from the ground, can be turned blue by irradiation, which transforms it into a gemstone that looks like an aquamarine.
"The {stones} that were irradiated in the U.S. are safe," says John Hickey, chief of the NRC operations branch, Washington.
"We believe that the vast majority of imported material is safe.
But there is a small risk that some were imported with high radiation levels."
Mr. Hickey added that the stones found in Hong Kong are thought to carry double the U.S. radiation limit, although he noted that double or even triple the U.S. limit is "still in the range of safe levels."
Some jewelers have Geiger counters to measure topaz radiation.
CAPITAL TRAVELS to Europe as 1992 unification nears.
Boston's Advent International raises $230 million from U.S. pension funds and other institutions to invest in Europe.
Other venture capitalists are already there: MMG Patricof Group and its Alan Patricof Associates, New York; Burr, Egan, Deleage & Co., Boston; and San Francisco's Hambrecht & Quist have about $800 million to invest in European companies.
European venture capital funds total about $14 billion and are expected to continue growing 35% annually.
Continentals believe that the strongest growth area will be southern Europe.
Spain and Italy are most often mentioned as the future economic hot spots.
Favored ventures include media, telecommunications and retailing.
Most popular acquisition method: the leveraged buy-out.
Family-owned firms that need cash to grow are attractive, says John Turner of Matuschka Gruppe, Munich.
AN AIDS DIRECTORY from the American Foundation for AIDS Research rates and reviews educational materials.
"Learning AIDS" lists films, pamphlets, brochures, videos and other educational data.
The distributor is R.R. Bowker, New York.
SUSPECT "SALES" ads are challenged by the Better Business Bureau of Metropolitan New York.
The bureau found that only two of six New York furniture stores could prove their presale prices were higher.
DRACULA'S BUSY this time of year, but a visit to his Transylvania castle is part of a Chicago-based Unitours trip in the spring, presumably the count's off-season.
RADIO MALAISE draws the ear of the Federal Communications Commission.
AM radio, which has been losing listeners to FM channels since the 1970s, approaches the 1990s with a diminished voice.
But it may have a good listener in Washington.
The FCC plans to hear a day of testimony Nov. 16 on the plight of AM radio.
The commission believes that improving AM service would broaden listening selections and increase options for advertisers.
The issues are also thought to be important to the FCC's new chairman, Alfred Sikes, a former AM broadcaster in his native Missouri.
The FM radio band, considered technically superior because it can carry stereo broadcasts, has cornered the airwaves for delivering music.
AM stereo remains largely undeveloped because it lacks a uniform delivery system.
The National Association of Broadcasters in June adopted an agenda for revitalizing AM radio that includes, among other things, pursuing further FCC action on selecting an AM stereo standard and seeking a law requiring all stereo receivers to include AM stereo.
Listeners turned to radios run on batteries for news when the San Francisco earthquake and Hurricane Hugo cut power lines.
BRIEFS:
A Modern Healthcare magazine article says 40% of surveyed executives admitted falling asleep during formal presentations. . . .
Lee Co., the jeans maker, celebrates its 100th anniversary with a hardcover yearbook featuring photos of its 10,000 employees.
Kemper Financial Services Inc., charging that program trading is ruining the stock market, cut off four big Wall Street firms from doing any of its stock-trading business.
The move is the biggest salvo yet in the renewed outcry against program trading, with Kemper putting its money -- the millions of dollars in commissions it generates each year -- where its mouth is.
The Kemper Corp. unit and other critics complain that program trading causes wild swings in stock prices, such as on Tuesday and on Oct. 13 and 16, and has increased chances for market crashes.
Over the past nine months, several firms, including discount broker Charles Schwab & Co. and Sears, Roebuck & Co.'s Dean Witter Reynolds Inc. unit, have attacked program trading as a major market evil.
Several big securities firms backed off from program trading a few months after the 1987 crash.
But most of them, led by Morgan Stanley & Co., moved back in earlier this year.
The most volatile form of program trading is index arbitrage -- the rapid-fire, computer-guided buying and selling of stocks offset with opposite trades in stock-index futures and options.
The object is to capture profits from fleeting price discrepancies between the futures and options and the stocks themselves.
Index arbitrage recently has accounted for about half of all program trading on the New York Stock Exchange.
Last month, program trading accounted for 20.9 million shares a day, or a record 13.8% of the Big Board's average daily volume.
On Tuesday afternoon, Kemper told Bear, Stearns & Co., General Electric Co.'s Kidder, Peabody & Co. unit, Morgan Stanley and Oppenheimer & Co. that it will no longer do business with them because of their commitment to index arbitrage, officials inside and outside these firms confirmed.
Kemper officials declined to identify the firms but acknowledged a long-simmering dispute with four securities firms and said the list of brokers it won't do business with may be lengthened in the months ahead.
"We've been opposed to" index arbitrage "for a long time," said Stephen B. Timbers, chief investment officer at Kemper, which manages $56 billion, including $8 billion of stocks.
"Index arbitrage doesn't work, and it scares natural buyers" of stock.
While Mr. Timbers explained he's "not totally convinced index arbitrage changes the overall level of the stock market," he said that "on an intraday basis, it has major effects.
We've talked to proponents of index arbitrage and told them to cool it because they're ruining the market.
They said, `Too bad,' so we finally said we're not going to do business with them."
Kemper also blasted the Big Board for ignoring the interests of individual and institutional holders.
"The New York Stock Exchange has vested interests" in its big member securities firms "that cloud its objectivity," Mr. Timbers said.
"It has never been interested in what we think.
The Big Board also has a terrible communication problem with individual investors," he added.
Small investors perceive that "big operators" dominate the market, said Thomas O'Hara, chairman of the National Association of Investors and head of the exchange's Individual Investors Advisory Committee set up after the 1987 crash.
"The impression I've got is they'd love to do away with it {program trading}, but they {the exchange} can't do it," he said.
Big Board Chairman John J. Phelan said in a recent interview that he has no inclination to eliminate program trading.
He said the market's volatility disturbs him, but that all the exchange can do is "slow down the process" by using its circuit breakers and shock absorbers.
Mr. Timbers countered that "the mere fact they put in circuit breakers is an admission of their problems."
Morgan Stanley and Kidder Peabody, the two biggest program trading firms, staunchly defend their strategies.
"We continue to believe the position we've taken is reasonable," a Morgan Stanley official said.
"We would stop index arbitrage when the market is under stress, and we have recently," he said, citing Oct. 13 and earlier this week.
Michael Carpenter, president and chief executive officer at Kidder Peabody, said in a recent interview, "We don't think that index arbitrage has a negative impact on the market as a whole."
According to Lawrence Eckenfelder, a securities industry analyst at Prudential-Bache Securities Inc., "Kemper is the first firm to make a major statement with program trading."
He added that "having just one firm do this isn't going to mean a hill of beans.
But if this prompts others to consider the same thing, then it may become much more important.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
Blockbuster Entertainment Corp. -- $300 million (redemption amount) of zero-coupon convertible notes, also known as liquid yield option notes, due Nov. 1, 2004, priced at 308.32 to yield at maturity 8%.
The notes are zero-coupon securities and will not pay interest periodically.
The size of the offering was increased from the originally planned $250 million (redemption amount).
The notes are convertible into common stock of Blockbuster Entertainment at $22.26 a share, representing a 12% conversion premium over yesterday's closing price.
Rated Ba-3 by Moody's Investors Service Inc. and single-B-plus by Standard & Poor's Corp., the issue will be sold through Merrill Lynch Capital Markets.
Merrill Lynch & Co. -- $200 million of 8.4% notes due Nov. 1, 2019, priced at 99.771 to yield 8.457%.
The issue, which is puttable back to the company Nov. 1, 1994, was priced at a spread of 70 basis points above the Treasury's five-year note.
Rated single-A-1 by Moody's and single-A-plus by S&P, the noncallable issue will be sold through underwriters led by Merrill Lynch Capital Markets.
Boise Cascade Corp. -- $150 million of 9.45% debentures due 2009, priced at 99.7.
ITT Financial Corp. -- $150 million of 8.35% subordinated notes due Nov. 1, 2004, priced at 99.85 to yield 8.387%.
The noncallable issue, which is puttable back to the company Nov. 1, 1994, was priced at a spread of 62.5 basis points above the Treasury's five-year note.
Rated single-A-2 by Moody's and single-A by S&P, the issue will be sold through underwriters led by Merrill Lynch Capital Markets.
ITT Financial is a subsidiary of ITT Corp.
Arco Chemical Co. -- $100 million of 9.35% debentures due Nov. 1, 2019, priced at 98.518 to yield 9.50%.
Rated single-A-2 by Moody's and single-A by S&P, the issue will be sold through underwriters led by Salomon Brothers Inc.
Trinity River Authority, Texas -- $134.8 million of regional wastewater system improvement revenue bonds, Series 1989, due 1992-2000, 2009 and 2016, through a Shearson Lehman Hutton Inc. group.
The bonds, insured and rated triple-a by Moody's and S&P, were priced to yield from 6.30% in 1992 to 7.25% in 2016.
There are $46,245,000 of 7% term bonds due 2009, priced at 97 7/8 to yield 7.20%, and $64.9 million of 7.1% term bonds due 2016, priced at 98 1/4 to yield 7.25%.
Serial bonds, which all carry 7% coupons, are priced to yield from 6.30% in 1992 to 7% in 2000.
Beverly Hills, Calif. -- $116,385,000 of refunding certificates of participation (civic center improvements project), due 1990-2004, 2007, 2016 and 2019, tentatively priced by a Goldman, Sachs & Co. group to yield from 6% in 1990 to 7.19% in 2016.
Serial certificates yield to 7.10% in 2004.
They are all priced at par.
There are $12,915,000 of 7% term certificates due 2007, priced to yield 7.15%.
The $58.9 million of 7% certificates due 2016 carry the issue's high yield, priced at 97 3/4 to yield 7.19%.
There are also $29 million of 6 3/4% certificates due 2019, priced to yield 7.10%.
The bonds are rated single-A-1 by Moody's and double-A-minus by S&P, according to the lead underwriter.
Michigan -- $80 million of first general obligation bonds (Series 1989 environmental protection program and recreation program), tentatively priced by a Shearson Lehman Hutton group to yield from 6% for current interest bonds due 1990 to 7.25% for convertible capital appreciation bonds.
Environmental protection program current interest bonds are due 1995-1999, 2005 and 2009.
They are tentatively priced to yield from 6.45% in 1995 to 7.10% in 2009.
The standard capital appreciation bonds in the issue, due 1998-2011, yield to maturity from 6.70% in 1998 to 7.10% in 2009-2011.
The convertible capital appreciation bonds all yield 7.25% to their respective conversion dates, when they become 7 1/4% current interest-bearing bonds until maturity.
Convertible capital appreciation bonds with a final stated maturity of Nov. 15, 2014, convert Nov. 15, 1999.
Convertible capital appreciation bonds with a final stated maturity of Nov. 15, 2019, convert Nov. 15, 2004.
Recreation program current interest bonds are due 1990-1995, and are priced to yield from 6% in 1990 to 6.45% in 1995.
All of the bonds are rated single-A-1 by Moody's and double-A by S&P.
Federal National Mortgage Association -- $300 million of Remic securities in 10 classes through Goldman Sachs.
The issue is backed by Fannie Mae 9% securitiess.
The offering is Fannie Mae's Series 1989-88.
Fuji Heavy Industries Ltd. (Japan) -- $300 million of 8 3/4% bonds due Nov. 17, 1999, priced at 101 3/8 to yield 8.85% less full fees annually, via Daiwa Europe Ltd.
Guarantee by Industrial Bank of Japan.
Fees 2.
European Investment Bank (agency) -- $150 million of 8 1/2% bonds due Nov. 22, 1999, priced at 99.75 to yield 8.54% at reoffered price, via lead manager JP Morgan Securities Ltd.
Nippon Meat Packers Inc. (Japan) -- $200 million of bonds due Nov. 9, 1993, with equity-purchase warrants, indicating a 3 7/8% coupon at par, via Yamaichi International Europe.
Each $5,000 bond carries a warrant exercisable Nov. 24, 1989, through Oct. 29, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Oct. 31.
GMAC Canada Ltd. (U.S. parent) -- 150 million Canadian dollars of floating-rate notes due November 1996, via Banque Paribas Capital Markets Ltd.
Coupon, paid monthly, is one-month Canadian bankers acceptance rate.
Guarantee by General Motors Acceptance Corp.
Call at par after two years and thereafter at par every six months.
Swedish Export Credit Corp. -- #100 million of 12% bonds due June 15, 1994, priced at 101 5/8 to yield 12.39% annually less full fees, via Samuel Montagu & Co.
Fees 1 7/8.
Skopbank (Finland) -- 10 billion yen of 5 3/4% bonds due Nov. 20, 1992, priced at 101 3/8 to yield 5 3/4% less full fees, via IBJ International.
Fees 1 3/8.
Hokkaido Takushoku Bank (Japan) -- 300 million Swiss francs of notes and bonds due March 31, 1994, with fixed 0.375% coupon at par via Swiss Bank Corp.
Put option March 31, 1992, at 107 3/4 to yield a fixed 3.52%.
The issue is in two parts: 200 million Swiss francs of privately placed notes, 100 million Swiss francs of publicly listed bonds.
Indentical conditions for the two parts.
Other terms to be fixed Nov. 1.
Kingdom of Morocco -- $208 million (redemption amount) of zero-coupon government trust certificates, with maturities stretching from May 15, 1990, to Nov. 15, 1999, priced at yields ranging from 8.23% to 8.43%.
All the issues were priced at a spread of 37 basis points above the Treasury strips with similar maturities.
Proceeds from the offering are about $160.4 million.
Rated triple-A by Moody's and S&P, the issue will be sold through underwriters led by BT Securities, a subsidiary of Bankers Trust New York Corp.
At a time when Jon Levy should be planning the biggest spring season in his dress company's 17 years, his work day is studded with intense moments of concern about one of his biggest customers, Campeau Corp.
"The dress business has always been a gamble, but it's never been like this," says Mr. Levy, president of St. Gillian Group Ltd., which has become a hot name thanks to a campaign of sexy TV commercials.
Every day, Mr. Levy checks orders from Campeau department store chains, trying to guess if he will be paid.
"I'm now monitoring every major account."
Campeau, owner of such retailers as Bloomingdale's, Bon Marche, and Jordan Marsh, sidestepped financial collapse last month after an emergency $250 million loan from Olympia & York Developments Ltd., a Canadian developer and a major shareholder in Campeau.
The need for the loan surprised many analysts and bond holders who had been told at the company's annual meeting in July that there weren't any major problems ahead.
The risk of doing business with Campeau's Federated and Allied department store chains is about to increase greatly, not only for Mr. Levy but for hundreds of other small apparel makers, button suppliers, trucking firms and fabric houses.
Next week, the country's top designers and manufacturers will begin showing fashions for spring 1990, the second most important selling season of the year.
And as the applause dies down in showrooms along Seventh Avenue and Broadway, stylishly clad Campeau buyers will begin writing orders.
Orders from Campeau retailers used to be cause for celebration.
This is no longer true because of Campeau's massive debt load.
"It's all anybody wants to talk about," says Richard Posner, executive vice president for Credit Exchange Inc., a leading credit service.
"People wonder what's going to happen next."
Many manufacturers are worried about being paid for merchandise already shipped to Campeau stores.
But those dollars at risk pale in comparison to the investment required to make and ship spring goods to Campeau stores.
"The few million dollars I could lose today is nothing against what I could lose on the spring line," says Mr. Levy, who estimates that Campeau stores will sell $25 million worth of his clothes this year.
"I'm buying fabric right now for clothes which I may not be paid for until April or May.
What happens to me if Campeau collapses between now and then?"
Some credit concerns, such as Bernard Sands Credit Consultants Inc., have told clients not to ship anything to Federated or Allied stores on credit.
"This is especially true for spring merchandise," says Jim Rindos, credit manager at Bernard Sands.
"Campeau has too much debt."
Other credit houses, such as Credit Exchange and Solo Credit Service Corp., are suggesting that their clients study each order before shipping.
"Payments are good right now, but we aren't recommending any long-term lines of credit," says Richard Hastings, a retail credit analyst, referring to credit lines which make inventory purchases automatic.
"The Campeau situation is a little uncertain and very difficult to analyze."
Because of those concerns, some manufacturers say they will ask for letters of credit before shipping spring merchandise.
"We're being paid today, but we're worried about tomorrow and will want" letters of credit, says the sales director at one major dress maker who asked not to be identified.
Howard Bloom, president of the dress firm Chetta B Inc., says: "It's big time chaos today.
I'm going to ship and hope I get paid.
If I need to ask for money up front later, I will."
Carol Sanger, vice president, corporate communications at Campeau, says that all of the Federated and Allied chains are paying their bills in a timely manner.
"They continue to pay their bills and will do so," says Ms. Sanger.
"We're confident we'll be paying our bills for spring merchandise as well."
Typically, manufacturers are paid 10 days after the month in which they ship.
If goods are shipped to Bloomingdale's between Oct. 1 and Oct. 20, manufacturers expect to be paid by Nov. 10.
But manufacturers now buying fabric for spring season goods won't be paid until March, April or even May.
Some in the market question whether Campeau will be in a position to pay bills at that time.
"Everybody is worried about the possibility of cancellations," says Kurt Barnard, publisher of Barnard's Retail Marketing Report.
"The buyers who work for the various Campeau chains may lose their jobs.
The stores they work for may be sold.
What that will mean for manufacturers is anybody's guess."
Campeau's financial situation is complicated by an estimated $1.23 billion in debt due next spring.
This includes a working capital facility for Allied Stores of $350 million that matures March 15, 1990, and an $800 million bridge loan due April 30, 1990.
The company has stated in recently filed financial documents that it anticipates refinancing its March 1990 payments.
In recent months, numerous retailers have filed for Chapter 11 bankruptcy protection, including Bonwit Teller, B. Altman & Co., and Miller & Rhoads Inc.
Those filings, plus the expected sale of a number of financially healthy chains, such as Saks Fifth Avenue, Marshall Field's and Bloomingdale's, have added to the anxiety.
"Right now, Federated owes us a considerable amount of money," says Morris Marmalstein, president of David Warren Enterprises, a major dress manufacturer.
"We expect they will be current with their debts by the end of the week, but we are considering asking them for letters of credit before we take more orders."
Mr. Marmalstein adds that his company is now holding some goods in anticipation of being paid in full.
"It's become a day-by-day business," he says.
"Business has never been this tough before.
Not only does your product have to be excellent, but you also have to be able to collect."
Other manufacturers are equally cautious.
Bud Konheim, president of Nicole Miller Inc., says his company is now shipping only to the flagship stores of the Federated and Allied chains.
This limits his financial exposure, he says.
"The branches are just warmed over, empty halls," says Mr. Konheim.
"Why should I be part of that problem?
I've got limited production, and I can't give it to underperformers."
Campeau's Ms. Sanger disputes Mr. Konheim's comments.
"Many of the branches are very lucrative," she says.
"That's just nonsense."
As for Mr. Levy at St. Gillian, he says he will maintain his credit lines with the various Campeau stores unless they miss a payment.
"If they slip for 10 cents for 10 minutes, I'll stop," he says.
Bethlehem Steel Corp., hammered by higher costs and lower shipments to key automotive and service-center customers, posted a 54% drop in third-quarter profit.
Separately, two more of the nation's top steelmakers -- Armco Inc. and National Intergroup Inc. -- reported lower operating earnings in their steel businesses, marking what is generally believed to be the end of a two-year boom in the industry.
Wall Street analysts expect the disappointing trend to continue into the fourth quarter and through at least the first two quarters of 1990, when the industry will increasingly see the effect of price erosion in major product lines, such as rolled sheet used for cars, appliances and construction.
"It doesn't bode well for coming quarters," said John Jacobson, who follows the steel industry for AUS Consultants.
In fact, he thinks several steelmakers will report actual losses through the third quarter of 1990.
Bethlehem, the nation's second largest steelmaker, earned $46.9 million, or 54 cents a share.
The figures include $15 million in costs related to a blast furnace outage and $8 million in losses from unauthorized work outages at the company's coal operations.
In the year-ago period, Bethlehem earned $101.4 million, or $1.27 a share, including a $3.8 million gain from early retirement of debt.
Third-quarter sales dropped 11% to $1.27 billion from $1.43 billion a year ago.
In composite trading on the New York Stock Exchange, Bethlehem shares rose 50 cents to $17.375.
Of all the major steelmakers, Bethlehem would seem to be the most vulnerable to a slowdown.
It hasn't diversified beyond steel, nor has it linked up with a joint venture partner to share costs and risks.
However, in spite of the difficult industrywide environment of high cost and low volume, Bethlehem "had pretty good earnings numbers," said Michelle Galanter Applebaum, an analyst with Salomon Brothers Inc.
Ms. Applebaum had estimated third-quarter earnings of 55 cents a share, but said the losses for the unusual items were larger than expected.
Still, Bethlehem's core basic steel operations experienced a steep drop in operating profit to $58.6 million from $186.4 million a year ago, when the industry enjoyed strong demand and pricing.
The company said its shipments declined as a result of a reduction in inventories by service centers, a lackluster automotive market and increasing competitive pressures in the construction market.
At the same time, production costs, compared with a year ago, were boosted by higher raw material and employment costs, which resulted from the company's new labor pact effective June 1.
"We anticipate that steel market conditions will exhibit a further moderate decline in the fourth quarter as the automotive sector remains weak and customers continue to adjust inventories," said Bethlehem Chairman Walter F. Williams.
He noted, however, that the company's order entry has increased from the low levels of the early summer, following the end of labor negotiations.
Armco, hampered by lower volume in its specialty steel business, said third-quarter net income dropped 8% to $33 million, or 35 cents a share, from $36 million, or 39 cents a share in the year-ago quarter.
Sales dropped to $441.1 million from $820.4 million, because the company no longer consolidates its Eastern Steel division, which is now a joint venture with Kawasaki Steel Corp.
Along with reduced volume, analysts said the nation's fifth largest steelmaker was hurt by holding higher-cost inventory when raw material costs of such key products as nickel dropped.
Operating profit dropped 46% in its specialty flat-rolled steel segment.
Moreover, the company said higher sales and shipments to service centers from its Armco Steel Co. joint venture failed to offset weakness in the automotive market, higher production costs and a poorer product mix.
Armco shares closed unchanged at $10.625 in composite trading on the New York Stock Exchange.
National Intergroup, which owns 50% of the nation's sixth largest steelmaker -- National Steel Corp. -- posted net income for the fiscal second-quarter of $8.6 million, or 33 cents a share, compared with a net loss of $50.3 million.
Sales increased in the quarter ended Sept. 30 to $747.8 million from $623.5 million a year ago.
The latest period includes gains of $9.1 million from early retirement of debt and tax loss carry-forward.
Last year's results were hurt by $41.3 million in restructuring charges.
National Intergroup stock closed at $15, unchanged in composite trading on the New York Stock Exchange.
The company noted that its Fox-Meyer Drug Co., Ben Franklin Stores Inc. and Permian Corp. operations showed improvements as a result of restructuring moves.
However, its equity in the net income of National Steel declined to $6.3 million from $10.9 million as a result of softer demand and lost orders following prolonged labor talks and a threatened strike.
National Intergroup is negotiating for the sale of its 50% interest in National Steel to concentrate more fully on drug distribution operations.
International Business Machines Corp. said it agreed to let Motorola Inc. participate in a semiconductor research project as part of its effort to bolster the U.S. semiconductor industry.
IBM, which made the announcement at the dedication of a research center here, said it invited many other companies to participate as well, including some from Europe.
Jack Kuehler, IBM's president, said IBM is also considering letting other companies participate in additional semiconductor work but declined to be more specific.
IBM, which said a year ago it was inviting companies to participate in some semiconductor work, has become far more open about its technology as it has tried to rally U.S. industry to head off the Japanese, who now dominate the market for dynamic random access memory chips.
While IBM, Armonk, N.Y., makes the bulk of the DRAMs it uses, it doesn't make the equipment needed to produce those chips.
And IBM worries that the Japanese will take over that equipment market, too, unless U.S. semiconductor companies produce enough memory chips here to keep U.S. equipment makers healthy.
Failure of U.S. equipment makers, IBM fears, would leave it dependent on many of the Japanese companies that compete with it in other parts of the market.
IBM also said it expects to benefit from the expertise that Motorola and other companies can bring to bear on the difficult problems involved in semiconductor manufacturing.
IBM already participates in one industrywide effort to improve semiconductor-manufacturing techniques.
IBM said it expects industrywide efforts to become prevalent because semiconductor manufacturing has become so expensive.
A state-of-the-art plant cost $40 million in the mid-1970s but costs $500 million today because the technology is so complex.
And IBM said it expects the costs to continue climbing.
IBM, which said Motorola is paying just a nominal fee to cover the 21-month agreement, acknowledged some companies had turned down its invitation to join in.
But it said that was mainly because the project may not bear fruit until the mid-1990s.
IBM said it thought more companies would become interested as the project progresses.
The project involving Motorola concerns a technique, called X-ray lithography, that figures to be crucial to future generations of memory chips.
Currently, chips are produced by shining light through a mask to produce an image on the chip, much as a camera produces an image on film.
But details on chips must now be extraordinarily fine, and the wavelengths of even ultraviolet light are long enough so that the images they draw may be too blurry -- much as someone using a wide paintbrush could produce a broad line but would have trouble painting a thin one.
X-rays, by contrast, travel straighter and can be focused more tightly than light.
X-rays have problems, too.
They can make the masks brittle and can pass through material they're not supposed to.
But, assuming those problems can be overcome, they should allow for memory chips that could approach one billion bits of information -- 250 times as much as is contained in the four-megabit chips that are just reaching the market and a million times what was possible in the mid-1970s.
Allied-Signal Aerospace Co. received a $65 million contract to outfit Continental Airlines' 393 planes with the Bendix/King Traffic Alert and Collision Avoidance System.
The airborne system operates independent of ground-based radar systems, informing pilots of nearby aircraft, Allied-Signal said.
The system also provides course-correction advisories.
Allied-Signal is a unit of Allied-Signal Inc., a manufacturer with interests in aerospace, automotive products and engineered materials.
Continental Airlines is a unit of Texas Air Corp., Houston.
In a stunning shift in direction, Provigo Inc. said it will sell all its non-food operations to concentrate solely on its retail and wholesale grocery business.
The non-food operations accounted for about 27% of Provigo's 7.38 billion Canadian dollars (US$6.3 billion) in sales in the latest fiscal year.
In a related move, Pierre Lortie, chairman and chief executive, resigned.
Mr. Lortie joined Provigo in 1985 and spearheaded the company's drive to grow outside its traditional food business.
He couldn't be reached for comment.
Bertin Nadeau, newly appointed chairman and interim chief executive of Provigo, wouldn't say if Mr. Lortie was asked to leave.
"Mr. Lortie felt less pertinent," Mr. Nadeau said, given the decision to dump Provigo's non-food operations.
"At this stage it was felt I was perhaps more pertinent as chief executive."
Mr. Nadeau also is chairman and chief executive of Unigesco Inc., Provigo's controlling shareholder.
At a news conference, Mr. Nadeau said the sale of the three non-food businesses, which account for nearly half the company's C$900 million in assets, should be completed in a "matter of months."
The three units are a nationwide pharmaceutical and health-products distributor, a small sporting-goods chain, and a combination catalog showroom and toy-store chain.
Investors and analysts applauded the news.
Provigo was the most active industrial stock on the Montreal Exchange, where it closed at C$9.75 (US$8.32), up 75 Canadian cents.
"I think it's a pretty positive development," said Ross Cowan, a financial analyst with Levesque Beaubien Geoffrion Inc., of the decision to concentrate on groceries.
Mr. Lortie's departure, while sudden, was seen as inevitable in light of the shift in strategy.
"The non-food operations were largely Mr. Lortie's creation {and} his strategy didn't work," said Steven Holt, a financial analyst with Midland Doherty Ltd.
Provigo's profit record over the past two years tarnished the company's and Mr. Lortie's reputations.
For the six months ended Aug. 12, Provigo posted net income of C$6.5 million, or eight Canadian cents a share, compared with C$18.1 million, or 21 Canadian cents a share, a year earlier.
Sales were C$4.2 billion compared with C$3.7 billion.
Last month, Canadian Bond Rating Service downgraded Provigo's commercial paper and debentures because of its lackluster performance.
Analysts are skeptical Provigo will be able to sell the non-food businesses as a group for at least book value, and are expecting write-downs.
Mr. Nadeau said he couldn't yet say if the sale prices would match book values.
He said all three non-food operations are profitable.
Mr. Nadeau said discussions are under way with potential purchasers of each of the units.
He declined to confirm or deny reports that Provigo executive Henri Roy is trying to put together a management buy-out of the catalogue showroom unit.
Mr. Roy couldn't be reached.
Yvon Bussieres was named senior executive vice president and chief operating officer of Provigo, a new position.
Mr. Bussieres was president and chief operating officer of Provigo's Quebec retail and wholesale grocery unit.
Mr. Nadeau said he intends to remain Provigo's chief executive only until the non-food businesses are sold, after a which a new chief executive will be named.
Comments by Federal Reserve Board Chairman Alan Greenspan lent some support to the dollar, but the U.S. unit ended yesterday lower against most major currencies.
Foreign-exchange dealers noted that the impact of the chairman's remarks was slight and warned that the currency remains sensitive to developments on Wall Street.
Traders said that Mr. Greenspan, whose statements are ordinarily cautious, was especially careful to avoid any jarring proclamations, with fears about equities still unnerving financial markets.
Testifying before a panel of the House Banking Committee, Mr. Greenspan said the short-term value of the dollar on foreign-exchange markets isn't the primary policy focus of the central bank.
"Our essential focus is on domestic policy," Mr. Greenspan said, referring to the goals of price stability and a stable economy.
In perhaps his most telling remark, Mr. Greenspan termed the current U.S. inflation rate of around 4.5% as "much too high to be ignored."
He added, however, that inflation could be brought down "close to zero" without throwing the economy into a recession.
Analysts viewed the chairman's comments as an indication that the central bank is disinclined to ease monetary policy further in the near future.
The dollar climbed immediately higher on news of Mr. Greenspan's testimony, settling lower in later trade as dealers squared positions ahead of today's preliminary report on third-quarter U.S. gross national product.
In late New York trading yesterday, the dollar was quoted at 1.8353 marks, down from 1.8355 marks Tuesday, and at 141.52 yen, up from 141.45 yen late Tuesday.
Sterling was quoted at $1.6145, up from $1.6055 late Tuesday.
In Tokyo Thursday, the U.S. currency opened for trading at 141.60 yen, up from Wednesday's Tokyo close of 141.55 yen.
Many traders forecast a continuation of the market's recent bearish trend and predict the U.S. currency will remain stuck in its relatively narrow ranges in the near term and then shift lower.
But according to Doug Madison, a corporate trader with Bank of America in Los Angeles, a large number of short positions must first be corrected, spurring a temporary upswing, before the unit can turn lower.
He predicts a downward move in dollar-mark trade and a less dramatic slip in dollar-yen, noting that there continues to be a large pool of Japanese investor interest in U.S. securities, which could provide a solid base for the dollar at around 140 yen.
Market participants hope today's GNP report will offer more substantial evidence on U.S. economic growth, although analysts are quick to point out that the figures may overstate the economy's vigor.
"The `r' word is looming again," says one dealer, referring to persistent concern among some market analysts that the U.S. economy is heading toward a major slowdown if not a recession.
Some dealers note that while the third-quarter figures may appear relatively bullish -- the market consensus calls for a 2.5% annual growth rate, unchanged from the second-quarter rate -- it would take a significantly stronger figure to alter market perceptions that the economy is softening.
Some analysts reckon that the next quarter's figures will present a more accurate picture of the U.S. economy, showing a marked slowdown in a number of sectors, including housing starts and equities.
On the Commodity Exchange in New York, gold for current delivery settled at $369.10 an ounce, down $1.10.
Estimated volume was a light 1.7 million ounces.
In early trading in Hong Kong Thursday, gold was quoted at $368.24 an ounce.
Lawrence Insurance Group Inc. said it acquired United Republic Reinsurance Co., a Houston property and casualty reinsurance company, from United Savings Association of Texas for $28 million.
Lawrence Insurance also sold 3.2 million of its shares for $7.125 each to its parent, Lawrence Group Inc.
Lawrence Insurance, based in Albany, N.Y., plans to use the $22.5 million in proceeds to help finance the acquisition of United Republic.
By acquiring the shares, Lawrence Group increased its stake in Lawrence Insurance to 93.2% from 91.2%.
Lawrence Insurance underwrites mostly primary insurance, a company spokesman said.
A reinsurance company effectively insures insurance companies that wish to spread the risk of a particular policy.
Lawrence Group also owns Lawrence Agency Corp., Schenectady, N.Y., an insurance agency and brokerage.
Levi Strauss Associates Inc., the closely held owner of Levi Strauss & Co., said its fiscal third-quarter earnings jumped to $128.6 million from $31.3 million a year earlier, aided by a $69.8 million gain from the sale of stock in a Japanese subsidiary.
The apparel holding company had sales in the quarter ended Aug. 27 of $1 billion, up 12% from $908.8 million a year ago.
The company said its quarterly results are now being publicly filed as the result of the formation earlier this year of employee stock investment plans.
Wall Street would like UAL Corp.'s board to change its mind about keeping the company independent.
But what happens next in the continuing takeover drama may depend more on the company's two most powerful and fractious unions: the pilots and machinists.
Some people familiar with the situation believe that the collapse of the previous $6.79 billion buy-out, if anything, may have strengthened the hands of these two labor groups.
As a result, both may now have virtual veto power over any UAL transaction.
One reason: banks -- likely to react to any new UAL deal with even more caution than the first time around -- probably will insist on labor harmony before they agree to put up cash for any new bid or even a less-ambitious recapitalization plan.
"United pilots have shown on a number of occasions they are willing and able to strike," said an executive at Fuji Bank, one of UAL's large lenders.
"If you have both {labor} groups on strike, you've got no revenue and that's a very scary thing for a bank to be looking at."
Just this past week, a leading Japanese bank asked for a meeting with the machinists' union leaders to determine where the union would stand if another bid or recapitalization became possible.
Another reason: Emboldened by their success in helping to scuttle the previous transaction, the machinists are likely to be more aggressive if a second buy-out attempt occurs.
The two unions already had significant leverage simply because their employer has yet to settle with either on new contracts.
That gives them both the threat of a strike and the ability to resist any wage concessions that may be necessary to make a transaction work.
Thus, even investors who are pushing for the board to do a recapitalization that would pay shareholders a special dividend and possibly grant employees an ownership stake acknowledge that the unions are key.
"There's less likelihood of creating and completing a transaction without the unions' cooperation and wage concessions," said Richard Nye, of Baker, Nye Investments, a New York takeover stock-trader.
Mr. Nye thinks the UAL board should be ousted if it doesn't move soon to increase shareholder value.
Both the pilots and machinists have made it clear that they intend to block any transaction they don't like.
"The pilots will be involved in any transaction that takes place around here," pilot union chairman Frederick C. Dubinsky declared yesterday.
But whether the pilots can team up with their longtime adversaries, the machinists, is another question.
The pilots' Mr. Dubinsky says his union would like majority ownership for employees.
At the very least, the pilots want some form of control over the airline, perhaps through super-majority voting rights.
On the other hand, the machinists have always opposed majority ownership in principle, saying they don't think employees should be owners.
Still, in recent days, machinists' union leaders have shown some new flexibility.
"We may be able to reach a tradeoff where we can accommodate {the pilot union's} concerns and ours," said Brian M. Freeman, the machinists' financial adviser.
Mr. Freeman said machinists' union advisers plan to meet this week to try to draw up a blueprint for some form of recapitalization that could include a special dividend for shareholders, an employee stake and, perhaps, an equity investment by a friendly investor.
If a compromise can't be reached, the pilots maintain they can do a transaction without the support of the machinists.
But at this point, that may just be wishful thinking.
The machinists lobbied heavily against the original bid from UAL pilots and management for the company.
Their opposition helped scare off some Japanese banks.
The pilots' insistence on majority ownership also may make the idea of a recapitalization difficult to achieve.
"Who wants to be a public shareholder investing in a company controlled by the pilots' union?" asks Candace Browning, an analyst at Wertheim Schroeder & Co.
"Who would the board be working for -- the public shareholders or the pilots?" she adds.
Ms. Browning says she believes a recapitalization involving employee ownership would succeed only if the pilots relent on their demand for control.
She also notes that even if the pilots accept a minority stake now, they still could come back at a later time and try to take control.
Another possibility is for the pilots' to team up with an outside investor who might try to force the ouster of the board through the solicitation of consents.
In that way, the pilots may be able to force the board to approve a recapitalization that gives employees a majority stake, or to consider the labor-management group's latest proposal.
The group didn't make a formal offer, but instead told UAL's advisers before the most-recent board meeting that it was working on a bid valued at between $225 and $240 a share.
But again, they may need the help of the machinists.
"I think the dynamics of this situation are that something's got to happen," said one official familiar with the situation.
The board and UAL's management, he says, "can't go back" to business as usual.
"The pilots won't let them.
Delta Air Lines earnings soared 33% to a record in the fiscal first quarter, bucking the industry trend toward declining profits.
The Atlanta-based airline, the third largest in the U.S., attributed the increase to higher passenger traffic, new international routes and reduced service by rival Eastern Airlines, which is in bankruptcy proceedings in the wake of a strike that began last spring.
For the quarter ended Sept. 30, Delta posted net income of $133.1 million, or $2.53 a share, up from $100 million, or $2.03 a share, a year earlier.
Revenue rose 15% to $2.17 billion from $1.89 billion.
During the quarter, Delta issued 2.5 million shares of common stock to Swissair, and repurchased 1.1 million shares for use in a company employee stock ownership plan.
"The key to Delta's record earnings continued to be excellent passenger revenue growth," said Thomas Roeck, chief financial officer.
Passenger traffic jumped 14% in the quarter, while profit per passenger grew 2%.
Delta has benefited more than other carriers from the weakness of Eastern Airlines, which shares the Atlanta hub.
Although Eastern is back to about 80% of its pre-strike schedule now, the Texas Air Corp. subsidiary was only beginning to get back on its feet during the quarter.
Separately, America West Airlines, Phoenix, Ariz., reported third-quarter profit jumped 45% to $5.8 million, or 28 cents a share, from $4 million, or 24 cents a share, a year earlier.
The latest results include a $2.6 million one-time payment from a "foreign entity."
America West wouldn't identify the entity, but said the payment was for the foreign company's use of certain tax benefits in connection with America West plane purchases.
Year-earlier results included an extraordinary gain of $1.6 million from a buy-back of convertible subordinated debentures.
Revenue rose 21% to $243.4 million from $201.2 million.
For the nine months, America West posted earnings of $18.9 million, or 97 cents a share, compared with a loss of $9.7 million, or 74 cents a share, a year earlier.
Revenue rose 27% to $715.1 million from $563.8 million.
PAPERS:
Thomson Corp.'s Globe & Mail newspaper in November will begin transmitting an experimental edition to selected subscribers' facsimile machines.
The four-page news summary will be aimed at readers outside Canada or in Canadian locations where the national daily isn't available on the day of publication.
In the U.S., the Hartford Courant has a facsimile edition and some other newspapers are considering the idea.
WHO'S NEWS:
Michael T. Carr, advertising director of Playboy magazine, was named publisher of National Lampoon and Heavy Metal magazines, succeeding George Agoglia.
It was the first management change since film-makers Daniel Grodnik and Tim Matheson took control of National Lampoon Inc. in March.
They are looking for a new editor for National Lampoon and are trying to sell Heavy Metal.
Columbia Savings & Loan Association, reeling from thrift-accounting changes mandated by Congress and the recent collapse of the junk-bond market, announced a loss for the third quarter of $226.3 million, or $11.57 a share.
For the quarter a year ago, Columbia reported earnings of $16.3 million, or 37 cents a share.
Total assets increased to $12.7 billion in the latest quarter from $12.4 billion a year earlier.
The loss stems from $357.5 million of write-downs on Columbia's $4.4 billion high-yield investment securities portfolio, which includes about $3.7 billion of junk bonds, $400 million of preferred stock, and Treasury securities.
Columbia owes its spectacular growth in recent years to its junk-bond portfolio, the largest of any U.S. thrift.
Much of Columbia's junk-bond trading has been done through the high-yield department of its Beverly Hills neighbor, Drexel Burnham Lambert Inc.
For the nine months, losses totaled $212 million, or $10.83 a share, compared with net income of $48.7 million, or $1.11 a share, a year earlier.
The results include a $130.2 million write-down of the securities in the high-yield portfolio to the lower of their cost or market value.
Columbia also added $227.3 million to reserves for losses on the portfolio, increasing general reserves to $300 million, or about 6.7% of the total portfolio, as of Sept. 30.
On June 30, loss reserves stood at $108.3 million.
Thrift officials said the $300 million reserve will be adjusted quarterly and will reflect the rate of dispositions and market conditions.
The adjustments result from the recently passed thrift-industry bailout legislation, which requires thrifts to divest all high-yield bond investments by 1994.
Previously, Columbia didn't have to adjust the book value of its junk-bond holdings to reflect declines in market prices, because it held the bonds as long-term investments.
Because Columbia now must sell the bonds within five years, accounting rules require the thrift to value the bonds at the lower of cost or market prices.
For its future strategy, Columbia officials said the thrift may branch out into commercial lending or managing outside investments, as well as beefing up more traditional thrift activities.
The quarterly results also reflected $21.4 million in non-recurring losses from commercial real-estate activities in California.
Thomas Spiegel, Columbia's chairman, said in a statement that the thrift was "disappointed" by the effects of the accounting changes.
But he said Columbia remains "one of the most strongly capitalized thrifts in the industry," based on the economic value of its assets and tangible capital.
Columbia announced the results after the close of the stock market.
Its shares closed at $5.125 each in composite New York Stock Exchange trading, down 37.5 cents.
The price of Columbia shares has been cut nearly in half since August, when they traded at about $10, as investors apparently realized that the thrift would be forced to take a big write-down.
The stock's decline accelerated in the past two weeks, from a price of $8 a share on Oct. 9.
Columbia officials said they don't know how quickly they will dispose of the thrift's junk bonds, because federal regulations, such as those that would allow thrifts to continue holding the bonds in separately capitalized subsidiaries, haven't yet been completed.
Columbia officials also said the thrift shouldn't face problems meeting regulatory capital requirements, despite the large reserves and write-downs and stiffer regulatory requirements that should be in place by year's end.
Its ratio of tangible equity to total assets as of Sept. 30 was 3.6%, and total equity was $457.9 million.
The thrift emphasized that it has a large portfolio of equity securities issued in connection with corporate restructurings and leveraged buy-outs, which has a book value of $90 million.
Although many of the transactions related to those securities haven't been completed, Columbia said the ultimate gain on the sale of those assets will range from $200 million to $300 million.
Columbia also has unrealized gains in its public equity securities portfolio of more than $70 million.
David B. Hilder in New York contributed to this article.
Anheuser-Busch Cos. said it plans to aggressively discount its major beer brands, setting the stage for a potentially bruising price war as the maturing industry's growth continues to slow.
Anheuser, the world's largest brewer and U.S. market leader, has historically been reluctant to engage in price-cutting as a means of boosting sales volume.
With the passing of the heady days of swelling industry sales, however, the once-sporadic and brief forays into discounting are becoming standard competitive weapons in the beer industry.
Over the summer, Anheuser competitors offered more and deeper discounts than industry observers have seen for a long time.
Some experts now predict Anheuser's entry into the fray means near-term earnings trouble for all the industry players.
The St. Louis company said major rivals, Philip Morris Co.'s Miller Brewing unit and Adolph Coors Co. "have been following a policy of continuous and deep discounting for at least the past 18 months" on their premium brands, pricing their product as much as 25 cents a 12-pack below Anheuser's Budweiser label in many markets.
Anheuser said it's discounting policy basically would involve matching such moves by rivals on a market-by-market basis.
Anheuser-Busch announced its plan at the same time it reported third-quarter net income rose a lower-than-anticipated 5.2% to $238.3 million, or 83 cents a share, from $226.5 million, or 78 cents.
Third-period sales were $2.49 billion, up from last year's $2.34 billion.
Anheuser said its new strategy -- started in some markets last month and expected to be applied soon in selected markets nationwide -- will mean lower-than-anticipated earnings for the last half of 1989 and for 1990.
The projection sent Anheuser shares plunging $4.375 in New York Stock Exchange composite trading yesterday.
The stock closed at $38.50 on heavy volume of about 3.5 million shares.
Shares of Coors, the company's sole publicly traded major competitor, fell $1.50 apiece to $19.125 in national over-the-counter trading, apparently on investor concerns over potential fallout from the coming pricing struggle.
Anheuser noted that "beer industry sales volume is 1989 is following the trend that has characterized the last half of the '80s, with sales volume being essentially flat" while consolidation creates fewer, bigger players.
"We cannot permit a further slowing in our volume trend," Anheuser said, adding it will take "appropriate competitive pricing actions to support our long-term market share growth strategy" for the premium brands.
Anheuser said it continues to hold to its earlier-announced goal of a 50% U.S. market share by the mid-1990s.
Beneath the tepid news-release jargon lies a powerful threat from the brewing giant, which last year accounted for about 41% of all U.S. beer sales and is expected to see that grow to 42.5% in the current year.
"Anheuser is the biggest guy in the bar, and he just decided to join in the barroom brawl," said Joseph J. Doyle, an analyst with Smith Barney, Harris Upham & Co.
"It's going to get bloody."
Jerry Steinman, publisher of Beer Marketers Insights, a trade newsletter, said Anheuser's announcement means "everybody else in the industry is going to have a difficult time reaching their profit objectives."
Prudential-Bache Securities Inc. analyst George E. Thompson downplayed the importance of the announcement, and called any comparison between the coming beer-industry tiff and the seemingly unending "cola wars," unwarranted.
Mr. Thompson calls discounting "a loser's game for anyone without a dominant market share," and projected that Anheuser's statement of intent could simply be a means of warning competitors to ease up on price-cutting or face a costly and fruitless battle.
Mr. Thompson noted that the disappointing earnings, which fell five cents a share short of his own projections, contributed to the sell-off by an edgy and currently unforgiving investing public.
But Smith Barney's Mr. Doyle, who yesterday trimmed his 1990 Anheuser earnings projection to $2.95 a share from $3.10, called the market's reaction "justified."
While the third-quarter earnings were a "moderate disappointment," he said, "the real bad news is the intensity of price competition" in the premium-beer sector.
According to Mr. Steinman, the newsletter publisher, Anheuser's market share is nearly twice that of its nearest competitor, Miller Brewing, which had a 21.2% stake last year.
It's followed by Stroh Brewery Co., which has agreed to sell its assets to Coors.
Both Coors and Stroh have recently been ceding market share to Miller and Anheuser.
Tokyo stocks closed easier for the second consecutive day, finishing at the intraday low on index-linked investment trust fund selling toward the end of the afternoon session.
Stocks rose in London, but fell again in Frankfurt.
Tokyo's Nikkei index fell 84.15 points to 35442.40.
Trading was active.
Volume on the first section was estimated at 1 billion shares, up from 914 million Tuesday.
The Tokyo stock price index of first section issues was down 8.65 at
In early trading in Tokyo Thursday, the Nikkei index rose 145.45 points to 35587.85.
On Wednesday, the market opened bullishly with high turnover, ignoring the volatility in New York stocks.
But losers were spread in a broad range by the end of the session.
A trader said that the more an issue gained recently, the sharper the loss sustained Wednesday.
A trader at Yamaichi Securities said the market's mood was undercut by the continuing fall of Nippon Telegraph & Telephone shares, which declined to their lowest level since the begining of this year.
NTT lost 30,000 yen to 1,380,000 yen ($9,756).
Some traders noted individual investors dumped NTT shares amid growing expectation for a division of the company as suggested by a recent government-sponsored panel.
Dealers said they also took profits to reduce holdings in their own account at the end of the October transaction period.
Among pharmaceutical shares, Chugai lost 60 yen to 2,290 yen ($16.20), and Mochida fell 150 to 4,290.
Other losing issues included Showa Shell, which fell 40 to 1,520.
Toyota Motor fell 40 to 2,680.
Sekisui House, which gained 150 Tuesday, lost 70 to 2640.
Daiwa House also ended easier, but Misawa Home was firmer.
Pioneer Electronic and Sony, both of which dominated buying earlier this month, continued to fall Wednesday.
Pioneer was down 90 at 5,810, and Sony lost 40 to 8,550, down 10% from its record set Oct. 11.
London share prices closed modestly higher largely on technical factors, although the market was underpinned near the end of the session by Wall Street's firmer trend.
The Financial Times 100-share index finished at 2161.9, up 12.6 points.
The 30-share index ended 12.6 points higher at 1751.9.
Volume was thin at 374.6 million shares traded, down from 405.4 million Tuesday.
Dealers said the market gained some late steam on a flurry of buying by market-makers looking at blue-chip issues and stocks viewed as oversold during the market's recent downtrend.
Outside what essentially amounted to a bookkeeping exercise, dealers said London dealings were largely dulled by the absence of active interest beyond the market-makers.
The late buying was drawn into the London market, dealers added, after Wall Street showed signs of stability following its rocky opening.
Stocks that suffered on the day were those with active U.S. operations, dealers noted.
Among them were B.A.T Industries, which settled 6 pence a share lower at 753 ($12.10).
Hanson, with 15 million shares traded, closed 2.5 lower at 212.5.
Dealers said the shares were hit by fears of a slowdown in the U.S. economy.
Cable & Wireless benefited from a market squeeze, bouncing 13 to 498 in moderately active volume.
Jaguar was boosted 21 to 715 on follow-through buying after Ford Motor's announcement Tuesday that it might be prepared to mount a full bid for the U.K. luxury auto maker.
It was further helped by Ford, which announced after London's close that it had raised its stake to 12% from just under 11% on Tuesday.
Frankfurt prices closed sharply lower in thin dealings, hurt by the roller-coaster session on Wall Street Tuesday and worries about wage demands by the largest West German trade union.
The German stock index tumbled 26.29 to end at
"It was dead, listless, depressing and negative," said one trader at a U.S. bank in Frankfurt.
"There was little turnover and nothing to stimulate the market."
Equities tumbled at the opening as Tuesday's gyrations on Wall Street, where the Dow Jones Industrial Average recovered most of an 80-point loss, fueled fears of another stock market crash, brokers said.
Tough talk from trade union officials at the conference of the powerful IG Metall metals worker union in West Berlin raised the specter of nationwide strikes next spring, they said.
For the 1990 wage negotiations, the IG Metall is demanding a further cut in the German workweek and steep wage increases, which could sharply increase the costs for German industry.
"All the positive figures on the economy are out already, and people are focusing more on the dangers for next year, mostly the wage talks and the {parliamentary} elections," the U.S. trader said.
The market also shrugged off positive factors, such as higher bond prices and a slowdown in monetary growth in September, traders said.
They said they expect the bearish mood to persist a while longer, as trading volume is falling toward the end of the year and the market is becoming more volatile.
In the auto sector, Bayerische Motoren Werke plunged 14.5 marks to 529 marks ($288), Daimler-Benz dropped 10.5 to 700, and Volkswagen slumped 9 to 435.5.
Continental gave up some of its recent gains, dropping 8 to 338, as rumors of an impending takeover attempt for the tiremaker faded, brokers said.
Deutsche Bank plummeted 12 to 645, hurt by the general mood.
Other banks were slightly more resilient, with Dresdner Bank shedding 4.8 to 320, and Commerzbank slipping 2.5 to
Meanwhile, Wall Street's volatility unnerved investors in other markets.
Share prices closed lower in Paris, Zurich, Brussels, Milan and Stockholm, and mixed in Amsterdam.
Among Pacific markets, prices closed lower in Sydney, Seoul, Hong Kong, Manila, Singapore and Wellington.
Trading in Taipei was suspended for a national holiday.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
French chemicals group, Orkem S.A., said Wednesday it has made a bid for control of Coates Brothers PLC, a British manufacturer of inks and polyester resins.
State-controlled Orkem already owns 40.6% of Coates.
The remainder is held by the public and by family interests, a spokeswoman for the French group said.
Orkem declined to give details of its offer, saying only that the bid will be submitted for approval by the board of the British company.
The Democratic-controlled House, by a margin of 51 votes, failed to override President Bush's veto of legislation renewing federal support of Medicaid abortions for poor women who are victims of rape and incest.
The 231-191 roll call illustrates the limits of power a resurgent abortion-rights movement still faces.
It continues to gain strength in the chamber but remains far short of the two-thirds majority required to prevail over Mr. Bush.
Democrats voted to override by a 3-1 margin, but Republicans were equally firm in support of the president, who has threatened to make abortion a decisive issue on at least three separate fiscal 1990 spending bills.
Yesterday's vote dealt with the largest of these bills, an estimated $156.7 billion measure funding the departments of Labor, Education, and Health and Human Services.
To gain more leverage, abortion-rights advocates may seek to fold the bill into an omnibus continuing resolution next month.
But the stark numbers yesterday -- when 282 votes were needed -- indicate the president is in a commanding position for at least this year.
"Unless he changes, they lose," said a Democratic leadership aide.
The action came as Congress sent to the president last night a stopgap spending bill to keep the government operating through Nov. 15 and provide $2.85 billion in emergency funds to assist in the recovery from Hurricane Hugo and the California earthquake.
By a lopsided 97-1 margin, the Senate approved the measure after attaching further provisions sought by the influential California delegation and, despite reservations, the House adopted the bill on a 303-107 roll call.
The package is more than $1 billion above the recommendations of Budget Director Richard Darman this week.
But given the political importance of California, the administration was content to use its influence to prevent any Senate amendments adding further new appropriations.
The $2.85 billion measure comes on top of $1.1 billion appropriated after Hugo struck the Carolinas and Caribbean last month, and these totals don't reflect the additional benefit of low-interest disaster loans.
The bill last night includes $500 million to help finance this credit and further raises the obligation ceiling for the Small Business Administration sixfold to $1.8 billion to accommodate the expected loan activity.
In direct cash assistance, $1 billion is provided in federal highway construction funds, and $1.35 billion is divided between general emergency aid and a reserve to be available to the president to meet unanticipated costs from the two disasters.
In the Senate, Majority Whip Alan Cranston used his position to win not only the expanded credit but also more generous treatment than the House had permitted in the distribution of highway funds in the next six months.
The emergency assistance wouldn't be counted against a state's normal allocation of annual highway funds, and the bill circumvents existing restrictions that otherwise would prevent the use of federal aid to repair a toll road, such as the San Francisco-Oakland Bay Bridge damaged in last week's earthquake.
The underlying stopgap bill is the second required by Congress this fall and, since the current fiscal year began Oct. 1, only the Energy and Interior departments are operating on permanent appropriations enacted into law.
The standoff over abortion is certain to contribute to further delays and, apart from the health and education measure vetoed by Mr. Bush, bills funding the District of Columbia and the entire U.S. foreign-aid budget are in jeopardy because of related abortion or family-planning issues.
The vote yesterday was the most partisan in many years, and though the Democratic leadership is ambivalent about how to address the abortion issue, the debate is increasingly measured in party terms.
The 189 Democrats who supported the override yesterday compare with 175 who initially backed the rape-and-incest exemption two weeks ago and 136 last year on a similar vote.
By comparison, Republicans have held closer to the anti-abortion movement.
Only 42 GOP members opposed the president's veto, a marginal increase over the vote two weeks ago and just 12 more than the 30 who supported the rape-and-incest exemption last year.
At a recent White House meeting, Rep. Silvio Conte (R., Mass.), the ranking minority member of the House Appropriations Committee, argued with his friend Mr. Bush against a veto, and though Mr. Conte and Minority Leader Robert Michel of Illinois stood with the president yesterday, they are plainly uncomfortable with his position.
"This isn't a political issue, this is a moral issue," said Rep. Henry Hyde (R., Ill.), the most eloquent spokesman for the anti-abortion movement.
But after years of using the issue for its benefit, the GOP finds its candidates on the defensive.
New Jersey gubernatorial candidate Rep. James Florio pointedly returned from campaigning to vote against the president yesterday in contrast with his opponent, GOP Rep. James Courter, who has ardently supported abortion restrictions in the past but was absent.
In an extraordinary mix of cultures and church-state powers, Rep. Robert Dornan (R., Calif.) lectured his fellow Roman Catholics -- including Mr. Florio -- for having the "chutzpah" to disagree with the hierarchy of their church on abortion.
Rep. Les AuCoin was as blunt on behalf of the abortion-rights movement.
"This may not make George Bush a one-term president," said the Oregon liberal, addressing the Republican side of the House.
"But if you support him over rape victims, this may be your last term."
Separately, the House last night approved a nearly $67 billion compromise spending bill providing the first construction funds for the administration's ambitious space station in fiscal 1990 and incorporating far-reaching provisions affecting the federal mortgage market.
The current ceiling on home loans insured by the Federal Housing Administration would be increased to $124,875, and the bill gives the Department of Housing and Urban Development new authority to facilitate the refinancing of subsidized loans for low-income homeowners.
By a 325-92 margin, the Appropriations Committee leadership beat back an early challenge by House Banking Chairman Henry Gonzalez (D., Texas) to the FHA provision.
And on a closer 250-170 roll call, lawmakers upheld controversial agreements made by a House-Senate conference earmarking community development funds for more than 40 projects backed by often influential members.
Rupert Murdoch acquired a 25% stake in Grupo Zeta S.A., the leading Spanish magazine and newspaper publisher said.
The transaction called for Mr. Murdoch's News International PLC, a unit of Australia-based News Corp., to subscribe to a rights issue by Zeta valued at 6.65 billion pesetas ($57 million).
Also participating in the issue was Servifilm Spain Cinematografica S.A.
The film producer, owned by Madrid-based financier Jacques Hachuel, received a 5% stake in the Barcelona-based publishing group.
The cash injection boosted Zeta's capital more than four-fold, to 8.47 billion pesetas from 1.82 billion pesetas, greatly enhancing the group's ability to make investments, Zeta officials said.
Following its failure last month to win a license for one of Spain's first three private television stations, Zeta is seeking investment opportunities in communications and publishing.
With annual sales of about 30 billion pesetas, Zeta publishes over a dozen magazines, including the popular Tiempo, Interviu and Panorama, and three regional dailies.
Chairman Antonio Asensio will retain a 70% share in Zeta.
The New York Stock Exchange is expected to launch its own program trading vehicle today, just as controversy over this trading strategy heats up.
The Big Board this morning plans to begin trading its Exchange Stock Portfolio "basket" product, the first program-trading vehicle carrying the exchange's seal of approval.
ESPs will allow institutional investors to buy or sell all 500 stocks in Standard & Poor's index in a single trade of a minimum of $5 million.
"Customized" baskets of fewer stocks will also be available.
The Securities and Exchange Commission gave provisional six-month approval to the Big Board basket at a meeting late yesterday.
The SEC at the same time approved a similar but smaller basket product on the Chicago Board Options Exchange, where the minimum will be $1.7 million.
Also approved was a plan to trade stock portfolios by computer after regular hours on the Midwest Stock Exchange.
The basket products are "an evolutionary step" in solving problems in trading big blocks of stock that came to light in the 1987 market crash, said SEC Commissioner Joseph Grundfest.
New SEC Chairman Richard Breeden, overseeing his first public meeting, said there have been concerns that the Big Board's basket could attract investors with a "short-term perspective" who would rapidly turn over the product, thus increasing volatility.
But Richard Ketchum, the SEC's market regulation chief, said he didn't believe "this will spawn dramatic new program-trading strategies that will be destabilizing."
The baskets on the Big Board and CBOE -- which involve the actual S&P stocks, unlike the stock-index contracts currently traded on the Chicago futures markets, and index options on the CBOE -- will begin trading as critics step up their attacks on program trading and its contributions to the stock market's wild price swings.
The Big Board argues that its new product will help rather than hurt the situation by possibly drawing business from more-volatile forms of program trading.
ESPs are also an attempt by the Big Board to head off the exodus of program trading business to overseas markets such as London.
Big Board officials also hope Japanese investors will become interested in the exchange's product.
Already, many of the Big Board's own floor traders are warning that the ESP baskets are risky and not in the best interests of the investing public.
The 400-member Alliance of Floor Brokers said the new product, with the $5 million minimum, will benefit only big institutional investors and could lead to "wild spasms of volatility."
Stockbrokers who cater to individual investors said the Big Board's new product confirms the exchange doesn't want to curtail program trading, which last month accounted for a record 13.8% of the exchange's average daily volume.
"The New York Stock Exchange is losing its cool here," said James Andrews, head of institutional trading at Janney Montgomery Scott Inc. in Philadelphia.
The new stock baskets "are going to make it easier for program trading to be done.
And it's going to be done more frequently as the result of having more access to it at different places."
Both the Big Board's Exchange Stock Portfolio and the Chicago exchange's Market Basket are designed for institutional investors.
The Big Board lists its targets as pension plans, mutual fund managers and index-arbitrage traders.
In index arbitrage, program traders buy and sell stocks and stock-index futures to profit from small price discrepancies between the markets.
At the same time, only four securities firms have signed up with the Big Board to buy and sell ESPs as market makers, an unenthusiastic response.
The market makers so far are CS First Boston Group's First Boston Corp. unit, Morgan Stanley & Co., PaineWebber Group Inc. and Salomon Inc.'s Salomon Brothers Inc. unit.
Kidder, Peabody & Co., a General Electric Co. unit that has become the biggest program trader along with Morgan Stanley, isn't a market maker, although the Big Board hopes that will change.
Similarly, the Big Board hopes to entice Merrill Lynch & Co.
Neither has plans to be a market maker for now.
Traders said major securities firms are reluctant to become market makers because they fear the baskets may attract only limited trading.
Big Board officials say only 25 contracts a day may trade at first, equivalent to a day's action at a small, regional exchange.
Even though the Big Board says its product represents a post-crash "reform," some traders suggest that if the new basket had been trading during this month's Friday the 13th market plunge, the Dow Jones Industrial Average might have dropped more than the 190 points it did.
With the futures locked into a trading halt Oct. 13 and trading in some individual stock difficult, program traders would have undoubtedly fled to the basket system, the traders say.
"If we had the baskets, we would be leaving in caskets," one trader said.
The SEC's Mr. Breeden said the after-hours trading on the Midwest exchange would help the U.S. win back business that has moved overseas to conduct after-hours trades.
Comprehensive Care Corp., which has agreed to be acquired by closely held First Hospital Corp., reported a $4.7 million loss for its Aug. 31 first quarter and said it is negotiating an extension of senior bank debt past its Oct. 18 due date.
In composite trading yesterday on the New York Stock Exchange, Comprehensive Care shares plunged $3.625 to close at $4.75 on volume of 1,177,000 shares.
The loss in Comprehensive Care's latest quarter is equal to 46 cents a share.
In the year-earlier quarter, Comprehensive Care earned $1.6 million, or 18 cents a share.
Revenue in the latest quarter fell 17% to $44 million from $53.2 million, the company said, reflecting poor utilization of the company's facilities and its behavioral medicine contracts.
Comprehensive Care shareholders have approved acquisition of the developer and operator of Care-Unit chemical dependency and psychiatric programs for about $58 million in cash, notes and stock of First Hospital, Norfolk, Va.
The price was reduced last August from an indicated value of $76 million.
Comprehensive Care said First Hospital had advised it that both bank debt and senior notes would be repaid after the acquisition, although it isn't assured the acquisition will be completed.
If it isn't completed, Comprehensive Care said it would be "required to promptly restructure its debt."
First Hospital advised Comprehensive Care that an agent for the financial institutions providing financing of its acquisition is scheduled to make a final credit determination tomorrow, and that a favorable determination could result in a reorganization at Comprehensive Care "by the end of October."
Failure to win such a determination, however, would lead Comprehensive Care directors to "consider various alternatives," Comprehensive Care said, without elaborating.
Separately, First Hospital reported a 1.6% rise in net income to $6.1 million for its year ended June 30 on a 27% increase in revenue to $110.6 million.
It said, however, that net income for the two-month period ended Aug. 31 plunged to $150,000 from $851,000 in the prior year on a 33% rise in revenue to $21.4 million.
A group including New York investors Douglas A. Kass and Anthony Pedone holds the equivalent of a 12.6% stake in H.H. Robertson Co.'s common shares outstanding, according to a filing with the Securities and Exchange Commission.
Officials of Pittsburgh-based H.H. Robertson, which makes steel roofs, store fronts and building parts, declined comment.
As reported last month, Mr. Kass said he was interested in making an offer to buy H.H. Robertson for $13 a share.
In the SEC filing, the Kass-Pedone group said it intends to acquire additional H.H. Robertson shares "with a view towards a possible change in control of the company."
It has not, however, made a formal proposal.
The group also is engaged in talks with third parties regarding obtaining financing to buy more shares, but no agreements have yet been reached, the filing said.
The group controls 795,900 H.H. Robertson common shares, assuming exercise of an option it acquired from Executive Life Insurance Co. to buy 497,400 shares.
Its stake includes 106,100 shares bought in the open market from Aug. 30 to Oct. 18 for $10.375 to $12.125 a share.
In New York Stock Exchange composite trading yesterday, H.H. Robertson closed at $11.625, up 62.5 cents.
After coming close to a partial settlement a year ago, shareholders who filed civil suits against Ivan F. Boesky and the partnerships he once controlled again are approaching an accord, people familiar with the case said.
Meanwhile, within the next few weeks, the limited partners in Ivan F. Boesky & Co. L.P. are expected to reach a partial settlement with Drexel Burnham Lambert Inc. regarding the distribution of the $330 million in partnership assets, said one of the individuals.
Under the terms of the settlement, the limited partners would drop their civil suits against Drexel, now pending in federal court in New York, another individual said.
Attorneys involved in the talks said that the parties were closer to accord than they were a year ago, when reports of an imminent agreement circulated.
One individual said the shareholders' accord was "well worked out."
However, less optimistic attorneys warned that because of the tangle of numerous defendants and plaintiffs with overlapping claims, there is always the possibility that the talks will again fall apart.
A shareholders' accord would provide the first restitution to thousands of individuals and institutions claiming losses as a result of insider trading by Boesky & Co., once the largest arbitrage fund in the U.S.
The plaintiffs are investors who bought and sold securities in which Mr. Boesky and his partnerships were dealing.
Some claim they suffered losses because they sold while he was buying and others because they bought while he was selling.
Stocks involved in the shareholder suits include Union Carbide, RJR Nabisco, American Natural Resources, Boise Cascade Corp., General Foods Corp., Houston Natural Gas and FMC Corp.
There are at least 27 class-action shareholder suits that have been consolidated in federal court in New York under U.S. District Judge Milton Pollack.
Among the defendants are Mr. Boesky; the now-defunct Ivan F. Boesky & Co.; Mr. Boesky's main underwriter, Drexel Burnham; and Cambrian & General Securities PLC, a British investment fund once controlled by Mr. Boesky.
Individuals familiar with the negotiations said the partial settlement being negotiated would remove the Boesky partnership, the British fund and Mr. Boesky as defendants, while Drexel and other defendants would remain.
Charles Davidow, of the Washington, D.C.-based law firm Wilmer, Cutler & Pickering, which represents Mr. Boesky in this matter, said only that "discussions are under way.
There are no agreements yet."
It has been three years since Mr. Boesky, now in prison, agreed to pay a $100 million fine to settle the government's charges that he had traded illegally using insider information.
Out of this, the government set up a $50 million fund for plaintiffs who can prove their financial losses.
According to William Orbe, an attorney at Grais & Richards, the escrow agents for the fund, as of Sept. 30 the fund amounted to $60.5 million.
Separately, attorneys for the 42 or so limited partners have had serious discussions that could lead to the distribution of the partnership's assets.
The limited partners include insurance companies, financial institutions and individual investors.
An agreement with Drexel regarding the limited partners' investments is an essential step toward getting their money back.
This is because a Delaware court earlier this year said that Drexel is entitled to get its money back before or at the same time as the limited partners.
Drexel is owed $20 million by the partnership.
An individual familiar with the negotiations said that whatever investments the limited partners do not recoup from the $330 million in partnership assets, they will receive from the $350 million restitution fund available as a result of Drexel's settlement with the government in December 1988.
Drexel agreed to plead guilty to six felony counts and pay $650 million, of which $350 million was set aside for shareholders and other plaintiffs, including the limited partners, who claim they were injured by Drexel.
JAILED AFRICAN-AMERICAN activist wins a battle against the
U.S. District Judge Robert P. Patterson Jr. ordered the FBI to immediately begin processing Herman Benjamin Ferguson's request for documents stemming from the agency's investigation of him during the 1960s.
The FBI had said it would not be able to begin processing the request until June
Mr. Ferguson, who is 68 years old, fled the U.S. in 1970 after exhausting his appeals of a 1968 conviction on conspiracy to murder.
He turned himself in to authorities in New York earlier this year.
He maintains that the information from the FBI will help him get his 1968 conviction vacated and his bail-jumping indictment dismissed.
His attorneys claim he was framed by the FBI and New York police as part of a campaign to destroy the black liberation movement of the 1960s.
Because the federal Freedom of Information Act wasn't law at that time, the FBI wasn't required to turn over information on its investigations when Mr. Ferguson appealed his conviction in the 1960s.
But in federal court in Manhattan, Judge Patterson said the FBI records could show that Mr. Ferguson's arrest was the result of questionable legal practices.
The judge said that if the FBI's proposed schedule was followed in releasing the documents, "a delay of over one year will have occurred and plaintiff will have served approximately two-thirds of his 3 1/2-year minimum sentence by the time he receives the files."
Gabriel W. Gorenstein, the assistant U.S. attorney handling the case for the FBI, said no decision has been made about appealing the judge's ruling.
FEDERAL COURTS URGED to cut costs and reduce delays of civil suits.
The study, conducted by a task force of the Brookings Institution, suggests that Congress should require the courts to develop the plans.
The study was initiated by Senate Judiciary Committee chairman Joseph Biden (D., Del.).
The Washington, D.C., think tank recommends that the courts adopt different "tracks" for different types of civil cases in order to separate the handling of highly complex suits from simpler ones.
Complex cases, such as antitrust suits and many business disputes, would receive intense supervision by federal judges to keep pretrial proceedings moving.
Standard cases would require less judicial attention, and fast-track cases could be resolved quickly.
The study also said each federal court should set strict time limits for the pretrial exchange of documents and evidence, ranging from as much as 100 days for cases in the fast track to as much as 18 months for complex disputes.
And the study said federal courts should set firm trial dates early in the process.
To take advantage of local expertise and custom, the study said, Congress should require each of the 94 federal district courts to adopt its own plan to speed the handling of civil suits and to reduce the high costs in civil cases.
Although some of the study's recommendations resemble those of similar projects, the makeup of the task force was unusually diverse, adding significance to the effort.
It included lawyers from civil rights and consumer groups, plaintiffs' lawyers and defense attorneys, corporate counsel and law professors.
Businessland Inc. said it purchased a major regional computer retailer, Data Systems Computer Centre Inc., Springfield, New Jersey.
Terms weren't disclosed.
The purchase strengthens San Jose, Calif.-based Businessland's links to the large corporations who are among the biggest buyers of computers.
Data Systems has five retail stores in the northeast, but specializes in selling personal computers made by International Business Machines Corp. and Apple Computer Inc. to banks, brokerage firms and other big businesses based in the New York metropolitan area.
John Fitzsimmons, chief executive officer of Data Systems, said the company was profitable and expected sales of nearly $100 million this year.
He said Businessland, which operates stores in 50 U.S. metropolitan areas, planned to absorb his firm's operations.
Eastman Kodak Co. of Rochester, N.Y., said its Lehn & Fink Products subsidiary was restructured to form two operating groups, one for household products such as cleaners and disinfectants and the other for do-it-yourself products such as wood finishes and stains.
The Montvale, N.J., unit said the new operating structure "creates a more focused and responsive organization geared to effectively managing the size and scope of the unit's current business."
The consumer brands unit was absorbed by the photographic, pharmaceutical and chemical concern last year when it acquired Sterling Drug Inc.
In a related matter, Peter Black, president of consumer brand Minwax, was named group vice president for the household products operating group.
Kenneth M. Evans, president of Thompson & Formby brand, was named group vice president of the do-it-yourself operating group.
Sotheby's Holdings Inc., the parent of the auction house Sotheby's, said its net loss for the seasonally slow third quarter narrowed from a year earlier on a leap in operating revenue.
The New York-based company reported a third-quarter net loss of $5.1 million, or 10 cents a share, compared with a year-earlier net loss of $6.2 million, or 12 cents a share.
Operating revenue surged 54% in the latest period to $42.9 million from $27.7 million.
The company said 80% of its auction business is usually conducted in the second and fourth quarters, with the current quarter having begun "extremely well.
West Texas Intermediate, the U.S. benchmark crude, seemed tethered again yesterday in trading on the New York Mercantile Exchange.
Widely expected to open 10 to 15 cents a barrel higher on the strength of statistics from the American Petroleum Institute, the December contract managed to start the session only eight cents higher.
In the last hour of the trading day, December contract took a tumble to end the session 10 cents lower at $19.62 a barrel.
And now that the price has fallen below $19.65, which many had said showed considerable resistance, some traders and analysts figure there's little to stop the price from going lower on technical decisions.
With no petroleum-related news or changes in the fundamentals to dictate price moves, "technicians are wanting to sell this stuff," said Eric Bolling of Edge Trading Corp.
"And short-term, the technicians may have their way."
The market quickly discounted the weekly inventory report showing a 6.3 million barrel decrease in U.S. crude oil stocks as the legacy of Hurricane Jerry.
That storm hit the Gulf Coast Oct. 13, closing the Louisiana Offshore Oil Port for a time and preventing tankers from unloading.
Next week's report could very well show an increase in crude inventories.
Dismissing the trade group's numbers left traders plenty of time to worry anew about the latest reports on OPEC production.
An AP-Dow Jones survey of integrated oil companies, independent refiners, and oil industry consultants indicates that the Organization of Petroleum Exporting Countries increased its production to 22.2 million barrels a day in September.
Estimates suggest October's figure may be even higher.
That level of production isn't of much concern as long as demand continues strong, analysts said.
But the first quarter of the year is generally the weakest and OPEC production doesn't seem to be slackening in anticipation of that.
Also, maintaining current demand assumes no significant slowdown in world economies.
To top off the bearish factors affecting yesterday's trading, late October weather, especially in the Northeast U.S., continues to be very moderate, leaving heating oil futures trading lackluster.
"We aren't seeing any cold weather here," Mr. Bolling said from New York.
In other commodity markets yesterday:
GRAINS AND SOYBEANS:
Soybean and corn futures prices moved higher on the strength of buying from commodity pool managers trying to profit from technical price trends, as well as continued export strength.
A leveling off of farmer selling tied to the harvest also removed some of the downward pressure on futures contract prices.
Wheat futures prices fell, however, at least partly in reaction to the rumored selling of futures contracts equal to several million bushels of wheat by commodity speculator Richard Dennis.
Neither Mr. Dennis nor officials of his Chicago trading company, C&D Commodities, could be reached for comment.
As for corn and soybean futures, "a lot of commission house buying this morning and computer-driven buying" supported prices in early trading, said Steven Freed, a futures analyst with Dean Witter Reynolds Inc. in Chicago.
Soybean futures for November delivery gained 5.25 cents a bushel to close at $5.66 a bushel on the Chicago Board of Trade.
December corn futures added 2.25 cents a bushel to close at $2.4225 a bushel on the Board of Trade.
Announced and anticipated purchases from foreign countries are also supporting futures prices.
"Russian ships are arriving in the gulf and there isn't enough grain in the pipeline," said Katharina Zimmer, a futures analyst with Merrill Lynch & Co. in New York.
The Soviet Union has purchased roughly eight million tons of grain this month, and is expected to take delivery by year end, analysts said.
COTTON:
Futures prices rose modestly, but trading volume wasn't very heavy.
The December contract settled at 73.97 cents a pound, up 0.59 cent, but it rose as high as 74.20 cents.
Several cotton analysts said that the move appeared to be mostly technical.
Traders who had sold contracts earlier, in hopes of buying them back at lower prices, yesterday were buying contracts back at higher prices to limit their losses.
Floor traders also said that the market could have been helped by rumors, which have been circulating for the past two days, about China purchasing cotton.
The rumor, which has been neither confirmed nor denied, has China buying 125,000 to 200,000 bales for near-term delivery.
One floor trader said that if there were Chinese purchases, they should have had a bigger effect on the market.
Another said that if China was a buyer, it would be the earliest that country had made purchases since the 1979-80 crop year, and thus would be a bullish sign.
This trader characterized the recent price action as a contest between the fundamentalists, who see higher prices ahead, and the technicians, who are basically buying cotton toward the bottom of the current trading range, around 71 cents, and selling it when the price climbs more than 74 cents.
This trader said that he thought the market would turn aggressively bullish from a technical standpoint if the December contract was able to exceed 75.75 cents.
He also noted that stocks on Aug. 1, 1990, are currently projected at 3.3 million bales, the smallest end-of-season supply since 1985.
COCOA:
The modest sell-off, which started on Tuesday, continued.
The December contract ended at $999 a metric ton, down $15.
The market is drifting, at least partly, because of a lack of crop information out of Ghana and the Ivory Coast, the two largest African producers.
Harry Schwartz, a soft commodity specialist for Cargill Investors Services in New York, said the only report Ghana has issued about the arrival of cocoa from the interior was for 7,839 metric tons as of Oct. 12.
By this time last year, he noted, arrivals totaling 33,270 tons had been announced.
A similar situation apparently exists in the Ivory Coast with no figures released yet this year, compared with 55,000 tons as of this time a year ago.
He said that if little cocoa actually has arrived at the ports, shipping delays could result.
This is the worry that probably brought steadiness to the market earlier in the week, he said.
There was also some fear that without Ivory Coast cocoa a large French cocoa merchant, Cie. Financiere Sucre et Denrees, might not be able to deliver cocoa against the contracts it had sold earlier for December delivery in London.
However, the French merchant has about 200,000 tons of old crop Ivory Coast cocoa stored in the Netherlands from an agreement it had negotiated with the Ivory Coast last spring.
Cargill thinks that even though the merchant has a contract stating that it won't bring this cocoa to market until after March 1991, there is some evidence the contract has been modified.
This modification, apparently, would permit the French merchant to deliver this cocoa, if necessary, against existing short positions.
Richard D. Sutton, 64 years old, chairman of this bank-holding company, was named acting president and chief executive officer of the company and its First National Bank of Toms River subsidiary.
Joseph W. Robertson, 61, was dismissed from those posts, the company said.
He couldn't be reached and a company spokesman wouldn't comment on the dismissal.
Mr. Robertson was also removed from the board of First National Bank of New Jersey-Salem County, another unit, and the Toms River bank.
American Medical International Inc. said it hasn't received any other offers to acquire the owner and operator of hospitals, and took another step toward completion of its $3 billion acquisition by IMA Holdings Corp.
Earlier this month IMA, an investment group that includes Chicago's Pritzker family and First Boston Corp., submitted a reduced bid for American Medical after it couldn't finance its initial offer.
Under the new offer, IMA will pay $26.50 a share for 63 million shares, or about 86% of the shares outstanding.
IMA also will assume $1.4 billion in debt.
Yesterday, in composite trading on the New York Stock Exchange, AMI common closed at $23.625, up 12.5 cents, on volume of almost 1.8 million.
Earlier, American Medical said it had been approached again by two other possible suitors, whom it wouldn't identify but who had previously submitted bids for the company.
Yesterday, American Medical said that the two other parties told the company that they don't have any current intention of making a takeover bid.
American Medical said its directors have approved what is, in effect, a draft of a solvency opinion on the acquisition, submitted by the Los Angeles-based investment banking and evaluation consulting firm of Houlian Lokey Howard & Zukin Inc.
A final opinion must be approved prior to the acceptance of tendered shares for payment under the offer, which was due to expire at 12:01 a.m. EDT today.
Separately, Moody's Investors Service Inc. downgraded the ratings of American Medical's senior and subordinated debt issues and those of its international affiliate.
The downgrade anticipates completion of the IMA Holdings acquisition today, Moody's said.
The ratings concern said the acquisition should result in pretax losses from operations because of increases in interest expense and charges for depreciation and amortization, but that it expects the losses to be reduced through productivity gains and above average growth of the company's hospitals.
Moody's said the ratings anticipate a successful debt-reduction program and modest improvement in discretionary cash flow because of planned asset sales.
Moody's changes affected the following issues:
American Medical International: Senior notes, sinking-fund debentures, Euromarket notes, Eurobonds, Swiss franc bonds, unsecured loan stock to Ba3 from Baa2; convertible subordinated debentures, notes, and sinking-fund debentures to B2 from Baa3.
American Medical International N.V.: Guaranteed Euroissues to Ba3 from Baa2.
An American Medical spokeswoman said the Moody's downgrading was expected because of the nature of the takeover.
Bay Financial Corp., Boston, which has been reporting big losses and warning of a possible bankruptcy-law filing, said it was sued by a holder.
The real estate investment trust said the "purported class action suit," seeks "damages and other remedies under federal securities law and state law."
Gerald E. Wilson, corporate secretary and legal counsel, said the company wouldn't disclose further details.
He declined to name the shareholder, the plaintiff's lawyer or the court where the lawsuit was filed.
Bay, which has substantial investments in the floundering Massachusetts market, reported a loss of $62 million, or $15.97 a share, for the fiscal year ended June 30.
It has said it might seek bankruptcy-court protection from creditor lawsuits if it can't renegotiate its borrowings.
In New York Stock Exchange composite trading, Bay closed at $2.625, down 25 cents.
Keith A. Tucker was named a director of this insurance and financial services concern.
Mr. Tucker, 44 years old, is president of Trivest Securities Corp. and senior vice president of Trivest Inc., closely held investment companies based in Miami.
His selection increases the size of the board to 12 members.
Torchmark also said that Samuel E. Upchurch Jr., 37, vice president and general counsel, was selected to serve the remainder of the term vacated by John S.P. Samford, who resigned as director.
Philip Morris Cos., New York, adopted a defense measure designed to make a hostile takeover prohibitively expensive.
The giant foods, tobacco and brewing company said it will issue common-share purchase rights to shareholders of record Nov. 8.
Under certain circumstances, the rights would entitle Philip Morris holders to buy shares of either the company or its acquirer for half price.
The board isn't aware of any attempts to take over Philip Morris, the company said.
As of Sept. 30, Philip Morris had 926 million shares outstanding.
In composite trading on the New York Stock Exchange, Philip Morris shares closed yesterday at $43.50 each, down $1.
Beghin-Say S.A. said that it plans to sell its remaining paper operations by the end of January as part of a drive to refocus on the food sector and lower its debt.
The French unit of Ferruzzi Agricola Finanziaria also disclosed a 40% rise in its consolidated net profit for the first half of 1989, excluding nonrecurring items and after payments to minority interests.
Beghin-Say said the sale will be done in two parts and will raise a total of 2.025 billion francs ($325 million).
This will include the sale of its interest in the joint venture Beghin Corbehem to Feldemuehle AG.
The West German paper company entered the venture in April 1988 by acquiring a 50% stake, also from Beghin-Say.
The other part of the transaction will see Beghin-Say sell its 50% stake in its Kaysersberg paper affiliate to an unspecified unit of the petrochemical group Montedison S.p.A., which is also controlled by Ferruzzi.
And in a separate transaction, Beghin-Say will sell its remaining 25% interest in A.T.B., a holding company for international trading assets, to an unspecified unit of Ferruzzi for 258 million francs.
Esselte AB, the Stockholm office supplies company, as expected, proposed to acquire the 22% it doesn't own of its U.S. unit, Esselte Business Systems Inc.
The price in the proposal is $43.50 for each of the 4.9 million shares the parent doesn't own, or $213.2 million.
In New York Stock Exchange composite trading, Esselte closed yesterday at $43.50 a share, up $1.
A committee of outside directors for the Garden City, N.Y., unit is evaluating the proposal; the parent asked it to respond by Oct. 31.
The unit said it can provide no assurance a transaction will occur.
Esselte AB sold the minority stake five years ago in a $40 million international share offering.
The unit, which is the holding company for Esselte's non-Swedish units, accounted for 58% of sales and 71% of operating profit last year.
Separately, Esselte Business Systems reported third-quarter net income fell 5.9% to $9.5 million, or 46 cents a share, from $10.1 million, or 49 cents a share, in the year-ago period.
Sales rose 2.9% to $329.2 million from $320 million.
House and Senate conferees agreed to continue production of Grumman Corp.'s F-14 and to provide more than $3.8 billion for the Strategic Defense Initiative during the current fiscal year.
Industry officials and congressional aides said that the main points of a compromise defense authorization bill, hammered out during a flurry of private meetings over the past few days, provide a face-saving compromise for both the White House and House Democrats.
Although conferees are still putting the finishing touches on the package, the final agreement could be announced as early as tomorrow.
An announcement is more likely next week, though.
President Bush and other supporters of SDI will be able to take credit for blocking House efforts to significantly cut the program to develop a space-based antimissile system, which already has cost some $17 billion.
Senate Armed Services Committee Chairman Sam Nunn (D., Ga.) and other Senate conferees have opposed the House cuts, stalling for almost two months action on a number of big-ticket items in the Pentagon's budget.
The Senate voted to authorize $4.5 billion for SDI spending in the current fiscal year, but the House, reflecting a dramatic erosion of support for the program, earmarked only $3.1 billion.
Despite the widening gap between the two sides, conferees eventually followed the pattern set in previous years by opting to roughly split the difference.
That would hold spending on the program at about the previous year's level.
The decision to keep the embattled F-14's production line running for at least another year is an important victory for the House, and especially for Rep. Les Aspin (D., Wis.).
As the head of the House conferees, Rep. Aspin has been under intense pressure from his colleagues to reject Senate provisions that would have abruptly cut further F-14 production.
The package "provides a temporary, golden parachute for Grumman," according to one congressional aide familiar with the closed-door bargaining.
But as part of the overall agreement, Grumman and its outspoken supporters on Capitol Hill effectively will be precluded from reopening the emotional issue in the debate over next year's budget.
Defense Secretary Dick Cheney and most senators contend that the Navy's F-14 is too expensive in an era of shrinking Pentagon budgets.
But the plane boasts a strong core of support in the House, where members are intent on saving Grumman jobs and are worried about potential shortages of carrier-based aircraft by the late 1990s.
Conferees also agreed to Pentagon requests to earmark a total of nearly $1 billion for work on both mobile MX and Midgetman nuclear missiles, according to congressional aides.
And lawmakers are putting the finishing touches on a compromise that would give the Air Force nearly all of the $2.4 billion it wants for production of Northrop Corp.'s radar-eluding B-2 bombers, which cost $530 million apiece.
The final B-2 agreement is certain to require detailed testing and verification of the bomber's capabilities, but congressional aides said the accord won't include a House-passed provision that would have withheld production funds until Congress approves a cheaper, scaled-down version of the $70 billion fleet of 132 B-2s envisioned by the Pentagon.
Consolidated Freightways Inc. reported a 77% drop in third-quarter net income, citing expected losses in its Emery Worldwide shipping business.
The Menlo Park, Calif., company said net was $7.4 million, or 22 cents a share, down from $32.3 million, or 86 cents a share, a year ago.
Revenue totaled $1.01 billion, a 43% increase from $704.4 million, reflecting the company's acquisition of Emery earlier this year.
Profit also suffered because of "intense" discounting in its long-haul trucking business, the company said.
Analysts had expected Consolidated to post a slim profit, and the company's stock was down only 25 cents to $30.25 in New York Stock Exchange composite trading yesterday.
"They have to continue to tighten their belts," said Craig Kloner, an analyst at Goldman, Sachs & Co.
A round of futures-related program selling near the close sent the stock market lower in otherwise directionless trading.
Nervousness that the market hasn't seen the last of its recent volatility kept trading at a moderate pace, as did anticipation of a report on the economy's third-quarter performance.
The Dow Jones Industrial Average, which plunged more than 80 points in early trading Tuesday and then recovered nearly all of its losses by the close, fell 5.94 to 2653.28 in the latest session.
The average drifted in a trading range of about 30 points throughout the day.
The lower boundary was established just after the opening in a brief round of selling; the upper boundary was set at midday as scattered bargain-hunting pushed prices higher.
Buying interest in Du Pont, which declared a stock split and a dividend boost, and certain other blue-chip issues gave the industrial average a better performance than broader indexes.
Standard & Poor's 500-Stock Index dropped 1.20 to 342.50; the decline was the equivalent of a nine-point setback in the 30-stock average.
The Dow Jones Equity Market Index fell 1.16 to 320.94 and the New York Stock Exchange Composite Index slid 0.53 to 189.52.
But advancing issues topped decliners by 784 to 700 on the Big Board despite the late sell programs, resulting from stock-index arbitrage.
The programs occurred against the backdrop of a late pullback in UAL, which had held at slightly lower levels through most of the session amid optimism that another bidder might surface.
Traders said program activity wasn't in evidence through most of the session, however, and Big Board volume dropped to 155,650,000 shares from about 238 million Tuesday as concerns about the potential for additional sharp swings in the market kept other trading in check.
"People are sort of nervous to do anything in the market now.
Our phones are quiet around here," said Don R. Hays, director of investment strategy at Wheat First Butcher & Singer Inc., Richmond, Va.
The gross national product report, due to be released before today's opening, is expected to show that the economy continued to expand in the third quarter at a moderate pace.
The consensus of economists polled by Dow Jones Capital Markets Report calls for a 2.5% annual growth rate for GNP during the quarter.
Du Pont, which announced plans for a 3-for-1 stock split and raised its quarterly dividend by 14%, jumped 2 1/2 to 117 3/8.
The company also posted third-quarter earnings that were in line with analysts' forecasts.
Blue-chip consumer stocks also provided a lift to the industrial average.
American Telephone & Telegraph rose 3/8 to 43 1/2 in Big Board composite trading of 1.5 million shares, Chevron advanced 1 3/4 to 66 5/8 on 2.3 million shares, Woolworth rose 1 to 58 5/8, Coca-Cola Co. gained 5/8 to 72 1/2 and Eastman Kodak added 3/8 to 44 1/2.
But General Motors dropped 1 7/8 to 44 7/8.
Its GM Hughes Electronics and financial-services units both reported that third-quarter earnings were down from a year earlier.
Anheuser-Busch plunged 4 3/8 to 38 1/2 on 3.5 million shares.
Its third-quarter earnings were lower than analysts had forecast, and the company said it had lowered its projections for earnings growth through the end of 1990 because of planned price cuts.
Xerox fell 3 1/8 to 59 5/8.
Disappointment with the company's earnings for the quarter led Prudential-Bache Securities to reduce its 1989 and 1990 earnings estimates, according to Dow Jones Professional Investor Report.
Computer Associates International, the most active Big Board issue, was another victim of an earnings-related sell-off.
The stock fell 3/4 to 12 7/8 as 3.6 million shares were traded in the wake of its report that fiscal second-quarter net income fell 66% from a year ago.
Insurance stocks moved higher in the wake of a strong third-quarter earnings report from Chubb, coming on the heels of speculation that last week's devastating earthquake in the San Francisco area would lead to higher premium rates.
Chubb, whose net income for the quarter exceeded most analysts' expectations, rallied 3 3/4 to 86 1/2.
Aetna Life & Casualty gained 1 3/8 to 61 1/8, Cigna advanced 7/8 to 64 3/4, Travelers added 1/2 to 40 3/8 and American International Group rose 3 1/8 to 107 3/4.
Comprehensive Care plunged 4 3/4 to 3 5/8 on 1.2 million shares.
The company reported a third-quarter loss and said it is holding talks with its bank lenders for an extension on some overdue debt payments.
TW Services dropped 1 1/4 to 31 1/4 following the postponement of a $1.4 billion junk-bond offering that would have permitted Coniston Partners to complete its takeover of the company.
Coniston said it would pursue "various financing alternatives."
UAL stock declined by 9 to 161 after nobody surfaced to claim credit for aggressive buying Tuesday by Bear Stearns that sent UAL stock up 35 points in a matter of hours.
Tuesday's rumored buyer, Coniston Partners, wouldn't comment on speculation that Coniston, which battled the UAL board in 1987, might challenge the board's decision Monday to remain independent.
Other airline stocks were mixed.
AMR, which owns American Airlines, rose 3 3/8 to 72 1/4; USAir Group fell 1 1/2 to 38 5/8, and Delta Air Lines rose 1/2 to 66 1/2 after posting higher earnings for the September quarter.
Stocks that reportedly benefited Tuesday from a Japanese buy program handled by PaineWebber gave back some of their gains.
Procter & Gamble went down 3 1/2 to 130, Dow Jones fell 3 1/2 to 37 1/2 and Rockwell International dropped 2 1/8 to 25.
However, Atlantic Richfield preserved its twopoint advance in the previous session and added 1/8 to 103 7/8.
General Mills gained 2 1/4 to 72 7/8.
Goldman Sachs placed the stock back on its list of recommended issues, raised its 1990 earnings estimate and recommended that its clients shift funds from Kellogg to General Mills.
Kellogg dropped 1 3/4 to 73 1/4.
Manville advanced 3/4 to 10.
The company offered to purchase $500 million of convertible preferred stock from the trust that handles its payments to asbestos victims.
Di Giorgio gained 1 to 30 3/4 after the company said it is starting negotiations with unidentified parties interested in acquiring its units.
Investor Arthur Goldberg is pursuing a $32-a-share takeover offer.
Esselte Business Systems rose 1 to 43 1/2.
Esselte AB of Sweden offered $43.50 a share for the 22% of the company it doesn't already own.
Public Service of New Hampshire went up 3/8 to 4.
Northeast Utilities boosted its offer to acquire the company by $400 million, to $2.25 billion.
Newell, which declared a 2-for-1 stock split and boosted its quarterly dividend by 14%, added 7/8 to 49 3/8.
Also, the company posted improved third-quarter earnings.
The American Stock Exchange Market Value Index fell 0.44 to 375.92.
Volume totaled 8,930,000 shares.
Mission Resource Partners lost 5 1/4 to 14 1/8.
The partnership, which had solicited takeover offers, said it failed to receive any adequate bids for all of its operations but is reviewing offers for individual properties.
Japan is going on a capital-spending binge that could make its trade surpluses even harder to shrink.
Its capital spending is growing at double-digit rates for the second year in a row, and its superefficient producers of everything from cars to computer chips are rushing to expand capacity, modernize factories and develop new products.
"The boom's so huge," says Mitsuru Saito, an economist at Sanwa Research Institute, "it makes you think of the Golden '60s," when Japan developed rapidly.
The more factories and robots Japanese manufacturers add, the more they will be able to export, and the less their domestic customers will need to import.
At Canon Inc., for example, sales are up nearly 20% this year; so, the maker of cameras and computer printers is doing what any Japanese company would do under the circumstances: It is increasing capital spending -- by 60%.
It is building, among other things, a new laser-beam-printer factory in western Japan that can produce up to 150,000 printers next year.
Some 70% of them are to be exported to the U.S.
Even companies in smokestack industries wrestling with world-wide overcapacity are joining the boom.
Japan's steelmakers are raising capital spending 22% this year to $4.8 billion.
Hitachi Zosen Corp., a shipbuilder buried in debt just a few years ago, will build a machinery plant, its first expansion in 14 years.
So big is the capital-spending boom that Japanese companies' outlays in Japan topped American companies' domestic outlays by $521.4 billion to $494.8 billion in the 12 months ended March 31 even though Japan's total output of goods and services is less than two-thirds America's.
From a financial standpoint, the boom couldn't come at a better time.
Many Japanese companies expect record profits this fiscal year, and Japanese interest rates, though up a bit recently, are still low.
And in a business system where shareholders have few rights and expect only modest dividends, companies can plow their profits back into plant and equipment.
But some economists and government officials here aren't applauding.
They fear that the boom may be too big for Japan's or anyone else's good.
"It's an explosive cocktail" thrown at the world, says Kenneth Courtis, senior economist at the Tokyo unit of Deutsche Bank Group.
The Ministry of International Trade and Industry is so concerned that it recently took the unusual step of urging Japanese auto companies to exercise caution in capital spending.
MITI officials hope to avoid yet-another source of trade friction with the U.S. even though export restraints currently limit Japanese car exports to the U.S.
Not everyone is worried, however.
Some economists -- and many Japanese companies -- are puzzled by the warnings.
The investment boom is mainly sparked, they say, by strong domestic demand and isn't likely to increase exports sharply.
Moreover, much investment isn't aimed at increasing capacity.
According to a survey of some 2,400 large companies by the Japan Development Bank, expanded capacity is the goal of just 51.8% of the outlays; for manufacturers alone, the figure is 32%.
The manufacturers said 14.2% of their spending is designed to improve products or add new ones, 17.5% is to cut costs, 12.5% is for research and development, and the rest is for maintenance and other purposes.
But the worriers remain unconvinced.
With Japan running enormous trade surpluses against much of the world, they think that Japan should meet the increased domestic demand by importing more.
And eventually, they contend, domestic demand will weaken, forcing companies to emphasize exports again.
"If there's a further drive to export," says Nobuyuki Arai, an economist at the Japan Development Bank, "that'll be a problem."
Even in the short run, the investment boom could exacerbate a disturbing trend: Japanese exports are showing surprisingly little tendency to ease.
Japanese auto makers, for example, are increasing their production capacity in the U.S.; the additional production should, in part, replace imported vehicles with locally manufactured ones.
But although Japanese companies increased their U.S. auto output by 42% from January to September compared with the year-earlier period, their exports to the U.S. will drop only 9% this year, Nikko Research Center estimates.
In contrast to previous economic booms, Japanese auto companies aren't just trying to boost production.
Many are pouring money into developing high-quality products to target affluent consumers and, to some extent, to avoid direct combat with cheaper cars from South Korea and Taiwan.
Others are replacing older facilities with flexible assembly lines on which different models can be turned out at once.
So many companies are investing in high-tech machinery that Fanuc Ltd., a robot maker, also had to build a new plant.
The buildup is "making Japan clearly more efficient, more technologically advanced and more competitive," declares a Western diplomat in Tokyo.
But whatever its effects on exports and imports, Japan's investment boom during the past two years has been stimulated at least partly by soaring domestic demand.
Japan's marathon economy, growing at 4.3% this year, is now in its 35th month of expansion, and some economists are betting that the boom will outlast the record 57-month expansion in the late 1960s.
Japanese consumers are increasingly eager to spend their money, especially on high-priced goods such as 29-inch television sets and luxury cars.
Nissan Motor Co.'s domestic auto sales are up 20% this year largely because its expensive Cima, Sylvia and Cefiro models are in heavy demand.
"One dealer told me that if he had more cars, he'd sell them right away," says Takuro Endo, Nissan executive vice president.
He adds that the company is trying to keep up with demand "by overworking" its employees.
Similarly, Honda Motor Co.'s sales are so brisk that workers grumble they haven't had a Saturday off in years, despite the government's encouragement of more leisure activity.
With demand growing and workers in short supply, many Japanese manufacturers are spending heavily on automation.
Among them are the shipbuilders, which had halved their shipyard work forces to cut costs during a prolonged slump in demand but now are capturing an increased share of the strengthening global market.
Sasebo Heavy Industries Co., a medium-sized shipbuilder, expects its sales to increase 30% this year, largely because of rising demand for oil tankers.
Once one Japanese company steps up its investments, the whole industry follows.
Because most businesses put market share above profitability, to let a competitor's addition to capacity go unmatched is to concede defeat.
The emphasis on market share is evident at Daikin Industries Ltd., Japan's biggest maker of industrial air conditioners.
Seeing new office buildings sprout up and its sales soar, Daikin is building another plant, which will lift its production capacity 50%.
The expansion is aimed not just at meeting demand but also at expanding the company's market share to 30% from 27% currently.
Besides, Daikin's major competitors, Hitachi Ltd. and Mitsubishi Heavy Industries Ltd., "are all adding production lines," a Daikin spokesman says.
"Until now, we were trying to increase productivity with the facilities we already had.
But we can't produce enough anymore."
The competition is even more heated in the auto industry, where companies are racing one another in a world-wide market.
Nissan aims to expand its 25% share of the market to 30% by spending $141 million on a plant in southern Japan that could make as many as 240,000 cars a year.
Meanwhile, Toyota Motor Corp.'s $247 million buildup is increasing its annual capacity by 180,000 cars, and Honda is spending $317 million on expansion.
Mazda Motor Corp. is still considering its options, but it boldly aims to double its annual domestic sales to 800,000 cars in the next four years.
Those who aren't worried about how Japanese manufacturers' investments will affect trade note that many new products aren't replacements for imports.
Although imports account for less than 1% of beer sales in Japan, Asahi Breweries Ltd., which has been gaining share with its popular dry beer, plans to fend off Japanese competitors by pouring $1.06 billion into facilities to brew 50% more beer.
But new-product development will make Japanese companies stronger, and big investments in "domestic" industries such as beer will make it even tougher for foreign competitors to crack the Japanese market.
Moreover, much of the investment boom is in high-tech fields in which Japanese companies have only limited foreign competition; so, more investment practically assures more exports.
Toshiba Corp., for example, is spending $986 million on two new plants to build four-megabit dynamic random access memories, the next generation of computer chips.
The product isn't widely used yet, but Toshiba, which has already beaten everyone else in producing the current-generation one-megabit DRAMs, believes that its early investment will heighten its chances of beating its competitors again.
"It's important to gain leadership," a Toshiba spokesman says.
Meanwhile, Toshiba's Japanese rivals, Hitachi, Fujitsu Ltd. and NEC Corp., aren't sitting still.
After doubling production in one plant, NEC is spending $275 million to build another plant that, in two years, will be able to make a million four-megabit DRAMs a year.
The new chip plants "won't be excessive investment," says Hajime Sasaki, an NEC vice president.
"We have enough products to make and the markets to sell these products."
Some of Japan's goods being produced as a result of the investment boom are already successful overseas.
Toyota's $35,000 Lexus automobile, a luxury model that it started shipping to the U.S. only last month, is racking up orders at a time when U.S.-made luxury-car sales are slow.
Toyota plans to raise Lexus exports when a new plant starts up next year.
What if its sales weaken someday?
Japanese companies have a caveat competitor attitude.
If excess capacity develops, they say, not everyone will suffer.
The losers will be those with the least attractive products, and many of them, analysts think, will be foreign companies.
Benjamin Franklin Federal Savings & Loan Association said it plans to restructure in the wake of a third-quarter loss of $7.7 million, or $1.01 a share, reflecting an $11 million addition to loan-loss reserves.
The Portland, Ore., thrift said the restructuring should help it meet new capital standards from the Financial Institution Reform, Recovery and Enforcement Act.
A year ago, Benjamin Franklin had profit of $1.8 million, or 23 cents a share.
In over-the-counter trading yesterday, Benjamin Franklin rose 25 cents to $4.25.
The company said the restructuring's initial phase will feature a gradual reduction in assets and staff positions.
The plan may include selling branches, consolidating or eliminating departments, and winding down or disposing of unprofitable units within 18 months.
Initially, the company said it will close its commercial real-estate lending division, and stop originating new leases at its commercial lease subsidiary.
Details of the restructuring won't be made final until regulators approve the regulations mandated by the new federal act, the company said.
Amdahl Corp., a maker of mainframe computers, reported a sharp decline in net income for its third quarter, citing pricecutting by competitors and adverse effects from a strong U.S. dollar.
Net income fell 37% to $32.9 million, or 30 cents a share, from $52.2 million, or 48 cents a share, in the year-ago period.
Revenue rose 15% to $534.3 million from $464.7 million.
Amdahl's results were somewhat worse than expected.
Jay Stevens, an analyst with Dean Witter Reynolds, said he expected the Sunnyvale, Calif., company to earn 35 cents a share for the quarter and said the firm's weaker profit was partly the result of increased competition from International Business Machines Corp., Amdahl's principal competitor for mainframe sales.
ONEIDA Ltd. declared a 10% stock dividend, payable Dec. 15 to stock of record Nov. 17.
The Oneida, N.Y., maker of consumer, food-service and industrial products also declared a quarterly cash dividend of 12 cents a share, with the same payable and record dates.
The cash dividend paid on the common stock also will apply to the new shares, the company said.
The move rewards shareholders and should improve the stock's liquidity, Oneida said.
The company has about 8.8 million shares outstanding.
In New York Stock Exchange composite trading yesterday, Oneida's shares closed at $18.375 a share, unchanged.
Federal health officials are expected today to approve a program granting long-deferred access to the drug AZT for children with acquired immune deficiency syndrome.
Announcement of the approval is expected to be made by Louis Sullivan, secretary of Health and Human Services.
The clearance by the Food and Drug Administration comes after two years of restricted access for the youngest victims of AIDS to the only antiviral drug yet cleared to treat the fatal disease.
The drug will be given treatment investigational new drug status, a label accorded to drugs believed effective but lacking formal approval.
The move will make the drug available free of charge for a time to children with the disease and symptoms of advanced infection.
Adults with AIDS have had access to AZT since FDA approved the drug's usage for adults in March 1987.
But despite more than two years of research showing AZT can relieve dementia and other symptoms in children, the drug still lacks federal approval for use in the youngest patients.
As a result, many youngsters have been unable to obtain the drug and, for the few exceptions, insurance carriers won't cover its cost of $6,400 a year.
So far, AIDS has stricken 1,859 children under age 13, with many times that number believed to carry the infection without symptoms.
To date, 1,013 of those children have died, according to the federal Centers for Disease Control.
Mothers of young AIDS patients expressed somber satisfaction.
"Thank goodness it's happening.
It should have happened sooner," said Elizabeth Glaser, a Los Angeles mother and activist who contracted the AIDS virus through a blood transfusion, and transmitted it to two of her children.
One of them, a daughter Ariel, died a year ago at age seven after her parents unsuccessfully pleaded for the drug.
"I could get AZT," says Mrs. Glaser, who bears her infection without any symptoms.
"But my daughter couldn't, until she was too ill to take it.
To watch your child die is an inhuman experience."
Her son, healthy and symptom-free, currently takes no medication.
The delay in getting AZT to children has been blamed on a combination of factors.
Traditionally, the medical establishment has waited two years to approve adult treatments for pediatric uses, because of a combination of conservative safety standards and red tape.
Secondly, critics have charged AZT's maker Burroughs Wellcome Co. with corporate inertia because children account for just 1% of the patient population and hence a small part of the large and lucrative market.
Wellcome has replied that it is moving ahead to compile the relevant data, and recently promised to develop a pediatric syrup form easier for youngsters to take.
Still, all this comes nearly a year and a half after Philip Pizzo of the National Cancer Institute offered evidence that AZT could reverse the ravages of AIDS dementia, sometimes prompting dramatic recovery of IQ levels and reappearance of lost motor skills.
Since then, roughly 50 pediatric patients have received the drug in his program.
To some mothers, the expected FDA action is a poignant reminder of what might have been.
"My first reaction is I don't understand why it's taken so long.
Why has it taken people so long for people to understand pediatric AIDS is a major problem?" asked Helen Kushnick, whose son Samuel died six years ago at age three, victim of a tainted transfusion.
Similar sentiments were voiced on Capitol Hill.
"While I'm pleased the FDA is finally releasing AZT for children, it's taken much too long to get to this point," said Rep. Ted Weiss.
"Why did it take Burroughs Wellcome so long to apply" for treatment investigational new drug status? the New York Democrat asked.
"Let's not forget this is the same company that has been profiteering with this drug for 2 1/2 years," Mr. Weiss added.
Mrs. Glaser, who is a co-founder of the Pediatric AIDS Foundation, based in Santa Monica, Calif., condemned neither bureaucratic nor corporate foot-dragging.
"There's no finger to be pointed," she said.
"The crucial thing is that we learn our lesson well, and to make sure other experimental drugs, like Bristol-Myers Co.'s DDI, don't follow the same frustrating course as AZT."
AIDS dementia -- which gradually steals children's ability to speak, walk and think -- is often the most striking aspect of the pediatric syndrome.
For some patients, AZT has restored the ability to ride a bicycle or solve puzzles, giving back a piece of their childhood if only temporarily.
"It's impossible to overstate how much this means to the families of these patients," said Samuel Broder, director of the National Cancer Institute and a main developer of AZT.
AVON RENT-A-CAR & TRUCK Corp. said it declared a dividend of one warrant for each three shares of common stock.
Currently, Avon, based in Santa Monica, Calif., has 3.3 million common shares outstanding.
About 1.1 million Class C warrants were issued, the company said.
Each of the Class C warrants will enable the holders to purchase one share of common stock at $5.50.
The warrants may be exercised until 90 days after their issue date.
Avon also said it will issue an additional 243,677 of the Class C warrants to holders of its Class A, Class B and unclassified warrants.
Issuance of those warrants will be at the rate of one-third warrant for each warrant exercised.
THE BIG BOARD PLANS to launch its own vehicle for program trading today amid growing controversy over the practice.
The new "baskets" of stocks will allow big investors to buy or sell all 500 S&P index stocks in a single trade.
The exchange argues that the product, which the SEC temporarily approved yesterday, will help ease rather than worsen any volatility in the stock market.
SEC Chairman Breeden said he would consider imposing "circuit breakers" to halt program trading during sharp swings in the market.
Kemper Financial Services has stopped executing its stock trades through four big securities firms because of their involvement in program trading, which Kemper and others say is ruining the market.
The main capital-gains tax plan in the Senate isn't winning support from Democrats who favor a reduction.
The trend is making proponents less optimistic a tax cut will pass.
Bethlehem Steel's profit plunged 54% in the third quarter, hurt by higher costs and lower shipments to key clients.
Also, Armco and National Intergroup had lower operating profit in steel, marking what may be the end of a two-year industry boom.
Columbia S&L posted a quarterly loss of $226.3 million as the Beverly Hills thrift reeled from new industry rules and turmoil in junk bonds.
Anheuser-Busch plans to aggressively discount its major beer brands, setting the stage for a price war as the beer industry's growth slows.
PS New Hampshire received a sweetened bid from another suitor, United Illuminating, which valued its new proposal at $2.29 billion, apparently topping all others so far.
Financial markets quieted, with stock prices edging lower, bonds inching up and the dollar almost unchanged.
The Dow Jones industrials closed off 5.94 points, at 2653.28.
Fed Chairman Greenspan said the central bank can wipe out inflation without causing a recession, but doing so will inflict short-term pain.
GM's Hughes Electronics unit said profit slid 22% in the third quarter.
The finance unit, GMAC, said net fell 3.1%, but EDS's profit rose 16%.
Campeau reportedly may receive a $1.3 billion offer for Bloomingdale's from Tokyu Department Store of Japan.
Campeau declined to comment.
UAL's pilots and machinists unions appear to hold the key to any future takeover bid for the airline.
Provigo plans to sell all non-food operations to refocus on its retail and wholesale grocery business.
Also, Chairman Pierre Lortie resigned.
Westinghouse expects operating margins of over 10% and sharply higher earnings per share next year due to a major restructuring.
Some major U.S. trade partners quickly rejected a compromise proposal by Bush to liberalize trade and reduce farm-product subsidies.
Markets --
Stocks: Volume 155,650,000 shares.
Dow Jones industrials 2653.28, off 5.94; transportation 1199.32, off 11.38; utilities 216.49, up 1.45.
Bonds: Shearson Lehman Hutton Treasury index 3427.39, up
Commodities: Dow Jones futures index 129.48, up 0.24; spot index 130.73, off 0.03.
Dollar: 141.52 yen, up 0.07; 1.8353 marks, off 0.0002.
GORBACHEV SAID Moscow won't intervene in East bloc moves to democracy.
The Kremlin leader, on the first day of a three-day official visit to Helsinki, assured Finland's president that the Soviet Union has "no moral or political right" to interfere with moves toward democracy in Poland, Hungary or elsewhere in Eastern Europe.
In Moscow, the Soviet State Bank announced a 90% devaluation of the ruble against the dollar for private transactions, in an apparent attempt to curb a black market for hard currency.
The action will establish a two-tier exchange rate.
Workers at six mines in Arctic Circle coal fields called strikes over a series of economic and political demands.
The move defied a law, approved in Moscow this month, banning such walkouts.
THE HOUSE FAILED to override Bush's veto of a bill easing abortion funding.
The chamber voted 231-191, 51 votes short of the two-thirds majority needed to overturn the president's veto of legislation renewing support of Medicaid abortions for poor women who are victims of rape and incest.
The roll call was considered an illustration of the limits of power that the resurgent abortion-rights movement faces.
The legislation was part of a $156.7 billion measure funding the departments of Labor, Education, and Health.
Michigan's Senate passed a bill requiring girls to get parental consent for an abortion and Pennsylvania's House cleared a measure banning abortions after the 24th week of pregnancy.
The FDA is expected to approve today a program granting access free of charge to the drug AZT for children with AIDS.
Adults have had access to the only approved antiviral drug since 1987.
Research shows AZT can relieve dementia and other symptoms in children, 1,859 of whom are known to have been infected.
Congress sent to Bush a $2.85 billion emergency package to assist in the recovery from last week's California earthquake and from Hurricane Hugo.
The action came after the Senate approved the House-passed measure.
In the San Francisco Bay area, more than 13,000 people were homeless and landslides threatened more houses.
House-Senate conferees agreed to continue production of Grumman Corp.'s F-14 jet and to provide more than $3.8 billion during the current fiscal year to develop a space-based anti-missile system.
The final package is expected to be announced within the next week.
The White House has decided to seek changes in pesticide law that are aimed at speeding the removal of harmful chemicals from the food supply.
The changes, which could be announced as early as today, would apply to pesticides and other substances found on fresh and processed foods, officials said.
East German leader Krenz said he was willing to hold talks with opposition groups pressing for internal changes.
The Communist Party chief, facing what is viewed as the nation's worst unrest in nearly 40 years, also said he would allow East Germans to travel abroad more freely, but made clear that the Berlin Wall would remain.
A Lebanese Christian alliance accepted an Arab-sponsored proposal aimed at ending Lebanon's 14-year-old civil war.
The move by the coalition of political parties and Lebanon's largest Christian militia isolated military chief Aoun, who has rejected the plan, which includes political changes and a Syrian troop withdrawal from Beirut.
Baker offered to review Israel's "suggested changes" to his proposal for direct Israeli-Palestinian talks.
But the secretary of state advised Israel that attempting to overhaul the five-point plan risked delaying the negotiations aimed at Mideast peace.
NATO defense ministers said the 16-nation alliance continues to need a strong nuclear strategy despite political changes in Eastern Europe.
The ministers, concluding a two-day meeting in southern Portugal, welcomed Moscow's pledges to cut its military forces, but urged the Soviets to do more to slash short-range nuclear weapons.
The Justice Department indicated a possible challenge to a court order allowing former National Security Adviser Poindexter to subpoena ex-President Reagan's personal papers for use in the defense case against Iran-Contra charges.
A department spokesman said the ruling "raised a serious question" about the office of the president.
Bush said Washington would continue a trade embargo against Nicaragua, declaring that the Central American country poses "an unusual and extraordinary threat" to the security of the U.S.
Meanwhile, Secretary of State Baker said the U.S. protested to Moscow over shipments of East bloc arms to Salvadoran rebels from Managua.
A landslide engulfed a hillside slum in Sao Paulo, Brazil, and at least 20 people, most of them children, were missing and feared dead.
The city's mayor vowed to take legal action against developers who had been excavating at the crest of the hill.
Czechoslovakia's premier said he supports broad political and economic restructuring, but ruled out any dialogue between Prague's Communist government and independent human-rights or dissident groups.
Ladislav Adamec, ending a two-day visit to Austria, pledged changes in Czechoslovakia, including freer travel to the West.
Died: Mary McCarthy, 77, novelist and literary critic, in New York City, of cancer. . . .
Marion Harper, 73, founder and ex-chief executive of Interpublic Group of Cos., in Oklahoma City, of a heart attack.
Adolph Coors Co. said William K. Coors, chairman, assumed the additional responsibilities of president, succeeding Jeffrey H. Coors.
Jeffrey Coors, 44 years old, had been president since 1985, when he succeeded his father Joseph in the job.
But the brewer said Jeffrey Coors voluntarily gave up the position to focus more of his energy on Coors Technology Co., a small unit of Coors he has run for several years.
A Coors spokesman said the company doesn't believe the move will further increase William Coors's influence or reduce the influence of Jeffrey Coors, Peter Coors or Joseph Coors Jr., who run the company's three operating units.
"It certainly wasn't intended to be a demotion," the spokesman said.
"Pete and Jeff and Joe Jr. have taken over the reins and are doing most of the work.
We don't think this will affect that."
Jeffrey, Peter and Joseph Jr. are brothers.
William Coors is their uncle.
Jeffrey, Peter, Joseph Jr., William and Joseph Sr. constitute the company's board.
Peter Coors runs the Coors Brewing Co. unit, the nation's fourth-largest brewery that accounted for $1.24 billion of Adolph Coors's $1.52 billion in 1988 sales.
Joseph Jr. runs Coors Ceramics Co., the other operating unit, which had about $150 million in 1988 sales.
Dun & Bradstreet Corp. said business failures fell 17.8% to 11,586 in the third quarter from 14,099 in the year-earlier period.
In the first nine months of this year, business failures dropped 15.6% to 37,820 from 44,796.
Except for a few spots, notably Georgia, Virginia and Michigan, failures declined almost across the board, according to the business information services company.
D&B defines a business failure as a company that closes with losses to creditors.
The current decline in failures continues a trend begun in late 1987, D&B said.
The drop accelerated in this year's third quarter, underscoring an overall lack of stress in the U.S. economy, the company said.
Failures in seven of nine regional areas fell more than 10% in the nine months.
The South Atlantic States were the only region to report an increase in bankruptcies, up 5.3% to 5,791 from 5,502.
This occurred partly because of more competition as the number of new businesses surged.
The only industry sector to report more business failures for the nine months was the finance, insurance and real-estate sector, where bankruptcies grew 8.1% to 2,046 from 1,892.
The troubled savings-and-loan industry and subsequent stress in real-estate businesses fueled bankruptcies in this sector, D&B said.
A major Tokyo newspaper reported that a Japanese department store concern is planning to offer about $1.3 billion to buy Bloomingdale's.
Campeau Corp., the chain's owner, declined to comment on the report.
A spokeswoman said Toronto-based Campeau has received "expressions of interest" in Bloomingdale's, but she declined to comment on whether any actual bids had been made.
Nihon Keizai Shimbun, Japan's leading economic newspaper, reported Wednesday that Tokyu Department Store Co. is planning to team up with U.S. and Western European financing to buy the New York-based retail chain, which Campeau has put up for sale.
The service didn't identify its Tokyu sources.
"This is the first of many rumors we expect to hear during the sale's process," said a Bloomingdale's spokesman.
"We won't comment on them."
Tokyu executives weren't available for comment early Thursday morning in Tokyo.
Campeau's chairman, Robert Campeau, said at its annual meeting in July that he valued Bloomingdale's at $2 billion.
Among previously disclosed possible bidders is Bloomingdale's Chairman Marvin Traub, who has aligned himself with Drexel Burnham Lambert Inc. and Blackstone Group.
Investment bankers in Tokyo confirmed that Tokyu Department Store is one of several Japanese companies that has been approached by representatives of a management committee headed by Bloomingdale's Mr. Traub.
But they said detailed financial figures haven't been passed yet to any prospective buyers.
"Nobody is going to make a real bid before the middle of November," said one investment banker familiar with the discussions in Japan.
"Tokyu is one of the potential buyers who might raise its hand.
But it's in very early stages still."
Bloomingdale's is a 17-store chain acquired last year by Campeau in its $6.6 billion acquisition of Federated.
Bloomingdale's does an estimated $1.2 billion in annual sales.
The sale of Bloomingdale's is a condition of efforts by Toronto-based Olympia & York Developments Ltd. to arrange $800 million in bridge financing for Campeau, which disclosed last month that its retailing units, Federated Department Stores Inc. and Allied Stores Corp., were strapped for cash.
O&Y, owned by Toronto's Reichmann family, is also supervising major restructuring and refinancing of Campeau, a Toronto-based real estate and retailing company.
One executive familiar with the Bloomingdale's situation said, "No book has been issued regarding Bloomingdale's, there are no projections, so I doubt very much whether any bid has been made."
Separately, a Campeau shareholder filed suit, charging Campeau, Chairman Robert Campeau and other officers with violating securities law.
The suit, filed in U.S. District Court in Manhattan, seeks class-action status.
The suit accuses the retailer and several of its officers of making false and misleading statements about the company's business affairs.
The suit says the company failed to disclose material adverse information about its financial condition.
A spokesman for the company said Campeau hasn't seen the suit and declined to comment.
McCaw Cellular Communications Inc. must extend its offer for LIN Broadcasting Corp. because it has "not yet announced committed financing sufficient to complete" the bid, LIN said in New York.
According to Securities and Exchange Commission rules, McCaw is required to keep its offer for the cellular-phone and broadcasting concern open for at least five business days after the announcement of the financing, LIN said.
McCaw's offer is scheduled to expire tomorrow.
Last week, McCaw said it obtained "firm" financing commitments from three major banks in regard to its bid to control LIN Broadcasting.
The banks jointly committed $1.2 billion of financing, subject to certain conditions, McCaw said.
A spokesman for McCaw said the company was "moving forward with our financing."
He added that "hopefully LIN will conduct a fair auction."
McCaw wants to buy 22 million shares of LIN for $125 each, or $2.75 billion, which would result in McCaw's owning 50.3% of LIN.
The offer is in limbo, however, because LIN has agreed to merge its cellular-phone businesses with BellSouth Corp.
In national over-the-counter trading yesterday, LIN rose 50 cents, to $109.25.
NICHOLS INSTITUTE declared a 2-for-1 split of its common stock, payable Nov. 27 to stock of record Nov. 10.
The clinical testing services holding company is based in San Juan Capistrano, Calif.
StatesWest Airlines, Phoenix, Ariz., said it sent a more detailed merger proposal to much-larger Mesa Airlines.
Farmington, N.M.-based Mesa has consistently rejected StatesWest's offers, and early this week said its board wouldn't give the proposal further consideration, calling it "vague and ill-defined" because it didn't describe the source of funds or the specific terms of StatesWest securities which were part of the offer.
The new letter purports to do this, saying that in addition to $7 a share in cash, StatesWest would offer one share of new 6% convertible preferred stock of StatesWest it values at $3 a share.
It also said the cash portion of the transaction would be financed with StatesWest's own cash and short-term investments, plus debt and other financing arranged through Hibbard Brown & Co., the company's investment banker.
In national over-the-counter trading yesterday, Mesa closed at $7.25, up 25 cents.
StatesWest asked Mesa to repond by Oct. 31.
Mesa President Larry Risley said his board had received Stateswest's most recent offer and was reviewing it.
Spiegel Inc., citing continuing improvement in the apparel market, said third-quarter net income jumped 65% from the soft year-earlier period, on an 11% increase in revenue.
The catalog retailer reported net income of $10.8 million, or 21 cents a share, up sharply from $6.6 million, or 13 cents a share, a year earlier.
Revenue rose to $372.1 million from $336.4 million.
Spiegel said margins improved because its inventory position this year didn't need the costly markdowns required to trim last year's swollen levels.
A spokeswoman said the apparel market troughed in the first half of 1988, then began showing improvement in the second half of last year.
"We've seen continued improvement in 1989," she said.
The year-ago quarter's results were crimped by expenses associated with Spiegel's $260 million acquisition of catalog-clothing-merchandiser Eddie Bauer, Spiegel noted.
In addition, the company said ongoing cost-cutting efforts contributed to the latest period's earnings upturn.
Spiegel is 84%-controlled by the Otto family of West Germany.
In national over-the-counter trading, the company's shares climbed 37.5 cents to $20.375.
For the latest nine months, Spiegel's net climbed a solid 47% to $23.8 million, or 46 cents a share, from $16.2 million, or 34 cents.
Unlike the quarter's results, which were based on roughly equal shares outstanding, nine-month per-share figures reflect an increase in average common shares outstanding to 51.9 million from 47 million.
Nine-month revenue was $1.02 billion, up 22% from $841.5 million.
The bad news in the junk bond market yesterday was that TW Services, a group of restaurant chains, became the latest prospective issuer to get a cold shoulder from bond buyers.
The good news -- to fans of stable credit, at least -- is what the rejection says about the state of mind of junk buyers.
Apparently they are learning to say no to excess risk.
Coniston Partners, which with related entities controls 80% of TW, had been planning to sell $1.15 billion of junk bonds, among other things to finance their acquisition of the remaining public shares.
But Coniston, a New York partnership managed by the firm of Gollust, Tierney & Oliver, yesterday announced that "in view of unsettled conditions in securities markets" the offering would be postponed and restructured.
What wasn't mentioned is that Coniston and its investment banker, Donaldson, Lufkin & Jenrette, just completed a two-week "road show" for the purpose of marketing the bonds.
And investors, at least for now, took a pass.
TW's junk bonds weren't, as junk bonds go, unusually weak.
Its fast-food restaurants -- including Denny's, Hardee's, Quincy's and El Pollo Loco ("the only significant fast-food chain to specialize in char-broiled chicken") -- are stable, recession-resistant and growing.
But unless they continued to grow, TW, based in Paramus, N.J., would have run into trouble.
Until recently, such buy-now, pray-for-growth-later deals were routine.
"But people don't buy anything on expectation anymore," says Jack Utter, who manages the high-yield fund of IDS Financial Services.
"Investors," he adds, "are getting religion."
The TW buy-out may yet be financed.
"There is nothing wrong with the company," says Coniston principal Paul Tierney.
The rub, he says, is that "the junk market isn't as deep" as before.
TW's stockholder meeting was postponed from tomorrow to Nov. 21.
By then, DLJ hopes to be able to sell less-junky junk bonds.
Gollust, Tierney & Oliver is likely to contribute more than the $120 million in equity it had planned on.
Banks may contribute more senior debt.
And the total amount of junk financing will be reduced.
A DLJ banker, putting a best possible face on it, asserts that "very few people said they didn't like the credit quality.
People said they didn't think a billion-dollar deal would trade."
But trading risk stems from credit risk.
And by adding equity, DLJ would seem to be acknowledging that credit risk was a concern.
Indeed, the DLJ banker says, in the reborn capital structure cash coverage of interest "will meaningfully improve."
As he sums it up: "We are listening to the market."
What is it, to borrow a term from Coniston, that so unsettled the market?
Some of the same risks that were cited -- and seemingly ignored -- in dozens of previous junk offerings.
The TW prospectus says that if the acquisition had been completed earlier, pretax earnings "would have been insufficient to cover its fixed charges, including interest on debt securities," by approximately $62.7 million in the first six months of 1989.
TW notes, as many junk issuers do, that "adjusted to eliminate non-cash charges" TW would have run a cash surplus -- in this case, of $56 million over six months.
But such calculations ignore the noncash charge of depreciation, taken to allow for the gradual wearing out of french friers, deterioration of stores and the like.
In fact, DLJ says, the company envisions capital expenses of about $180 million a year.
TW's pitch was that sales and earnings at its restaurants have risen steadily and that people won't stop eating during a downturn.
But they won't necessarily eat at Denny's.
The fast-food business is "intensely competitive," notes Wertheim Schroder analyst John Rohs.
Prospective bond buyers noted that TW historically has prospered because it has been willing to spend aggressively on remodeling restaurants and redoing menus.
"We were concerned that they weren't going to generate enough cash for capital spending and also to pay down debt," says a big investor in high-yield debt.
DLJ argues that TW could, if necessary, cut capital spending, since half of what it plans to spend is for "growth," rather than maintenance.
But investors noted that under the shelved offering, TW would have needed to grow to meet its debt payments.
Its calculations for meeting cash charges ignore $52 million a year in interest on cash-deferred, or zero-coupon debentures -- which ultimately would have had to be paid.
The prospectus notes "there can be no assurance" that future growth will continue at past levels.
In the recent past, bond buyers didn't seek such assurance.
Now, apparently, they do.
TW Services
(NYSE; Symbol: TW)
Business: Restaurants
Year ended Dec. 31, 1988*
Revenue: $3.57 billion
Net Income: $66.9 million; $1.36 a share**
Third quarter, Sept. 30, 1989: (Net Loss: 7 cents share) vs. net income: 51 cents a share
Average daily trading volume: 179,032 shares
Common shares outstanding: 49 million
*Includes results of Denny's Inc., acquired in September
**Includes $9 million write-down of assets and takeover defense costs.
Maggie Thatcher must be doing something right; her political enemies are screaming louder than ever.
Mrs. Thatcher, who was practicing the read-my-lips school of politics years before Mr. Bush encountered it, has made clear her opposition to refashioning Britain's free-market policies to suit the bureaucrats in Brussels.
In return, Mrs. Thatcher is excoriated from Fleet Street to Paris as an obstructionist.
Well, it now turns out that Mrs. Thatcher had to travel across the globe to the 49-member Commonwealth summit in Kuala Lumpur to discomfit the Holy Order of Consensus Builders.
"A disastrous farce in Malaysia," screamed the Manchester Guardian.
"She can no longer be trusted to behave in a civilised -- that is unflaky -- fashion when abroad."
Egad.
Canada's Brian Mulroney and Australia's Bob Hawke, the paper said, were "enraged."
The London Times said she had "contravened protocol."
As usual, her sin was saying what she thought.
She issued a separate statement, separating herself from a Commonwealth document reasserting the political value of imposing sanctions against South Africa.
While supporting the Commonwealth "in utterly condemning apartheid," her statement urged it to "encourage change" rather than inflict further punishment on the country's black population.
Actually there is a consensus somewhere on sanctions: In May a Gallup Poll found that most South African blacks, 85%, oppose economic sanctions.
Still, Mrs. Thatcher had once again gone against the grain.
Malaysia's Prime Minister Mahathir Mohamad sniffed, "If everybody else puts out their left foot and you put out your right foot, you are out of step."
Mrs. Thatcher: "If it's one against 48, I'm very sorry for the 48."
If indeed Mrs. Thatcher has one opponent that could throw her off political course it is Britain's mysteriously intractable inflation problem.
We cannot, however, join the political chorus that as one proclaims how offputting it is that Mrs. Thatcher refuses to get along by going along.
It is refreshing to see at least one world figure who knows what she believes in and is not inclined to reflexively compromise those beliefs.
Perhaps Mrs. Thatcher understands better than those distressed at her style that ultimately history and Britain's voters will decide who is right about Europe, sanctioning South Africa or running Britain's economy.
Follow With Care
"Work hard, play hard" is advice Best taken with some caution, For it can bring fitness and success Or a state of total exhaustion.
-- Edward F. Dempsey.
Double Check
The guest paid his bill at the resort hotel, and as he departed he noticed a sign saying, "Have You Left Anything?"
The man went back and spoke to the desk clerk: "That sign is wrong," he said.
"It should read, "Have You Anything Left?"
-- Sam Ewing.
After being trampled in Tuesday's selling stampede, the Nasdaq over-the-counter market dusted itself off and moved on in moderate trading.
But while the Composite gained 1.19, to 462.89, many issues didn't participate in the advance.
"It was a mixed bag," said Richard Bruno, who heads over-the-counter trading at PaineWebber.
"We played catch-up in some areas, and sold off in some others."
Volume totaled 132.1 million shares, which is about average for the year.
Of the 4,348 issues that changed hands, 1,074 advanced and 866 declined.
Big financial stocks carried the day.
The Nasdaq Financial Index rose 2.09, to 454.86.
Meanwhile, the Nasdaq 100 Index of the big non-financial stocks basically stood still, easing 0.12, to 452.23.
Despite the Composite's advance, some trading officials are guardedly optimistic that the market is on the road to recovery.
Lance Zipper, head of over-the-counter trading at Kidder Peabody, said it is difficult to make predictions based on yesterday's trading volume.
The advance felt more like a technical bounce, he said.
"The market acted better, but it wasn't a tremendous comeback," Mr. Zipper observed.
"If we get a decent rally {today}, maybe the buyers will come back."
If E.E. "Buzzy" Geduld is right, a seatbelt may come in handy during the next few sessions.
The president of Herzog, Heine, Mr. Geduld expects the market to be "very choppy" for a while.
"There's a lot of uncertainty out there, and it will cause a lot of swings," he said.
Among active stocks, MCI Communications rose 7/8 to 43 on 2.2 million shares, Mentor Graphics added 1/8 to 16 3/8 on turnover of 1.5 million shares.
Apple Computer dropped 1 1/8 to 46 1/2 on one million shares.
Almost one million shares of Sun Microsystems changed hands, but the issue was unchanged at 17 3/4.
Biotechnology issues were strong.
Amgen advanced 1 1/2 to 56; Chiron jumped 2 to 29 3/4; Cetus gained 1 to 16 7/8 and Biogen rose 5/8 to 14 5/8.
The American depositary receipts of Jaguar jumped 3/8 to 11 5/8 on turnover of 1.9 million.
Ford Motor said it raised its stake in the British car maker to 12.45% of the ordinary shares outstanding.
In a Securities and Exchange Commission filing, Ford said it holds 22.8 million ordinary shares.
The company has said it is prepared to make a bid for all of the shares outstanding of Jaguar if British government restrictions to such a transaction are removed.
Another takeover target, LIN Broadcasting, rose 1/2 to 109 1/4 on 495,000 shares.
Its suitor, McCaw Cellular, also added 1/2 to 40 1/2 on 395,700 shares.
Other stocks were affected by corporate earnings.
Informix, which recently said third-quarter net income rose to 16 cents a share from a penny a share a year ago, gained 1 5/8 to 13 5/8 on 810,700 shares.
The 1988 results included a one-time gain.
Cimflex Teknowledge rose 13/16, or 39%, to 2 7/8 on volume of 494,100 shares.
The maker of software products and services, which had a net loss in the 1988 third quarter, earned 200,000, or a penny a share, in this year's quarter.
It was Nasdaq's biggest percentage gainer.
Star States plunged 3 1/4 to 8 3/4 on 207,000 shares.
The company suffered a $9 million loss in the third quarter, compared with net of $2.5 million a year earlier.
Collagen dropped 2 5/8 to 15 5/8 on 428,000 shares.
In its fiscal-first quarter ended Sept. 30, the biomedical-products maker earned 10 cents a share, up from eight cents a share in the 1988 quarter, which included an extraordinary credit.
Occupational-Urgent Care Health fell 1 3/4 to 15 1/2 on 354,000 shares.
The company's third-quarter earnings also rose to 10 cents a share from eight cents a share a year ago.
Companies listed below reported quarterly profit substantially different from the average of analysts' estimates.
The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share.
Estimated and actual results involving losses are omitted.
The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days.
Otherwise, actual profit is compared with the 300-day estimate.
One day last March, CBS Sports President Neal Pilson and Olympics superagent Barry Frank met for lunch at the Lotos Club here.
Mr. Frank told Mr. Pilson that Olympics officials wanted $290 million or more for TV rights to the 1994 Winter Games in Norway.
The CBS official said that price sounded fine.
At that price, CBS was the only player at the table when negotiations with the International Olympic Committee started in Toronto Aug. 23.
Dick Pound, a committee member, began by disclosing that ABC and NBC had refused to even bid.
Then, he asked Mr. Pilson to raise his offer anyway: "If we can have a number that starts with a three, you can have a dea."
Mr. Pilson and his team huddled in a hallway and took just 10 minutes to return with a $300 million offer.
Mr. Pound responded, "It's a deal."
A beaming Mr. Pilson announced his lastest coup at a news conference that afternoon.
Mr. Pilson's rivals at ABC and NBC grimaced at the price.
How could CBS get pushed into outbidding itself?
Well, CBS, mired in the ratings cellar and looking to sports as a way out, wanted to close the deal immediately and block its rivals from getting another chance to bid.
But Mr. Pilson has been put in the uncomfortable role of setting off a bidding frenzy for sports rights, a frenzy that the networks had hoped to avoid.
"The price of poker has gone up," crows Charles M. Neinas, the College Football Association's executive director.
With CBS Inc. on a spending spree that may top $2.5 billion for four years of major sports events, the new bout of hyperinflation could jolt the entire broadcast business.
CBS itself could run up losses of a few hundred million dollars on four years of various sports if its big gamble goes wrong.
ABC, a unit of Capital Cities/ABC Inc., and General Electric Co.'s National Broadcasting Co. also risk losses if they outbid CBS for other contracts.
While rights fees head skyward, ad rates won't.
Advertisers already are balking at higher prices.
"The networks are paying too much for rights," warns adman Paul Isacsson of Young & Rubicam.
"If they ask advertisers to absorb the costs, they're likely to lose all but a few who need sports, above all."
Viewers may not be cheering, either.
Soaring rights fees will lead to an even greater clutter of commercials.
At the same time, some sports events will move off "free" television and onto cable or pay-cable, where half the nation's TV homes can't see them.
CBS has changed the rules by throwing out the old basis for sports bids -- that is, can the network alone make a profit on it?
Mr. Pilson emphasizes the ancillary benefits of positive press, contented affiliate stations, enthusiastic advertisers and huge audiences that might stick around to watch other CBS programs when the game is over.
The billion-dollar question is, How much are those benefits worth?
Some TV people doubt they will materialize and argue that even if they do, they won't offset the multimillion-dollar deficits that CBS could run up.
"As we've seen in the '80s," says Roger Werner, the president of the ESPN sports channel, "those deals can turn sour if the numbers don't work.
And three years later, in a sea of red ink, the heroes can find themselves with a lot of explaining to do."
CBS pursues top sports "to belie the fact that they aren't supporting affiliates, viewers and advertisers," charges Thomas H. Wyman, who was ousted as chairman of CBS Inc. after Laurence A. Tisch bought a 24.9% stake in the company and took over three years ago.
"They lost the entertainment crown, and they needed one.
And they've bought one."
On just three big deals -- for four years of baseball and for the Olympic Winter Games in both 1992 and 1994 -- Pilson bid a total of $1.64 billion.
That's well over half a billion dollars more than ABC and NBC were willing to pay.
(After 1992, the winter and summer Olympics will be held two years apart, with the revised schedule beginning with the winter games in 1994 and the summer games in 1996.)
Now, Mr. Pilson -- a former college basketball player who says a good negotiator needs "a level offocus and intellectual attention" similar to a good athlete-s is facing the consequences of his own aggressiveness.
Next month, talks will begin on two coveted CBS contracts, for the pro and college basketball finals.
CBS is likely to spend whatever it takes to keep them.
The potential bill: more than $600 million for several seasons, an 80% jump.
A few months later, CBS's college and pro football contracts come up for renewal; they could go for close to $100 million more than CBS now pays, a 40% to 50% rise.
"What happens to those two basketball contracts will shape the next five years of network sports," says Peter Lund, a former CBS Sports president now at Multimedia Inc.
J. William Grimes, former president of ESPN, says NBC may "come in with a huge bid for college basketball to take it away from CBS and say, 'We can overbid, too.'
And the winners will be the colleges, not either network.
Nor, by the way, advertisers."
Mr. Pilson is an unlikely big spender.
In the mid-1980s, after ABC had just bid a record $309 million for the 1988 Winter Games, he sniped at rivals for paying reckless prices.
"I love Pilson, but he was the guy who complained most bitterly and loudly," says Robert Wussler, a former CBS Sports president.
"And yet his company is one reason why rights are so high today."
Rivals carp at "the principle of Pilson," as NBC's Arthur Watson once put it -- "he's always expounding that rights are too high, then he's going crazy."
But the 49-year-old Mr. Pilson is hardly a man to ignore the numbers.
A Yale law school graduate, he began his career in corporate law and then put in years at Metromedia Inc. and the William Morris talent agency.
In 1976, he joined CBS Sports to head business affairs and, five years later, became its president.
Mr. Pilson says that when he spoke out a few years ago, "I didn't say forever, and I didn't say every property."
The market changed, he adds.
And he isn't the only big spender: NBC will pay a record $401 million for the 1992 Summer Games, and ESPN, 80%-owned by Capital Cities/ABC, will shell out $400 million for four years of baseball, airing 175 regular-season games a year.
"Our competitors say we overbid them.
Who cares?
Maybe we recognize values the other guys don't," Mr. Pilson says.
Mr. Pilson's "Major Events" strategy jelled after Mr. Tisch took over.
Mr. Pilson recalls that in April 1986, after CBS's annual meeting in Philadelphia, he and Mr. Tisch took the 90-minute train ride back to New York, and Mr. Pilson used this extended private audience to outline his ambitions.
Mr. Tisch, a billionaire in hotels and finance, was just learning the TV business.
Five months later, Mr. Tisch took over as CBS's chief executive, and soon he was wielding sole approval each time Mr. Pilson scribbled a frighteningly large figure on a slip of paper, sealed it in an envelope and gave it to sports negotiators.
Then, in May 1988, Mr. Tisch urgently needed to make a bold statement to quell rumors that he might sell the network.
Mr. Pilson gave him one: He bid $243 million for rights to the 1992 Winter Games in Albertville, France; ABC and NBC wouldn't bid even $200 million.
That started the still-raging bidding wars.
The "Major Events" strategy, Mr. Pilson says, is designed to notch a place for CBS on the crowded TV dial of the 1990s.
It's also a fast fix for an ailing image.
He sees flashy sports as the only way the last-place network can cut through the clutter of cable and VCRs, grab millions of new viewers and tell them about other shows premiering a few weeks later.
Next October, CBS, for the first time, won't have to start the season against the much-watched American and National baseball league championships and the World Series.
"I've been struggling against that for years," says Jonathan Rodgers, who runs WBBM-TV, the CBS-owned station in Chicago.
Even if baseball triggers losses at CBS -- and he doesn't think it will -- "I'd rather see the games on our air than on NBC and ABC," he says.
That isn't surprising.
Regular TV series ratings have slumped in the past five years, and premiering new shows is "a crap shoot," Mr. Pilson says.
But top sports events are still a strong bet to lure audiences 30% or 40% larger than those CBS usually gets.
Mr. Pilson says baseball and the Olympics may help CBS move up to No. 2 in the household ratings race, putting pizazz back into the network's image.
And the Winter Olympics will air during the February "sweeps," when ratings are used to set ad rates for local stations.
That will please once-grumpy affiliates -- another aim of the Pilson plan.
They gleefully await the "dream season" in 1990.
CBS will air the Super Bowl, baseball playoffs, college and pro basketball finals and other premier sports events.
"It's made me more committed to CBS," says Philip A. Jones, the president of Meredith Corp.'s broadcast group, which has two CBS affiliates.
The CBS plan to use big-time sports as a platform for other series carries no guarantee of success, however.
No amount of hype will bring viewers back if the shows are weak.
"In this market of 40 channels, sophisticated viewers and the remote control, trial isn't a guarantee of anything," ESPN's Mr. Werner says.
"If the show ain't a killer, they're gone."
During the 1984 Summer Games, for example, ABC touted "Call to Glory," but the military drama was missing in action within weeks.
Last October, during the 1988 Summer Games, NBC relentlessly pitched a new series, "Tattingers."
It belly-flopped anyway.
Moreover, sports is hardly the best way to lure adult women.
Though CBS might move up to No. 2 in household ratings, most advertisers buy based on ratings for women aged 18 to 49.
CBS may remain a distant No. 3 in that regard.
Nor is CBS a shoo-in to get blockbuster ratings.
In recent years, the World Series and the Olympics were aired against CBS's last-place lineup.
But CBS will put the athletes up against Bill Cosby, "Cheers" and other shows in NBC's No. 1 schedule.
Even the boon to affiliate relations may be limited.
The sports lineup may add only 1% to 5% to a station's annual profits.
It alone isn't likely to stop a station from dumping CBS shows.
"The World Series, seven nights, wasn't enough of an incentive," says Arnold Klinsky of WHEC-TV in Rochester, which dropped CBS for NBC six weeks ago.
"You've got to judge where the network will be in three years."
The intangible benefits may prove extremely costly if CBS can't avoid big losses on the sports coverage itself.
And avoiding such losses will take a monumental effort.
On the $1.06 billion baseball agreement alone, CBS is likely to lose $250 million in four years, contends Mr. Wussler, the former CBS man, now at Comsat Inc.
Nevertheless, he deems the deal "plain smart" for its huge promotional value.
Mr. Pilson calls that loss estimate "wildly inaccurate," conceding only that CBS will lose money on baseball in the first year.
"It's too early to tell" what happens after that, he says.
But Mr. Tisch expects losses in all four years of the contract, he told U.S. senators last June.
CBS will pay an average of $82 million more each year than ABC and NBC had paid together -- and those two networks expect losses on baseball this season.
Yet CBS will air only 12 regular-season games, 26 fewer than ABC and NBC.
That has outraged some fans.
It also indicates a $50 million drop in ad sales for regular-season games -- a risk CBS took to get an unprecedented lock on all playoff games.
If the playoffs end in four-game sweeps, losses could soar.
Advertisers are resisting higher prices, which would help close the gap.
CBS signed General Motors and Toyota to be the only auto-maker sponsors in baseball for four years.
Price: $265 million.
But ad executives who negotiated the deal say that works out to only $275,000 for a 30-second ad in the World Series through 1993 -- 17% less than what ABC is charging for the Series this month.
Moreover, "there's no question ad rates will come down considerably" from the GM-Toyota price, says Arnold Chase of Bozell Inc.
Other admen, however, say rates could rise later if ad spending surges.
The Winter Games outlook also is mixed.
CBS expects to make modest profits, but rivals contend that it will take a beating.
ABC lost $75 million on the 1988 Winter Games, partly because of its $309 million rights fee.
It aired 94.5 hours of mostly live events in Calgary -- helping raise ratings slightly from 1984 -- but still failed to deliver the audience promised to advertisers.
CBS will add 25 1/2 hours to that load in 1992, and ratings could be hurt by a lack of live events.
All prime-time fare will be on tape-delay because of time differences with Norway, so the results can be announced on the 6 o'clock news.
(Turner Broadcasting will pay CBS $25 million to air 50 hours of CBS coverage plus 50 hours of additional events.)
Barry Frank, the agent who took Mr. Pilson to lunch last March, says that even if CBS loses, say, $10 million, it matters little.
"Ten million ain't jack, man, when you got $3 billion sitting in the bank," says Mr. Frank, senior vice president at International Management Group, citing CBS's enormous cash reserves from selling off various businesses.
"It doesn't mean anything -- it's public-relations money."
Moreover, sports has "claimed its place" as a guaranteed ratings-getter, says David J. Stern, the commissioner of the National Basketball Association.
"This isn't outlandish bidding; this is a situation of very careful businessmen making judgments about the worth of product and acting on it. . . .
I would tend to trust their judgment."
That's easy for him to say: CBS's four-year NBA pact, now at $176 million for four years, could double in price by the time his talks with Mr. Pilson are completed later this month.
That would cut into CBS's slim margin for profit -- and error.
CBS Sports earned $50 million or so last year.
And CBS takes in the least money in prime time; ABC and NBC charge 30% to 35% more for ads, according to a Variety survey.
But CBS's costs are huge, and the risks go up with each new sports package that CBS locks up.
Although sports officials predict jumps of 50% to 100% in the major contracts coming up for renewal, ad rates may rise only 20%.
CBS hopes to save money by ordering fewer episodes of regular series because sports will fill up a few weeks of prime time.
But the savings will be minuscule.
Each hour of Olympics and baseball in prime time will cost CBS $2.6 million to $2.8 million; an hour-long drama costs only $900,000, and it is aired twice.
CBS may cushion losses with about $200 million a year in interest earned on the proceeds from selling CBS Records and other businesses.
But media-stock analyst Richard J. MacDonald of MacDonald Grippo Riely says Wall Street won't take kindly to that.
"On a stand-alone basis, the network ought to make money," he says.
When Mr. Pilson is asked directly -- can you make money on all this? -- he doesn't exactly say yes.
"What you're really asking is, Are the profit and loss margins anticipated on the events acceptable to management?" he says.
Then, he answers his own question.
"Yes, they are.
That's the only question we need to address.
Place a phone order through most any catalog and chances are the clerk who answers won't be the only one on the line.
Bosses have big ears these days.
Or open up an electronics magazine and peruse the ads for sneaky tape recorders and other snooping gadgets.
Some would make even James Bond green with envy.
Eavesdropping -- both corporate and private -- is on the rise, thanks to the proliferation of surveillance technologies.
And while sellers of the equipment and companies "monitoring" employees have few qualms, right-to-privacy advocates and some lawmakers are alarmed.
"New technologies are changing the way we deal with each other and the way we work," says Janlori Goldman, a staff attorney at the American Civil Liberties Union.
"Our expectation of confidentiality is being eroded."
On the corporate side, companies claim that monitoring employee phone conversations is both legal and necessary to gauge productivity and ensure good service.
The practice is common at catalog, insurance and phone companies, banks and telemarketers, according to trade groups and worker organizations.
It's also widespread for reservations clerks in the airline, car-rental, hotel and railroad industries.
The Communications Workers of America, which opposes such monitoring, says supervisors listen in on an estimated 400 million calls each year.
Among companies saying they monitor employees are United Airlines, American Airlines, United Parcel Service, Nynex Corp., Spiegel Inc., and the circulation department of this newspaper.
Some Wall Street firms monitor for recordkeeping purposes.
Dictaphone Corp. says there's a big business demand for its voice-activated taping systems, whether the sophisticated Veritrac 9000 system, which costs from $10,000 to $120,000 and can record 240 conversations simultaneously, or simple handheld units selling for $395.
Businesses "want to verify information and ensure accuracy," says John Hiltunen, Dictaphone's manager of media relations.
The state of Alaska recently bought the Veritrac system, he says, "to monitor the Exxon cleanup effort."
Merrill Lynch & Co. and Shearson Lehman Hutton Inc. say they use voice-activated systems to record and verify orders between salesmen and traders.
Shearson says it has taped some of its institutional trading desks, such as commodities and futures, for about four years.
Both companies stress that employees know they are being recorded and that customer conversations aren't taped.
Kidder Peabody & Co. says it monitors bond-trading conversations between brokers and customers to safeguard order accuracy.
Eavesdropping by individuals is harder to measure.
But devices are there for the asking, whether in stores or through the mail.
The Counter Spy Shop in Washington, D.C., for instance, offers the "Secret Connection" attache case, which can surreptitiously record conversations for nine hours at a stretch.
That and other fancy gizmos may cost thousands, but simple voice-activated tape recorders sell for as little as $70 at electronics stores like Radio Shack.
The most common use of spying devices is in divorce cases, say private investigators.
While tape recordings to uncover, say, infidelity aren't admissible in court, they can mean leverage in a settlement.
Concerned with the increased availability of surveillance technology and heavier use of it, lawmakers have proposed laws addressing the issue.
Nine states have introduced bills requiring that workers and customers be made aware of monitoring.
And four states -- California, Florida, Michigan and Pennsylvania -- have adopted rules that all parties involved must consent when phone calls are recorded.
Two bills in Congress hope to make such restrictions national.
In May, Rep. Don Edwards (D. Calif.) introduced congressional legislation that would require an audible beeping during any employee monitoring, warning people that they are being heard.
(The legislation is similar to a 1987 "beeper bill" that was defeated after heavy lobbying by the telemarketing industry.)
Also last spring, Rep. Ron Dellums (D., Calif.), introduced a bill requiring universal two-party consent to any tapings in cases that don't involve law enforcement.
In addition, products such as voice-activated tape recorders would have to include beep tones and labels explaining federal laws on eavesdropping.
The outlook on both federal bills is uncertain, especially remembering the 1987 defeat.
The ACLU and worker organizations back tighter laws, but employers and device manufacturers object.
"I'm sympathetic with workers who feel under the gun," says Richard Barton of the Direct Marketing Association of America, which is lobbying strenuously against the Edwards beeper bill.
"But the only way you can find out how your people are doing is by listening."
The powerful group, which represents many of the nation's telemarketers, was instrumental in derailing the 1987 bill.
Spiegel also opposes the beeper bill, saying the noise it requires would interfere with customer orders, causing irritation and even errors.
Laura Dale, center manager at the catalog company's customer order center in Reno, Nev., defends monitoring.
"We like to follow up and make sure operators are achieving our standards of company service," says Ms. Dale, who supervises 350 operators.
John Bonomo, a Nynex spokesman, says the telephone company needs to monitor operators to evaluate performance during the first six months on the job.
"Sometimes," he says, "we'll pull someone off the phones for more training."
Federal wiretap statutes recognize the right of employers to monitor employees' for evaluation purposes.
And in the past, Congress has viewed monitoring as an issue best handled in union negotiations.
But opponents, led by the CWA, say new laws are needed because monitoring is heavily concentrated in service industries and 81% of monitored workers aren't represented by unions.
The CWA claims that monitoring not only infringes on employee privacy, but increases stress.
"Nine to Five," a Cleveland-based office workers organization that supports the beeper bill, six months ago started a privacy hot line to receive reports of alleged monitoring abuses.
Meanwhile, supporters of the Dellums two-party consent bill say it is needed because of a giant loophole in the one-party consent law.
Currently, if the person taping is a party to the conversation, it's all right to record without the knowledge of the other person on the line.
(Intercepting other people's private conversations is illegal and punishable by five years in prison and fines of $10,000.)
The electronics industry is closely following the Dellums bill.
Some marketers of surveillance gear -- including Communication Control System Ltd., which owns the Counter Spy Shop and others like it -- already put warning labels in their catalogs informing customers of the one-party law.
But vendors contend that they can't control how their products are used.
Radio Shack says it has a policy against selling products if a salesperson suspects they will be used illegally.
"Everything sold at Radio Shack has a legal purpose," says Bernard Appel, president of the Tandy Corp. subsidiary.
He says he hasn't yet studied the Dellums bill, but that requiring a beeping tone on recorders "would be ludicrous."
Still, Radio Shack is aware that some of its products are controversial.
A few years ago, the company voluntarily stopped selling "The Big Ear," a powerful microphone.
With its ability to pick up rustlings and flapping wings, "it was meant to be a toy for children for bird watching," says Mr. Appel.
"But we were getting too many complaints that people were using them to eavesdrop on their neighbors."
The hottest rivalry in the computer industry intensified sharply yesterday as Digital Equipment Corp. announced its first line of mainframe computers, targeting International Business Machines Corp.'s largest market.
IBM fired back with new mainframes of its own, extending the long-dominant 3090 line with a 7% to 14% power boost.
Up to now, the intense competition between IBM and Digital has been confined largely to the broad midrange of the computer market, where Digital sought to exploit IBM's weaknesses in networking.
But Digital's move into mainframes will target IBM's home turf, where it has a commanding 70% share of the market.
Digital, Maynard, Mass., insisted yesterday that its marketing focus would differ sharply from IBM's.
"This is not your father's mainframe," said Allan McGuire, a Digital spokesman.
"It's a whole new generation," he said.
IBM, which gets about half its revenue and more than half its profit from mainframes, also announced upgraded operating system software that, together with the new hardware, lets customers do so-called batch processing as much as 60% faster.
Batch processing is the high-volume, single-job data processing that most mainframes typically chug through at night, such as updating accounts at banks.
IBM said the 16 new J and JH models will generally be available immediately, though three won't ship until the third quarter of next year.
Prices on the larger models, which range as high as $13 million, generally won't change.
Small models, whose performance increased as much as 46%, will carry higher prices.
Upgrades to bigger models also will be costlier.
Digital's VAX 9000 mainframes, which it claimed were among the fastest available, were priced from $1.2 million to $3.9 million, sharply lower than IBM models of comparable power.
The first models will ship in the spring, with the largest following in the fall.
Analysts were disappointed that Digital's new line apparently won't contribute much to earnings before the next fiscal year, which begins in July.
Jay Stevens of Dean Witter Reynolds Inc. said he may cut his earnings estimate for the current fiscal year because he had expected at least some mainframe profit this year.
But he added that he expected to raise his estimate for fiscal 1991 at the same time.
After the announcement yesterday, Digital shares gained $1.25 to close at $89.875 in New York Stock Exchange composite trading.
IBM shares closed at $103, down 50 cents, in Big Board trading.
Analysts have predicted strong pent-up demand for the new line among Digital's customers.
Large Digital buyers say the new VAX will let them stay with Digital when they need the power of a mainframe, instead of turning to IBM.
"I'm convinced there's a huge market for this machine," said Stephen Smith of PaineWebber Inc.
Digital also plans to compete fiercely with IBM when the giant's customers are computerizing new aspects of their businesses.
Digital, however, doesn't expect to displace IBM mainframes that are already installed at big companies.
In addition to commercial markets, Digital's new line targets the low end of the engineering and scientific supercomputer market, when it's packaged with an optional supercharger, known as a vector processor.
Digital's push into mainframes comes at a time when its mainstay minicomputer line is under growing pressure from smaller personal computers and workstations that operate on standard operating systems rather than on the proprietary systems that older minicomputers use.
Although Digital has staked out a major presence in the booming workstation market, profit margins in that market are much slimmer than for mainframes.
The slow-growing mainframe market also has shown new signs of life lately.
IBM's mainframe sales have held up better than expected this year, with analysts estimating they have risen 10% to 12%.
"Demand for these systems has been very, very strong," said Bill Grabe, a senior IBM marketing executive.
"We have a good strong backlog for the fourth quarter even without" the systems that were announced yesterday.
But the 3090 line is nearly five years old -- which is getting up there in mainframe years -- and its growth is expected to slow in 1990.
IBM, Armonk, N.Y., said it wanted to bring out the mainframes as soon as it could to spark as many sales as possible by the end of the year.
The fourth quarter is always IBM's biggest by far, with most sales coming in December as customers seek to use budgets before year end.
Still, Steve Cohen, an analyst at SoundView Financial Group Inc., said, "I don't see that this will be sufficient to give IBM a significant kick in the fourth quarter."
IBM has already indicated it will have problems in the quarter, partly because of a delay in shipping a high-end disk drive and partly because the strong dollar will cut significantly the value of IBM's overseas earnings when translated into dollars.
Some analysts have estimated IBM's fourth-quarter per-share earnings will fall 10% to $3.57 a share from $3.97 a share a year earlier.
In addition to the new mainframe hardware and software, IBM announced a magnetic-tape system for data storage that it said occupies half as much floor space as older systems but can store five times as much data on a single cartridge.
That should help IBM address the damage that a resurgent Storage Technology Corp. has inflicted in that market.
Concord Camera Corp. completed the acquisition of Peter Bauser G.m.b.H., a West German photographic products distributor.
Terms weren't disclosed.
Concord is a camera and photographic products company.
The Navy awarded Litton Industries Inc.'s Ingalls Shipbuilding division $15.5 million for shipyard services on the Aegis cruiser program.
The award exercises a Navy option to extend a contract given in 1984.
The White House called on Congress to attach the proposed capital-gains tax cut to its final deficit-reduction bill, but lawmakers seem likely to balk at the idea.
Earlier this month, the White House endorsed stripping the controversial tax measure from the bill so that Congress could pass quickly a "clean" bill containing only provisions specifically designed to meet federal budget targets under the Gramm-Rudman act.
But now that Congress has missed the legal deadline for meeting the Gramm-Rudman targets, the White House said it has returned to its original view that a capital-gains cut should be part of the deficit-reduction bill, on which Congress continues to work.
"If that doesn't happen, then we press forward on another vehicle and a separate vote," said press secretary Marlin Fitzwater.
On Capitol Hill, though, there doesn't seem to be sufficient sentiment to pair capital gains and the deficit-reduction bill.
Texas Rep. William Archer, the ranking Republican on the House Ways and Means Committee said, "I don't see how we have the votes" to place a capital-gains tax cut there.
Meanwhile, President Bush stepped up his personal lobbying for the capital-gains tax cut.
The White House said he plans to hold a series of private White House meetings, mostly with Senate Democrats, to try to persuade lawmakers to fall in line behind the tax cut.
The first meeting yesterday was with 10 Senate Democrats who have expressed an interest in cutting the tax.
According to some who attended, the senators argued that the president should give the Democratic leaders in Congress a victory of their own to compensate them for allowing the president to win on the controversial capital-gains issue.
Issues discussed in this context were an increase in the minimum wage and an increase in child-care spending.
The president was said to have been noncommittal.
Toshiba Corp. said its new French marketing concern has started operating under the aegis of the company's West German subsidiary, which formerly handled all sales of Toshiba electronic products in France.
A recent change in French law, according to Toshiba, permitted formation of the semiconductor marketing arm in Paris.
American Telephone & Telegraph Co. unveiled new optical transmission systems for data, video and voice communications.
Two products in what the telecommunications giant called a new generation of such equipment are available now, AT&T said, and three others will be introduced in 1990 and 1991.
The products are aimed at a market expected to total more than $1 billion a year in sales by 1995, said Morgan Buchner Jr., vice president of transmission systems for AT&T.
The products already available are cross-connect systems, used instead of mazes of wiring to interconnect other telecommunications equipment.
This cuts down greatly on labor, Mr. Buchner said.
To be introduced later are a multiplexer, which will allow several signals to travel along a single optical line; a light-wave system, which carries voice channels; and a network controller, which directs data flow through cross-connect systems.
AT&T said the products, unlike previous generations, will meet so-called Sonet compatability standards, which AT&T expects to be broadly adopted.
Sonet, or synchronous optical network, products have more capacity than earlier models.
"These products are the heart of our transmission-product line," Mr. Buchner said.
He declined to disclose specific prices, but said each product costs in the tens of thousands, or even hundreds of thousands, of dollars.
AT&T said it expects to beat to the marketplace two rivals, Northern Telecom Ltd. of Canada and France's Alcatel N.V., which also have announced Sonet-based products.
AT&T predicted strong growth in demand for such products.
It noted that last July, Nippon Telegraph & Telephone Corp. of Japan selected AT&T to supply $154 million of such equipment over a four-year period starting next year.
Law firms that have feasted and grown on the revenue from mergers and acquisitions work are feeling the squeeze as that work declines.
The disarray in the junk-bond market that began last month with a credit crunch at Campeau Corp. and the failure of banks to deliver financing for a leveraged buy-out of United Airlines parent UAL Corp. has reverberated through some of the nation's largest law firms.
While it is still too early to tell whether the dearth of takeover activity is only temporary, many lawyers say their firms are bracing for lower revenue from merger work, which has been so lucrative in the past.
Much of this work was done for higher fees than other legal work and was not generally billed by the hour.
If deals take longer to complete and there are fewer of them to do, "you can't bill the same kind of premium as when deals took a few weeks from start to finish," says one lawyer at a large New York firm.
"We're planning on a rip-roaring year in 1989, but next year we'll be another story," said Robert Freedman, a partner at Simpson Thacher & Bartlett.
"We're settling down to a less active period."
Lawyers at such firms as Sullivan & Cromwell; Willkie Farr & Gallagher; Wachtell, Lipton, Rosen & Katz; and Fried, Frank, Harris, Shriver & Jacobson all say they, too, have experienced a significant slowdown, particularly during the past few weeks.
"Everyone is waiting to see if deals can be done at sensible prices and if money is available," said Jack Nusbaum, co-chairman of Willkie Farr.
"It's hard to know right now if the change is fundamental or cyclical."
Some lawyers say the slump, while more obvious in recent weeks, began earlier this year.
Dennis Block, a partner at the New York firm of Weil, Gotshal & Manges, said that in the first eight months of this year, 89 hostile offers were launched, compared with 157 for the first eight months of
What's more, he said, "transactions are taking a much longer time to conclude and many fall apart for lack of financing" and more stringent scrutiny by state courts.
Lawyers also say an erratic stock market and uncertain financing conditions have sharply reduced the number of lucrative big deals likely to be proposed.
Still, some lawyers say the mergers slowdown hasn't affected foreign buyers as much as domestic ones.
"We just took another floor for our London offices," said Joseph Flom of the New York firm of Skadden, Arps, Slate, Meagher & Flom.
Davis Polk & Wardwell also said its international clients are keeping mergers and acquisitions partners busy.
"European companies are looking to buy American ones," said Henry King, the managing partner at that firm.
"But the question is whether things people are looking at will actually surface in live transactions in light of the current market conditions."
MURDER THREAT charged in Haas Securities Corp. stock-manipulation trial.
In the trial of former Haas Securities Chairman Eugene Laff, the defense accused one of the government's chief witnesses of threatening to kill Mr. Laff.
Mr. Laff's attorney, John Lang, filed a memorandum asking that the trial record include a secretly taped conversation in which the witness, Henry Lorin, told a Haas stockbroker that Mr. Laff should be killed.
The conversation was taped by federal investigators in what Mr. Lang said was an effort to get Mr. Lorin to implicate Mr. Laff.
In his opening arguments last week in federal court in New York, Mr. Lang told the jury that Mr. Lorin was the "real master criminal" behind the stock manipulation, and that Mr. Laff knew nothing about it.
In March, Mr. Laff was indicted on 15 counts of conspiracy, mail and securities fraud, and obstructing an investigation by the Securities and Exchange Commission.
The government has charged that Mr. Lorin and Mr. Laff were part of a conspiracy to maintain the prices of certain stocks at artificially high prices.
Mr. Lorin, a stock promoter, pleaded guilty to the stock-manipulation charges in April and agreed to cooperate with the government's investigation of Mr. Laff.
During his cross examination of Mr. Lorin, Mr. Lang read from the transcripts of a conversation that was taped Oct. 20, 1988.
Stanley Aslanian, the Haas broker who agreed to carry a hidden microphone during the conversation, also has pleaded guilty to conspiracy to commit securities violations in the stock manipulation and agreed to cooperate.
According to the transcript, Mr. Lorin said Mr. Laff should be killed after Mr. Aslanian told him that information given to Mr. Laff by another conspirator could jeopardize the stock scheme.
Mr. Lorin then repeated the threat, and Mr. Aslanian urged him not to say such things.
From the parts of the transcript read by Mr. Lang, it was unclear what exactly Mr. Lorin feared might happen.
When asked for a copy of the transcript, Mr. Lang said Judge Thomas P. Griesa had instructed him not to release it or the memorandum.
During the trial, Mr. Lang asked Mr. Lorin whether he had been so upset "that you considered killing Mr. Laff? . . .
Isn't it true that you were so worked up that framing Mr. Laff for this crime was the least that you planned for him?"
Mr. Lorin responded, "No."
When Mr. Lang asked Mr. Lorin whether he had taken steps to have Mr. Laff killed, the witness again said no.
Peter Lieb, the assistant U.S. attorney prosecuting the case, declined to comment on the trial.
TRUSTEE WHO MONITORED settlement payments to Dalkon Shield claimants quits.
Stephen A. Saltzburg, one of five trustees appointed to monitor payments to women injured by the Dalkon Shield intrauterine contraceptive, resigned, citing personal reasons.
Mr. Saltzburg, who teaches evidence at the University of Virginia School of Law and was a deputy assistant attorney general in the U.S. Justice Department until August, submitted his resignation earlier this month to federal Judge Robert R. Merhige Jr., in Richmond, Va.
Judge Merhige is overseeing the bankruptcy-law reorganization of A.H. Robins Co., the company that manufactured the shield.
In a letter Monday to Mr. Saltzburg, the judge said he would "reluctantly" accept the resignation.
The $2.38 billion Dalkon Shield Claimants Trust was established as part of A.H. Robins' bankruptcy-reorganization plan to resolve injury claims arising from use of the shield.
American Home Products Corp. proposes to acquire the company.
The remaining four trustees on the Claimants Trust have 60 days to nominate a successor to Mr. Saltzburg.
Judge Merhige will make the appointment.
CHICAGO LAW FIRM recruits American Express Co. vice president:
Coffield Ungaretti Harris & Slavin brought in Howard A. Menell as a partner in its Washington, D.C., office, which opened Oct. 1.
For the past six years, Mr. Menell, 43 years old, served as vice president for government affairs at American Express.
He previously was staff director and counsel for the Senate committee on banking, housing and urban affairs.
The other lawyer in the office is partner Robert A. Macari, the firm's legislative director.
THE PHILADELPHIA law firm of Ballard, Spahr, Andrews & Ingersoll said three partners have joined its business and finance department.
John Ake, 48, a former vice-president in charge of legal compliance at American Capital Management & Research Inc., in Houston, will join Ballard Spahr's corporate-securities practice.
Kent Walker, 45, a former partner at the Philadelphia law firm of Mesirov, Gelman, Jaffe, Cramer & Jamieson, will specialize in antitrust, real estate and mergers and acquisitions.
Richard L. Sherman, 42, will advise midsized businesses.
Mr. Sherman is former deputy general counsel for SmithKline Beckman Corp., in Philadelphia, now SmithKline Beecham PLC, in London.
Delmed Inc.'s top two officers resigned and were succeeded by executives of Fresenius USA Inc. and its parent, Fresenius AG, a major Delmed holder that has been negotiating to acquire a controlling stake.
In addition, Delmed, which makes and sells a dialysis solution used in treating kidney diseases, said negotiations about pricing had collapsed between it and a major distributor, National Medical Care Inc.
Delmed said Robert S. Ehrlich resigned as chairman, president and chief executive.
Mr. Ehrlich will continue as a director and a consultant.
Leslie I. Shapiro, chief operating officer and chief financial officer, also resigned, the company said.
Mr. Ehrlich was succeeded as chairman by Gerd Krick, a director of Fresenius, a West German pharmaceutical concern.
Ben Lipps, president of Fresenius USA, was named president, chief executive and chief operating officer.
None of the officials was available for comment.
In trading on the American Stock Exchange, Delmed closed at 50 cents, down 6.25 cents.
Fresenius owns about 42% of Delmed's fully diluted common stock.
The two companies have been discussing a transaction under which Fresenius would buy Delmed stock for cash to bring its beneficial ownership to between 70% and 80% of Delmed's fully diluted common stock.
The transaction also would combine Fresenius USA and Delmed.
Under the proposal, Delmed would issue about 123.5 million additional Delmed common shares to Fresenius at an average price of about 65 cents a share, though under no circumstances more than 75 cents a share.
Yesterday, Delmed said it "continues to explore the possibility of a combination with Fresenius USA."
It added that it is apparent that any terms of a combination "would be substantially less favorable than those previously announced."
While the discussions between Delmed and National Medical Care have been discontinued, Delmed will continue to supply dialysis products through National Medical after their exclusive agreement ends in March 1990, Delmed said.
In addition, Delmed is exploring distribution arrangements with Fresenius USA, Delmed said.
Philip L. Hall, president of J. Lawrence Hall Co., Nashua, was named a director of this thrift holding company, filling a vacancy.
Kennametal Inc. said it intends to acquire J&L America Inc. for $44 million plus a consideration of as much as an additional $12 million, payable over five years.
Kennametal is a carbide-products and cutting-tools company.
J&L, whose principal offices are in Detroit, is a mail-order distributer of industrial tools and supplies.
The acquisition is subject to approval by Kennametal's board.
Genentech Inc. said third-quarter profit more than doubled to $11.4 million, or 13 cents a share, from a depressed 1988 third-quarter performance of $5.3 million, or six cents a share.
Revenue rose 23% to $100 million from $81.6 million.
Net product sales accounted for $76 million, up from $57.5 million a year earlier.
Sales of the heart drug TPA were $43.6 million, better than last year's depressed third period when the company sold just $29.1 million of the drug.
But TPA sales fell below levels for this year's first and second quarter sales of $48 million, cooling investors.
Genentech stock fell 12.5 cents in trading yesterday on the New York Stock Exchange to $20.125.
In the nine months, net income slid 21% to $28.4 million, or 33 cents a share, from $36 million, or 42 cents a share.
Revenues climbed 18% to $289 million from $245.3 million.
"We continue to be on target for . . . increasing TPA sales 20% to 25% this year," said founder and Chief Executive Officer Robert Swanson.
But some analysts remain sour on the company.
"TPA sales are down quarter to quarter.
Expenses are flat and that's a good sign.
There's contract revenue from {limited research and development} partnerships.
But I still think the fundamentals are poor," said Denise Gilbert, an analyst with Montgomery Securities in San Francisco.
Genentech faces competition in the cardiac-drug market from SmithKline Beecham PLC's heart drug Eminase, expected to receive market approval shortly.
And Genentech isn't likely to have any new products ready for market until at least 1992, Ms. Gilbert added.
"The company's stock is trading at 40 times next year's numbers, and that's too much," she said.
On the plus side, Genentech is benefiting from a lower tax rate due to its research outlays, giving a boost to earnings, she said.
THE AMERICAN CANCER SOCIETY'S 1988 costs of fund raising and administration were $72.4 million, or 23.2% of its revenue.
A chart in last Friday's special report on personal finance contained an incorrect figure supplied by NonProfit Times, a monthly newspaper covering charities.
Ryder System Inc. posted a third-quarter net loss of $27.6 million, because of an expected $57 million after-tax charge and continued weakness in the company's truck-rental business.
The loss, which is 38 cents a share, is the transportation services concern's first quarterly setback in more than a decade and compares with net income of $55.3 million, or 68 cents a share, in the year-ago period.
The previous year's third quarter included gains on the sale of aircraft by the company's Aviation Leasing & Services Division.
Revenue was flat at $1.3 billion.
The latest quarter's after-tax charge -- which is 75 cents a share -- was related to adjustments to reserves for workers' compensation claims; reductions in vehicle fleets, staff and facilities; and writedowns of assets.
Although Ryder didn't break out the charge, analysts estimated that the majority of the $57 million was linked to workers' compensation reserves and anticipated losses on the disposal of trucks.
Many analysts said they weren't surprised that problems in many of Ryder's lines of business continued to plague the company.
"It pretty much confirms what we had been expecting," said Anthony Hatch, an analyst at PaineWebber Inc.
In New York Stock Exchange composite trading yesterday, Ryder closed at $22.25, down 37.5 cents.
M. Anthony Burns, Ryder's chairman and chief executive officer, said: "We're constantly trying to find ways to regain the earnings momentum.
But we're still at the beginning stages of some of these changes."
He said the fourth quarter will be "challenging," and maintained his conservative forecast that 1990 "won't be a barn burner."
In the nine months, net income fell 79% to $31.1 million, or 33 cents a share, from $149.3 million, or $1.82 a share, a year earlier.
Revenue rose slightly to $3.8 billion from $3.7 billion.
Robert L. Wood, 37-year-old chief financial officer, was named chairman and chief executive officer of this independent power producer, succeeding Raymond L. Hixson, 63.
Mr. Hixson, who resigned effective Jan. 1 for health reasons, remains a director.
Advanced Medical Technologies Inc. said it purchased 93% of a unit of Henley Group Inc.
Advanced Medical paid $106 million in cash for its share in a unit of Henley's Fisher Scientific subsidiary.
The unit makes intravenous pumps used by hospitals and had more than $110 million in sales last year, according to Advanced Medical.
Maxicare Health Plans Inc., operating under Chapter 11 bankrupty-law protection, outlined terms of its reorganization plan that calls for creditors and shareholders to receive at least $78.8 million in cash and $67 million face amount of 10-year, 13.5% notes.
The plan, outlined in a filing with the Securities and Exchange Commission, also calls for creditors and shareholders to receive common stock and warrants in the new company.
The health-maintenance concern said it reached the agreement with its court-appointed creditors' committees Sept. 28, and intends to submit the plan to the bankruptcy court in November.
Maxicare, which filed for bankruptcy protection March 16, has total debt of $750 million.
The company has promptly paid all its expenses and obligations since March 16, a Maxicare spokesman said.
General unsecured creditors of Maxicare's continuing operations initially will receive $47 million in cash, $35 million face amount of senior notes, and 49% of the new company's stock.
Those creditors, whose claims are estimated at about $200 million, include doctors and hospitals.
General unsecured creditors of Maxicare's discontinued operations, whose claims total $110 million, initially will receive $17.8 million in cash and $10 million in senior notes.
Maxicare's public shareholders will receive 2% of the new company's stock and warrants entitling them to acquire as much as an additional 5% of the stock on a fully-diluted basis.
General unsecured creditors of the parent holding company initially will receive $14 million in cash, $22 million face amount of senior notes and 49% of the new company's stock.
That group includes banks and bondholders, who have claims of $150 million and $350 million respectively.
Maxicare also will guarantee that the banks will realize at least $7 million on certain notes pledged to them.
Maxicare said the plan stipulates that enrollees in the company's health plans will have valid claims covered in full.
Those claims, along with priority employee claims, administrative claims, priority tax claims and administrative convenience claims, are expected to total about $16 million.
The plan is subject to approval by the bankruptcy court and others.
The spokesman said Maxicare hopes to complete the reorganization by early 1990.
Birmingham Steel Corp. said that its Emeryville, Calif., minimill sustained only minor damage from last week's earthquake.
Steelmaking resumed Oct. 18, but the company expects production to be hampered in the next few months by traffic disruptions around the plant and outages for repair to gas and electric power systems.
The average interest rate rose to 8.337% at Citicorp's $50 million weekly auction of 91-day commercial paper, or corporate IOUs, from 8.292% at last week's sale.
Bids totaling $475 million were submitted.
Accepted bids ranged from 8.328% to 8.347%.
However, Citicorp said that the average rate fell to 7.962% at its $50 million auction of 182-day commercial paper from 7.986% at last week's sale.
Bids totaling $425 million were submitted.
Accepted bids were all at 7.962%.
The bank holding company will auction another $50 million in each maturity next Tuesday.
Hughes Aircraft Co., a General Motors Corp. unit, said the Intelsat VI commercial communications satellite is set to be launched Friday.
The satellite, built by Hughes for the International Telecommunications Satellite Organization, is part of a $700 million contract awarded to Hughes in 1982 to develop five of the three-ton satellites.
Italian car manufacturer Fiat said it isn't interested in partnership or industrial cooperation with Swedish auto and aerospace group Saab-Scania AB, which faces heavy losses in its car division.
Fiat said it's only interested in technical cooperation with Saab.
"We know that Saab is looking for a partner for industrial and financial cooperation," Fiat said.
"But that partner isn't Fiat."
The Italian auto maker confirmed that it was discussing technical cooperation with Saab, but declined to comment on rumors that it was planning to buy Saab's car division.
Fiat's rejection of partnership with Saab means that the Swedish company, which announced last Friday that its pretax profit for the first eight months plummeted 49%, will have to look for a partner among other car manufacturers as both Ford Motor Corp. and Fiat have turned down the offer.
News reports said yesterday that Saab is trying to start negotiations with French automakers Peugeot and Renault.
ITT Corp., its insurance business hurt by Hurricane Hugo, reported a 4% decline in third-quarter net income, despite a 4.2% rise in revenue.
ITT also forecast a fourth-quarter blow to earnings from the California earthquake.
Except for insurance, however, ITT said it expects improved operating earnings "in all of our businesses for the full year."
Third-quarter net income dropped to $221 million, or $1.55 a share, from $230 million, or $1.60 a share, in the year-earlier period.
ITT bought back 8.8 million shares this year, including 2.8 million during the third quarter.
Third-quarter revenue rose to $4.9 billion from $4.7 billion.
In New York Stock Exchange composite trading yesterday, ITT common stock fell 62.5 cents to close at $58.75 a share.
In addition to insurance and finance, ITT has interests in electronic parts, defense technology, automotive parts, fluid technology, pulp and timber, and communications and information services.
"Hurricane Hugo losses and the continuing industrywide downturn in the property and casualty insurance business were the major factors affecting quarterly comparisons," said Rand V. Araskog, chairman and chief executive officer.
ITT's Hartford Insurance Group had a $53 million quarterly pretax loss from Hurricane Hugo, ITT said.
Hartford expects to report a further pretax loss of about $30 million for the current quarter, as a result of the California earthquake this month, ITT added.
The company also disclosed its financial operations had increased reserves for bankrupt accounts, resulting in a $40 million pretax charge for the third quarter.
This charge was partly offset, however, by $19 million in pretax capital gains.
ITT also said its consumer finance unit agreed in September to settle a civil suit with the California attorney general over alleged improper lending and sales practices.
Anticipating this settlement, the company recorded a pretax charge of $24 million during the fourth quarter of 1988.
An ITT spokesman said the charge wasn't publicly reported at the time.
"The company's product businesses, with the exception of electronic components, had higher operating earnings for the first nine months of 1989," the company said.
Elaborating on the exception, it said volume and margins were lower in semiconductor and power systems operations.
Amoco Corp. said it plans to install two platforms and drill as many as 22 wells to develop oil reserves it discovered in the Atlantic Ocean about 25 miles off the coast of Congo.
Amoco, an energy concern, is the operator of the project with a 43.75% working interest, and other partners include Hydro Congo, the Congolese state oil company, with a 50% interest, and Kuwait Foreign Petroleum Exploration Co. with a 6.25% stake.
Production is expected to be about 40,000 barrels of oil a day after completion of the drilling program.
Jacobs Engineering Group Inc.'s Jacobs International unit was selected to design and build a microcomputer-systems manufacturing plant in County Kildare, Ireland, for Intel Corp.
Jacobs is an international engineering and construction concern.
Total capital investment at the site could be as much as $400 million, according to Intel.
The 150,000-square-foot plant will be constructed on a 55-acre site near Dublin.
Jacobs Engineering officials couldn't be reached for comment.
Bob Evans Inc. said its board authorized the purchase of as many as 500,000 shares of its common.
The stock, to be purchased on the open market or through privately negotiated transactions, will be held as treasury shares for stock options or other general corporate purposes.
The program expires April 27.
The restaurant operator had 32.2 million shares outstanding as of Sept. 29.
Coda Energy Inc. said it completed the sale of Phenix-Transmission Co. to Bishop Pipeline Co., for $17 million in cash and notes.
Coda, an oil and gas concern, said it and its partners received $7 million in cash and $10 million in five-year notes for the Kansas intrastate pipeline.
Coda owned 60% of the pipeline and private entities owned the rest.
Bishop is based in Hutchinson, Kansas.
French consumer prices rose 0.2% in September from August, according to provisional estimates by the National Statistics Institute.
The agency noted that because of a strike by Finance Ministry personnel the provisional estimate doesn't correspond exactly to the consumer price index usually published.
The agency noted, however, the estimate will likely be confirmed.
The institute didn't estimate annual price growth in September, but a 0.2% rise by the consumer price index would put growth at either 178.8 or 178.9, up 3.3% or 3.4% from the year-earlier level of 173.1.
The index was 178.5 in August and is based on 1980 equaling 100.
International Technology Corp. and Davy McKee Corp., a unit of London's Davy Corp., said they were awarded a $55 million contract by the U.S. Army Corps of Engineers for the closure of the Helen Kramer Landfill Superfund site in Mantua Township, N.J.
International Technology, an environmental management concern, said the contract includes construction of slurry walls, gas collection systems, a multilayer cap and water treatment plant.
U.S. Memories Inc., the venture that seeks to crack Japan's domination of the memory-chip market, said it has chosen four potential sites for its operations after a fierce bidding war by 15 states.
U.S. Memories said it will begin visits during the next several weeks to sites in Austin, Texas; Colorado Springs, Colo.; Middletown, N.Y.; and Phoenix, Ariz.
Sanford Kane, president, said the finalists were chosen from among 57 locations based on financial, business, and quality of life considerations.
Conspicuous by its absence is California.
San Jose and several other California cities mounted major campaigns during the summer to woo the group, which was founded last June by seven electronics concerns.
The venture plans to announce a final site by late November.
It expects to begin construction by year end and start shipping four-megabit dynamic random-access memory chips by mid-1991.
U.S. Memories investors include Advanced Micro Devices Inc., Digital Equipment Corp., Hewlett-Packard Co., International Business Machines Corp., Intel Corp., LSI Logic Corp., and National Semiconductor Corp.
Mr. Kane said he expects several other companies to join some time after the venture completes a business plan, probably later this week.
A seat on the Chicago Board of Trade was sold for $390,000, unchanged from the previous sale Oct. 13.
Seats currently are quoted at $361,000 bid, $395,000 asked.
The record price for a full membership on the exchange is $550,000, set Aug. 31, 1987.
Dennis R. Mangino, a general manager of EniChem Americas, was named vice president of research and development, a new post at this steel company.
Fred D. Thompson, a 47-year-old attorney in private practice in Washington and Nashville, Tenn., was elected to the board of this engineering and construction company.
The board increased to 11 seats.
Sun Microsystems Inc. said Prime Computer Inc. has agreed to resell as much as $200 million worth of Sun's machines over the next two years.
The computers use the company's own microprocessor called Sparc, Sun said.
Quickview Systems Inc. said it filed a lawsuit against Apple Computer Inc., claiming patent infringement in an element of Apple's popular HyperCard software program.
The suit, filed in Minneapolis federal court, claims that Apple violated a Quickview patent that allows computer users to display "only portions of multiple fields on a computer screen with the ability to see the entire contents of any given field."
The HyperCard program allows users to design applications for Macintosh computers without having to be hardcore programmers and is distributed with every Macintosh sold.
It's one of the most popular computer programs of all time, but analysts said the Quickview suit doesn't appear to bode major difficulties for Apple.
The technology at issue "is not an underlying technology of HyperCard to my knowledge," said Danny Goodman, a San Francisco-area HyperCard program developer.
Nonetheless, the suit seeks unspecified damages that an attorney for Quickview claimed could run into the millions of dollars.
In Cupertino, Calif., Apple said that it believes the case has no merit, and that HyperCard does not infringe "any valid claims" of the Quickview patents.
It said it filed an action of its own in federal court in San Jose, Calif., seeking a declaration that Quickview's claims are invalid.
This is in response to Atsushi Kageyama's Manager's Journal, "Looking for the Real Thing in Sony" (editorial page, Oct. 2).
Though I agree with many of Mr. Kageyama's comments, I believe he points the gun in the wrong direction: It isn't the Americans who must be criticized for not understanding the Japanese culture, but the Japanese who insist on forcing their culture on Americans.
The Japanese want us to accept their culture, but they refuse to accept the American culture.
Japanese managers can't expect Americans to behave as if they were Japanese; instead, they must manage Americans as Americans.
Americans are expected to conform to the Japanese culture when in Japan.
What is wrong with expecting the Japanese to conform to American norms when they locate here?
Americans place native or native speakers in charge of subsidiaries overseas.
European multinationals do likewise; even in America, their affiliates are usually run by American managers.
But the Japanese insist upon Japanese managers everywhere they set up shop.
Do the Japanese feel so superior that they cannot find capable American managers?
Paul A. Herbig Indiana University Bloomington, Ind.
Mr. Kageyama suggests that Kotobuki Electronics Industries workers were having difficulty understanding their foreign bosses' perspective.
While Mr. Kageyama does an excellent job of explaining the differences, both cultural and philosophic, I question his perspective.
Would he suggest that employees of an American company doing business in Japan conform to their new bosses' culture and philosophy?
Obviously not.
Thus the conclusion is that the burden rests with management to understand/adopt the culture and philosophy of the country in which they are operating.
The workers can be motivated, and the company reach its full potential, only when management embraces the employees' perspective.
A. Lawton Langford President Municipal Code Corp. Tallahassee, Fla.
I believe Mr. Kageyama left out one major aspect of Japanese culture that permeated his piece: the belief in the superiority of Japanese culture and behavior vs. others.
A manager should not have to rebut the opinions of his employees about the style of his management.
Instead, he should listen to see how that criticism can be used constructively to advance his objective of carrying out a set of tasks through the efforts of his subordinates.
Japanese culture vs. American culture is irrelevant.
The key is how a manager from one culture can motivate employees from another.
For Mr. Kageyama to argue that American employees must passively accept a direct imposition of the Japanese way of doing things is outright cultural chauvinism of the first order.
The Japanese are neglecting the opportunity to synthesize a new corporate culture based on a fusion of the best aspects of both national cultures.
Mr. Kageyama is accurate to deny a specific anti-American bias.
It is more difficult to deny a general bigotry in seeing things only the Japanese way.
When the response to criticism is only a better explanation of policies without altering the reasons for the criticism, I am convinced that Mr. Kageyama has still failed to attack the root cause of the problem and is simply treating symptoms.
Norman L. Owens Tempe, Ariz.
Cie. Generale des Eaux reported that net profit climbed 30% in the first half of 1989 and said that it expects a gain of about 25% for the full year.
The French water treatment group said consolidated net profit after payments to minority interests rose to 749 million francs (US$119.2 million) from 575 million francs in the first half of 1988.
Revenue climbed 13% to 45.4 billion francs from 40.1 billion.
Generale des Eaux said the earnings gain was led by its water, energy and building activities.
As a presidential candidate in 1980, George Bush forthrightly expressed his position on abortion in an interview with Rolling Stone magazine published that March.
What did he think of the Supreme Court's decision legalizing abortion?
"I happen to think it was right," Mr. Bush said flatly.
A few months later, Mr. Bush became Ronald Reagan's running mate.
Suddenly, George Bush the pro-choice advocate became George Bush the anti-abortionist.
And the vacillation didn't end there.
Just a month ago, Mr. Bush sternly threatened to veto a pending welfare bill if it provided any abortion funds, except to save a woman's life.
Then, two weeks ago -- declaring that "I'm not looking for any conflict over this" -- the president said he would consider a compromise to fund abortions for poor women in cases of rape and incest.
But only four days after that, Mr. Bush resurrected the veto threat.
"I do not support federal funding for abortions except where the mother's life is threatened," he proclaimed, and finally vetoed the measure last weekend.
So what does George Bush really believe?
The answer is so murky that it is beginning to get this popular president in trouble with each of the increasingly vocal, increasingly powerful sides of the abortion issue.
The result is mistrust and criticism from all around.
Anti-abortion forces regard him as at best an uncertain ally.
"In all honesty if you ask me, `Is this man a true believer?' I don't know," says John Fowler, head of the Washington-based Ad Hoc Committee in Defense of Life Inc.
Yet abortion-rights forces remain bitterly critical.
Douglas Gould, vice president of communications for the Planned Parenthood Federation of America, calls Mr. Bush's position on the abortion-funding issue "extremely cruel," adding: "The guy hasn't done one thing about prevention.
He's totally geared to a punitive position."
Mr. Bush is plainly uncomfortable with the entire abortion question.
For most of the past nine years, he has striven to convince anti-abortion activists of his stalwart support for their position.
But ever since the Supreme Court's Webster vs. Reproductive Health Services decision this year changed the political landscape of the abortion issue, the president seemingly has tried just as hard to avoid saying anything more unless pressed to the wall.
Many Americans still agonize over their own personal feelings about abortion.
Mr. Bush's problem isn't so much that he seems to be agonizing over the issue as it is that he seems to vacillate on it.
The political risk would be far less if the president drew a firm line and hewed to it, experts insist.
"If you have a position, you're better off to stick with it than to move around very much," says Republican strategist John Sears.
The need for consistency is especially acute for Mr. Bush, who, Mr. Sears maintains, lacks a strong ideological base.
By his moderate Republican heritage as well as the warnings of political advisers who say the issue is vital to younger voters, the president might seem to have at least some sympathy with abortion-rights arguments.
Yet he is also firmly bound by his hard-line rhetoric and promises he made to anti-abortion activists during his long pursuit of the White House.
On many issues -- flag-burning, for instance -- his keen political sensitivities overcome such conflicts.
But Mr. Bush and his advisers miscalculated the politics of the abortion issue, failing to grasp how dramatically the abortion-rights movement would be aroused following last summer's Supreme Court decision to restrict those rights in the Webster case.
"It was one of the quickest changes in public attitudes I've ever seen," says former Reagan pollster Richard Wirthlin.
These days, when others raise the subject of abortion, the usually loquacious president can be close-mouthed almost to the point of curtness.
Ten days ago he was asked to amplify the reasons behind his anti-abortion stance.
"My position is well-known and well-stated," he replied.
A close look at his record over the last 15 years suggests that Mr. Bush has well-stated his views -- on all sides of the issue.
In 1974, as the U.S. representative to the United Nations, he wrote an introduction to a book on world population in which he boasted of his leadership during his term in Congress in expanding family-planning services for the poor.
Running for president in early 1980, he was also quoted as supporting federal funding for abortions in cases of rape, incest and to save the life of the mother.
In his Rolling Stone interview in 1980, Mr. Bush volunteered his abortion-rights remarks to contrast himself with his rival, Ronald Reagan.
In addition to supporting the landmark Roe vs. Wade Supreme Court decision legalizing abortion, Mr. Bush said he opposed the constitutional ban on abortion that Mr. Reagan was promising to promote.
As Mr. Reagan's running mate, though, Mr. Bush plunged headlong into the anti-abortion position, endorsing a constitutional amendment outlawing abortion.
He acknowledged only one difference with Mr. Reagan -- that the amendment ought to have exceptions for rape and incest as well as to save a woman's life.
Throughout the early 1980s, Mr. Bush was quoted sometimes supporting federal funding for abortion in cases of rape and incest and sometimes opposing it.
In April 1986, then-Vice President Bush had his staff write a letter spelling out that he would support a constitutional amendment banning abortions except in cases of rape, incest and life endangerment, but that he opposed federal funding in all but the latter case.
At the GOP convention last year, he again came out for an amendment with exceptions for rape, incest and life endangerment.
His rhetoric gathered momentum as he rolled into office, affirming his "firm support of our cause" during an anti-abortion rally three days after his inauguration last January.
He again urged passage of a constitutional amendment outlawing abortion.
But when the high court ruled in the Webster case in July, the president began to lower the volume.
When the ruling was handed down, the vacationing president dispatched Chief of Staff John Sununu to issue a statement and refused to answer questions himself.
He did later threaten vetoes over legislation restoring the District of Columbia's right to use its own tax money to fund abortions for poor women and over restoring funding to the United Nations Population Fund.
But in the months since then, while trying to drum up support for other issues -- such as an anti-flag-burning constitutional amendment -- he has shied away from talking about abortion.
What few comments he has initiated have been oblique, such as urging "greater efforts toward the protection of human life" at a meeting of Catholic lawyers in Boston last month.
The White House has likewise avoided any involvement in Florida's recent special legislative session on abortion, which anti-abortion forces had regarded as a key test of their ability to get state lawmakers to toughen abortion restrictions.
The session failed to enact any new curbs.
Now, some see Mr. Bush trapped in a position he is neither comfortable with nor able to escape.
Ken Ruberg, head of the Republican Mainstream Committee, a group of party moderates, observes: "The administration finds itself in an ideological cul de sac that it will find it difficult -- if not impossible -- to get itself out of.
Christopher Cox's Oct. 13 editorial-page article "Toward More Crippling Lawsuits . . ." misses the point.
The 1989 Americans With Disabilities Act is about eliminating discriminatory barriers.
When we look closely at our own history, it is clear that our constitutionally mandated civil rights have evolved not through the goodness of people's hearts but through legislation and constitutional amendments.
This is how American women won the right to vote.
And it is how African-Americans and other minority groups were guaranteed their equal rights as citizens in this nation.
For the more than 43 million Americans with disabilities, the 1989 Americans With Disabilities Act provides the missing piece.
Disabled Americans have had their civil rights guaranteed in all federally funded programs since Section 504 was passed as a part of the 1973 Rehabilitation Act.
The 1989 act simply extends these guarantees to the private sector.
Those who fear a plethora of suits paralyzing our legal system need only look at the record on the Rehabilitation Act.
Without legal recourse, there are no guarantees of civil rights for anyone.
John R. Garrison President National Easter Seal Society
Ford Motor Co. said it is consolidating control of its Asian operations under a new organization here that will be headed by W. Wayne Booker.
Ford Asia-Pacific will coordinate the activities of Ford subsidiaries in Japan, Australia, Taiwan and New Zealand and work with Ford business associates throughout the region.
These functions are currently performed out of Melbourne, Australia, and at Ford's headquarters in Dearborn, Mich.
Mr. Booker, executive director of Ford's Latin America Automotive Operations since December 1988, was named vice president of Ford Asia-Pacific.
Goodyear Tire & Rubber Co., buoyed by improved operating profit in its tire segment, reported that third-quarter net income rose 11% to $70.5 million, or $1.22 a share.
In the year-ago period, Goodyear had net of $63.5 million, or $1.11 a share.
Sales rose slightly to $2.68 billion, from $2.66 billion.
Analysts had mixed responses to the results.
Donald DeScenza, an independent analyst in New Canaan, Conn., said he was "impressed with the company's performance."
He said results were better than he'd expected and indicate that Goodyear is in the midst of a turnaround from a string of lackluster quarters that have plagued the company for a year.
However, Harry Millis, an analyst at McDonald & Co., Cleveland, said Goodyear's results "fell at the bottom" of his range of estimates.
Excluding an increase in the tax rate and the effects of foreign currency translations, Mr. Millis said the company's results "were still a little disappointing."
Goodyear's stock, which has been weak in recent weeks, fell $2.875 yesterday to close at $43.875 a share in composite trading on the New York Stock Exchange.
The Akron, Ohio-based company said pretax operating income in its tire segment jumped about 31% to $196.2 million from $150.2 million a year earlier, reflecting improvements in raw material costs, sales of replacement tires and pricing.
McDonald's Mr. Millis said Goodyear appeared to have held or gained some market share in the U.S. for the first time since the second quarter of 1988.
But Goodyear said total U.S. tire unit sales were off about 2%.
Total tire segment sales were up only about 1% to $2.2 billion, and the company said it reduced manufacturing levels at some of its U.S. tire plants because of inventory adjustments and slackened production by auto makers.
In the latest quarter, Goodyear's tax rate was 51% compared with 41% a year earlier.
As a result, total tax outlays were $73.5 million, compared with $44.1 million the year earlier.
For the nine months, profit skidded about 35%, reflecting charges taken in this year's second quarter and the effect of translations of weaker foreign currencies into the stronger U.S. dollar.
Net was $192.1 million, or $3.33 a share, compared with net of $293.7 million, or $5.13 a share, the year earlier.
The latest nine months included charges of $95 million related to the company's South African subsidiary and unused pipe sold by its crude oil pipeline unit.
Sales rose nearly 2% to $8.13 billion from $7.98 billion.
Environmental Control Group Inc. said it expects to report "minimal" earnings or a loss for the third quarter.
The environmental services company said that the discontinuation of unsuccessful product lines and an increase in baddebt reserves probably will result in charges of $2.5 million to $4 million, most of which will be taken against third-quarter results.
In the year-ago quarter, the company reported earnings of $2.2 million, or 35 cents a share.
Former USX Corp. Chairman David M. Roderick may have been lucky he retired last May.
As he handed over the reins to successor Charles A. Corry, steel profits were close to a cyclical peak.
Though imports were troublesome, they weren't running away with the market, and American companies had high hopes that steel import quotas would be extended for another five years.
Perhaps most important, Carl Icahn, who had once threatened a hostile takeover bid, was subdued.
He and Mr. Roderick were even dining out together.
Today, Mr. Corry presides over a company whose fortunes have changed abruptly.
Mr. Icahn, the company's deep-pocketed, tenacious adversary, recently disclosed that he had raised his USX stake to 13.1%, and he again threatened a takeover.
A battle with Mr. Icahn would rattle even the most seasoned chief executive, to say nothing of one who took the helm less than five months ago.
In addition, USX's giant steel segment, representing 34% of its 1988 sales, is facing softening demand and slipping prices as well as increasing competition from foreign steelmakers and low-cost minimills.
The import quotas got only a 2 1/2-year extension, and USX is laboring under a staggering $5.8 billion debt at a time when it must spend money to upgrade steel mills and drill for oil.
"It's a baptism of fire for Corry," says one USX executive.
The burning question is whether the new chief can parry Mr. Icahn without being pushed into unwelcome moves.
Mr. Corry might have to dismember the company more than he wants to.
Or he might have to incur a huge expense of either buying Mr. Icahn's stock, possibly at a premium, or paying stockholders a special dividend partly because of Mr. Icahn's pressure.
With his recent purchases of USX common stock, Mr. Icahn shattered a three-year-old, unwritten standstill agreement with Mr. Roderick.
In 1986, Mr. Roderick adroitly dodged Mr. Icahn's first bullet after the takeover specialist had built up an 11.4% stake.
Mr. Roderick did so by having USX redeem a series of guaranteed notes, a move that, in effect, raised the cost of a $7.19 billion Icahn bid by about $3 billion.
And he managed to fend off further advances and even strike up an unlikely friendship with the interloper.
Over dinners at New York's Sky Club and Links Club restaurants, the steel executive and the big investor talked steel, international trade and thoroughbred horses.
Mr. Corry, who has boned up on corporate raiders by reading T. Boone Pickens's autobiography, had hoped the detente would continue.
He was shocked, associates say, to learn of Mr. Icahn's new takeover threat.
(Both men declined to be interviewed for this article.)
But the fiercely competitive Mr. Corry quickly showed he's no pushover.
He huddled with directors at a special meeting two weeks ago and tried to block his opponent.
Although the board believed that Mr. Icahn is more interested in talking the stock price higher than acquiring USX, it adopted a poison-pill defense, to be swallowed if anyone amasses a 15% stake.
Now, it's Mr. Icahn's move.
Will he try to gain a seat on or control of the board and force a radical split of USX into separate oil and steel companies?
Given the weakness of the junk-bond market, can he finance a buy-out?
Mr. Icahn may not want to sell out unless he can get a special dividend similar to one he received before selling his stake in Texaco Inc. in June -- a coup that gave him enough cash to make his USX move.
And although the recent turmoil in the stock and junk-bond markets, by making it harder to arrange takeover financing, has eased some of the pressure on Mr. Corry, it doesn't end the takeover threat.
"I know it's not over," a sober-faced Mr. Corry acknowledged while greeting steel suppliers in New York on Oct. 12 and inviting them to a buffet of salmon and sushi in honor of Kobe Steel Ltd., USX's partner in a steel mill in Lorain, Ohio.
In fact, it's barely begun for Mr. Corry, who faces tough decisions before he has had a chance to get settled into his new job.
"He's in a vulnerable position because he hasn't established much credibility on his own," says Bryan Jacoboski, a securities analyst at PaineWebber Inc.
The 57-year-old tax attorney never even aspired to the job of chief executive.
An undistinguished college student who dabbled in zoology until he concluded that he couldn't stand cutting up frogs, Mr. Corry wanted to work for a big company "that could do big things."
But after joining the tax department of a USX subsidiary 30 years ago, he set the modest goal of becoming tax manager by the age of 46.
For years, he quietly stuck to the back accounting rooms, wearing a hat to work because everyone else did.
"I was never a rebel," he said in an earlier interview.
"I don't think most of the people that have been around me would ever say they've seen me pound the table or get angry."
Yet, the unassuming Mr. Corry helped chart USX's transition from Big Steel to Big Oil.
He served as Mr. Roderick's front man in tense negotiations for the 1982 purchase of Marathon Oil for $5.9 billion.
Nevertheless, Mr. Corry, once named chief executive, didn't waste any time distancing himself from his former boss, who still has an office on the 62nd floor of the USX tower in Pittsburgh.
Soon after taking over last June, Mr. Corry rescinded a pay cut imposed on clerical workers, a move that Mr. Roderick hadn't made in spite of improved earnings.
Mr. Corry also ruled that all board meetings would be held in Pittsburgh instead of New York or Findlay, Ohio, Marathon's home.
And, earlier this month, he announced the sale of the reserves of Texas Oil & Gas, which was acquired three years ago and hasn't posted any significant operating profits since.
One former executive says, "Nobody wanted that deal inside USX except Dave Roderick," who was a hunting and fishing buddy of William L. Hutchison, chairman of Texas Oil & Gas.
The executive recalls Mr. Corry whispering to him and others, "Remember, this was Dave's deal."
What miffed many USX executives and shareholders was that the acquisition, for $3 billion of stock, doubled the USX shares outstanding and considerably diluted them.
What's more, the takeover occurred as natural-gas prices were falling and just as Texas Oil & Gas reported its first annual loss in 28 years.
Mr. Corry expected the Texas Oil & Gas sale to delight Mr. Icahn by addressing his concern about boosting shareholder value.
But when the two men met in New York a day after Mr. Icahn disclosed the rise in his USX stake, Mr. Corry learned that Mr. Icahn wanted him to sell all of Texas Oil -- not just its reserves of about 1.2 trillion cubic feet of natural gas and 28 million barrels of oil but also its pipeline, gas-gathering and contract-drilling operations.
That would leave USX with Marathon, its steel mills and its diversified business segment, which includes, among other things, mineral and transportation products.
Some speculate that Mr. Corry would agree if he could find a buyer at the right price.
The problem is that Mr. Icahn is pushing him to move faster and further in restructuring USX than Mr. Corry had planned.
Mr. Icahn has long believed, associates say, that the company, whose 1988 sales totaled $16.88 billion, is worth $70 a share if broken up.
The stock closed yesterday at $33.625, giving Mr. Icahn's 33.6 million shares a value of $1.13 billion.
Mr. Icahn advocates the sale of the company's steel operations, and Mr. Corry doesn't necessarily disagree.
Unlike his predecessor, who saw steel as America's backbone, Mr. Corry tends to view it as a capital-draining and labor-intensive business with limited potential, associates say.
In the past five years, USX has turned steel into a profit maker by closing several plants and reducing labor costs.
But the short-term outlook is so-so.
It isn't surprising that Messrs. Roderick and Corry view steel so differently.
While Mr. Roderick was reared in the shadows of Pittsburgh's smoking mills, Mr. Corry grew up in Cincinnati, a city nicknamed "Porkapolis" and more accustomed to pork chops than pig iron.
He has never met Lynn Williams, the president of the United Steelworkers union, and isn't active in the industry's main trade group, the American Iron and Steel Institute, which Mr. Roderick served as chairman.
"Dave thought the country needed a strong U.S. Steel and, while Chuck agreed, he was more apt to say, `Not at any cost to shareholders,'" a former executive says.
Indeed, Mr. Corry, at an August press conference, talked about investing in steel as long as it provides a good return and "not a day longer."
However, shedding steel would run directly counter to Mr. Roderick's original rationale for diversifying into oil and gas: Having two major products would lessen the company's vulnerability to one market's down cycle and help smooth out the flow of cash and earnings.
As Mr. Roderick once said: "We're a two-product company and, boy, if you can't figure out the value of those two parts, you are so damn dumb that you don't belong on Wall Street."
Moreover, the opportunity to sell steel at a price acceptable to USX may be gone, for now.
"The time has passed for us to spin off steel," either in a public offering or to a buyer, one executive contends.
About the only way that USX now can get out of steel is to dish it out, piece by piece, in separate joint ventures, he adds.
With Mr. Icahn breathing down his neck, however, Mr. Corry may have little choice but to sell at a weak price, even if it means losing some steel-related tax-loss carryforwards.
That would leave USX essentially an oil company with Marathon as its core.
Marathon has benefited from higher crude-oil prices and strong demand for refined products.
Oil has long been Mr. Corry's pet.
Indeed, when the Bush administration finally decided this summer to renew import restrictions -- arguably the most important decision to affect the steel industry in five years -- Mr. Corry and his directors were aboard helicopters, high above Marathon's rich oil reserves in the North Sea.
Should USX be left with only Marathon, Mr. Corry might well feel pushed to scout out other energy companies.
However, even USX executives who work closely with him aren't sure about his long-term goals.
"I don't think he has a clear sense of where he wants the company to go," one says.
Right now, the executive adds, "he wants to continue to focus on paying down" USX's debt by selling assets.
One thing is certain, however: Mr. Corry, while studying other options, probably won't make a major move until he's clear about Mr. Icahn's intentions.
And then, "he won't panic," says J. Bruce Johnston, a former USX executive and now a labor and benefit consultant with Adler Cohen & Grigsby in Pittsburgh.
Mr. Corry learned presence under fire when, as vice president of corporate planning, he handled what Mr. Johnston calls "don't-con-me" negotiations that led to USX's shedding of a wide array of assets ranging from chemicals to construction.
When negotiating, Mr. Corry played his cards close to the vest.
Johnnie Johnson, who worked for Mr. Corry in strategic planning, recalls how his boss would routinely ask a subordinate to research an entire industry to target acquisition candidates.
"What he really wanted to know was about a particular company, but you didn't know that.
He wanted your own unbiased, virgin opinion," says Mr. Johnson, now managing director at Georgeson & Co., a proxy-solicitation and investor-relations firm.
Ever the pragmatist, Mr. Corry said in August that he realized that USX is on "acquisition screens all over the country."
"It's part of the capitalistic market system that equity can be bought and equity is bought," he said.
USX, he noted, was formed 88 years ago, "by in effect buying out a bunch of other companies. . . .
People got rich through takeovers in those days, as they do today."
Thomas F. O'Boyle contributed to this article.
Westinghouse Electric Corp. said it will buy Shaw-Walker Co.
Terms weren't disclosed.
Shaw-Walker, based in Muskegon, Mich., makes metal files and desks, and seating and office systems furniture.
Israel has launched a new effort to prove the Palestine Liberation Organization continues to practice terrorism, and thus to persuade the U.S. to break off talks with the group.
U.S. officials, however, said they aren't buying the Israeli argument.
Israeli counterterrorism officials provided the State Department with a 20-page list of recent terrorist incidents they attribute directly to forces controlled by PLO Chairman Yasser Arafat.
Mr. Arafat publicly renounced terrorism Dec. 15, satisfying the U.S. precondition for a direct "dialogue" with the PLO.
A U.S. counterterrorism official said experts are studying the Israeli list.
"We have no independent evidence linking Fatah to any acts of terrorism since Dec. 15, 1988," he said, referring to the specific PLO group that Mr. Arafat heads.
"So far, this list doesn't change our view.
Israel wants to end the dialogue, but our analysts take a different view than theirs."
Israeli Prime Minister Yitzhak Shamir's top adviser on counterterrorism, Yigal Carmon, was here Monday to present the report to members of Congress, reporters and others.
Mr. Carmon said he also presented the list last week to William Brown, U.S. Ambassador to Israel.
Separately, the New York Times reported that the Israeli government had provided its correspondent in Jerusalem with different documents that Israel said prove the PLO has been conducting terrorism from the occupied Arab territories.
The State Department said it hasn't yet seen copies of those papers.
"If the dialogue was based on the assumption that Arafat or the PLO would stop terrorism, and we have evidence of continued terrorism, what would be the logical conclusion?" Mr. Carmon asked.
Israel has long claimed Mr. Arafat never meant to renounce terrorism, particularly because he and his lieutenants reserved the right to press "armed struggle" against the Jewish state.
Now, Jerusalem says it is backing up its contention with detailed accounts of alleged terrorist acts and plans linked to Mr. Arafat.
It blames most of these on Fatah.
The new accusations come at a delicate time in U.S. efforts to bring about talks between Israel and Palestinian representatives.
The State Department said it had received a new letter on the subject from Israeli Foreign Minister Moshe Arens, restating Israel's previous objection to negotiating with any Palestinian tied to the PLO.
Deciding what constitutes "terrorism" can be a legalistic exercise.
The U.S. defines it as "premediated, politically motivated violence perpetrated against noncombatant targets by subnational groups or clandestine state agents."
To meet the U.S. criteria, Israel contended it only listed incidents that involved civilians and occurred inside its pre-1967 borders.
At the heart of Israel's report is a list of a dozen incidents Jerusalem attributes to Fatah, including the use of bombs and Molotov cocktails.
But U.S. officials say they aren't satisfied these incidents constitute terrorism because they may be offshoots of the intifadah, the Palestinian rebellion in the occupied territories, which the U.S. doesn't classify as terrorism.
In addition, the officials say Israel hasn't presented convincing evidence these acts were ordered by Fatah or by any group Mr. Arafat controls.
U.S. terrorism experts also say they are highly uncertain about the veracity of the separate documents leaked to the New York Times.
The papers, which Israel says were discovered in Israeli-occupied Gaza, refer to terrorist acts to be carried out in the name of a group called "the Revolutionary Eagles."
Some supporters of Israel say U.S. policy on Palestinian terrorism is colored by an intense desire to maintain the dialogue with the PLO.
But State Department officials accuse Israel of leaking questionable claims to embarrass the U.S.
The dollar finished lower yesterday, after tracking another rollercoaster session on Wall Street.
Concern about the volatile U.S. stock market had faded in recent sessions, and traders appeared content to let the dollar languish in a narrow range until tomorrow, when the preliminary report on third-quarter U.S. gross national product is released.
But seesaw gyrations in the Dow Jones Industrial Average yesterday put Wall Street back in the spotlight and inspired market participants to bid the U.S. unit lower.
UAL's decision to remain an independent company sent share prices tumbling.
By midmorning, the DJIA had plunged 80 points and foreign-exchange dealers quickly drove the dollar down.
When the DJIA modestly rebounded, the dollar bounced back in choppy dealings but ended the day below the levels of late Monday.
Stock prices, meanwhile, posted significant gains in later trading and closed down by only 3.69 points on the day.
Some dealers said that the market's strong reaction to Wall Street reflects a general uneasiness about the dollar.
They added that the DJIA's swift drop proved an easy excuse for the market to drive the U.S. currency in the direction it was already headed.
In late New York trading yesterday, the dollar was quoted at 1.8355 marks, down from 1.8470 marks Monday, and at 141.45 yen, down from 141.90 yen late Monday.
Sterling was quoted at $1.6055, up from $1.6030 late Monday.
In Tokyo Wednesday, the U.S. currency opened for trading at 141.57 yen, down from Tuesday's Tokyo close of 142.10 yen.
Tom Trettien, a vice president with Banque Paribas in New York, sees a break in the dollar's long-term upward trend, a trend that began in January 1988.
He argues that the dollar is now "moving sideways," adding that "the next leg could be the beginning of a longer term bearish phase."
Analysts peg the dollar's recent weakness to an underlying slowdown in the U.S. economy, highlighted by recent economic data, particularly a surprisingly sharp widening in the August U.S. trade gap.
They also point out that narrowing interest-rate differentials between the U.S. and its major trading partners tend to make the U.S. currency less attractive to foreign investors.
Despite several spurts of dollar trading, it was noted that mark-yen cross trade grabbed much of the market's attention.
Following the dive in U.S. stocks, the mark has strengthened more than its major counterparts.
Traders attribute the mark's surge to a robust West German economy and higher rate differentials.
But, they add that the mark's strength is in part a reflection of a shift away from U.S. assets by Japanese investors into West German investments.
"The question remains: how much can the West German market absorb?" says one senior dealer.
Some dealers say that Bank of Japan Governor Satoshi Sumita's reassurance that Japanese monetary policy won't be changed for the time being has given investors an added excuse to push the yen down even further against the mark.
Despite the yen's weakness with respect to the mark, Tokyo traders say they don't expect the Bank of Japan to take any action to support the Japanese currency on that front.
Meanwhile, sterling slumped on news that the United Kingdom posted a wider-than-expected trade deficit in September.
The news also knocked the British unit to below 2.95 marks in London, but a bout of short-covering helped sterling recoup some of its earlier losses.
On the Commodity Exchange in New York, gold for current delivery jumped $3.20 to $370.20 an ounce.
The close was the highest since Aug. 15.
Estimated volume was a light two million ounces.
In early trading in Hong Kong Wednesday, gold was quoted at $368.25 an ounce.
Boston Co., the upper-crust financial services concern that was rocked by a management scandal late last year, has had a sharp drop in profitability -- mainly because a high-risk bet on interest rates backfired.
Boston Co.'s fall from grace is bad news for its parent, Shearson Lehman Hutton Holdings Inc., which has relied heavily on the banking and money management unit's contributions in recent years.
In 1988, for example, Boston Co. had an estimated pretax profit of at least $110 million, while Shearson managed net income of just $96 million.
Shearson doesn't break out the earnings of its subsidiaries.
But people familiar with Boston Co.'s performance say the unit had profit of around $17 million for the third quarter, after barely breaking even for the first six months.
Shearson, meanwhile, posted net income of $106 million for the first nine months of the year, down slightly from $110 million for the year-ago period.
Moody's Investors Service Inc. last week downgraded the long-term deposit rating of Boston Co.'s Boston Safe Deposit & Trust Co. subsidiary, to single-A-1 from double-A-3, citing problems in the company's "aggressively managed securities portfolio."
John Kriz, a Moody's vice president, said Boston Safe Deposit's performance has been hurt this year by a mismatch in the maturities of its assets and liabilities.
The mismatch exposed the company to a high degree of interest-rate risk, and when rates moved unfavorably -- beginning late last year and continuing into this year -- "it cost them," Mr. Kriz said.
Mr. Kriz noted that Boston Safe Deposit "has taken some actions to better control asset-liability management and improve controls in general, and we think these will serve to improve credit quality."
As some securities mature and the proceeds are reinvested, the problems ought to ease, he said.
But he also cited concerns over the company's mortgage exposure in the troubled New England real estate market.
Boston Co. officials declined to comment on Moody's action or on the unit's financial performance this year -- except to deny a published report that outside accountants had discovered evidence of significant accounting errors in the first three quarters' results.
An accounting controversy at the end of last year forced Boston Co. to admit it had overstated pretax profits by some $44 million.
The resulting scandal led to the firing of James N. von Germeten as Boston Co.'s president and to the resignations of the company's chief financial officer and treasurer.
The executives were accused of improperly deferring expenses and booking revenue early, in an effort to dress up results -- and perhaps bolster performance-related bonuses.
Mr. von Germeten, in turn, attributed the controversy to judgmental errors by accountants and accused Shearson of conducting a "witch hunt."
Mr. Kriz of Moody's said the problems in the securities portfolio stem largely from positions taken last year.
The company's current management found itself "locked into this," he said.
Mexico exported an average of 1,296,800 barrels of crude oil a day at an average of $15.31 a barrel during 1989's first eight months for a total of $4.82 billion, Petroleos Mexicanos S.A. said.
The state petroleum monopoly said sales in the period gained 15%, and $262.4 million more than originally projected at an average of $10 a barrel on an export platform of 1,250,000 barrels a day.
CHICAGO -
Sears, Roebuck & Co. is struggling as it enters the critical Christmas season.
Yesterday, the retailing and financial services giant reported a 16% drop in third-quarter earnings to $257.5 million, or 75 cents a share, from a restated $305 million, or 80 cents a share, a year earlier.
But the news was even worse for Sears's core U.S. retailing operation, the largest in the nation.
Sears said its U.S. stores had a loss of $6.9 million, their first deficit for the period in more than five years.
Analysts estimated that sales at U.S. stores declined in the quarter, too.
The results underscore Sears's difficulties in implementing the "everyday low pricing" strategy that it adopted in March as part of a broad attempt to revive its retailing business.
Under the new approach, Sears set prices that were somewhere between its old "regular" and "sale" prices.
The company said it would resort far less often to slashing prices to woo shoppers.
Sears officials insist they don't intend to abandon the everyday pricing approach in the face of the poor results.
Instead, a spokesman blames the dismal third-quarter showing on "an environment that is being distorted by a very harsh climate for sales of durable goods," which account for roughly two-thirds of Sears's annual merchandise volume.
The new pricing strategy "is working," the spokesman asserted.
He added that, after an initial surge triggered by an advertising blitz in March, Sears expected that the pricing program wouldn't have any effect on revenue.
Sears has been counting on growth coming from the large displays of brand-name merchandise it is adding to its stores over the next two years in what it calls "power formats."
But analysts say Sears faces an especially daunting challenge on the eve of the Christmas shopping season.
"I believe everyday pricing in the current environment doesn't work," says Walter Loeb of Morgan Stanley & Co., pointing to soft durable-goods sales.
"Sears is likely to be unsuccessful if it continues with its pricing policy when everyone else is offering unusual values."
In what amounts to an admission that the transition hasn't gone as smoothly as Sears had hoped, the giant retailer is now trying new ways to drum up business without appearing to abandon its seven-month-old strategy.
The company is highlighting more special deals in its advertising and stores, and it's offering to defer finance charges on certain big-ticket items.
Sears is also stepping up its television ads and changing its message.
In a new TV ad, for instance, a woman going through the Sunday newspaper brands as hype claims by other stores that they are offering goods for "50%, 60% and 70% off.
" By lowering prices throughout its stores, she says, "Sears has the right idea."
But the ad also mentions Sears's sales -- a topic that the retailer has avoided since switching to everyday pricing.
"When Sears has a sale at a special price," the woman in the ad declares, "it's something you don't want to miss."
Recent surveys by Leo J. Shapiro & Associates, a market research firm in Chicago, suggest that Sears is having a tough time attracting shoppers because it hasn't yet done enough to improve service or its selection of merchandise.
The number of people who said they were more likely to shop at Sears fell in September to 37% from 66% in March, when Sears blanketed the airwaves with ads about its new pricing strategy.
Moreover, the number of people who spontaneously cited lower prices as the reason for their interest in Sears declined to 16% in September from 33% in March.
Just 5% of the respondents mentioned brands in September, up slightly from 2% in March.
Only 2% of the people in September cited Sears's "friendly personnel."
"The power of price as an appeal, which was very considerable in driving traffic in March and April, has diminished," says George Rosenbaum, president of Shapiro & Associates.
"You see some improvement in these other areas, but it's a very small and slow process."
For the third quarter, Sears said its total revenue rose 4.8% to $13.18 billion from $12.57 billion a year earlier.
Net income at Sears's merchandise group, which includes international and credit card operations, as well as U.S. stores, fell 25%.
Profit at Sears's Allstate insurance unit fell 38% to $126.1 million because of Hurricane Hugo, which inflicted the greatest single storm damage loss in the company's history.
Sears said claims from the storm, as expected, reduced its third-quarter net by $80 million, or 23 cents a share.
Allstate is expected to absorb another big hit in the fourth quarter as claims pour in from the San Francisco earthquake.
But a spokesman said the quake won't have as big a financial impact on Allstate as Hurricane Hugo did.
Net income at Sears's Dean Witter Financials Services group, meanwhile, rose nearly 32% to $35.7 million, reflecting improvements in its basic stock brokerage and Discover credit card businesses.
Profit at Sears's Coldwell Banker Real Estate Group nearly quadrupled to $81.2 million because of gains on sales of property.
In New York Stock Exchange composite trading yesterday, Sears shares closed at $40.50, up 87.5 cents.
Oil imports to Japan rose 12% in September from year-earlier levels, according to statistics released by the government's Ministry of International Trade and Industry.
The imports, totaling 98.5 million barrels, were 11% lower than August levels.
The year-on-year rise was partly because of higher demand for petroleum products, and partly because of tax changes in 1988 that left oil companies with high inventories in the late-summer/early-FALL PERIOD.
Imports of crude from the Middle East grew 17% from year-earlier levels, and Southeast Asian crude imports grew 43%.
While Mideast crude imports were higher compared with year-earlier levels, they fell 18% compared with August imports.
Southeast Asian crude imports, however, were 3.6% higher than August.
This is in response to George Melloan's Business World column "The Housing Market Is a Bigger Mess Than You Think" (op-ed page, Sept. 26).
In Houston, we have seen how bad the housing problem can become.
Unused houses deteriorate rapidly, affecting the value of nearby homes; in a domino effect, the entire neighborhood can fall victim.
At this stage some people just "walk away" from homes where the mortgage exceeds current market value.
But most of them could have afforded to keep up their payments -- they chose not to do so.
The problem is so vast that we need to try innovative solutions -- in small-scale experiments.
Here are some ideas:
1) Foreclosed homes could be sold by the FHA for no down payment (the biggest obstacle to young buyers), but with personal liability for the mortgage (no walking away by choice).
2) Encourage long-term occupancy by forgiving one month's payment (off the tail end of the mortgage) for every six months paid; or perhaps have the down payment deferred to the end of the mortgage (balloon), but "forgiven" on a monthly pro-rata basis as long as the owner remains the occupant.
3) Develop rental agreements with exclusive purchase options for the renter.
An occupant will, in most every case, be better for the home and neighborhood than a vacant house.
In this way, the house is not dumped on to a glutted market.
John F. Merrill
Houston
The Federal Housing Administration, Veterans Administration and the Department of Housing and Urban Development further aggravate the problem of affordable housing stock by "buying in" to their foreclosed properties (of which there are, alas, many) at an inflated "balance due" -- say $80,000 on a house worth $55,000 -- instead of allowing a free market to price the house for what it's really worth.
Worse, the properties then sit around deteriorating for maybe a year or so, but are resold eventually (because of the attractiveness of the low down payment, etc.) to a marginal buyer who can't afford both the mortgage and needed repairs; and having little vested interest that buyer will walk away and the vicious cycle repeats itself all over again.
Paul Padget
Italy's unemployment rate rose to 12% of the labor force in July from 11.9% in April, and was up from 11.7% a year earlier, according to quarterly figures from the state statistical institute.
Istat said a national survey during the first week of July showed the number of job seekers was 2,888,000 up from 2,822,000 in April, and from 2,853,000 a year ago.
The unemployment rate was by far the highest in the southern, so-called Mezzogiorno region.
The southern unemployment rate rose to 21.3% in July from 21.2% in April and from 20.6% a year earlier.
Istat said 369,000 more people were employed in July than in April.
Xerox Corp.'s third-quarter net income grew 6.2% on 7.3% higher revenue, earning mixed reviews from Wall Street analysts.
Quarter net for the business-machines and financial-services company rose to $155 million, or $1.41 a share, from $146 million, or $1.37 a share, in the year-earlier period.
Revenue rose to $4.45 billion from $4.15 billion.
In New York Stock Exchange composite trading, Xerox closed at $62.75 a share, up $1.
Sales growth and profit in business products and systems -- Xerox's main business -- were "disappointing," said B. Alex Henderson, who follows the company for Prudential-Bache Securities Inc.
Sales of Xerox copiers and other office products grew 1.6%; "we expected growth of 6% to 7%," Mr. Henderson said.
Operating-profit margins slipped almost 18%, to 4.3% of sales, the analyst noted.
Still, with competitors such as Eastman Kodak Co. faltering in copier sales, Xerox's sales increases "were encouraging," says Eugene Glazer of Dean Witter Reynolds Inc.
"They are holding their own in a weak market, and the restructuring is working," he says.
David T. Kearns, Xerox chairman and chief executive officer, cited the restructuring and "strong" cost controls for the 13% growth in profit from business products and systems operations.
Mr. Glazer expects Xerox to experience tough sledding, though, in financial services because of rate pressures and uncertainty surrounding tax treatment of capital gains.
In the quarter, the Crum & Forster insurance unit reported $200 million before tax of capital gains from property and casualty operations.
The subsidiary also increased reserves by $140 million, however, and set aside an additional $25 million for claims connected with Hurricane Hugo.
For the nine months, Xerox earned $492 million, or $4.55 a share, up 5.8% from $465 million, or $4.32 a share.
Revenue rose 7.6% to $12.97 billion from $12.05 billion.
New orders for durable goods fell back slightly in September after shooting up the month before, reflecting weakening auto demand after a spurt of orders for new 1990 models, the Commerce Department reported.
Orders for military equipment, household appliances, machinery and other goods expected to last at least three years dipped 0.1% last month, to $126.68 billion, after leaping 3.9% in August, the department said.
Most analysts had expected a sharper decline after the steep rise in August.
Moreover, a recent government report showing widespread layoffs in manufacturing had contributed to perceptions that the manufacturing sector of the economy had slowed to a crawl.
But many economists pointed to a 1.8% September rise in orders outside the volatile transportation category.
That "suggests the manufacturing sector is not falling apart," said Sally Kleinman, an economist at Manufacturers Hanover Securities Corp. in New York.
She added, however: "It is not robust by any means."
While a decline in orders for cars and civilian airplanes pulled down the orders total, an enormous jump in orders for heavy military equipment propped it up.
Orders for capital defense goods skyrocketed 56%, and a government analyst said nearly all areas saw increases, including airplanes, missiles, ships, tanks and communications equipment.
Orders for military goods usually catapult in September, government officials say, as the Pentagon scrambles to spend its money before the new fiscal year begins Oct. 1.
While all the numbers in the durable goods report were adjusted for seasonal fluctuations, a Commerce Department analyst said that the adjustment probably didn't factor out all of the wide-ranging surge in defense orders.
Without the increase in defense bookings, September orders would have plummeted 3.9%.
Analysts were most unsettled by evidence the backlog of orders at factories is slipping.
Unfilled orders for durable goods rose 0.4% in September, to $476.14 billion, after declining for the first time in 2 1/2 years in August.
In July unfilled orders grew 1%.
But analysts noted that excluding transportation-where what they believe was a temporary surge in auto demand pushed up the figures-order backlogs have declined for three months in a row.
"It means we're eating into the bread that keeps us going.
That is a little disturbing," Ms. Kleinman said.
"It also means if you have a real drop-off in orders, production will likely fall off very quickly because there is less to keep things going."
Capital goods orders outside of the defense sector tumbled for the second month in a row, posting a 5.6% drop after a 10.3% decline.
Such steep drops in a category seen as a barometer of business investment would customarily be grave news for the economy.
But a Commerce Department analyst said that in both months orders would have risen had it not been for a drop in civilian aircraft bookings, a category that is showing declines only after a huge surge earlier this year.
Still, Milton Hudson, senior economic adviser at Morgan Guaranty Trust Co. in New York, said: "If you look back a half-year or so the evidence was pretty good of affirmative strength in the capital-goods sector.
Now at least there are question marks about that, and without any question the pace of growth has slowed.
Norfolk Southern Corp. directors authorized the railroad company to buy back as many as 45 million of its shares, which would have a current value of more than $1.7 billion.
The buy-back, coupled with a nearly completed earlier purchase of 20 million shares, would reduce shares outstanding by more than 26%.
The Norfolk, Va., company has 172.2 million shares outstanding.
In a statement, Arnold B. McKinnon, chairman and chief executive officer, noted that the new repurchase program "should serve to enhance shareholder value."
A spokeswoman said the company will finance the buy-back with cash on hand, borrowing and "cash Norfolk expects to generate."
Analysts said they expected the action, and investors applauded the move.
In composite trading on the New York Stock Exchange, Norfolk Southern shares closed at $37.875, up $1.125.
Still, analysts don't expect the buy-back to significantly affect per-share earnings in the short term.
"The impact won't be that great," said Graeme Lidgerwood of First Boston Corp.
That is in part because of the effect of having to average the number of shares outstanding, she said.
In addition, Mrs. Lidgerwood said, Norfolk is likely to draw down its cash initially to finance the purchases and thus forfeit some interest income.
Longer term, however, the buy-back is expected to increase earnings, especially after 1990, Mrs. Lidgerwood said.
Moreover, the extensive program in effect establishes a floor for the stock price, said Joel Price, analyst for Donaldson, Lufkin & Jenrette.
The buy-back "is really a comfort to those who want to buy the stock that there is a {price} floor," he said.
"At a certain price, if the management thinks {the stock} is cheap, they can go in and buy it."
Under the program, Norfolk plans to acquire shares in the open market.
Under the earlier plan, Norfolk was authorized in 1987 to buy up to 20 million shares.
It has purchased about 19 million of them.
John B. Curcio, 55 years old, resigned as chairman of this diesel truck manufacturer, effective upon appointment of a successor.
Last month, Mr. Curcio was succeeded by Ralph E. Reins as chief executive officer following several quarters of lackluster or declining performance.
Falcon Holding Group Inc. said it agreed to acquire about 54,000 subscribers from First Carolina Cable TV Limited Partnership for about $100 million, or roughly $2,000 a subscriber.
The subscribers are in 52 different communities in Georgia, Alabama and Mississippi.
Completion of the sale is expected early next year, Falcon said.
Currently, Falcon has about 750,000 cable-television subscribers around the nation; the company's cable-television unit reported 1988 revenue of about $100 million.
In composite trading on the American Stock Exchange, Falcon closed at $20, unchanged.
Richard W. Lock, retired vice president and treasurer of Owens-Illinois Inc., was named a director of this transportation industry supplier, increasing its board to six members.
USX Corp. said it delayed the proposed initial public offering of common stock of RMI Titanium Co. because of market conditions.
RMI Titanium is owned jointly by USX and Quantum Chemical Corp.
USX, which hadn't set a date for the offering, didn't disclose any timetable for the offering.
Your Oct. 2 editorial "Reding, Wrighting & Erithmatic" on the recent "education summit" was like most pieces on the subject of education: It had little to say.
Oddly, though, on the very same page you printed a comment that addresses one of the most serious shortcomings of the American education system.
Unfortunately, the comment was buried in another article, so it could not stand out in an education context.
In the Manager's Journal, Atsushi Kageyama, in commenting on many differences between American and Japanese culture, said, "Japanese children are raised in a way many Americans would find severe.
After a wonderfully frivolous early childhood, they are exposed to rigid discipline as soon as they enter school."
What far too many people concerned about education either fail to understand or choose to ignore is that American children, on the whole, are among the most undisciplined in the world, making any attempt at improvements in the mode of education potentially unsuccessful.
Unless parents and educators alike start to develop more discipline in children, all the worthy concern, discussions and actions will not solve the problem.
Allen B. Richards Peterborough, N.H.
Retired Adm. William J. Crowe, former chairman of the Joint Chiefs of Staff, and Robert P. Luciano, chairman and chief executive officer of Schering-Plough Corp., were elected directors of this securities firm.
The board expanded to 17 seats.
Tuesday, October 24, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 8 3/4% high, 8 5/8% low, 8 11/16% near closing bid, 8 11/16% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.45% 30 to 44 days; 8.25% 45 to 68 days; 8.30% 69 to 89 days; 8.125% 90 to 119 days; 8% 120 to 149 days; 7.875% 150 to 179 days; 7.50% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.55% 30 days; 8.475% 60 days; 8.45% 90 days.
CERTIFICATES OF DEPOSIT: 8.09% one month; 8.09% two months; 8.06% three months; 8% six months; 7.94% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market: 8.55% one month; 8.50% three months; 8.35% six months.
BANKERS ACCEPTANCES: 8.48% 30 days; 8.30% 60 days; 8.28% 90 days; 8.10% 120 days; 8% 150 days; 7.90% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 5/8% to 8 1/2% two months; 8 5/8% to 8 1/2% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 7/16% to 8 5/16% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 11/16% three months; 8 1/2% six months; 8 1/2% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS: Results of the Monday, October 23, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.52% 13 weeks; 7.50% 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days.
9.78%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.75%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.59%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Roy E. Parrott, the company's president and chief operating officer since Sept. 1, was named to its board.
The appointment increased the number of directors to 10, three of whom are company employees.
Simpson is an auto parts maker.
Japan has climbed up from the ashes of World War II and a gross national product of about $800 per capita to reach the heavyweight class among industrialized nations.
Now this remarkable economic growth seems to be coming to an end because the government has not converted itself into a modern, democratic, "developed nation" mode of operation.
Until 1980, when Japan joined the $10,000 per capita GNP club of the advanced countries, it was a model developing nation.
The government built ports, bridges, highways, schools, hospitals and railways.
When industries were weak, it protected them.
It gave the Japanese people a value system, based on the rationalization that given the country's lack of natural resources, they must work hard to create value through exports and buy food with the surplus.
Individual prosperity inevitably would result.
That system has worked.
The standard of living has increased steadily over the past 40 years; more than 90% of the people consider themselves middle class.
The people have given their leading and only credible political party, the Liberal Democratic Party, clear and uninterrupted power for those 40 years.
The LDP won by a landslide in the last election, in July 1986.
But less than two years later, the LDP started to crumble, and dissent rose to unprecedented heights.
The symptoms all point to one thing: Japan does not have a modern government.
Its government still wants to sit in the driver's seat, set the speed, step on the gas, apply the brakes and steer, with 120 million people in the back seat.
In a modern system, the government's role is to give the people as much choice as possible and to keep them well informed so they are capable of making a choice.
It also allows people to buy the best and the cheapest goods from anywhere in the world.
The Japanese government doesn't allow this.
The Ministry of Agriculture and Fishery actually is a ministry for farmers and fishermen instead of a ministry of provisions.
The Ministry of Health and Welfare is a ministry of doctors and pharmaceutical companies rather than an organization dedicated to protecting the health of the people.
The Ministry of Education is nothing but a cartel for licensed teachers, and certainly does not act on behalf of students.
The Ministry of Construction spreads concrete throughout the country and boasts in international conferences that Japan's paved roadway per capita is the longest in the world, but they seldom think of the poor commuters who spend so much time sitting in traffic.
The Ministry of Transportation serves the industry, certainly not the passengers who must pay extraordinarily high prices.
And the Ministry of Foreign Affairs works for itself, supporting Japanese diplomats who sprinkle abundant aid money around the world to ensure that their seat at the dinner table is next to the host's.
This ministry has done nothing to correct the misunderstandings and misperceptions that are at the root of Japan's deteriorating image.
Instead, it seems to be using foreign pressure and even the trade conflict to expand its sphere of influence vis a vis other ministries.
All this illustrates that Japanese ministries still have a "provider" mentality; they do not serve the people, and particularly not consumers.
They serve the industries and the special-interest groups.
The rest of the world accepted such methods when Japan was developing.
Japanese put up with it because the government provided job stability and growing paychecks.
Japan is not a political country.
It is a bureaucratic country.
The Diet plays a minor role compared with the powerful bureaucratic system.
Most bills are drafted by bureaucrats, not politicians.
The Diet doesn't normally even debate bills because the opposition parties are so often opposed to whatever LDP does that it would be a waste of time.
So most bills are passed without full discussion; particularly difficult bills are passed in the absence of the opposition parties.
A recent example is the 3% consumption tax on all commercial activities.
This makes enormous sense in Japan, where direct tax accounts for more than 70% of revenues and the capture rate of direct tax is so unfair.
If you are a salaried man, Amen! 100% captured.
If you are a retailer, 50%, and a farmer, 30%.
To correct this inequality, most people would have favored an indirect tax, like the consumption tax.
But the bill was passed without debate in the Diet, in the absence of the opposition.
As a result, the Japanese people didn't know what to expect when the new law was introduced on April 1.
They were frustrated by the longer queues at the cashier and the small coins given as change.
All of a sudden, prices were no longer in denominations of 100 or 200.
They were 103 or 206.
Pockets exploded with one-yen coins.
While people were jingling their change, the LDP politicians were caught in scandals.
Money, such as in Recruit's political donations, and women, as in the cases of Prime Minister Sosuke Uno and Secretary General Tokuo Yamashita, seldom have caused political scandals in Japan.
Whereas most men were a bit ambivalent about the sex scandals (though they were furious about Recruit), women were upset about both and surged to the polls.
In the recent Upper House and Tokyo metropolitan congressional elections, in which the Socialist Party won a runaway victory, 60% of all women voted, as opposed to the usual 40%.
It is difficult to analyze how much of their anger was due to Recruit, the sex scandals, or the one-yen coins in their purses, but they obviously were voting to punish the LDP.
Taken by surprise, the Socialist Party is busy changing its doctrines.
It's now OK to deal with the U.S., but not the Soviet Union.
Nuclear power plants are acceptable.
The U.S.-Japan Security Treaty can continue, sort of.
And so on.
Against the rapid cosmetic overhaul of the Socialist Party the LDP has been paralyzed.
Now is the time to reform the government from a provider, developing-country vanguard role to that of a modern, industrialized nation in which consumers have the ultimate choice.
If the LDP, as currently composed, can't make the transformation, then it should split into two parties.
One party could stand for consumer interests, small government, free trade and globalism to put Japan clearly among the most developed and open countries.
The other party could continue on the traditional track of the LDP, representing the manufacturers' preference for larger government, control, regulation and protectionism.
The LDP must make a decision immediately; Lower House elections must take place before June.
In the current mood of the Japanese people, journalists and even some industrialists, giving power to the Socialists might be good for the LDP, cleansing it of past sins.
We must not forget, however, that such a humble political experiment could cause a global tidal wave of shocks in real-estate and financial markets.
At the most there is only nine months before the LDP fuse burns out.
Mr. Ohmae is managing director of McKinsey & Co. in Japan.
Early this century, diamond mining in the magnificent dunes where the Namib Desert meets the Atlantic Ocean was a day at the beach.
Men would crawl in the sand looking for shiny stones.
It was as easy as collecting sea shells at Malibu.
Men are still combing the beach with shovels and hand brushes, searching for that unusual glint.
But only after a fleet of 336 gargantuan earthmoving vehicles belonging to De Beers Consolidated Mines Ltd., the world's diamond kingpins, do their work.
Last year, 43 million tons of desert were moved from one dune to another to recover 934,242 carats, which comes to 46 tons of sand per carat, or one-fifth gram.
Oh yes, the Atlantic was also pushed back 300 yards.
"If there's diamonds out there, we'll get to them," says Les Johns, De Beers's engineering manager.
Here, wedged between shifting dunes and pounding waves at the world's most inhospitable diamond dig, lies the earth's most precious jewel box.
Thanks to centuries of polishing by Mother Nature -- first in the gentle current of the Orange River that carried the stones from South Africa's interior, then in the cold surf of the ocean, and finally in the coarse sands of the desert -- 98% of the diamonds uncovered are of gem quality.
While other mines might yield more carats, a higher percentage of them go to industrial use.
Since this treasure chest is too big to fit in a bank vault, it has been turned into one.
Months after railway worker Zacharias Lewala first picked up a diamond from the sand in 1908, the German colonialists who controlled Namibia proclaimed a wide swath of the desert -- about 200 miles north from the Orange River and 60 miles inland from the Atlantic -- a restricted area, a designation normally reserved for military operations.
When the Germans lost World War I, they lost Namibia to South Africa and the diamonds to Ernest Oppenheimer, patriarch of Anglo American Corp. and De Beers.
Today, no one gets in or out of the restricted area without De Beers's stingy approval.
The mining zone has thus remained one of the most desolate places in Africa.
Ghost towns dot the Namib dunes, proving diamonds aren't forever.
Oranjemund, the mine headquarters, is a lonely corporate oasis of 9,000 residents.
Jackals roam the streets at night, and gemsbok, hardy antelope with long straight horns, wander in from the desert to drink from water sprinklers.
On most days, the desert's heat and the cool of the ocean combine to create a mist like a damp rag.
The wind, stinging with sand, never seems to stop.
Still, miners from all parts of Namibia as well as professional staff from De Beers's head offices in South Africa and London keep coming.
And Oranjemund boasts attractions besides diamonds.
There are six video rental shops, three restaurants, one cinema and 34 sports and recreation clubs for everything from cricket to lawn bowling.
The pride of Oranjemund is the 18-hole golf course -- with the largest sand trap in the world.
Last year, when the rising Orange River threatened to swamp the course, the same engineers who are pushing back the Atlantic rushed to build a wall to hold back the flood.
"Nothing is too good for our golf course," says Tony George, a mining engineer.
Despite fears the mine may be partially nationalized by the new Namibian government following next month's elections freeing the country from South African control, De Beers engineers are working to extend the mine's productive life for another 25 years, from the current estimate of 10.
Huge machines that look as though they came from the Star Wars desert-battle scene lumber among the dunes.
Mechanized vacuum cleaners probe the sand like giant anteaters; a whirring ferris wheellike excavator, with buckets instead of seats, chews through layers of compacted sand; tracks and conveyor belts, shuttling sand to the screening plants, criss-cross the beach.
Then there is the artifical sea wall, 600 yards long and 60 yards thick, jutting into the ocean.
Made of sand, it receives around-the-clock maintainence against the battering waves.
When the mining in front of the wall is complete, it is moved northward.
A companion jetty that helps hold back the sea looks like a rusting junkyard.
Engineers first used concrete blocks to bolster the barrier, but the ocean tossed them aside like driftwood.
Then someone decided to try broken-down earthmoving equipment that, inexplicably, held against the waves.
"The Caterpillar people aren't too happy when they see their equipment used like that," shrugs Mr. George.
"They figure it's not a very good advert."
Despite all these innovations, most of the diamonds are still found in the sand swept away by the men wielding shovels and brushes -- the ignominiously named "bedrock sweepers" who toil in the wake of the excavators.
Laboring in blue and gray overalls, they are supposed to concentrate on cleaning out crevices, and not strain their eyes looking for diamonds.
But should they spy one, the company will pay a bonus equal to one-third its value.
For these workers at the bottom of the mine's pay scale, this is usually enough to overcome the temptation to steal -- a crime that could earn them up to 15 years in jail.
Still, employees do occasionally try to smuggle out a gem or two.
One man wrapped several diamonds in the knot of his tie.
Another poked a hole in the heel of his shoe.
A food caterer stashed stones in the false bottom of a milk pail.
None made it past the body searches and X-rays of mine security.
DISASTER STATES aren't jumping to raise taxes for relief and recovery.
Not yet, anyway.
Just after Hurricane Hugo battered South Carolina, some officials talked of perhaps adding a penny to the state gasoline tax or raising property taxes.
Gov. Campbell responded, "They're mentioning rope when there's been a hanging in the family."
A spokesman says the governor believes he can avoid increases by relying on federal aid and shifting funds in state programs.
Still, Hugo's impact may revive unsuccessful proposals to give local governments authority to levy sales taxes.
A spokesman for North Carolina Gov. Martin says Hugo hasn't prompted proposals for state or local increases.
California, where earthquake damage may top $5 billion, plans a special legislative session.
Property-tax relief is likely.
Legislators are talking about temporary rises in sales or gasoline taxes, although Gov. Deukmejian says they should be a last resort.
Needs aren't clear, and the state constitution makes increasing taxes and spending very difficult.
But some legislators think the time may be ripe to revise the constitution.
THE IRS WILL PAY if its error burdens you with bank charges.
Policy statement P-5-39 sets out terms.
As a result of an erroneous IRS levy on a bank account, a taxpayer may incur administrative and overdraft charges.
If the IRS admits its error and the charges have been paid, it will reimburse a taxpayer who hasn't refused to give timely answers to IRS inquiries or hasn't contributed to continuing or compounding the error.
The IRS recently amended the policy to cover stop-payment charges for checks lost by the IRS.
If the IRS asks for and gets a replacement for a check that it concedes it lost in processing, it will reimburse the taxpayer for the stop-payment charge on the original.
Reimbursement claims must be filed with the IRS district or service-center director within a year after the expense accrues.
If the IRS seeks late-payment interest because of the lost check, you should request interest abatement, publisher Prentice Hall notes.
JUST FIVE ACRES MORE are all we need to feel really at home, they say.
A couple we'll call the Blandings spent nearly $800,000 on a 15-acre plot and main home and have an old $175,000 mortgage exempt from the new limit on mortgage-interest deductions.
They plan to expand the home site by buying five adjoining acres for $200,000, borrowed against a first mortgage on the five acres and also collateralized by the 15 acres.
Their debt will be well under the $1 million limit -- on borrowing to acquire, build, or improve a home -- that qualifies for mortgage-interest deductions.
As you can guess, the Blandings want to deduct home-mortgage interest on the $200,000 loan.
But, IRS private ruling 8940061 notes, no rule or court case bears directly on the issue of adding land to a principal residence.
So the IRS has drawn a rationale from the sale of a home site split in two and sold in different years to the same buyer; a court let the seller in that old case treat this as the sale of one residence.
Thus, the IRS says, the Blandings' $200,000 loan is home-acquisition debt, and interest on it is fully deductible.
EARTHQUAKE VICTIMS facing imminent filing and payment deadlines will get extensions and penalty waivers like those provided for Hugo's victims; IRS Notice 89108 has details.
Notice 89-107 offers added relief for hurricane-hit concerns that must file pension and benefit-plan returns.
REPORTS OF PAYMENTS to independent contractors for services must be filed by businesses, but don't bet that contractors' unreported income will be detected that way.
The General Accounting Office estimates that 50% of IRS audits don't spot companies that fail to file the reports.
UH HUH:
A claim by Peter Testa of New York that a stranger paid him $500 to go into a bank and change $44,400 in small bills into large bills "is unconvincing," the Tax Court found.
It held that Testa is taxable on $44,400 of unreported income.
WHY BE A MIDDLEMAN for charitable gifts? a retiree asks.
A retired electrical engineer we'll call Ben works part-time as a consultant, but he doesn't want to earn so much that Social Security reduces his benefits.
So he has arranged for a university foundation to set up a scholarship fund for undergraduate engineering students.
He plans to tell clients to pay certain fees directly to the foundation instead of to him; he would omit those fees from income reported on his return.
So he asked the IRS if the plan would work.
Well, notes IRS private ruling 8934014, "a fundamental principle" is that income must be taxed to whoever earns it.
The rule goes back at least as far as a 1930 Supreme Court decision, Robert Willens of Shearson Lehman Hutton says.
If you assign your income to another, you still have controlled its disposition and enjoyed the fruits of your labor, even if indirectly.
Ben earns any fees sent directly to charity and is taxable on them, the IRS says; of course, he also may take a charitable deduction for them.
BRIEFS:
Ways and Means veteran Gephardt (D., Mo.) moves to the House Budget Committee; Rep. Cardin (D., Md.) replaces him. . . .
Seattle's license fees for adult peep shows vary from those for other coin-operated amusements without serving a substantial government interest and are unconstitutional, the ninth-circuit appeals court holds for Acorn Investments Inc.
Blue-chip advertisers have plenty of complaints about the magazines they advertise in, ranging from inadequate consumer research to ad "clutter" and a seemingly unchecked proliferation of special interest magazines.
Criticism from such big advertisers as Estee Lauder Inc., Colgate-Palmolive Co. and Seagram Co. put a damper on the euphoria at the American Magazine Conference here.
The conference opened Monday with glowing reports about consumer magazines' growth in circulation and advertising revenue in the past year.
"Magazines are not providing us in-depth information on circulation," said Edgar Bronfman Jr., president and chief operating officer of Seagram, in a panel discussion.
"How do readers feel about the magazine?
How deeply do they read it?
Research doesn't tell us whether people actually do read the magazines they subscribe to."
Reuben Mark, chief executive of Colgate-Palmolive, said advertisers lack detailed demographic and geographic breakdowns of magazines' audiences.
"We need research that convinces us that magazines are a real value in reader's lives, that readers are really involved."
The critics also lambasted the magazine industry for something executives often are very proud of: the growth in magazine titles during the 1980s.
Leonard Lauder, president and chief executive officer of Estee Lauder, said consumer magazines are suffering from what he called "niche-itis,"the increasing number of magazines that target the idosyncratic interests of readers.
"Niche-itis fragments our advertising dollars," said Mr. Lauder.
"We are being over-magazined.
We are constantly faced with deciding which partnerships {with magazines} we can keep."
He added: "There's probably even a magazine for left-handed golfers . . . but the general interest magazine is something we all miss, and it should come back."
Mr. Lauder also attacked what he sees as the wide imitation of Elle, a fashion magazine published by Diamandis Communications Inc., and criticized the practice of stacking ads at the front of magazines.
"Readers don't want to face all those ad pages at the front of a magazine," he said.
Magazine editors did not take the criticisms lying down.
"We spend a fortune on research information," said Steve Burzon, publisher of Meredith Corp.'s Metropolitan Home.
And Tina Brown, editor of Conde Nast Publications Inc.'s Vanity Fair, said advertisers are frequently asked to take advertising positions in the back of her magazine to relieve ad clutter.
"But advertisers wouldn't think of it," she said.
Bernard Leser, president of Conde Nast, added: "Our research shows we sell more of our heavier issues . . . because readers believe they are getting more for what they pay for.
Wall Street securities giant Salomon Inc. posted a big, unexpected earnings gain in the third quarter, buoyed by its securities trading and investment banking activities.
Salomon said net income soared to $177 million, or $1.28 a share, from $65 million, or 38 cents a share, a year earlier.
Revenue more than doubled to $2.62 billion from $1.29 billion.
A Salomon spokesman said its stock, bond and foreign exchange trading, as well as its investment banking operations, were mostly responsible for the earnings jump.
"The earnings were fine and above expectations," said Michael W. Blumstein, an analyst at First Boston Corp.
Nevertheless, Salomon's stock fell $1.125 yesterday to close at $23.25 a share in New York Stock Exchange composite trading.
"I suspect October wasn't as good as the third quarter, and they'll have difficulty matching the third quarter in the fourth quarter," Mr. Blumstein said.
But some analysts say Salomon has turned the corner.
"I upgraded the firm to my buy list because I certainly see signs of improvement," says Lawrence Eckenfelder, an analyst at Prudential-Bache Securities.
"The market has been overly harsh to them."
Analysts say investors remain skittish toward Salomon because of its volatile earnings.
In the first quarter, Salomon had a record loss of $28 million on revenue of $1.54 billion.
But in the second quarter, Salomon posted a record $253 million net on revenue of $2.33 billion.
For the real estate industry, a watchword for the 1990s will be buy, more than build.
That's the word expected to be on the lips of the more than 3,000 developers, pension-fund advisers and real estate financiers slated to attend a four-day conference, beginning here today, sponsored by the Urban Land Institute.
The ULI is a non-profit research and education group based in Washington, D.C., with 14,000 members nationwide.
With the market overbuilt, builders are finding limited opportunities and increased risks.
Developers and money managers are looking for bargains among the thousands of financially troubled properties around the country.
Real estate professionals now often bill themselves as "turnaround experts" and "workout specialists."
Conference attendees are expected to be buzzing about the workings of the recently formed Resolution Trust Corp., a federal agency charged with disposing of an estimated $200 billion of real estate dumped in government hands by insolvent savings and loans.
Developers are also eyeing the real estate portfolios of major corporations.
Some plan to pursue foreign development ventures, mostly in Europe.
And other developers may shift from commercial to residential development in the U.S.
"There aren't as many economically viable alternatives for real estate developers in this country as 10 years ago," says Charles Shaw, a Chicago-based real estate developer. "
So developers are saying they will look into distressed properties.
They'll go into someone else's pasture as long as it's greener than the one they're in now."
Developers are also forming more joint ventures with pension funds and insurance companies that can finance big projects.
The builders are more willing to give up some equity and rely on management and consulting fees to stay afloat in the soft market.
"Developers are teaming up with institutions often acting as project managers," says Smedes York, ULI president and president of York Properties Inc., of Raleigh, N.C.
"They are growing more pragmatic about their role."
Real estate firms are also using their alliances with financial institutions to amass acquisition funds.
"Why should you beat your brains out fighting the environmentalists, the neighborhood groups, dealing with traffic mitigation, sewers and fighting city hall, then try to convince a lender to lend you money in an overbuilt market when you can get pension fund money, buy a portfolio, sell off pieces off it and play your own game?" says Jack Rodman, managing partner of the Los Angeles office of Kenneth Leventhal Inc. a national accounting firm.
But experts say that when it comes to distressed properties, finding diamonds in the rough isn't easy.
The level of interest in the RTC's properties has been greater than expected, and has come from larger companies than initially anticipated, says Stan Ross, Leventhal's co-managing partner.
And to succeed in the turnaround business, he says, developers may have to put in a lot of money and time.
Finding pension funds and other sources willing to invest is a high priority.
Quips David Shulman, director of real estate research for Salomon Brothers Inc.: "A theme of the Urban Land conference will be `take a pension fund manager to lunch.
Sheraton Corp. and Pan American World Airways announced that they and two Soviet partners will construct two "world-class" hotels within a mile of Red Square in Moscow.
U.S. and Soviet officials hailed the joint project as a new indication of the further thaw in U.S.-Soviet relations.
"This is an outstanding example of how the East and the West can work together for their mutual benefit and progress," said Soviet Ambassador Yuri Dubinin, who hosted a signing ceremony for the venture's partners at the Soviet embassy here.
Commerce Secretary Robert Mosbacher, who attended the ceremony, called the undertaking a "historic step" in the evolution of U.S.-Soviet ties.
He added that it likely will have a "mulitiplier effect" in stimulating further trade between the two countries.
The project will be the largest U.S.-backed joint venture to be undertaken in the Soviet Union in recent years.
One of the hotels, to be called the Sheraton Moscow, will have 450 rooms and will cost an estimated $75 million to build.
The six-story hotel will be on Gorky Street and initially will cater mostly to business travelers.
It will have a Russian tavern, an English pub, a discotheque and Japanese and Italian restaurants, according to a Sheraton announcement.
The hotel is scheduled to open in 1992.
The second hotel, to be called the Budapest Hotel, is to be constructed at a site even closer to Red Square.
Details about its size and cost haven't yet been determined.
Sheraton, a subsidiary of ITT Corp., will have a 40% share in the two hotels; Pan American, a subsidiary of Pan Am Corp., will have a 10% share.
The Soviet owners will be Mossoviet, Moscow's city governing body, and Aeroflot, the Soviet national airline.
Although a Finnish group has a minority interest in an already operating Moscow hotel, the Sheraton-Pan Am venture will be the first joint-venture hotels in the Soviet Union to have as much as 50% foreign ownership.
U.S. companies account for less than 8% of the 1,000 or more Soviet joint ventures that have been announced since the Soviets began encouraging such undertakings in 1987.
But some U.S. companies are negotiating projects that could be among the biggest ones to be launched.
Chevron Corp., Amoco Corp., Archer-Daniels-Midland Co., and Eastman Kodak Co. are among the U.S. companies known to be considering such ventures.
Sheraton and Pan Am said they are assured under the Soviet joint-venture law that they can repatriate profits from their hotel venture.
The Sheraton Moscow will charge about $140 to $150 a day for each of its rooms, and it will accept payment only in currencies that can be traded in foreign exchange markets, according to a Sheraton executive.
Thomas Plaskett, Pan Am's chairman, said the U.S. airline's participation is a natural outgrowth of its current arrangements with Aeroflot to jointly operate nonstop New York-Moscow flights.
He said the rising volume of passenger traffic on this route justifies a major investment in new high-standard Moscow hotels.
David Shaffer was named to the new post of executive vice president of the Maxwell Macmillan group of this communications giant.
Mr. Shaffer takes primary responsibility for the electronic and technical-services group.
He had been group vice president of the electronic-publishing group.
Also, Sheldon Aboff, formerly a vice president at Maxwell, was named group vice president with responsibility for various electronic and publishing-group companies.
Soichiro Honda's picture now hangs with Henry Ford's in the U.S. Automotive Hall of Fame, and the game-show "Jeopardy" is soon to be Sony-owned.
But no matter how much Japan gets under our skin, we'll still have mom and apple pie.
On second thought, make that just mom.
A Japanese apple called the Fuji is cropping up in orchards the way Hondas did on U.S. roads.
By 1995 it will be planted more often than any other apple tree, according to a recent survey of six apple-industry sages by Washington State University horticulturist Robert Norton.
Some fruit visionaries say the Fuji could someday tumble the Red Delicious from the top of America's apple heap.
It certainly won't get there on looks.
Compared to the Red Delicious, the exemplar of apple pulchritude, the Fuji is decidedly more dowdy -- generally smaller, less-perfectly shaped, greenish, with tinges of red.
To hear most U.S. growers tell it, we'd still be in Paradise if the serpent had proffered one to Eve.
But how sweet it is.
It has more sugar "than any apple we've ever tested," says Duane Greene, a University of Massachusetts pomologist, or apple scholar.
It has a long shelf life and "doesn't fool the public," says Grady Auvil, an Orondo, Wash., grower who is planting Fujis and spreading the good word about them.
"It doesn't look nice on the outside while getting mealy inside."
Mr. Auvil, razor sharp at 83, has picked and packed a zillion pecks of apples over the past 65 years.
He is known as the father of the U.S.-grown Granny Smith, a radically different apple that the conventional wisdom once said would never catch on.
It did, shaking the apple establishment to its roots.
Now, even more radical changes seem afoot as the grand old maverick of American apples plays the role of Hiroshi Appleseed.
"The Fuji is going to be No. 1 to replace the Red Delicious," he says.
The Delicious hegemony won't end anytime soon.
New apple trees grow slowly, and the Red Delicious is almost as entrenched as mom.
Its roots are patriotic -- with the first trees appearing in 1872 in an orchard near Peru, Iowa, to be exact.
For more than 50 years, it has been the apple of our eye.
A good Delicious can indeed be delicious.
More than twice as many Red Delicious apples are grown as the Golden variety, America's No. 2 apple.
But the apple industry is ripe for change.
"Red Delicious has been overplanted, and its prices have dropped below the cost of production," says Washington State's Mr. Norton.
The scare over Alar, a growth regulator that makes apples redder and crunchier but may be carcinogenic, made consumers shy away from the Delicious, though they were less affected than the McIntosh.
The glut and consequent lower prices, combined with cancer fears, was a very serious blow to growers.
"A lot of growers won't be around in a few years," says Mr. Norton, although they have stopped using Alar.
One may be William Broderick, a Sterling, Mass., grower.
"This is beautiful stuff," he says, looking ruefully at big boxes of just-picked Red Delicious next to his barn.
"But I'm going to lose $50,000 to $60,000 on it.
I'm going to have to get another job this year just to eat."
Besides rotten prices, he has been hit recently by hail, a bark-nibbling horde of mice, fungi and bugs.
Some 500 insects and 150 diseases wiggle, chew and romp through growers' nightmares, including maggots, mites, mildew, thrips, black rot and the flat-headed borer.
Even if a grower beats them back, his $2,000 rented bees might buzz off to the neighbors' orchards instead of pollinating his, Mr. Broderick says.
Though growers can't always keep the worm from the apple, they can protect themselves against the price vagaries of any one variety by diversifying -- into the recently imported Gala, a sweet New Zealand native; the Esopus Spitzenburg, reportedly Thomas Jefferson's favorite apple; disease-resistant kinds like the Liberty.
"I've ripped out a lot of Delicious" and grafted the trees with many different shoots, says Steve Wood, a West Lebanon, N.H., grower, tramping through his 100-acre Poverty Lane Orchard on a crisp autumn day recently.
"I've got 70 kinds of apples.
Here's a Waltana," he exclaims, picking one off a tree.
He bites it, scowls and throws it down. "
It's a real dog."
Supermarkets are getting into the variety act, too.
They still buy apples mainly for big, red good looks -- that's why so many taste like woodchucks' punching bags.
But freshness counts more than it once did, and stores are expanding shelf space for unconventional, but tastier, and often pricier, apples.
"Rather than sell 39-cents-a-pound Delicious, maybe we can sell 79-cents-a-pound Fujis," says Chuck Tryon, perishables director for Super Valu Inc., a Minneapolis supermarket chain and food distributor.
The Fuji is a product of meticulous Japanese pomological engineering, which fostered it 50 years ago at a government research orchard.
Japanese researchers have bred dozens of strains of Fujis to hone its color, taste and shelf life.
Now the best of them age as gracefully as Grannies, the industry's gold standard for storability.
In the cornucopia of go-go apples, the Fuji's track record stands out: During the past 15 years, it has gone from almost zilch to some 50% of Japan's market.
"The Japanese apple market is very keyed to high quality," says David Lane, a scientist at a Canadian horticulture research center in Summerland, British Columbia, and so apples are more of a delicacy there than a big food commodity.
The U.S. Department of Agriculture estimates that this year Americans will eat about 40% more fresh apples per capita than the Japanese.
The Fuji is still small potatoes in the U.S., sold mainly in fruit boutiques.
But in California, says Craig Ito, a Fuji-apple grower, "There's a Fuji apple cult.
Once somebody eats one, they get hooked."
Mr. Auvil, the Washington grower, says that he could sell Fujis to Taiwan buyers at $40 a box if he had them.
(Taiwan already is a big importer of Fujis from other places, he adds.)
But his first crop won't be picked till next year.
"I expect to see the demand exceed supply for Fujis for the next 10 to 15 years," he adds.
Washington Red Delicious, by the way, are wholesaling for less than $10 a box these days.
Mr. Auvil sees Fujis, in part, as striking a blow against the perversion of U.S. apples by supermarkets.
"When the chain stores took over, there was no longer a connection between grower and consumer.
A guy is sitting up in an office deciding what you're going to eat."
After all, until the 1950s even the Red Delicious was a firm, delectable morsel.
Then, as growers bred them more for looks, and to satisfy supermarket chains' demands of long-term storage, the Red went into decline.
Now, those red applelike things stores sell in summer are fruitbowl lovely, but usually not good eating.
They do deserve respect, however -- they are almost a year old, probably equal to about 106 in human years.
The Fuji, to be sure, has blemishes too.
It ripens later than most apples, and growing it in U.S. areas with chilly autumns may be tricky.
Moreover, the frumpy Fuji must compete with an increasingly dolledup Delicious.
Mr. Broderick, the Massachusetts grower, says the "big boss" at a supermarket chain even rejected his Red Delicious recently because they weren't waxed and brushed for extra shine.
And he hadn't used hormones, which many growers employ to elongate their Delicious apples for greater eye appeal.
Still, Mr. Auvil points out, Grannies became popular without big, red looks, so why not Fujis?
He sees a shift in American values -- at least regarding apples -- toward more emphasis on substance and less on glitz.
"Taste has finally come to the fore," he says.
Or, for that matter, the core.
Brush Wellman Inc. said its board increased the number of shares of common stock to be purchased under a previously authorized program to 3.9 million from 2.9 million.
The maker of engineered materials has acquired more than 2.7 million shares under the program.
The state attorney general's office filed suit against five New York brokerage firms, charging them with responsibility for much of a $200 million loss incurred by the state treasurer's office in 1987.
The suit sets the firms' liability at more than $185 million.
The firms are Morgan Stanley & Co., Salomon Brothers Inc., County Natwest Government Securities Inc., Greenwich Capital Markets Inc. and Goldman, Sachs & Co.
The firms have all said that West Virginia's suit is without merit.
On Friday, the firms filed a suit against West Virginia in New York state court asking for a declaratory judgment absolving them of liability.
That suit is pending.
The suits relate to a $200 million loss, disclosed in December, that was suffered by West Virginia's consolidated investment pool.
The pool invested idle cash for many state agencies and local governments.
In its suit, the attorney general's office alleges that brokers encouraged members of the treasurer's office to engage in high-volume, high-risk transactions that benefited the brokers.
Few people are aware that the federal government lends almost as much money as it borrows.
From 1980 to 1988, while federal budget deficits totaled $1.41 trillion, the government issued $394 billion of new direct loans and an additional $756 billion of new primary loan guarantees.
These figures omit secondary guarantees, deposit insurance, and the activities of Government-Sponsored Enterprises (a huge concern in its own right, as detailed on this page May 3).
Federal credit programs date back to the New Deal, and were meant to break even financially.
Since the 1950s, federal lending has experienced extraordinary growth in credit volume, subsidy rates, and policy applications, spurred on by the growth of government in general and budget gimmicks and deceptive management in particular.
As we will see, many of these obligations don't show up as part of the federal deficit.
But recent events indicate that federal credit is out of control.
Student loan defaults remain high at about 12%, and the program has been rocked by allegations of fraud and mismanagement.
Farmers Home Administration (FmHA) loans have turned into de facto giveaway programs; losses over the next three years are expected to exceed $20 billion.
Defaults on Veterans Affairs loan guarantees have quadrupled in the past eight years.
Last month, the General Accounting Office reported that defaults in Federal Housing Administration guarantees were five times as high as previously estimated, and that FHA's equity fell to minus $2.9 billion.
GAO's findings are particularly troubling because the FHA has about $300 billion in obligations outstanding and had previously been considered one of the most financially secure credit programs.
Scores of other credit programs, subsidizing agriculture, small business, exporters, defense, energy, transportation and others, are less visible but in no better shape.
If the programs continue their present path, the potential government losses are staggering: The federal government holds $222 billion in direct loans outstanding and backs an additional $550 billion in primary guarantees.
(Secondary guarantees of pools of FHA- and VA-backed loans by the agency known as Ginnie Mae currently exceed $330 billion.)
Although external events have contributed to the morass, the principal causes of the current crisis are internal and generic to all programs.
To reduce the risks while still retaining the legitimate benefits these programs can provide, credit policy must: 1. Use credit to improve the operation of capital markets, not to provide subsidies.
There is a fundamental conflict between providing a subsidy and maintaining the integrity of a credit program.
If the program is meant to provide a subsidy, collecting the debt defeats the original goal.
Thus, subsidized loans tend to turn into giveaway programs, with increasing subsidy and default rates over time.
To avoid this problem, government should issue credit only if it intends to use every legal method to collect.
In contrast, credit programs can be appropriate tools to improve the operation of capital markets.
For example, legal restrictions on interstate banking once inhibited the supply of credit to the agricultural sector.
Farm lending was enacted to correct this problem by providing a reliable flow of lendable funds.
However, this in no way justifies the huge government subsidies and losses on such loans.
Credit policy should separate these two competing objectives and eliminate aspects that provide the subsidy.
For example, student loans currently attempt to subsidize college attendance and mitigate problems created by the fact that students' future earnings are not accepted as collateral.
The program provides highly subsidized loans to any student whose family earns less than a particular amount.
High default rates, a low interest rate, and government coverage of all interest costs while the student is in school make program costs extremely high.
Families that do not need the loan can make money simply by putting the loan in the bank and paying it back when the student graduates.
In contrast, a student loan program that was meant solely to correct capital-market imperfections would allow loans for any student, regardless of family income, at market or near-market rates.
While the student was in school, interest costs would either be paid by the student or added to the loan balance.
This program, combined with cash grants to needy students, would reduce program costs and much more effectively target the intended beneficiaries.
2. Provide better incentives.
Given the structure of most credit programs, it is surprising that default rates are not even higher.
Guarantee rates are typically 100%, giving lenders little reason to screen customers carefully.
Reducing those rates moderately (say, to 75%) would still provide substantial assistance to borrowers.
But it would also encourage lenders to choose more creditworthy customers, and go a long way toward reducing defaults.
For example, the Small Business Administration has had reasonable success in reducing both guarantee rates and default rates in its Preferred Lenders' Program.
Borrowers' incentives are equally skewed.
Since the government has a dismal record of collecting bad debts, the costs to the borrower of defaulting are usually low.
In addition, it is often possible to obtain a new government loan even if existing debts are not paid off.
Simple policy prescriptions in this case would be to improve debt collection (taking the gloves off contracted collection agencies) and to deny new credit to defaulters.
These provisions would be difficult to enforce for a program intended to provide a subsidy, but would be reasonable and effective devices for programs that attempt to offset market imperfections.
3. Record the true costs of credit programs in the federal budget.
Since the budget measures cash flow, a new $1 direct loan is treated as a $1 expenditure, even though at least part of the loan will be paid back.
Loan guarantees don't appear at all until the borrower defaults, so new guarantees do not raise the deficit, even though they create future liabilities for the government.
By converting an expenditure or loan to a guarantee, the government can ensure the same flow of resources and reduce the current deficit.
Predictably, guarantees outstanding have risen by $130 billion since 1985, while direct loans outstanding have fallen by $30 billion.
The true budgetary cost of a credit subsidy is the discounted value of the net costs to government.
This figure could be estimated using techniques employed by private lenders to forecast losses, or determined by selling loans to private owners (without federal guarantees).
Neither technique is perfect, but both are better than the current system, which misstates the costs of new credit programs by amounts that vary substantially and average about $20 billion annually, according to the Congressional Budget Office.
A budget that reflected the real costs of lending would eliminate incentives to convert spending or lending programs to guarantees and would let taxpayers know what Congress is committing them to.
4. Impose standard accounting and administrative practices.
Creative accounting is a hallmark of federal credit.
Many agencies roll over their debt, paying off delinquent loans by issuing new loans, or converting defaulted loan guarantees into direct loans.
In any case, they avoid having to write off the loans.
Some agencies simply keep bad loans on the books; as late as 1987, the Export-Import Bank held in its portfolio at face value loans made to Cuba in the 1950s.
More seriously, FmHA has carried several billion dollars of defaulted loans at face value.
Until GAO's recent audit, FHA books had not been subject to a complete external audit in 15 years.
The administration of federal credit should closely parallel private lending practices, including the development of a loan loss reserve and regular outside audits.
Establishing these practices would permit earlier identification of emerging financial crises, provide better information for loan sales and budgeting decisions, and reduce fraud.
Government lending was not intended to be a way to obfuscate spending figures, hide fraudulent activity, or provide large subsidies.
The reforms described above would provide a more limited, but clearer, safer and ultimately more useful role for government as a lender.
Without such reforms, credit programs will continue to be a large-scale, high-risk proposition for taxpayers.
Mr. Gale is an assistant professor of economics at UCLA.
Malcolm S. Todt was named vice president and senior officer in charge of equipment leasing to municipalities, a new effort of this bond insurer.
Mr. Todt had been vice president and treasurer of Insilco Corp.
President Bush is considering casting a line-item veto as a test to determine whether the courts will rule that he has such authority.
Mr. Bush has long campaigned for passage of a bill or a constitutional amendment that would explicitly give him a line-item veto, which would enable him to kill individual items in a big spending bill without having to kill the entire bill.
He has argued that such presidential power is necessary to rein in congressional spending.
But some analysts, particularly conservative legal scholars, have urged Mr. Bush not to wait for explicit authorization but simply to assert that the Constitution already implicitly gives him the power to exercise a line-item veto.
Such an assertion most likely would bring about a court challenge from Congress that would clarify whether a president already has such power.
White House spokesman Marlin Fitzwater, confirming comments made this week by Vice President Dan Quayle, said Mr. Bush is "interested" in finding a suitable test case.
But he also said that exercising a test line-item veto isn't a "top initiative" on the president's agenda because he faces more-pressing budget issues at the moment.
Harris Ravine, executive vice president of customer satisfaction, was named executive vice president, finance and administration of this maker of data storage equipment.
Mr. Ravine succeeds William R. Mansfield Jr., who will remain with the company until the end of the year to support the transition and to complete important projects.
The Bush administration said it is submitting a "comprehensive" proposal for overhauling agricultural trade that could help break an impasse in the current round of multilateral trade negotiations.
The proposal reiterates the U.S. desire to scrap or reduce a host of trade-distorting subsidies on farm products.
But it would allow considerable flexibility in determining how and when these goals would be achieved.
The U.S. plan also would ease the transition to freer agriculture trade by allowing some countries to convert non-tariff barriers into tariffs that, together with existing tariffs, then would be phased out over 10 years.
Trade Representative Carla Hills, who along with Agriculture Secretary Clayton Yeutter unveiled the proposal, said she is confident it will gain considerable support from the U.S.'s trading partners.
Mr. Yeutter, seeking to allay European objections to an earlier U.S. plan that called for eliminating all farm-trade barriers by the year 2000, said the new U.S. proposal wouldn't "put farmers out of business" but would only encourage them to "grow what the markets desire instead of what the government wants."
The U.S. is submitting the proposal today in Geneva, hoping that the initiative will spur members of the General Agreement on Tariffs and Trade to reach agreement on new trade rules before their current negotiating round concludes in December 1990.
Another U.S. proposal filed Monday urges more "fair play" in services trade, including predictable and clear rules and equality in the treatment of foreign and domestic service companies.
Unlike the earlier U.S. farm-trade proposal which struck European countries as too extreme, the latest plan would provide some room for maneuver.
For instance, the new U.S. package makes clear there would be a transition period during which GATT members could use a combination of tariffs and quotas to cushion their farmers from foreign competition.
It also says countries could temporarily raise tariffs on certain products if they experience an unusually heavy volume of imports.
Instead of proposing a complete elimination of farm subsidies, as the earlier U.S. proposal did, the new package calls for the elimination of only the most tradedistorting ones.
Less objectionable ones would be subject only to some restraints, and others with a "relatively minor trade impact" would be allowed to continue under certain conditions.
The new U.S. plan also would establish procedures to prevent countries from using health and sanitation rules to impede trade arbitrarily.
The goal would be to resolve disputes such as one prompted by the European Community's current attempt to bar imports of beef from hormone-treated U.S. cattle.
The U.S. contends that the rules aren't justified on health grounds.
To encourage more competition among exporting countries, the U.S. is proposing that export subsidies, including tax incentives for exporters, be phased out in five years.
Procter & Gamble Co., helped by a gain from a lawsuit settlement and continued growth overseas, posted a 38% rise in fiscal first-quarter net income.
Net for the quarter ended Sept. 30 climbed to $551 million, or $1.66 a share, from $400 million, or $1.18 a share, a year earlier.
Per-share figures have been adjusted for a 2-for-1 stock split effective Oct. 20.
Sales increased 6% to $5.58 billion from $5.27 billion.
Earnings at the consumer-products giant were boosted by a gain of $125 million, or about 25 cents a share, stemming from last month's settlement of litigation with three of P&G's competitors over patents on P&G's Duncan Hines cookies.
Excluding the gain, P&G's earnings were close to analysts' predictions of about $1.40 a share for the quarter.
Wall Street had expected a modest rise in the company's domestic sales and earnings, and more substantial increases in overseas results.
One factor helping sales and earnings was a 3% price rise for most P&G products, except coffee, analysts said.
Unit volume, or amount of products shipped, rose about 11% in the international segment, with P&G continuing to win market share in Japan's diaper and detergent markets.
Jay Freedman, analyst with Kidder, Peabody & Co., said P&G's Always sanitary napkin, sold under the Whisper name in Japan, has firmly established itself as a leading brand.
He figures P&G will expand its personal-care product line in Japan to "continue that momentum."
P&G's U.S. shipments were up just 1%, partly because the company decided to shift more promotions and sales for health and beauty products to the fiscal second quarter.
Hugh Zurkuhlen, analyst with Salomon Bros., predicts the shift will mean P&G's sales growth in the second quarter will be "in the double digits."
Also slowing growth in the U.S. were lackluster results for P&G's cooking oils, which had a strong year-earlier first quarter.
Last year's drought in the Midwest prompted retailers to stock up on oils ahead of anticipated price increases, boosting sales for Crisco and Puritan oils, analysts said.
For fiscal 1990, analysts expect P&G's sales to continue to grow, with earnings climbing between 15% and 20%.
Lynne Hyman, vice president of equity research for First Boston Corp., expects P&G to post net of about $4.20 a share, on a post-split basis.
"But I'm recognizing there's a good chance they'll do a bit better than that," she says.
In fiscal 1989, P&G earned $3.56 a share, adjusted for the stock split.
One big factor affecting the fiscal second half will be the new stewardship of Edwin L. Artzt, who becomes chairman and chief executive officer in January.
Because of his remarkable success turning around P&G's international operations, analysts have high hopes for his tenure.
"If he does to the domestic operations what he did internationally," says Mr. Zurkuhlen, "this company will earn $6 or $7 a share in a few years.
The Voting Rights Act of 1965 was enacted to keep the promise of the Fifteenth Amendment and enable Southern blacks to go to the polls, unhindered by literacy tests and other exclusionary devices.
Twenty-five years later, the Voting Rights Act has been transformed by the courts and the Justice Department into a program of racial gerrymandering designed to increase the number of blacks and other minorities -- Hispanics, Asians and native Americans -- holding elective office.
In the 1980s, the Justice Department and lower federal courts that enforce the Voting Rights Act have required state legislatures and municipal governments to create the maximum number of "safe" minority election districts -- districts where minorities form between 65% and 80% of the voting population.
The program has even been called upon to create "safe" white electoral districts in municipalities where whites are the minority.
Although Section 2 of the act expressly disclaims requiring that minorities win a proportional share of elective offices, few municipal and state government plans achieve preclearance by the Justice Department or survive the scrutiny of the lower federal courts unless they carve out as many solidly minority districts as possible.
The new goal of the Voting Rights Act -- more minorities in political office -- is laudable.
For the political process to work, all citizens, regardless of race, must feel represented.
One essential indicator that they are is that members of minority groups get elected to public office with reasonable frequency.
As is, blacks constitute 12% of the population, but fewer than 2% of elected leaders.
But racial gerrymandering is not the best way to accomplish that essential goal.
It is a quick fix for a complex problem.
Far from promoting a commonality of interests among black, white, Hispanic and other minority voters, drawing the district lines according to race suggests that race is the voter's and the candidate's most important trait.
Such a policy implies that only a black politician can speak for a black person, and that only a white politician can govern on behalf of a white one.
Examples of the divisive effects of racial gerrymandering can be seen in two cities -- New York and Birmingham, Ala.
When they reapportion their districts after the 1990 census, every other municipality and state in the country will face this issue.
New York City:
Racial gerrymandering has been a familiar policy in New York City since 1970, when Congress first amended the Voting Rights Act to expand its reach beyond the Southern states.
In 1972, the Justice Department required that the electoral map in the borough of Brooklyn be redrawn to concentrate black and Hispanic votes, despite protests that the new electoral boundaries would split a neighborhood of Hasidic Jews into two different districts.
This year, a commission appointed by the mayor to revise New York's system of government completed a new charter, expanding the City Council to 51 from 35 members.
Sometime in 1991, as soon as the 1990 census becomes available, a redistricting panel will redraw the City Council district lines.
The Charter Revision Commission has made it clear that in response to the expectations of the Justice Department and the commission's own commitment to enhancing minority political leadership, the new district lines will be drawn to maximize the number of solidly minority districts.
Blacks and Hispanics currently make up 38% of the city's population and hold only 25% of the seats on the council.
Several of the city's black leaders, including Democratic mayoral nominee David Dinkins, have spoken out for racial gerrymandering to accord blacks and Hispanics "the fullest opportunity for representation."
In this connection, it is important to note that several members of New York's sitting City Council represent heterogeneous districts that bring together sizable black, Hispanic, and non-Hispanic white populations -- Carolyn Maloney's 8th district in northern Manhattan and the south Bronx and Susan Alter's 25th district in Brooklyn, for example.
To win their seats on the council, these political leaders have had to listen to all the voices in their district and devise public policies that would benefit all.
Often they have found that the relevant issue is not race, but rather housing, crime prevention or education.
Birmingham, Ala.:
The unusual situation in Birmingham vividly illustrates the divisive consequences of carving out safe districts for racial minorities.
In Birmingham, which is 57% black, whites are the minority.
Insisting that they are protected by the Voting Rights Act, a group of whites brought a federal suit in 1987 to demand that the city abandon at-large voting for the nine member City Council and create nine electoral districts, including four safe white districts.
The white group argued that whites were not fully and fairly represented, because in city-wide elections only black candidates or white candidates who catered to "black interests" could win.
No federal court has ruled that the Voting Rights Act protects a white minority, but in June the Justice Department approved a districting plan for Birmingham that carves out three white-majority districts and six black-majority districts.
Richard Arrington, Birmingham's black mayor, lamented the consequences.
"In the past, people who had to run for office had to moderate their views because they couldn't afford to offend blacks or whites," he said.
"Now you go to districts, you're likely to get candidates whose views are more extreme, white and black, on racial issues."
Two hundred years ago, critics of the new United States Constitution warned that the electoral districts for Congress were too large and encompassed too many different economic interests.
A small farmer and a seaport merchant could not be represented by the same spokesman, they said.
But James Madison refuted that argument in one of the most celebrated political treatises ever written, No. 10 of the Federalist Papers.
Madison explained that a representative's duty was to speak not for the narrow interests of one group but instead for the common good.
Large, heterogeneous election districts would encourage good government, said Madison, because a representative would be compelled to serve the interests of all his constituents and be servile to none.
Madison's noble and unifying vision of the representative still can guide us.
As long as we believe that all Americans, of every race and ethnic background, have common interests and can live together cooperatively, our political map should reflect our belief.
Racial gerrymandering -- creating separate black and white districts -- says that we have discarded that belief in our ability to live together and govern ourselves as one people.
Ms. McCaughey is a constitutional scholar at the Center for the Study of the Presidency in New York.
The Justice Department has distributed these new guidelines for U.S. Attorneys prosecuting RICO cases.
A related editorial appears today.
Under {RICO}, the government may seek a temporary restraining order (TRO) upon the filing of a RICO indictment, in order to preserve all forfeitable assets until the trial is completed and judgment entered.
Such orders can have a wide-ranging impact on third parties who do business with the defendants, including clients, vendors, banks, investors, creditors, dependents, and others.
Some highly publicized cases involving RICO TROs have been the subject of considerable criticism in the press, because of a perception that pre-trial freezing of assets is tantamount to a seizure of property without due process.
In order to ensure that the rights of all interested parties are protected, the Criminal Division has instituted the following requirements to control the use of TROs in RICO prosecutions.
(It should be noted that these requirements are in addition to any other existing requirements, such as review by the Asset Forfeiture Office.):
1. As part of the approval process for RICO prosecutions, the prosecutor must submit any proposed forfeiture TRO for review by the Organized Crime and Racketeering Section.
The prosecutor must show that less-intrusive remedies (such as bonds) are not likely to preserve the assets for forfeiture in the event of a conviction.
2. In seeking approval of a TRO, the prosecutor must articulate any anticipated impact that forfeiture and the TRO would have on innocent third parties, balanced against the government's need to preserve the assets.
3. In deciding whether forfeiture (and, hence, a TRO) is appropriate, the Section will consider the nature and severity of the offense; the government's policy is not to seek the fullest forfeiture permissible under the law where that forfeiture would be disproportionate to the defendant's crime.
4. When a RICO TRO is being sought, the prosecutor is required, at the earliest appropriate time, to state publicly that the government's request for a TRO, and eventual forfeiture, is made in full recognition of the rights of third parties -- that is, in requesting the TRO, the government will not seek to disrupt the normal, legitimate business activities of the defendant; will not seek through use of the relation-back doctrine to take from third parties assets legitimately transferred to them; will not seek to vitiate legitimate business transactions occurring between the defendant and third parties; and will, in all other respects, assist the court in ensuring that the rights of third parties are protected, through proceeding under {RICO} and otherwise.
The Division expects that the prosecutor will announce these principles either at the time the indictment is returned or, at the latest, at the first proceeding before the court concerning the TRO.
Sales of North American-built cars and trucks plunged 20.5% in mid-October from a year earlier, as domestic manufacturers paid the price for heavy incentives earlier this year.
"People are waiting for {new} factory giveaways," said Ben Kaye, sales manager of Bob Brest Auto World in Lynn, Mass., whose sales are slow.
This trend appears to be especially true at General Motors Corp., which used both dealer and consumer incentives to ignite sales in August and September.
Since then, deliveries have slumped.
GM's car sales dropped 24.8% in mid-October to 69,980, while truck sales fell 26% to 37,860.
GM also had dismal results in the first 10 days of the month, while other auto makers reported mixed results.
All of the Big Three suffered in the just-ended period, however, with sales of all domestically made cars, including those built at Japanese-managed plants, falling 19% to 158,863 from a year earlier.
The seasonal adjusted annual selling rate was six million vehicles, a small improvement from the 5.8 million rate of early October, but a big drop from the 7.1 million rate a year ago.
Sales of domestically made trucks also continued to be sluggish in mid-October, dropping 22.8% to 94,543 from a year ago.
The Big Three auto makers already have slashed fourth-quarter production plans 10.4% below year-ago levels, but that may not be enough to prevent inventories from ballooning if sales don't improve.
Industry analyst John H. Qualls, a vice president with Hill & Knowlton in St. Louis, forecasts that domestic auto makers will have a 93-day supply of cars at the end of the year, even if car sales improve to a 6.5 million vehicle rate for the quarter.
Ford Motor Co. reported a 21.2% drop in sales of domestic-made cars to 46,995 and a 24.2% drop in domestic trucks to 31,143.
The sales are being dragged down by a glut of 1989 vehicles, said Joel Pitcoff, a Ford analyst.
The earlier use of incentives depleted the market of "scavengers" for bargain-basement 1989 cars, he said.
Town & Country Ford in Charlotte, N.C., still needs to move about 850 1989 cars and trucks.
Business had been fairly strong until Hurricane Hugo hit the area, but has been down since.
Chrysler Corp. also hit the rocks in mid-October.
The No. 3 U.S. auto maker had a 23.7% plunge in car sales to 22,336 and a 17.5% drop in truck sales to 22,925, which include its minivans and Jeeps.
Honda Motor Co., which continues to have short supplies of domestically made Accords, saw its sales of North American-built cars fall 14.1% to 8,355.
But sales of domestic cars and trucks at Nissan Motor Corp. rose 26.1% to 5,651.
A Nissan spokesman attributed the increase to the use of incentives this year and not a year ago and to higher fleet sales.
Toyota Motor Corp., which opened a plant in Georgetown, Ky., last year, saw sales triple to 6,256 vehicles.
a-Totals include only vehicle sales reported in the period.
c-Domestic car
d-Percent change greater than 999%.
x-There were 9 selling days in the most recent period and 9 a year earlier.
Percentage differences based on daily sales rate rather than sales volume.
Short interest in Nasdaq over-the-counter stocks rose 6% as of mid-October, its biggest jump since 6.3% last April.
The most recent OTC short interest statistics were compiled Oct. 13, the day the Nasdaq composite index slid 3% and the New York Stock Exchange tumbled 7%.
The coincidence might lead to the conclusion that short-sellers bet heavily on that day that OTC stocks would decline further.
As it happens, the Nasdaq composite did continue to fall for two days after the initial plunge.
However, the short interest figures reported by brokerage and securities clearing firms to the National Association of Securities Dealers include only those trades completed, or settled, by Oct. 13, rather than trades that occurred on that day, according to Gene Finn, chief economist for the NASD.
Generally, it takes five business days to transfer stock and to take the other steps necessary to settle a trade.
The total short interest in Nasdaq stocks as of mid-October was 237.1 million shares, up from 223.7 million in September but well below the record level of 279 million shares established in July 1987.
The sharp rise in OTC short interest compares with the 4.2% decline in short interest on the New York Stock Exchange and the 3% rise on the American Stock Exchange during the September-October period.
Generally, a short seller expects a fall in a stock's price and aims to profit by selling borrowed shares that are to be replaced later; the short seller hopes the replacement shares bought later will cost less than those that were sold.
Short interest, which represents the number of shares borrowed and sold, but not yet replaced, can be a bad-expectations barometer for many stocks.
Among 2,412 of the largest OTC issues, short interest rose to 196.8 million shares, from 185.7 million in 2,379 stocks in September.
Big stocks with large short interest gains as of Oct. 13 included First Executive, Intel, Campeau and LIN Broadcasting.
Short interest in First Executive, an insurance issue, rose 55% to 3.8 million.
Intel's short interest jumped 42%, while Campeau's increased 62%.
Intel makes semiconductors and Campeau operates department-store chains and is strained for cash.
Meritor Savings again had the dubious honor of being the OTC stock with the biggest short interest position on Nasdaq.
Meritor has headed the list since May.
First Executive and troubled Valley National Corp. of Arizona were next in line.
Short selling isn't necessarily bad for the overall market.
Shorted shares must eventually be replaced through buying.
In addition, changes in short interest in some stocks may be caused by arbitrage.
For example, an investor may seek to profit during some takeover situations by buying stock in one company involved and shorting the stock of the other.
Two big stocks involved in takeover activity saw their short interest surge.
Short interest in the American depositary receipts of Jaguar, the target of both Ford Motor and General Motors, more than doubled.
Nasdaq stocks that showed a drop in short interest included Adobe Systems, Class A shares of Tele-Communications and takeover targets Lyphomed and Jerrico.
The NASD, which operates the Nasdaq computer system on which 5,200 OTC issues trade, compiles short interest data in two categories: the approximately two-thirds, and generally biggest, Nasdaq stocks that trade on the National Market System; and the one-third, and generally smaller, Nasdaq stocks that aren't a part of the system.
Short interest in 1,327 non-NMS securities totaled 40.3 million shares, compared with almost 38 million shares in 1,310 issues in September.
The October short interest represents 1.04 days of average daily trading volume in the smaller stocks in the system for the reporting period, compared with 0.94 day a month ago.
Among bigger OTC stocks, the figures represent 2.05 days of average daily volume, compared with 2.14 days in September.
The adjacent tables show the issues in which a short interest position of at least 50,000 shares existed as of Oct. 13 or in which there was a short position change of at least 25,000 shares since Sept. 15 (see accompanying tables -- WSJ Oct. 25, 1989).
From the Sept. 30-Oct. 4 issue of The Economist:
What defeated General Aoun was not only the weight of the Syrian army.
The weight of Lebanon's history was also against him; and it is a history Israel is in danger of repeating.
Like Lebanon, and however unfairly, Israel is regarded by the Arab world as a colonial aberration.
Its best hope of acceptance by its neighbours lies in reaching a settlement with the Palestinians.
Like Lebanon, Israel is being remade by demography.
In Greater Israel more than half the children under six are Muslims.
Within 25 years Jews will probably be the minority.
Yet Israel will neither share power with all these Arabs nor, says its present prime minister, redraw its borders closer to its pre-1967 Jewish heartland.
By not choosing one of these options, Israelis will condemn themselves, as the Maronites did, to perpetual war with the Muslims in their midst, and so to the internal erosion of their state.
Unlike the Maronites, Israel's Jews will not let themselves become the weakest force in a system of private armies; Jerusalem will become Belfast before it becomes Beirut.
But that is not much of a consolation to draw from the failure of General Aoun.
The Nasdaq over-the-counter market didn't fully recover from a selling stampede, and closed down 1.2%.
The effects on the market of the mostly computer-driven sell-off among exchange-listed stocks irked many market makers, who watched the Nasdaq Composite Index tumble in sympathy with the Dow Jones Industrial Average, and then saw it get left behind in the subsequent rally.
After plummeting 1.8% at one point during the day, the composite rebounded a little, but finished down 5.52, at 461.70.
In contrast, the industrial average recovered almost completely from its skid and closed down 0.1%.
The New York Stock Exchange Composite was 0.4% lower for the day.
As usual, the over-the-counter market's biggest technology stocks were hardest hit.
Microsoft, battered by profit taking in recent sessions, sank as much as 4; but it finished at 80 7/8, down 2 1/4 on volume of one million shares.
MCI Communications, the most active issue, finished down 5/8 to 42 1/8.
MCI traded as low as 41 3/8 during the session.
Other active stocks included Jaguar, whose American depositary receipts added 1/8 to 11 1/4.
Apple Computer improved 7/8 to 47 5/8; Intel slipped 1/4 to 33 1/4, and Valley National Corp. was up 1/8 to 15 1/8.
"The market started with several strikes against it," said Peter DaPuzzo, head of retail equity trading at Shearson Lehman Hutton, referring to news that the labor-management buy-out of UAL Corp. continued to unravel, and reports that the junk-bond market is disintegrating.
But the computer-guided selling in response to those developments dealt a serious blow to the over-the-counter market, Mr. DaPuzzo said.
Even though the over-the-counter market usually doesn't fall by as much as listed stocks during program-selling blitzes, he said, "when the market does recover, the damage is done and it leaves Nasdaq down more than the Big Board."
Mr. DaPuzzo also complained that the sharp swings in stock prices lately is scaring away retail and foreign investors.
While Shearson doesn't do computer-guided program trading for its own account, the firm does execute orders for clients involved in the buying and selling of shares tied to movements in certain stock indexes, Mr. DaPuzzo acknowledged.
The volatility inherent in program trading troubled other traders, too.
They don't like the risks they are forced to assume when prices swing so drastically.
Market makers are supposed to keep supplies of stocks on hand to maintain orderly trading when imbalances occur.
That means that on days when prices are tumbling and sellers abound they must be willing to buy shares from sellers when no one else will.
In such an environment, a market maker can absorb huge losses.
But the recent volatility in stock prices caused by the program trading has made some market makers less willing to soak up the stocks that are for sale.
The market makers say they aren't comfortable carrying big positions in stocks because they realize prices can tumble quickly.
The situation makes it harder to buy and sell shares quickly, exacerbating the rise and fall in stock prices during program-dominated trading.
Groused Robert Antolini, head of over-the-counter trading at Donaldson, Lufkin & Jenrette: "It's making it tough for traders to make money."
He said that when sell programs kick in, many traders believe that "there's no sense in sticking your nose out because you're an instant loser."
Kinder-Care Learning Centers added 1/4 to 4 7/8 on 461,200 shares.
Lodestar Group said it will make a $6-a-share offer for the remaining Kinder-Care Learning Center common stock if it acquires a majority of the company's shares in a pending rights offering by Kinder-Care Learning Center's parent, Kinder-Care Inc.
Shares of KinderCare Inc. closed at 3 1/2, also up 1/4, on volume of 700,000.
Ohio Casualty dropped 2 1/8 to 49 1/2.
The company posted third-quarter earnings of 95 cents a share, down from $1.26 a year earlier.
The company estimated that losses from Hurricane Hugo reduced net income by 32 cents a share in the most recent quarter.
The company said losses from the Oct. 17 earthquake in California haven't yet been determined, but that it provides earthquake coverage to about 1,400 properties in the stricken area.
Any quake-related losses will be reported in the fourth quarter, the company said.
North Atlantic Industries jumped 1 to 5 3/4.
The electronics-instruments maker is to be acquired by Asset Management Associates for $7.25 a share.
LIN Broadcasting slid 1 3/8 to 108 3/4, despite reporting third-quarter net of 46 cents a share, up from 39 cents the previous year.
The company said the latest quarter included about $3.4 million in special legal and financial advisory costs related to McCaw Cellular Communications' bid for the company and LIN's merger pact with BellSouth.
McCaw was unchanged at 40.
XL/Datacomp slid 2 1/4 to 16 1/2 amid continuing concerns about the company's contract negotiations with International Business Machines.
IBM is reviewing its entire business-partners program, and XL/Datacomp confirmed earlier this month that it was in talks with the company about possible modifications to its current IBM-remarketer contract.
Remarketers make modifications to IBM's computer hardware and resell the products.
Omni Capital Group surged 1 3/4 to 16 1/4.
The company said net rose to 38 cents a share in its fiscal-first quarter ended Sept. 30, from 35 cents a shares a year ago.
Probably the most clear-cut Soviet violation, for example, is the Krasnoyarsk radar.
-- "Arms Control Reality," Nov. 20, 1984, the first of some 20 Journal editorials saying that Krasnoyarsk violated the ABM treaty.
-- "Whether the installation is for early warning or space track, it clearly is not deployed," the lawmakers said.
"Thus we judge it to be not a violation of the ABM treaty at this time."
The delegation included a reporter from the New York Times, aides to Sen. Edward M. Kennedy and Rep. Les AuCoin, and Natural Resources Defense Council staff members.
-- The Washington Post, Sept. 9, 1987.
-- The U.S.S.R. has taken unprecedented unilateral measures of openness, by giving American representatives a possibility to inspect the building site of the Krasnoyarsk radar as well as radar vans in the areas of Gomel and Moscow, so as to see for themselves that there are no violations of the ABM treaty of 1972 on the part of the Soviet Union.
-- Letter from Eduard Shevardnadze to U.N. Secretary-General Perez de Cuellar, reported in Tass, June 10, 1988.
-- The construction of this station equal in size to the Egyptian pyramids constituted, I say it directly, a clear violation of ABM.
-- Eduard Shevardnadze, Oct. 23, 1989.
We're happy, we guess, to receive confirmation of the Krasnoyarsk violation from the Soviets, five years after we started writing about it.
Perhaps even the American apologists will now accede.
Without question, something intriguing is going on in the policy chambers of the Politburo.
As it bids for new agreements, new loans and indeed admission to the civilized world, the Soviet government has recognized it has a credibility problem.
So after 70 years, it is confessing the obvious, hoping to be believed about other things.
It's not enough.
If the Soviets want to be believed, they need to start telling the truth about more than the totally obvious.
Our own test of "glasnost's" authenticity would be a Soviet decision to open itself to a complete international examination of one of the most troubling mysteries in U.S.-Soviet relations -- the reported 1979 anthrax outbreak at a Soviet military facility in Sverdlovsk.
The U.S. government has never waivered in its assessment of this incident as an accident at a biological weapons facility there, and hence a violation of the 1972 Biological Weapons Convention.
The Pentagon's recently issued "Soviet Military Power," though in general adopting a softer line, repeated the Sverdlovsk assessment.
It also was detailed in Congressional testimony this past February: An explosion at the Microbiology and Virology Institute in Sverdlovsk released anthrax germs that caused a significant number of deaths.
Since Mr. Shevardnadze did not address this topic before the Supreme Soviet, the Soviet Union's official position remains that the anthrax deaths were caused by tainted meat.
We doubt this claim just as we doubted Mr. Shevardnadze's assurance last year that Krasnoyarsk didn't violate the ABM treaty.
And just as we did not believe the tendentious claims of the Congressmen and arms-control advocates who visited Krasnoyarsk, we are in no way persuaded by the assent to the tainted-meat theory by a U.S. team of scientists who met with Soviet counterparts in Washington last year.
The Soviets' explanation is that the anthrax came from one lot of animal feed made from the bones of cattle that grazed on soil that was naturally infected with anthrax spores.
Harvard's Matthew Meselson -- who we read has sold something called the "scientific community" on the notion that "yellow rain" attacks on the Laotian Hmong were in fact the result of fecal showers by giant bees -- found the Soviet anthrax scenario "completely plausible."
We don't believe it.
And we certainly do not believe that Mr. Gorbachev or any of his emissaries yet deserve to have the West take their word for it.
Sverdlovsk is a large gray cloud over glasnost and indeed over the legitimacy of the arms-control process itself.
The U.S. government's Sverdlovsk complaint, as with Krasnoyarsk, is no mere political posturing.
Biological weapons violations have figured little in political debate, and indeed have not been pressed vigorously enough by the U.S. government.
But the stated U.S. position is detailed and specific, and the prospect of biological warfare is profoundly chilling.
The Soviets should be willing to set in motion a process that would allow them to acknowledge that Sverdlovsk violated the 1972 agreement or, alternatively, that would give U.S. specialists reasonable confidence that this was a wholly civilian accident.
Until that happens, glasnost cannot begin to deserve the kind of credibility Mr. Shevardnadze was bidding for with his confessions on Monday.
Manville Corp. said it offered to buy $500 million of its convertible preferred stock from the Manville Personal Injury Settlement Trust in a move that would improve the trust's liquidity and reduce the potential number of Manville shares outstanding.
Manville said it made the offer within the past several weeks as part of an effort to improve shareholder value.
It said it would purchase the stock at market price.
Manville and a spokeswoman for the trust said that the two are discussing the proposal but a decision hasn't been made.
"We are considering that offer along with all other alternatives," the trust spokeswoman said.
"We need to look at how to maximize our cash flow to pay our beneficiaries."
The trust, created as part of Manville's bankruptcy-law reorganization to compensate victims of asbestos-related diseases, owns 7.2 million of the Series A convertible preferred shares, which are each convertible into 10 Manville common shares.
The trust also owns half of Manville's 48 million common shares outstanding.
Based on Manville's closing price yesterday of $9.25 a share, Manville's offer would purchase about 5.4 million of its preferred shares, or about 75% of the trust's preferred stock holding.
In addition to the stock and 20% of Manville's profits beginning in 1992, the trust is supposed to receive $2.5 billion over its 27-year life.
But it initially was funded with about $765 million and may soon face a cash crunch.
As of June 30, it had settled about 15,000 of 81,000 claims filed and its unpaid claims totaled $136 million, a large portion of its $268 million in cash and marketable securities.
Since most of its assets are tied to Manville, a forest and building products concern, the trust might also want to diversify its holdings.
As part of its offer, Manville said it requested changes in some covenants between it and the trust to allow Manville to "reflect a more typical corporate ownership and financial structure."
A Manville spokesman wouldn't elaborate on the proposed changes.
But he said they are "to a large degree, housekeeping," although some may generate some disagreement.
Manville said the shares issued to the trust were intended to be sold, as needed, and that Manville has the right of first refusal to buy those shares.
Northeast Utilities raised its bid for Public Service Co. of New Hampshire, which is operating under Bankruptcy Code protection, to $2.25 billion from $1.85 billion.
Northeast's raised bid, which was supported by PS of New Hampshire's official shareholder committee, is a prelude to what is expected to be a round of higher bids by the other groups trying to acquire the company, the largest utility in New Hampshire.
The $2.25 billion value claimed by Northeast, based in Hartford, Conn., is the highest yet given to a bid.
Some of the three other bidding groups are expected to increase their offers tomorrow, a date set for revised offers by a bankruptcy court judge.
A hearing is set for Nov. 15, but participants don't expect a resolution until July 1990.
Under the new Northeast Utilities plan, it would pay $1.65 billion in cash to creditors and assume $100 million in pollution control bonds.
Secured creditors would recover both principal and interest, while unsecured creditors would receive only principal and interest accrued before PS of New Hampshire filed for Bankruptcy Code protection in January
The biggest change in Northeast's offer was in improvements made for equity holders who had been given short shrift previously.
Assuming full operation of the Seabrook nuclear power plant, which is completed but isn't yet operating, equity holders would receive up to $500 million in cash, preferred stock and new 10-year Seabrook bonds.
Northeast's previous offer had proposed that equity holders receive just $165 million.
In addition, Northeast promised the State of New Hampshire that rate increases would be limited to 5.5% annually for seven years.
Its previous proposal had conditioned rate limits on Seabrook operations and other contingencies.
Wilbur Ross, financial adviser to the equity holders said, "Given the state's strong bargaining position . . . we believe the NU plan provides the best recovery available" to PS of New Hampshire's equity holders.
Officials of PS of New Hampshire couldn't be reached for comment.
The company has filed an internal reorganization plan it valued at $2.2 billion that would require 5.5% rate increases.
That plan would leave existing preferred shareholders with at least a 41% stake and give common shareholders as little as 13%.
New England Electric System, Westborough, Mass., has proposed buying the company for $2 billion as part of a plan that would require rate increases of only 4.8% annually for seven years.
The state of New Hampshire has favored that plan.
The other bidder is United Illuminating Co., New Haven, Conn., with a bid valued at $2.2 billion and and a proposal for seven years of 5.5% rate increases.
The Polish rat will eat well this winter.
Tons of delectably rotting potatoes, barley and wheat will fill damp barns across the land as thousands of farmers turn the state's buyers away.
Many a piglet won't be born as a result, and many a ham will never hang in a butcher shop.
But with inflation raging, grain in the barn will still be a safer bet for the private farmer than money in the bank.
Once again, the indomitable peasant holds Poland's future in his hands.
Until his labor can produce a profit in this dying and distorted system, even Solidarity's sympathetic new government won't win him over.
In coming months, emergency food aid moving in from the West will be the one buffer between a meat-hungry public and a new political calamity.
Factory workers on strike knocked Poland's Communist bosses off balance last year; this year, it was the farmers who brought them down.
In June, farmers held onto meat, milk and grain, waiting for July's usual state-directed price rises.
The Communists froze prices instead.
The farmers ran a boycott, and meat disappeared from the shops.
On Aug. 1, the state tore up its controls, and food prices leaped.
Without buffer stocks, inflation exploded.
That was when the tame old Peasants' Party, desperate to live through the crisis, broke ranks with the Communists and joined with Solidarity in the East Bloc's first liberated government.
But by the time Solidarity took office in September, the damage was done.
"Shortageflation," as economists have come to call it, had gone hyper.
The cost of raising a pig kept bounding ahead of the return for selling one.
The farmers stayed angry.
They still are.
At dawn on a cool day, hundreds travel to the private market in Radzymin, a town not far from Warsaw, hauling pigs, cattle and sacks of feed that the state's official buyers can't induce them to sell.
Here, they are searching for a higher price.
In a crush of trucks and horse carts on the trodden field, Andrzej Latowski wrestles a screeching, overweight hog into the trunk of a private butcher's Polish Fiat.
"Of course it's better to sell private," he says, as the butcher trundles away.
"Why should anybody want to sell to them?"
The young farmer makes money on the few hogs he sells here.
He won't for long, because his old state sources of rye and potatoes are drying up.
"There's no feed," he says.
"You can't buy anything nowadays.
I don't know why."
Edward Chojnowski does.
His truck is parked across the field, in a row of grain sellers.
Like the others, it is loaded with rye, wheat and oats in sacks labeled "Asbestos. Made in U.S.S.R."
The farmer at the next truck shouts, "Wheat!
It's nice!
It won't be cheaper!
We sell direct!"
A heavy, kerchiefed woman runs a handful through her fingers, and counts him out a pile of zlotys.
"Country people breed pigs," says Mr. Chojnowski, leaning against the back of his truck.
"They can't buy feed from the state.
There isn't enough.
Some state middlemen come to buy from me.
I sell -- a little.
I am waiting.
I have plenty more at home."
On this morning, he doesn't sell much in Radzymin, either.
At closing time, farmers cart out most of what they carted in.
A private market like this just isn't big enough to absorb all that business.
The hulk of Stalinism, it seems, will not quickly crumble away.
State monopolies will keep on stifling trade, "free" prices or not, until something else replaces them.
Polish agriculture will need a whole private network of procurement, processing and distribution -- plus a new manufacturing industry to supply it with tractors, pesticides, fertilizers and feed.
The Communists spent 40 years working to ensure that no such capitalistic structures ever arose here.
Building them now will require undergirding from the West, and removal of political deadwood, a job that Solidarity has barely started.
But Polish agriculture does possess one great asset already: the private farmer.
"We are dealing with real entrepreneurs," says Antoni Leopold, an economist who advises Rural Solidarity, the union's countryside offshoot.
"There are a lot of them, and they have property."
Polish peasants, spurning the collectivizers, were once a source of shame to orthodox Communists.
Now, among Communist reformers, they are objects of envy.
Food is the reformer's top priority, the key to popular support.
As the Chinese have shown and the Soviets are learning, family farms thrive where collectives fail.
Ownership, it seems, is the best fertilizer.
The Poles have had it all along.
Poland's 2.7 million small private farms cover 76% of its arable land.
On it, a quarter of the country's 39 million people produce three-quarters of its grain, beef, eggs and milk, and nine-tenths of its fruit, vegetables and potatoes.
Like the Roman Catholic Church, the Polish peasant is a pillar of the nation.
Try as they might, the Communists could neither replace nor break him.
And they did try.
A few miles past Radzymin, a dirt road narrows to a track of sand and leads into Zalubice, a village of tumbledown farms.
Czeslaw Pyszkiewicz owns 30 acres in 14 scattered scraps.
He grows rye and potatoes for a few hens, five cows and 25 piglets.
In patched pants and torn shoes, he stands in his barnyard eyeing the ground with a look both helpless and sardonic.
"It's bad soil," he says.
Until 1963, it was good soil.
Then the state put in a reservoir to supply the area with drinking water.
Farmers lay down before the bulldozers.
Their protest was ignored.
The dam caused the water level to drop in Zalubice.
Mr Pyszkiewicz smiles and his brow furrows.
He expected as much.
In his lifetime, 47 years, the Communists brought electricity to his village and piped in drinking water from the reservoir.
No phones.
No gas.
"We wanted them to build a road here," he says.
"They started, and then abandoned it."
A tractor, his only mechanized equipment, stands in front of the pigsty.
"It's Russian.
Good for nothing.
Parts are a tragedy.
Even if I had a lot of money, I couldn't buy what I need."
The farmer can say the same for coal, cement, saw blades.
In Poland, only 4% of all investment goes toward making things farmers want; in the West, it is closer to 20%.
The few big state farms take first crack at what does get made.
They use 60% more fertilizer per acre, twice the high-grade feed.
Yet their best boast is that they produce 32% of Polish pork.
"I've heard from friends that state farms are subsidized," Mr. Pyszkiewicz says as his wife, Wieslawa, sets some chairs out in the sun.
"We have one near here.
There is a lot of waste.
A private farmer never wastes anything."
The state quit shoving peasants onto its subsidized farms over 30 years ago.
But it never did let up on the pressure.
Until recently, a farmer with no heir had to will the state his land to collect his pension.
The pension's size still depends on how much produce he sells the state.
His allotment of materials also did, until the state couldn't hold up its end of that bargain.
Yet the state alone sells seeds and machines.
When supplies are short, it often hands them over only in exchange for milk or grain.
A private farmer in Poland is free to buy and sell land, hire help, decide what to grow and how to grow it.
He is free to invest in chickens, and to fail for lack of chicken wire.
He has plenty of freedom -- but no choices.
"I'm on my own land," Mr. Pyszkiewicz says.
"I don't have to listen to what anybody tells me to do."
"Sometimes," says his wife, "we're happy about that."
By starving the peasant, the Communists have starved Poland.
Villages like Zalubice exist in a desert of poor schools and few doctors.
Farm income is 15% below the average.
The young leave, especially girls who won't milk cows by hand.
Some men stay, their best friend a bottle of vodka, but two million acres have gone fallow.
Without machines, good farms can't get bigger.
So the potato crop, once 47 million tons, is down to 35 million.
Meat consumption is at 1979's level, pork production at 1973's, milk output at 1960's.
If a food crisis undid the Communists, a food revolution will make Solidarity.
The potential is displayed along every road into Warsaw: row upon row of greenhouses, stretching out behind modern mansions that trumpet their owners' wealth.
Vegetables are abundant and full of flavor in Poland, the pickles and sauerkraut sublime, the state monopolies long broken.
Grain, milk and meat come next.
A private challenge to the monolithic tractor industry will take more time and money than Poland can spare, although a smokehouse or a local dairy can spring up fast.
Poland makes no machinery for a plant on that scale.
Solidarity wants it from the West.
Maria Stolzman, one of its farm experts, lays it on the line: "The World Bank will be brought in to help us destroy the old system."
Felix Siemienas is destroying it now.
He packs pork.
A law went on the books in January that let him smoke bacon without breeding pigs.
He cashed in.
Poland is short on enterprises, not enterprise.
"I pay a lot to the farmer and five times the state salary to my employees," he says.
He is in Warsaw to open a shop.
"I hire transportation, and my customers have fresh cold cuts every day.
I don't subsidize anyone.
Everyone around me lives well.
Yes, my prices are high.
If nobody buys, I bring my prices down.
That's the rule.
That's the market."
Mr. Siemienas is making a fortune -- $10,000 a month, he says.
He has bought some trendy Western clothes, and a green Mercedes with an American flag in the window.
But the meat-processing machines he picked up are 50 years old.
"I don't want expensive machines.
If the situation changes, I'll get stuck with them."
That's politics.
By taking power in a deal with the Peasant Party's onetime Communist stooges, Solidarity has spooked the rural entrepreneur.
Rural Solidarity objected, to no avail, when Solidarity leader Lech Walesa accepted the Peasants' support.
It objected again in September when Prime Minister Tadeusz Mazowiecki reluctantly named a Peasant Party man as his agriculture minister.
Both the Peasants and Rural Solidarity are forming new political parties for farmers.
The Peasants can make a credible case, against Solidarity, that hell-bent reform will drive millions from the land.
Next Spring, the two will battle in local elections.
But until then, and probably long afterward, the Communists' apparat of obstruction -- from the head of the dairy co-op to the village bank manager -- will stay planted in the Polish countryside.
"We know how to get from capitalism to socialism," Sergiusz Niciporuk is saying one afternoon.
"We don't know how to get from socialism to capitalism."
He farms 12 acres in Grabowiec, two miles from the Soviet border in one of Poland's poorest places.
Now he is mounting the steps of a stucco building in a nearby village, on a visit to the Communist administrator, the "naczelnik."
"Many people in Poland hope this government will break down," says Mr. Niciporuk, who belongs to the local council and to Rural Solidarity.
"That's what the naczelnik counts on.
He is our most dangerous enemy.
Every time he sees me, he gets very nervous."
The farmer barges into the naczelnik's office.
A thin man in a gray suit looks up from a newspaper.
Mr. Niciporuk sits.
Anatol Pawlowski's leg begins jiggling beneath his desk.
"Solidarity doesn't care for the good of this region," he says after a few pleasantries.
"They want to turn everything upside down in a week.
Mr. Niciporuk here wants 60 acres used at the moment by a state farm.
He can't guarantee that he can use it any better."
"I am ready at any moment to compete with a state farm."
The naczelnik averts his eyes.
"What have you got?
Not even a tractor.
And you want to make wicker baskets, too."
"I can do five things at once -- to be a businessman."
"Big business," Mr. Pawlowski snorts in English.
The farmer stands to go.
The naczelnik stands, too.
"I care very much for this post," he says.
"Eight years I've had it.
A cultural center has been built, shops.
Suddenly, I am not a comfortable man for Solidarity.
I have accomplished too much.
They want to do more.
I wish them all the best!"
The farmer leaves.
And the naczelnik shuts his door.
The House approved a short-term spending bill to keep the government operating through Nov. 15 and provide $2.85 billion in emergency funds to assist in the recovery from Hurricane Hugo and the California earthquake.
The 321-99 roll call vote reflected broad support for the disaster assistance, but the cost to the Treasury is sure to aggravate budget pressures this year and next under the Gramm-Rudman deficit reduction law.
By a lopsided 401-18 margin, the chamber rejected an effort to waive Gramm-Rudman for purposes of addressing the two disasters, and budget analysts estimate the increased appropriations will widen the fiscal 1990 deficit by at least $1.44 billion unless offsetting spending cuts or new revenues are found by Congress.
The budget impact will be greater still in fiscal 1991, and the issue forced a confrontation between the Appropriations Committee leadership and Budget Committee Chairman Leon Panetta, whose California district was at the center of the earthquake last week.
Going to the well of the chamber, Mr. Panetta demanded the costs be fully counted.
His prominent role put him in the awkward position of challenging the very committee members on whom his state will be most dependent in the months ahead.
"We do not come to this House asking for any handout," said the California Democrat.
"We do not intend to hide these costs from the American people."
The $2.85 billion package incorporates $500 million for low-interest disaster loans, $1 billion in highway construction funds, and $1.35 billion divided between general emergency assistance and a reserve to be available to President Bush to meet unanticipated costs from the two disasters.
The funds are in addition to $1.1 billion appropriated last month to assist in the recovery from Hugo, bringing the total for the two disasters to nearly $4 billion in unanticipated spending.
Because of the vagaries of Gramm-Rudman, the immediate impact is relatively small.
But the appropriations set in motion spending that adds to an already grim budget picture for fiscal 1991.
Within the appropriations process, the situation is even more difficult since the costs will be counted against the share of funds to be allocated to those subcommittees that recently have had the greatest difficulty in staying within the budget.
The underlying bill approved yesterday is required to keep the government operating past midnight tonight, and this urgency has contributed to the speed -- and, critics say, mistakes -- that have accompanied the package of disaster assistance.
The hastily drafted measure could hurt California by requiring it to put up more matching funds for emergency highway assistance than otherwise would be required.
And the state's delegation is fearful that the new funding will be counted against a separate $185 million in federal highway funds it would expect to receive under its normal allocation this year.
Also, the high price of San Francisco real estate puts the state at odds with federal regulations more attuned to the national average.
For example, disaster loans, which will go to small businesses and homeowners, offer credit as low as 4% in some cases.
But the San Francisco delegation finds itself asking that the cap per household be lifted to $500,000 from $100,000 to assist the hard hit but often wealthy Marina district.
The Senate is expected to make some modifications today, but both the White House and Congress appear most anxious to speed final approval before tonight's deadline.
Administration pressure discourages any effort to add to total funding, and the Senate changes are expected to be largely technical -- dealing with highway aid and lifting the ceiling on total Small Business Administration loans to $1.8 billion to accommodate the increased activity expected.
Yesterday's floor action came as a House-Senate conference approved a nearly $8.5 billion fiscal 1990 military construction bill, representing a 5% reduction from last year and making severe cuts from Pentagon requests for installations abroad.
An estimated $25.8 million is allocated to continue work in Oman.
But all funding is cut for the Philippines, and projects in South Korea are cut to $13.6 million, or less than a sixth of the administration's request.
Closer to home, the negotiators were more generous.
An estimated $38.9 million was set aside for military installations in the home state of North Carolina Rep. W.G. Hefner, the House chairman.
And $70.2 million would go to projects in Tennessee represented by his Senate counterpart and fellow Democrat, Sen. James Sasser.
Texas and California are traditionally powerful within the conference, but equally striking is the dominance of Alaska, Pennsylvania and West Virginia because of their power elsewhere in the appropriations process.
Senate Appropriations Committee Chairman Robert Byrd (D., W.Va.) even added report language listing $49.4 million in projects he wants in the budget next year.
No individual illustrated this mix of power more yesterday than Sen. Daniel Inouye (D., Hawaii), who chairs the Senate defense subcommittee.
In the final trading, the House was insistent on setting aside $500 million to carry out base closings ordered to begin in fiscal 1990.
But it gave ground to Mr. Inouye on a number of projects, ranging from a $11 million parking garage here, to a land transfer in Hawaii, to a provision to assist the Makwah Indian Tribe in Washington state.
The tribe is one of the poorest in the Pacific Northwest.
Mr. Inouye, who chairs the select committee on Indian Affairs, used his power to move $400,000 from the Air Force to the Bureau of Indian Affairs to assist in renovating a decommissoned base to accommodate a drug and alcohol rehabilitation center.
Meanwhile, House-Senate negotiators have tentatively agreed on a $3.18 billion anti-drug and anti-crime intitiative, cutting other federal spending 0.43% to pay for it.
A formal House-Senate conference is expected to ratify the accord later this week.
Mobil Corp. is preparing to slash the size of its work force in the U.S., possibly as soon as next month, say individuals familiar with the company's strategy.
The size of the cuts isn't known, but they'll be centered in the exploration and production division, which is responsible for locating oil reserves, drilling wells and pumping crude oil and natural gas.
Employees haven't yet been notified.
Sources said that meetings to discuss the staff reductions have been scheduled for Friday at Mobil offices in New Orleans and Denver.
This would be a second round of cuts by Mobil, which along with other oil producers and refiners reduced its work force by 15% to 20% during the mid-1980s as part of an industrywide shakeout.
Mobil's latest move could signal the beginning of further reductions by other oil companies in their domestic oil-producing operations.
In yesterday's third-quarter earnings report, the company alluded to a $40 million provision for restructuring costs involving U.S. exploration and production operations.
The report says that "the restructuring will take place over a two-year period and will principally involve the transfer and termination of employees in our U.S. operations."
A company spokesman, reached at his home last night, would only say that there will be a public announcement of the reduction program by the end of the week.
Most oil companies, including Mobil, have been reporting lower third-quarter earnings, largely as a result of lower earnings from chemicals as well as refining and marketing businesses.
Individuals familiar with Mobil's strategy say that Mobil is reducing its U.S. work force because of declining U.S. output.
Yesterday, Mobil said domestic exploration and production operations had a $16 million loss in the third quarter, while comparable foreign operations earned $234 million.
Industrywide, oil production in this country fell by 500,000 barrels a day to 7.7 million barrels in the first eight months of this year.
Daily output is expected to decline by at least another 500,000 barrels next year.
Some Mobil executives were dismayed that a reference to the cutbacks was included in the earnings report before workers were notified.
One Mobil executive said that the $40 million charge related to the action indicates "a substantial" number of people will be involved.
Some will likely be offered severance packages while others will be transferred to overseas operations.
The Justice Department is in the process of trying to gain control over a law that federal Judge David Sentelle recently called a "monster."
Needless to say, he was talking about RICO.
With its recently revised guidelines for RICO, Justice makes it clear that the law currently holds too many incentives for abuse by prosecutors.
The text of the "new policy" guidelines from the Criminal Division are reprinted nearby.
They strongly suggest that Justice's prosecutions of Drexel Burnham Lambert, Michael Milken and Princeton/Newport violated notions of fundamental fairness.
Justice is attempting to avoid a replay of these tactics.
This amounts to an extraordinary repudiation of the tenure of New York mayoral candidate and former U.S. Attorney Rudolph Giuliani, who was more inclined to gathering scalps than understanding markets.
The new guidelines limit the pretrial forfeitures of assets of RICOed defendants and their investors, clients, bankers and others.
This follows earlier new guidelines from the Tax Division prohibiting Princeton/Newport-like tax cases from masquerading as RICO cases.
The forfeiture memo cited "considerable criticism in the press, because of a perception that pre-trial freezing of assets is tantamount to a seizure of property without due process."
It told prosecutors not to seek forfeitures if there are "less intrusive" alternatives, such as bonds, and in any case not to seek forfeitures "disproportionate to the defendant's crime."
These changes come a tad late for Princeton/Newport, the first RICOed securities firm.
It was forced into liquidation before trial when investors yanked their funds after the government demanded a huge pre-trial asset forfeiture.
Princeton/Newport investors, including McKinsey & Co. and the Harvard endowment, made the rational decision to withdraw their money; for the firm, the liquidation was sentence first, verdict later.
Prosecutors wanted $23.8 million in forfeiture for alleged tax fraud of some $400,000.
The experience of Princeton/Newport and initiation of other RICO-forfeiture cases against legitimate businesses taught Drexel that a RICOed investment bank would be an ex-investment bank.
Drexel therefore agreed instead to an arrangement allowing it to plea to charges "which the company is not in a position to dispute" because of RICO.
Part of Drexel's plea was to cut Mr. Milken loose.
So after all the prosecutorial hoopla no one has established what, if anything, Drexel did wrong.
So two cheers for the new rules.
Justice has finally recognized its employees' abuses, thanks largely to the demands for reform by former U.S. attorney in Washington Joseph diGenova, who wants to salvage RICO for real criminals.
But prosecutorial guidelines are effective only if someone at Justice is willing and able to supervise hyperactive prosecutors.
Judge Sentelle, of the appeals court in Washington, made this point at a Cato Institute conference last week in a remarkable speech titled, "RICO: The Monster That Ate Jurisprudence."
He said ours is supposed to be "a government of laws not of men," and yet RICO defenders "tell us that we should rely on prosecutorial discretion to protect against overbreadth of RICO."
No prosecutorial guidelines, observed or unobserved, limit civil RICO cases by plaintiffs for damages.
What now for Princeton/Newport officials, Drexel and Mr. Milken?
Justice should review these cases to see what other prosecutorial abuses may have occurred.
We suspect that Justice will some day agree that only the complete repeal of RICO can guarantee an end to injustices in its name.
"The Famous Teddy Z," which CBS Inc. had hoped would emerge as one of the few bright spots in its otherwise lackluster prime-time schedule, isn't turning out to be the hit the network envisaged.
Although the half-hour situation comedy seen Mondays at 9:30 p.m. Eastern and Pacific time isn't a candidate for cancellation, it is slated for fine-tuning and by next week the network may announce "Teddy Z" is moving to 8:30 p.m. from its 9:30 time slot, replacing "The People Next Door," which became the first network show to be canceled this season.
"Teddy Z," which centers on a mailroom clerk-turned agent at a Hollywood talent agency, was scheduled in the coveted 9:30 p.m. slot to follow "Murphy Brown," a situation comedy about a television news magazine, starring Candice Bergen.
"Teddy Z" was boosted by favorable reviews and a network-wide promotional tie-in contest with K mart Corp.
It was promoted on cable services, including MTV, Nick at Night and VH-1, and premiered as the No. 22-rated show for the week.
But five weeks after the premiere, the series has floundered.
In figures released yesterday by A.C. Nielsen Co. "Teddy Z," produced by the television unit of Columbia Pictures Entertainment Inc., was in 37th place.
Worse, every week it suffers audience drop-off from "Murphy Brown" and viewership on CBS picks up again once "Teddy Z" is over and is followed by "Designing Women."
"There is strong indication that `Teddy Z' is not compatible with the shows it is surrounding," said John Sisk, senior vice president at J. Walter Thompson Co., a unit of WPP Group PLC.
Last week, "Murphy Brown" was viewed by 14.1% of the available television households, while the number dropped to 12.6% for "Teddy Z" and rose to 14.2% for "Designing Women."
CBS executives said the program is also slated to undergo some plot changes.
Creator Hugh Wilson, for example, included the lead character's Greek family in the cast, "but that is not the right focus anymore," said one CBS executive.
Instead, CBS hopes the show will increasingly highlight the talent agency and the business of being an agent.
"We're making adjustments on the show, yes, but nothing radical," said Craig Nelson, the story consultant on "Teddy Z."
"But we hope to keep a balance between the office and the family."
The opening credits are being redone, Mr. Nelson said, "to make Teddy's situation clear to viewers who have not been with us since the beginning.
Those viewers find the show confusing.
The stock market's woes spooked currency traders but prompted a quiet little party among bond investors.
Prices of long-term Treasury bonds moved inversely to the stock market as investors sought safety amid growing evidence the economy is weakening.
But the shaky economic outlook and the volatile stock market forced the dollar lower against major currencies.
The bond market got an early boost from the opening-hour sell-off in stocks.
That rout was triggered by UAL Corp.'s announcement late Monday that the proposed management-labor buy-out had collapsed.
The 80-point decline in the Dow Jones Industrial Average during the morning trading session touched off a flight to safety that saw investors shifting assets from stocks to Treasury bonds.
At its strongest, the Treasury's benchmark 30-year bond rose more than a point, or more than $10 for each $1,000 face amount.
As the stock market recovered some of its losses later in the day, bond prices retreated.
But analysts said the combination of a second consecutive decline in monthly durable-goods orders and lackluster mid-October auto sales helped prop up the Treasury market.
A slowing economy and the implication of lower inflation and interest rates tend to bolster bond prices.
On the surface, the decline in September durable goods -- only 0.1% -- didn't appear very weak.
But orders for non-defense capital goods, a precursor of future plant and equipment spending, were off 5.6% after falling 10.3% in August.
Auto makers reported that mid-October sales were running at an annual rate of about 5.8 million units, far less than the 6.6 million units analysts had expected.
Taken together, the auto-sales and durable-goods reports confirmed perceptions that the economy is bogging down.
Although analysts don't expect the Federal Reserve to ease credit policy soon, reports like those yesterday help build the case for lower rates.
Now bond investors are looking toward next week's report from national purchasing managers and the government's October employment report as potentially prompting the Fed to lower rates.
The stock market's precipitous drop frightened foreign investors, who quickly bid the dollar lower.
But as stock prices recovered some of the early losses, so did the U.S. currency.
Although dealers said investors are becoming more bearish toward the dollar in the wake of the stock market's recent troubles and as the U.S. economy weakens, the dollar ended down only modestly.
In major market activity: Bond prices rose.
The Treasury's benchmark 30-year bond gained nearly half a point, or about $5 for each $1,000 face amount.
The yield on the issue slipped to 7.89%.
The dollar retreated.
In late New York trading the currency was quoted at 1.8355 marks and 141.45 yen, compared with 1.8470 marks and 141.90 yen Monday.
"Lifestyles of the Rich and Famous" may be visiting some new venues in the near future.
Judge Robert ("Maximum Bob") Potter sentenced Jim Bakker to 45 years in the big house yesterday, while a Beverly Hills judge tucked away Zsa Zsa Gabor for three days, plus 120 hours of work with homeless women.
Miss Gabor recanted her earlier-expressed fear of jailhouse lesbians.
Mr. Bakker said he was guilty of sin but not fraud.
We can only wonder who will be the next lost soul chosen to be America's Celebrity Convict.
Boeing Co. said Trans European Airways ordered a dozen 737 jetliners valued at a total of about $450 million.
The 300 and 400 series aircraft will be powered by engines jointly produced by General Electric Co. and Snecma of France.
Currently, Boeing has a backlog of about $80 billion, but production has been slowed by a strike of 55,000 machinists, which entered its 22nd day today.
Last week, a mediator failed to rekindle talks between the company and the strikers, who have rejected a pay raise offer of 10% over three years.
When the good fairy assigned to Slovakia hovered over the cradle of Edita Gruberova many years ago in Bratislava, she sprinkled her with high E flats, sparkling Ds, clean trills, and coloratura ornaments silvery as magic dust.
Maybe she could drop by at the Metropolitan Opera and bring along what she forgot, a little charm, a few smidgins of thespian skills and a nice wig.
Cast as Violetta Valery in a new production of Verdi's "La Traviata," Ms. Gruberova last week did many things nicely and others not so well.
It isn't every day that we hear a Violetta who can sing the first act's high-flying music with all the little notes perfectly pitched and neatly stitched together.
Never once did she gasp for air or mop her brow.
She was as cool as a cucumber.
But as you may know, things are not going well for Violetta.
There are times when she must show a little emotion.
She has TB, after all, and a weak-kneed lover; and though a successful courtesan, she is just about overdrawn at the bank.
Worse, her walls move all the time -- at least in this production.
Just when Ms. Gruberova sat down away from her guests to cough in private, her salon began sliding around the stage; her country hideaway also has a very active set of drapes.
Hold on to those funny braids! you wanted to caution her as the sets started to roll around once more.
This is the most moving "Traviata" I've ever seen.
Normally, Violetta can go about her business without wondering whether she is moving as gracefully as the scenery.
But this is a production designed and directed by Franco Zeffirelli and paid for by Sybil Harrington, who has no need to count her pennies, unlike Violetta, down to 20 louis at the opera's end.
Seeing all those millions in action, I was just so relieved that Ms. Gruberova, gawky thing that she is, didn't accidentally smother herself in a drape.
Large and lavish, "Traviata" is another addition to the Met's growing stock of cast-proof productions mostly by Mr. Zeffirelli.
They have a life of their own and can be counted on to look good and perform whenever a cast isn't up to either.
If a strike ever hits the Met, the company can still sell tickets to his "Boheme" and "Turandot" and boom out recordings (of another era).
Last week's discerning audience gave a bigger hand to a greenhouse than to the tenor Neil Shicoff, who sang an aria inside it.
Inexplicably costumed as a rabbinical student, tottering around on lifts, Mr. Shicoff hardly seemed the fellow to catch a fancy cocotte's eye.
I wish he could wear lifts in his voice.
Not nearly in his best form, the tenor made dullish sounds along with his usual clumsy hand gestures.
Maybe Mr. Z. was too busy taming his set to work with his naturally ungainly Alfredo.
Or is it that Mr. Z. is getting a little tired of "Traviata"?
This is the same production already seen in Paris and Florence, and its scenic ideas echo the movie he made with Placido Domingo and Teresa Stratas.
Decades earlier, Maria Callas sang the Dallas staging that introduced the flashback idea.
In an invention that drives Verdi purists bananas, Violetta lies dying in bed during the prelude, rising deliriously when then she remembers the great parties she used to throw.
The entire opera is her dream.
Given the prelude's thematic connections with the music preceding the last act, the idea is more worn than bad, though as luck would have it, for a change there actually was a conductor in the pit whom we wanted to hear, Carlos Kleiber, trying to make memorable music while we all waited for the bed lump to stir into song.
Once she did so, the big-souled German maestro with the shaky nerves who so often cancels offered a limpid, flowing performance that in its unswagged and unswaggering approach was totally at odds with the staging.
Of heart-pounding moments there were nearly none, and whether this has to do with Mr. Kleiber or the wooden cast is hard to say.
In any event, Ms. Gruberova barely ventilated Violetta's anguish in her long meeting with Wolfgang Brendel, who as Germont seemed fairly desperate trying to inject an Italianate lilt into his heavy, teutonic baritone.
"Di Provenza" wasn't much of an advertisement for sunny, southern France.
Perhaps Mr. Kleiber could let him substitute one of the songs about dead children and dark nights from Mahler's "Kindertotenlieder."
Speaking of dark nights, the Met's next-door neighbor, the New York City Opera, has canceled its season after failing to reach a settlement with its musicians, who wanted pay parity with the the Chicago Lyric and San Francisco Opera orchestras.
Well, they can now go and audition there.
Good luck.
Common sense suggests that people who play for a company that charges about half what those houses do for a ticket are not in the same market.
The cancellation bodes poorly for a company already beset with an identity crisis exacerbated by the retirement of general director Beverly Sills and the amazing appointment of Christopher Keene as her successor after his years of feckless toiling in the pit.
As the Met discovered years ago following a belated December opening, it is nearly impossible to recapture subscribers once they have had time to ponder their entertainment choices.
I, for instance, was perfectly happy at Avery Fisher Hall the other day listening to Helmuth Rilling conduct the Messa per Rossini, a strange piece written by 13 different Italian composers to honor Rossini after his death in 1868.
Each of them contributed a section at the behest of Verdi, who was nearly driven to his own early grave by the troublesome arrangements.
For all that, the piece landed unperformed in a dusty archive after Bologna refused to supply a chorus and orchestra.
We know Verdi's own contribution was mighty impressive since the operatic "Libera me" was reworked for the Manzoni Requiem, of which he wrote every note himself having learned his lesson.
The surprising discovery of the evening at Fisher was the high standard achieved by some of his now-obscure colleagues, notably Raimondo Boucheron.
His melodious "Confutatis" was smoothly sung by bass Brian Matthews.
Also, Teodulo Mabellini's "Lux aeterna" was intriguingly scored and splendidly put across by Mr. Rilling.
He brought along his Stuttgart-based Gaechinger Kantorei chorus, and even better, the Czech soprano Gabriela Benackova.
She was in her most radiant, expressive voice.
Maybe she could step across the plaza to the Met -- where she has still to make her debut -- and help out her Czech compatriot by singing the slow parts of "Traviata."
The Tokyo International Film Festival was no match for the Cannes Film Festival in terms of prestige, but it made its mark: It awarded the largest cash prize of any film festival to young and first-time film makers.
At this year's event, the third since the festival got under way in 1985, Idrissa Ouedraogo of Burkina Faso won the Sakura Gold prize of $143,000 for "Yaaba" ("Old Woman").
By comparison, Cannes now gives $39,000 to the winner of its young director's award.
Says director George Miller ("Mad Max"): "I think the Tokyo festival may become known as a major attraction for young directors because of the money as well as the recognition."
There are drawbacks.
Vincent Tolentino, a correspondent for the French magazine Telerama, says of the recently ended Tokyo festival: "No one makes deals . . . and most of the films have been seen before at other festivals."
Belgium decided that investors who demand the delivery of their securities when they buy shares or domestic bonds will have to pay an additional 100 Belgian francs (about $2.60) for each transaction, bringing the total fee to 200 francs.
While no figures exist, it is thought that many small investors in Belgium store securities privately, in some cases to avoid paying high inheritance taxes.
The law could redound to the advantage of brokers and banks, who incur high administrative costs to deliver securities to investors.
Japan is considering giving aid to Hungary and Poland to support their recent political reforms, a spokesman for the Foreign Ministry said.
"This is the first time, if we decide to do so, for Japan to extend aid of this kind to Eastern European countries," the spokesman said.
He said Prime Minister Toshiki Kaifu also is studying the possibility of a visit to the two Eastern bloc nations and to Western Europe next January.
Drugs were a major issue in two days of talks between French President Francois Mitterrand and Spanish Prime Minister Felipe Gonzalez.
"I demand the utmost severity in the fight against drug traffickers," President Mitterrand said after the meeting in Valladolid, Spain.
He added: "Banks must open their books."
The leaders' talks coincided with a meeting in Madrid of anti-drug experts from the U.S., France, Italy, Spain, Peru, Bolivia and Colombia.
That conference, which began yesterday, was expected to cover such matters as police training and extradition agreements, Spanish officials said.
Three Soviet government officials -- the ministers of railroads, of foreign economic relations and of heavy-machine building -- will visit Tehran next month for talks, Iran's official news agency reported.
Under an agreement signed last June, the Soviets will help Iran in oil exploration and other areas in return for exports of Iranian natural gas.
And in Paris, Mahmoud Vaezi, Iran's vice minister of foreign affairs, began a five-day visit to discuss such matters as compensation to French enterprises for contracts broken by the Khomeini regime.
Toto Co., a Japanese ceramics maker, has developed a toilet that can check the user's health.
A Toto spokesman said the toilet not only tests blood pressure, pulse and urine, it also stores the data for up to 130 days.
Nippon Telegraph & Telephone Corp. and Omron Tateisi Electronics are involved with Toto's new product, which will go on the market in about two years time.
"It will be very expensive," the spokesman warned.
"The price cannot be less than $7,000."
Since Mexican President Carlos Salinas de Gortari took office last December, special agents have arrested more than 6,000 federal employees on charges ranging from extortion to tax evasion.
Hector Castaneda Jimenez, chief prosecutor at the Attorney General's Office, said that an estimated $82.8 million in government property and unpaid taxes have been recovered in the campaign to root out official corruption.
Mr. Castaneda's office will reportedly issue warrants during the next six months for the arrest of another 10,000 federal employees.
Those employees are suspected of illegally gaining an estimated $376.8 million, the prosecutor was quoted as saying by the Excelsior news service.
He added that federal agents hope to recover at least half that amount.
"The rest will probably not be recoverable either because the statute of limitations expired or because many prefer to spend additional time in jail rather than return the money," the prosecutor said.
The United Nations, which is distributing farm tools to returning refugees in Namibia, is rethinking a plan to hand out machetes because of the tense political climate during preparations for independence from South Africa.
"The decision to distribute machetes at this time, which could be used as weapons, is under review," said a U.N. spokesman. . . .
Sources close to the family of Pakistani Prime Minister Benazir Bhutto said she is expecting a second child, probably early next year.
Cray Research Inc. forecast that 1990 will be a no-growth year for its supercomputer line.
In what has become a series of bad-news announcements, the world's largest maker of supercomputers said that after reviewing its order prospects, "we have concluded it is prudent to plan for next year on the assumption that revenue again will be flat."
Cray jolted the market in July when it slashed revenue and earnings projections for this year, citing a slowing economy that has delayed orders from government as well as commercial customers.
The company made its 1990 projection -- an unusual event for Cray -- in announcing improved net income for the third quarter.
Cray said it earned $30.6 million, or $1.04 a share, up 35% from $22.6 million, or 73 cents a share, a year ago.
Revenue gained 45% to $210.2 million from $145.2 million.
For the nine months, earnings totaled $36.6 million, or $1.24 a share, down 46% from $68.1 million, or $2.19 a share, a year earlier.
Revenue was $454.6 million, a 6.9% gain from $425.4 million.
Cray made its announcement after the stock market closed.
In New York Stock Exchange composite trading yesterday, Cray closed down $1.125 at $34.25.
Cray said its order backlog at Sept. 30 was $315 million, down $25 million from June 30.
Marcello Gumucio, president, said the company "did well in the quarter as far as revenues and earnings are concerned, and not quite as well in terms of signing orders."
As for the current period, Mr. Gumucio said, "We anticipate that fourth-quarter revenue and earnings will be substantially greater than any of the preceding three quarters, but not up to the record levels of last year's fourth quarter" when Cray earned $88.5 million, or $2.80 a share.
He added that the company expects "strong" operating profit for the year, "but at a level significantly lower than last year."
He said 1989's net income could be 11% to 13% of revenue, which, assuming current expectations, would be 40% to 45% below 1988's level.
Last year, Cray earned $156.6 million, or $4.99 a share, on revenue of $756.3 million.
Next year "looks dismal," said analyst Paul Luber of Robert Baird & Co., Milwaukee.
Noting that Cray doesn't have a low-end supercomputer to compete with the likes of Convex Computer Corp. and International Business Machines Corp., Mr. Luber said such a machine would be necessary "to get things back on line here."
Cray has indicated it will decide on whether to build such a machine before year end.
Johnson & Johnson reported a 10% rise in third-quarter net income on a 12% sales increase-results that were driven particularly by new products including pharmaceuticals and the company's professional operations.
Net for the New Brunswick, N.J., maker of health-care products climbed to $265 million, or 80 cents a share, from $240 million, or 71 cents a share, in the year-earlier period.
Sales rose to $2.45 billion from $2.2 billion.
The year-ago per-share earnings are adjusted to reflect a 2-for-1 stock split last May.
In a statement, Ralph S. Larsen, chairman and chief executive officer, said the company was pleased with its third-quarter sales performance, "especially in light of the extremely competitive environment in domestic consumer markets and the negative impact of unfavorable exchange rates this quarter."
David J. Lothson, an industry analyst for PaineWebber Group Inc., said Johnson & Johnson's results slightly exceeded his expectations for the third quarter.
In New York Stock Exchange composite trading yesterday, Johnson & Johnson shares fell 37.5 cents to $54.625.
Mr. Larsen noted "substantial sales growth" for the recently introduced Acuvue disposable contact lens and Hismanal, a once-a-day antihistamine.
Eprex, used by dialysis patients who are anemic, and Prepulsid, a gastro-intestinal drug, did well overseas, he said.
Despite health-care cost controls and programs to hold down inventory, the professional division, which makes products including sutures and surgical stapling equipment, "achieved solid growth," Johnson & Johnson said.
But domestic consumer sales slipped 1.2% for the quarter, to $490 million from $496 million.
The company cited softness in the retail health and beauty aids category, "as well as the intense competition in the company's sanitary protection product line."
Overseas sales were stronger, principally because of a rebound in Brazil, where economic turmoil had hurt year-earlier results, Johnson & Johnson said.
Mr. Lothson of PaineWebber said the company's sales pace has been picking up largely because the effect of unfavorable exchange rates has been easing -- a pattern continuing this quarter.
He cautioned, however, that a "tough tax-rate comparison" may slow the company's earnings growth for the current quarter.
For last year's fourth quarter, the company's tax rate was less than 20%, he said.
While the third period contained no major surprises, Mr. Lothson said, the results show how sensitive the multinationals can be to developments in a single country such as Brazil.
He also questioned whether recent gains in that country can be sustained.
The following issues were recently filed with the Securities and Exchange Commission:
Bergen Brunswig Corp., proposed offering of liquid yield option notes, via Merrill Lynch Capital Markets.
Columbia Gas System Inc., shelf offering of up to $200 million of debentures.
Laserscope, initial offering of 1,656,870 common shares, of which 1,455,000 shares are to be sold by the company and 201,870 by holders, via Alex. Brown & Sons Inc. and Volpe, Covington & Welty.
TeleVideo Systems Inc., proposed offering of 1,853,735 common shares, to be sold by holders.
Western Gas System Inc., initial offering of 3,250,000 common shares, of which 3,040,000 shares will be sold by the company and 210,000 by a holder, via Prudential-Bache Capital Funding, Smith Barney, Harris Upham & Co. and Hanifen, Imhoff Inc.
Insiders have been selling shares in Dun & Bradstreet Corp., the huge credit-information concern.
Six top executives at the New York-based company sold shares in August and September.
Four of those insiders sold more than half their holdings.
The stock, in New York Stock Exchange composite trading yesterday, closed at $51.75, up 62.5 cents, well below the $56.13 to $60 a share the insiders received for their shares.
Much of the recent slide in Dun & Bradstreet's stock came late last week, after negative comments by analysts at Merrill Lynch & Co. and Goldman, Sachs & Co.
A company spokesman declined to comment and said that the officials who sold shares wouldn't comment.
One of Dun & Bradstreet's chief businesses is compiling reports that rate the credit-worthiness of millions of American companies.
It also owns Moody's Investors Service, which assigns credit-ratings to bonds and preferred stock; A.C. Nielsen, known for its data on television-viewing patterns, and Yellow-pages publisher Donnelley.
Last March, this newspaper reported on widespread allegations that the company misled many customers into purchasing more credit-data services than needed.
In June, the company agreed to settle for $18 million several lawsuits related to its sales practices, without admitting or denying the charges.
An investigation by U.S. Postal inspectors is continuing.
Among the insider sales, Charles Raikes, the firm's general counsel, sold 12,281 shares in August, representing 46% of his holdings in the company.
He received $724,579 for the shares, according to insider filings with the Securities and Exchange Commission.
John C. Holt, an executive vice president and Dun & Bradstreet director, sold 10,000 shares on Aug. 31 for $588,800, filings show.
He retains 9,232 shares.
William H.J. Buchanan, the firm's secretary and associate general counsel, sold 7,000 shares in two separate sales in September for $406,000.
The shares represented 66% of his Dun & Bradstreet holdings, according to the company.
The other insiders, all senior or executive vice presidents, sold between 2,520 and 6,881 shares, representing between 8% and 70% of their holdings, according to SEC filings.
Dun & Bradstreet's stock price began its recent spiral downward last Wednesday, when the company reported third-quarter results.
Net income rose to 83 cents a share from 72 cents a share the year-earlier period.
But analysts focused more on the drop in revenue, to $1.04 billion from $1.07 billion, reflecting in part a continuing drop in sales of the controversial credit-reporting services.
Last Thursday, Merrill Lynch securities analyst Peter Falco downgraded his investment rating on the firm, according to Dow Jones Professional Investors Report, citing a slowdown in the credit-reporting business.
He cut his rating to a short-term hold from above-average performer and reduced his 1990 earnings estimate.
Mr. Falco continues to rank the stock a longterm buy.
The stock slid $1.875 on more than four times average daily volume.
The stock received another blow on Friday, when Goldman Sachs analyst Eric Philo advised that investors with short-term horizons should avoid Dun & Bradstreet stock because it is unlikely to outperform the market.
The stock fell 75 cents.
Insider selling is not unusual at Dun & Bradstreet; in fact, the recent pace of selling is just about average for the company, according to figures compiled by Invest/Net, a North Miami, Fla., firm that specializes in tracking and analyzing SEC insider filings.
But previous sales have often been sales of shares purchased through the exercise of stock options and sold six months later, as soon as allowed, said Robert Gabele, president of Invest/Net.
The most recent sales don't appear to be option-related, he said.
TASTY PROFITS:
Michael A. Miles, chief executive officer of Philip Morris Cos.' Kraft General Foods unit, bought 6,000 shares of the company on Sept. 22 for $157 each.
The $942,000 purchase raised his holdings to 74,000 shares.
The stock split four-for-one on Oct. 10.
Mr. Miles's newly purchased shares are now worth $1,068,000, based on Philip Morris's closing price of $44.50, up 62.5 cents, in composite trading on the New York Stock Exchange yesterday.
A spokesman for Mr. Miles said he bought the shares because he felt they were "a good investment."
The executive made his purchases shortly before being named to his current chief executive officer's position; formerly he was Kraft General Foods' chief operating officer.
SHEDDING GLITTER:
Two directors of Pegasus Gold Inc., a Spokane, Wash., precious-metals mining firm, sold most of their holdings in the company Aug. 31.
John J. Crabb sold 4,500 shares for $11.13 each, leaving himself with a stake of 500 shares.
He received $50,085.
Peter Kutney sold 5,000 shares, all of his holdings, for $11.38 a share, or $56,900.
Gary Straub, corporate counsel for the company, said the directors sold for "personal financial reasons."
Both insiders declined to comment.
On Wall Street, Merrill Lynch & Co. analyst Daniel A. Roling rates the stock "neutral" and Drexel Burnham Lambert Inc. lists it as a "buy."
Pegasus Gold "has been on a lot of recommended lists as a junior growth company stepping into the big leagues," says Marty McNeill, metals analyst at Dominick & Dominick, a New York investment firm.
"It's a good company, and growing; there's nothing that would warrant that it be sold."
Yesterday, in composite trading on the American Stock Exchange, Pegasus closed at $10.125, up 12.5 cents.
Medieval philosophers used to hold the sensible belief that it was more perfect to exist than not to exist, and that to exist as a matter of necessity was most perfect of all.
Now, only God exists as a matter of absolute necessity; it is built into His nature.
But since the time of Darwin, we humans could at least claim a sort of natural necessity for the existence of our species.
Aren't we, after all, the inevitable culmination of that stately pageant called evolution?
If mutation and natural selection slowly but surely give rise to more and more advanced forms of life, then it was only a matter of eons before splendid beings endowed with reason, self-awareness and taste shimmered onto the scene.
Now along comes Stephen Jay Gould to dash this flattering illusion.
His credentials are excellent for the task.
Star lecturer at Harvard, author of numerous popular books on science, and scourge of the creationist lobby, Mr. Gould is perhaps the world's most eminent evolutionary theorist.
Yet he puts quite a twist on the old story handed down from Darwin.
For him, natural history is anything but a gradual, predictable march from primordial slime to human consciousness; it is a careening, chaotic affair in which the emergence of a featherless biped was a one-in-a-million shot.
In "Wonderful Life: The Burgess Shale and the Nature of History" (Norton, 326 pages, $19.95), Mr. Gould makes his case for "the awesome improbability of human evolution."
The argument turns on the discovery in 1909 of an amazing fossil quarry high in the Canadian Rockies called the Burgess Shale.
Here, in an area smaller than a city block, lay buried traces of countless weird creatures that had frolicked more than 500 million years ago -- creatures whose anatomical variety far exceeded what can be found in all the world's oceans today.
Such an embarrassment of riches was inconceivable to the man who discovered the Burgess Shale, one Charles Doolittle Walcott.
The received Darwinian wisdom of the day said that animals living so long ago must be simple in design, limited in scope and ancestral to contemporary species.
Accordingly, the hidebound traditionalist reconstructed hypothetical organisms from the Burgess fossils in such a way that they could be shoehorned into familiar categories.
It was not until the early 1970s that Cambridge Prof. Harry Whittington and two sharp graduate students began to publish a reinterpretation of the Burgess Shale.
By making clever inferences about how the squashed and distorted fossil remains corresponded to three-dimensional structures, this trio was able to piece together a series of wondrous beasties quite unlike anything currently on the planet.
One was so fantastic in appearance, it was dubbed Hallucigenia.
Would that Mr. Gould's minute descriptions of these creatures was always so colorful.
A good deal of the book is boring, particularly the endless allusions to high and pop culture and the frequent jokes festooning the text.
These turns do not provide sufficient relief from sentences like, "Most modern chelicerates have six uniramous appendages on the prosoma."
Interest picks up, though, when Mr. Gould gets around to discussing the meaning of the Burgess oddities for the theory of evolution.
Not long after the appearance of life, evidently, there was an explosive proliferation in the number of animal designs seen on the earth.
The vast majority of them, however, were wiped out by a succession of environmental upheavals that were too sudden and catastrophic for the normal rules of natural selection to operate.
Consequently, the winnowing process was like a lottery "in which each group {held} a ticket unrelated to its anatomical virtues.
" So much for survival of the fittest.
So much, too, for the notion that we humans triumphed in the Darwinian struggle by evolving big brains.
Our mammalian forerunners lucked out through the extraterrestrial impact that did in the dinosaurs because they were small, not smart.
If anyone has difficulty imagining a world in which history went merrily on without us, Mr. Gould sketches several.
In one, birds are the dominant carnivores; in another the seas abound with "little penises."
Back when the Burgess fauna were flourishing, it seems, human evolutionary hopes hung on the survival of a little worm with a backbone called Pikaia.
Mr. Gould finds this oddly exhilarating; like an existentialist of old, he views our contingency as "a source of both freedom and consequent moral responsibility."
I, by contrast, cannot help feeling that if some other curiosity from the Burgess Shale had survived instead, beings at once wiser and less boorish than Homo sapiens might have eventually gained earthly dominion.
But even if no conscious life had evolved here at all, the universe is a big place, and given the right conditions, sympathetic to creating some form of life.
Surely at some other cosmic address a Gouldoid creature would have risen out of the ooze to explain why, paleontologically speaking, "it is, indeed, a wonderful life."
Mr. Holt is a columnist for the Literary Review in London.
The Justice Department scrambled to play down the significance of its new guidelines concerning prosecutions under the federal racketeering law.
The guidelines were distributed to U.S. attorneys last summer but were disclosed for the first time by press reports this week.
They discourage prosecutors, under certain circumstances, from seeking court orders seizing the assets of racketeering defendants prior to trial.
But David Runkel, chief Justice Department spokesman, said the guidelines "are a codification and a clarification far more than a new direction."
Use of the Racketeer Influenced and Corrupt Organizations law against white-collar defendants, as opposed to alleged organized-crime figures, has come under attack from some defense lawyers and legal scholars.
Critics have complained that the law unfairly strips defendants of assets before a jury determines they have committed a crime and that aggressive use of the forfeiture provisions can ruin corporate defendants or force them into unfavorable plea bargains.
In the new guidelines, the Justice Department says that in attempting to freeze disputed assets before trial, "the government will not seek to disrupt the normal, legitimate business activities of the defendant" and "will not seek. . .to take from third parties assets legitimately transferred to them."
The guidelines also state, "The government's policy is not to seek the fullest forfeiture permissible under the law where that forfeiture would be disproportionate to the defendant's crime."
Another provision clarifies certain limits on when prosecutors may use tax-fraud charges as a basis for bringing a racketeering case.
Mr. Runkel declined to speculate on whether the guidelines would curb racketeering prosecutions against corporate defendants.
"The impact, if there is any, will be impossible to judge ahead of time because the decision whether to use {racketeering charges} is made in individual cases" by Justice Department officials in Washington, he said.
In a memorandum describing the guidelines, Assistant Attorney General Edward Dennis Jr. said that government efforts to freeze defendants' assets pending racketeering prosecutions "have been the subject of considerable criticism in the press."
But Mr. Runkel said the government isn't "backing off on these kinds of matters at all.
California legislators, searching for ways to pay for the $4 billion to $6 billion in damages from last week's earthquake, are laying the groundwork for a temporary increase in the state's sales tax.
The talk of a sales tax rise follows a rebuff from Congress on the question of how much the federal government is willing to spend to aid in California's earthquake relief efforts.
The state had sought as much as $4.1 billion in relief, but yesterday the House approved a more general scaled-back measure calling for $2.85 billion in aid, the bulk of which would go to California, with an unspecified amount going to regions affected by Hurricane Hugo.
That leaves the state roughly $2 billion to $4 billion short.
A sales tax increase appears to be the fastest and easiest to raise funds in a hurry.
According to the state department of finance, a one-penny increase in the state's six-cent per dollar sales tax could raise $3 billion.
Willie Brown, speaker of California's Assembly, said that Gov. George Deukmejian has agreed to schedule a special session of the legislature within two weeks.
California's so-called Gann limit effectively prevents the state from spending new tax money and so drastically limits its options in an emergency.
Both Mr. Brown, the state's most influential legislator, and Gov. Deukmejian favor a temporary sales tax increase -- should more money be needed than the state can raise from existing sources and the federal government.
According to a spokesman, the governor is also studying the possibility of raising state gasoline taxes.
Mr. Brown, meanwhile, believes "only one tax will be feasible, and it will be a one-penny sales tax increase," said Chuck Dalldorf, an aide.
One immediate source of money is an emergency fund set up by Gov. Deukmejian.
The fund has about $1 billion and is set up to handle "precisely the kind of emergency" the state faces, said Tom Beermann, the Governor's deputy press secretary.
But the fund's size is disputed by Mr. Brown's office, which estimates the fund holds from $630 million to $800 million.
Moreover, an aide to Mr. Brown said Gov. Deukmejian "has expressed a desire not to spend all the reserve on this."
To push through a sales tax increase, however, the state will have to suspend the Gann limit, citing an emergency.
And then it will be required to lower taxes by a corresponding amount during a three-year period after the temporary tax increase ends, said Cindy Katz, assistant director of the state department of finance.
A sales tax increase would require two-thirds approval in both houses of the state's legislature.
But observers expect broad support.
"If there's an emergency and there aren't sufficient funds from elsewhere, I think the attitude will be supportive," said Kirk West, president of the California Chamber of Commerce.
But others think property owners ought to pay a higher portion of the state's earthquake relief tab.
Since the late 1970s, California property owners have benefited from a tax rollback as a result of a state ballot initiative known as Proposition 13.
The state could also increase gasoline taxes; every one penny increase in the tax would yield $11 million a month.
But Gov. Deukmejian and others are reluctant to do anything to harm the state's chances of sharply raising gasoline taxes on a permanent basis.
To raise more highway funds, a measure to double the state's nine-cent a gallon tax over five years is set to appear on the state's June election ballot.
But some fear imposing a temporary gasoline tax increase in the meantime could undercut support among voters for the measure.
Not everyone is convinced the state must raise new revenue to meet its earthquake needs.
"It's possible, though not probable," that the state could get by with its existing resources and federal help, said Quentin Kopp, chairman of the state senate's transportation committee.
Separately, two men injured in last week's earthquake-triggered freeway collapse in Oakland began a legal battle against the state over whether officials adequately heeded warnings about the structure's safety.
The claims, which were filed with the State Board of Control but will probably end up in court, are the first arising out of the collapse of the so-called Cypress structure viaduct.
The men can defeat immunities that states often assert in court by showing that officials knew or should have known that design of the structure was defective and that they failed to make reasonable changes.
A Board of Control spokesman said the board had not seen the claim and declined to comment.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
Exxon Capital Corp. -- $200 million of 8 1/4% notes due Nov. 1, 1999, priced at 99.60 to yield 8.31%.
The notes, which are noncallable, were priced at a spread of 45 basis points above the Treasury's 10-year note.
Rated triple-A by both Moody's Investors Service Inc. and Standard & Poor's Corp., the issue will be sold through Salomon Brothers Inc.
Citicorp -- $200 million of 8 3/4% notes due Nov. 1, 1996, priced at 99.64 to yield 8.82%.
The noncallable issue was priced at a spread of 98 basis points above the Treasury's seven-year note.
Rated single-A-1 by Moody's and double-A by S&P, the issue will be sold through Salomon Brothers.
Boatmen's Bancshares Inc. -- $150 million of 9 1/4% subordinated notes due Nov. 1, 2001, priced at 99.821 to yield 9.275%.
The noncallable issue was priced at a spread of 140 basis points above the Treasury's 10-year note.
Rated single-A-3 by Moody's and single-A-minus by S&P, the issue will be sold through underwriters led by Morgan Stanley & Co.
Xerox Corp. -- $150 million of 8 3/4% notes due Nov. 1, 1995, priced at 99.555 to yield 8.85%.
The noncallable issue was priced to yield 105 basis points above the Treasury's fiveyear note.
Rated single-A-2 by Moody's and single-A-plus by S&P, the issue will be sold through underwriters led by Salomon Brothers.
American General Finance Corp. -- $150 million of 8.45% notes due Oct. 15, 2009, through Bear, Stearns & Co., being offered at a price of 99.661 to yield 8.50%.
The noncallable issue, which has a one-time put Oct. 15, 1999, was priced at a spread of 66 basis points above the Treasury's 10-year note.
The issue is rated single-A-1 by Moody's and single-A-plus by S&P.
Baltimore Gas & Electric Co. -- $100 million of first and refunding mortgage bonds, due Oct. 15, 1999, through Shearson Lehman Hutton Inc., offered at par to yield 8.40%.
The noncallable issue is rated double-A-3 by Moody's and double-A-minus by S&P.
It was priced at a spread of 55 basis points above the Treasury's 10-year note.
Massachusetts -- $230 million of general obligation bonds, consolidated loan of 1989, Series D, due 1990-2009, through a Goldman, Sachs & Co. group.
The insured bonds, rated triple-A by Moody's and S&P, were priced to yield from 6.00% in 1990 to 7.20% in 2009.
Broward County School District, Fla. -- $185 million of school district general obligation bonds, Series 1989, due 1991-1999 and 2008, tentatively priced by a First Boston Corp. group to yield from 6.20% in 1991 to 7.30% in 2008.
There are $120.7 million of 7 1/8% term bonds due 2008, priced to yield 7.30%.
Serial bonds are priced to yield to 7% in 1999.
The bonds are rated single-A-1 by Moody's and double-A-minus by S&P.
Culver City Redevelopment Financing Authority, Calif. -- $145 million of revenue bonds, Series 1989, tentatively priced by a Stone & Youngberg group.
The issue includes $100 million of insured senior lien bonds.
These consist of current interest bonds due 1990-2002, 2010 and 2015, and capital appreciation bonds due 2003 and 2004, tentatively priced to yield from 5.75% in 1990 to 7.14% in 2010.
Bonds due 2003, 2004 and 2015 aren't being formally reoffered.
There are also $40 million of uninsured subordinate lien bonds, due Dec. 1, 2008, and Dec. 1, 2015.
There are $15,015,000 of 7 1/2% bonds priced at par and due 2008 and $24,985,000 of 7.6% bonds priced at par and due 2015.
The insured bonds are rated triple-A by Moody's and S&P.
The uninsured subordinate lien bonds aren't rated, according to the lead underwriter.
West Virginia Parkways, Economic Development and Tourism Authority -- $143 million of parkway revenue bonds, Series 1989, with current interest bonds due 1990-2002 and 2019 and capital appreciation bonds due 2003-2008, tentatively priced by a PaineWebber Inc. group to yield from 6% in 1990 to 7.31% in 2019.
There are $86,525,000 of 7 1/8% bonds priced at 97 3/4 to yield 7.31% in 2019.
Current interest serial bonds are tentatively priced to yield to 7.05% in 2002.
Capital appreciation bonds are priced to yield to maturity from 7.10% in 2003 to 7.25% in 2007 and 2008.
The bonds are insured and rated triple-A by Moody's and S&P.
Connecticut Housing Finance Authority -- $132.8 million of housing mortgage revenue bonds priced by a PaineWebber Inc. group.
The $82.8 million of Series B bonds, which aren't subject to the alternative minimum tax, were priced at par to yield from 6.85% in 2000 to 7.20% in 2009.
Meanwhile, the $50 million of Series C bonds, which are suject to the alternative minimum tax, were priced at par to yield from 6.25% in 1990 to 7.10% to 2000.
The issue is expected to receive a double-A rating from Moody's, the underwriter said.
An S&P rating of double-A-plus has already been confirmed.
Montgomery County, Md. -- $75 million of general obligation, Series B, consolidated public improvement bonds of 1989, through a Manufacturers Hanover Trust Co. group.
The bonds, rated triple-A by Moody's and S&P, were priced to yield from 5.75% in 1990 to 6.90% in 2006 to 2009.
Federal Home Loan Mortgage Corp. -- $500 million of Remic mortgage securities being offered by Prudential-Bache Capital Funding Inc.
There were no details available on the pricing of the issue, Freddie Mac's Series 108.
The issue is backed by Freddie Mac 8 1/2% securities.
Hanwa Co. (Japan) -- Two-part, $800 million issue of bonds due Nov. 9, 1994, with equity-purchase warrants, indicating a 4 3/8% coupon at par.
European portion of $700 million via Yamaichi International Europe Ltd.
Asian portion of $100 million via Yamatane Securities Europe Ltd.
Each $5,000 bond carries one warrant, exercisable from Nov. 28, 1989, through Oct. 26, 1994, to buy shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Oct. 26.
Japan Storage Battery Co. -- $100 million of bonds due Nov. 9, 1993, with equity-purchase warrants, indicating a 3 7/8% coupon at par via Nikko Securities Co. (Europe) Ltd.
Guaranteed by Mitsubishi Bank Ltd.
Each $5,000 bond carries one warrant, exercisable from Nov. 27, 1989, through Oct. 26, 1993, to buy shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Nov. 1.
Sanraku Inc. (Japan) -- $100 million of bonds due Nov. 9, 1993, with equity-purchase warrants, indicating a 3 7/8% coupon at par, via Nomura International.
Guaranteed by Dai-Ichi Kangyo Bank Ltd.
Each $5,000 bond carries one warrant, exercisable from Nov. 21, 1989, through Oct. 19, 1993, to buy shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Oct. 31.
Nippon Signal Co. (Japan) -- 80 million marks of bonds with equity-purchase warrants, indicating a 1 1/2% coupon, due Nov. 9, 1994, and priced at par, via Commerzbank.
Guaranteed by Fuji Bank.
Each 5,000 mark bond carries one warrant and one certificate for four warrants, exercisable from Dec. 18, 1989, to Oct. 26, 1994, to buy shares at an expected premium of 2 1/2% above the closing share price when prices are fixed Oct. 30.
Miyoshi Oil & Fat Co. (Japan) -- 120 million Swiss francs of privately placed convertible notes due Dec. 31, 1993, with a fixed 0.25% coupon at par, via Union Bank of Switzerland.
Put option on Dec. 31, 1991, at a fixed 107 to yield 3.43%.
Each 50,000 Swiss franc bond convertible from Nov. 28, 1989, to Dec. 20, 1993, at a 5% premium over closing share price Oct. 30, when terms are scheduled to be fixed.
Fokker N.V. (Netherlands) -- 150 million Swiss francs of convertible bonds due Nov. 15, 1997, with a fixed 4% coupon at par via Union Bank of Switzerland.
Each 5,000 Swiss franc bond convertible from Jan. 3, 1989, to Oct. 31, 1997.
Fees 2 1/8.
Sapporo Lion Ltd. (Japan) -- 50 million Swiss francs of privately placed convertible notes due Dec. 31, 1994, with a 0.25% coupon at par, via Yamaichi Bank (Switzerland).
Put option on Dec. 31, 1991, at an indicated 107 7/8 to yield 3.84%.
Each 50,000 Swiss franc note convertible from Dec. 1, 1989, to Dec. 16, 1994, at 5% premium over the closing share price Oct. 26, when terms are scheduled to be fixed.
Credit Local de France -- 100 million Swiss francs of 6%, privately placed notes due Dec. 1, 1996, priced at 100 1/2 to yield 5.91%, via Swiss Bank Corp.
People start their own businesses for many reasons.
But a chance to fill out sales-tax records is rarely one of them.
Red tape is the bugaboo of small business.
Ironically, the person who wants to run his or her own business is probably the active, results-oriented sort most likely to hate meeting the rules and record-keeping demands of federal, state and local regulators.
Yet every business owner has to face the mound of forms and regulations -- and often is the only one available to tackle it.
There is hope of change.
Last week, Sen. Malcolm Wallop (R., Wyo.) held hearings on a bill to strengthen an existing law designed to reduce regulatory hassles for small businesses.
"A great many federal regulations are meant for larger entities and don't really apply to small businesses," says Marian Jacob, a legislative aide to Sen. Wallop.
Other lawmakers are busy trying to revive the recently lapsed Paperwork Reduction Act, which many feel benefited small enterprises.
Thus, optimistic entrepreneurs await a promised land of less red tape -- just as soon as Uncle Sam gets around to arranging it.
Meanwhile, they tackle the mounds of paper -- and fantasize about a dream world where bulk-mail postal regulations and government inspectors are banished.
To find out what red tape riles entrepreneurs most, the Journal asked a completely unscientific, random sample of business owners to fantasize about the forms and regulations they would most like to get lost in the mail.
Some entrepreneurs say the red tape they most love to hate is red tape they would also hate to lose.
They concede that much of the government meddling that torments them is essential to the public good, and even to their own businesses.
Rules that set standards for products or govern business behavior, generally the best regarded form of red tape, "create a level playing field and keep unscrupulous competitors away," says Sidney West, president of TechDesign International Inc., a Springfield, Va., business that designs telecommunication and other products.
Mr. West cites the Federal Communications Commission and its standards for telecommunications equipment: "They monitor product quality and prevent junk from flooding the market."
Some gripes about red tape are predictable: Architects complain about a host of building regulations, auto leasing companies about car insurance rules.
Determining when handicapped access is required can be a nightmare for architects, says Mark Dooling, president of Dooling & Co., a Newton, Mass., architectural firm.
There is such a maze of federal, state and local codes that "building inspectors are backing away from interpreting them," Mr. Dooling says.
Taxi, leasing and other companies that maintain fleets of vehicles devote substantial resources to complying with state insurance laws and a host of agencies.
"It's very costly and time-consuming," says Phil Rosen, a partner in Fleet & Leasing Management Inc., a Boston car-leasing company.
One senior executive at his firm spends nearly 20% of his time on insurance, he says.
Other forms of red tape are more pervasive.
The most onerous, many entrepreneurs say, is the record-keeping and filing required by tax authorities.
Complying with environmental and workplace regulations runs a close second.
But gripes run the gamut.
Here is the red tape that irks surveyed business owners the most:
ENVIRONMENTAL REGULATIONS:
Next to medical insurance, "costs of compliance" are the fastest-growing expense at Impco Inc., a Providence, R.I., chemical company.
Peter Gebhard, the company's owner, says spending on regulatory paper work and the people to do it -- mostly to comply with federal, state and local environmental laws -- will rise almost 30% this year to $100,000.
Mr. Gebhard adds that spending on environmental red tape amounts to between 6.5% and 7.5% of Impco's total operating expenses.
Eastern Reproduction Corp., a Waltham, Mass., maker of thin metal precision parts, must report to five federal and state agencies as well as to local fire, police, hospital and plumbing authorities, says Robert Maguire, president.
One state environmental regulator returned a report because "it wasn't heavy enough, it couldn't have been correct," Mr. Maguire says.
WITHHOLDING RULES:
Employers must deposit withholding taxes exceeding $3,000 within three days after payroll -- or pay stiff penalties -- and that's a big problem for small businesses.
It's especially nettlesome "if you're on the road and you're the one responsible," says Eddie Brown, president of Brown Capital Management Inc., a Baltimore money-management firm.
EMPLOYEE MANUALS:
Revising employee manuals on pensions, health care and other subjects costs over $25,000 a year for Bert Giguiere, president of Professional Agricultural Management Inc., a Fresno, Calif., provider of business services to farmers.
An employer leaves itself open to a great deal of liability if its employee manuals don't reflect the most recent laws, he says.
But the ever-changing laws are usually so complicated and confusing that "you need professionals to help you; you can't do it yourself," he adds.
PENSION AND PROFIT-SHARING RULES:
Complying with these is enough to make business owners look forward to their own pension days.
Yearly changes in federal benefit laws force small businesses to repeatedly re-evaluate and redesign existing plans.
Alice Fixx, who runs her own public-relations concern in New York, says she has had to overhaul her pension and profit-sharing plans three times in the past three years.
"It doesn't increase benefits, but it's costly and time-consuming," Ms. Fixx says.
Compliance added 15% to 20% to her accounting bill last year, she says.
SALES TAX RECORDS:
Advertising agencies and other service companies are exempt from city and state sales tax in most locales -- but the exemption comes at a price of exhaustive records and rigorous reviews.
To justify their exempt status and avoid penalties, these businesses must show once a year that each and every transaction on which they didn't pay sales tax was a legitimate business expense.
"You need one person to just take care of sales tax," says Jennie Tong, executive vice president of Lee Liu & Tong Advertising Inc., New York.
When the Trinity Repertory Theater named Anne Bogart its artistic director last spring, the nation's theatrical cognoscenti arched a collective eyebrow.
Ms. Bogart, an acclaimed creator of deconstructed dramatic collages that tear into such sacred texts as Rodgers and Hammerstein's "South Pacific," is decidedly downtown.
Trinity Rep meanwhile is one of the nation's oldest and most respected regional theaters, still hosting an annual "A Christmas Carol."
How would this bastion of traditional values fare in Ms. Bogart's iconoclastic hands?
She held her fire with her first production at the Trinity earlier this season.
It was a predictable revival of her prize-winning off-Broadway anthology of Bertolt Brecht's theoretical writings, called "No Plays, No Poetry."
Now, with the opening of Maxim Gorky's bourgeois-bashing "Summerfolk," Ms. Bogart has laid her cards on the table.
Hers is a hand that will test the mettle of her audiences.
For Ms. Bogart, who initially studied and directed in Germany (and cites such European directors as Peter Stein, Giorgio Strehler and Ariane Mnouchkine as influences) tends to stage her productions with a Brechtian rigor -- whether the text demands it or not.
And Gorky, considered the father of Soviet socialist realism, did not write plays that easily lend themselves to deliberately antirealistic distancing techniques.
Gorky was a loyal if occasionally ambivalent proletarian writer committed to enlightening the masses with plain speaking rooted in a slightly sour version of Chekhovian humanism.
And "Summerfolk," penned in 1904 as a kind of sequel to Chekhov's "Cherry Orchard," is a lawn party of Russian yuppies engaged in an exhausting ideological fight to the finish between the allrightniks and the reformers.
Along the way there also are lots of romantic dalliances.
Wisely Ms. Bogart has kept Gorky's time and place intact.
Despite the absence of samovars (and a tendency to turn the furniture upside down), the production is rich in Russian ennui voiced by languorous folk sporting beige linen and rumpled cotton, with boaters and fishing poles aplenty.
But beyond this decorative nod to tradition, Ms. Bogart and company head off in a stylistic direction that all but transforms Gorky's naturalistic drama into something akin to, well, farce.
The director's attempt to force some Brechtian distance between her actors and their characters frequently backfires with performances that are unduly mannered.
Not only do the actors stand outside their characters and make it clear they are at odds with them, but they often literally stand on their heads.
Like Peter Sellars, Ms. Bogart manipulates her actors as if they were rag dolls, sprawling them on staircases, dangling them off tables, even hanging them from precipices while having them perform some gymnastic feats of derring-do.
There are moments in this "Summerfolk" when the characters populating the vast multilevel country house (which looks like a parody of Frank Lloyd Wright and is designed by Victoria Petrovich) spout philosophic bon mots with the self-conscious rat-a-tat-tat pacing of "Laugh In."
"Talk hurts from where it spurts," one of them says.
The clash of ideologies survives this treatment, but the nuance and richness of Gorky's individual characters have vanished in the scuffle.
As for the humor that Gorky's text provides, when repainted in such broad strokes (particularly by the lesser members of the ensemble) it looks and sounds forced.
Ms. Bogart does better with music than with words when she wants, as she so often does want, to express herself through Gorky's helpless play.
Here she has the aid of her longtime associate Jeff Helpern, whom she appointed Trinity's first-ever musical director and whom she equipped with a spanking new $60,000 sound system and recording studio.
For Gorky, Mr. Helpern provided an aural collage of Debussy and Rachmaninoff, which is less a score than a separate character with a distinct point of view.
Like Brecht, and indeed Ezra Pound, Ms. Bogart has said that her intent in such manipulative staging of the classics is simply an attempt to "make it new."
Indeed, during a recent post-production audience discussion, the director explained that her fondest artistic wish was to find a way to play "Somewhere Over the Rainbow" so that the song's "original beauty comes through," surmounting the cliche.
The danger that Ms. Bogart seems to be courting here is one of obfuscation rather than rejuvenation, a vision so at odds with the playwright's that the two points of view nullify, rather than illuminate, each other.
Ms. Bogart's cast is part and parcel of the problem.
Ed Shea and Barbara Orson never find a real reason for their love affair as the foolish, idealistic young Vass and the tirelessly humanitarian doctor Maria Lvovna.
Cynthia Strickland as the long-suffering Varvara is a tiresome whiner, not the inspirational counterrevolutionary Gorky intended.
Better to look in the corners for performances that inspire or amuse.
Janice Duclos, in addition to possessing one of the evening's more impressive vocal instruments, brings an unsuspected comedic touch to her role of Olga, everybody's favorite mom.
Marni Rice plays the maid with so much edge as to steal her two scenes.
But it is the Trinity Rep newcomer, Jonathan Fried (Zamislov, the paralegal) who is the actor to watch, whether he is hamming it up while conducting the chamber musicians or seducing his neighbor's wife (Becca Lish) by licking her bosom.
Ms. de Vries writes frequently about theater.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
MORGAN STANLEY, THE ONCE STODGY investment house, in 1974 helped a corporate client complete a hostile takeover.
It was the start of a boom in unfriendly, even ungentlemanly, mergers.
On July 18, 1974, International Nickle of Canada -- advised by Morgan -- offered $28 a share, equal to $157 million, for ESB, a Philadelphia battery maker.
ESB said it was given only a three-hour advance warning on a "take it or leave it" basis from Inco, as the Toronto company is called.
"ESB is aware that a hostile tender offer is being made by a foreign company for all of ESB's shares," said F.J. Port, ESB's president.
"Hostile" thus entered the merger-acquisition lexicon.
Joseph Flom, of Skadden, Arps, Slote, Meagher & Flom, which became a leading legal firm in merger cases, said the case "made takeovers respectable."
ESB spurned Inco and within five days ESB had a "white knight" as United Aircraft -- headed by Harry Gray, a shrewdly friendly acquirer of companies -- offered $34 a share.
Gray was advised by Goldman Sachs and Merrill Lynch.
ESB directors warmly accepted, but a whirlwind bidding match ensued.
Within a few days in July, Inco raised its bid to $36 and United matched it.
On a single day Inco lifted its offer to $38 and then to $41, equal to $225.5 million.
United met the $38 but then withdrew.
ESB on July 29 accepted the Inco offer and the brief battle -- unlike the intricate and lengthy big takeovers of 1984-1989 -- was over.
The new gritty game became a money maker for Wall Street's once austere old-name houses.
Inco paid Morgan an advisory fee of about $250,000, a paltry figure by today's measures.
Early this year Morgan and three other investment houses each received $25 million in advisory fees from Kohlberg Kravis & Roberts in its $25 billion friendly buy-out of RJR Nabisco.
HomeFed Corp. said third-quarter net income slid 14% to $23.9 million, or $1.10 per fully diluted share, from $27.9 million, or $1.21 a fully diluted share, because of increased bad assets and unexpected trouble in unloading foreclosed property.
The decline surprised analysts and jolted HomeFed's stock, which lost 8.6% of its value, closing at $38.50 on the New York Stock Exchange, down $3.625.
HomeFed had been one of the handful of large West Coast thrifts that in recent quarters had counteracted interest-rate problems dogging the industry by keeping a lid on problem assets and lending heavily into the furious California housing market.
Analysts had been projecting fully diluted earnings in the third quarter in the range of about $1.30 a share.
However, HomeFed's loan originations and purchases plunged 26% in the quarter, to $1.4 billion from $1.9 billion a year earlier.
Meanwhile, non-performing assets rose to $593 million from $518.7 million.
Some $380 million of the troubled assets is repossessed real estate, a 55.6% surge from the $244.2 million of repossesed property HomeFed held a year ago.
HomeFed has $17.9 billion of assets.
HomeFed said most of the troubled assets are apartment complexes, shopping malls and other commercial real estate.
It said about half are in California, with the rest scattered across the country.
It said sales of such properties were slower than anticipated in the third quarter, but it expects sales to pick up in the rest of the year.
HomeFed said the slide in loan originations was more a matter of design than a sign of cooling in the California market.
Any such downturn in California would be grim news for West Coast thrifts, particularly the less healthy ones, which have performed poorly even with a torrid market.
But HomeFed said it purposely curbed loan originations in the quarter because of uncertainty over the new capital requirements and regulations that will emerge from negotiations over implementing the government's massive thrift bailout bill.
It said its real-estate operations earned a record $21.7 million, more than double year-earlier real estate profit of $9 million.
And analysts said they see no signs of an imminent swoon in California real estate, even with last week's earthquake.
The thrift said earnings also were nicked in the quarter by a $4 million provision for losses associated with its previously reported plan to liquidate a real-estate franchise network.
For the nine months, HomeFed earned $82.5 million, or $3.52 a fully diluted share, a 4.3% increase from year-earlier net income of $79.1 million, or $3.43 a fully diluted share.
Yields on certificates of deposit at major banks were little changed in the latest week.
The average yield on six-month CDs of $50,000 and less slipped to 7.96% from 8.00%, according to Banxquote Money Markets, an information service based here.
On one-year CDs of $50,000 and less, the average slid to 8.02% from 8.06%.
Both issues are among the most popular with individual investors.
"Because of shrinkage in the economy, rates can be expected to decline over a one-year horizon," said Norberto Mehl, chairman of Banxquote.
"It's unclear how much rates can fall and how soon."
Changes in CD yields in the week ended Tuesday were in line with blips up and down within a fairly narrow range for the last two months.
Interest rates generally began declining last spring after moving steadily upward for more than a year.
The average yield on small-denomination three-month CDs moved up two-hundredths of a percentage point in the latest week to 7.85%.
Long-term CDs declined just a fraction.
The average yield on both two-year CDs and five-year CDs was 7.98%.
Only CDs sold by major brokerage firms posted significant increases in average yields in the latest week, reflecting increased yields on Treasury bills sold at Monday's auction.
The average yield on six-month broker-sold CDs rose to 8.29% from 8.05% and on one-year CDs the average yield rose to 8.30% from 8.09%.
The brokerage firms, which negotiate rates with the banks and thrifts whose CDs they sell, generally feel they have to offer clients more than they can get on T-bills or from banks and thrifts directly.
T-bills sold at Monday's auction yielded 7.90% for six months and 7.77% for three months, up from 7.82% and 7.61%, respectively, the week before.
So-called jumbo CDs, typically in denominations of $90,000 and up, also usually follow T-bills and interest rate trends in general more than those aimed at small investors.
Some jumbos posted fractional changes in average yields this week, both up and down.
The average yield on threemonth jumbos rose to 8.00% from 7.96%, while the two-year average fell by the same amount to 7.89%.
Six-month and oneyear yields were unchanged, on average.
"The (CD) market is unsettled right now," said Banxquote's Mr. Mehl.
"It's very easily influenced by changes in the stock market and the junk bond market."
The small changes in averages reflect generally unchanged yields at many major banks.
Some, however, lowered yields significantly.
At Chase Manhattan Bank in New York, for example, the yield on a small denomination six-month CD fell about a quarter of a percentage point to 8.06%.
In California, Bank of America dropped the yield on both six-month and one-year "savings" CDs to 8.33% from 8.61%.
Yields on money-market deposits were unchanged at an average 6.96% for $50,000 and less and down just a hundredth of a percentage point to 7.41% for jumbo deposits.
Lion Nathan Ltd. agreed to buy the franchise to bottle, distribute and market Pepsi-Cola soft-drink products in Australia, the company said.
The New Zealand brewing and retail concern didn't disclose terms.
The agreement is effective Jan. 1 and is subject to approval from Australia's Foreign Investment Review Board.
Cadbury Schweppes Australia Ltd. has held the Australian Pepsi franchise for the past four years.
Lion Nathan and PepsiCola Australia, a unit of PepsiCo Inc. of the U.S., didn't say why Cadbury Schweppes will no longer hold the franchise.
Wang Laboratories Inc. has sold $25 million of assets and reached agreements in principle to sell an additional $187 million shortly, Richard Miller, president, said at the annual meeting.
He said Wang had reached an agreement with a "major financial firm" to sell for $150 million its domestic equipment lease portfolio and that of its Wang Credit Corp. subsidiary.
He said it also agreed to sell a portion of its European real estate unit for $37 million.
Mr. Miller said that Wang has already sold some $12 million of miscellaneous assets and disclosed that it had received $13 million from Compaq Computer Corp., Houston, in the previously announced sale of its Stirling, Scotland, plant.
Mr. Miller repeated that in the next six months he plans to sell another $200 million to $300 million of assets to repay debt and reduce interest costs at Wang, a minincomputer maker in Lowell, Mass.
In response to questions after the annual meeting, Mr. Miller said the company is no longer looking for an equity investor.
During the summer, Wang executives had said they might seek outside investment.
Murata Mfg. Co. said it is establishing a subsidiary in Britain to produce electric parts, including ceramic condensers.
The Tokyo maker of ceramic capacitors said it purchased a plant in Plymouth.
The company didn't disclose a purchase price or capitalization figures.
Murata said, however, it will invest about 1.4 billion yen ($9.9 million) in the new company.
Production is slated to begin in April.
The company, which has a European foothold, Murata Europe Management G.m.b.H. in Germany, said the latest venture is designed to meet demand for electric parts in European Community countries ahead of the creation of the unified market by the end of 1992.
Murata expects sales at the unit of about 1.5 billion yen in the first year.
Safeway Stores Inc. reported a 69% decline in profit for the fiscal third quarter, but said operating improvements were masked by unusual gains in the year-earlier period.
The Oakland grocery retailer, closely held since a $4.2 billion leveraged buy-out in 1986, said profit for the three months ended Sept. 9 was $7.1 million, compared with $23 million a year earlier.
But it said the year-earlier results included gains of $23.5 million from divestitures.
Sales rose 4.2% to $3.31 billion from $3.2 billion.
For the nine months, the company said profit fell 49% to $23.5 million from $46 million in the year-earlier quarter, which included divestiture-related gains of $50.6 million.
Sales increased 5.5% to $9.81 billion from $9.3 billion.
Benjamin Jacobson & Sons has been the New York Stock Exchange specialist firm in charge of trading stock in UAL Corp. and its predecessors since the early 1930s.
But the firm has never had a day like yesterday.
At first UAL didn't open because of an order imbalance.
When it did a half-hour into the session, it was priced at $150 a share, down more than $28 from Monday's close.
It sank further to as low as $145, but a big rally developed in the last half hour, pushing the stock back up to close at $170, down just $8.375 from Monday.
In the process, 4.9 million shares traded, making UAL the second most active issue on the Big Board.
Munching pizza when they could and yelling until their voices gave out, the two Benjamin Jacobson specialists at the Big Board's UAL trading post yesterday presided over what can only be described as a financial free-for-all.
"It was chaotic.
But we like to call it 'controlled chaos,'" said 47-year-old Robert J. Jacobson Jr., grandson of the firm's founder.
He manned the UAL post yesterday with Christopher Bates, 33, an energetic Long Islander who's a dead ringer for actor Nicolas Cage.
Who was doing all the selling?
"Options traders, arbitrage traders -- everyone," said Mr. Bates, cooling down with a carton of apple juice after the close yesterday.
Added Mr. Jacobson, "There were some pretty bad losses in the stock."
Big Board traders said a 200,000-share buy order at $150 a share entered by Bear, Stearns & Co., which was active in UAL stock all day, is what set off the UAL crowd in the late afternoon.
A subsequent rally in UAL helped the staggering stock market stage an astonishing recovery from an 80-point deficit to finish only slightly below Monday's close.
Both Jacobson traders, who had been hoping UAL trading would get back to normal, read the news about the unraveling of UAL takeover plans on the train into work yesterday morning.
The news told them it would be a while longer before UAL resumed trading like a regular airline stock after months of gyrations.
When Mr. Jacobson walked into the office at 7:30 a.m. EDT, he announced: "OK, buckle up."
Messrs. Jacobson and Bates walked on the Big Board floor at about 8:45 a.m. yesterday and immediately spotted trouble.
Already entered in the Big Board's computers and transmitted to their post were sell orders for 65,000 UAL shares.
The UAL news had already caused a selling furor in the so-called third market, in which firms buy and sell stock away from the exchange floor.
UAL, which closed on the Big Board Monday at $178.375 a share, traded in the third market afterward as low as $158 a share.
There were rumors of $148-a-share trades.
In the 45 minutes before the 9:30 opening bell, the Jacobson specialists kept getting sell orders, heavier than they imagined.
And at 9:15, they posted a $135 to $155 "first indication," or the price range in which the stock would probably open.
That range was quickly narrowed to $145 to $155, although traders surrounding the post were told that $148 to $150 would be the likely target.
When UAL finally opened a half hour late, some 400,000 shares traded at $150.
There was "selling pressure from everyone," said one trader.
This month's Friday-the-13th market plunge spurred by UAL news wasn't as bad for the Jacobson specialists as yesterday's action.
On that earlier day, the stock's trading was halted at a critical time so the specialists could catch their breath.
Not yesterday.
Mr. Jacobson, his gray hair flying, didn't wear out his red-white-and-blue sneakers, but he sweat so much he considered sending out for a new shirt.
Mr. Bates usually handles day-to-day UAL trading on his own.
But yesterday, the heavy trading action eventually consumed not only Messrs. Jacobson and Bates but four other Jacobson partners, all doing their specialist-firm job of tugging buyers and sellers together and adjusting prices to accommodate the market.
About 30 floor traders crammed near the UAL post most of the day, and probably hundreds more came and went -- a "seething mass," as one trader described it.
The 4.9 million-share volume flowing through the Jacobson specialist operation was about five times normal for the stock.
The heavy buying in the last half hour led the specialists to take special steps.
The Bear Stearns order that marked the late-day turnaround caused a "massive buying effort" as UAL jumped $20 a share to $170 in the last half hour, said Mr. Bates.
With 15 seconds of trading to go, Mr. Jacobson, with what voice he had left, announced to the trading mob: "We're going to trade one price on the bell."
That meant no trading would occur in the final seconds, as a way of making sure that last-second orders aren't subjected to a sudden price swing that would upset customers.
About 11,000 shares sold at $170 on the bell, representing about eight to 10 late orders, the specialists estimate.
Big Board traders praised the Jacobson specialists for getting through yesterday without a trading halt.
In Chicago, a UAL spokesman, "by way of policy," declined to comment on the company's stock or the specialists' performance.
Leaving the exchange at about 5 p.m., the Jacobson specialists made no predictions about how trading might go today.
Said Earl Ellis, a Jacobson partner who got involved in the UAL action, "It all starts all over again" today.
Britain's current account deficit dropped to #1.6 billion ($2.56 billion) in September from an adjusted #2 billion ($3.21 billion) the previous month, but the improvement comes amid increasing concern that a recession could strike the U.K. economy next year.
The Confederation of British Industry's latest survey shows that business executives expect a pronounced slowdown, largely because of a 16-month series of interest-rate increases that has raised banks' base lending rates to 15%.
"The outlook has deteriorated since the summer, with orders and employment falling and output at a standstill," said David Wigglesworth, chairman of the industry group's economic committee.
He also said investment by businesses is falling off.
Of 1,224 companies surveyed, 31% expect to cut spending on plant equipment and machinery, while only 28% plan to spend more.
But despite mounting recession fears, government data don't yet show the economy grinding to a halt.
Unemployment, for example, has continued to decline, and the September trade figures showed increases in both imports and exports.
As a result, Prime Minister Margaret Thatcher's government isn't currently expected to ease interest rates before next spring, if then.
Chancellor of the Exchequer Nigel Lawson views the high rates as his chief weapon against inflation, which was ignited by tax cuts and loose credit policies in 1986 and 1987.
Officials fear that any loosening this year could rekindle inflation or further weaken the pound against other major currencies.
Fending off attacks on his economic policies in a House of Commons debate yesterday, Mr. Lawson said inflation "remains the greatest threat to our economic well-being" and promised to take "whatever steps are needed" to choke it off.
The latest government figures said retail prices in September were up 7.6% from a year earlier.
Many economists have started predicting a mild recession next year.
David Owen, U.K. economist with Kleinwort Benson Group, reduced his growth forecast for 1990 to 0.7% from 1.2% and termed the risk of recession next year "quite high."
But he said the downturn probably won't become a "major contraction" similar to those of 1974 and 1982.
Still, Britain's current slump is a cause for concern here as the nation joins in the European Community's plan to create a unified market by 1992.
Compared with the major economies on the Continent, the U.K. faces both higher inflation and lower growth in the next several months.
As a result, Mr. Owen warned, investment will be more likely to flow toward the other European economies and "the U.K. will be less prepared for the single market."
Britain's latest trade figures contained some positive news for the economy, such as a surge in the volume of exports, which were 8.5% higher than a year earlier.
But while September exports rose to #8.43 billion, imports shot up to #10.37 billion.
The resulting #1.9 billion merchandise trade deficit was partly offset by an assumed surplus of #300 million in so-called invisible items, which include income from investments, services and official transfers.
Despite the narrowing of the monthly trade gap, economists expect the current account deficit for all of 1989 to swell to about #20 billion from #14.6 billion in 1988.
Increasingly, economists say the big deficit reflects the slipping competitive position of British industry.
"When the country gets wealthier, we tend to buy high-quality imports," Mr. Owen said.
Vickers PLC, a British aerospace, defense and automotive conglomerate, said it reached an agreed cash bid of #108.2 million ($173.3 million) for Ross Catherall Group PLC, a maker of specialty alloy and ceramics.
The company said it expects to receive acceptances for its offer of 253 pence ($4.05) per share representing at least 67% of Ross Catherall's issued share capital, or 12.7 million ordinary shares.
Vickers said its offer also includes an option to receive a redeemable loan note in lieu of cash.
The notes can be redeemed starting in July 1991.
The company said its acquisition of Ross Catherall will be covered largely by cash raised in its July disposal of Howson-Algraphy for #241.7 million.
If bluebloods won't pay high prices for racehorses anymore, who will?
Breeders are betting on the common folk.
The Thoroughbred Owners and Breeders Association, a Lexington, Ky.-based trade group, has launched "seminars" for "potential investors" at race tracks around the country.
The group, which has held half a dozen seminars so far, also is considering promotional videos and perhaps a pitch to Wall Street investment bankers.
"People in this business have been insulated," says Josh Pons, a horse breeder from Bel Air, Md.
"But the real future of this game is in a number of people owning a few horses."
At the Laurel race track, the breeders are romancing people like Tim Hulings, a beer packaging plant worker.
Right now, Mr. Hulings is waving his racing program, cheering for Karnak on the Nile, a sleek thoroughbred galloping down the home stretch.
Mr. Hulings gloats that he sold all his stocks a week before the market plummeted 190 points on Oct. 13, and he is using the money to help buy a 45-acre horse farm.
"Just imagine how exciting that would be if that's your horse," he says.
But experts caution that this isn't a game for anyone with a weak stomach or wallet.
"It's a big-risk business," warns Charles C. Mihalek, a Lexington attorney and former Kentucky state securities commissioner.
"You have to go into it firmly believing that it's the kind of investment where you can lose everything."
And many have done just that.
Consider Spendthrift Farm, a prominent Lexington horse farm that went public in 1983 but hit hard times and filed for bankruptcy-court protection last year.
A group of investors recently bought the remaining assets of Spendthrift, hoping to rebuild it.
Other investors have lost millions in partnerships that bought thoroughbred racehorses or stallion breeding rights.
One big problem has been the thoroughbred racehorse market.
From 1974 to 1984, prices for the best yearlings at the summer sales rose 918% to an average of $544,681.
Since then, prices have slumped, to an average of $395,374 this summer.
But that's for the best horses, with most selling for much less -- as little as $100 for some pedestrian thoroughbreds.
Even while they move outside their traditional tony circle, racehorse owners still try to capitalize on the elan of the sport.
Glossy brochures circulated at racetracks gush about the limelight of the winner's circle and high-society schmoozing.
One handout promises: "Pedigrees, parties, post times, parimutuels and pageantry."
"It's just a matter of marketing and promoting ourselves," says Headley Bell, a fifth-generation horse breeder from Lexington.
Maybe it's not that simple.
For starters, racehorse buyers have to remember the basic problem of such ventures: These beasts don't come with warranties.
And for every champion, there are plenty of nags.
Katherine Voss, a veteran trainer at the Laurel, Md., track, offers neophytes a sobering tour of a horse barn, noting that only three of about a dozen horses have won sizable purses.
One brown two-year-old filly was wheezing from a cold, while another had splints on its legs, keeping both animals from the racetrack.
"You can see the highs and lows of the business all under one roof," she tells the group.
"There aren't too many winners."
Perhaps the biggest hurdle owners face is convincing newcomers that this is a reputable business.
Some badly managed partnerships have burned investors, sometimes after they received advice from industry "consultants."
So owners have developed a "code of ethics," outlining rules for consultants and agents, and disclosure of fees and any conflicts of interest.
But some are skeptical of the code's effectiveness.
"The industry is based on individual honesty," says Cap Hershey, a Lexington horse farmer and one of the investors who bought Spendthrift.
Despite the drop in prices for thoroughbreds, owning one still isn't cheap.
At the low end, investors can spend $15,000 or more to own a racehorse in partnership with others.
At a yearling sale, a buyer can go solo and get a horse for a few thousand dollars.
But that means paying the horse's maintenance; on average, it costs $25,000 a year to raise a horse.
For those looking for something between a minority stake and total ownership, the owners' group is considering a special sale where established horse breeders would sell a 50% stake in horses to newcomers.
BUELL INDUSTRIES Inc. halved its quarterly dividend to five cents a share, payable Nov. 17 to stock of record Nov. 3.
The company's quarterly dividend had been 10 cents a share since April 30, 1988.
Buell recently said it would incur an aftertax charge of about $3.6 million in its fourth quarter ending Tuesday, in connection with the sale and discontinuance of several lines at a plant.
The Waterbury, Conn., maker of industrial fasteners and metal stampings has 2.3 million shares outstanding.
Dunkin' Donuts Inc., battling a takeover proposal by Canada's DD Acquisition Corp., said that its directors will evaluate takeover offers submitted by Nov. 10.
Dunkin' Donuts, based in Randolph, Mass., previously said it would explore "alternatives," including a leveraged buy-out of the company, but hadn't set a date for submission of proposals.
Dunkin' Donuts Chairman and Chief Executive Robert M. Rosenberg said "a sale is one alternative being considered," but he added the board hasn't decided whether to sell the doughnut franchiser.
DD Acquisition, jointly owned by Unicorp Canada Corp.'s Kingsbridge Capital Group unit and Cara Operations Ltd., has made a $45-a-share tender offer valued at $268 million for Dunkin' Donuts.
Dunkin' Donuts' announcement followed DD Acquisition's request to the Delaware Court of Chancery Monday to set a trial date for its suit against the company.
The trial had been postponed to allow Dunkin' Donuts to seek alternatives to DD Acquisition's offer.
Combustion Engineering Inc. said third-quarter net income of $22.8 million, reversing a $91.7 million year-earlier loss.
The Stamford, Conn., power-generation products and services company said per-share earnings were 56 cents compared with the year-ago loss of $2.39.
Sales fell 1.5% to $884 million from $897.2 million.
Strong profit in the process industries, including chemical and pulp and paper, were offset by higher interest expense and by lower earnings as the company closed out certain long-term contracts.
Combustion reported improved profits in its automation and control products businesses, and it narrowed its losses in its public sector and environmental segment.
Power generation had higher sales but lower earnings; the company cited factors including work on certain low profit-margin contracts from previous years.
Net in the latest quarter included a pretax gain of $22.4 million from the sale of Combustion's minority interest in Stein Industrie to GEC Alsthom N.V. of the Netherlands.
Last year's results reflected a gain of $28.2 million on disposition of assets and a $165 million pretax provision mainly from costs of completing certain waste-to-energy and other power plants.
Claude Bebear, chairman and chief executive officer, of Axa-Midi Assurances, pledged to retain employees and management of Farmers Group Inc., including Leo E. Denlea Jr., chairman and chief executive officer, if Axa succeeds in acquiring Farmers.
Mr. Bebear added that the French insurer would keep Farmers' headquarters in Los Angeles and "will not send French people to run the company."
Axa would also maintain Farmers' relationships with the insurance exchanges that it manages.
Mr. Bebear made his remarks at a breakfast meeting with reporters here yesterday as part of a tour in which he is trying to rally support in the U.S. for the proposed acquisition.
The bid is part of Sir James Goldsmith's unfriendly takeover attempt for B.A.T Industries PLC, the British tobacco, retailing, paper and financial-services giant that acquired Farmers last year for $5.2 billion.
Axa has agreed to acquire Farmers from Sir James's investment vehicle, Hoylake Investments Ltd., for $4.5 billion plus a $1 billion investment in Hoylake.
Any acquisition of Farmers needs the approval of insurance commissioners in the nine states where Farmers operates, and Mr. Bebear's trip will take him to Idaho, Arizona and New York after his stay here; he will meet with insurance regulators, legislators, industry excutives and the press.
Hearings on Axa's acquisition application have been set for Nov. 13 in Idaho; Nov. 20 in Illinois; Nov. 24 and Dec. 4 in Arizona; Dec. 11 in Washington state; and Jan. 8 in Oregon.
Hearings haven't yet been set in Texas, Ohio and Kansas.
California's insurance commissioner doesn't hold hearings on acquisition applications.
Although Axa has been rebuffed by Farmers and hasn't had any meetings with management, Mr. Bebear nonetheless appears to be trying to woo the company's executives with promises of autonomy and new-found authority under Axa.
He said Mr. Denlea would be a member of the top management team of the Axa-Midi group of companies, and would "help define policies and strategies of the group."
Farmers was quick yesterday to point out the many negative aspects it sees in having Axa as its parent.
For one, Axa plans to do away with certain tax credits that have resulted in more than $600 million paid to the Farmers exchanges during the past few years to offset underwriting losses.
Those credits result because of taxes that Farmers, as the management company, has paid, and have "proved to be very important for the exchanges," a Farmers spokesman said.
Mr. Bebear contended that the tax cost to the exchanges under the revised structure would be about $8 million a year, which he described as "peanuts.
Honeywell Inc., Minneapolis, said it completed its previously announced sale of 16% of the shares outstanding in its Japanese joint venture, Yamatake-Honeywell, for $280 million.
The stake was acquired by a group of 10 Japanese financial institutions and industrial corporations, primarily insurance companies, Honeywell said.
Proceeds will be used to repurchase as many as 10 million shares of Honeywell stock, as previously announced.
Honeywell said a second sale of Yamatake-Honeywell is still being negotiated.
The company, which now holds a 34% stake in the venture, has indicated that it intends to retain at least a 20% stake long term.
A 20% stake would allow Honeywell to include Yamatake earnings in its results.
A company spokesman said the gain on the sale couldn't be estimated until the "tax treatment has been determined.
OPPENHEIMER CAPITAL LIMITED PARTNERSHIP increased the quarterly distribution to 40 cents a limited partnership unit from 36.25 cents.
The distribution represents available cash flow from the partnership between Aug. 1 and Oct. 31.
It is payable Nov. 30 to units of record Oct. 31.
The money manager is controlled 67.7% by its top officers and top officers of Oppenheimer & Co., a securities firm.
Both firms are in New York.
Oppenheimer Capital has about 7.9 million limited partnership units outstanding.
In New York Stock Exchange composite trading yesterday, the units closed at $15.125, up 12.5 cents.
Bank of Montreal said it added 850 million Canadian dollars (US$725.8 million) to its reserves against losses on Third World loans, bringing the total it has set aside this year to C$1 billion.
The bank said the C$1 billion in reserves will result in a charge of C$595 million against earnings but said it still expects to report a profit for the year ending Tuesday.
The bank reported net income of C$389 million for the nine months ended July 31.
The bank said the increase in loan-loss provisions won't affect the payment of dividends.
The bank said reserves now amount to 61% of its total less-developed-country exposure.
Excluding Mexico, reserves equal 95% of LDC exposure.
In Toronto Stock Exchange trading, Bank of Montreal closed at C$33.25, up 87.5 Canadian cents.
Knight-Ridder Inc. said third-quarter earnings jumped 18%, partly because of the sale of two of its media properties.
The media concern said net income rose to $37.8 million, or 72 cents a share, from $32 million, or 57 cents a share, in the year-earlier period.
The latest results include a gain of $4.2 million, or eight cents a share, on the sale of television stations in Oklahoma City and Flint, Mich.
Revenue increased 7.5% to $540.9 million from $503.1 million.
Robert F. Singleton, Knight-Ridder's chief financial officer, said the company was "pleased" with its overall performance, despite only single-digit growth in newspaper revenue.
That division's revenue rose 2.3% to $472.5 million from $461.9 million in the year-ago period.
Gains in advertising revenue, however, resulted in operating profit of $78.4 million -- up 20% from $65.6 million.
In New York Stock Exchange composite trading, Knight Ridder closed at $51.50 a share, down 12.5 cents.
ALBERTA ENERGY Co., Calgary, said it filed a preliminary prospectus for an offering of common shares.
The natural resources development concern said proceeds will be used to repay long-term debt, which stood at 598 million Canadian dollars (US$510.6 million) at the end of 1988.
The company plans to raise between C$75 million and C$100 million from the offering, according to a spokeswoman at Richardson Greenshields of Canada Ltd., lead underwriter.
The shares will be priced in early November, she said.
General Electric Co. executives and lawyers provided "misleading and false" information to the Pentagon in 1985 in an effort to cover up "longstanding fraudulent" billing practices, federal prosecutors alleged in legal briefs.
The government's startling allegations, filed only days before the scheduled start of a criminal overcharge trial against GE in Philadelphia federal district court, challenge the motives and veracity of the nation's third-largest defense contractor.
In a strongly worded response summarizing a filing made in the same court yesterday, GE asserted that "prosecutors have misstated the testimony of witnesses, distorted documents and ignored important facts."
The company attacked the government's allegations as "reckless and baseless mudslinging," and said its management "promptly and accurately reported" to the Pentagon all relevant information about billing practices.
The case strikes at the corporate image of GE, which provides the military with everything from jet engines and electronic warfare equipment to highly classified design work on the Strategic Defense Initiative, and could cause a loss of future defense contracts if Pentagon and Justice Department officials take a tough stance.
The company has been considered an industry leader in advocating cooperation and voluntary disclosures of improper or inflated billing practices.
But the government now claims that a group of company managers and lawyers engaged in an elaborate strategy over five years to obscure from federal authorities the extent and details of "widespread" fraudulent billing practices.
The problems were uncovered during a series of internal investigations of the company's Space Systems division, which has been the focus of two separate overcharge prosecutions by the government since 1985.
The dispute stems from pretrial maneuvering in the pending court case, in which prosecutors have been demanding access to a host of internal company memos, reports and documents.
Last November, a federal grand jury indicted GE on charges of fraud and false claims in connection with an alleged scheme to defraud the Army of $21 million on a logistics computer contract.
The company, for its part, maintains that many of the disputed documents are privileged attorney-client communications that shouldn't be turned over to prosecutors.
A hearing is scheduled on the issue today.
The government's 136-page filing covers events leading up to the current case and an earlier indictment in March 1985, when GE was accused of defrauding the Pentagon by illegally claiming cost overruns on Minuteman missile contracts.
GE pleaded guilty and paid a fine of more than $1 million in the Minuteman case, which involved some of the same individuals and operations that are at the center of the dispute in the Philadelphia court.
In order to show that all of its units had corrected billing problems and therefore should become eligible again for new contracts, prosecutors contend that "high-level GE executives" and company lawyers provided "misleading statements" to then-Air Force Secretary Verne Orr and other Pentagon officials during a series of meetings in 1985.
Overall, the government contends that GE's disclosure efforts largely were intended to "curry favor" with Pentagon officials without detailing the extent of the management lapses and allegedly pervasive billing irregularities uncovered by company investigations.
Prosecutors depict a company that allegedly sat on damaging evidence of overcharges from 1983 to 1985, despite warnings from an internal auditor.
When GE finally disclosed the problems, prosecutors contend that Mr. Orr "was erroneously informed that the {suspected} practices had only just been discovered" by GE management.
In its brief, the government asserted that it needs the internal GE documents to rebut anticipated efforts by GE during the trial to demonstrate "its good corporate character."
GE, which was surprised by the last-minute subpoena for more than 100 boxes and file cabinets of documents, countered that senior GE managers didn't find out about questionable billing practices until 1985, and that the information was passed on quickly to Mr. Orr at his first meeting with company representatives.
Subsequent meetings, initiated after the company and two of its units were briefly suspended from federal contracts, were held to familiarize Mr. Orr with the company's self-policing procedures and to disclose additional information, according to GE.
GE's filing contends that the billing practices at the heart of the current controversy involved technical disputes rather than criminal activity.
The company's conduct "does not even raise a question of wrongful corporate intent, ratification or cover-up," GE's brief asserts.
"On the contrary, it shows a corporation reacting swiftly and aggressively to very difficult issues in largely uncharted waters."
Mr. Orr couldn't be reached for comment yesterday.
Applied Solar Energy Corp. of City of Industry, Calif., said it and its majority shareholder, American Cyanamid Co., signed a non-binding letter of intent for the acquisition of Applied Solar by McDonnell Douglas Corp. for about $38 million.
The proposed acquisition provides for a cash payment of $10 a share at closing and a contingent payment of as much as 80 cents a share placed in escrow.
Details of the escrow agreement haven't been completed, the companies said.
There are 3.5 million shares of Applied Solar, of which American Cyanamid owns 2.7 million.
American Cyanamid is a Wayne, N.J., chemicals, drugs and fertilizer concern.
Completion of the acquisition is subject to execution of a definitive agreement, approval by all three companies' boards and the approval of Applied Solar's shareholders.
An Applied Solar spokesman said completion is expected at the end of the year or early next year.
A spokeswoman for the St. Louis aerospace and defense concern said it wanted the acquistion because Applied Solar is involved in solar cells and solid-state laser components, and this fits with McDonnell's business of laser applications for military space.
Trading in Cineplex Odeon Corp. shares was halted on the New York and Toronto stock exchanges late yesterday afternoon at the company's request, Toronto Stock Exchange officials said.
Brian Hemming, a spokesman for the company's committee of independent directors, established in May to solicit and evaluate offers for the company, said it was expected to make an announcement early this morning.
But Mr. Hemming said he wasn't aware of the nature of the talks under way between committee members and their advisers.
Cineplex traded on the New York Stock Exchange at $11.25 a share, up $1.125, before trading was halted.
Analysts have speculated in recent days that the value of offers received by the committee fell well short of what they had hoped, or even that the company's chairman, president and chief executive officer, Garth Drabinsky, is the only bidder for the company as a whole.
The current effort to auction off the company was triggered by a dispute between Mr. Drabinsky and the Toronto-based movie chain's major shareholder, MCA Inc.
London share prices closed sharply lower Tuesday on the back of Wall Street's steep drop and renewed fears over U.K. economic fundamentals.
Tokyo's winning streak came to an end, and stocks fell in Frankfurt and across Europe as well.
London's Financial Times 100-share index shed 40.4 points to finish at 2149.3.
At London's close, the Dow Jones Industrial Average was 51.23 points lower at 2611.68.
Dealers said the initial pressure came from mildly disappointing U.K. trade figures for September and a worrisome report by the Confederation of British Industry that a decline in orders for manufactured goods is depressing both business optimism and investment plans for the coming year.
The trade and CBI reports refocused attention on high interest rates and corporate profitability and helped rekindle underlying concerns over prospects for a recession in the U.K., dealers said.
The 30-share index fell 33.3 points to 1739.3.
Volume was a modest 405.4 million shares traded, but better than the year's lowest turnover of 276.8 million Monday.
Market watchers also noted an absence of institutional interest later in the session helped pave the way for broader declines when Wall Street opened weaker.
They added that market-makers were knocking share prices down in midafternoon in a bid to attract some interest, but the action largely helped open the way for London's late declines.
Insurance stocks provided some early support to the market, partly on favorable brokerage recommendatons and talk of continental European interest in British life and composite insurers.
British life insurer London & General, which firmed 2 pence to 356 pence ($5.70), and composite insurer Royal Insurance, which finished 13 lower at 475, were featured in the talk.
On the life insurance side, Pearl Group finished 5 lower at 640, and Sun Life dropped 15 to #11.53.
Jaguar finished 4 lower at 694.
Dealers said the market didn't react substantially to Ford Motor Co.'s disclosure to the U.S. Securities and Exchange Commission that it will seek 100% of Jaguar's shares outstanding when U.K. government share regulations are lifted at the end of next year.
Tokyo stocks closed easier, posting their first loss in six trading days, partly because of programmed index-linked selling by trust investment funds in the afternoon session.
The Nikkei index fell 58.97 points to 35526.55.
The index gained 99.14 points Monday.
In early trading in Tokyo Wednesday, the Nikkei index rose 17.92 points to 35544.47.
On Tuesday, the Tokyo stock price index of all first section issues was down 6.31 at 2681.22.
First section volume was estimated at 900 million shares, up from 605 million Monday.
Observers said the market again failed to find a trading focus, discouraging much participation by investors.
The market, however, is expected to remain stable and expectations for future gains are high, traders said.
Such sentiment is being supported by word that a large amount of cash from investment trust funds is scheduled to enter the market later this week and in early November.
The expected amount is said to be 700 billion yen ($4.93 billion) to 1.05 trillion yen -- the second largest amount this year in a given period, following the record high set at the end of July, according to market observers.
In addition to a large amount of investment trust fund cash, analysts generally see the market environment improving compared with the past couple of weeks.
Toshiyuki Nishimura, an analyst at Yamaichi Securities, said, "The market sentiment is bullish, simply because there are few bad factors."
Buying activity Tuesday centered on a wide range of midcapitalization, domestic demand-related shares whose prices range from 1,000 to 2,000 yen.
Investors expect these shares will be targets of investment trust funds, which often buy small amounts spread across a wide range of issues.
On the other hand, high-priced shares such as Pioneer Electronic and Sony failed to spark investor interest because these issues are unlikely to be bought by investment trust funds, observers said.
Tuesday's notable losers were highpriced shares such as Pioneer, which shed 210 yen to 5,900 yen.
Sony was down 130 to 8,590.
TDK fell 120 to 5,960, Fuji Photo Film declined 160 to 4,830, and Fanuc dropped 160 to 7,440.
Share prices on the Frankfurt stock exchange closed sharply lower in thin dealings as worried investors remained idle as the result of two potentially destabilizing domestic developments.
The DAX index fell 15.85 to end at 1507.37.
Cutting against the downward trend was Continental, which jumped 4 marks to 346 marks ($187) in heavy trading on rumors that the tire maker is about to be taken over.
It jumped 7.5 Monday.
Traders said the market was exceptionally thin, as small investors remain on the sidelines.
Market participants say investors are not only licking their wounds following the turbulence last week, but they have also been made nervous by two events in West Germany.
On Sunday, the governing Christian Democratic Union suffered a series of setbacks, the extent of which became fully known only late Monday, in municipal elections in Baden-Wuerttemberg.
Traders say investors are worried that the CDU won't be able to hold office in federal elections at the end of 1990.
And statements by the chairman of the IG Metall labor union, Franz Steinkuehler, also cast a cloud over trading, dealers said.
Mr. Steinkuehler said at a convention in West Berlin that the union has to prepare for "a big fight" to achieve its main goal of a 35-hour workweek, down from current 37-hour workweek.
The decline in prices cut broadly through the blue-chip issues, as Siemens tumbled 7.5 to 544, Deutsche Bank plunged 7 to 657, and the auto makers fell sharply as well.
Daimler-Benz dropped 12.5 to 710.5, Bayerische Motoren Werke dropped 10.5 to 543.5, and Volkswagen lost 7.1.
Elsewhere, share prices closed lower in Zurich, Amsterdam, Milan and Stockholm.
Uneasiness about Wall Street was cited in several markets.
Prices closed lower in Sydney, Singapore and Wellington, were mixed in Hong Kong and higher in Taipei, Manila, Paris, Brussels and Seoul.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
Directors of Bergen Bank and Den Norske Creditbank, two of Norway's leading banks, announced they had agreed to the formal merger of the banks.
The merger would create Scandinavia's seventh largest bank, with combined assets of 210 billion Norwegian kroner ($30.3 billion).
The banks said an application for a concession to merge into one entity to be called Den Norske Bank AS was sent Monday to the Finance Ministry.
The two boards said in a joint statement that the proposed merger agreement was considered in separate board meetings in Oslo Monday.
They said the agreement will be submitted to their respective supervisory boards next Wednesday.
Extraordinary general meetings, to be held Nov. 28, will decide the share exchange ratio.
The merger requires the approval of Norwegian authorities.
Savings and loans reject blacks for mortgage loans twice as often as they reject whites, the Office of Thrift Supervision said.
But that doesn't necessarily mean thrifts are discriminating against blacks, the agency said.
The office, an arm of the Treasury, said it doesn't have data on the financial position of applicants and thus can't determine why blacks are rejected more often.
Nevertheless, on Capitol Hill, where the information was released yesterday at a Senate banking subcommittee hearing, lawmakers said they are worried that financial institutions are routinely discriminating against minorities.
They asked regulators to suggest new ways to force banks and thrifts to comply with anti-discrimination laws.
Sen. Alan Dixon (D, Ill.), chairman of the subcommittee on consumer and regulatory affairs, said, "I'm not a statistician.
But when blacks are getting their loan applications rejected twice as often as whites -- and in some cities, it is three and four times as often -- I conclude that discrimination is part of the problem."
James Grohl, a spokesman for the U.S. League of Savings Institutions, said, "The data is a red flag, but lacking the financial data you can't make a case that discrimination is widespread."
The trade group official added: "Certainly the federal government should take a hard look at it."
Sen. Dixon held the hearing to follow up on a provision in the savings and loan bailout bill that required regulators to report on evidence of discimination in mortgage lending.
The legislation also requires broad new disclosures of the race, sex and income level of borrowers, but that information won't be gathered in new studies for several months at least.
The Federal Reserve said its studies in recent years, which adjust for income differences and other variables, showed that blacks received fewer home mortgages from banks and thrifts than whites.
But John LaWare, a Fed governor, told the subcommittee the evidence is mixed and that the Fed's believes the vast majority of banks aren't discriminating.
For instance, he noted, the Fed studies have shown that blacks receive more home improvement loans than whites.
Several lawmakers were angered that the bank and thrift regulators generally said they have been too busy handling the record number of bank and thrift failures in the past few years to put much energy into investigating possible discrimination.
"We would be the first to admit that we have not devoted the necessary amount of emphasis over the past several years" to developing examinations for discrimination, said Jonathan Fiechter, a top official of the Office of Thrift Supervision.
"If we've got folks out there who are being turned away in the mortgage market improperly and unfairly," said Sen. Donald Riegle (D., Mich.), chairman of the banking committee, "then that is a matter that needs remedy now, not six months from now, or six years from now, or 26 years from now."
Officials of the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency said they have punished only a few banks for violations of anti-discrimination laws.
The FDIC said it has issued five citations to banks over the past three years for discriminatory practices.
The comptroller's office said it found no indications of illegal discrimination in 3,437 examinations of banks since April 1987.
The comptroller's office also said that of 37,000 complaints it received since January 1987, only 16 alleged racial discrimination in real estate lending.
The agency investigated the complaints but no violations were cited.
Thrift regulators didn't give any figures on their enforcement actions.
Mr. Fiechter said that among the possibilities being considered by regulators to fight discrimination is the use of "testers" -- government investigators who would pose as home buyers.
The Department of Housing and Urban Development has used testers to investigate discrimination in rental housing.
Using testers could be controversial with financial institutions, but Mr. Grohl said the U.S. League of Savings Institutions hadn't yet taken any position on the matter.
Time Warner Inc. is considering a legal challenge to Tele-Communications Inc.'s plan to buy half of Showtime Networks Inc., a move that could lead to all-out war between the cable industry's two most powerful players.
Time is also fighting the transaction on other fronts, by attempting to discourage other cable operators from joining Tele-Communications as investors in Showtime, cable-TV industry executives say.
Time officials declined to comment.
Last week, Tele-Communications agreed to pay Viacom Inc. $225 million for a 50% stake in its Showtime subsidiary, which is a distant second to Time's Home Box Office in the delivery of pay-TV networks to cable subscribers.
Tele-Communications, the U.S.'s largest cable company, said it may seek other cable partners to join in its investment.
Tele-Communications is HBO's largest customer, and the two have a number of other business relationships.
Earlier this year, Time even discussed bringing Tele-Communications in as an investor in HBO, executives at both companies said.
The purchase of the Showtime stake is "a direct slap in our face," said one senior Time executive.
Time is expected to mount a legal challenge in U.S. District Court in New York, where Viacom in May filed a $2.5 billion antitrust suit charging Time and HBO with monopolizing the pay-TV business and trying to crush competition from Showtime.
Executives involved in plotting Time's defense say it is now preparing a countersuit naming both Viacom and Tele-Communications as defendants.
The executives say Time may seek to break up the transaction after it is consummated, or may seek constraints that would prevent Tele-Communications from dropping HBO in any of its cable systems in favor of Showtime.
Viacom officials declined to comment.
Jerome Kern, Tele-Communications' chief outside counsel, said he wasn't aware of Time's legal plans.
But he said that any effort by Time to characterize the Tele-Communications investment in Showtime as anti-competitive would be "the pot calling the kettle black."
"It's hard to see how an investment by the largest {cable operator} in the weaker of the two networks is anti-competitive, when the stronger of the two networks is owned by the second largest" cable operator, Mr. Kern said.
In addition to owning HBO, with 22 million subscribers, Time Warner separately operates cable-TV system serving about 5.6 million cable-TV subscribers.
Tele-Communications controls close to 12 million cable subscribers, and Viacom has about one million.
In its suit against Time, Viacom says the ownership of both cable systems and cable-programming networks gives the company too much market power.
Time argues that in joining up with Tele-Communications, Viacom has potentially more power, particularly since Viacom also owns cable networks MTV, VH-1 and Nick at Nite.
Ironically, Tele-Communications and Time have often worked closely in the cable business.
Together, they control nearly 40% of Turner Broadcasting Systems Inc.; Tele-Communications has a 21.8% stake, while Time Warner has a 17.8% stake.
But since Time's merger with Warner Communications Inc., relations between the two have become strained.
Each company worries that the other is becoming too powerful and too vertically integrated.
Meanwhile, some legal observers say the Tele-Communications investment and other developments are weakening Viacom's antitrust suit against Time.
Viacom accuses Time in its suit of refusing to carry Showtime or a sister service, The Movie Channel, on Time's Manhattan Cable TV system, one of the nation's largest urban systems.
But yesterday, Manhattan Cable announced it will launch Showtime on Nov. 1 to over 230,000 subscribers.
Showtime has also accused HBO of locking up the lion's share of Hollywood's movies by signing exclusive contracts with all the major studios.
But Showtime has continued to sign new contracts with Hollywood studios, and yesterday announced it will buy movies from Columbia Pictures Entertainment Inc., which currently has a non-exclusive arrangement with HBO.
The Federal Trade Commission said it authorized its staff to seek a preliminary injunction barring Imo Industries Inc. from acquiring the shares outstanding of the U.S. unit of the British company, United Scientific Holdings PLC, for $69 million.
The FTC said it "had reason to believe that the proposed acquisition could substantially reduce competition" in the production of certain image intensifier tubes, which are important components of night-vision devices sold primarily to the defense industry.
The FTC said it would seek to enjoin the proposed acquisition in a federal trial court, but declined to specify which one.
Under federal law, if the court grants a preliminary injunction, the FTC must begin administrative proceedings to determine the legality of the proposed stock purchase within 20 days.
Officials at the United Scientific unit, Optic-Electronic Corp. of Garland, Texas, and at Imo Industries of Lawrenceville, N.J., couldn't be reached for comment.
The airline industry's fortunes, in dazzling shape for most of the year, have taken a sudden turn for the worse in the past few weeks.
Citing rising fuel costs, promotional fare cuts and a general slowdown in travel, several major carriers have posted or are expected to post relatively poor third-quarter results.
Yesterday, USAir Group Inc., recently one of the industry's stellar performers, posted a worse-than-expected $77.7 million net loss for the period.
So far, the industry's fourth quarter isn't looking too strong either, prompting many analysts to slash earning projections for the rest of the year by as much as one-fourth.
And they say the outlook for 1990 is nearly as bad.
Airlines in 1989 "came in like a bang and are going out like a whimper," said Kevin Murphy, an airline analyst at Morgan Stanley & Co.
This turn of events has put a big damper on an industry that seemed almost invincible last spring, when fares were rising at double-digit rates and many carriers seemed to be growing fat on near-monopolies in certain markets.
Now, many airline companies might become a lot less attractive as takeover targets on Wall Street.
The downturn also raises questions about the carriers' ambitious orders for new airplanes, which currently total $32.5 billion over the next three years.
For travelers, though, the industry's problems have had some positive effects.
In recent weeks, airlines have cut numerous fares in leisure markets to try to win back customers.
Others have tried to spruce up frequent-flier programs.
Previously, airlines were limiting the programs because they were becoming too expensive.
Just last week, for example, Trans World Airlines and Pan Am Corp.'s Pan American World Airways went so far as to offer cash rebates or gift checks of $200 to $1,000 to certain frequent-flier members making trans-Atlantic flights in business class or first class.
The industry's slowdown became apparent this month when AMR Corp., parent of American Airlines, reported an 8.8% drop in third-quarter net income and said its fourth quarter would be "disappointing."
Shortly before that, USAir had said its third-quarter results would be "significantly lower" than a year earlier.
Yesterday, it provided the details:
Its loss of $77.7 million, or $1.86 a share, contrasted with net of $68.5 million, or $1.58 a share, in the 1988 third quarter.
Revenue rose only 3.3% in the latest period, to $1.53 billion from $1.48 billion.
For the nine months, the Arlington, Va., company's net plunged 73% to $38.5 million, or 76 cents a share, from $142.2 million, or $3.28 a share.
Revenue rose 12% to $4.75 billion from $4.22 billion.
The results surprised many analysts, because USAir has almost no competition in its Pittsburgh hub and has expanded operations by completing its acquisition of Piedmont Airlines.
Shortly after announcing its quarterly loss, USAir's stock tumbled $3 a share.
It ended at $40.125, down $2.375, in New York Stock Exchange composite trading.
"Nobody was expecting this size of a loss," said Paul Karos, an analyst with First Boston Corp.
One airline executive, who declined to be identified, called the loss "amazing."
In announcing the results, USAir cited many of the same problems that several other industry officials have named recently.
It said the industry's domestic traffic was flat in the third quarter; analysts say this was because hefty fare increases earlier in the year scared off many leisure travelers this summer.
To try to combat the traffic slowdown, airlines started reducing fares; average fares rose only 1.7% in August, in contrast to increases of 16% each in February and March.
But so far, the effort has failed, and traffic is still slow.
Some other fare promotions have backfired.
This summer, the industry introduced a "kids fly free" program, in which children were allowed to fly free if they were traveling with an adult.
Airlines tried to restrict the program substantially by limiting the offer to certain days of the week, but it still was apparently used far more heavily than the airlines expected.
Airlines also say their frequent-flier programs are squeezing profits because awards are being redeemed at a heavier-than-normal rate.
One airline official said about three times as many free-travel coupons are being turned in as in previous years -- not surprisingly, as the airlines last year allowed many travelers to build up mileage at triple the normal rate.
Rising operating expenses are another problem.
Fuel costs were up 10% in the third quarter.
Labor costs, which leveled off in the past few years because of lower pay scales for newer employees, are on the upswing again at many carriers.
And some carriers are facing other unexpected headaches: USAir, for example, blamed some of its loss on merger expenses and on disruptions caused by Hurricane Hugo last month.
"We cannot quantify the total adverse effects of Hugo," said Edwin Colodny, chairman and president of USAir Group.
Whatever the cause for the downturn, few people are predicting any sudden improvement.
Airline Economics Inc., an aviation consulting firm, is projecting an industrywide operating profit of $2.5 billion for 1989, compared with earlier forecasts of $3 billion to $3.5 billion.
As for 1990, the firm predicts that profit will slip to between $1 billion and $1.5 billion.
Good grief!
Charlie Brown is selling out.
Those Metropolitan Life ads were bad enough.
But now, Charlie Brown is about to start pitching everything from Chex Party Mix to light bulbs.
Why is he cashing in now?
Turns out that next year, Charlie Brown, Snoopy and the gang turn 40 -- and Scripps Howard's United Media unit, the syndicator and licensing agent for Charles Schulz's comic strip, sees a bonanza in licensing the cartoon characters to a bevy of advertisers for ads, tie-ins and promotions.
"Peanuts has become a major part of American culture," says Peter Shore, United Media's vice president of marketing and licensing.
The comic strip "has a magical, everlasting quality about it.
Our plan is to honor Charles Schulz and the strip all year long."
The effort will make the Peanuts gang very familiar pitchmen in 1990.
General Electric plans to use the characters to plug its Miser light bulb.
Teleflora will run TV ads at Valentine's Day promoting its "Snoopy's Love Bouquet."
Ralston Purina will promote its Chex Party Mix's three new flavor packets named for Charlie Brown, Lucy and Linus.
The characters will also be featured in a new public service effort for the United Way.
Beyond the advertisements, the syndicator is planning a traveling arena show, new TV specials for CBS and even an exhibit at the Smithsonian Institute.
The yearlong schedule of festivities will be kicked off officially with a combination live and animation half-time special at the Super Bowl in January.
All the tie-ins, though, have some marketing experts questioning whether the party may go too far.
"There are too many people participating," says Al Ries, of Trout & Ries, a Greenwich, Conn., marketing consulting firm.
"If you want to cut through the clutter, you have to make your message as distinct, sharp and individual as possible.
Sharing a character with other advertisers isn't a way to do that."
But United Media says it's very scrupulous with the contracts it hands out.
"We're not interested in promoting every single product that comes along," Mr. Shore says.
Metropolitan Life ad executives couldn't be reached about the use of the Peanuts characters by others.
But Mr. Shore says that company's exclusive advertising rights extend only to the insurance and financial services category.
Berry Rejoins WPP Group
Norman Berry, the creative executive who was apparently squeezed out of Ogilvy & Mather in June, is returning to Ogilvy's parent company, WPP Group PLC.
Mr. Berry, 58, had resigned after being asked by Ogilvy's chairman and chief executive officer, Kenneth Roman, to give up his title as creative head of the New York office and to take a fuzzier international role.
Yesterday, just a day after Mr. Roman announced he would leave to take a top post at American Express, WPP said Mr. Berry would return to take an international role at the parent company.
Mr. Berry said the timing was a coincidence and that his decision was unrelated to Mr. Roman's departure.
RJR Taps FCB/Leber
RJR Nabisco Inc. awarded its national broadcast media-buying assignment to FCB/Leber Katz Partners, the New York outpost of Chicago-based Foote, Cone & Belding.
The naming of FCB/Leber Katz Partners as agency of record for Nabisco Brands Inc. and Planters LifeSavers Co. follows RJR Nabisco's announcement last week that it will disband its RJR Nabisco Broadcast division and dismiss its 14 employees Dec. 1. to cut costs.
New York-based RJR Nabisco wouldn't say what it spends annually, but industry executives say it will spend more than $140 million this year, down from about $200 million last year.
Ad Notes. . . .
EARNINGS:
Interpublic Group of Cos. said third-quarter net rose 15% to $6.9 million, or 21 cents a share, from $6 million, or 18 cents a share, in the year-earlier period.
Revenue increased more than 5% to $283.2 million from $268.6 million.
HOLIDAY PROMOTION:
PepsiCo Inc. will give away 4,000 sets of "Game Boy," Nintendo's new hand-held video game in a two-month promotion scheduled to begin Nov. 1.
Pepsi said it will spend $10 million advertising the promotion.
International Business Machines Corp. agreed to acquire a 15% stake in Paxus Corp., an Australian computer-software and information-services concern, for 20 million Australian dollars (US$17 million).
The investment will be made through IBM Australia Ltd., a unit of IBM, the two companies said yesterday.
IBM can raise its stake in Paxus to 20% over three years, but agreed to not go beyond 20% in that time.
Paxus said in a statement it has several "well developed product and services relationships" with the U.S. computer company, and plans to expand these links.
The company earns about half its revenue overseas and plans further expansion.
A majority stake in Paxus currently held by NZI Corp. will be diluted to slightly less than 50% after IBM acquires its interest.
The agreement requires approval from Australia's Foreign Investment Review Board and National Companies and Securities Commission, and from shareholders of Paxus.
Bond Corp. Holdings Ltd.'s consolidated debt totals 6.9 billion Australian dollars (US$5.32 billion), including A$1.6 billion of bonds convertible into shares.
Alan Bond, chairman and controlling shareholder of the cash-strapped Australian media, brewing, resources and property concern, disclosed the debt figures yesterday.
The disclosure follows last Friday's news that Bond Corp. incurred an overall loss of A$980.2 million for the fiscal year ended June 30, the largest loss in Australian corporate history.
The debt load would have been higher but for a reduction of A$5 billion over the past year from asset sales, Mr. Bond said at a business gathering.
Mr. Bond indicated the consolidated debt figures, which include debt of units such as Bell Group Ltd., will be published soon in Bond Corp.'s 1989 annual accounts.
He predicted the debt will be reduced by another A$3.8 billion this fiscal year ending June 30, 1990, but didn't explain how this will be achieved.
Mr. Bond blamed rising Australian interest rates and the acquisition of Bell Group "with its very high levels of shortterm debt" for producing a condition "that was no longer sustainable.
"In order to restore confidence and ensure the support of our principal lenders," Mr. Bond said, "we embarked on fundamantal changes in the structure and direction of the group."
That reassessment resulted in continuing asset sales, as well as write-offs exceeding A$1.1 billion last fiscal year.
"In essence we have made a decision to clear the decks," Mr. Bond told the meeting.
While some assets have been written down, others are undervalued in the accounts, Mr. Bond maintained.
Among these are the company's Australian brewing assets, in the books at A$950 million but actually worth A$2.5 billion, he said.
An investment in Chile's telephone company is carried at US$300 million but really worth US$500 million, and the company's property portfolio is undervalued by at least A$250 million, Mr. Bond said.
Mr. Bond forecast that by next June, "what will emerge will be a company with a honed sense of purpose . . . a stable balance sheet, with good-quality assets in brewing, telecommunications, media and property."
He didn't name energy resources in that list, signaling that all the company's coal and oil interests might be for sale in total or in part.
Some of the oil interests already have been sold.
Mercedes-Benz of North America Inc., Grosse Pointe Shores, Mich., estimated it will sell about as many cars in 1990 as the 75,000 it expects to deliver this year.
Mercedes officials said they expect flat sales next year even though they see the U.S. luxury-car market expanding slightly.
Erich Krampe, president of the U.S. sales arm of West German auto maker Daimler Benz AG, predicted luxury-car sales will rise to 840,000 in 1990 from 830,000 this year primarily because of the new Japanese makes.
Most of the growth, he said, will come in the $35,000-to-$50,000 price range, where Mercedes has a 35% U.S. market share.
Mercedes sold 82,348 cars in 1988.
Mr. Krampe also said that Mercedes plans to bring out new models every year through the mid-1990s and it will shorten its product development cycle to eight years from 10 or 12 years to compete more effectively with Toyota Motor Corp.'s Lexus, Nissan Motor Co.'s Infiniti and Honda Motor Co.'s Acura luxury-car divisions.
Homestake Mining Co., San Francisco, blamed the continued slump in gold prices for an 83% plunge in third-quarter net income to $2 million, or two cents a share, from $11.2 million, or 12 cents a share, a year earlier.
Revenue rose 5% to $110.4 million from $105.4 million.
In New York Stock Exchange composite trading, Homestake closed at $15.25, down 25 cents.
"A significant increase in gold sales to 248,279 ounces for the quarter from 188,726 in the third quarter of 1988 was more than offset by the continued decline in average gold price realization to $367 from $429 per ounce," the company said.
For the nine months, the mining company posted a 40% drop in profit to $30.1 million, or 31 cents a share, from $50.6 million, or 52 cents a share, on a 6% rise in revenue to $323.2 million from $305.7 million.
The Treasury plans to raise $1.8 billion in new cash with the sale Monday of about $15.6 billion in short-term bills to redeem $13.81 billion in maturing bills.
The offering will be divided evenly between 13-week and 26-week bills maturing Feb. 1, 1990, and May 3, 1990, respectively.
Tenders for the bills, available in minimum $10,000 denominations, must be received by 1 p.m. EST Monday at the Treasury or at Federal Reserve banks or branches.
The Treasury said it will alter the auctions unless it has assurance of enactment of legislation to raise the statutory debt limit before the scheduled auctions Monday.
Apogee Enterprises Inc. said profit for the third quarter ending Dec. 2 will fall below the year-earlier results because of an after-tax charge of $1.9 million related to a project that was guaranteed by the company.
A year ago, the Minneapolis glass products and aluminum window maker earned $4 million, or 30 cents a share, on revenue of $114 million.
Apogee said the charge stems from a building supply contract in which the company guaranteed a contractor's performance.
Apogee said a subcontractor had severe cost overruns and was unable to fulfill the contract terms on its own, making it necessary for Apogee to advance cash to ensure completion of the project.
The company said its core businesses have performed well and it expects them to continue to do so in the remainder of the fiscal year.
Japan's production of cars, trucks and buses in September fell 4.1% from a year ago to 1,120,317 units because of a slip in exports, the Japan Automobile Manufacturers' Association said.
Domestic demand continues to grow, but its contribution to higher production was sapped in September by the estimated 2% fall in imports, accompanied by a growing tendency for Japanese manufacturers to build vehicles overseas, according to the association.
The association said domestic demand grew 8.8% in September.
Demand has been growing consistently under the encouragement of pro-consumption government policies, an association spokesman said.
He also said the introduction of a 3% consumption tax in April has helped sales.
The new tax, though a source of general resentment among Japanese taxpayers, replaced a higher commodities tax that applied to automobiles.
Japanese domestic motor-vehicle sales rose 12% in September, the Japan Automobile Dealers' Association said earlier this month.
The manufacturers' association will issue statistics on vehicle exports later this month.
Production of cars rose to 801,835 units in September, a 5.5% increase from a year earlier.
Midsized cars accounted for the greatest growth in units, rising 62,872 units to 134,550 units, or 88%.
Minicar output more than tripled.
Manufacturers produced 46,835 of the vehicles -- which have engines of 500 cubic centimeters or less -- an increase of 31,777 units.
Total truck production fell 22% from a year earlier to 315,546 units.
Minitruck production fell 13% to 94,243 units.
Bus production also slipped, by 49% from a year earlier to 2,936 units.
The association spokesman said bus production has declined since January, but couldn't offer an explanation for the fall.
Auto production for the first half of the fiscal year, which began in August, totaled 6,379,884 units, the association said.
Half-year production was up 3.4% compared with the same period a year earlier.
Stock of United Airlines parent UAL Corp. gyrated wildly yesterday amid speculation that one or more investors may challenge the UAL board's decision to remain independent instead of pursuing a buy-out or other transaction.
The board's decision, announced after the market closed Monday, initially prompted a severe sell-off in UAL shares, which at midday traded as low as $145 a share, down $33 a share, in composite trading on the New York Stock Exchange.
The deepening bloodbath for takeover-stock traders, who by then had seen UAL stock tumble 49% since Oct. 12, also triggered a marketwide sell-off that sent the Dow Jones Industrial Average down more than 80 points at 10:40 a.m.
But then steady, concentrated buying by Bear, Stearns & Co., which frequently buys stock for corporate raiders, took hold and steadied the fall in UAL, which eventually buoyed the entire market.
The industrial average closed down only 3.69 points at 2659.22.
Late in the afternoon, several big purchases by Bear, Stearns, particularly a block of 200,000 shares at 2:43 p.m. at $150 a share, triggered a buying spree that took UAL up more than 18 points in the final hour of trading.
UAL stock closed at $170 a share, down $8.375.
Volume was a tumultuous 4.9 million shares, or 22% of the 21.8 million UAL shares outstanding.
Traders estimated that Bear, Stearns bought more than 1 million shares.
The two most frequently rumored buyers, neither of whom would comment, were Coniston Partners, which battled the UAL board in 1987, and New York real estate developer Donald Trump, who recently made and withdrew an offer for American Airlines parent AMR Corp.
However, one person familiar with UAL said the signs pointed to Coniston because Mr. Trump hasn't asked for permission to buy more than $15 million of stock under federal antitrust rules.
Takeover-stock traders, stung by their huge losses in UAL stock, remained eager for some action by an outside catalyst following the collapse Oct. 13 of a $300-a-share, $6.79 billion labor-management buy-out.
Their hope was that the catalyst would seek to oust the board in a solicitation of shareholder consents.
Baker, Nye Investments, a New York takeover-stock trader that owns UAL stock, wouldn't comment on reports the firm is considering seeking such a shareholder vote.
But partner Richard Nye said, "This is the most extraordinary failed transaction I've seen in 25 years in this business.
It would make sense for somebody to do it.
I have never seen a case of incompetence shared by so many participants."
In 1986, Baker, Nye waged a proxy fight for control of Leaseway Transportation Inc. that ultimately led to Leaseway's being sold.
Some traders pointed hopefully to earlier estimates by UAL's investment adviser, First Boston Corp., that recapitalizations could yield $245 to $280 a share.
But those would require pilots' cooperation.
Any investor who acquires UAL stock in an attempt to force a buy-out or recapitalization must deal with United's contentious unions.
The pilots are working under an expired contract, and the machinists contract expires next month.
That gives them enormous leverage, including the threat of a strike to block any buy-out or recapitalization attempt they oppose.
However, a catalyst like Coniston could seek shareholder support for a sale to a labor-management group at the last price discussed by that group before the board meeting Monday.
The pilots had been working on a buy-out bid between $225 and $240 a share, or $5.09 billion to $5.42 billion.
One person familiar with UAL said the unsettled labor situation and the uncertain world-wide financial markets contributed to the board's decision to avoid "rushing around selling the company at a bargain price," particularly since it accepted a $300-a-share offer just last month.
Even some takeover-stock traders said they couldn't quarrel with the board's logic.
But the board's decision prompted many to bail out of the stock yesterday.
"We had a lot of people who threw in the towel today," said Earl Ellis, a partner in Benjamin Jacobson & Sons, a specialist in trading UAL stock on the Big Board.
Another trader noted that many arbitrage firms are afraid to sell their UAL stock at the bottom, but already own so much they can't buy any more.
"This deal is like a Roach Motel," he said.
"They check in, but they can't check out."
But both the traders and the pilots remain interested in some transaction.
So too, according to many reports, is British Airways PLC, despite its public withdrawal from the buy-out.
The pilots might end up teaming up with their longtime adversaries, the machinists union, in a recapitalization.
The machinists are reviewing proposals they made in the past for recapitalizations that would pay a special shareholder dividend and give employees a minority stake.
The company rejected those past proposals.
It is unclear, however, if the machinists would support a majority stake, as the pilots want.
A machinist official said that would depend on how much in concessions machinists would have to give in return for the majority stake.
Some investors whose names were bandied about by traders as potential UAL stock buyers said they weren't buying.
"I'm not interested," said Dallas investor Harold Simmons.
A source close to Carl Icahn, a corporate raider who owns Trans World Airlines Inc., said he hasn't owned any UAL stock and isn't buying.
One person familiar with Texas billionaire Robert Bass said he isn't likely to make any hostile moves.
And a spokesman for Reliance Group Holdings Inc., which had held 7% of UAL before the first buy-out bid but later reduced its holdings below 5%, wouldn't comment.
Marvin Davis, whose $5.4 billion takeover bid originally put the nation's second-largest airline in play, is limited by a standstill agreement with UAL he signed in September.
The Los Angeles investor can't buy UAL stock, solicit shareholder consents or make a new offer unless he makes a formal offer of $300 a share or UAL accepts an offer below $300.
However, Mr. Davis could pressure the board by asking that the agreement be waived, or letting it be known that he has financing for an offer at a lower price.
Times Mirror Co. said third-quarter net income fell 13% to $70.1 million, or 54 cents a share, compared with net income of $81 million, or 62 cents a share, a year earlier.
The Los Angeles media concern said that the year-ago period included a $26.5 million gain from the sale of assets, primarily timberlands.
Revenue was $873.9 million, up 7.3% from $814.8 million.
Stronger results from the company's broadcast and cable television units and professional and textbook publishing divisions, plus increased advertising at the company's largest newspaper, the Los Angeles Times, offset advertising declines in the company's newspapers in the Eastern U.S., the company said.
"Looking ahead to the fourth quarter, the outlook for the newspaper group remains guarded, with no improvement yet seen in operating trends in our Eastern markets," said Robert F. Erburu, Times Mirror's chairman and chief executive.
Copper futures sold off sharply yesterday, influenced by declines in the stock market and dollar, and a rally in bonds.
December copper opened near Monday's close, tried to rally but failed, and then triggered stop-loss orders on its way down to settle at $1.1510 a pound, off 4.50 cents for the day.
Stop-loss orders are placed previously with instructions to execute them if the market hits a predetermined price.
William Kaiser, president of the Kaiser Financial Group in Chicago, said the decline was almost certainly influenced by the early sell-off in the stock market, which partly reflected a weakening economy.
He said the recent decline in copper stocks was misleading in the face of a slowdown in manufacturing.
Mr. Kaiser said traders could have picked up signals of an imminent price decline had they been watching the scrap metal markets, which became noticeably weaker two to three weeks ago.
But though a weakening economy implies reduced demand, Mr. Kaiser said that Third World copper-producing countries haven't any choice but to sell copper.
They might even step up sales in a falling market, he said, in an effort to maintain the flow of foreign exchange into their treasuries.
Technically, Mr. Kaiser noted that a lot of traders had bought into the market when the price was in the $1.24 to $1.26 range, thinking there was support at the $1.20 level.
When the market fell below that level on Monday and then yesterday couldn't climb above that level, traders started selling out their positions.
Betty Raptopoulos, senior metals analyst at Prudential-Bache Securities in New York, agreed that most of the selling was of a technical nature.
She said the market hit the $1.18 level at around 10 a.m. EDT where it encountered a large number of stop-loss orders.
More stop-loss orders were touched off all the way down to below $1.14, where modest buying was attracted.
Ms. Raptopoulos said the settling of strikes in Canada and Mexico will have little effect on supplies of copper until early next year.
She thinks the next area of support for copper is in the $1.09 to $1.10 range.
"I believe that as soon as the selling abates somewhat we could see a rally back to the $1.20 region," she added.
She thinks a recovery in the stock market would help copper rebound as well.
She noted that the preliminary estimate of the third-quarter gross national product is due out tomorrow and is expected to be up about 2.5% to 3%.
"If the number is a little better, then copper will respond positively, if it is worse then more selling could ensue," she predicted.
Ms. Raptopoulos noted that relating economic numbers to specific market activity is tricky.
Yesterday, for example, "the durable goods numbers came out for September and the number was down only 0.1%," she said.
"However, if you exclude defense-related orders then durable goods were down 3.9%.
I believe that number reflects a slowing economy."
She said copper traders will also be looking toward the release of the index of leading economic indicators next Tuesday.
However, David Threlkeld, president of Threlkeld & Co., an international metals company, noted that so far this year copper consumption is way ahead of the same period of 1988, and that projected production is below last year.
Mr. Threlkeld said the copper market seems to be anticipating a recession in three months, with declining use being the result.
"But," he added, "we have had that exact same perception six times in the last six years."
He noted that currently the ratio of available copper to consumption is about 3.5 weeks.
He said the normal ratio is five to six weeks.
According to Mr. Threlkeld, the bottleneck in copper production isn't at the mines but at the copper refineries.
"It takes three months to turn copper concentrate into cathodes," he said.
If there isn't a recession, he said, "we will be out of copper by the end of March.
If there is a recession that will change the statistical situation."
He thinks that without a recession copper prices could exceed a high of $1.65 a pound, which was reached last year.
In the past Mr. Threlkeld has been known to have substantial long positionsthat is, he had bought copper futures in anticipation of rising prices -- in the copper futures market.
In other commodity markets yesterday:
ENERGY: The attitude was "wait-and-see" in crude oil futures yesterday in trading on the New York Mercantile Exchange.
Prices for the U.S. benchmark West Texas Intermediate crude remained locked in a fairly narrow range before ending the session four cents lower at $19.72 a barrel for December delivery.
Several analysts and brokers said the petroleum market was ready to rally after two days of price declines from profit-taking.
But an early 80-point drop in the Dow Jones Industrial Average stopped the crude rally cold.
The industrial average recovered to close only 3.69 points lower, but petroleum futures never shook off the chill.
Most market participants said they were looking to this week's inventory statistics from the American Petroleum Institute to give the market some direction.
The report isn't generally available until late on Tuesdays.
PRECIOUS METALS: Futures prices inched upward in mostly lackluster trading.
December gold was up $3.20 an ounce at $373.40; December silver gained 5.7 cents to $5.1950 an ounce.
January platinum rose $2.30 an ounce to $488.60.
Mr. Kaiser said there were no fundamental factors moving these markets.
He noted that two weeks ago there were rumors of Soviet sales of precious metals to finance grain purchases, but the sales don't seem to have materialized.
Ms. Raptopoulos thought yesterday's price action reflected weakness in the stock market and the dollar.
"Gold still acts as a haven when uncertainty prevails in the financial markets as it did" yesterday, she said.
Mr. Kaiser noted that gold was more than 71 times the price of silver at the close yesterday, which is historically high.
"The high ratio reflects the fact that silver is still regarded as about a half-industrial metal and its price lagging relative to gold says that traders are expecting a weakening economy," he said.
GRAINS AND SOYBEANS: Prices closed lower after trading in relatively narrow ranges because of strong selling in the cash market and continued favorable harvest weather.
The sale to the Chinese government of 330,000 metric tons of wheat under the government's export enhancement program was announced after the close of trading Monday, but the sale was expected and failed to buoy prices yesterday, said Dale Gustafson, a futures analyst with Drexel Burnham Lambert Inc. in Chicago.
As for other export customers, the Soviet Union isn't expected to be back buying U.S. corn in significant amounts until early next year, he said.
A number of commercial grain users buttressed that opinion yesterday by buying certain corn options for delivery in March, indicating to analysts that the commercial companies would use the options to hedge against expected corn sales in next year's first quarter.
COCOA: Futures at first continued the rally begun on Monday, but then faltered and closed lower.
The December contract opened just under Monday's close, triggered some previously placed buy orders just above $1,030 a metric ton, pushing the price to $1,040, and then encountered heavy selling by traders who buy and sell for their own accounts and by commercial interests.
The contract settled at $1,014 a ton, off $13.
Robert Hafer, senior commodities analyst at Kaiser Financial Group, said Monday's rally continued yesterday for only about 20 minutes after the opening.
He said even though there was arbitrage buying in New York because of the weak dollar, cocoa fell to relentless pressure from bearish traders.
But he noted that speculators apparently don't believe there is much more of a decline in store for cocoa.
The December contract reached its life-of-contract low of $975 a ton on Oct. 11; its lifetime high was $1,735, set in 1988, and its recent high was $1,368, set in early August.
The last time cocoa traded at prices as low as currently was in 1974.
But while further modest declines might be ahead, Mr. Hafer said it would be difficult to get through resistance levels just above yesterday's high.
Citizens First Bancorp. Inc. said it agreed to buy Lakeland First Financial Group Inc., a Succasunna, N.J., bank holding company, for about $50.6 million in cash and stock.
Citizens First, which controls Citizens First National Bank and is based in Glen Rock, N.J., will pay a maximum of 40% in cash for the parent of Lakeland Savings Bank and the remainder in convertible preferred stock, with a liquidation value of $18 a share.
Lakeland holders will have the option to request either stock or cash.
The convertible preferred will pay dividends at 7.875% and be convertible into shares of Citizens First at a rate equal to 20% above the average closing price of the stock during a 20-day period prior to the transaction's completion.
The deal requires regulatory and shareholder approval.
Color Systems Technology Inc., Los Angeles, said its major creditor, General Electric Pension Trust, agreed to convert $11.8 million of debt owed into 25% of Color System's fully diluted common stock.
The agreement also calls for General Electric Pension, a unit of General Electric Co., to receive as much as 10% of Color Systems' fully diluted common stock, depending on the proceeds from the sale of the AEI Film Library and its receivables.
General Electric Pension took control of the 85-title library last month after Color Systems defaulted on the loan.
The agreement depends on Color Systems' ability to win similar concessions from other creditors.
Buddy Young, president, said the company expects to conclude negotiations with other creditors within 60 days.
Color Systems, which converts black-and-white film to color videotape, posted a loss of $7.1 million, or $1.32 a share, on revenue of $10.6 million for the fiscal year ended June 30.
Its stock fell 12.5 cents, to $2.125, in American Stock Exchange composite trading yesterday.
Next to Kohlberg Kravis Roberts's megabillion RJR Nabisco deal, SCI Television is small fry.
But the troubles of SCI TV are a classic tale of the leveraged buy-out excesses of the 1980s, especially the asset-stripping game.
SCI TV, which expects to release a plan to restructure $1.3 billion of debt in the next day or so, isn't just another LBO that went bad after piling on debt -- though it did do that.
The cable and TV station company was an LBO of an LBO, a set of assets that were leveraged twice, enabling the blue-chip buy-out king Henry Kravis in 1987 to take more than $1 billion of cash out of the com- pany.
SCI TV's buy-out was an ace in the hole for Mr. Kravis and for investors in KKR partnerships.
But it has left holders of SCI TV's junk bonds holding the bag, including some heavyweights that KKR might need to finance future deals, such as Kemper Financial Services, First Executive, Columbia Savings & Loan and Prudential Insurance Co. of America.
Some junk-holders are said to be considering legal action against KKR or moves to force SCI TV into bankruptcy court.
And KKR's majority partner in SCI TV's buy-out, Nashville, Tenn., entrepreneur George Gillett, also is said to be very unhappy.
SCI TV's six stations once were part of Storer Communications.
KKR loaded up the cable and television company with debt in an 1985 buy-out, then later sold Storer's cable operations at a fat profit.
In 1987, KKR for the second time piled debt onto Storer's TV stations, selling them for $1.3 billion to a new entity that was 45%-owned by KKR and 55%-owned by Gillett Corp., which now operates the SCI TV stations.
In this second LBO, KKR with one hand took more than $1 billion of cash out of the TV company's assets and moved it into the Storer cable operations, making them more valuable in a 1988 sale.
(Storer also took $125 million of junior SCI TV bonds as partial payment for the TV assets.)
With the other hand, KKR put back into SCI TV less than 10% of the cash it had taken out, buying SCI TV common and preferred shares.
So, while KKR today has an estimated $250 million sunk in now-shaky SCI TV, including equity and debt, the LBO firm still is $1 billion ahead on the SCI TV buy-out after taking cash up front.
On Storer as a whole, KKR racked up compound annual returns of 60% in the three years it owned Storer.
Meanwhile, Mr. Gillett risks losing his entire equity investment of about $100 million in SCI TV if the company can't be restructured.
Overall, Mr. Gillett's holding company, Gillett Holdings, is heavily indebted and, except for its Vail Mountain resorts, isn't doing very well.
With the TV business falling on hard times in recent years, analysts say that if SCI TV had to be liquidated today, it might fetch 30% less than in the 1987 buy-out, wiping out most of the company's junk-holders and its stockholders.
Meanwhile, SCI TV can barely pay its cash interest bill, and to stay out of bankruptcy court it must soon reschedule a lot of bank loans and junk bonds that have fallen due.
SCI TV's grace period for paying its bills is due to expire Nov. 16.
It now is quietly circulating among creditors a preliminary plan to restructure debt.
Negotiations "have started con- structively, but that's not to say we like this particular offer," says Wilbur Ross of Rothschild Inc., adviser to SCI TV junk-holders.
No major player in the SCI TV deal will talk publicly.
But it's understood that Mr. Kravis is disappointed that Mr. Gillett didn't manage to boost SCI TV's operating profit after the buy-out.
Mr. Kravis apparently thinks SCI TV can survive if lenders extend its debt payments until TV stations rise in value again, allowing SCI TV to sell assets to pay debt.
Mr. Gillett is said to be proud of his operating record; he has lifted some stations' ratings and turned around a Detroit station.
As for junk-holders, they're discovering it can be a mistake to take the other side of a trade by KKR.
The bonds of SCI TV now are being quoted at prices ranging from only five cents to about 60 cents on the dollar, according to R.D. Smith & Co. in New York, which trades distressed securities.
People who have seen SCI TV's restructuring plan say it offers concessions by KKR and Gillett Corp.
They would both give part of their combined $50 million in common equity in SCI TV to holders of SCI TV's $488 million of junk bonds, as a carrot to persuade them to accept new bonds that might reduce the value of their claims on the company.
But some militant SCI TV junk-holders say that's not enough.
They contend that SCI TV's equity now is worthless.
They add that it isn't costing KKR anything to give up equity because of its big up-front cash profit on the buy-out, which they think contributed to SCI TV's current problems.
Kemper, the biggest holder of senior SCI TV bonds, has refused to join the bond-holders committee and is said to be reviewing its legal options.
To protect their claims, some junk-holders want KKR and perhaps Mr. Gillett to invest new money in SCI TV, perhaps $50 million or more.
One investment banker who isn't involved in the deal says SCI TV needs at least $50 million of new equity to survive.
Junk-holders say they have a stick to beat KKR with: "The threat of bankruptcy is a legitimate tool" to extract money from KKR, says one big SCI TV holder.
This could be the first major bankruptcy-law proceeding for KKR, he adds.
A big bankruptcy-court case might tarnish KKR's name, and provide new fuel for critics of LBOs in Washington and elsewhere.
But others say junk-holders have nothing to gain by putting SCI TV into bankruptcy-law proceedings.
While KKR doesn't control SCI TVwhich is unusual for a KKR investment -- it clearly has much deeper pockets than Mr. Gillett.
Bankruptcy specialists say Mr. Kravis set a precedent for putting new money in sour LBOs recently when KKR restructured foundering Seaman Furniture, doubling KKR's equity stake.
But with Seaman, KKR was only trying to salvage its original investment, says bankruptcy investor James Rubin of Sass Lamle Rubin in New York.
By contrast, KKR probably has already made all the money it can on SCI TV.
And people who know Mr. Kravis say he isn't in a hurry to pour more money into SCI TV.
Rubbermaid Inc., reflecting strong earnings growth, boosted its quarterly dividend 18%, to 13 cents a share from 11 cents.
The maker of household products said the new dividend is payable Dec. 1 to shares of record Nov. 10.
Separately, the company's board adopted a proposal to amend its 1986 shareholder rights plan, further insulating the company from takeover.
Rubbermaid officials said they aren't aware of any effort to take over the company, but believed the shareholder plan needed to be strengthened.
"The board has stated repeatedly that Rubbermaid should be independent," said Walter W. Williams, Rubbermaid president.
Some changes to the plan were minor adjustments, but the most significant was an amendment that provides that if any investor holds 25% or more of Rubbermaid's voting securities, each right held by others would entitle the holder to buy Rubbermaid shares with a market value of twice the right's exercise price.
Mr. Williams said the exercise price is $125, meaning holders would have the right to buy $250 of Rubbermaid stock for half price, diluting the investor's 25% stake.
For the third quarter, Rubbermaid earned $32.6 million, or 44 cents a share, up 16% from $28.1 million, or 38 cents a share, a year earlier.
Sales rose 9.7% to $351.5 million from $320.4 million.
Rubbermaid shares closed yesterday at $33.875, off 12.5 cents, in New York Stock Exchange composite trading.
The stock market went on a dizzying ride as UAL, parent of United Airlines, once again led shares into a breathtaking decline and then an afternoon comeback.
At the end of it all, the Dow Jones Industrial Average closed down 3.69 to 2659.22.
At one point yesterday morning, the Dow was down 80.53 points.
New York Stock Exchange volume was 237,960,000 shares.
Declining issues swamped advancers, 1,222 to 382.
Yesterday's sell-off and rebound was a powerful reminder that 11 days after the 190-point plunge on Friday the 13th, the stock market still has a bad case of nerves.
Takeover stock speculation and futures-related program trading drove the industrial average through wide ranges.
And there is more volatility to come.
"October 13th left us with a cut and exposed nerve," said Jack Solomon, technical analyst for Bear Stearns.
"People are fearful and sensitive.
Everybody's finger is one inch closer to the button.
I have never had as many calls as I had this morning.
Volatility is here to stay."
The Dow Jones Industrial Average plunged about 80 points in slightly more than one hour after the opening bell.
For many, it began to look like a replay of Oct. 13.
As stocks and stock-index futures fell, a trading limit was hit in the S&P 500 stock futures pit.
Under a post-1987 crash reform, the Chicago Mercantile Exchange wouldn't permit the December S&P futures to fall further than 12 points for a half hour.
That caused a brief period of panic selling of stocks on the Big Board.
But at a critical moment, stock-index arbitrage traders showed their power and control.
They scooped up hundreds of S&P futures when the market needed it most.
At about 10:40 a.m. EDT, several big buy orders hit the S&P pit simultaneously, lifting the futures up out of the trading limit and eventually into ranges that caused computer-driven program buying of stocks.
"It is very clear that those buy orders came from people who wanted their franchise protected," said one Chicago-based futures trader.
"These guys wanted to do something to show how powerful they are."
Traders said Goldman Sachs, Shearson Lehman Hutton and Salomon Brothers were the main force behind the futures buying at the pivotal moment.
Shearson Lehman Hutton declined to comment.
Officials at Goldman Sachs and Salomon Brothers were unavailable for comment.
As in the Oct. 13 massacre, yesterday morning's drop was triggered by bad news for speculators in UAL.
A UAL statement after the market closed Monday indicated that the airline's board wanted to keep the company independent, effectively crushing hopes of an immediate buy-out.
Five minutes before the Big Board opened, a preliminary price was flashed for UAL -- somewhere between 135 and 155, a loss of as much as $43 a share from Monday's close.
UAL finally opened for trading at 10:08 a.m. at 150, down $28.
Floor traders said there was a huge crowd around the Big Board specialist's post where UAL trades.
"There was a seething mass of people," said one floor trader.
"Then there was a big liquidation of stock" across the board, he added.
Takeover speculators -- who have already taken a record loss estimated at more than $700 million on UAL -- started selling other stocks as well as S&P futures in an attempt to hedge against a further UAL blood bath.
Shortly after the UAL opening, program traders started selling stocks in the Major Market Index and S&P 500 index.
The 20-stock MMI mimics the Dow Jones Industrial Average.
By 10:30 a.m. the Dow was down 62.70.
All 20-stocks in the MMI except Exxon, General Motors and Sears were down $1 to $2.
At 10:33, when the S&P 500 December futures contract crunched to a 12-point loss under the force of sell programs, S&P futures trading was halted and program trades on the Big Board were routed into a special computer that scans for order imbalances.
Under the rules adopted by the Chicago Mercantile Exchange, the futures contract cannot drop below the limit, but buyers can purchase futures.
At this point, the Dow industrials were down 75.41 points and falling.
The trading halt in the S&P 500 futures exacerbated selling and confusion, many traders maintain.
But as the fright began to spread through the S&P pit, the big brokerage firms came in and bought futures aggressively.
"It was whooosh!" said one futures trader.
In five minutes, the Dow industrials climbed almost 30 points.
The big futures buying triggered stock-index buy programs that eventually trimmed the Dow's loss to 31 points by 11 a.m.
Traders said the futures buying was finely calculated by program traders.
These firms sold stock into the big morning decline, but seeing the velocity of the market's drop, held back on their offsetting purchases of futures until the S&P futures hit the trading limit.
Then they completed the other side of the trade by buying futures, which abruptly halted the stock market's decline as traders began to buy stocks.
From then on, the Dow industrials held at a loss of 40 to 50 points.
Then, in late-afternoon trading, hundred-thousand-share buy orders for UAL hit the market, including a 200,000-share order through Bear Stearns that seemed to spark UAL's late price surge.
Almost simultaneously, PaineWebber began a very visible buy program for dozens of stocks.
The combined buying rallied the Dow into a small gain, before closing at a slight loss.
Some institutional traders loved the wild ride.
"This is fun," asserted Susan Del Signore, head equity trader at Travelers Investment Management Co.
She said she used the market's wild swings to buy shares cheaply on the sell-off.
On the comeback, Ms. Del Signore unloaded shares she has been aiming to get rid of.
But traders who risk money handling big blocks of stock were shaken.
"This market is eating away my youth," said Chung Lew, head equity trader at Kleinwort Benson North America Inc.
"Credibility sounds intangible.
But I think we are losing credibility because when the market does this, it doesn't present itself as a rational investment.
But if you overlook all this, it is a beautiful market for investment still."
Traders attributed rallies in a number of stocks to a Japanese buy program that PaineWebber carried out as part of a shift in portfolio strategy, according to Dow Jones Professional Investor Report.
Dow Jones climbed 5 3/4 to 41 on very heavy volume of 786,100 shares.
Analysts said a big Japanese buy order was behind the rise.
A Dow Jones spokesman said there were no corporate developments that would account for the activity.
Other issues said to be included in the buy program were Procter & Gamble, which rose 2 7/8 to 133 1/2; Atlantic Richfield, which gained 2 to 103 3/4, and Rockwell International, which jumped 2 3/4 to 27 1/8.
PaineWebber declined to comment.
UAL finished at 170, off 8 3/8.
Other airline stocks fell in response to the UAL board's decision to remain independent for now, including USAir Group, which separately reported a third-quarter loss of $1.86 a share compared with a year-ago profit.
USAir fell 2 1/2 to 40.
AMR, the parent of American Airlines, fell 1 3/4 to 68 7/8 on 2.3 million shares; Delta Air Lines lost 1 1/2 to 66, Southwest Airlines slid 3/4 to 24 1/4 and Midway Airlines dropped 1/4 to 14 7/8.
Texas Air, which owns Continental and Eastern airlines, lost 3/8 to 13 1/8 on the American Stock Exchange.
Metals stocks also were especially weak, as concerns about the earnings outlook for cyclical companies weighed on the group.
Aluminum Co. of America dropped 1 1/2 to 70 1/4, Phelps Dodge fell 4 to 59 7/8, Asarco lost 1 3/8 to 31 3/4, Reynolds Metals slid 1 3/8 to 50 3/8, Amax dropped 1 1/8 to 21 5/8 and Cyprus Minerals skidded 2 to 26 3/4.
Alcan Aluminium was an exception, as it gained 1 3/8 to 23 on two million shares.
Goodyear Tire & Rubber tumbled 2 7/8 to 43 7/8.
Its third-quarter earnings were higher than a year ago, but fell short of expectations.
Other stocks in the Dow industrials that failed to benefit from the market's rebound included United Technologies, which dropped 1 to 53 5/8, and Bethle hem Steel, which fell 1 to 16 7/8.
BankAmerica dropped 1 1/4 to 29 1/2 on 2.3 million shares amid rumors that the earthquake last week in the San Francisco area had caused structural damage to its headquarters building.
The company denied the rumors and noted that it doesn't own the building.
Stocks of California-based thrifts also were hard hit.
Great Western Financial lost 1 1/8 to 20 1/2 on 1.6 million shares, Golden West Financial dropped 1 1/4 to 28 1/2 and H.F. Ahmanson dipped 5/8 to 21 1/4.
HomeFed plunged 3 5/8 to 38 1/2; its third-quarter earnings were down from a year ago.
Golden Valley Microwave Foods skidded 3 5/8 to 31 3/4 after warning that its fourth-quarter results could be hurt by "some fairly large international marketing expenses."
Dividend-related trading swelled volume in two issues: Security Pacific, which fell 7/8 to 44 1/2 and led the Big Board's most actives list on composite volume of 14.8 million shares, and Nipsco Industries, which lost 3/8 to 17 3/8 on 4.4 million shares.
Both stocks have dividend yields of about 5% and will go ex-dividend Wednesday.
Kellogg surged 4 1/4 to 75.
Donaldson, Lufkin & Jenrette placed the stock on its list of recommended issues.
The company noted that its third-quarter results should be released later this week or early next week.
Vista Chemical rose 1 3/8 to 38 5/8 after Bear Stearns added the stock to the firm's buy list, citing recent price weakness.
Georgia Gulf, another producer of commodity chemicals, advanced 2 to 49 1/2; Dallas investor Harold Simmons, who holds about 10% of its shares, said he hasn't raised his stake.
Norfolk Southern went up 1 1/8 to 37 7/8.
The company's board approved the repurchase of up to 45 million common shares, or about 26% of its shares outstanding, through the end of 1992.
Airborne Freight climbed 1 1/8 to 38 1/2.
Its third-quarter earnings more than doubled from a year earlier and exceeded analysts' expectations.
John Harland, which will replace American Medical International on the S&P 500 following Wednesday's close, gained 5/8 to 24 1/8.
The Amex Market Value Index fell 3.10 to 376.36.
Volume totaled 14,560,000 shares.
GANNETT Co. raised its quarterly dividend 11% to 30 cents a share from 27 cents, payable Jan. 2, 1990, to shares of record Dec. 8, 1989.
The action increases the annual dividend to $1.20 a share from $1.08.
This is the 22nd year in which the Washington media company has increased dividends.
Gannett's third-quarter earnings rose 11% to 52 cents a share from 47 cents in the year-ago period.
Sales rose 2.9% to $827.9 million from $804.3 million.
Gannett has 161 million shares outstanding.
Fireman's Fund Corp. said third-quarter net income plunged 85% to $7.2 million from last year's $49.1 million, or 99 cents a share, because of ravages of Hurricane Hugo and increased reserves for legal expenses.
Payout of preferred dividends resulted in a net loss of five cents a share in the most recent quarter.
Revenue edged up 3.4% to $904 million from $874 million in last year's third quarter.
In New York Stock Exchange composite trading, Fireman's closed at $35.50 a share, down 50 cents.
Impact of the Oct. 17 San Francisco earthquake, which will be recorded in the fourth quarter, isn't expected to exceed $50 million after taxes, the company added.
For the nine months, the insurance company said net fell 46% to $88.8 million, or $1.54 a share, from $164 million, or $3.16 a share, the previous year.
Revenue slid 7% to $2.6 billion from $2.8 billion a year earlier.
Fireman's Fund property-liability subsidiaries reported a 120.7% combined underwriting ratio for the nine months, up from 108.4% for the year-ago period.
Hurricane Hugo accounted for about $36 million in pretax third-quarter losses, net of reinsurance recoveries.
The company said there was an additional increase in loss and loss-expense reserves of $71 million reflecting "higher than expected" development in claims legal expenses from to prior periods.
For the third quarter, net premiums were $742 million, up 9.6% from $677 million in last year's quarter, because of the expiration of the National Indemnity quota share reinsurance agreement.
Net premiums written through Sept. 30 fell 5% to $2.1 billion from $2.2 billion a year ago, because of the writing of fewer policies at flat prices, the company said.
Third-quarter and nine-month results don't include any provision for premium returns that could be ordered by the California Department of Insurance under Proposition 103.
Fireman's Fund said it has applied for an exemption from these rate rollbacks, and plans to defend its filing in hearings before the department.
CONTROL DATA Corp. said it is offering to purchase the $154.2 million amount of its 12 3/4% senior notes due June 15, 1991, at par, plus accrued interest to the Dec. 8 purchase date.
The Minneapolis computer systems and services concern said the offer is required under the senior note indenture as a result of Control Data's recent sale of its disk drive subsidiary, Imprimis, to Seagate Technology Inc.
Child's Game
There was very slow play on the market today, They were selling and buying by halves; Instead of trading like Bears and Bulls, They behaved like cubs and calves.
-- George O. Ludcke.
Politrick
I've learned one thing from candidates, A technique so deftly done: If a question can't be answered, Strongly answer an unasked one!
-- Mimi Kay.
Foresight
We need to get a space platform set up soon -- just in case we want to step out for a breath of fresh air.
-- Ivern Ball.
After being whipsawed by a volatile stock market, Treasury bonds closed higher.
But junk bonds took more hits.
Early in the day, bond dealers said trading volume was heavy as large institutional investors scrambled to buy long-term Treasury bonds on speculation that the stock market's volatility would lead to a "flight-to-quality" rally.
That happens when nervous stock investors dump equities and buy Treasurys, which are higher in quality and thus considered safe.
"Some retail accounts, such as commercial banks and pension funds, wanted to get on the bandwagon before it was too late," said Sung Won Sohn, chief economist at Norwest Corp., Minneapolis.
At one point, the Dow Jones Industrial average fell about 80 points on news that UAL Corp. decided to remain independent.
In response, Treasury prices soared 1 1/8 points, or about $11.25 for each $1,000 face amount.
But the gains in Treasury bonds were pared as stocks staged a partial recovery.
The industrial average ended at 2659.22, down 3.69 points.
Economists said the bond market's strength also is a sign that investors expect the Federal Reserve to cut interest rates amid growing evidence that the economy is slowing.
While they don't expect the Fed to move right away, they say the case for lower rates is building.
Yesterday, for example, the Commerce Department reported that new orders for durable goods fell 0.1%, while the nation's auto makers reported lackluster mid-October sales.
The Treasury's 30-year bond ended over 1/4 point higher.
Municipal, mortgage-backed and investment-grade corporate bonds rose 1/8 to 1/2 point.
But high-yield, high-risk bonds fell 1/4 to 1/2 point with the stock market early in the session and never recovered.
According to a trader at Drexel Burnham Lambert Inc., the hardest hit junk bonds were those issued by RJR Holdings Capital Corp., which are the easiest to sell.
RJR's 14.70% bonds due 2007 fell 2 1/2 points.
Trading activity in the junk market was extremely light as dealers couldn't find enough buyers to match sellers.
"While the stock market was falling, most {junk bond holders} were just watching it not knowing what to do," said Paul Suckow, director of fixed-income securities at Oppenheimer Management Corp.
"It was like driving down the highway watching a wreck.
Everybody was rubber-necking."
Adding to the junk market's jitters were reports that Donaldson, Lufkin & Jenrette Securities Corp. is having trouble structuring a $1.6 billion offering for TW Food Services Inc. and will postpone or even cancel the issue.
TW is the largest franchisee of Hardee's, a fast-food restaurant, and operates several other food chains.
Donaldson Lufkin wouldn't comment.
Credit analysts said investors are nervous about the issue because they say the company's ability to meet debt payments is dependent on too many variables, including the sale of assets and the need to mortgage property to retire some existing debt.
Also, the TW offering includes interest-deferred and pay-in-kind securities, which are currently unpopular.
Meanwhile, investors turned a cold shoulder to the Treasury's sale of $10 billion of new two-year notes yesterday.
"It's not too surprising that the auction was sloppy, given the volatility in the bond market because of stocks," said Robert T. McGee, a senior vice president at Tokai Bank Ltd.
"People are looking past supply to lower interest rates, but they're also worried about being whipsawed by the volatility in the stock market."
The new two-year notes were priced with an average yield of 7.74%.
That was higher than the 7.71% to 7.73% average yield that traders had expected.
In when-issued trading, the notes were quoted at a price to yield 7.78%.
Sluggish demand was also evidenced by the weak 2.41-to-1 bid-to-cover ratio, which was lower than the average 2.79-to-1 ratio at the last 12 similar auctions.
The ratio, which reflects the number of bids the Treasury receives for each bid accepted, is used to gauge investor demand.
Dealers said players shied away from the note sale because they were concerned that prices at the time of the auction might erode if the stock market staged a recovery, which, in fact, did happen.
Individual and Japanese participation in the auction was disappointing, according to dealers.
"Interest by Japanese investors was limited," said Michael Moran, chief economist at Daiwa Securities America Inc.
"They are typically not active in two-year note auctions, but today's participation could be viewed as lighter-than-normal."
However, Mr. Moran added that the Japanese generally have a positive view of the U.S. bond market because of expectations that the dollar will remain strong and interest rates will decline.
He said, "Possibly, they're waiting to buy at the (quarterly) refunding" of government debt to be held next month by the Treasury.
A trader at a Japanese firm estimated that the Japanese purchased no more than 10% of the two-year notes.
Treasury, Agency Securities
Today investors will focus on the long-awaited auction of $4.5 billion of 30-year bonds by Resolution Funding Corp.
The initial bond offering by the new government agency, which was created to help rescue the nation's troubled thrifts, isn't expected to see robust demand.
A small yield premium over comparable Treasurys and a lack of liquidity is hampering dealers' efforts to drum up interest in the so-called bailout bonds.
In when-issued trading, the Refcorp bonds were quoted at a price to yield 8.17%.
Yesterday, the benchmark 30-year bond was quoted late at 102 18/32 to yield 7.89%, compared with 102 9/32 to yield 7.93% on Monday.
The latest 10-year Treasury was quoted at 100 22/32 to yield 7.88%, compared with 100 17/32 to yield 7.9%.
Short-term rates were unchanged to slightly lower.
The discount rate on three-month Treasury bills was quoted at 7.52% for a bond-equivalent yield of 7.75%, while the rate on six-month Treasury bills was quoted at 7.47% for a yield of 7.85%.
Rates are determined by the difference between the purchase price and face value.
Thus, higher bidding narrows the investor's return while lower bidding widens it.
Corporate Issues
Several blue-chip companies tapped the new-issue market yesterday to take advantage of falling interest rates.
Three of the largest offerings, by Exxon Capital Corp., Xerox Corp. and Citicorp, were underwritten by groups led by Salomon Brothers Inc.
Exxon Capital, long-rumored to be a potential debt issuer, offered $200 million of 10-year notes priced to yield 8.31%.
Citicorp issued $200 million of seven-year notes priced to yield 8.82%, and Xerox priced $150 million of six-year notes to yield 8.85%.
Meanwhile, International Business Machines Corp. paved the way for a visit to the credit markets by filing a shelf registration with the Securities and Exchange Commission for $800 million in new debt.
This is in addition to IBM's existing shelf registration under which $200 million in debt securities are available for issuance.
In secondary trading, investment-grade corporate bonds ended 1/8 to 1/4 higher.
Municipals
Actively traded municipal bonds ended 1/4 to 1/2 point higher in brisk trading, despite a flood of new supply.
New Jersey Turnpike Authority's 7.20% issue of 2018 finished 1/4 point stronger at 98 1/2 bid, to yield 7.32%.
Traders said municipals were underpinned by influences including the climb in Treasury issue prices.
Also, municipal bonds lured buying because the stock market remains wobbly, traders contended.
Mainly, though, it was a favorable outlook for yesterday's new supply that propped up municipals, some traders said.
Among the new issues was Massachusetts's $230 million of general obligation bonds.
The bonds were won by a Goldman, Sachs & Co. group with a true interest cost of 7.17%.
They were priced to yield from 6.00% in 1990 to 7.20% in 2009.
The Massachusetts deal had an unsold balance of $84.3 million in late trading, the underwriter said.
Mortgage-, Asset-Backed Securities
Mortgage securities gained 3/32 to 9/32 point after a hectic session, with Government National Mortgage Association 8% securities as the standout issue.
The Ginnie Mae issue rose amid talk of large purchases of the securities by institutional investors.
The derivative markets remained active as one new issue was priced and talk circulated about more offerings in the next day or two.
The Federal Home Loan Mortgage Corp. issued a $500 million real estate mortgage investment conduit backed by its 8 1/2% securities.
In the asset-backed market, a big offering of Ford Motor Credit Corp. auto-loan securities was increased in size after strong institutional demand.
The deal by the Ford Motor Co. unit, priced Monday, was increased to $3.05 billion from $2.58 billion.
Among major pass-through issues, Ginnie Mae 9% securities for November delivery ended at 98 15/32, up 5/32, after touching an early high of 98 27/32; 8% securities were at 94 5/32, up 9/32; 9 1/2% securities at 100 15/32, up 4/32; and 10% securities at 102 11/32, up 3/32.
Freddie Mac 9% securities were at 97 21/32, up 5/32.
The Ginnie Mae 9% issue was yielding 9.34% to a 12-year average life assumption, as the spread above the Treasury 10-year note held at 1.46 percentage points.
Foreign Bonds
The Eurodollar bond market sprang to life late in the European trading session after the Dow Jones Industrial Average tumbled.
Eurodollar bonds are often issued by foreign corporations, but interest and principal are paid in dollars.
The bonds ended about 1/2 point higher yesterday.
Prices of European government bonds also rose as U.S. stocks declined.
West Germany's 7% issue due October 1999 rose 0.13 point to 99.93 to yield 7.01%, while the 6 3/4% issue due July 1994 rose 0.05 to 97.70 to yield 7.33%.
Britain's 11 3/4% Treasury bond due 2003/2007 rose 17/32 to 112 6/32 to yield 10.05%, while the 12% notes due 1995 rose 11/32 to 104 2/32 to yield 10.93%.
In Japan, government bond prices fell.
The No. 111 4.6% bond due 1998 ended on brokers' screens at 95.22, down 0.17 point, to yield 5.41%.
BSB BANCORP Inc., Binghamton, N.Y., said it increased its regular quarterly dividend 50%, to 15 cents a share from 10 cents.
It is payable Dec. 10 to stock of record Nov. 24.
The move was made because of the bank-holding company's increased profitability, officials said.
In the third quarter, BSB earned $2 million, up from $1.8 million a year earlier.
In national over-the-counter trading yesterday, BSB closed at $17.50, up 12.5 cents.
BSB has 3.1 million shares outstanding.
Staar Surgical Co.'s board said that it has removed Thomas R. Waggoner as president and chief executive officer and that John R. Wolf, formerly executive vice president, sales and marketing, has been named president and chief executive officer.
Mr. Waggoner has been involved in a dispute with the board since August, when he ousted all the directors.
Later they said they fired him, and two directors attempted to place the company under bankruptcy-law protection.
A federal judge turned down the Chapter 11 petition.
The company's latest announcement said Mr. Waggoner will remain a director of Staar, a maker of products for small-incision surgery.
Mr. Wolf and other members of the board declined to comment on the announcement.
Mr. Waggoner couldn't be reached.
The Staar board also said that John R. Ford resigned as a director, and that Mr. Wolf was named a member of the board.
EAST GERMANY'S KRENZ WARNED against further pro-democracy protests.
After the legislature confirmed him as the Communist Party leader, Krenz said demonstrations to demand democratic freedoms could cause a "worsening of the situation, or confrontation."
He also reaffirmed East Germany's allegiance to Communist orthodoxy.
But as many as 12,000 people marched in East Berlin after the speech to protest his election.
During the balloting, 26 members of the 500-seat Parliament voted against Krenz, a move considered unprecedented in the country's 40-year history.
Officials in East Berlin, responding to complaints from opposition groups, admitted police used excessive force in dispersing protesters this month.
The Iran-Contra judge agreed to allow Poindexter to subpoena the personal papers of ex-President Reagan, ruling that there was sufficient evidence that the data would be important to the defense.
But the judge denied a request by the former national security adviser, who faces five criminal charges, to seek documents from Bush.
San Francisco Bay area officials said nine people remain missing in the aftermath of last week's earthquake.
The death toll rose to 63.
The House, meanwhile, approved $2.85 billion to aid in the recovery from the temblor and from Hurricane Hugo as state legislators moved toward a temporary sales-tax increase.
U.S. officials expressed skepticism over an Israeli effort to show the PLO continues to practice terrorism.
Israel provided the State Department with a list of recent alleged terrorist incidents attributed to forces controlled by Arafat, but the U.S. said it wasn't satisfied that the incidents constituted terrorism.
TV evangelist Jim Bakker was sentenced to 45 years in prison and fined $500,000 for defrauding followers of his PTL ministry.
Bakker, who was immediately taken into custody, was convicted Oct. 5 by a federal court jury in Charlotte, N.C., of fraud and conspiracy for diverting more than $3.7 million of ministry funds for personal use.
Lawmakers in Moscow voted to deny the Communist Party its 100 guaranteed seats in the Soviet Congress, meaning Gorbachev and other aides might have to face voters.
In Warsaw, Shevardnadze held his first talks with the Solidarity-led government and vowed to maintain fuel supplies.
Poland's premier is to visit Moscow next month.
The Arab League pledged an accord for a complete Syrian troop pullout from Lebanon, where about 70,000 people marched to the headquarters of Christian leader Aoun to support his rejection of a peace plan approved Sunday by Lebanon's legislature.
The plan lacked a withdrawal timetable.
Pro-Iranian kidnappers renewed an offer to trade their captives in Lebanon for at least 15 Shiite Moslem comrades jailed in Kuwait.
The statement by Islamic Jihad, which holds at least two U.S. hostages, was accompanied by a photograph of Associated Press correspondent Terry Anderson, longest held of 18 Western hostages.
The Treasury Department said S&Ls reject blacks for mortgage loans twice as often as they reject whites.
The department's Office of Thrift Supervision said that doesn't necessarily mean thrifts are biased, but conceded that it doesn't have data about applicants to determine why blacks are rejected more often.
Emergency crews searched through the charred rubble of a Phillips Petroleum Co. plastics plant near Pasadena, Texas, where a series of explosions Monday killed at least two people and injured 124.
Company officials said 22 workers were missing and presumed dead.
Safety authorities didn't immediately know the cause of the blasts.
NATO defense ministers opened a two-day meeting in Portugal to assess the alliance's nuclear-weapons needs amid reduced East-West tensions.
The ministers ordered a study on the strategic role of nuclear arms in Western Europe once Soviet conventional weapons are reduced in the East bloc.
The Justice Department scrambled to play down the significance of revised guidelines concerning prosecutions under the federal racketeering law.
The guidelines, which discourage prosecutors from seeking court orders seizing the assets of certain racketeering defendants prior to trial, were first disclosed this week.
Died: S. Clark Beise, 91, ex-president and chief executive officer of Bank of America NT&SA, Saturday, in Hillsboro, Calif.
STOCK PRICES SWUNG wildly as the market reacted to an initial plunge by UAL shares, followed by a sharp rebound in the afternoon.
The Dow Jones industrials, down over 80 points in the morning, closed off 3.69, at 2659.22.
Bond prices surged in reaction to the sell-off in stocks, then eased slightly during the afternoon recovery.
The dollar finished lower.
UAL's stock regained most of an early loss amid speculation one or more investors may challenge the airline's decision to stay independent.
The stock closed down $8.375, at $170, after plunging $33, to $145.
Ford may seek all of Jaguar, setting the stage for a possible bidding war with GM.
Jaguar has been discussing an alliance with GM, but Ford's move may derail the talks.
Car and truck sales slid 20.5% in mid-October as U.S. manufacturers paid the price for heavy incentives earlier in the year.
General Motors continued to be hardest hit.
Durable goods orders slipped 0.1% in September, reflecting weakening auto demand after a spurt of orders for new 1990 models.
Excluding transportation items, orders rose 1.8%.
Norfolk Southern's board approved a buy-back of up to 45 million shares, valued at over $1.7 billion.
The repurchase, coupled with an earlier buyback, will reduce the firm's shares outstanding by over 26%.
PS New Hampshire received a sweetened $2.25 billion offer from Northeast Utilities, likely spurring a new round of bidding for the utility.
GE executives were accused by U.S. prosecutors of providing "misleading and false" data to the Pentagon in 1985 to cover up "longstanding fraudulent" billing practices.
Texaco said profit rose 11% in the quarter, partly due to a massive restructuring.
Sun posted a gain.
Mobil, Shell and Chevron had declines.
Mobil is preparing to slash its work force in the U.S., possibly as soon as next month, sources said.
Sears posted a 16% drop in third-quarter profit as U.S. retail operations recorded the first loss in over five years.
The results show Sears is struggling to attract shoppers.
Digital Equipment announced its first mainframe computers, targeting IBM's largest market and heating up the industry's biggest rivalry.
Cray Research expects supercomputer sales to be flat next year, the latest in a series of negative announcements by the company.
Short interest increased 6% in the Nasdaq over-the-counter market for the month ended Oct. 13.
Salomon posted an unexpectedly big gain in quarterly earnings, aided by its securities trading and investment banking activities.
Procter & Gamble's profit surged 38% in its latest fiscal quarter, aided by a gain from a legal settlement and continued growth overseas.
Goodyear's profit rose 11% in the quarter, buoyed by improved operating results in its tire business.
Markets --
Stocks: Volume 237,960,000 shares.
Dow Jones industrials 2659.22, off 3.69; transportation 1210.70, off 25.96; utilities 215.04, off 0.31.
Bonds: Shearson Lehman Hutton Treasury index 3425.22, up
Commodities: Dow Jones futures index 129.24, off 0.25; spot index 130.76, off 0.88.
Dollar: 141.45 yen, off 0.45; 1.8355 marks, off 0.0115.
Genetic Defect Spotted In 3-Day-Old Embryo
RESEARCHERS diagnosed a genetic defect in a three-day-old mouse embryo in an experiment directly applicable to humans.
Prenatal diagnosis of genetic defects as early as the sixth week of pregnancy is increasingly common today.
But the mouse experiment at a Medical Research Council laboratory in London shows genetic defects can be detected three days after conception using a new American-developed gene-copying technique.
The experiment, applicable to many genetic disorders, involved beta-thalassemia, a severe blood anemia resulting from a missing hemoglobin gene.
It's an inherited human disorder that's been duplicated in mice.
In the experiment, mice with the defective gene were mated.
Three days later, before the new embryo had become implanted in the uterus, it was washed out of the mother mouse.
The embryo had progressed only to a clump of eight identical cells.
One cell was teased out, and its DNA extracted.
Using the new technique developed by Cetus Corp., called the polymerase chain reaction, the scientists rapidly made millions of copies of the section of DNA that ordinarily contains the hemoglobin gene, providing enough copies to test.
A genetic probe showed the hemoglobin gene was missing, the researchers report in the medical journal Lancet.
In the report, two molecular biologists suggest such embryo diagnosis can be used by couples at high risk of passing a genetic defect to a child.
For example, infertile couples who have the woman's eggs fertilized in the test tube usually have several eggs fertilized at a time.
When the fertilized cells divide to eight cells, a single cell from each embryo can be tested for genetic defects.
A healthy embryo can be picked for implantation and defective ones discarded.
Or in other couples, the embryo could be temporarily taken out and tested three days after conception and returned if healthy, or discarded if not.
Yeast Adapted to Make Gene-Spliced Drugs
AN OIL COMPANY finds a sideline in the microscopic world of yeast.
In the early 1970s, when the "world food crisis" was a major worry, Phillips Petroleum Co., like several other big companies, began developing "single-cell protein," edible protein made by microbes feeding on non-edible materials.
Phillips found and improved a yeast, "Pichia pastoris," which made protein from natural gas-derived alcohol.
It also could convert glucose from farm wastes into edible protein.
Single-cell protein never panned out, and most companies abandoned such research.
But Phillips persisted, calling in scientists from the Salk Institute.
They've now adapted the yeast to making genetically engineered drugs.
Like the bacteria used by genetic engineers, the yeast can take in human genes and churn out human proteins for medical use.
But the yeast genetic apparatus is more like that of animals than the bacterial genetic apparatus.
Thus, the proteins from the yeast are molecularly more like human proteins than those from bacteria.
The oil company claims its yeast system also is better than bacteria at high-volume production of genetically engineered drugs.
Chiron Corp., an Emeryville, Calif., biotechnology firm, is seeing if the Phillips yeast can be used to make its genetically engineered human proteins.
Peeking Inside Arteries From Outside the Body
VISUALIZING BLOOD vessels without poking catheters into the body may come out of research at AT&T Bell Laboratories.
Strokes, heart attacks, leg pains (intermittent claudication) and other problems stem from clogging of the arteries by cholesterol-rich deposits.
At present, doctors can see how badly an artery is clogged only by inserting a thin catheter into the artery and injecting a fluid that makes the arteries visible on X-rays.
A non-invasive method is being researched by biophysicist Lynn Jelinski at the AT&T unit.
It relies on the fact that certain atoms give off detectable signals when subjected to an intense magnetic field.
It's the same phenomenon used in the new MRI (magnetic resonance imaging) scanners being used in hospitals in place of X-ray scans.
In the Bell Labs experiments, an MRI-type of machine, synchronized with the heartbeat via an electrocardiogram, rapidly flashes a magnetic field on and off as blood passes a certain point in a vessel.
The rapidly flashing return signals from excited hydrogen atoms in the blood give a "stop-motion" movie of the blood-filled vessel, (like the "stop-motion" seen in disco dancers when a strobe light is flashing).
The scientists have experimented on the tiny neck arteries of rats.
They've been able to measure the minuscule movements of the artery wall as the beating heart raises and lowers the pressure of the flowing blood, a first for such tiny blood vessels, they report in Nature, a scientific journal.
They now are experimenting with measuring blood flow.
The ultimate hope is that the technique could identify diseased vessels.
Odds and Ends
TESTS ON 2,800-year-old mummies from Chile indicate ancient wood fires didn't produce dioxins or dibenzofurans, contradicting a theory the two pollutants today are coming from wood burning, General Electric Co. reports in Environmental Science & Technology magazine. . . .
Almost 40% of schizophrenic men have an impaired sense of smell vs. fewer than 10% of schizophrenic women, reports the American Journal of Psychiatry.
The Justice Department said it filed a lawsuit seeking more than $7.7 million from a Meredith Corp. unit on charges that the company defrauded the government on a contract to provide relocation services for federal employees.
The suit, filed in federal trial court in Des Moines, Iowa, where Meredith is based, alleges that the diversified media company's relocation unit cheated the government by misrepresenting the value of government employees' homes.
The government contract required Meredith Relocation Corp. to purchase employees' homes based on independent appraisals.
The Justice Department alleges that the company "engaged in various forms of misrepresentation" with the goal of reducing the appraised value of employees' homes.
In the suit, the department seeks to recover $7.7 million in costs incurred when the government terminated its contract with Meredith Relocation and sought other contracts to replace it.
The department also said it seeks "three times the government's damages, which are presently undetermined, plus penalties."
Officials with Meredith didn't have any immediate comment on the suit.
Lloyd's of London said it plans to clamp down on the ability of underwriting syndicates to leave their annual accounts open beyond the customary three years.
Underwriting syndicates at Lloyd's, the world's largest insurance market, generally don't close their accounts for three years, to allow for the filing of claims and litigation.
When such claims and litigation extend beyond the period, the syndicates can extend their accounting deadlines.
Lloyd's said there are currently 115 open account years involving 68 of the market's roughly 360 syndicates.
The open-year accounting practice "is widely recognized within Lloyd's as of serious concern" to the 31,329 member investors, who underwrite insurance at Lloyd's in return for premium and investment income, Lloyd's said.
The procedure causes "great uncertainty" because an investor can't be sure of his or her individual liability, Lloyd's said.
As a result, the insurance market plans new measures to restrict the ability of syndicate officials to leave years open.
Lloyd's said it expects to enact new rules mandating the changes by year end.
Under the new rules, the officials will have to secure additional information and reports from actuaries, including an assessment of whether officials have acted reasonably.
In addition, officials will have to get quotes for certain reinsurance contracts and obtain approvals from other syndicate directors.
Computer Associates International Inc. reported earnings for the second quarter, ended Sept. 30, plummeted 66%, primarily because of the acquisition of Cullinet Software Inc.
The nation's largest software company earned $9.6 million, or five cents a share, compared with $28 million, or 16 cents a share, a year earlier.
Revenue rose 5% to $282 million from $268.3 million.
The drop in earnings had been anticipated by most Wall Street analysts, but the results were reported after the market closed.
Computer Associates closed at $13.625, down 25 cents, in composite trading on the New York Stock Exchange.
Anthony Wang, president, attributed the drop to the disruption of the company's business resulting from the prolonged process of acquiring Cullinet.
The acquisition was completed in September.
In August, the company warned investors that the acquisition was being delayed, and many customers were holding off on purchase decisions until the takeover was completed.
The delays mainly affected sales of data base management products, a core area for both Computer Associates and Cullinet, as well as sales of other products as part of package sales.
Residents of this city soon will be seeing ads urging them to visit "Cleveland's outdoor museum" -- Lake View Cemetery.
Despite such famous tenants as oil magnate John D. Rockefeller, Lake View Cemetery has fallen on hard times.
So the inner-city burial ground is trying to resurrect itself with a television advertising campaign.
The ads celebrate the achievements of some of Lake View's residents.
A spot honoring Bill White, the inventor of chewing gum, shows a woman trying to extricate her high-heeled shoe from a wad of gum.
Another focuses on Charles Brush, the first person to light a city electrically.
It shows a boy hurling rocks at a street lamp.
Street lights, the ad points out, "helped sharpen the arm of many a budding baseball player."
Cemetery officials hope the ads, which will begin airing next month, will not only draw visitors but bolster burials and endowment fund contributions.
Lake View had an operating deficit last year and has a poor reputation as an out-of-repair and crime-infested cemetery.
The private, non-profit cemetery has had trouble competing against its for-profit counterparts, which use direct mail and other advertising to sell lots.
"We don't want to be known as ambulance chasers," says William Garrison, Lake View's president.
"We want people to think of Lake View as an historical park and educational experience. . . .
A pleasant place to come and spend a few hours."
Not all of the cemetery's better-known tenants lend themselves to the promotional job at hand, however.
For example, President James A. Garfield is entombed here, the victim of an assassination in 1881.
(Mr. Garrison notes, however, that the Garfield tomb is one of the nation's premier examples of Romanesque architecture.)
Mr. Rockefeller, buried beneath a 180-foot-tall granite obelisk, didn't seem right for an ad either.
The oil magnate, who spent his later years passing out dimes to counter his penny-pinching image, "isn't terribly amusing," says Barry Olson, creative director at Innis-Maggiore-Olson, Canton, Ohio, which is producing the ads.
But there are plenty of other promising prospects at Lake View, promoters believe: Ernest Ball, for instance, who wrote "When Irish Eyes are Smiling," and Garrett Morgan, the inventor of the gas mask and the tri-colored traffic light.
Euro Disneyland shares made a debut like Snow White yesterday while most of the London stock market looked like it had eaten the Evil Queen's poisoned apple.
In its first day of when-issued trading here, Euro Disney soared like Dumbo to close at 814 pence ($13.05), up 15% from its 707-pence offering price.
The overall London market, following Wall Street's early nosedive, took a late beating.
The Financial Times-Stock Exchange 100-Share Index plummeted 40.4 points to close at 2149.3.
Traders credited Euro Disney's share performance to the tremendous hyping of the project that the shares are destined to help finance: Walt Disney Co.'s 4,800-acre theme park 20 miles east of Paris.
The park is slated to open in 1992.
"The issue was very well-received -- Disney is such a well-known, you can say world-wide, name," said Vernon Dempsey, head trader of European equities at Kleinwort Benson Ltd., which is making a market in the issue.
Mr. Dempsey estimated that the issue's London debut was accompanied by "very, very heavy turnover -- between five million and six million shares."
Most of the buying was institutional, he added.
Official trading in the shares will start in London, Paris and Brussels on Nov. 6, when the French-franc denominated offering, valued at the equivalent of nearly $1 billion, comes to market in the European Community.
U.S. investors will be permitted to buy the shares from EC investors 90 days later.
Because of the interest connected with the issue, the London exchange took the unusual step of letting traders establish an officially sanctioned when-issued market.
A volatile, unofficial "gray" market in the shares has been operating in Paris for about two weeks.
In contrast to the London performance, Euro Disney there closed down three francs yesterday, at 79 1/2 francs ($12.66) bid, but still about 10% over the 72-franc offering price.
"A lot of people are getting hurt on this wicked whipsawing," cautioned Alistair Cuddeford, a London-based Salomon Brothers International Ltd. trader who makes a market in franc-denominated Euro Disney shares.
"There should be no great rush for investors to buy this.
A lot of big European banks, mostly French, and Swiss arb accounts have been buying the stock just to flip it" for a quick profit, he said.
Albert Fried Jr., a 59-year-old director and holder of a 9.5% stake in the company, was named chairman of this maker of products for the construction equipment, material handling and railroad industries.
He succeeds L.L. White Jr., 62, who resigned but continues as a director.
Mr. Fried also is the managing partner of Albert Fried & Co.
Ford Motor Co. intensified its battle with General Motors Corp. over Jaguar PLC by saying it is prepared to make a bid for all of the British auto maker when restrictions on its shareholding are lifted.
The statement was part of a Ford filing with the U.S. Securities and Exchange Commission.
Ford didn't say how much it might offer for Jaguar, or when.
The British government currently forbids any outside investor from holding more than 15% of the company's shares without permission until Dec. 31,
But with its stake in Jaguar, which it raised yesterday to 11.95%, Ford could convene a special Jaguar shareholders' meeting and urge holders to vote to drop the restriction sooner.
A successful vote would put pressure on the British government to lift the restriction.
"We have not made that decision" to seek a Jaguar special shareholders' meeting, said Martyn Watkins, a Ford spokesman in London.
He emphasized that the car maker only would bid for all of Jaguar under the right circumstances, and said "those circumstances aren't right or possible at the moment."
Last month, Ford announced plans to acquire as much as 15% of Jaguar.
Since then, Jaguar officials have confirmed that they are discussing an alliance with GM and said last week that they hoped to reach an agreement within a month.
Analysts have been expecting a GM-Jaguar pact that would give the U.S. car maker an eventual 30% stake in the British company and create joint ventures that would produce an executive-model range of cars.
But the specter of Ford eventually launching a full-fledged bid could unravel the GM-Jaguar talks.
Jaguar seems to be losing interest in giving GM a minority stake, said one individual close to the talks, adding, "It wouldn't surprise me if {Jaguar executives} want to wait and see what the color of that {Ford bid} is" first.
He predicted Ford officials will meet with Jaguar executives in the next week to outline their proposed offer.
Sir John Egan, Jaguar's chairman, so far has refused to meet with Ford officials, but he is believed to be willing to consider a specific bid proposal.
As for GM, its "fallback position has to be a full bid itself," said Stephen Reitman, European auto-industry analyst at London brokers UBS-Phillips & Drew.
A Ford takeover of Jaguar would "have such implications for the balance of power in the 1990s that General Motors can't afford to step aside.
They will have to throw their hat in the ring."
A GM spokesman yesterday reiterated the company's interest in acquiring a minority stake to help Jaguar remain independent.
A pitched battle could mean Jaguar would fetch #10 ($16.02) a share, or about #1.8 billion ($2.88 billion), several analysts believe.
The prospect of such a takeover fight has sent Jaguar shares soaring in recent weeks.
U.S. takeover-stock speculators now own an estimated 25% of Jaguar shares.
In a declining London stock market yesterday, Jaguar shares were down four pence from Monday in late trading, at 694 pence ($11.11) a share.
In the U.S., Jaguar's American depositary receipts rose 12.5 cents in over-the-counter trading, to $11.25.
Both Ford and GM badly need a luxury brand to combat new competition from the Japanese in the European and U.S. markets.
And financially strapped Jaguar has spent over a year looking for a rich uncle to provide cash and technological know-how.
The company has expressed a preference for GM over Ford because GM has promised it would keep Jaguar independent.
Ford's need to acquire some or all of Jaguar became more acute last week when it abandoned a four-year effort to market its German-built Merkur Scorpio sedan as a European luxury import in the U.S.
Then, last Friday, Ford's talks about a possible alliance with Saab-Scania AB of Sweden collapsed.
GM's interest in Jaguar reflects a desire to help diversify the U.S. company's products in the growing luxury-car segment of the market.
Its Opel line has a solid image and a recent string of highly successful new models, but it lacks Jaguar's cachet.
GM officials also see a lot of potential in marrying Jaguar's cars to the technological know-how of Group Lotus PLC, a British engineering and specialty car maker GM bought in 1986.
Texaco Inc. reported an 11% increase in third-quarter earnings, which it attributed partly to the company's massive restructuring after it emerged from bankruptcy-law proceedings 18 months ago.
Sun Co. also reported higher earnings.
Meanwhile, like many other oil companies hurt by less-profitable downstream businesses, Mobil Corp., Shell Oil Co. and Chevron Corp. reported lower quarterly earnings.
Texaco
Texaco's exploration and production earnings improved as a result of its streamlining of those operations as it sold many of its marginal producing properties over the past 18 months.
An increase in production at some major oil fields in the North Sea, which had been knocked out by an explosion in July 1988, also aided results.
The sale of a portion of refining and marketing operations to Saudi Arabia helped alleviate the decline in earnings from that business.
"The company has been completely revamped," said Frank Knuettel, analyst for Prudential-Bache Securities Inc.
Third-quarter net income at Texaco rose to $305 million from $274 million last year.
Revenue declined 3.4%, to $8.4 billion from $8.7 billion.
Per-share earnings declined to $1.10 a share from $1.12 a share, largely because of 21 million additional shares issued to retire $1 billion of debt.
Per-share earnings also shrank because of dividends on a new series of preferred stock.
Sun Sun Co.'s net income climbed 18% to $85 million, or 80 cents a share, from $72 million, or 67 cents a share.
Revenue increased 11%, to $2.73 billion from $2.46 billion.
Sun said some of the growth reflects higher earnings in the oil sands operation of Suncor, a majority-owned Canadian subsidiary.
Chairman Robert McClements Jr. said the synthetic crude oil production from the facility rose even as the price for that oil increased.
Overseas exploration and production results also improved because of additional output from the North Sea Magnus Field, a portion of which was acquired by Sun earlier this year.
Results declined, however, in Sun's refining and marketing and coal businesses.
Shell Oil
Profits of Shell, a subsidiary of the Royal Dutch/Shell Group, tumbled $24 million, or 6.6%, to $340 million, despite a gain of $30 million from an insurance settlement.
President Frank Richardson attributed the decline to lower natural gas prices, which countered higher earnings from the crude oil sector of Shell's exploration and production operation.
Shaving away some of the gain in that unit was a decline in U.S. oil production to 502,000 barrels of oil a day during the quarter from 527,000 barrels a day last year.
Shell's chemical earnings fell by $67 million, to $137 million, reflecting lower margins and less demand for commodity chemicals.
Mobil
Net income at Mobil Corp. slipped 4.5% to $532 million, or $1.30 a share, from $557 million, or $1.36 a share.
Revenue declined $518 million, to $13.63 billion.
Earnings included a one-time gain of $192 million on a property transaction in Hong Kong.
Exploration and production profits slumped $40 million due to a provision for restructuring costs.
The restructuring will take place over a two-year period and will involve the transfer and layoff of employees in U.S. operations to reduce costs and focus efforts in other areas.
Last year, third-quarter earnings included a $157 million gain from foreign tax rate changes and a loss from a $65 million write-off of reserves.
Chevron
Chevron's net income fell 0.7%, to $417 million, or $1.22 a share, from $420 million, or $1.23 a share.
Results included a $37 million gain from the sale of rights from Chevron's investment in Amax Inc., and a loss of $30 million from the sale of California oil and gas properties.
Revenue rose 11%, to $8 billion from $7.2 billion.
Chevron said higher crude oil prices boosted profits from production operations, but margins in refining and marketing declined.
Profits from U.S. exploration and production operations totaled $58 million, after the property sale loss, compared with a year-earlier $44 million loss that included a $16 million reorganization charge.
Refining and marketing operations earned $130 million in the quarter this year, compared with earnings of $186 million a year earlier that included $18 million in charges for environmental programs.
Foreign earnings fell to $180 million from $182 million that included a $48 million gain from lower Canadian and Australian taxes.
Chemical profits fell to $78 million from $98 million.
Jeff Rowe contributed to this article.
Asarco Inc., continuing its effort to refocus its business, ended its involvement in asbestos mining in the third quarter and said it would stop mining and selling coal by year end.
The mining, metal and specialty-chemical concern said combined revenue for asbestos and coal was about $40 million of the company's total revenue in 1988 of $1.98 billion.
Richard de J. Osborne, chairman, president and chief executive officer, said the company's "decisions to get out of asbestos and high-sulfur coal continue the process of simplifying and focusing the company in areas with a better future."
Asarco also reported third-quarter net income rose 14%, to $52.7 million, or $1.25 a share, from a restated $46.2 million, or $1.10 a share, a year earlier.
Asarco said the gain reflected continued strength in prices for refined copper, lead and zinc, and higher equity earnings in Mexico Desarrollo Industrial Minero S.A., a Mexican mining company in which Asarco has a 34% stake.
The 1988 results were restated for accounting-rules changes.
Sales rose 4.5% to $522.3 million from $499.4 million.
In August, Asarco, through its Lac d'Amiante du Quebec subsidiary, sold its remaining one-third interest in an asbestos mining limited partnership in Canada for $11.7 million.
Asarco said it plans to shut down or sell its Rapatee coal mine and will end its involvement in southern Illinois strip mining.
The company said that it is discussing a management-employee buy-out of the facility, but that it would stop mining and selling coal at year end when existing sales contracts expire, regardless of the outcome of those talks.
In New York Stock Exchange composite trading, Asarco fell $1.375 to close at $31.75.
Companies listed below reported quarterly profit substantially different from the average of analysts' estimates.
The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share.
Estimated and actual results involving losses are omitted.
The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days.
Otherwise, actual profit is compared with the 300-day estimate.
David W. Lodge was elected vice president and chief financial officer, effective Nov. 1.
Mr. Lodge, 48 years old, a former finance executive at Singer Sewing Machine Co. and Celanese Corp., succeeds Francis L. Brophy, 64, who plans to retire from the company next year.
Carlos A. Salvagni, vice president, pharmaceutical manufacturing, will assume responsibility for manufacturing in Kalamazoo, Mich., effective Nov. 1.
Mr. Salvagni, 53 years old, succeeds John C. Griffin, 57, who is retiring as corporate vice president of pharmaceutical manufacturing.
Upjohn is a world-wide provider of health-care products and services, seeds and speciality chemicals.
This Brooklyn, N.Y., generic-drug maker announced a 5% stock dividend payable Dec. 15, to holders of record Nov. 15.
As of Sept. 30, Halsey had 5.3 million common shares outstanding.
Jay Marcus, president, said the move "reflects the confidence of our board and management in Halsey's long-term prospects and our desire to provide our shareholders with an attractive return on their investment."
In American Stock Exchange composite trading, Halsey closed at $5.8125 a share, up 6.25 cents.
Walter M. Brady was named a senior vice president of this insurer in the Canadian head office.
He had been vice president in that office.
John B. Foy was named senior vice president and remains responsible for the individual policy services department.
Frank J. Ollari was named senior vice president in charge of the mortgage finance department.
He had been vice president of the department, which was formerly called the real estate department.
Timothy C. Brown, a vice president, was named executive vice president and a director of this lighting and specialty products concern.
In the director post, Mr. Brown, 38 years old, succeeds Joseph W. Hibben, who retired from the board in August.
C. Barr Schuler, 49, vice president and chief financial officer, was named senior vice president of corporate development and acquisitions, a new post.
Phillip J. Stuecker, 37, vice president, secretary and treasurer, was named vice president of finance and chief financial officer.
He remains secretary.
Ronald B. Koenig, 55 years old, was named a senior managing director of the Gruntal & Co. brokerage subsidiary of this insurance and financial-services firm.
Mr. Koenig will build the corporate-finance and investment-banking business of Gruntal, which has primarily been a retail-based firm.
He was chairman and co-chief executive officer of Ladenburg, Thalmann & Co. until July, when he was named co-chairman of the investment-banking firm along with Howard L. Blum Jr., who then became the sole chief executive.
Yesterday, Mr. Blum, 41, said he wasn't aware of plans at Ladenburg to name a co-chairman to succeed Mr. Koenig and said the board would need to approve any appointments or title changes.
Mr. Blum added he wasn't surprised Mr. Koenig resigned, but his departure was "nothing that we desired or worked for."
Mr. Koenig said: "I just got a tremendous offer from Gruntal.
MCI Communications Corp. said it received a $12 million contract to provide virtual network services to Woolworth Corp.'s 5,600 corporate and retail sites in the
The contract also provides for advanced billing and network management services.
Woolworth said it expects to expand usage of the MCI services as it adds about 6,000 business locations over the next few years.
The Philippine merchandise trade deficit widened to $1.71 billion during the first eight months of 1989 from $807 million a year earlier.
Imports continued to outpace Philippine exports, despite gains in shipments abroad, the government National Statistics Office said.
Exports reached $5.12 billion, up from $4.52 billion a year earlier, while imports rose to $6.81 billion from $5.33 billion.
The trade deficit in the first eight months is already wider than the trade gap of $1.09 billion for all of 1988.
Analysts expect the trade gap for the year to surpass $2 billion as demand for capital equipment and raw materials continues to push imports higher.
Birtcher Corp. said it signed a definitive agreement with C.R. Bard Inc., a Murray Hill, N.J., maker of health-care products, for the purchase of the company's Bard/EMS Electrosurgery division for about $11 million.
Birtcher, a maker of electronic medical equipment, said the transaction is expected to close on or before Nov. 30.
Bard/EMS had 1988 sales of about $14 million, Birtcher said.
WINSTON-SALEM, N.C. --
First Wachovia Corp. said John F. McNair III will retire as president and chief executive officer of this regional banking company's Wachovia Corp. and Wachovia Bank & Trust Co. subsidiaries on Dec. 31.
Mr. McNair, 62 years old, will be succeeded by L.M. "Bud" Baker Jr., 47, the parent's chief credit officer and head of its administration division.
Mr. Baker will relinquish his previous positions, but a successor for him hasn't been named yet.
In addition, on Jan. 1, Thomas A. Bennett, 52, will become vice chairman and chief operating officer of Wachovia and Wachovia Bank & Trust, filling a vacancy left by the retired Hans W. Wanders in April.
Mr. Bennett will continue as executive in charge of the North Carolina banking operation.
Messrs. Baker and Bennett have been elected directors of Wachovia and Wachovia Bank & Trust filling vacant seats on both boards.
Canadian retail sales rose 0.2% in August from July, Statistics Canada, a federal agency, said.
The August increase followed a 0.3% decline in July.
During the past four months, retail sales have remained generally weak, advancing an average 0.2% a month, the agency said.
Raw-steel production by the nation's mills decreased 0.7% last week to 1,816,000 tons from 1,828,000 tons the previous week, the American Iron and Steel Institute said.
Last week's output fell 1.7% from the 1,848,000 tons produced a year earlier.
The industry used 81.6% of its capability last week, compared with 82.2% the previous week and 86.2% a year ago.
The American Iron and Steel Institute reported: The capability utilization rate is a calculation designed to indicate at what percent of its production capability the industry is operating in a given week.
With reduced exports and rising imports, South Korea's trade surpluses with the U.S. and Europe between January and September fell sharply from a year ago, the Customs Administration said.
Officials said South Korea's trade surplus with the U.S. for the first nine months of the year totaled $3.49 billion, down 43% from the same period last year on a customs-clearance basis.
South Korean exports to the U.S. during the period fell 1.6% from a year ago to $15.06 billion, while imports from the U.S. soared 26% to $11.56 billion.
The trade surplus with Europe was pegged at $414 million, down 57% from a year ago.
Officials said South Korean exports to Europe dropped 5.3% to $3.02 billion while imports from there went up 17% to $2.61 billion.
Bausch & Lomb Inc. said its pharmaceuticals subsidiary agreed to supply collagen corneal shields for animal eye surgery to a unit of International Minerals & Chemical Corp.
Terms weren't disclosed.
The agreement marks Bausch & Lomb's first venture selling its eye care products for use by veterinarians.
The collagen corneal shield helps speed healing of the cornea after eye surgery.
The product will be distributed by Pitman-Moore Inc., a subsidiary of International Minerals.
France's industrial production index for July and August rose 1% from June and was up 4.6% from a year ago, according to seasonally adjusted data from the National Statistics Institute.
The state agency, which usually publishes the data on monthly basis, but traditionally combines the index for the two summer-holiday months, said the advance was led by output of consumer goods, which rose 3.5% from June and was up 7.2% from a year earlier.
Semifinished goods turned in a strong showing, with a monthly rise of 2% and a year-on-year advance of 3%.
Food production was ahead 1.7% from June and 5.3% from a year earlier.
Output in the capital-goods sector was ahead 0.9% on a monthly basis and 2.7% year on year.
These gains were partly offset by output of cars and other consumer durables, which eased 3.9% from June's high level.
The sector was still 8.8% above its output levels from a year earlier, however.
International Minerals & Chemical Corp. said it agreed definitively to sell its international fragrance business to Bayer AG of West Germany.
Terms weren't disclosed.
The maker of animal health and nutrition products said the business, Creations Aromatiques of Port Valais, Switzerland, and Woodside, N.Y., is a division of its Mallinckrodt Inc. subsidiary and had sales of about $30 million for its most recent year.
International Minerals said the sale will allow Mallinckrodt to focus its resources on its core businesses of medical products, specialty chemicals and flavors.
Consumers Power Co. filed with the Michigan Public Service Commission a contract to buy power from the Palisades nuclear plant under a proposed new ownership arrangement for the plant.
Consumers Power and Bechtel Power Corp. last year announced a joint venture to buy the plant, currently owned completely by the utility.
Two Japanese scientists said they discovered an antibody that, in laboratory test-tube experiments, kills AIDS-infected cells while preserving healthy cells.
If further experiments are successful, the work would represent a major advance in research on acquired immune deficiency syndrome.
The drug AZT, the only treatment currently on the market, claims only to help stop the spread of AIDS, not to cure it.
But several analysts and Japanese scientists familiar with the study, which was announced at a conference in Nagoya yesterday, expressed skepticism over the significance of the results.
And the researchers themselves acknowledged they still must do much more work before they can say whether the treatment would actually cure humans.
Shin Yonehara, a research scientist at the Tokyo Metropolitan Institute of Medical Science, said the antibody he discovered works by recognizing an antigen called a Fas-antigen, which is characteristic of an infected cell.
The antibody then kills the cell.
Dr. Yonehara and his partner, Nobuyuki Kobayashi of Yamaguchi University, said their experiments showed that the antibody wiped out an average of 60% of AIDS-infected cells within three days.
In some of the experiments, it killed almost all the infected cells, the researchers said.
Meanwhile, fewer than 10% of the healthy cells were killed.
The two said they must still do more laboratory tests, then experiment on animals.
They said they hoped to conduct tests on human patients in the U.S. by late next year.
Japan doesn't have enough AIDS patients to do significant experimentation in that country, they said.
The announcement got wide exposure in the Japanese media, and even moved some pharmaceutical stocks yesterday.
But Takashi Kitamura, director of the biology department at Japan's National Institute of Health and secretary of the government's AIDS-research center, said, "I'm not so optimistic of its future use in therapeutic methods."
He said some infected cells may not have the relevant antigen and so wouldn't be killed even after exposure to the antibody.
"The results seem to be very premature," said Mitsuru Miyata, editor of Nikkei Biotechnology, a leading Japanese industry newsletter.
Dr. Kobayashi responded that he thought the antibody could potentially kill all infected cells.
But he and Dr. Yonehara said there were still several uncertainties, particularly regarding possible side effects.
"Our antibody specifically killed infected cells at a very low dose, but it can also kill other cells," said Dr. Yonehara.
"We don't know the effect of our antibody on the human body."
AIDS isn't considered a widespread problem in Japan -- the government reports about 1,000 known carriers of the virus -- but many companies have poured substantial resources into research in recent years, hoping to cash in on a possible cure.
Dr. Kitamura said about 35 projects are currently under way in Japan, and that Japanese researchers in the past year have made available three possible cures to American researchers for clinical tests.
He said that when scientists from the two countries meet again in January in New Orleans, the Japanese will present at least three more drugs for human testing.
AZT is the world's only prescription medicine approved for treating the disease.
Wellcome PLC, a major British pharmaceutical maker, sells the drug under the name Retrovir.
A Wellcome spokesman declined to comment on the discovery of the antibody in Japan.
But Andrew Porter, a drug-industry analyst at Nikko Securities Co. in London, said if the product were to be successfully developed it would represent "a potential threat to the long-term viability of Retrovir.
The following issues were recently filed with the Securities and Exchange Commission:
American Exploration Co., offering of five million common shares, via Smith Barney, Harris Upham & Co. and Shearson Lehman Hutton Inc.
Chemical Waste Management Inc., proposed global offering of 8,500,000 shares of common stock, of which seven million of the shares will be offered in the U.S. and 1,500,000 shares will be offered overseas, via Merrill Lynch Capital Markets (domestic) and Kidder, Peabody & Co. (international).
Interlake Corp., proposed offering of $200 million of senior subordinated debentures, via Goldman, Sachs & Co.
InterMedia Capital Corp., Robin Cable Systems L.P. and Brenmor Cable Partners, offering of senior subordinated discount reset debentures, via Drexel Burnham Lambert Inc.
John Nuveen & Co., initial offerings of the Nuveen California Performance Plus Municipal Fund Inc. and the Nuveen New York Performance Plus Municipal Fund Inc., via Alex. Brown & Sons Inc.
KnowledgeWare Inc., initial offering of three million shares of its common stock, of which 1,657,736 shares will be sold by the company and 1,342,264 will be sold by holders, via Montgomery Securities and Donaldson, Lufkin & Jenrette Securities Corp.
MGM Grand Inc., proposed offering of six million shares of common stock, via Merrill Lynch.
Microlog Corp., formerly called Old Dominion Systems Inc., offering of 1.2 million common shares, of which one million will be sold by the company, and the balance by holders, via Hambrecht & Quist and Johnston, Lemon & Co.
Scott Paper Co., shelf offering of up to $360 million of debt securities, via Goldman Sachs, Salomon Brothers Inc. and Smith Barney, Harris Upham.
Sullivan Graphics Inc., offering of $110 million of senior subordinated notes, via Merrill Lynch.
Sun Sportswear Inc., initial offering of 1.7 million common shares, of which one million shares will be sold by the company, and the balance by a holder, via Salomon Brothers Inc. and Piper, Jaffray & Hopwood Inc.
Yes Clothing Co., proposed initial offering of 776,470 common shares, of which 600,000 shares will be offered by the company and 176,470 by holders, via Seidler Amdec Securities Inc.
A #320 million ($508 million) British Airways PLC rights issue flopped badly -- the victim of recent market turbulence and the collapse of the buy-out bid for United Airlines' parent, UAL Corp.
The United Kingdom carrier had planned the issue to help finance its $750 million purchase of a 15% stake in UAL.
But British Airways withdrew from the UAL labor-management buy-out plan last Friday, after the group failed to get bank financing for its $6.79 billion buy-out.
British Airways said its shareholders accepted only 6.3% of the convertible capital bonds, but that the rest of the issue will be taken up by underwriters.
Analysts said that 6.3% level marked the poorest showing for any major British rights issue since the 1987 global stock market crash.
"It is close to being a record undersubscription," said Bob Bucknell, an analyst with London broker Smith New Court Securities.
"Fund managers don't like to have rights issues that don't have an obvious reason.
The obvious reason was (for British Air) to buy a stake in United Airlines."
In a statement, British Air Chairman Lord King said the company was "obviously disappointed that the issue was not taken up, but it would have been unreasonable to expect a better result given the volatility of the stock market since the launch of the issue."
But except for the embarrassment, British Air will emerge relatively unscathed from the flopped issue.
Underwriters led by Lazard Brothers & Co. will pick up the rest of the airline's offer of four convertible capital bonds for every nine common shares.
Lazard and other primary underwriters have reduced or eliminated their exposure by sub-underwriting the issue among U.K. institutional investors.
"The (paper) loss here is very small" for these sub-underwriters, observed John Nelson, a Lazard managing director.
In any case, he added, "most institutions probably won't sell" the bonds.
And instead of buying the UAL stake, the U.K. carrier will be able to reduce its high debt level and build an acquisition war chest.
"From a cash flow point of view, British Airways is better off not being in United Airlines in the short term," said Andy Chambers, an analyst at Nomura Research Institute in London.
Added another U.K. analyst: "It gives them some cash in the back pocket for when they want to do something."
For instance, British Air is continuing to negotiate with KLM Royal Dutch Airlines about each acquiring a 20% stake in Sabena World Airlines, the air transport subsidiary of the Belgian national airline.
A definitive agreement had been expected by the end of July.
The failed rights issue also should have a modest impact on British Air shares.
The airline's share price already is far below the 210 pence ($3.33) level seen after the company announced the rights issue in late September.
In late trading on London's Stock Exchange yesterday, the shares were off three pence at 194 pence.
And because British Air is issuing convertible bonds rather than ordinary shares, the share price won't be directly hurt by any surplus left with underwriters after they try to sell the issue in the open market.
But British Air's withdrawal from the UAL buy-out could have further repercussions.
Some analysts speculated yesterday that the move has set off a board room split, which may lead to the resignation of Sir Colin Marshall, the carrier's chief executive officer.
"The stories are rubbish," a British Air spokesman said.
"There is no difference of opinion between (Chairman) Lord King and Sir Colin on any aspect of company policy.
MINORITY RECRUITING has yet to meet hopes raised by Bush administration.
Six months ago, as some personnel specialists saw it, a perception that President Bush really cared about fair employment -- after what they said was eight years of Reagan-era neglect -- was prodding top management to raise hiring goals for females, blacks and other minorities.
The perception lingers, says an official at a major industrial company.
But so far, he declares, there's little evidence the "new urgency" is trickling down to the managers who actually do hiring.
"Is there really a commitment or an illusion of activity?" he asks.
The recruiting "hasn't materialized," asserts Jeffrey Christian, who runs a search agency.
Samuel Hall, Howard University's placement director, also doesn't see it.
And he questions the White House dedication.
"I don't think the Bush administration has done anything," he says.
Recruiter Donald Clark does note an increase in searches for minority candidates.
But some of the activity, he says, may reflect a rush to get "numbers in order" for end-of-year reports.
PAY FOR PERFORMANCE hangs mostly on boss's subjective view.
Du Pont Co. in a couple of units has installed objective tests based on earnings or return on equity.
Many companies have set up machinery to assure workers a fair shake.
At most firms, though, it's the immediate supervisor who decides the merit increases subordinates will be paid.
Managers have "some very broad discretion," says an official at Walt Disney Co.
Unocal Corp.'s top management sets guidelines, but line supervisors slice up the merit pie.
Lotus Development Corp. feeds its evaluations into a computer, but only for storage; the decisions are made by supervisors.
Hershey Foods Corp. strives for fairness by basing increases on quarterly reviews, annual appraisals and meetings with workers.
At Chemfix Technology Inc., each supervisor's recommendation must be approved by the next boss up the line, and then sanctioned by a salary review committee.
JAPANESE COMPANIES fare best in U.S. when they give Americans more say.
University of Michigan researchers find the companies earn more and win a bigger market share when their American employees get a voice in planning, product development and design, including decision-making back in Japan.
"You can't hire competent Americans and say, `Let them run only their own show,'" says Vladimir Pucik, who headed the study run with Egon Zehnder International, a search firm.
The researchers say many Japanese companies err in the U.S. by adopting the American practice of hiring managers on the "open market."
In Japan, by contrast, companies tend to develop their own talent and promote from within.
The Japanese also are accused of keeping their cards too close to their vests.
"Some Japanese executives are not yet . . . comfortable about sharing strategic information with their American colleagues," the researchers say.
Americans stay longer with Japanese firms than American companies.
But they think promotions are limited.
THE HOUSE votes down a proposal to put pension plans under the control of joint labor-management boards.
Some consultants had insisted it wouldn't work.
LONG-TERM care insurance gains favor.
More than half the people surveyed for the Employee Benefit Research Institute say they would be willing and able to pick up most of the cost of the coverage.
FRINGE-BENEFIT spending by small and medium-sized employers has dropped to 25% of payroll from 29% three years ago, says the National Institute of Business Management, an advisory service.
OUSTED EXECUTIVES over 50 years old take slightly less time than their younger colleagues to find a job -- 3.23 months vs. 3.26 for the juniors -- outplacement firm Challenger, Gray & Christmas finds.
It's the first time in the survey's 15 years that the over-50 group came out ahead.
FEAR OF AIDS hinders hiring at few hospitals.
Dedication runs high.
Wafaa El-Sadr, who heads the AIDS program at New York City's Harlem Hospital Center, can't find help.
"I've been recruiting every single day since it's been identified that many AIDS patients come from the inner city," she says.
She was the only staff physician available to treat AIDS patients last summer and now she has the help of only two doctors part time.
Part of the problem, though, may reflect a general unwillingness to work with the urban poor.
Parkland Memorial Hospital in Dallas says it hasn't had any problem recruiting, even after a nurse contracted the virus while injecting an AIDS patient.
"I can tell you that nobody quit over it.
No one panicked," a spokeswoman says.
St. Paul Medical Center, also in Dallas, sees only a "minimal erosion" of support staff due to AIDS.
Yale-New Haven Hospital sees no problem, says John Fenn, the chief of staff.
"There are enough enlightened and spirited individuals who know their responsibilities," he says.
THE CHECKOFF: At least somebody gains on layoffs.
The Association of Outplacement Consulting Firms says the industry's volume has soared tenfold since 1980, to $350 million a year. . . .
And somebody loses on the expected repeal of Section 89, the benefits test fought by most employers.
Triad Solutions says software producers had each invested hundreds of thousands of dollars in programs that now have no use.
Big gains for the ultra-right Republicans party in Baden-Wuerttemburg state municipal elections Sunday showed eroding support for Chancellor Helmut Kohl in a traditional bastion for his Christian Democratic Union.
With ballots from most of the state's major cities in by yesterday morning, the Republicans came away with 10% of the vote in several of the key districts.
With many rural districts yet to report ballots, election officials estimate support for Christian Democrats fell an average five percentage points statewide.
The left-of-center Social Democrats and the environmental Greens party posted mixed results.
Headed by a former Waffen SS sergeant and working from a nationalistic platform of anti-foreigner rhetoric, the fledgling Republicans party has scored surprising gains in earlier elections in the states of West Berlin, Hesse and North-Rhine Westphalia.
With West German unemployment remaining high at two million jobless and the lack of affordable housing becoming a primary issue for next year's campaign, the Republicans are seen drawing support for their "Germans First" stand on social-welfare issues.
Election analysts acknowledge that a "Red-Green" coalition of Social Democrats and Greens could edge out Chancellor Kohl's coalition in the December 1990 national election if support for the Republicans continues to spread.
International investigators urged Britain to allow prosecution of suspected Nazi war criminals who took refuge there after 1945.
Under current law, such suspects are immune from prosecution for acts committed while not British citizens.
"If we're not careful we could become known as a haven for war criminals," said Jeff Rooker, a member of Parliament and one of several British politicians attending a London conference with government investigators from the U.S., Canada and Australia.
A parliamentary inquiry found in July that more than 70 people living in Britain could have been part of death squads that roamed Nazi-occupied Eastern Europe.
Parliament is expected to discuss next month whether to change the law.
British investigations were prompted by a list of 17 alleged war criminals living in Britain sent to Prime Minister Margaret Thatcher in October 1986 by the Simon Wiesenthal Center in Los Angeles.
In a sign of easing tension between Beijing and Hong Kong, China said it will again take back illegal immigrants caught crossing into the British colony.
China had refused to repatriate citizens who sneaked into Hong Kong illegally since early this month, when the colony allowed a dissident Chinese swimmer to flee to the U.S.
About 1,100 Chinese were awaiting repatriation yesterday.
Italy's Foreign Ministry said it is investigating exports to the Soviet Union by an Ing. C. Olivetti & Co. subsidiary called OCN-PPL that makes numerically controlled machine tools.
Although Italy's investigation of whether Olivetti had violated Western export-control rules had previously been made known, this marked the first time the unit and product were named.
The U.S. is worried about the convertibility of Olivetti's machine tools to military use.
However, an Olivetti spokeswoman said OCN-PPL, of which Olivetti sold the majority interest last year, "doesn't make equipment that has the type of precision necessary for sophisticated productions."
Conservationists say that drift-net fishing threatens to wipe out much of the world's tuna stocks in a few years.
But the Japanese Fisheries Association criticized moves to ban the practice in international waters.
"It is really unfortunate for human beings to be swayed by emotional discussions," the association said.
In driftnet, or "wall of death," fishing, fleets lay nets up to three miles long that trap almost everything in their path.
Earlier this year, Japan said it would cut the number of its drift-net vessels in the South Pacific by two-thirds, or down to 20.
Workers at Peugeot S.A.'s car plant at Sochaux, in eastern France, voted to end a six-week-old strike that has cost the Peugeot group production of 60,000 automobiles, a company spokesman said.
The strikers voted to accept a series of management proposals that will give them a higher basic wage, better profit-sharing benefits and bigger annual bonuses.
The spokesman said the vote at Sochaux is expected to be followed by a similar move at the company's assembly plant at Mulhouse, where the number of strikers has been whittled down to 80.
About 8,000 National Union of Mineworkers members resumed their strike against De Beers Consolidated Mines Ltd. after further negotiations to settle a wage dispute broke down.
Striking workers, who began striking five diamond mines on Oct. 13, had returned to work last week when the union and De Beers arranged to reopen negotiations.
A De Beers spokesman said yesterday the company had offered to increase the minimum wage by 18%, while the union was demanding 26.6%.
Before the two parties resumed talks last week, De Beers offered 17% and the union wanted 37.6%.
China's People's Daily took note of the growing problem of computer fraud.
Since the first fraud was discovered in July 1986 at an office of the People's Bank of China in Shenzhen, 15 major cases have been found, the paper said; the biggest was the theft of $235,000 from a bank in Chengdu in March 1988.
The number of computers has mushroomed in recent years, with 10,000 in use, as well as 30,000 miniature models.
But security systems, effective management controls and regulations to govern their use have not kept pace, the People's Daily said.
Besides money, criminals have also used computers to steal secrets and intelligence, the newspaper said, but it gave no more details.
Japanese tourists will be told to take care when photographing earthquake damage in San Francisco, the Japan Association of Travel Agents said.
The association issued an advisory to its 1,685 member agencies following a report from the Foreign Ministry that picture-taking by Japanese tourists in earthquake-stricken areas was causing ill feeling among local residents. . . .
Tass said Lenin's tomb in Red Square will be closed from Nov. 10 to Jan. 15 for essential maintenance.
The red granite mausoleum draws thousands of visitors daily.
Fatalities on rural interstates rose 33% between 1986 and last year, the National Highway Traffic Safety Administration said in a report on the impact of the 65 miles-per-hour speed limit on those roads.
The report to Congress said that fatalities rose 18% in 1987 and 13% in 1988 on rural interstates.
The 1987 highway bill permitted states to raise the speed limit to 65 mph from 55 mph on interstate roads, which are defined as highways that pass through areas with fewer than 50,000 people.
Since 1987, 40 states have increased the speed limit on rural interstates.
"About one-third of the fatality increase is attributed to greater travel, and about two-thirds is attributed to other factors {primarily to greater speed}," according to NHTSA.
The report showed that deaths on urban interstate highways rose 7% between 1986 and last year, while fatalities on non-interstate roads were about the same in 1988 as in 1986.
In states that raised the speed limit on rural interstates, the fatality rate rose about 18% to 1.7 deaths per 100 million miles traveled between 1986 and 1988.
In contrast, the fatality rate in the states that retained the 55 mph limit was 0.9 last year, the same as in 1986.
Well-Seasoned Reasoning
("Food manufacturer changes spelling of `catsup' to `ketchup,' saying that's the spelling people now prefer."
-- WSJ Business Bulletin)
Public preference is important, So product names should match up, And firms that find they're lagging behind Should now take steps to ketchup!
-- George O. Ludcke.
Judge Not
How easy it is To attack others' views Without ever setting A foot in their shoes!
-- G. Sterling Leiby.
Daffynition
Money-making course: wad-working.
-- Thomas Henry.
In an Oct. 10 editorial-page article, "It's the World Bank's Turn to Adjust," Paul Craig Roberts lays most of the blame for what ails developing countries at the doorstep of the World Bank.
The article is, unfortunately, replete with outrageous distortions.
One of Mr. Roberts's observations is that the Bank's own loan portfolio is in deep trouble because of its lending to developing countries.
This is just not so.
The reality is that Bank finances are rock solid.
As of June 30, 1989 -- the day our past fiscal year came to a close -- only 4.1% of the Bank's portfolio was affected by arrears of over six months.
This is an enviably low level.
Moreover, the Bank follows a prudent provisioning policy and has set aside $800 million against possible loan losses.
For the same fiscal year, by the way, the Bank's net income was a robust $1.1 billion after provisions.
Because of the business-like manner in which the Bank goes about development, financial markets have confidence in it.
This helps explain the triple-A rating enjoyed by our bonds and our ability to borrow $9.3 billion in fiscal 1989 on the most advantageous terms.
Another of Mr. Roberts's criticisms is that Bank lending has done more harm than good "by implanting the wrong incentives and deflecting energy away from economic development."
Here, too, Mr. Roberts is way off the mark.
The reality is that Bank loans have been linked to policy improvements for 40 years.
Our traditional project loans have, for instance, supported sensible energy pricing in the power sector, sound interest-rate policies in the credit area and the operation of public utilities as efficient, autonomous agencies.
By and large, these efforts have borne fruit.
In my home region, Latin America, much of the existing infrastructure base -- an important building block for development -- has been financed by the World Bank.
Mr. Roberts also takes a swipe at the Bank's adjustment lending.
What are the facts on this type of lending?
The Bank has been making adjustment loans for 10 years.
As their name implies, these operations are linked to far-reaching policy reforms that aim at helping borrowing countries get back on the growth path and at enhancing their credit-worthiness.
Typically, these measures include reforms to downsize the role of government and parastatals in the economy, to open up inward-looking economies to international competition and to promote the development of a vigorous private sector.
Support for the private sector has been a longstanding concern of the Bank's.
Over the years, it has helped encourage investments by entrepreneurs in the Third World through its extensive credit operations and through loans and investments by the International Finance Corp.
Most recently, the Bank Group has been expanded to include the Multilateral Investment Guarantee Agency to stimulate direct foreign investment in developing countries by offering guarantees against noncommercial risk and advice to member countries on how to improve their business climate.
These are not the actions of a development agency wed to central planning and to the concentration of investment decisions in the hands of government, as Mr. Roberts alleges.
Rather, they reflect the Bank's time-tested, pragmatic approach, which aims at ensuring that developing countries put their scarce resources to the best possible use.
Francisco Aguirre-Sacasa Director, External Affairs The World Bank
The government said it would streamline its enormous and often-criticized food marketing and distribution network, Compania Nacional de Subsistencias Populares, or Conasupo.
Conasupo Director Ignacio Ovalle Fernandez said the agency will sell 589 midsized supermarkets and several food-production plants and warehouses beginning early next year.
The agency will withdraw from the production of nine food products, maintaining production of the two most important ones, corn and milk.
Mr. Ovalle also said Conasupo will cut back subsidies to producers of nonessential farm products and close retail outlets in wealthy neighborhoods.
The agency's workers and private companies would be allowed to bid for the assets up for sale.
Conasupo controls prices on agricultural goods and operates retail outlets where basic consumer items are sold at state-subsidized prices.
Business leaders have long criticized the agency as a leading example of bureacratic waste.
Private-sector leaders praised the Conasupo restructuring.
But most economists doubt the streamlining would cut deeply into Conasupo government subsidy, which largely goes to reduce consumer prices for corn and milk.
The Food and Drug Administration banned all imports of mushrooms from China in response to a rash of food-poisoning outbreaks linked to canned Chinese mushrooms.
"The agency has concluded that contamination may be widespread throughout the mushroom-processing industry in China," an FDA spokesman said yesterday.
The agency won't allow mushrooms that were canned or packed in brine at any Chinese plant to enter the U.S. until "satisfactory sanitation-control measures are implemented in China to prevent" bacterial contamination.
On May 19, the FDA began detaining Chinese mushrooms in 68-ounce cans after more than 100 people in Mississippi, New York and Pennsylvania became ill from eating tainted mushrooms.
In subsequent tests, the agency found smaller-size cans from several Chinese plants to be similarly contaminated.
The outbreaks were traced to staphylococcus aureus, a type of bacteria that produces a toxin capable of surviving the high temperatures used in canning vegetables.
A recall of the mushrooms blamed for the food poisoning began in early March.
In 1987, China exported 65 million pounds of mushrooms, valued at $47 million, to the U.S.
The shipments went mostly to food-service distributors that supply pizzerias and restaurants.
A spokesman for the Chinese Embassy here said that the Beijing government has taken "many effective measures" to stop the mushroom contamination and is further investigating the underlying causes.
He predicted the problem will be solved "very soon."
Your Sept. 26 "Politics & Policy" article about William Bennett's Emergency Drug Plan for Washington gives the impression that the FBI has not been nor is actively involved.
This is not the case.
The FBI is very supportive of and an active participant in Mr. Bennett's initiative.
It was agreed at the outset of the Washington Drug Initiative that the FBI's role would be to continue targeting the major drug traffickers through our National Drug Strategy.
Through these investigations we do not focus on the street drug user, but rather we target and attack major drug-trafficking organizations that control a large segment of the drug market.
The trial of Raful Edmond III in Washington serves to highlight our efforts in this area and the results achieved through our excellent working relationship with the Drug Enforcement Administration and the Metropolitan Police Department (MPD).
The FBI's role is to complement the D.C. initiative through not only these major trafficking investigations, but also by providing a full range of services through various task forces and our contacts with local police squads handling drug-related crimes.
In fact, we have agents assigned full time to assist the MPD in drug-related crimes such as homicide and other crimes of violence.
Milt Ahlerich Assistant Director Office of Public Affairs Federal Bureau of Investigation
Ramada Inc. revised the terms of its restructuring and extended to Feb. 28, 1990, the deadline to complete the sale of its hotel business to New World Development Co. of Hong Kong and Prime Motor Inns Inc. of Fairfield, N.J.
Ramada's previous plan was derailed by upheaval in the junk-bond market that hindered the offering of $400 million in high-yield securities of Aztar Corp., the new company that will operate Ramada's casinos in Nevada and Atlantic City,
Under the new terms, New World will still pay $540 million for Ramada's hotel business, subject to adjustment at closing, but Ramada will now reimburse New World for $10 million in expenses.
Prime will still manage Ramada's domestic franchise system when the sale closes.
Revised terms call for each Ramada common share to be exchanged for $1 in cash, subject to possible reduction, and one share of Aztar common stock.
Shareholders will also receive one cent per share for the redemption of preferred stock purchase rights.
The cash payout will be reduced by 40% of any amount by which the weighted mean price of Ramada's common stock exceeds $14 on the day the transaction closes.
The provision will help provide for tax liabilities that may stem from the restructuring.
Ramada's stock rose 87.5 cents on the news to close at $11.25 in composite New York Stock Exchange trading.
The announcement dispelled some Wall Street observers' fears that New World might demand a huge premium for the delay, or scrap the deal entirely.
The previous deadline to complete the sale was Nov. 30.
One major advantage of the revised plan is that Aztar will have far less debt than under the old terms.
"They'll go from being one of the most leveraged to one of the least leveraged casino companies," said Daniel Lee, an analyst with Drexel Burnham Lambert Inc.
Mr. Lee values the package at between $15 and $20 a share, based on current trading prices of other casino-company stocks.
The much-revised restructuring, which was first announced in October 1988, must again be approved by shareholders and state casino regulators in Nevada and New Jersey.
Financing plans include raising $170 million in debt secured by the company's holdings in New Jersey.
In May, Ramada sold its Marie Callender Pie Shops Inc. unit to a group of private investors as part of its plan to focus on its casinos in Atlantic City and in Las Vegas and Laughlin, Nev.
Bond prices took the high road and stock prices took the low road as worries mounted about the economy and the junk bond market.
The Dow Jones Industrial Average fell 26.23 points to 2662.91 in sluggish trading.
But long-term Treasury bonds staged a modest rally, with prices on most issues rising about half a point, or $5 for each $1,000 face amount.
The dollar sagged against other major currencies in lethargic trading.
Traders and analysts said the divergence between the stock and bond markets is a sign of growing unease about the economic outlook.
A sinking economy depresses corporate earnings and thus stock prices, but it buoys bond prices as interest rates fall.
That unease is expected to grow today when the government reports on September durable goods orders and again Thursday when the first assessment of third-quarter economic growth is released.
Analysts say they think durable goods orders fell about 1%, compared with a 3.9% gain in August, and that growth in the third quarter slowed to about 2.3% from the second quarter's 2.5%.
The stock market's decline, coming after a record weekly gain of 119.88 points, surprised some investors.
But A.C. Moore, director of research at Argus Research, said last week's rally was a reflex reaction to the Oct. 13 stock market rout.
Overall, he said, the trend in stock prices will be down as the economy weakens.
"We think we're on target in looking for renewed economic deterioration," he said.
"Corporate profits are going to decrease faster than interest rates will fall, and the probability is that we'll see negative economic growth in the fourth quarter."
Hugh Johnson, chief investment officer at First Albany Corp., agreed that a deteriorating economy is worrisome, but he said the real concern among stock investors is that some new problem will crop up in the junk bond market.
In major market activity: Stock prices slumped in sluggish trading.
Volume on the New York Stock Exchange totaled 135.9 million shares.
Declining issues on the Big Board were ahead of gainers, 1,012 to 501.
Bond prices rallied.
The yield on the Treasury's benchmark 30-year bond slipped to 7.93%.
The dollar weakened against most other major currencies.
In late New York trading, the dollar was quoted at 1.8470 marks and 141.90 yen, compared with 1.8578 marks and 142.43 yen late Friday.
The Wall Street Journal "American Way of Buying" Survey consists of two separate, door-to-door nationwide polls conducted for the Journal by Peter D. Hart Research Associates and the Roper Organization.
The two surveys, which asked different questions, were conducted using national random probability samples.
The poll conducted by Peter D. Hart Research Associates interviewed 2,064 adults age 18 and older from June 15 to June 30, 1989.
The poll conducted by the Roper Organization interviewed 2,002 adults age 18 and older from July 7 to July 15, 1989.
Responses were weighted on the basis of age and gender to conform with U.S. Census data.
For each poll, the odds are 19 out of 20 that if pollsters had sought to survey every household in the U.S. using the same questionnaire, the findings would differ from these poll results by no more than 2 1/2 percentage points in either direction.
The margin of error for subgroups -- for example, married women with children at home -- would be larger.
In addition, in any survey, there is always the chance that other factors such as question wording could introduce errors into the findings.
(See related story: "The American Way of Buying: Is Buying a Car a Choice or a Chore? --
Ironically, American Airlines' attempt to lead industry prices higher was reported in the same issue as your survey showing that consumers had the least confidence in the airline industry (Sept. 20).
You quote Robert Crandall, chairman of American's parent, AMR Corp., as having said that discount deals for big customers would be "dumb" because "you will go to Detroit because you have to go to Detroit whether the fare is $175, $275 or $375."
Even if Mr. Crandall is correct, he of all people must realize our society relies on competition to keep prices at a competitive level.
In 1986, he settled an antitrust suit based on a taped telephone conversation of him proposing to Braniff's president that they both raise fares 20%.
(Braniff declined).
When I asked American Airlines for its side of the story for use in my MBA class, where I teach business ethics, it did not respond.
Perhaps the ethics of an industry's leader filters down and is one of the factors that ultimately shapes consumer trust in that industry.
Arnold Celnicker Assistant Professor Ohio State University
Meredith Corp. is launching a new service to offer advertisers package deals combining its book, magazine and videocassette products.
The Des Moines-based publisher said it created a new Custom Marketing Group that will offer advertisers special rates for combination packages in its magazines, such as Ladies Home Journal and Better Homes and Gardens.
In addition, the group will create custom-designed media such as cookbooks, newspaper inserts and videos for ad campaigns.
Earlier this year, Meredith sold its first such package for $3 million to Kraft Inc., now a unit of New York-based Philip Morris Cos.
The Kraft package included a specially published cookbook, a national free-standing insert in Sunday newspapers, and a Kraft "advertorial" section that ran in five Meredith magazines.
Kraft recently agreed to spend an additional $3 million on similar programs through 1990.
Bill Murphy, director of the new marketing unit, said Meredith is negotiating other large-scale packages with leading companies in several product categories, but he wouldn't disclose their names.
Sources close to the company and ad agencies that work with Meredith said leading advertisers in consumer electronics, packaged goods and automotive products were among those negotiating ad packages with the Meredith group.
Other magazine publishing companies have been moving in the same direction.
The New York Times Co.'s Magazine Group earlier this year began offering advertisers extensive merchandising services built around buying ad pages in its Golf Digest magazine.
Time Warner Inc. recently formed a "synergy department" to seek out ways to offer advertisers packages that could combine Time's magazines with Warner products such as videocassettes.
Paul DuCharme, director of media services at Grey Advertising, said Meredith is the leader in providing multimedia packages.
"They may get passed up later when other publishers get their acts together, but for now they are the quickest offering the most extensive plan," he said.
Mr. Murphy of Meredith said one advertiser, which he wouldn't identify, wants Meredith to provide ad pages in seven Meredith magazines, publish an interior-decorating book that will be distributed at point of purchase, give away a videotape on installation pointers, and possibly use Meredith's Better Homes and Gardens' residential real-estate agents to distribute discount-coupon books to new homeowners.
"Five years ago, magazine publishers would simply bid on an advertiser's big ad schedule for their magazine," said Mr. Murphy.
"But the marketplace changed.
Advertisers now say `Help us improve our image and extend our selling season.'
They are coming to publishers looking for ideas.
Your Sept. 21 article "It's So Easy to Get Burned When Buying a Small Firm" was excellent.
I've been advising small businesses many years and have lived with the fact that 50% will go out of business within two years, and 80% in five years.
The economic loss, jobs lost, anguish, frustration and humiliation are beyond measure.
And most of these are absolutely unnecessary.
Your article points out the traps people fall into, but when reviewing those traps one sees just about all of them could have been avoided.
An accountant did not review the seller's books before buying a business.
"I guess I was naive," he said.
There is a more descriptive word to describe his lapse of common sense.
Corporate managers who want to start their own business are the highest failure risks.
They know all the answers and are not used to working more than 40 hours a week.
The blue-collar worker who decides to start a business will listen and take advice.
His humility gives him a much better chance of success.
A few months ago your paper reported the results of a study to determine why Asians who arrive in this country without any money, and unable to speak English, become overnight successes.
Their "secret" is that they gather a small group of advisers around them, listen to what they have to say, prepare a business plan and they are on their way.
Successful American business owners do the same thing.
Unfortunately, they are in the minority.
Avoiding failure is easy.
It's unfortunate so many must learn the hard way.
Daniel B. Scully Tucson, Ariz.
The management turnover at Reebok International Ltd. continued with the resignation of company president C. Joseph LaBonte, who joined Reebok just two years ago.
Mr. LaBonte's departure follows by two months the resignation of Mark Goldston as senior vice president and chief marketing officer after only 11 months at Reebok.
The resignations by the two executives, considered hard-charging and abrasive by Reebok insiders, reflect a difference in style with Paul Fireman, chairman and chief executive, according to several former executives.
The two executives are among a number of outsiders recruited by Reebok in the past few years to help it make the transition from a small start-up company to a marketing giant with sales last year of $1.79 billion.
The changes come as Reebok, which grew rapidly in the mid-1980s but has seen its sales flatten of late, is seeking to regain momentum in the athletic-shoe business against rivals Nike Inc. and L.A. Gear Inc.
The departures, said Alice Ruth, an analyst at Montgomery Securities in San Francisco, should enable the company to focus on business issues instead of management differences.
"I think it's more an issue of style.
I would view it as a net positive.
The company can go about its business.
They're in the midst of a turnaround," she noted.
Earnings have rebounded in 1989 after a 20% decline last year.
A former executive agreed that the departures don't reflect major problems, adding: "If you see any company that grows as fast as Reebok did, it is going to have people coming and going."
Reebok said Mr. LaBonte will resume the presidency of Vantage Group Inc., a California-based venture capital firm that he founded in 1983.
Before that he was president and chief operating officer of Twentieth Century-Fox Film Corp.
Reebok added that Mr. Fireman will assume the title of president.
A spokesman said that neither Mr. Fireman nor Mr. LaBonte would be available for comment.
"We will not be commenting beyond the news release," the spokesman said.
Mr. Goldston, who had been president of Faberge Inc.'s Faberge U.S.A. division before joining Reebok in September 1988, left in August to pursue other interests.
Magazine publishers are facing spiraling costs and a glut of new titles.
But even a raft of recent failures isn't stopping them from launching new publications.
At the American Magazine Conference here, publishers are plenty worried about the industry's woes.
But they are also talking about new magazines.
For example, Toronto-based Telemedia Inc. will publish Eating Well, a new food and health magazine due out next summer.
New York-based Hearst Corp. this fall plans to publish its first issue of 9 Months, a magazine for expectant mothers, and has already launched American Home.
And Time Warner Inc. is developing a spinoff of Time magazine aimed at kids, on the heels of its successful Sports Illustrated for Kids.
Over the past four years, the number of consumer magazines has increased by an average of 80 magazines annually, according to Donald Kummerfeld, president of the Magazine Publishers of America.
"This is an impressive show of faith in the future of the magazine industry," said Mr. Kummerfeld.
"Entrepreneurs don't rush to get into a stagnant or declining industry."
And despite the recent tough advertising climate, industry figures released at the meeting here indicate things may be turning around.
For the first nine months, advertising pages in consumer magazines tracked by the Publishers Information Bureau increased 4% from the same period last year, to 125,849 pages.
Total magazine ad revenue for the same period increased 12% to $4.6 billion.
Though for some magazines categories a tough advertising climate persists, the industry in general is doing well compared with the newspaper industry.
Though some magazines are thriving, the magazine publishing industry remains a risky business.
Within the same nine months, News Corp. closed down In Fashion, a once-promising young woman's fashion magazine, Drake Publications Inc. has folded the long-troubled Venture magazine, and Lang Communications has announced Ms. magazine, after 17 years, will no longer carry advertising as of January.
Lang is cutting costs and will attempt to operate the magazine with only subscription revenue.
Meanwhile, American Health Partners, publisher of American Health magazine, is deep in debt, and Owen Lipstein, founder and managing partner, is being forced to sell the magazine to Reader's Digest Association Inc.
Mr. Lipstein's absence from the meeting here raised speculation that the sale is in trouble.
Mr. Lipstein said in a telephone interview from New York that the sale was proceeding as planned.
"The magazine is strong.
It's simply the right time to do what we are doing," Mr. Lipstein said.
"Magazines can no longer be considered institutions," said James Autry, president of Meredith Corp.'s magazine group.
"Publishers will find that some magazines have served their purpose and should die," he added.
"Magazines could, like other brands, find that they have only a limited life."
There are also indications that the number of magazine entrepreneurs, traditionally depended upon to break new ground with potentially risky start-ups, are dwindling.
More than ever, independent magazines and small publishing groups are being gobbled up by larger publishing groups, such as American Express Publishing Corp., a unit of American Express Co., and Conde Nast Publications Inc., a unit of Advance Publications Inc., which are consolidating in order to gain leverage with advertisers.
Some entrepreneurs are still active, though.
Gerry Ritterman, president of New York-based Network Publishing Corp., earlier this year sold his Soap Opera Digest magazine to Rupert Murdoch's News Corp.
Mr. Ritterman said that in the next six months he will take $50 million from the Soap Opera Digest sale to acquire new magazines.
He would not reveal which magazines he is considering.
"The magazines I am looking for are underdeveloped," said Mr. Ritterman.
"They could be old or new, but they are magazines whose editorial quality needs to be improved.
They will be the next hot magazines.
MCA Inc. said its toy-making unit agreed to buy Buddy L Corp., producer of a line of toy vehicles and preschool products.
The price wasn't disclosed, but an executive of LJN Toys Ltd., the MCA unit, said the closely held Buddy L had annual sales in excess of $20 million.
The 40-year-old Buddy L concern, based in New York, designs and develops toys under the names "Buddy L" and "My First Buddy," he said.
MCA said it expects the proposed transaction to be completed "no later than Nov. 10.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
FRANKLIN NATIONAL BANK DIED at 3 p.m. EDT, Oct. 8, 1974, and was promptly resurrected under new owners to shore up confidence in other banks during a recession.
Arthur Burns, Federal Reserve Board chairman, said the government's "luck" in keeping the bank open -- despite being the then-biggest U.S. bank failure -- prevented "shock waves around the country and around the world."
Federal officials who had been probing the bank for months arranged a merger with European-American Bank & Trust, owned by six foreign banks, to avert the closedown.
And federal insurance protected the bank's 631,163 depositors.
The crisis had peaked on May 10, 1974, when the bank disclosed "severe" foreign-exchange losses due to "unauthorized" trading.
Massive withdrawals followed and there was a brief rescue attempt, with political undertones, including $1.77 billion in Federal Reserve loans.
Within six years many figures were convicted for their illegal abuse of Franklin funds.
In June 1980, Michele Sindona -- an Italian financier who in July 1972 had bought a 22% block of Franklin's stock from Loews Corp., headed by Laurence A. Tisch -- was sentenced to 25 years in prison after being convicted of fraud and perjury.
Included was the charge that Sindona siphoned $45 million of Franklin funds for his other ventures.
(Sindona in 1979 faked his "kidnapping" for 2 1/2 months to delay his trial.)
During 1976 to 1979, other former Franklin officials either pleaded guilty to or were found guilty of violations including phony transactions to hide the bank's losses.
Sindona, the onetime Vatican financial adviser with reported links to the Mafia, died on March 22, 1986, at age 65, reportedly after drinking cyanide-laced coffee in an Italian prison.
It happened four days after he was sentenced to life in prison for ordering a 1979 murder.
Italian magistrates labeled his death a suicide.
In a nondescript office building south of Los Angeles, human behavior is being monitored, dissected and, ultimately, manipulated.
A squiggly line snakes across a video screen, gyrating erratically as subjects with hand-held computers register their second-by-second reactions to a speaker's remarks.
Agreement, disapproval, boredom and distraction all can be inferred from the subjects' twist of a dial.
In another experiment, an elaborate chart with color codes reveals how people's opinions were shaped -- and how they can be reshaped.
Donald Vinson, who oversees the experiments, isn't some white-coated researcher.
He heads Litigation Sciences Inc., the nation's largest legal consulting firm, which is helping corporate America prepare for high-stakes litigation by predicting and shaping jurors' reactions.
In the process, Litigation Sciences is quietly but inexorably reshaping the world of law.
Little known outside the legal world but a powerhouse within, Litigation Sciences, a unit of Saatchi & Saatchi PLC, employs more than 100 psychologists, sociologists, marketers, graphic artists and technicians.
Twenty-one of its workers are Ph. D.s.
Among other services, the firm provides pre-trial opinion polls, creates profiles of "ideal" jurors, sets up mock trials and "shadow" juries, coaches lawyers and witnesses, and designs courtroom graphics.
Much like their cohorts in political consulting and product marketing, the litigation advisers encourage their clients to play down complex or ambiguous matters, simplify their messages and provide their target audiences with a psychological craving to make the desired choice.
With jury verdicts getting bigger all the time, companies are increasingly willing to pay huge sums for such advice.
Recently, Litigation Sciences helped Pennzoil Co. win a $10.5 billion jury verdict against Texaco Inc.
It advised the National Football League in its largely successful defense of antitrust charges by the United States Football League.
And it helped win defense verdicts in product-liability suits involving scores of products, ranging from Firestone 500 tires to the anti-nausea drug Bendectin.
Largely as a result, Litigation Sciences has more than doubled in size in the past two years.
Its 1988 revenue was $25 million.
Meanwhile, competitors are being spawned almost daily; some 300 new businesses -- many just one-person shops -- have sprung up.
Mr. Vinson estimates the industry's total revenues approach $200 million.
In any high-stakes case, you can be sure that one side or the other -- or even both -- is using litigation consultants.
Despite their ubiquity, the consultants aren't entirely welcome.
Some lawyers and scholars see the social scientists' vision of the American jury system as a far cry from the ideal presented in civics texts and memorialized on the movie screen.
In the film classic "Twelve Angry Men," the crucible of deliberations unmasks each juror's bias and purges it from playing a role in the verdict.
After hours of conflict and debate, that jury focuses on the facts with near-perfect objectivity.
In real life, jurors may not always work that way, but some court observers question why they shouldn't be encouraged to do so rather than be programmed not to.
Litigation consulting is, as New York trial attorney Donald Zoeller puts it, "highly manipulative."
He adds, "The notion they try to sell is that juries don't make decisions rationally.
But the effort is also being made to try and cause jurors not to decide things rationally.
I find it troubling."
But Mr. Zoeller also acknowledges that consultants can be very effective.
"It's gotten to the point where if the case is large enough, it's almost malpractice not to use them," he says.
Others complain that the consultants' growing influence exacerbates the advantage of litigants wealthy enough to afford such pricey services.
"The affluent people and the corporations can buy it, the poor radicals {in political cases} get it free, and everybody in between is at a disadvantage, and that's not the kind of system we want," says Amitai Etzioni, a prominent sociologist who teaches at George Washington University.
Sophisticated trial consulting grew, ironically, from the radical political movements of the 1960s and 1970s before finding its more lucrative calling in big commercial cases.
The Harrisburg 7 trial in 1972, in which Daniel Berrigan and others were charged with plotting anti-war-related violence, was a landmark.
In that case, a group of left-leaning sociologists interviewed 252 registered voters around Harrisburg.
The researchers discovered that Episcopalians, Presbyterians, Methodists and fundamantalist Protestants were nearly always against the defendants; the lawyers resolved to try to keep them off the jury.
The defense also learned that college-educated people were uncharacteristically conservative about the Vietnam War.
A more blue-collar panel became a second aim.
Ultimately, that carefully picked jury deadlocked with a 10-2 vote to acquit, and the prosecution decided not to retry the case.
Litigation consulting had arrived.
The fledgling science went corporate in 1977 when International Business Machines Corp. hired a marketing professor to help defend a complex antitrust case.
The problem for IBM trial lawyers Thomas Barr and David Boies was how to make such a highly technical case understandable.
As the trial progressed, they were eager to know if the jury was keeping up with them.
The solution devised by the professor was to hire six people who would mirror the actual jury demographically, sit in on the trial and report their reactions to him.
He then briefed Messrs. Boies and Barr, who had the chance to tilt their next day's presentation accordingly.
Thus, the "shadow" jury was born.
Mr. Vinson, the professor, got the law bug and formed Litigation Sciences.
(IBM won the case.)
"The hardest thing in any complex case is to retain objectivity and, in some sense, your ignorance," says Mr. Boies of Cravath, Swaine & Moore.
"What you look for in a shadow jury is very much what you do when you give an opening argument to your wife or a friend and get some response to it.
A shadow jury is a way to do that in a more systematic and organized way."
The approach worked well in the recent antitrust case in which Energy Transportation Systems Inc. sued Santa Fe Pacific Corp. over the transport of semi-liquefied coal -- the kind of case likely to make almost anyone's eyes glaze over.
Energy Transportation retained Litigation Sciences, at a cost of several hundred thousand dollars, to poll, pre-try, profile and shadow.
Just before the actual closing arguments, the firm put the case to a vote of the five shadow jurors, each of whom was being paid $150 a day.
The jurors, who didn't know which side had retained them, decided for Energy Transportation, and awarded $500 million in damages.
The real jury returned days later with a $345 million victory for Energy Transportation.
"It's just like weather forecasting," says Energy Transportation trial attorney Harry Reasoner of Vinson & Elkins.
"It's often wrong, but it's better than consulting an Indian rain dancer."
Forecasting is only one part of Litigation Sciences' work.
Changing the outcome of the trial is what really matters.
And to the uninitiated, some of the firm's approaches may seem chillingly manipulative.
Theoretically, jurors are supposed to weigh the evidence in a case logically and objectively.
Instead, Mr. Vinson says, interviews with thousands of jurors reveal that they start with firmly entrenched attitudes and try to shoe-horn the facts of the case to fit their views.
Pre-trial polling helps the consultants develop a profile of the right type of juror.
If it is a case in which the client seeks punitive damages, for example, depressed, underemployed people are far more likely to grant them.
Someone with a master's degree in classical arts who works in a deli would be ideal, Litigation Sciences advises.
So would someone recently divorced or widowed.
(Since Litigation Sciences generally represents the defense, its job is usually to help the lawyers identify and remove such people from the jury.)
For personal-injury cases, Litigation Sciences seeks defense jurors who believe that most people, including victims, get what they deserve.
Such people also typically hold negative attitudes toward the physically handicapped, the poor, blacks and women.
The consultants help the defense lawyers find such jurors by asking questions about potential jurors' attitudes toward volunteer work, or toward particular movies or books.
Litigation Sciences doesn't make moral distinctions.
If a client needs prejudiced jurors, the firm will help find them.
As Mr. Vinson explains it, "We don't control the facts.
They are what they are.
But any lawyer will select the facts and the strategy to employ.
In our system of advocacy, the trial lawyer is duty bound to present the best case he possibly can."
Once a jury is selected, the consultants often continue to determine what the jurors' attitudes are likely to be and help shape the lawyers' presentation accordingly.
Logic plays a minimal role here.
More important are what LSI calls "psychological anchors" -- a few focal points calculated to appeal to the jury on a gut level.
In one personal-injury case, a woman claimed she had been injured when she slipped in a pool, but the fall didn't explain why one of her arms was discolored bluish.
By repeatedly drawing the jury's attention to the arm, the defense lawyers planted doubt about the origin of the woman's injuries.
The ploy worked.
The defense won.
In a classic defense of a personal-injury case, the consultants concentrate on encouraging the jury to shift the blame.
"The ideal defense in a case involving an accident is to persuade the jurors to hold the accident victim responsible for his or her plight," Mr. Vinson has written.
Slick graphics, pre-tested for effectiveness, also play a major role in Litigation Sciences' operation.
Studies show, the consultants say, that people absorb information better and remember it longer if they receive it visually.
Computer-generated videos help.
"The average American watches seven hours of TV a day.
They are very visually sophisticated," explains LSI graphics specialist Robert Seltzer.
Lawyers remain divided about whether anything is wrong with all this.
Supporters acknowledge that the process aims to manipulate, but they insist that the best trial lawyers have always employed similar tactics.
"They may not have been able to articulate it all, but they did it," says Stephen Gillers, a legal ethics expert at New York University law school.
"What you have here is intuition made manifest."
Many lawyers maintain that all's fair in the adversary system as long as no one tampers with the evidence.
Others point out that lawyers in small communities have always had a feel for public sentiment -- and used that to advantage.
Litigation consulting isn't a guarantee of a favorable outcome.
Litigation Sciences concedes that in one in 20 cases it was flatout wrong in its predictions.
A few attorneys offer horror stories of jobs botched by consultants or of overpriced services -- as when one lawyer paid a consultant (not at Litigation Sciences) $70,000 to interview a jury after a big trial and later read more informative interviews with the same jurors in The American Lawyer magazine.
Some litigators scoff at the notion that a sociologist knows more than they do about what makes a jury tick.
"The essence of being a trial lawyer is understanding how people of diverse backgrounds react to you and your presentation," says Barry Ostrager of Simpson Thacher & Bartlett, who recently won a huge case on behalf of insurers against Shell Oil Co.
He says he used consultants in the case but "found them to be virtually useless."
But most lawyers accept that the marketplace has spoken.
And the question remains whether the jury system can maintain its integrity while undergoing such a skillful massage.
For more than a decade, Mr. Etzioni, the sociologist, has been a leading critic of the masseurs.
"There's no reason to believe that juries rule inappropriately," he says.
"But the last thing you want to do is manipulate the subconscious to make them think better.
What you then do is you make them think inappropriately."
To hamper the work of litigation scientists, he suggests that courts sharply limit the number of jurors that lawyers can remove from the jury panel through so-called peremptory challenges -- exclusions that don't require explanations.
In most civil cases, judges allow each side three such challenges.
For complex cases, judges sometimes allow many more.
Mr. Etzioni also suggests forbidding anyone from gathering background information about the jurors.
(Some courts release names and addresses, and researchers can drive by houses, look up credit ratings, and even question neighbors.)
Furthermore, he says, psychologists should not be allowed to analyze jurors' personalities.
Even some lawyers who have used consultants to their advantage see a need to limit their impact.
Mr. Boies, the first lawyer to use Mr. Vinson's services, cautions against courts' allowing extensive jury questioning (known as voir dire) or giving out personal information about the jurors.
"The more extensive the voir dire, the easier you make it for that kind of research to be effective, and I don't think courts should lend themselves to that," Mr. Boies says.
Silicon Graphics Inc., a fast-growing maker of computer workstations, said it landed two federal government contracts worth more than $100 million over the next five years.
One award is part of a Department of Defense contract to Loral Rolm Mil-Spec Computers and could be valued at more than $100 million over five years.
The other involves the sale of about 35 of the company's high-end workstations to the National Institutes of Health.
The models, which cost about $75,000 each, will be used in research.
The awards are evidence that Silicon Graphics' approach to computer graphics is catching on with users of powerful desktop computers, analysts said.
"The company's on a roll," said Robert Herwick, an analyst at Hambrecht & Quist.
"No other {computer} vendor offers graphics performance that good for their price."
In the battle to supply desktop computers for researchers and design engineers, most of the attention is given to the biggest competitors: Sun Microsystems Inc., Hewlett-Packard Co. and Digital Equipment Corp., which make computers mainly aimed at a wide range of engineering and scientific needs.
Silicon Graphics, on the other hand, has targeted a specific niche since its inception in 1982, which has been dubbed by some as "motion-picture computing."
This is a style of "visual" computing that provides three-dimensional, color models of everything from the inside of a house to the latest in women's fashion.
Though Silicon Graphics is much smaller than Digital, Hewlett and Sun, it has emerged in recent years as a feared adversary in this graphics portion of the workstation market.
In addition, the company has made it tough on competitors by offering a stream of desktop computers at sharply lower prices.
A year ago, Silicon Graphics introduced a model priced at $15,000 -- almost as cheap as mainstream workstations that don't offer special graphics features.
Silicon Graphics also plans to unveil even less expensive machines in the near future.
"It's pretty safe to assume we can bring the cost down of these systems by 30% to 40% a year," said Edward McCracken, the company's chief executive officer.
Silicon Graphics' strategy seems to be paying off.
Revenue for its first quarter ended Sept. 30 was $86.4 million, a 95% increase over the year-ago period.
Profit was $5.2 million, compared with $1 million for the year-ago quarter.
Remember those bulky, thick-walled refrigerators of 30 years ago?
They, or at least something less efficient than today's thin-walled units, may soon be making a comeback.
That something, whatever it is, could add as much as $100 to the $600 or so consumers now pay for lower-priced refrigerators.
These and other expensive changes in products ranging from auto air conditioners to foam cushioning to commercial solvents are in prospect because of something called the Montreal Protocol, signed by 24 nations in 1987.
In one of the most sweeping environmental regulatory efforts to date -- involving products with an annual value of $135 billion in the U.S. alone -- the signatories agreed to curtail sharply the use of chlorofluorocarbons (CFCs).
World-wide production would be cut in half by 1998.
The U.S. Senate liked the treaty so well it ratified it by a vote of 89 to 0.
Not to be outdone, George Bush wants CFCs banished altogether by the year 2000, a goal endorsed at an 80-nation U.N. environmental meeting in Helsinki in the spring.
That's a lot of banishment, as it turns out.
CFCs are the primary ingredient in a gas, often referred to by the Du Pont trade name Freon, which is compressed to liquid form to serve as the cooling agent in refrigeration and air-conditioning equipment.
Gases containing CFCs are pumped into polyurethane to make the foam used in pillows, upholstery and insulation.
Polyurethane foam is a highly efficient insulator, which accounts for why the walls of refrigerators and freezers can be thinner now than they were back in the days when they were insulated with glass fiber.
But even though by some estimates it might cost the world as much as $100 billion between now and the year 2000 to convert to other coolants, foaming agents and solvents and to redesign equipment for these less efficient substitutes, the Montreal Protocol's legions of supporters say it is worth it.
They insist that CFCs are damaging the earth's stratospheric ozone layer, which screens out some of the sun's ultraviolet rays.
Hence, as they see it, if something isn't done earthlings will become ever more subject to sunburn and skin cancer.
Peter Teagan, a specialist in heat transfer, is running a project at Arthur D. Little Inc., of Cambridge, Mass., to find alternative technologies that will allow industry to eliminate CFCs.
In addition to his interest in ozone depletion he has extensively studied the related topic of global warming, a theory that mankind's generation of carbon dioxide through increased combustion of fossil fuels is creating a "greenhouse effect" that will work important climatic changes in the earth's atmosphere over time.
"I would be the first to admit that there is not a complete consensus in the scientific community on either one of these problems," says Mr. Teagan.
"In the kind of literature I read I come across countervailing opinions quite frequently.
But the nature of the problem is such that many others feel it has to be addressed soon, before all the evidence is in.
We can't afford to wait."
But does it have to be so soon?
Some atmospheric scientists think that even if CFCs were released into the atmosphere at an accelerating rate, the amount of ozone depletion would be only 10% by the middle of the next century.
It's easy to get something comparable by simply moving to a higher altitude in the U.S.
Moreover, there are questions, particularly among atmospheric scientists who know this subject best, about the ability of anyone to know what in fact is happening to the ozone layer.
It is generally agreed that when CFCs rise from earth to stratosphere, the chlorine in them is capable of interfering with the process through which ultraviolet rays split oxygen molecules and form ozone.
But ozone creation is a very large-scale natural process and the importance of human-generated CFCs in reducing it is largely a matter of conjecture.
The ozone layer is constantly in motion and thus very hard to measure.
What scientists have known since the late 1970s is that there is a hole in the layer over Antarctica that expands or contracts from year to year.
But it is at least worthy of some note that there are very few refrigerators in Antarctica.
Moreover, surely someone has noticed that household refrigerators are closed systems, running for many years without either the CFC gas or the insulation ever escaping.
Another argument of the environmentalists is that if substitutes are available, why not use them?
Mr. Teagan cites a list of substitutes but none, so far, match the nonflammable, nontoxic CFCs.
Butane and propane can be used as coolants, for example, but are flammable.
Moreover, new lubricants will be needed to protect compressors from the new formulations, which, as with CFCs, are solvents.
Mr. Teagan points out as well that if the equipment designed to get along without CFCs is less efficient than current devices, energy consumption will rise and that will worsen the greenhouse effect.
Folks in the Midwest who just suffered a mid-October snowstorm may wonder where the greenhouse was when they needed it, but let's not be flippant about grave risks.
As it happens, Arthur D. Little is not at all interested in throwing cold water on ozone depletion and global warming theories.
It is interested in making some money advising industry on how to convert to a world without CFCs.
There is, after all, big money in environmentalism.
Maybe we should ask why it was that Du Pont so quickly capitulated and issued a statement, giving it wide publicity, that it was withdrawing CFCs.
Freon, introduced in 1930, revolutionized America by making refrigeration and air conditioning practical after all.
One answer is that big companies are growing weary of fighting environmental movements and are trying instead to cash in on them, although they never care to put it quite that way.
Du Pont, as it happens, has a potential substitute for CFCs.
Imperial Chemical Industries of the U.K. also has one, and is building a plant in Louisiana to produce it.
Japanese chemical companies are at work developing their own substitutes and hoping to conquer new markets, of course.
There are still others who don't mind seeing new crises arise.
Environmental groups would soon go out of business were they not able to send out mailings describing the latest threat and asking for money to fight it.
University professors and consultants with scientific credentials saw a huge market for their services evaporate when price decontrol destroyed the energy crisis and thus the demand for "alternative energy."
They needed new crises to generate new grants and contracts.
In other words, environmentalism has created a whole set of vested interests that fare better when there are many problems than when there are few.
That tends to tilt the public debate toward "solutions" even when some of the most knowledgeable scientists are skeptical about the seriousness of the threats and the insistence of urgency.
There is an element of make-work involved.
Consumers pay the bill for all this in the price of a refrigerator or an air-conditioned car.
If they were really getting insurance against environmental disaster, the price would be cheap.
But if there is no impending threat, it can get to be very expensive.
but worries about 1990.
With most legislatures adjourned for the year, small business is tallying its scorecard.
Much of its attention was spent fighting organized labor's initiatives on issues the small-business community traditionally opposes -- from raising state minimum wage levels to mandating benefits in health plans.
While results were mixed in many states, "small business got by fairly well," concludes Don L. Robinson, associate director of the National Federation of Independent Business, the largest small-business organization.
Five states -- Oregon, Rhode Island, New Hampshire, Iowa and Wisconsin -- passed bills to boost the minimum wage, but measures in 19 other states were defeated.
Oregon's rate will rise to $4.75 an hour, the nation's highest, in Jan. 1, 1991.
Iowa's will be the second highest -- at $4.65 an hour in January 1992 -- but small-business lobbyists won an exclusion for tiny concerns and a lower training rate.
In 17 central states, one small-business count shows lawmakers adopted only three of 46 bills mandating health coverage or parental leave.
The Illinois Legislature narrowly passed a parental-leave bill, which Gov. James Thompson vetoed, and Iowa and Tennessee amended laws to require that employers pay for breast-cancer exams.
Small business is bracing for an avalanche of similar proposals next year.
"Those kinds of issues always keep coming back," says Robert Beckwith, who manages the Illinois Chamber of Commerce's small-business office.
DESPITE VICTORIES this year, small business fears losing parental-leave war.
Only two states -- Vermont and Washington -- this year joined five others requiring private employers to grant leaves of absence to employees with newborn or adopted infants.
Similar proposals were defeated in at least 15 other states.
But small business, which generally detests government-mandated benefits, has taken note of the growing number of close votes.
"It's just a matter of time before the tide turns," says one Midwestern lobbyist.
Consequently, small business is taking more "pro-active" steps to counter mandated leaves.
In Pennsylvania, small businesses are pushing for a voluntary alternative; they favor a commission that would develop sample leave policies that employers could adopt.
They also support a tax credit for employers to offset the cost of hiring and training workers who temporarily replace employees on parental leave.
In 1990, the issue is expected to be especially close in Alaska, California, Michigan, New York, Pennsylvania and Illinois.
"We'll be playing a lot of defense, especially in the Midwest and Northeast," says Jim Buente of the NFIB.
IN LOS ANGELES, more small businesses ponder adopting a child-care policy.
Triggering the re-examination is a recent city council decision to give preference in letting city contracts to suppliers with a stated policy on child care for their employees.
The preferential treatment even applies to awarding small contracts under $25,000 and consulting and temporary services -- which often go to the smaller concerns.
Firms are permitted wide flexibility in the child-care arrangements they provide.
Council member Joy Picus, the measure's chief advocate, considers it part of a "pro-family policy" that makes Los Angeles a leader in "humanizing the workplace."
NOVEMBER BALLOTS will contain few referendum or initiative issues that especially affect small business.
In San Francisco, small businesses are urging passage of a local initiative to build a new $95 million downtown baseball stadium; they believe it will spur retail sales and hotel-restaurant business.
But in Washington state, small business generally opposes an initiative to boost spending on children's programs by $360 million, fearing the state's 7.8% sales tax will be raised to finance the outlays.
DIALING DOLLARS:
Small businesses in suburban Chicago are discovering that an area-code switch Nov. 11 -- to 708 from the familiar 312 -- won't be without some costs as they alter stationery, among other things, and notify customers.
Wessels & Pautsch, a small St. Charles law firm, plans to mail 500 customers a list of its lawyers' new phone and fax numbers as well as updated Rolodex cards.
But many owners plan to practice frugality -- crossing out the old code and writing in the new one until their stock runs out.
Even print-shop operator Clay Smith of Naperville won't discard his old supply.
(He reports his business is up slightly from customers replacing old stock.)
CALIFORNIA, A TREND-SETTER in franchising rules, stirs a controversy.
With some new rules, state officials say they made it easier -- and faster -- to sell new franchises whose terms stray from those in state-registered contracts.
Previously, regulators insisted that franchisers pre-register such changes with the state -- a costly process taking at least six weeks.
Now some negotiated sales that meet a series of tests don't have to be pre-registered.
For instance, franchisers no longer must pre-register sales to aspiring franchisees who qualify as "sophisticated purchasers."
Such buyers must have a minimum net worth of $1 million, $200,000 annual income, or recent experience in the business area of the franchise being sold.
But critics consider the changes regressive.
Lewis G. Rudnick, a Chicago lawyer who represents franchisers, contends California is narrowly limiting -- rather than expanding -- opportunities for negotiating sales.
He argues California regulators historically have misinterpreted their law -- and he says negotiated sales that aren't pre-registered have been legal all along.
San Francisco lawyer Timothy H. Fine, who represents franchisees, insists California's cautiousness helps protect franchisees from crafty sales negotiators who push unlawful clauses.
SMALL TALK:
A new Maryland law frees store owners of liability if a customer trips or otherwise gets hurt on the way to the restroom. . . .
Only 4% of Missouri small businesses surveyed say they've tested an employee or applicant for drug or alcohol use. . . .
By 52%-36%, Tennessee NFIB members favor laws to limit foreign ownership of land and facilities in the state.
About 400,000 commuters trying to find their way through the Bay area's quake-torn transportation system wedged cheek-to-jowl into subways, sat in traffic jams on major freeways or waited forlornly for buses yesterday.
In other words, it was a better-than-average Manhattan commute.
City officials feared widespread gridlock on the first day that normal business operations were resumed following last Tuesday's earthquake.
The massive temblor, which killed at least 61 people, severed the Bay Bridge, a major artery to the east, and closed most ramps leading to and from Highway 101, the biggest artery to the south.
It will take several weeks to repair the bridge, and several months to repair some of the 101 connections.
But in spite of a wind-driven rainstorm, gridlock never materialized, mainly because the Bay Area Rapid Transit subway system carried 50% more passengers than normal.
For the first time in memory, it was standing-room only in BART's sleek, modern railcars.
Moreover, the two main bridges still connecting San Francisco with the East Bay didn't charge tolls, allowing traffic to zip through without stopping.
Officials also suspect that traffic benefited from steps by major employers to get workers to come in at odd hours, or that many workers are still staying at home.
Many commuters who normally drove across the Bay Bridge, which is shut down for several weeks because of damage to one span, actually may have reached work a bit faster on BART yesterday, provided they could find a parking space at the system's jammed stations.
In the best of times, the Bay Bridge is the worst commute in the region, often experiencing back-ups of 20 to 30 minutes or more.
Not that getting into town was easy.
Storm flooding caused back-ups on the freeway, and many commuters had to find rides to BART's stations, because parking lots were full before dawn.
Bus schedules were sometimes in disarray, stranding commuters such as Marilyn Sullivan.
Her commute from Petaluma, Calif., normally takes an hour and 15 minutes, via the Golden Gate Bridge, which connects San Francisco with the North Bay area.
Yesterday, she was still waiting at a bus stop after three hours, trying to transfer to a bus going to the financial district.
"It's worse than I thought," she said.
"I don't know where all the buses are."
But while traffic was heavy early in the commute over the Golden Gate, by 8 a.m. it already had thinned out.
"It's one of the smoothest commutes I've ever had," said Charles Catania, an insurance broker on the bus from Mill Valley in Marin County.
"It looks like a holiday.
I think a lot of people got scared and stayed home."
However, a spokeswoman for BankAmerica Corp. said yesterday's absenteeism at the bank holding company was no greater than on an average day.
At the San Mateo Bridge, which connects the San Francisco peninsula with the East Bay, police were surprised at the speed with which traffic moved.
"Everybody pretty much pitched in and cooperated," said Stan Perez, a sergeant with the California Highway Patrol.
There were many indications that the new work hours implemented by major corporations played a big role.
The Golden Gate handled as many cars as normally yesterday, but over four hours rather than the usual two-hour crush.
Bechtel Group Inc., the giant closely held engineering concern, says it has instituted a 6 a.m. to 8 p.m. flextime arrangement, whereby employees may select any eight-hour period during those hours to go to work.
Of Bechtel's 17,500 employees, about 4,000 work in San Francisco -- one-third of them commuting from stricken East Bay.
Pacific Gas & Electric Co. is offering its 6,000 San Francisco employees a two-tier flextime schedule -- either 6 a.m. to 2 p.m. or 10 a.m. to 6 p.m.
The flextime may cut by almost a third the number of PG&E employees working conventional 9-5 hours, a spokesman says.
Some of the utility's employees may opt for a four-day workweek, 10 hours a day, to cut the commute by 20%.
At Pacific Telesis Group, flextime is left up to individual working groups, because some of the telephone company's employees must be on-site during normal business hours, a spokeswoman says.
Some individuals went to some lengths on their own to avoid the anticipated gridlock.
One senior vice president at Bechtel said he got up at 3 a.m. to drive into San Francisco from the East Bay.
But transportation officials worry that such extraordinary measures and cooperation may not last.
Although one transportation official said drivers who didn't use car pools were committing "an anti-social act," about two-thirds of the motorists crossing the Golden Gate were alone, compared with the normal 70% rate.
And some commuters, relieved by the absence of gridlock, were planning to return to their old ways.
Garry Kasparov went to combat Sunday with the world's most advanced chess computer and kicked it around -- symbolically, anyway -- like an old tin can.
Playing black in the first game, the human champion maneuvered Deep Thought, known for its attacking prowess, into a totally passive position.
Then he unleashed his own, unstoppable, attack.
And in the second game, with Mr. Kasparov advancing ferociously as white, D.T. offered feeble resistance and lost even faster.
Well, mankind can rest easier for now.
Though almost everybody at the playing site had been looking for the 26-year-old Soviet to beat the Pennsylvania-based computer, he gave the machine a far worse drubbing than many expected.
And when Mr. Kasparov strode into the playing hall, he called the outcome.
As if he were Iron Mike, about to enter the ring with a 98-pound weakling, he declared: "I'll be able to beat any computer for the next five years."
His strategy against D.T. was based on a thorough study of dozens of its games, he said, including its notorious whippings of the grandmasters Bent Larsen of Denmark and Robert Byrne of the U.S.
Mr. Kasparov was underwhelmed.
"The computer's mind is too straight, too primitive," lacking the intuition and creativity needed to reach the top, he said.
The champion apparently was not worried at all about D.T.'s strong points.
Its chief builder, Taiwan-born Feng-hsiung Hsu, nicknamed his brainchild "the Weasel" for its tactical flair at wriggling out of horrible positions.
D.T. also has a prodigious and flawless memory, is utterly fearless, and couldn't be distracted by the sexy nude sculptures spread around the playing hall, in the New York Academy of Art.
In fact, D.T. never left home, Carnegie Mellon University in Pittsburgh, but communicated with its human handlers by telephone link.
They conceded that the odds favored Mr. Kasparov, but they put their hope in D.T.'s recently enhanced capacity for examining positions -- up to a million per second, from 720,000.
But the handlers mistakenly stuck with silicon chips; they needed kryptonite.
This became apparent as game one, a Sicilian Defense by Mr. Kasparov, proceeded.
No human can examine millions of moves, but Mr. Kasparov, using his ineffably powerful brain, consistently found very good ones.
After eight moves by each side, the board was the same as in a game in which Nigel Short of Great Britain fought the champion to a draw in 1980.
But the computer didn't play Mr. Short's ninth move, a key pawn thrust, and its position deteriorated rapidly.
Instead of castling, a standard measure to safeguard the king, D.T. made a second-rate rook maneuver at move 13; then it put a knight offside on move 16.
"Only two classes of minds would think of this -- very weak human players, and computers," said Edmar Mednis, the expert commentator for the match, which was attended by hundreds of chess fans.
By move 21, D.T. had fallen into a deep positional trap.
It allowed Mr. Kasparov to exchange his dark-squared bishop for one of D.T.'s knights.
Bishops usually are worth slightly more than knights, but in this case Mr. Kasparov was left with a very dangerous knight and D.T.'s surviving bishop was reduced to passivity.
Indeed, it looked more like a pawn, a "tall pawn," as spectators snidely put it.
Consistently, D.T. was over-optimistic about its chances, which it continually sized up, in numerical form.
When most spectators thought its position hopeless, the computer thought it was only, in effect, one-half of a pawn down.
Such evaluations met with derision, and kept the machine from resigning as soon as humans would have -- prompting more derision.
While D.T. shuffled its king back and forth in a defensive crouch, Mr. Kasparov maneuvered the knight to a dominant outpost.
He also launched a kingside storm, sacrificing a pawn to denude D.T.'s king.
No amount of weasling could have saved this game for D.T.
A piece down, the computer resigned.
Now, with the crowd in the analysis room smelling figurative blood, the only question seemed to be how fast Mr. Kasparov could win game two.
With the advantage of playing white (which moves first), Mr. Kasparov followed up cleverly against the computer's defense, a Queen's Gambit Accepted.
As early as move six, Mr. Kasparov deviated from a well-known sequence of moves, developing a knight instead of making a standard bishop attack against the computer's advanced knight.
This left the computer with a broader range of plausible replies -- and it immediately blundered by moving a queenside pawn, to the neglect of kingside development.
"In a new position just after the opening, a computer will have serious problems," Mr. Kasparov said later.
In such positions, he explained, "you have to create something new, and the computer isn't able to do that right now."
After only 11 moves for each side, the computer's position was shaky.
Greedily, it grabbed a pawn, at the cost of facing a brutal attack.
And when a defensive move was called for, D.T. passed up an obvious pawn move and instead exposed its queen to immediate tactical threats.
Mr. Kasparov remarked later that "even a weak club player" would have avoided the queen move.
Now, after only a dozen moves, spectators were looking for a mating combination.
On a demonstration board, emcee Shelby Lyman showed a quick kill initiated by a knight sacrifice; no spectator refuted this line of play.
Mr. Kasparov's continuation was slower but, in the end, just as deadly.
He won D.T.'s queen for two minor pieces and two pawns -- not enough compensation, in this position, to give the computer much hope.
In a hopeless position, the computer resigned rather than make its 37th move.
And Mr. Kasparov, to cheers and applause, marched back into the analysis room.
"In both games I got exactly what I wanted," he said.
What he had demonstrated, he added, is that there's more to chess than sheer calculation.
Undeterred, D.T.'s handlers vowed to press on.
Indeed, three of them will be building a successor machine for International Business Machines Corp.
Promises Feng-hsiung Hsu: "In three years we'll mount a better challenge."
Mr. Tannenbaum is a reporter in the Journal's New York bureau.
Reaching for that extra bit of yield can be a big mistake -- especially if you don't understand what you're investing in.
Just ask Richard Blumenfeld, a New Jersey dentist who considers himself "a reasonably sophisticated investor."
In May 1986, Dr. Blumenfeld gave Merrill Lynch & Co. about $40,000 for a federally insured certificate of deposit offering an effective yield of more than 9%.
"It was a time when interest rates came down very rapidly," Dr. Blumenfeld recalls.
Yields on five-year CDs at major banks were averaging about 7.45%, and 10-year Treasury notes were paying less than 8%.
The CD seemed like a great deal.
But nearly 3 1/2 years later, Merrill says the investment is worth about $43,000 -- an amount that represents an annual return of just over 2% on Dr. Blumenfeld's $40,000.
The problem is that the CD he bought for a retirement plan wasn't a plain vanilla CD.
Instead, his Merrill broker put him in a zero-coupon CD, which is sold at a deep discount to its face value.
The difference between the price and the face value payable at maturity is the investor's return.
More important, the CD was purchased on the secondary, or resale, market.
Because the CD had an effective yield of 13.4% when it was issued in 1984, and interest rates in general had declined sharply since then, part of the price Dr. Blumenfeld paid was a premium -- an additional amount on top of the CD's base value plus accrued interest that represented the CD's increased market value.
Now the thrift that issued the CD is insolvent, and Dr. Blumenfeld has learned to his surprise that the premium isn't insured under federal deposit insurance.
The tip-off came when he opened a recent Merrill Lynch statement and found that the CD's "estimated current market value" had plummeted by $9,000 in a month.
Several phone calls and a visit to his broker's office later, the dentist found out that the $9,000 drop represented the current value of the premium he paid when he bought the CD, and that the amount wasn't insured.
"This is one thing I was never aware of," he says.
He assumed that principal and interest were "fully insured up to $100,000," he adds.
Dr. Blumenfeld isn't unique.
Especially at times like these, when declining rates make it hard for investors to get yields they have come to expect, too many people chase the promise of above-market returns without fully appreciating the risk.
"Yield greed often gets in the way of understanding things," says John Markese, research director of the American Association of Individual Investors, a Chicago-based educational group.
"The biggest problem we have is that investors realize, after the fact, that they didn't understand what they were investing in."
Dr. Blumenfeld concedes he didn't fully understand what he was buying.
He says that he knew he was getting a zero-coupon CD and that he had previously invested in TIGRs (Treasury Income Growth Receipts), a type of zero-coupon Treasury security sold by Merrill Lynch.
But he says he didn't understand he was buying the CD on the secondary market, and he contends his broker never fully explained the risks.
The broker, Thomas Beairsto of Merrill Lynch's Morristown, N.J., office, refuses to discuss the matter with a reporter, referring inquiries to Merrill Lynch officials in New York.
Those officials say there was full disclosure of the risks in a "fact sheet" sent to all CD investors with their confirmation of sale.
The fact sheet, dated April 1986, says on page three: "If the price paid for a CD purchased in the secondary market . . . is higher than the accreted value in the case of zero-coupon CDs, the difference . . . is not insured . . . .
Computations involving zero-coupon CDs are more complicated and you should discuss any questions you may have with your financial consultant."
Dr. Blumenfeld says he doesn't remember the paragraph about premiums in the fact sheet he received and didn't realize part of what he paid was a premium.
"I assumed I was buying a CD as a CD," he says.
Nevertheless, Merrill Lynch has agreed that if the thrift that issued Dr. Blumenfeld's CD, Peoples Heritage Federal Savings & Loan Association in Salina, Kan., is liquidated and the CD terminated, the brokerage firm would cover the premium Dr. Blumenfeld paid.
(Federal deposit insurance would pay principal and interest accrued to the date of liquidation, to a maximum of $100,000.)
"It's not a blanket commitment, it's a case-by-case situation," says Albert Disposti, a managing director of Merrill Lynch Money Markets Inc.
"There's a question whether brokers at the time were fully aware" of the risks.
"We weren't sure that full disclosure, as we wanted it, was being made."
Merrill Lynch says it's impossible to estimate how many investors are in Dr. Blumenfeld's situation, although it says the firm has received only one other complaint about premiums on the secondary market in three years.
Merrill Lynch now provides credit rating information about the institutions whose CDs it sells, which it didn't provide in 1986.
Zero-coupon CDs are only a small portion of the $1 trillion-plus in CDs outstanding, and those purchased on the secondary market are an even smaller part of the total.
Merrill Lynch estimates that fewer than 10 financial institutions currently issue zero-coupon CDs.
Still, there are several billion dollars of zero-coupon CDs with various maturities outstanding.
Because of the tax consequences of zero-coupon investments -- income tax is payable in the year interest is accrued, although interest isn't actually paid until maturity -- zero-coupon CDs are usually sold for tax-advantaged accounts to finance things like retirement and children's education.
Most zero-coupon CDs are in maturities of six to nine years, and they usually double in value by maturity.
But investors who bought zero-coupon CDs in the secondary market aren't the only ones who may be surprised to learn the full amount of their investments isn't insured.
People who paid a premium for standard CDs purchased on the secondary market could also find that those premiums aren't insured if the institutions that issued the CDs failed.
However, those premiums are usually far smaller than on zero-coupon CDs, and the simpler pricing structure of a standard CD makes it more apparent when a premium is paid.
Whatever the case, a Merrill Lynch spokesman emphasizes, investors shouldn't have to worry about the uninsured premium issue, unless the bank or thrift that issued the CD is closed and its deposits paid off before maturity or transferred to another institution at a lower rate.
Dr. Blumenfeld says he's satisfied that his problem has been resolved.
And he says he's learned a lesson: "You always have to watch out for yourself.
No one else will watch out for you.
Americans are drinking less, but young professionals from Australia to West Germany are rushing to buy premium-brand American vodka, brandy and other spirits.
In particular, many are snubbing the scotch preferred by their parents and opting for bourbon, the sweet firewater from the Kentucky countryside.
With U.S. liquor consumption declining steadily, many American producers are stepping up their marketing efforts abroad.
And those efforts are paying off: Spirits exports jumped more than 2 1/2 times to $157.2 million in 1988 from $59.8 million in 1983, according to the Distilled Spirits Council of the U.S., a trade group.
"Spirits companies now view themselves as global marketers," says Michael Bellas, president of Beverage Marketing Corp., a research and consulting firm.
"If you want to be a player, you have to be in America, Europe and the Far East.
You must have world-class brands, a long-term perspective and deep pockets."
The internationalization of the industry has been hastened by foreign companies' acquisitions of many U.S. producers.
In recent years, for example, Grand Metropolitan PLC of Britain acquired Heublein Inc., while another British company, Guinness PLC, took over United Distillers Group and Schenley Industries Inc.
But the shift has also been fueled by necessity.
While premium-brand spirits like Smirnoff vodka and Jack Daniel's whiskey are riding high in the U.S., domestic spirits consumption fell 15% to 141.1 million cases in 1988 from 166 million cases in 1979.
In recent years, growth has come in the foreign markets.
U.S. brandy exports more than doubled last year to 360,000 proof gallons, a standard industry measure, according to Jobson Beverage Alcohol Group, an industry association.
Exports of rum surged 54% to 814,000 proof gallons.
Mexico is the biggest importer of both rum and brandy from the U.S.
Japan, the world's third-largest liquor market after the U.S. and Britain, helped American companies in April when it lowered its tax on imported spirits and levied a tax on many domestic products.
California wineries, benefiting from lowered trade barriers and federal marketing subsidies, are expanding aggressively into Japan, as well as Canada and Great Britain.
In Japan, the wineries are promoting their products' Pacific roots and courting restaurant and hotel chefs, whose recommendations carry weight.
In Australia, Britain, Canada and Greece, Brown-Forman Corp. has increased its marketing of Southern Comfort Liqueur.
Using cinema, television and print ads, the company pitches Southern Comfort as a grand old drink of the antebellum American South.
The biggest foreign inroads, though, have been made by bourbon.
While U.S. makers of vodka, rum and other spirits compete against powerhouses abroad, trade agreements prohibit any other country from making bourbon.
(All bourbon comes from Kentucky, though Jack Daniel's Tennessee whiskey often is counted as bourbon because of similarity of taste.)
Moreover, just as vodka has acquired an upscale image in the U.S., bourbon has become fashionable in many foreign countries, a uniquely American product tied to frontier folklore.
How was the West won?
With a six-shooter in one hand and bourbon in the other.
"We imagine with bourbon the Wild West, Western motion pictures and gunmen appearing," says Kenji Kishimoto, vice president of Suntory International Corp., a division of Suntory Ltd., Japan's largest liquor company.
Suntory distributes Brown-Forman bourbons in Japan.
Bourbon makes up just 1% of world-wide spirits consumption, but it represented 57% of U.S. liquor exports last year, according to Jobson; no other category had more than 19%.
Big U.S. distillers are fiercely vying for this market, which grew to $77 million last year from $33 million in 1987, according to government figures.
Jim Beam Brands Co., a division of American Brands Inc., is the leading exporter of bourbon and produces 10 other types of liquor.
The company says it will increase its international advertising 35% in 1990, with bourbon representing most of that amount.
Guinness's Schenley Industries unit has increased its TV advertising in Japan and has built partnerships with duty-free shops throughout Asia, enabling it to install prominent counter displays.
The company's I.W. Harper brand is the leading bourbon in Japan, with 40% of the market.
Bourbon exporters have succeeded in Japan where other industries have failed, avoiding cultural hitches in marketing and distribution by allying themselves with local agents.
Jim Beam Brands has a distribution partnership with Nikka Whiskey Co., a distiller.
Seagram Co., which exports Four Roses bourbon, has such a link with Kirin Brewery Co.
Some bourbon makers advertise abroad as they do at home.
To promote Jack Daniel's overseas, Brown-Forman uses the same photos of front porches from Lynchburg, Va., and avuncular old men in overalls and hightops.
Jim Beam print ads, however, strike different chords in different countries.
In Australia, land of the outback, a snapshot of Jim Beam lies on a strip of hand-tooled leather.
West Germans get glitz, with bourbon in the foreground and a posh Beverly Hills hotel in the background.
Ads for England are artsy and irreverent.
One ad features a huge robot carrying a voluptuous woman in a faint.
The tagline: "I only asked if she wanted a Jim Beam.
Capital Cities/ABC Inc.'s net income rose 29% on a modest 9% increase in revenue in the third quarter, mainly on strong advertising demand at its ABC television network operation.
Demand for ads also rose at the eight TV stations Capital Cities owns and at its 80%-owned ESPN sports cable channel.
The broadcast and publishing company reported net climbed to $80.8 million, or $4.56 a share, from $62.6 million, or $3.55 a share, in the year-earlier period.
Revenue reached $1.1 billion from $1.01 billion.
In New York Stock Exchange composite trading yesterday, Capital Cities closed at $558.50, down $5.
The broadcasting unit reported operating profit of $134.9 million, up 18% from the year-earlier $114.3 million.
Publishing reported operating profit was $33.3 million, nearly flat with the year-before $33 million.
Revenue at the broadcasting unit, consisting of the network and stations, advanced 11%, to $838 million from $752.9 million.
The publishing unit reported revenue edged up 2.6% to $263.2 million from $256.6 million.
Chairman Thomas S. Murphy cited Capital Cities' nine daily newspapers in explaining most of the gain.
The parent also publishes weeklies, shopping guides and specialty magazines.
For 1989's first nine months, Capital Cities net income grew 23% to $303.7 million, or $16.97 a share, from $246.9 million, or $14.43 a share.
Revenue eased 0.3% to $3.45 billion from $3.46 billion.
Last week, ABC unseated General Electric Co.'s National Broadcasting Co. unit as the No. 1 network, as rated by A.C. Nielsen Co.
ABC has four shows in the top 10, including the top show, "Roseanne.
As part of a previously announced transaction, Federal Mogul Corp. has bought approximately 565,000 shares of its common stock from Nortek Inc. at $23.50 a share.
Nortek has agreed not to acquire any securities of Federal-Mogul for 10 years and not to influence company affairs during that period.
Weyerhaeuser Co. said it sold its wall-paneling business to an affiliate of one of Indonesia's largest wood-products firms.
Terms of the transaction weren't disclosed.
Weyerhaeuser said its paneling business employs about 300 workers at two facilities in Chesapeake, Va., and Hancock, Vt.
Manville Corp. said it will build a $24 million power plant to provide electricity to its Igaras pulp and paper mill in Brazil.
The company said the plant will ensure that it has adequate energy for the mill and will reduce the mill's energy costs.
Manville said it expects the plant to begin operating at the end of 1991.
Housing and Urban Development Secretary Jack Kemp called on the Federal Reserve System to lower interest rates.
In a speech to the Mortgage Bankers Association, Mr. Kemp broke the administration's public silence on the Fed and complained that "interest rates are too high."
"I am convinced that a monetary policy for this country that would return interest rates to the historical level of 4% or 5% would have not only an immediate impact on housing starts, the housing stock, our industry in America, the refurbishing of our industrial system, it would help the Third World economies considerably and it would particularly have a favorable impact upon our budget deficit," Mr. Kemp said.
The Fed recently eased credit by lowering the bellwether federal funds interest rate to 8 3/4% from about 9%.
Bush administration officials say inflation is under control.
With economic growth slowing, they say they believe the Fed should ease credit even further.
But for the most part, officials have avoided expressing those views in public, fearing they would unnecessarily antagonize the Fed.
McDonald's Corp. said third-quarter earnings rose 14% on a hefty sales gain, but domestic franchisees apparently didn't partake of the improvement.
The world's largest fast-food chain said net income rose to $217.9 million, or 59 cents a share, from $191.3 million, or 51 cents a share, a year ago.
In the latest period, the company had an average of 370.8 million shares, 5.6 million shares below last year's level.
Revenue rose 12% to $1.63 billion from $1.46 billion.
Systemwide sales, which include sales at franchisee as well as company-owned stores, totaled $4.59 billion compared with $4.2 billion.
But sales for U.S. franchisees were flat at best on a per-store basis despite weak 1988 figures.
Compared with the first nine months of last year, average franchisee store sales this year were down nearly $3,200, reflecting a fierce discounting war among fast-food chains.
Since McDonald's menu prices rose this year, the actual decline may have been more.
McDonald's closed at $31.375, up $1, in New York Stock Exchange composite trading yesterday.
While franchisees were having a tough time holding sales, McDonald's company-operated stores posted hefty gains for the nine months, with sales per company-operated unit rising $20,000.
One analyst noted that the company often has better store locations than do its franchisees, thus aiding promotional efforts.
On average in the latest nine months, company-operated units in the U.S. had $90,552 more in sales than did franchised outlets.
There are more than three times as many franchised domestic outlets as there are company stores.
Profit margins at U.S. company-owned stores in the quarter were up nearly 1%, which the company attributed in part to lower food costs.
Prudential-Bache Securities analyst Leslie Steppel said reduced labor costs helped boost margins, although she doubted "that kind of performance is sustainable."
Calling sales "still relatively soft," Ms. Steppel believes that in real terms, U.S. sales slipped 3 1/2% to 4% at company-operated stores in the quarter.
Apparently acknowledging weaker U.S. sales systemwide, McDonald's vowed "to use our size and muscle to do all that is necessary to build the brand."
Overseas, both franchisees and the company performed substantially better than a year ago.
Third-quarter sales in Europe were exceptionally strong, boosted by promotional programs and new products -- although weaker foreign currencies reduced the company's earnings.
McDonald's said that systemwide sales would have been $115 million greater had 1988 exchange rates remained in effect.
"Going into the fourth quarter the sales comparison will be more difficult," predicted restaurant analyst Howard Hansen of Kidder, Peabody & Co.
Reflecting better growth prospects abroad, McDonald's noted that as of Sept. 30 more stores were under construction overseas than a year ago, while the opposite was true for domestic expansion.
At the end of the third quarter McDonald's had 10,873 units operating world-wide.
In the nine months, earnings rose 12% to $555.6 million, or $1.49 a share, from $494.4 million, or $1.31 a share, a year earlier.
Revenue rose 11% to $4.56 billion from $4.12 billion.
Carnival Cruise Lines Inc.'s common stock was dragged down yesterday amid concerns that a bankruptcy filing by a Finnish shipbuilder would delay delivery of three big cruise ships.
The Miami-based company's stock fell $1.75 yesterday to $20.75 a share in heavy American Stock Exchange composite trading.
Early yesterday, Carnival said in a company statement that it had been "notified unofficially" that Waertsilae Marine Industries, the Finnish shipyard that is building its three new cruise ships, planned to file for bankruptcy.
Officials at Carnival declined to comment.
"There is just a tremendous amount of uncertainty about what the effect, if any, of all this is," said John P. Uphoff, an analyst at Raymond James Associates Inc.
"I didn't even know that a company in a socialistic country could file for bankruptcy."
Carnival said the "Fantasy," the first of the three $200 million ships that Carnival has on order, is scheduled to be delivered next month, just in time for the winter tourist season in the Caribbean.
That ship, which would carry about 2,050 passengers, would expand the capacity of Carnival's existing 14-ship fleet by 24%.
The second ship, which is half-completed, is scheduled to be delivered in fall 1990, and the third in fall 1991.
"There's a 99% chance that the Fantasy will be delivered close to schedule," said Caroline Levy, an analyst at Shearson Lehman Hutton Inc.
"The others will probably be delivered as well, but Carnival will likely have to pay a higher price for them."
She said the company could pay as much as 25% more for the ships.
If the ships aren't delivered, however, it will likely have an effect on the company's earnings as soon as the 1990 fiscal year, which begins Dec. 1.
Analysts said those estimates -- which range from about $1.80 a share to $1.95 a share -- are based on Fantasy being in operation in 1990.
If the ship fails to arrive, those per-share earnings estimates could be trimmed 15 cents or more.
Analysts weren't willing to speculate on how much money Carnival might lose through deposits.
Normally, a company pays a portion of the total cost of a ship as it reaches various stages of construction.
Carnival, for example, has already paid about $160 million of the total cost for Fantasy.
Some analysts say this may give it the right to seize the ship if the situation warrants it.
According to reports from Finland, Waertsilae Marine, 19%-owned by conglomerate Oy Waertsilae, filed for bankruptcy yesterday after the shipyard's contractors had started to demand bank guarantees.
The shipyard disclosed in mid-August that it expected losses stemming from a series of unprofitable orders.
Designer Sandra Garratt filed for Chapter 7 Bankruptcy Code protection, saying that her cash flow had been cut off.
The designer, whose line of modular, one-size-fits-all clothing has spawned a host of clones, has been in a dispute with her latest licensee, Jerell Inc. for several months.
Ms. Garratt was the subject of a Wall Street Journal article in March.
The designer's attorney, Molly Bartholow, said that Ms. Garratt was forced to start bankruptcy-law proceedings because Jerell began withholding her royalty payments last month.
Jerell paid Ms. Garratt royalties for the line known as Multiples by Sandra Garratt, which are sold primarily through department stores.
Ms. Garratt sued the Dallas apparel maker earlier this year, charging that Jerell developed and marketed clothing lines fashioned after her designs, in violation of their contract.
That lawsuit is still pending.
Jerell couldn't immediately be reached for comment.
Ms. Garratt's assets and liabilities weren't disclosed.
Eaton Corp. had a 26% drop in third-quarter profit mainly because of lower sales of truck parts, its largest and most profitable single business.
Sales of medium and heavy-duty trucks continue to lag previous-year rates, leading Eaton to expect fourth-quarter net income to fall below year-earlier levels, said Stephen R. Hardis, vice chairman and chief financial and administrative officer.
He declined to make a specific earnings estimate.
Third-quarter net was $40 million, or $1.04 a share, from $54.4 million, or $1.47 a share, a year ago.
Sales rose 2.8% to $864.1 million, from $840.4 million.
The quarter net was below analyst expectations mainly because truck-parts sales didn't rebound in September from the summer doldrums as they usually do, said Patrick E. Sheridan, analyst with McDonald & Co.
Mr. Sheridan, who had been expecting quarter profit of about $1.25 a share, says he is reducing his estimate for the year to the area of $5.70 a share, from his previous estimate of $6.10.
Eli Lustgarten of PaineWebber Inc., who a couple of weeks ago reduced his 1989 estimate to $5.70 a share because of the weakening truck market, says he will make another cut to about $5.50 a share in light of the third-quarter report.
He said Eaton's quarter profit margin on controls was lower than he anticipated.
Eaton said sales of truck axles, transmissions and other parts fell 7.2% to $295 million.
Sales of parts for cars and construction vehicles rose.
Eaton doesn't provide profit figures separately for each category, but operating profit for vehicle parts as a group fell 26% to $51 million on an about 1% drop in sales to $488 million.
Mr. Hardis said truck-fleet operators appear to be cautious about buying new trucks until they see how the economy behaves.
The truck sales slowdown reflects the general slowing in sales of consumer goods, he said, and the latest reports show a slight improvement rather than any indication of a downward spiral.
Operating profit from electrical and electronics controls, Eaton's other major business group, fell 11% to $32 million, despite a 7.7% increase in sales to $376 million.
The company attributed the decline to weakness in the commercial-switch market in North America and in the European appliance-controls market.
For the nine months, net -- including profit from discontinued operations both years and in 1988 an extraordinary charge of $17.7 million related to settlement of a lawsuit -- was $170.6 million, or $4.54 a share, up 5.8% from $161.3 million, or $4.32 a share, a year ago.
Eaton earned from continuing operations $165.1 million, or $4.40 a share, down 7% from $177.5 million, or $4.76 a share, a year earlier.
Nine-month sales were $2.79 billion, up 8.2% from $2.58 billion a year earlier.
In New York Stock Exchange composite trading, Eaton closed at $57.50 a share, down $2.50.
In Poland's rapid shift from socialism to an undefined alternative, environmental issues have become a cutting edge of broader movements to restructure the economy, cut cumbersome bureaucracies, and democratize local politics.
Initial steps were taken at Poland's first international environmental conference, which I attended last month.
The conference, held in Lower Silesia, was co-sponsored by the Environment Ministry, the Rockefeller Brothers Fund, and the Polish Ecological Club, and was attended by 50 Poles from government and industry, as well as Hungarians, Czechs, Russians, Japanese and Americans.
The conference was entitled "Economic Mechanisms for Environmental Protection," a significant departure from East Bloc usage, which recognizes only one economic mechanism -- central planning -- to direct industrial behavior.
Even more remarkably, it focused on emissions trading and similar market approaches to address pollution, notwithstanding Poland's lack of functioning markets.
Why did East Bloc participants unanimously endorse market-based pollution approaches?
The answer lies both in the degraded environment of these countries and the perceived causes of that degradation.
Like other East Bloc countries, Poland possesses environmental laws more honored in their breach than in their observance.
According to a detailed report by Zbigniew Bochniarz of the University of Minnesota's Hubert Humphrey Institute, 27 areas containing a third of Poland's population are regarded as "ecological hazards" due to multiple violations of standards.
Norms are consistently exceeded at 60% of nitrogen oxide monitoring sites and 80% of those for dust and soot emissions.
Four-fifths of Poland's soils have become highly acidified; 70% of its southern forests are projected to die by century's end.
Between 1965 and 1985, Polish waters fit for human consumption dropped from 33% to 6% of all surface waters, while those unfit even for industry use nearly doubled.
Poland produces about 20 times more soot and five times more sulfur dioxide and solid waste per unit of gross national product than does Western Europe.
Its mortality rate for males over 35 is about 50% higher than West Germany's, and 50% higher in hazard areas than the national average.
Since 1978, average annual growth rates for most pollutants have outstripped the growth of GNP.
Conference participants saw these effects as flowing directly from (a) Marxist devaluation of environmental resources, which are not produced by labor; (b) planned economies' inability to control pollution where enterprises are state-owned and penalties are paid by the government; and (c) the continuing Stalinist emphasis on heavy industry for economic development, producing a far heavier and more wasteful use of energy and natural resources than in the West.
They repeatedly noted that environmental progress could not be secured without true ownership, genuine competition based on market factors, and the risk of bankruptcy if a business makes the wrong decisions.
The solutions they formally proposed included lead/sulfur taxes, conservation and recycling incentives, reforestation offsets, transferable pollution permits, an ecological bank to finance pollution-reduction credits, and debt-for-environment swaps.
But their most fundamental recommendation was to separate industry from the state, making it fully accountable for pollution control.
A revolution takes more than conference manifestos.
Indeed, skepticism was amply captured by a joke told by Poles at the conference: "The world must be coming to an end.
The Russians are talking peace.
The Palestinians are talking elections.
And the Poles are engaged in commerce."
But the implications of such a shift to market approaches go well beyond the fact that Poland is already working on nationwide emissions trades to reduce smelter pollution, or that the Soviets plan to introduce marketable pollution permits in some republics next year.
Those implications include: -- Privatization.
Faced with a $40 billion foreign debt and skyrocketing inflation, Poland must privatize industry and eliminate subsidies to stabilize its currency and qualify for international assistance.
Market-based pollution control may consume some capital that would otherwise purchase state industries.
But it could also accelerate "marketization" by reinforcing industrial accountability, breaking up state monopolies, giving managers a stake in solutions, and ensuring that modernization is not reversible for failure to address environmental effects.
-- Least-cost solutions.
As conferees noted, scarce capital means the costs of control must be minimized through a broad menu of compliance choices for individual firms.
That means simple, clear rules that secure the first large blocks of reduction, deferring more complex issues such as risk.
It also means use of quantity-based pollution limits such as transferable permits, rather than price-based limits such as effluent fees.
That's because quota-trained managers will likely respond better to quantity than to price signals.
-- Creative financing.
Even least-cost environmental solutions will require billions of dollars.
New types of financing must make funds available without draining Poland's hard-currency reserves.
-- Democratization.
East Bloc pollution data typically have been state secrets.
While Polish data have been freely available since 1980, it was no accident that participants urged the free flow of information.
For once information flows, public participation follows and repression becomes difficult to reimpose.
-- Global reciprocity.
One participant prematurely declared that America has had a free market in goods but a planned economy for environmental protection, while Poland represents the opposite.
His point: It will be increasingly difficult for the U.S. to cling to command-and-control measures if even the East Bloc steps to a different drummer.
At the moment, Poland resembles 19th-century Pittsburgh more than a modern industrial society -- with antiquated production, inadequate environmental management, and little ecological awareness.
But the continuing pressures for free-market economics suggest the conference's vision was not all fantasy.
Mr. Levin, former head of EPA's regulatory reform staff, adapted this from his November column for the Journal of the Air and Waste Management Association.
Disappointing earnings news from some technology companies unnerved investors in the over-the-counter market, who sold shares of Apple Computer, Intel and many other computer-related concerns.
The drop in those and other technology stocks contributed to an 0.7% slide by the Nasdaq composite index.
It finished at 467.22, down 3.45.
The nervousness about the technology stock outlook also hurt the Dow Jones Industrial Average, which slipped about 1%.
Mostly because of the sell-off in technology stocks, the Nasdaq 100 Index of the OTC's largest non-financial issues dropped 4.58 to 457.52.
The Nasdaq Financial Index of giant insurance and banking issues lost 2.38 to 458.32.
Some traders said the sell-off of technology stocks on low volume reflected a lack of conviction by investors.
But Charlie Howley, vice president in charge of OTC trading at SoundView Financial in Stamford, Conn., said the selling was orderly.
"It's a quiet retreat," said Mr. Howley.
"It's nothing dramatic, just a routine sell-off."
Some of it was due to lower-than-expected earnings from leading companies, he said.
But some of it also represented profit-taking by investors who have made big gains in some issues.
Yesterday's volume of 117.2 million shares was far below last week's sizzling average of nearly 177 million.
For October so far, daily volume is averaging 150.3 million, putting it on track to be the year's busiest month.
Apple Computer, which reported lackluster earnings Friday, lost 1 1/4 to 46 3/4 on 1.1 million shares.
Stratus Computer, which reported earnings late Friday that were in line with a disappointing forecast, eased 3/4 to 24 on 816,000 shares.
Investors apparently didn't like the news from Rainbow Technologies either.
It said net income was 17 cents a share in the third quarter, compared with 16 cents a share a year earlier.
Rainbow's stock dropped 2 to 14 1/4.
Other technology stocks that were weaker included Intel, which fell 1 1/4 to 33 1/2 on 1.9 million shares, Mentor Graphics, down 3/4 to 16 1/4 on 1.6 million shares, Sun Microsystems, which slipped 3/8 to 18 1/4, and MCI Communications, down 1 to 42 3/4.
Microsoft, which last week rose to a record, fell victim to profit-taking, traders said, as it declined 2 1/8 to 83 1/8.
Conner Peripherals was unchanged at 15.
Among takeover stocks, Jefferson Smurfit jumped 1 1/4 to 42 1/2 after SIBV-MS Holdings said the price to be paid to Jefferson Smurfit's minority holders has been raised to $43 a share.
The increase of $1.25 a share is being made to settle shareholder litigation relating to SIBV-MS's tender offer.
SIBV-MS Holdings is a new company jointly owned by an affiliate of Jefferson Smurfit and a Morgan Stanley limited partnership.
The Jefferson Smurfit affiliate, Smurfit International B.V., holds about 78% of the shares outstanding.
These shares will be bought by SIBV-MS Holdings at $41.75 each after the acquisition of the minority shares.
Another takeover target, LIN Broadcasting, eased 1/2 to 110 1/8 on 313,800 shares.
LIN's suitor, McCaw Cellular Communications, dropped 1 to 40 on almost 350,000 shares.
Some analysts say investors will begin paying more attention to earnings, partly in response to the latest round of disappointments.
They say investors will favor companies that historically have posted annual earnings growth of 15% to 20%.
That would be good news for the OTC market, some analysts say, because many small growth stocks are traded there.
Michael R. Weisberg, partner in charge of research at Robertson Stephens & Co. in San Francisco, said some investors have already made the switch.
The Robertson Stephens Index of 340 emerging growth stocks is up 23.1% for the year through Friday.
The rise matches that of the Dow Jones industrials this year.
"It's been a spectacular year for the emerging growth stock investor," Mr. Weisberg said.
He predicted that the most popular growth companies will be those with "some kind of unique product or franchise" that makes them appear able to sustain their momentum.
He puts the OTC market's Nellcor, Office Club and BizMart on the list.
Nellcor, a maker of electronic patient monitoring systems, was up 3/4 to 16 7/8 on 258,000 shares yesterday, while retailing issue Office Club was unchanged at 10 3/4 on 65,200 shares.
BizMart, another retailing stock, was off 3/8 to 8 1/4 on nearly 80,000 shares.
Other favorites of growth-stock analysts and money managers also had a mixed session.
Payco American, a credit collection concern, jumped 1 3/8 to 20 5/8 on volume of 93,000, and Mail Boxes Etc., a private postal services company, advanced 1/2 to 23 1/2 on volume of 64,000.
But Legent, a systems software stock, was down 1/2 to 29 3/4 on 39,300 shares.
Novell, a computer networking concern, fell 1 1/2 to 30 on 152,000 shares.
Elsewhere, Valley National continued its slide, dropping 2 1/8 to 15 on 1.7 million shares.
The Arizona banking concern is facing difficulties related to weakness in the real estate market in the state.
Higher earnings helped some issues.
Amgen rose 2 1/4 to 54 3/4 on almost 800,000 shares, and CVB Financial jumped 4 to 41 on only 1,000 shares.
Why can't we teach our children to read, write and reckon?
It's not that we don't know how to, because we do.
It's that we don't want to.
And the reason we don't want to is that effective education would require us to relinquish some cherished metaphysical beliefs about human nature in general and the human nature of young people in particular, as well as to violate some cherished vested interests.
These beliefs so dominate our educational establishment, our media, our politicians, and even our parents that it seems almost blasphemous to challenge them.
Here is an example.
If I were to ask a sample of American parents, "Do you wish the elementary schools to encourage creativity in your children?" the near-unanimous answer would be, "Yes, of course."
But what do we mean, specifically, by "creativity"?
No one can say.
In practice, it ends up being equated with a "self-expression" that encourages the youngsters' "self-esteem."
The result is a generation of young people whose ignorance and intellectual incompetence is matched only by their good opinion of themselves.
The whole notion of "creativity" in education was (and is) part and parcel of a romantic rebellion against disciplined instruction, which was (and is) regarded as "authoritarian," a repression and frustration of the latent talents and the wonderful, if as yet undefined, potentialities inherent in the souls of all our children.
It is not surprising that parents find this romantic extravagance so attractive.
Fortunately, these same parents do want their children to get a decent education as traditionally understood, and they have enough common sense to know what that demands.
Their commitment to "creativity" cannot survive adolescent illiteracy.
American education's future will be determined by the degree to which we -- all of us -- allow this common sense to prevail over the illusions that we also share.
The education establishment will fight against common sense every inch of the way.
The reasons are complex, but one simple reason ought not to be underestimated.
"Progressive education" (as it was once called) is far more interesting and agreeable to teachers than is disciplined instruction.
It is nice for teachers to think they are engaged in "personality development" and even nicer to minimize those irksome tests with often disappointing results.
It also provides teachers with a superior self-definition as a "profession," since they will have passed courses in educational psychology and educational philosophy.
I myself took such courses in college, thinking I might end up a schoolteacher.
They could all fairly be described as "pap" courses.
But it is unfair to dump on teachers, as distinct from the educational establishment.
I know many schoolteachers and, on the whole, they are seriously committed to conscientious teaching.
They may not be among the "best and brightest" of their generation -- there are very few such people, by definition.
But they need not be to do their jobs well.
Yes, we all can remember one or two truly inspiring teachers from our school days.
But our education proceeded at the hands of those others, who were merely competent and conscientious.
In this sense, a teacher can be compared to one's family doctor.
If he were brilliant, he probably would not be a family doctor in the first place.
If he is competent and conscientious, he serves us well.
Our teachers are not an important factor in our educational crisis.
Whether they are or are not underpaid is a problem of equity; it is not an educational problem.
It is silly libel on our teachers to think they would educate our children better if only they got a few thousand dollars a year more.
It is the kind of libel the teachers' unions don't mind spreading, for their own narrow purposes.
It is also the kind of libel politicians find useful, since it helps them strike a friendly posture on behalf of an important constituency.
But there is not one shred of evidence that, other things being equal, salary differentials result in educational differentials.
If there were such evidence, you can be sure you would have heard of it.
If we wish to be serious about American education, we know exactly what to do -- and, just as important, what not to do.
There are many successful schools scattered throughout this nation, some of them in the poorest of ghettos, and they are all sending us the same message.
Conversely, there are the majority of unsuccessful schools, and we know which efforts at educational reform are doomed beforehand.
We really do know all we need to know, if only we could assimilate this knowledge into our thinking.
In this respect, it would be helpful if our political leaders were mute, rather than eloquently "concerned."
They are inevitably inclined to echo the conventional pap, since this is the least controversial option that is open to them.
Thus at the recent governors' conference on education, Gov. Bill Clinton of Arkansas announced that "this country needs a comprehensive child-development policy for children under five."
A comprehensive development policy for governors over 30 would seem to be a more pressing need.
What Gov. Clinton is advocating, in effect, is extending the educational system down to the pre-kindergarten years.
Whether desirable or not, this is a child-care program, not an educational program.
We know that very early exposure to schooling improves performance in the first grade, but afterward the difference is quickly washed away.
Let us sum up what we do know about education and about those education reforms that do work and don't work: -- "Parental involvement" is a bad idea.
Parents are too likely to blame schools for the educational limitations of their children.
Parents should be involved with their children's education at home, not in school.
They should see to it that their kids don't play truant; they should make certain that the children spend enough time doing homework; they should scrutinize the report card.
If parents are dissatisfied with a school, they should have the option of switching to another.
-- "Community involvement" is an even worse idea.
Here, the experience of New York City is decisive.
Locally elected school boards, especially in our larger cities, become the prey of ambitious, generally corrupt, and invariably demagogic local politicians or would-be politicians.
New York is in the process of trying to disengage itself from a 20-year-old commitment to this system of school governance, even as Chicago and other cities are moving to institute it.
-- In most states, increasing expenditures on education, in our current circumstances, will probably make things worse, not better.
The reason is simple: Education takes place in the classroom, where the influence of money is minimal.
Decades of educational research tell us unequivocally that even smaller classes have zero effect on the academic performance of the pupils -- though they may sometimes be desirable for other reasons.
The new money flows into the already top-heavy administrative structure, which busies itself piling more and more paper work on the teachers.
There is neither mystery nor paradox in the fact that as educational expenditures (in real terms) have increased sharply in the past quarter-of-a-century -- we now spend more per pupil than any other country in the world -- educational performance has declined.
That is the way the system works.
-- Students should move up the educational ladder as their academic potential allows.
No student should be permitted to be graduated from elementary school without having mastered the 3 R's at the level that prevailed 20 years ago.
This means "tracking," whose main purpose is less to permit the gifted youngsters to flourish (though that is clearly desirable) than to ensure that the less gifted get the necessary grounding for further study or for entering the modern world of work.
The notion that tracking is somehow "undemocratic" is absurd.
The purpose of education is to encourage young men and women to realize their full academic potential.
No one in his right mind actually believes that we all have an equal academic potential.
-- It is generally desirable to use older textbooks -- many of them, alas, out of print -- rather than newer ones.
The latter are modish, trendy, often downright silly, and at best insubstantial.
They are based on dubious psychological and sociological theories rather than on educational experience.
One of the reasons American students do so poorly in math tests, as compared with British, French, German or Japanese students, is the influence of the "New Math" on American textbooks and teaching methods.
Anyone who wants to appreciate just how bizarre this situation is -- with students who can't add or subtract "learning" the conceptual basis of mathematical theory -- should read the article by Caleb Nelson (himself a recent math major at Harvard) in the November American Spectator.
-- Most important of all, schools should have principals with a large measure of authority over the faculty, the curriculum, and all matters of student discipline.
Study after study -- the most recent from the Brookings Institution -- tells us that the best schools are those that are free of outside interference and are governed by a powerful head.
With that authority, of course, goes an unambiguous accountability.
Schools that are structured in this way produce students with higher morale and superior academic performance.
This is a fact -- though, in view of all the feathers that are ruffled by this fact, it is not surprising that one hears so little about it.
Mr. Kristol, an American Enterprise Institute fellow, co-edits The Public Interest and publishes The National Interest.
International Business Machines Corp. unveiled a broad strategy to tackle the biggest problem that manufacturers face when computerizing their operations: Most machines can't talk to each other.
The company unveiled more than 50 products, mostly software, that are designed to integrate the three areas of a manufacturing operation -- the plant floor, design operations and production planning.
The aim, ultimately, is to increase the flow of information into a manufacturer's main computer network for use in business planning, marketing and other operations.
Manufacturers have already spent so heavily on automation that they are one of the computer industry's leading revenue sources.
But many manufacturers find that communication between different computers has been rendered nearly impossible by the babel of computer languages used by different machines, including robots and machine tools.
IBM's announcement, which was expected and will formally be made to customers today, also marks an attempt to gain credibility on the plant floor, where Digital Equipment Corp. has long dominated and where Hewlett-Packard Co. has recently gained market share.
Consultants have said that it will take a while for all the pieces of the IBM strategy to fall into place, even though the specific products IBM unveiled will generally be available by the end of the first quarter.
Sam Albert, a consultant in Scarsdale, N.Y., said that in the past IBM has developed broad software strategies only for problems that crossed industry lines.
He said he believes IBM's decision to invest this sort of effort into a single industry showed that it was getting serious about understanding customers' problems and wasn't just selling technology.
He said he expects IBM to unveil similar strategies for other industries in coming months.
IBM's push is also unusual in its approach to marketing.
Rather than just send out marketing people to knock on customers' doors, IBM is making several hundred of its own manufacturing people available to discuss specific needs.
IBM's manufacturing staff also will be able to provide software that IBM has developed internally and will be able to form teams with a customer to jointly solve manufacturing problems.
IBM can obviously bring its expertise to bear on problems related to computer manufacturing, but it could also help customers on software to deal with such things as changes in engineering documents.
"We may not have every manufacturing problem, but we have most," said George Conrades, IBM's top marketing official.
Japan's Big Four securities firms posted first-half unconsolidated results that mirrored softer performance as a result of slower turnover on the Tokyo Stock Exchange during July and August.
Figures for the period ended Sept. 30 for the four largest brokerage firms -- Nomura Securities Co., Daiwa Securities Co., Yamaichi Securities Co. and Nikko Securities -- also reflected a changeover to a fiscal year ending March 31, replacing the 12-month term formerly finishing Sept. 30.
As a result, brokerage house officials said, appropriate comparisons from the same period a year earlier were unavailable.
Operating profit, pretax profit and net income results, however, were provided for the immediately preceding six-month period.
The statistics follow a year-on-year rebound in consolidated and unconsolidated results in the full fiscal year ended in March 1989, recovering from dismal results in the prior fiscal year as a result of the October 1987 stock market crash.
Nomura said its pretax profits inched up 0.9% to 248.91 billion yen (US$1.75 billion) from 246.60 billion yen in the six months ended March 31.
Total operating profit fell 3.1% to 486.1 billion yen from 501.61 billion yen.
Net income, however, rose 3.7% to 107.87 billion yen from 103.98 billion yen.
Per-share net rose to 55.10 yen from 54.51 yen.
Daiwa said its pretax profits surged 9.6% to 171.04 billion yen from 156.12 billion yen in the preceding six-month term.
Operating profit rose 5.5% to 332.38 billion yen from 315.12 billion yen.
Net income jumped 21% to 79.03 billion yen from 65.53 billion yen.
Per-share net rose to 62.04 yen from 51.50 yen.
Yamaichi said its pretax profit increased 8.9% to 117.94 billion yen from 108.28 billion yen.
Operating profit rose 5.3% to 279.75 billion yen from 265.79 billion yen.
Net income surged 21% to 55.59 billion yen from 46.02 billion yen.
Per-share net rose to 47.46 yen from 39.31 yen.
Nikko's pretax profit rose 1.6% to 130.25 billion yen from 128.19 billion yen.
Operating profit rose 4% to 293.29 billion yen from 282.08 billion yen.
Net income rose 23% to 63.52 billion yen from 51.65 billion yen.
Per-share net rose to 44.08 yen from 36.13 yen.
Harken Energy Corp. of Dallas said it will drop its $11.75-a-share, or $190 million, offer for Tesoro Petroleum Corp. if the two companies don't have an agreement to merge by Dec. 15.
Harken, which made its offer in August, said it still is awaiting a response to its offer from Tesoro's board.
Harken also said that its financing from Bankers Trust Co. has been extended until Dec. 15 to give Tesoro's board time to consider the offer at a Tesoro board meeting scheduled for mid-November.
Harken, which owns about 800 retail gas stations, has said it is particularly interested in Tesoro's refinery because it would fill a gap in its business.
However, Tesoro, based in Houston, already has rejected a suitor in the past year.
Francis D. John, 35-year-old president, will assume the additional job of chief executive officer.
He succeeds Paul J. Montle, 42, who will remain chairman.
National Environmental also said it will move its headquarters from Hingham to Folcroft, Pa., the site of its sludge dewatering facility.
National Environmental, formerly Yankee Cos., is a sludge treatment company.
Eagle Clothes Inc., which is operating under Chapter 11 of the federal Bankruptcy Code, said it reached an agreement with its creditors.
Under the accord, Albert Roth, chairman and chief executive officer, and Arthur Chase, Sam Beigel, and Louis Polsky will resign as officers and directors of the menswear retailer.
Mr. Roth, who has been on leave from his posts, will be succeeded by Geoffrie D. Lurie of GDL Management Inc., which is Eagle's crisis manager.
Mr. Lurie is currently co-chief executive.
Arnold Levine, acting co-chief executive, will continue as senior vice president and a board member.
Eagle also said it received a commitment for as much as $8 million in financing from Norfolk Capital Group Inc.
In addition, a Norfolk affiliate, York Capital Inc., will purchase all of the interests of Eagle's secured lenders, which total $11.5 million, and guarantee as much as $8.2 million in payments to Eagle's unsecured creditors.
A committee representing the unsecured creditors agreed to accept 24 cents on the dollar, Eagle said.
The plan would extend the period under which Eagle has the exclusive right to file a reorganization plan.
It would extinguish all of Eagle's existing capital stock and issue new stock to York as sole holder.
A bankruptcy court hearing is set for Nov. 3 on these accords.
In its bankruptcy-law petition, filed in U.S. Bankruptcy Court in Manhattan, Eagle said its problems began in 1987 and early 1988 when its then-senior lender, Bankers Trust Co., reduced its credit line.
In September 1988, Eagle acquired Biny Clothing Inc., a closely held New York chain operated under the Bonds name.
Eagle's management retired and Biny's management took control of the company.
At the time, Eagle reached a new credit agreement with Bankers Trust and with Bank Leumi Trust Co. of New York for $8 million, and a new subordinated debt accord with First Century Partners and Biny management for $2 million.
But Eagle said the financing was insufficient and sales during the past fiscal year sagged.
Under Chapter 11, a company operates under protection from creditors' lawsuits while it works out a plan to pay debts.
Standard & Poor's Corp. said it would add John H. Harland Co., an Atlanta check printer, to its 500-stock index, effective at the close of trading on Wednesday.
American Medical International Inc., a New York hospital operator, will be deleted from the index at that time.
American Medical is being acquired.
The tougher new regulations under the savings-and-loan bailout law are accelerating the thrift industry's shrinking act.
Largely to meet tougher new capital requirements, thrifts reduced their assets $13.4 billion in August, by selling such assets as mortgage-backed securities and loans.
Industry assets as of Aug. 31 were $1.31 trillion, the lowest since August 1988.
As thrifts sell assets to improve their capital-to-asset ratio, as required under the new law passed in August, they must also reduce liabilities, such as deposits.
As interest rates paid depositors were lowered, thrift withdrawals exceeded deposits by $5.1 billion, not including interest credited to accounts.
It was the third consecutive month in which thrifts shed assets to increase the size of their capital in relation to their assets, the Office of Thrift Supervision said.
The asset shrinkage was particularly concentrated in several large California institutions.
"The downsizing of the thrift industry is well under way," said Bert Ely, an industry consultant in Alexandria, Va.
"This suggests the bailout law is having a more dramatic effect than anyone would have imagined so soon."
James Barth, an economist with the Office of Thrift Supervision, also attributed some of the outflow to seasonal factors.
"August is a month when people are paying school tuition," he said.
"That and adjustment to the new law were the biggest factors in the industry."
Not including thrifts under government conservatorship, S&Ls reduced their assets by $10.1 billion from the previous month, and deposit outflows totaled $3.9 billion.
For the 264 insolvent thrifts under government management at the end of August, assets declined by $3.3 billion and withdrawals exceeded deposits by $1.2 billion.
Thrifts raised capital mostly by selling mortgages and mortgage-backed securities, which were reduced by $7.8 billion in August from the prior month.
As of Aug. 31, thrifts held $185 billion in mortgage-backed securities.
The deposit numbers for August marked a swing back to huge outflows after a July net deposit inflow of $54 million -- the only net inflow in more than a year.
Deposits aren't expected to exceed withdrawals in the foreseeable future, as the industry continues to shrink.
"I think we are going to see deposit shrinkage continue, unless we see big changes in rates," Mr. Ely said.
For the first eight months of 1989, thrifts' withdrawals exceeded deposits by $44.5 billion.
For the prior year, deposits exceeded withdrawals by $8.8 billion.
The estimates of real gross national product prepared by the Bureau of Economic Analysis in the Department of Commerce significantly understate the rate of economic growth.
Since the bureau's estimates for the business sector provide the numerator for the productivity ratios calculated by the Department of Labor, underestimated growth rates artificially depress official productivity statistics.
If this thesis is correct, it has important implications for macroeconomic policies: It may lower the sense of urgency behind efforts to enact tax incentives and other measures to increase the rate of growth in productivity and real GNP.
It would also affect the perceptions of the board of governors of the Federal Reserve System, and the informed public generally, as to what constitutes a reasonable degree of price stability.
In the early 1980s, I predicted a significant acceleration in productivity growth over the rest of the decade.
This forecast was based on the apparent reversal of most of the negative forces -- such as demographic changes, the oil shock and accelerating inflation -- that had reduced productivity gains in the 1970s.
There has indeed been more than a one percentage point improvement in productivity growth since 1981.
But I had expected more, which is one reason I began looking at evidence suggesting defects in the official output estimates.
The evidence does not clearly support the view that the downward bias in output growth has become greater during the 1948-89 period, but all I am claiming is that the growth trend is understated.
(It is, however, possible, that further study will reveal increasing bias.)
This bias is in no way deliberate.
The understatement of growth is due largely to the conservative expedients adopted to deal with deficiencies in basic economic data.
The first of three major sources of error is the use of labor input estimates (mainly employment or hours) instead of output estimates for those sectors, such as governments, paid household services and private non-profit institutions, where there are difficulties in assembling output data.
This means that no allowance is made for possible increases in output per unit of labor.
In an unrelated program in which the Labor Department does estimate output per employee for more than two-thirds of federal civilian employees, it found an average annual rate of productivity improvement of 1.7% during the 1980s.
Even if it is assumed that productivity rose no more than half as quickly in the rest of the nonbusiness sector, this Labor Department estimate indicates a downward bias in the real GNP estimates of 0.2 percentage point a year, on average.
The federal productivity estimators use labor input, rather than output, data for their calculations of half of private financial and service industries as well.
Independent estimates of output in those industries, including one by the Department of Labor for banking, suggests that productivity in finance and services appears to have risen by an average of at least 1.5% a year between 1948 and 1988.
Because finance and services contribute 10% to final business product, missing these productivity improvements depresses the overall growth rate by 0.15% a year.
The second source of error in growth statistics is the use of inappropriate deflators to adjust for price changes.
I estimate that these mismeasurements as detailed by Martin N. Baily and Robert J. Gordon add a further 0.12 percentage point to the downward bias in the growth rate of real business product.
Finally, the official estimates understate growth because they make inadequate allowance for improvements in quality of goods and services.
In 1985, a new price index for computers adjusted for changes in performance characteristics was introduced, and that resulted in a significantly larger increase in real outlays for durable goods than the earlier estimates had showed.
Since then, further research argues that failure to take account of quality improvements has contributed a total of at least 0.26 percentage point to the downward bias in the growth rate.
In sum, the biases ennumerated above indicate a 0.7 percentage point understatement in growth of total real GNP.
For the private domestic business economy, the bias was a bit over 0.5 percentage point.
In other words, the growth rates of both total GNP and real private business product per labor hour have been underestimated by about 20%.
Mr. Kendrick is professor emeritus of economics at George Washington University.
He is co-author of "Personal Productivity: How to Increase Your Satisfaction in Living" (M.E. Sharp, 1988).
Union Carbide Corp. said third-quarter net income plunged 35% from a year earlier on weakness in the company's mainstay chemicals and plastics business.
Net was $139 million, or 98 cents a share, for the quarter, compared with $213 million, or $1.56 a share, a year ago.
Sales were $2.14 billion, up 1.6% from $2.11 billion the previous year.
Carbide, like other companies with a heavy reliance on the so-called commodity end of the chemicals industry, was expected to post earnings sharply lower than in an exceptionally strong 1988 third quarter.
But the company's latest quarter was a few pennies a share lower than the more pessimistic projections on Wall Street.
"It certainly wasn't a disaster, but it does show weakness" in some of the company's chief markets, said George Krug, a chemicals-industry analyst at Oppenheimer & Co.
In New York Stock Exchange composite trading, Carbide closed at $24.50 a share, down 50 cents.
Prices for polyethylene, a common plastic and an important Carbide product, started to fall early this year; the slide accelerated in the third quarter as buyers continued to trim inventories.
Prices also fell for ethylene oxide and glycols, products used in making antifreeze.
Some producers of polyethylene, figuring the inventory reductions are near an end, have announced price boosts.
The first real test of whether prices have hit bottom may come in the next several weeks, when the new prices become effective.
A Carbide spokesman said "the conditions are right for the increase to hold."
For the third quarter, operating profit from Carbide's chemicals and plastics business fell to $238 million from $352 million a year ago, before accounting for taxes and interest expense.
Operating profit from carbon products, such as graphite electrodes, also declined, to $6 million from $20 million.
In the industrial-gases segment, operating profit climbed to $87 million from $58 million.
The latest quarter included a gain of about $62 million on the sale of the company's urethane polyols and propylene glycols businesses.
Propylene glycols are used in making personal-care products such as shampoo, and urethane polyols are used in making the polyurethane foam found in furniture cushioning and other products.
That gain was mostly offset by a loss of about $55 million from a write-down in its polysilicon business.
Polysilicon is used in making integrated circuits.
For the nine months, net totaled $526 million, or $3.74 a share, up 5% from $501 million, or $3.71 a share, a year ago.
Sales rose 7.7% to $6.66 billion from $6.19 billion.
At least 10 states are resisting Drexel Burnham Lambert Inc.'s nationwide effort to settle its legal troubles, and some might instead try to revoke the firm's license to sell securities within their borders.
The reluctance of some states to let Drexel off the hook could hamper the firm's attempts to polish its image after its guilty plea to six felonies last month, say several people familiar with the discussions.
Up to now, Drexel has made a rapid-fire series of settlements with 25 states and the commonwealth of Puerto Rico.
Just yesterday, New Hampshire announced it made a $75,000 settlement with Drexel, a record-tying fine for a securities-law matter in that state.
These states have been entering into settlements with Drexel as part of the firm's efforts to operate freely anywhere in the U.S. despite its record as an admitted felon.
But individuals familiar with the generally successful Drexel talks say the firm is meeting resistance from some big states, including New Jersey, New York, California, Pennsylvania, Connecticut and Missouri.
Officials in some of these states say they don't want to simply accept the settlements offered by Drexel.
They question if Drexel is getting easier treatment than the many small penny-stock firms whose brokerage licenses are routinely revoked.
Drexel has to settle with state securities regulators in the wake of its criminal guilty plea and a related civil settlement with the Securities and Exchange Commission that includes payment of $650 million in penalties.
These stem from a two-year federal investigation of insider trading and securities fraud on Wall Street.
Ohio, the District of Columbia, Tennessee and Illinois have been less resistant to Drexel than the other six states, but nonetheless have refused to settle so far, say those familiar with the discussions.
Drexel says it doesn't expect any of its state brokerage licenses will be revoked, and even if some are, its securities business wouldn't be directly hurt.
It already has sold its retail, or individual-investor, brokerage network; securities firms don't need brokerage licenses for non-retail activities such as investment banking.
Still, if nothing else, a revoked brokerage license could be a burden because it must be disclosed in many of the transactions in which Drexel could be involved.
Securities regulators praise Drexel for its energetic effort, led by government-approved general counsel Saul S. Cohen, to settle its legal problems with the states.
But they disagree about the message these settlements give to the public.
"There was a lot of internal debate about that specific issue," said Susan Bryant, Oklahoma's chief securities regulator and president of the North American Securities Administrators Association, which drafted a voluntary settlement plan for the states with Drexel.
The question, she said, is whether Drexel should be allowed to pay and move on, or "whether you should (simply) revoke the license when someone is convicted of a felony."
While Ms. Bryant's state went ahead and accepted Drexel's settlement offer of $25,000, she said: "I don't have any argument with those who came to different conclusions.
I can see both sides."
Similarly, Alfred Rubega, New Hampshire's director of securities regulation, said his state hadn't received any complaints about Drexel, so it really couldn't press the issue.
Still, "I understand the reasons" that other states are holding out, he said.
Mr. Cohen, the Drexel general counsel, said, "I don't think, as we say in investment banking, that `by the end of the day' we'll be losing any licenses."
Asked about states that are taking a hard line, he said, "There are states that have asked for additional information, which we are providing to them."
Mr. Cohen said more than $2.8 million has been paid to 26 states and that Drexel still expects to pay out a total of $11.5 million.
By the end of this week, Drexel should have another three to four settlements, Mr. Cohen said.
"The rate we're going, I think that by the end of the month, we're looking to have a total of 30 to 35," he said.
That total would be important for Drexel.
The investment bank has previously announced that as part of its punishment it would create an independent foundation to promote ethical behavior in the securities industry.
A proviso to that promise is that a minimum of 35 states reach settlement agreements before next Tuesday.
There are, according to several securities commissioners, at least 16 states that are either close to settlements with Drexel or who don't appear opposed to settling.
Drexel's proposed state fines have been based on a state's population and on the size of Drexel's business in the state.
New Jersey, for example, was asked to accept $300,000, but refused.
The state isn't ruling out revoking Drexel's brokerage license.
The state can also bar Drexel as an investment adviser.
State officials won't describe their position in detail, but James McLelland Smith, state securities chief, said: "We really are still looking at it and have informed (Drexel) that the proposal is really not sufficient for settlement."
Connecticut already has issued a "notice of intent" to revoke Drexel's brokerage license.
It is one of the states that have met with Mr. Cohen and asked for additional information about investors' accounts and other matters.
"This particular issue goes to the very integrity of the capital-formation market," state Banking Commissioner Howard Brown said.
A banking department spokesman added: "Commissioner Brown doesn't feel that money alone is the issue here."
Particularly touchy are the cases of New York, which is Drexel's base, and California, the base of Drexel's highly profitable junk-bond operation that led to the firm's legal difficulties.
Neither state has settled, and officials in the two states won't discuss their reasons for not doing so.
But Drexel has made it clear it could mount a significant legal battle in each state if its license is revoked, according to state officials.
Ms. Bryant, the head of the state securities group, said Drexel has done a better job of settling with the states than E.F. Hutton did after its guilty plea to a massive check-kiting scheme several years ago.
Still, she said, Drexel's trouble with some states isn't a bad thing.
"This process should point out that it's not going to be easy for a firm that's convicted of a felony to immediately jump back into the retail business," Ms. Bryant said.
"We need to have somebody worried so they don't do this again."
These are the 26 states, including the commonwealth of Puerto Rico, that have settled with Drexel: Alaska, Arkansas, Delaware, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Minnesota, Mississippi, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Utah, Vermont, Washington, Wyoming and Puerto Rico.
Time Warner Inc. reported a third-quarter net loss of $176 million, or $2.88 cents a share, reflecting acquisition costs for a 59.3% stake in Warner Communications Inc. and the purchase method of accounting for the transaction.
Separately, Warner reported a net loss of $106 million, or 56 cents a share, including merger expenses of $100 million and $120 million in charges associated with stock-appreciation-based compensation plans.
Time Warner is in the process of completing its acquisition of the remaining Warner shares.
Time Warner emphasized in a news release that it should be evaluated based on its cash flow, which the company defined as earnings before interest, taxes, depreciation and amortization.
On a pro-forma basis, assuming the merger was effective Jan 1, 1988, including the results from both Time Inc. and all of Warner, that cash flow figure would be $526 million for the latest quarter, more than double the comparable figure a year ago, or $242 million, according to Time Warner.
Some analysts at least are buying that argument, and weren't alarmed by the losses.
"What really matters is the operating income of the divisions: I look at these numbers and I say, these businesses are doing well," said Mark Manson, a vice president of Donaldson, Lufkin & Jenrette Securities Corp.
"For example, Warner made more than $100 million from filmed entertainment in three months.
That's a big number.
Warner also had a gain of more than 13% from records and music publishing, even though the domestic record business was sluggish this summer."
In the year-ago third quarter, Time on its own reported net income of $81 million, or $1.42 a share.
Combined revenue for the latest quarter of Time Warner was $2.2 billion, compared with the year-ago Time revenue of $1.1 billion.
On a pro forma basis, including all of Warner's earnings, Time Warner had a third-quarter loss of $217 million, compared with a $342 million loss a year earlier.
On the same basis, revenue rose to $2.7 billion from $2.2 billion.
For the third quarter, Warner's $106 million loss compared with a year-ago loss of $113 million, or 90 cents a share.
Revenue rose to $1.5 billion from $1.1 billion.
The 1988 figures were restated to include the results of Lorimar Telepictures Corp., which Warner acquired in January.
Time Warner's operating earnings got a boost from Warner's record box-office results.
"Batman" alone has racked up more than $247 million in box-office receipts to date, making it Warner Bros.' largest grossing film ever.
"Lethal Weapon II" was also a big hit.
Warner also contributed record results from its music business, where unit sales of compact discs rose more than 50% from a year ago, the company said, helped by Prince's "Batman" soundtrack.
Time Warner said its cable division turned in a 77% increase in operating cash flow, to $166 million from $94 million, reflecting higher per-subscriber revenue.
In addition, the 1988 results included a $20 million charge reflecting a reserve for relocation related expenses at American Television & Communications Corp.
On the other hand, Time Warner said its operating cash flow declined in the quarter for its magazine division, its books division and the Home Box Office programming division.
In magazines, higher advertising revenues at Sports Illustrated and Fortune were offset by lower ad revenue for other major magazines.
The programming division saw a decline in operating cash flow because the year-ago quarter included a $12 million dividend from Turner Broadcasting System and because the quarter includes expenses associated with the Nov. 15 launch of HBO's Comedy Channel.
In New York Stock Exchange composite trading, Time Warner closed at $138.625 a share, up $1.875, while Warner closed at $63.875 a share, up 12.5 cents.
Robert J. Penn, president and chief executive officer, will take early retirement from this steelmaker Dec 31.
William S. Leavitt, chairman, said Mr. Penn, 58 years old, would continue as a consultant and would work with the board in selecting a successor.
UNR recently emerged from bankruptcy-law proceedings that left 64% of the reorganized company's common stock in the hands of trustees of an asbestos-disease claims trust.
The company said it would have no further comment.
Mr. Leavitt, 37, was elected chairman earlier this year by the company's new board, having served as vice president for legal and corporate affairs.
His father, David S. Leavitt, was chairman and chief executive until his death in an accident five years ago, at which time Mr. Penn was named president.
Some House Democrats are trying to head off an appointment by President Bush to the board that oversees the savings-and-loan bailout, contending that the prospective nominee is the head of troubled banks himself.
Four Democrats on the House Banking Committee sent President Bush a letter stating their concerns about the expected appointment of James Simmons, an Arizona banker and former fund-raiser for Mr. Bush, to the Oversight Board of the Resolution Trust Corp.
The Oversight Board, created in the savings-and-loan law signed in August, sets policy for the RTC, which will sell hundreds of the nation's sick thrifts and billions of dollars of their assets.
Treasury Secretary Nicholas Brady, Federal Reserve Board Chairman Alan Greenspan and Housing and Urban Development Secretary Jack Kemp are members of the board.
President Bush must appoint two other members, one a Democrat and one a Republican.
An administration official confirmed last week that Mr. Simmons, the chairman of Valley National Bank in Phoenix, is the Republican appointee, and that a security clearance was under way.
The Democratic appointee hasn't been determined, the official said.
Mr. Simmons declined to comment, and the White House said the congressmen's letter is under review.
The letter, dated last Thursday, cited the losses at Valley National, and at United Bank, also of Phoenix, where Mr. Simmons was chairman for 29 years.
Both banks have been battered, as have other Arizona banks, by falling real estate prices.
Valley National, for example, had $470 million in problem assets as of June.
"We believe that there are numerous other candidates more qualified for this important position and we encourage you to give them your thorough consideration before making this key RTC appointment," the letter said.
"The RTC needs the most able, competent management available."
But Mr. Simmons has long ties to both Republicans and banking.
He was co-chairman of Mr. Bush's Arizona campaign committee in last year's election, and also worked for Mr. Bush in the 1980 election.
The two met more than 30 years ago, when Mr. Simmons worked for Commercial Bank & Trust Co. of Midland, Texas, where Mr. Bush was an organizing director.
In 1986, Mr. Simmons also served on a committee of businessmen headed by William Seidman, chairman of the Federal Deposit Insurance Corp. and the Resolution Trust Corp.
That committee determined to open Arizona to banking across state lines.
Arizona Trend magazine referred to Mr. Simmons this year as one of the 25 most influential people in the state.
The letter to Mr. Bush was signed by Reps. Bruce Vento (D., Minn.), the chairman of the Banking Committee's RTC Task Force, Thomas McMillen (D., Md.), Kweisi Mfume (D., Md.) and Paul Kanjorski (D., Pa.).
Randolph W. McElroy, a vice chairman of this bank-holding company, was named to the additional position of chairman of its principal unit, Sovran Bank.
Mr. McElroy, 54 years old, will remain president and chief executive officer of the unit.
Sovran also named John B. Werner a vice chairman of the parent company and the unit and elected him to the newly created position of chief credit officer of Sovran Financial, increasing the number of corporate board members to 35.
Mr. Werner, 58, was formerly senior executive vice president of the parent company and the unit.
Moody's Investors Service Inc. said it lowered the debt ratings of certain long-term debt held by this company.
The debt-rating concern cited the bank's move into the Texas market, noting its profitability and capital adequacy measurements will be depressed relative to the bank's past performance.
Moody's also said it raised its rating on the Deposit Insurance Bridge Bank, now known as Bank One, Texas N.A., reflecting the support of other banking affiliates and substantial assistance for the FDIC.
Officials at the New York bank-holding company weren't available for comment on the debt-rating changes.
At Lloyd's of London, underwriters still scratch out policies using fountain pens and blotting paper.
Visitors are ushered into the premises by red-frocked doormen known as waiters, a reminder of the insurance market's origins in a coffeehouse in 17th century London.
Such trappings suggest a glorious past but give no hint of a troubled present.
Lloyd's, once a pillar of the world insurance market, is being shaken to its very foundation.
The 301-year-old exchange is battered by enormous claims from a decade-long run of unprecedented disasters, the most recent of which is last week's earthquake in California's Bay Area.
At the same time, Lloyd's is besieged by disgruntled investors and hamstrung by inefficient but time-honored ways of conducting business.
The exchange is gradually being squeezed into narrow, less-profitable segments of the market by less hidebound competitors.
"Lloyd's is on the ropes," says Peter Nutting, a Lloyd's investor for 17 years who now leads a dissident group threatening to sue exchange underwriters for alleged mismanagement and negligence.
"It needs more discipline.
It needs to sort itself out."
Most troublesome is the shrinking pool of "names," the well-heeled investors (some of them royal) who, as members of about 360 syndicates, underwrite policies.
Some 1,750 members quit the exchange last year, more than triple the number of resignations in 1987.
Names are resigning at an even faster pace this year.
Lackluster returns are one reason.
The average after-tax return on investment in 1986, the most recent year for which results are available, was 6.5%, according to Chatset Ltd., an insurance consulting firm in London.
In 1985, it was 2.1%.
Between 1981 and 1986, the most recent five-year period for which figures are available, Lloyd's reported over #3.6 billion in claims and reserves against future losses ($5.7 billion at today's exchange rates), more than double the #1.35 billion posted in the previous five-year period.
Many of the 31,329 investors who remain are beginning to question one of the exchange's most basic tenets, the concept of unlimited personal liability.
Investors may reap huge profits when premiums exceed claims, but they are liable to their last pound or dollar in the event of a catastrophe.
And catastrophes are getting ever more costly.
Lloyd's claims for the 1988 Piper Alpha oil-rig disaster in the North Sea, for instance, may reach $1 billion.
During the five-year period ended 1986, roughly 80% of the names had money tied up in money-losing syndicates, according to Chatset consultants.
The peril of unlimited liability looms large for a number of them now.
"I have wished I could die and be out of it -- that's how bad it is," Betty Atkins, a secretary from suburban London, says.
Ms. Atkins, whose Lloyd's membership was a bonus from a former employer in 1981, belongs to Mr. Nutting's dissident group on the Outhwaite syndicate, which has been hard hit by asbestos reinsurance claims.
Ms. Atkins, who underwrote #20,000, or about $32,000, of insurance coverage on that syndicate, now faces potential losses of roughly #70,000, or $111,000.
"If Lloyd's wants #70,000 out of me they will have to take everything I've got -- and even then I don't know if it will be enough," she says.
Unease is widespread among exchange members.
"I can't think of any reason to join Lloyd's now," says Keith Whitten, a British businessman and a Lloyd's member since 1979.
"The downside is very considerable, and at the moment the upside is very marginal."
If profits don't improve, Mr. Whitten says he may quit the exchange.
Meanwhile, competition from rivals unencumbered by history is intensifying.
Lloyd's is being squeezed out of low-margin but more consistently profitable product lines such as primary property and marine insurance.
Over the past decade, competitors have chipped away at the exchange's share of the #2.5 billion marine market in London, where half the world's ships are insured.
Lloyd's 66% stake in that market has shrunk to 50% in that period, according to an official at the Institute of London Underwriters, a Lloyd's competitor.
(The official asked not to be named.)
Much of the business has gone to the institute, an association of more than 100 insurers, including Cigna Corp., Allianz Versicherungs AG of West Germany and Britain's Commercial Union Assurance PLC.
Lloyd's has endured decades of genteel decline.
At the peak of its power and influence a century ago, Lloyd's dominated the insurance world with a 50% stake.
It virtually dictated how ships were to be built and it monitored commerce through a unrivaled intelligence network in ports around the globe.
Today, Lloyd's share of the world market, excluding life insurance, is about 2%.
(Its stake is even smaller if life insurance is included.)
Bigger rivals, such as Aetna and Allianz, backed by armies of statisticians using computers in hundreds of branches, operate more efficiently and often can offer lower rates, brokers say.
Though Lloyd's pioneered such now-standard policies as worker's compensation insurance, burglary insurance for homeowners and businesses, and bankers' liability insurance, competitors now underwrite most of that business.
Beyond that, many big oil, chemical and airline companies are siphoning off big chunks of the market by insuring themselves through "captive" offshore companies for industry-specific coverage.
Even Lloyd's specialty -- unusually risky ventures -- is being challenged.
Only 10 years ago, for instance, Lloyd's was the pre-eminent insurer of thoroughbred horses.
But since 1981, Kirk Horse Insurance Inc. of Lexington, Ky. has grabbed a 20% stake of the market.
Ronald Kirk, president, says Lloyd's has suffered because its structure doesn't allow underwriters to deal directly with clients; brokers are required intermediaries.
Thus, he asserts, Lloyd's can't react quickly to competition.
"Lloyd's has lost control of the situation," he says.
"They aren't controlling their destiny like they used to."
Murray Lawrence, Lloyd's chairman, agrees the exchange faces big challenges.
"This is a watershed time, and we are trying to plot our way ahead," he says.
"We have been a great market for inventing risks which other people then take, copy and cut rates."
Lloyd's, he says, is cut off from "the vast body of premium down at the bottom end which acts as a steadying influence" against catastrophic losses.
By that, he means low-margin but low-risk products such as certain types of primary property insurance.
The exchange, he says, must find new products and new markets.
That won't be an easy task.
Tradition is dictator at Lloyd's.
Three years ago, the exchange took up residence in a space-age tower of steel and glass -- evocative of the kind of modern architecture that Britain's Prince Charles has denounced.
(Some exchange wags call the building "the oil rig.")
But along with such treasured artifacts as Lord Nelson's spyglass, Lloyd's also brought its outmoded ways of doing business.
The Lloyd's market actively underwrites insurance just 4 1/2 hours a day, brokers say.
Underwriting doesn't get under way until after morning tea at 10 a.m.
A two-hour lunch break follows.
Things wind down at about 4:30 p.m., just in time for afternoon tea.
Lloyd's vast trading hall houses a warren of well-polished desks.
The hall's few computers are used mostly to send messages.
Sandwiched between desks, underwriters sit on benches surrounded by stacks of policies.
Brokers clutching thick folders stand in lines, waiting their turn to speak to the underwriters.
A broker may have to approach as many as 20 underwriters who insure the endeavors on behalf of the syndicates.
It could take six months for a claim to be paid.
"The system," says Nicholas Samengo-Turner, a Lloyd's broker who left the exchange in 1985, "is so ludicrously unprofessional it drives you mad."
Some maintain underwriters also have been inept.
John Wetherell, a Lloyd's underwriter, says he and his fellow underwriters underestimated by as much as 50% the premiums they should have charged for property risks from 1980 to 1985.
"How unprofessional we must have appeared to the outside world -- how incompetent at risk assessment and evaluation," he says.
Lloyd's officials decline to comment on the matter.
More recently, property rates have increased.
Many at Lloyd's expect the San Francisco earthquake will cause the industry to boost rates even further.
But it will be years before it is clear whether higher rates will offset the payouts for such disasters.
The magnitude of the exchange's problems may not become known for some time because of Lloyd's practice of leaving the books open for three years to allow for the settlement of claims.
Lloyd's only recently reported its financial results for 1986.
That year, it posted record pretax profit of #650 million, a gain it attributes to higher rates and fewer claims.
But Mr. Lawrence says reported profit will be down in 1987, 1988 and 1989, though he declines to specify how steep the decline will be.
Insurance analysts say the exchange's downturn in profitability is likely to be aggravated by more than $600 million in aviation losses (including the 1988 Pan Am airline disaster over Lockerbie, Scotland) and a still-uncalculated chunk of claims from September's Hurricane Hugo.
Lloyd's says the departures of names isn't likely to hurt its underwriting capacity, currently about #11 billion.
Mr. Lawrence says the drain of funds has been offset by an increase in investments by the remaining names.
Meanwhile, the exchange has been trying to lower costs.
(It recently cut its work force by 9%, or 213.)
But Lloyd's is hampered in its efforts to overhaul operations by its reluctance to embrace modern technology.
Mr. Wetherell, the underwriter, reckons half of his business could be transacted by computer, cutting costs at least 10%.
Though Lloyd's has talked for years about computerizing underwriting transactions, the effort hasn't gotten very far.
Competition among underwriters and brokers makes them loath to centralize price and policy information.
Both groups cling to traditional face-to-face dealings, even for routine policies.
Lloyd's overblown bureaucracy also hampers efforts to update marketing strategies.
Some underwriters have been pressing for years to tap the low-margin business by selling some policies directly to consumers.
Lloyd's presently sells only auto insurance directly to the public, and such policies are sold only in limited markets such as the U.K. and Canada.
But such changes must be cleared by four internal committees and dozens of underwriters, brokers and administrators before being implemented.
The proposal to sell directly to the public remains mired in bureaucratic quicksand.
Lloyd's is moving forward on some fronts, though.
Mr. Lawrence says the exchange is updating some procedures to make speedier payments on claims.
By next year, all underwriters will be linked to a communications network that could reduce paper work on claims.
Japan's Daiwa Securities Co. named Masahiro Dozen president.
Mr. Dozen succeeds Sadakane Doi, who will become vice chairman.
Yoshitoki Chino retains his title of chairman of Daiwa, Japan's second-largest securities firm.
In Japanese firms, the president usually is in charge of day-to-day operations, while the chairman's role is more a ceremonial one.
The title of chief executive officer isn't used.
While people within Daiwa, particularly internationalists, expected that Mr. Dozen, 52, would eventually become Daiwa's president, the speed of his promotion surprised many.
It was only earlier this year that the jovial, easygoing executive -- he likes to joke with Americans about how his name is synonymous with twelve -- was appointed deputy president.
Mr. Dozen is taking over the reins of a securities company that does very well in its domestic market but that is still seeking to realize its potential in global investment banking and securities dealing.
Daiwa is one of the world's largest securities firms.
As of March 31, the Daiwa group had shareholder equity of 801.21 billion yen ($5.64 billion).
For the six months ended Sept. 30, Daiwa reported unconsolidated (parent company) net income of 79.03 billion yen ($556.5 million) on revenue of 332.38 billion yen ($2.34 billion).
Both figures were record highs.
Several observers interpreted Mr. Dozen's appointment as an attempt by Daiwa to make its international operations more profitable while preparing the firm for the effects of the continuing deregulation of Japan's domestic markets, which should mean increased competition.
All of Japan's so-called Big Four securities firms -- Nomura Securities Co. Ltd., the world's largest, Nikko Securities Co. Ltd., Yamaichi Securities Co. Ltd. and Daiwa -- have suffered setbacks in their attempts to break into foreign markets.
While they have moved to the fore in underwriting fixed-income securities in the Eurobond market -- mostly for Japanese firms -- they have been only marginally profitable, if at all, in the U.S.
American institutional investors have never had a large appetite for Japanese equities.
And while the Japanese have stepped up their purchases of U.S. shares in the past several months, they have shown themselves in the past to be fickle investors.
At the same time, Daiwa and its brethren have faced stiff competition from well-entrenched American competitors that have prevented them from building strong links to U.S. corporations and institutional investors.
Mr. Dozen knows these problems firsthand.
When he arrived in the U.S. in 1969 -- the start of an eight-year tour -- he tried selling Japanese yen-denominated bonds to U.S. investors.
"He made desperate efforts, using the yellow pages from beginning to end," said Koji Yoneyama, president of Daiwa's U.S. unit.
"But not a single piece of paper was sold."
By his own account, Mr. Dozen didn't do much better with U.S. bonds.
In an interview a few months ago, he recalled how after some training at Salomon Brothers Inc., he successfully bid for the opportunity to sell portions of 20 U.S. corporate bond issues.
But he couldn't sell any.
"Japanese stock salesmen selling American bonds?
Maybe it's crazy," he said.
Mr. Dozen even related the indignity suffered when he and two colleagues went on an overnight fishing expedition off the New Jersey shore and caught nothing.
Upon returning to New York, "Exhausted, I got into a taxicab, and the woman driver said: `Americans make better fishermen,'" he recalled.
Undaunted, Mr. Dozen said that Daiwa's goal is to build "a high-technology oriented international organization with maybe some Japanese flavor to it."
He said that he was particularly interested in his firm gaining expertise in futures, options, mortgaged-backed securities, computerized trading and investment systems as well as mergers and acquisitions.
Mr. Dozen said Daiwa's strengths were its large capital base, its influential position in the Tokyo market and its links to Japanese corporations and institutional investors.
Mr. Dozen joined Daiwa upon his graduation from Kyoto University in 1959.
Like many young recruits in Japanese securities firms, he began his career peddling stock to individual investors.
In his climb to the top, Mr. Dozen also headed the company's stock-exchange division, its fixed-income units and its international operations.
"He was constantly picking up new things to fill out his experience; he is very well-balanced," said Takuro Isoda, chairman of Daiwa's U.S. unit in New York.
But it Mr. Dozen's experience as a salesman that enabled him to gain the political support -- particularly from the retail sales force -- to accede to the presidency.
Commission income from domestic stock and bond sales accounts form a large portion of Japanese securities companies' earnings.
And anybody who lacked the backing of the retail sales force "would be fragile," said a Daiwa executive.
If Mr. Dozen has a weakness, it may be his golf game.
"He digs in the sand instead of hitting the ball, like a farmer," said Mr. Yoneyama.
Inco Ltd. posted a 35% decline in third-quarter net income, a performance that was in line with analysts' expectations.
The nickel producer also raised its quarterly dividend to 25 cents a share from 20 cents and said it may buy back as much as 4.8% of its common outstanding.
Inco shares fell after the announcements.
Analysts said some investors were disappointed that the cash-rich company had failed to announce a special dividend.
Inco closed at $31.125 a share, down 62.5 cents, in New York Stock Exchange composite trading.
Some analysts said Inco, which had cash reserves of $272 million as of Sept. 30, could still announce a special dividend in the next few months, though it would be smaller than the $10-a-share special dividend it paid last year.
The quarterly dividend is payable Dec. 1 to shares of record Nov. 3.
Inco's net fell to $129.3 million, or $1.23 a share, in the third quarter from $200.3 million, or $1.88 a share, a year earlier.
Sales rose 8.2% to $848.7 million from $784.5 million.
Excluding special gains from tax-loss carry-forwards, earnings in the latest quarter were $117.7 million, or $1.12 a share, compared with $187.4 million, or $1.76 a share.
Inco said the drop in earnings resulted mainly from lower nickel prices for the period and a temporary cut in nickel output at the company's Manitoba operations due to high levels of arsenic in the ore.
Inco said it plans to buy back as many as five million common shares over the next 12 months if nickel market conditions are favorable.
Under a previous buyback program, Inco has purchased 1.7 million of its shares since April.
UAL Corp.'s board quashed any prospects for an immediate revival of a labor-management buy-out, saying United Airlines' parent should remain independent for now.
As a result, UAL's chairman, Stephen M. Wolf, pulled out of the buy-out effort to focus on running the company.
The two developments put the acquisition attempt back to square one and leaves the airline with an array of unresolved matters, including an unsettled labor situation and a management scrambling to restore its damaged credibility.
The effort to create the nation's largest employee-owned company began unraveling Oct. 13 when the labor-management group was unable to obtain financing for its $300-a-share, $6.79 billion offer.
Just last week it suffered another major setback when British Airways PLC, the largest equity investor in the labor-management bid, withdrew its support.
Takeover stock traders, focusing on the company's intention to stay independent, took the announcement as bad news.
UAL, which had risen $9.875 to $178.375 in composite trading on the New York Stock Exchange on reports of a new bid being prepared by the group, reversed course and plummeted in off-exchange trading after the 5:09 p.m. EDT announcement.
Among the first trades reported by the securities firm of Jefferies & Co., which makes a market in UAL after the exchange is closed, were 10,000 shares at $170, 6,000 shares at $162, 2,500 at $162, and 10,000 at $158.
The rebound in UAL stock during regular trading hours Monday was its first daily gain after six consecutive losses left the price 41% below its level before Oct. 13, the day the group announced the bank financing couldn't be obtained for the original deal.
Twelve of UAL's outside directors met at a five-hour meeting yesterday in Chicago to consider an informal proposal from the buy-out group for a revised bid.
But the board said it wasn't interested for now.
That proposal, valued at between $225 and $240 a share, would have transferred majority ownership to employees while leaving some stock in public hands.
The buy-out group had no firm financing for the plan.
And, with no other offers on the table, the board apparently felt no pressure to act on it.
The directors signaled, however, that they would be willing to consider future offers or take some other action to maximize shareholder value, saying they would continue to explore "all strategic and financial alternatives."
But it was clear that for the time being, the board wants the company to return to normalcy.
The board said it concluded that "the welfare of the company, its shareholders, its employees and the broader public . . . can best be enhanced by continued development of UAL as a strong, viable, independent company."
Mr. Wolf urged all employees to "now turn their full attention" to operating the airline.
He also vowed to "make every effort to nurture . . . a constructive new relationship that has been forged with participating employee groups."
But Mr. Wolf faces a monumental task in pulling the company back together again.
Labor problems top the list.
For a brief time, the buy-out effort seemed to solve his problems with United's pilot union.
In return for an ownership stake in the company, the pilots were willing to agree to a seven-year contract that included a no-strike clause and significant wage concessions and productivity gains the union previously resisted.
That contract was tied to the success of the buy-out.
As a "good-will measure," the pilots had been working four extra hours a month and had agreed to fly UAL's two new Boeing 747-400 aircraft.
It's uncertain if the pilots will continue to do so without a contract settlement.
The union said late last night that it is still committed to majority employee ownership and that the labor disputes that faced the company prior to the buy-out effort "still need to be addressed."
The buy-out effort also worsened already-strained relations between United's pilot and machinist unions.
The machinists' criticisms of the labor-management bid and their threats of a strike unless they received substantial wage increases this year helped cool banks' interest in financing the transaction.
The machinists previously had shown themselves to be an ally to Mr. Wolf, but he lost much of his credibility with that group when he teamed up with the pilot union.
The machinists criticized the terms Mr. Wolf and management received in the buy-out.
They paid $15 million for a 1% stake and received an additional 9% of the company at no additional cost.
His credibility is also on the line in the investment community.
Until the collapse of this bid, Mr. Wolf was regarded as one of the nation's savviest airline executives after engineering turnarounds of Tiger International Inc. and Republic Airlines.
But he and his chief financial officer, John Pope, sowed some of the seeds for the deal's failure by insisting banks accept low financing fees and interest rates, while they invested in the transaction only a small fraction of the $114.3 million they stood to gain from sale of their UAL stock and options.
The board's actions leave takeover stock traders nursing some $700 million in losses and eager to respond to anyone who might make a new offer.
It also inevitably leaves a residue of shareholder lawsuits.
Arbitragers said they were disappointed the company didn't announce some recapitalization or other plan to maximize value.
One takeover expert noted that arbitragers could force a recapitalization through the written consent process under which holders may oust the board by a majority vote.
The machinists union has suggested it may propose a recapitalization that includes a special dividend for holders and a minority ownership stake for employees.
Los Angeles investor Marvin Davis, whose $240-a-share offer for UAL in August triggered a bidding war, says he remains interested in the airline.
However, he is restricted from making certain hostile moves by an agreement he signed to obtain confidential UAL data.
Essentially, he can't make any hostile moves unless he makes a tender offer at least $300 a share.
Tandy Corp. said it won't join U.S. Memories, the group that seeks to battle the Japanese in the market for computer memory chips.
Tandy's decision is a second setback for U.S. Memories.
Last month, Apple Computer Inc. said that it wouldn't invest in the group.
Apple said that its money would be better spent in areas such as research and development.
U.S. Memories is seeking major investors to back its attempt to crack the $10 billion market for dynamic random access memory chips, a market dominated by the Japanese.
Those chips were in dire shortage last year, hurting many U.S. computer companies that couldn't get sufficient Japanese-supplied chips.
Tandy said its experience during the shortage didn't merit the $5 million to $50 million investment U.S. Memories is seeking from each investor.
"At this time, we elected not to get involved because we have been able to satisfy our need {for DRAMs} from the market as a rule," said Ed Juge, Tandy's director of market planning.
Sanford Kane, U.S. Memories president, said the decision was "disappointing," but doesn't presage U.S. Memories' failure.
"I would like to have had them," he said.
But "they weren't on my list of companies who were critical to be a part of it."
Mr. Kane became president and chief executive officer of U.S. Memories last June, when the group was formed by seven electronics companies: Advanced Micro Devices Inc., Digital Equipment Corp.; Hewlett-Packard Co.; Intel Corp.; International Business Machines Corp.; LSI Logic Corp. and National Semiconductor Corp.
Mr. Kane said he expects two or three major corporations to announce their participation in U.S. Memories soon after the group finishes a business plan, probably late this week.
U.S. Memories needs a catalyst, he said, to inspire others to join.
But so far, most potential participants haven't decided.
Sun Microsystems Inc. said it's still actively evaluating U.S. Memories and plans to meet with U.S. Memories representatives later this week.
American Telephone & Telegraph Co. said it was waiting to see U.S. Memories' business plan.
Personal-computer maker AST Research Inc. said it is still studying the situation.
A Compaq Computer Corp. spokeswoman said that the company hasn't made a decision yet, although "it isn't under active consideration.
In a startling turnabout, Members of the Senate Intelligence Committee are complaining that someone in the executive branch is leaking on them.
David Boren, the Intelligence Committee chairman, is upset that someone leaked a letter to the committee from the Reagan administration suggesting that the U.S. would undertake to warn Panamanian thug Manuel Noriega if it got wind of an impending coup that might result in his assassination.
With due respect to "highly classified correspondence" and other buzzwords, the leakers are performing a public service.
If the CIA has become a protection service for Mr. Noriega, the American people ought to know.
What went wrong in Panama is a fitting subject for public and congressional inquiry.
Naturally, Senator Boren and his committee would like free rein to blame the executive branch while stamping "top secret" on their own complicity.
But there's no danger of exposing sources and methods in disclosing the debate running up and down Pennsylvania Avenue.
And if Congress is going to assume authority to micromanage foreign policy, it's going to have to take some of the responsibility too.
The President of the United States urged the Panamanian armed forces to move against Mr. Noriega.
When they did, his commanders didn't have the initiative to do more than block a couple of roads.
The executive branch bears the first responsibility for timidity.
But what kind of initiative can you expect given the climate set by Congress?
For example, what exactly did the CIA tell Major Giroldi and his fellow coup plotters about U.S. laws and executive orders on assassinations?
What part did U.S. warnings play in the major's unwillingness to pull the trigger when he had General Noriega in custody, but was under attack by pro-Noriega troops?
Mr. Noriega didn't suffer from any hesitation once he had the pistol.
Maybe we need a CIA version of the Miranda warning: You have the right to conceal your coup intentions, because we may rat on you.
Or maybe a Surgeon General's warning: Confiding in the United States may be fatal.
CIA chief William Webster, hardly a Washington malcontent, got the debate started last week by noting that the executive order banning assassinations had contributed to U.S. paralysis during the coup.
The CIA's Deputy Director of Operations, Richard Stoltz, tried to smooth things over a few days later, but instead simply underlined Mr. Webster's point.
"The interpretation" of the executive order, Mr. Stoltz said, "and the way in which the various committees have over time interpreted it, has led in my view to a proper caution on the part of operators, including me."
In other words, Congress won't let the CIA do much of anything anymore, and that's fine with the CIA.
The pay's the same, and the duty's lighter.
And of course, doing anything that might be second-guessed by Congress carries heavy penalties.
Witness the Walsh prosecution of Ollie North.
The Intelligence Committee's ranking Republican, Senator William Cohen, joined with Senator George Mitchell to write a best seller about Iran-Contra, deploring "Men of Zeal."
No doubt many people in the CIA, the Pentagon and the National Security Council have read it.
What kind of initiative should anyone expect from people out on the line who've read all this and know what can happen if they fail?
Who wants to end up as the protagonist in a Bill Cohen morality play?
The order against assassinations is another artifact of the same congressional mind-set, a product of the 1970s Vietnam syndrome against any executive action.
President Bush would do himself and the country a favor by rescinding the order as an ambiguous intrusion on his ability to defend America's national security.
There are of course good reasons the U.S. shouldn't get into the assassination business, but rescinding the executive order is not the same thing as saying the U.S. should start passing out exploding cigars.
The world being the nasty place it is, we want Presidents to have the freedom to order operations in which someone might get killed.
In such situations, you cannot write rules in advance, you can only make sure the President takes the responsibility.
The executive order and the reported agreements with the Intelligence Committee are neither sensible nor moral.
As it now stands, the U.S. can bomb Tripoli, but can't "assassinate" Colonel Gadhafi.
It can send a fighter squadron to strafe terrorist hideouts in the Bekaa Valley, but can't shoot Abu Nidal.
Both the assassination order and the quality of debate in Washington are telling the world that the only way the U.S. will kill a madman is by making sure we take some innocent civilians with him.
We've heard California's property-tax-cutting Proposition 13 blamed for a lot over the years, but ABC's Ted Koppel came up with a new wrinkle in his earthquake coverage last week when he asked Democratic Assemblyman Richard Katz if Prop. 13 had withheld money needed for road maintenance.
Mr. Katz happily agreed, sliding over the fact that California's roads and bridges aren't funded by property taxes but by state and federal gasoline taxes.
Both have been raised at least 30% in recent years, even while the price of gasoline has fallen.
Dragging Prop. 13 into this story is a pretty long stretch.
A series of explosions tore through the huge Phillips Petroleum Co. plastics plant near here, injuring more than a hundred and closing parts of the Houston Ship Channel.
There were no immediate reports of deaths, but officials said a number of workers were still unaccounted for last night.
The Bartlesville, Okla., oil company late yesterday still hadn't said officially what caused the explosions and fires, which sent columns of heavy black smoke billowing high into the air.
One local Phillips manager said a seal blew in one of the plant's reactors.
Glenn Cox, Phillips' president and chief operating officer, and other Phillips officials flew from Bartlesville to assess the damage and determine the cause of the afternoon explosions.
In composite trading on the New York Stock Exchange, Phillips Petroleum shares fell $1.125 to $23.125.
The plastics plant is located on an 800-acre tract in the heart of the petrochemical corridor that reaches along the U.S. Gulf Coast.
The U.S. Coast Guard closed six miles of the Houston Ship Channel, where about 150 companies have operations, because the thick, black smoke obscured the area.
The Port of Houston closed its terminal for handling bulk cargo.
Broken water lines and gas leaks hindered firefighters' efforts, but by late yesterday authorities said they had the fire under control.
The blasts blew out windows, spewed debris for miles and crumpled the ceiling in an area elementary school.
The initial fireball was caught by cameras in downtown Houston, about 10 miles away.
Nearby Pasadena, Texas, police reported that 104 people had been taken to area hospitals, but a spokeswoman said that toll could rise.
The injured, including three in critical condition, were treated for burns, breathing problems and cuts from flying glass, hospital officials said.
The plant employs between 800 and 900 on three shifts.
The number working at the time of the blast wasn't known.
Yesterday's explosions were the second round in two months at the plastics plant.
In late August, four contract workers were injured and one Phillips employee died after an explosion at a fuel supply line near the facility's boiler house.
The Phillips facility manufactures polyethylene, polypropylene and K-resin, plastics used in a wide array of applications, including milk jugs and toys.
Plastics are the cornerstone of Phillips' chemicals operations, which is the biggest single contributor to the company's profits.
A federal judge in Manhattan has entered a judgment requiring a Chicago organized crime figure to pay the government $250,000, representing alleged profits he gained from his involvement with the International Brotherhood of Teamsters.
Manhattan U.S. Attorney Otto Obermaier said it was the first time ever that the government had obtained any disgorgement from an organized crime figure indicted under the civil racketeering law.
Joseph Lombardo, who the government alleged was the "captain" of organized crime in Chicago, was one of numerous defendants in the government's sweeping racketeering suit against the Teamsters.
In the suit, filed in June 1988, the government accused the union's leadership of depriving its 1.6 million members of their rights through a pattern of racketeering.
Among other things, the government claimed that organized crime figures had routinely handpicked the union's top officials.
U.S. District Judge David Edelstein also permanently enjoined Mr. Lombardo from any future dealings with the Teamsters or any other labor union.
Mr. Lombardo, the last of the defendants to settle the suit, agreed to pay the government the $250,000 within one week.
Exxon Corp. said its third-quarter earnings slipped 9% as profits from two of its three major businesses sagged.
All cleanup costs from last spring's Alaskan oil spill were reflected in earlier results, it said.
Phillips Petroleum Co. and Atlantic Richfield Co. also reported declines in quarterly profit, while Ashland Oil Inc. posted a loss for the latest quarter.
Amerada Hess Corp. and Occidental Petroleum Corp. reported higher earnings.
Exxon
Although Exxon spent heavily during the latest quarter to clean up the Alaskan shoreline blackened by its huge oil spill, those expenses as well as the cost of a continuing spill-related program are covered by $880 million in charges taken during the first half.
An Exxon official said that at this time the oil company doesn't anticipate any additional charges to future earnings relating to the cleanup of oil spilled when one of its tankers rammed into an underwater reef.
She added, however, that charges already taken don't take into account the potential effect of litigation involving the oil spill.
She said that impact can't be reasonably assessed yet.
Exxon's net income during the third quarter dropped to $1.11 billion, or 87 cents a share, from $1.22 billion, or 93 cents a share, a year earlier.
Revenue rose 8.1%, to $23.65 billion from $21.88 billion.
During the third quarter, Exxon purchased 8.34 million shares of its stock at a cost of $373 million.
Exxon's profitability, like that of many other oil companies, was hurt during the third quarter by declining returns from the chemicals and refining and marketing businesses.
Exxon's earnings from chemicals operations fell $90 million, to $254 million, while refining and marketing profits declined $180 million, to $357 million.
Although crude oil prices were significantly higher this year, they weren't strong enough to offset the declining profits in those business sectors at most oil companies, said William Randol, oil analyst for First Boston Corp.
He estimates that the price of West Texas Intermediate, the U.S. benchmark crude, was $4.04 a barrel higher during the third quarter of this year than in the same period last year.
Ashland Oil
A rash of one-time charges left Ashland Oil with a loss of $39 million for its fiscal fourth quarter.
A year earlier, the refiner earned $66 million, or $1.19 a share.
Quarterly revenue rose 4.5%, to $2.3 billion from $2.2 billion.
For the year, net income tumbled 61% to $86 million, or $1.55 a share.
The Ashland, Ky., oil company reported a $38 million charge resulting from settlement of a 10-year dispute with the National Iranian Oil Co. over claims that Ashland didn't pay for Iranian crude it had received.
In September, Ashland settled the long-simmering dispute by agreeing to pay Iran $325 million.
Ashland also took a $25 million after-tax charge to cover anticipated costs to correct problems with boilers built by one of its subsidiaries.
The oil refiner also booked a $15 million charge for selling Ashland Technology Corp., one of its subsidiaries, at a loss.
Amerada Hess
Third-quarter earnings at Amerada Hess more than tripled to $51.81 million, or 64 cents a share, from $15.7 million, or 20 cents a share, a year earlier.
Revenue climbed 28%, to $1.18 billion from $925 million.
Profits improved across Hess's businesses.
Refining and marketing earnings climbed to $33.3 million from $12.9 million, and exploration and production earnings rose to $37.1 million from $17.9 million.
Hess's earnings were up despite a $30 million charge to cover the cost of maintaining operations after Hurricane Hugo heavily damaged the company's refinery at St. Croix.
It is widely known within industry circles that Hess had to buy oil products in the high-priced spot markets to continue supplying its customers.
Hess declined to comment.
Phillips Petroleum
Phillips Petroleum's third-quarter earnings slid 60%, to $87 million, or 36 cents a share, from $215 million, or 89 cents a share.
Revenue rose 6.9%, to $3.1 billion from $2.9 billion.
Shrinking profit margins in chemical and refining and marketing sectors accounted for most of the decline, said Chairman C.J. Silas in a statement.
Despite higher oil prices, exploration and production profits were off because of foreign-currency losses and some construction costs incurred in one of Phillips' North Sea oil fields.
A year ago, results were buoyed by a $20 million after-tax gain from an asset sale.
Occidental Petroleum
Occidental Petroleum's third-quarter net income rose 2.9% to $108 million, or 39 cents a share, from $105 million, or 38 cents a share, a year earlier.
The latest quarter included an after-tax gain of $71 million from non-recurring items.
Sales dropped 2%, to $4.8 billion from $4.9 billion.
The latest period included a $54 million gain from the sale of various oil and gas properties, a $22 million charge from the restructuring of Occidental's domestic oil and gas operations, and tax credits of $42 million.
Both periods included non-recurring charges of $3 million for early retirement of debt.
Occidental said oil and gas earnings fell to $17 million from $20 million.
The latest period includes net gains of $32 million in non-recurring credits from the sale of properties, indicating operating losses for the quarter in the oil and gas division.
Chemical earnings fell 10%, reflecting softening of demand.
Atlantic Richfield
Citing its reduced ownership in the Lyondell Petrochemical Co., Atlantic Richfield reported that net income slid 3.1% in the third quarter to $379 million, or $2.19 a share, from $391 million, or $2.17 a share, for the comparable period last year.
Sales fell 20%, to $3.7 billion from $4.6 billion.
Arco's earnings from its 49.9% stake in Lyondell fell to $37 million from $156 million for the same period last year, when Lyondell was wholly owned.
Offsetting the lower stake in Lyondell were higher crude oil prices, increased natural gas volumes and higher coke prices, the company said.
Coal earnings rose to $26 million from $21 million.
For the nine months, Arco reported net income of $1.6 billion, or $8.87 a share, up 33% from $1.2 billion, or $6.56 a share a year earlier.
Sales were $12 billion, off 13% from $13.8 billion.
Jeff Rowe contributed to this article.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
Imo Industries Inc. -- $150 million of senior subordinated debentures due 2001, priced at par to yield 12%.
The issue will be sold through Morgan Stanley & Co.
Other details weren't available.
San Antonio, Texas -- $575 million of electric and gas system revenue refunding bonds, Series 1989, 1989A and 1989B, tentatively priced by a First Boston Corp. group to yield from 6.15% in 1991 to 7.30% in 2009.
The issue includes current interest bonds due 1991-2000, 2009, 2012, 2014 and 2016, and capital appreciation bonds due 2001-2005.
The current interest serial bonds are priced to yield from 6.15% in 1991 to 7.10% in 2000.
There are about $100 million of 7% term bonds due 2009, priced to yield 7.30%, which is the issue's high yield.
There are also about $124 million of 6 1/2% bonds priced to yield 7.25% in 2012; about $97 million of 6% bonds priced to yield 7.20% in 2014; and about $26.5 million of 5% bonds priced to yield 7.15% in 2016.
All of the term bonds are original issue discount bonds, according to the lead underwriter.
The capital appreciation bonds are tentatively priced to yield to maturity from 7% in 2001 to 7.10% in 2003-2005.
The bonds are rated double-A by Moody's Investors Service Inc. and Standard & Poor's Corp.
Maryland Stadium Authority -- $137.6 million of sports facilities lease revenue bonds, Series 1989 D, due 1992-1999, 2004, 2009 and 2019, tentatively priced at par by a Morgan Stanley group to yield from 6.35% in 1992 to 7.60% in 2019.
Serial bonds are priced to yield to 7.10% in 1999.
There are $15,845,000 of 7 3/8% bonds priced at par and due 2004; $22,985,000 of 7 1/2% bonds priced at par and due 2009; and $82.6 million of 7.60% bonds priced at par and due 2019.
The bonds are rated double-A by Moody's and double-A-minus by S&P.
Interest on the bonds will be treated as a preference item in calculating the federal alternative minimum tax that may be imposed on certain investors.
Federal Home Loan Mortgage Corp. -- $250 million of Remic mortgage securities being offered in 11 classes by Morgan Stanley.
The offering, Series 107, is backed by Freddie Mac 15-year, 9% securities, and brings Freddie Mac's 1989 Remic issuance to $32.8 billion and its total volume to $46.8 billion since the program began in February 1988.
The offering used at-market pricing.
Federal National Mortgage Association -- $500 million of Remic mortgage securities being offered in 10 classes by Merrill Lynch Capital Markets.
The offering, Series 1989-85, is backed by Fannie Mae 9% securities.
Separately, a $400 million issue of Fannie Mae Remic mortgage securities is being offered in 15 classes by Bear, Stearns & Co.
The offering, Series 1989-86, is backed by Fannie Mae 9% securities.
Finally, a $300 million issue of Fannie Mae Remic mortgage securities is being offered in 12 classes by Smith Barney, Harris Upham & Co.
The offering, Series 1989-87, is backed by Fannie Mae 9 1/2% securities.
The three offerings together bring Fannie Mae's 1989 Remic issuance to $32.4 billion and its total Remic volume to $44.5 billion since the program began in April 1987.
Credit Agricole (CNCA) (French) -- $250 million of 8 3/4% bonds due Nov. 21, 1994, priced at 101.80 to yield 8.77% annually less full fees, via IBJ International Ltd.
Fees 1 7/8.
Hokuriku Electric Power Co. (Japan) -- $200 million of 8 7/8% bonds due Nov. 20, 1996, priced at 101 3/4 to yield 8.90% less full fees, via Yamaichi International (Europe) Ltd.
Fees 1 7/8.
International Finance Corp. (agency) -- 10 billion pesetas of 11.6% bonds due Nov. 30, 1994, priced at 101 5/8 to yield 11.60% less full fees, via Citibank (Madrid) and Banco Espanol de Credito, Spain.
Fees 1 5/8.
Royal Bank of Canada, Grand Cayman branch (Canada) -- 100 million Canadian dollars of 10 3/4% deposit notes due Nov. 30, 1994, priced at 101 3/4 to yield 10.78% less full fees, via RBC Dominion Securities International Ltd.
Fees 1 7/8.
Union Bank of Finland -- 100 million Australian dollars of 9% bonds due Nov. 9, 1990, priced at 94 to yield 17.20% less full fees, via Banque Paribas Capital Markets Ltd.
Fees 1.
Ford Motor Credit -- $2.57 billion of certificates backed by automobile loans with a coupon rate of 8.70%, priced at 99 19/32 to yield 8.903% through an underwriting group headed by First Boston Corp.
The issue is the first by Ford Motor Credit, a unit of Ford Motor Co., and the second largest in the four-year history of the $45 billion asset-backed market.
The largest issue was a $4 billion offering of auto-loan securities by General Motors Acceptance Corp. in 1986.
The Ford issue, through Ford Credit 1989-A Grantor Trust, was priced at a yield spread of 95 basis points above the Treasury 7 3/4% issue due July 1991.
The offering is rated doubleA-2 by Moody's and double-A by S&P, based on the quality of the underlying auto loans and a guarantee covering 9% of the deal from Ford Motor Credit.
The certificates have an estimated average life of 1.8 years, assuming monthly prepayments at 1.3% of the original balance.
The final maturity is in five years.
The Mouth is back.
Morton Downey Jr., who self-destructed as a talk-show host and frequently verbally abused his guests, has been signed to co-host a half-hour nightly program on the Consumer News and Business Channel, the cable channel partly owned by the General Electric Co.'s National Broadcasting Co.
The premiere of "Showdown," with Mr. Downey and Richard G. Carter, a columnist with the New York Daily News, is scheduled for Dec. 4 at 8 p.m.
CNBC is available to 13 million cable households.
Mr. Downey said he is not going to change his style, which some critics said was flamboyant and others deemed offensive.
"But I'm going to proceed in a more logical way.
I'm not going to do anything that is not acceptable in anyone's home.
But that doesn't mean I'm not going to get angry."
Michael Eskridge, president of CNBC, said that although there will be a studio audience, viewers will no longer have to endure the shouting of "Mort! Mort! Mort!"
But just how does Mr. Downey's unorthodox style mesh with the sedate tone of CNBC's business programming?
"Ninety percent of Mort's old show fits into our style," said Mr. Eskridge.
"That is consumer issues."
Mr. Downey's previous show, a one-hour shout fest, syndciated by MCA Inc. and produced by Quantum Media Inc., was canceled in July after advertisers and stations abandoned it.
Investors dumped stocks of big companies whose earnings fluctuate with the economy.
Many of those "cyclical" issues are in the Dow Jones Industrial Average, which fell 26.23 to 2662.91.
Declining issues on the New York Stock Exchange outpaced advancers, 1,012 to 501.
Recession fears are springing up again among investors.
Analysts say that the selling of cyclical stocks yesterday will be followed by a sell-off in shares of companies with big debt loads on their balance sheets.
In an economic slowdown, heavy debt loads reduce the flexibility of companies because cash that would normally be used to keep the company buoyant must be diverted to interest payments.
On the other hand, investors beat a clear path yesterday to blue-chip issues with proven earnings growth records.
Among the 30 Dow industrials, they bought McDonald's, Coca-Cola Co. and Procter & Gamble and sold Aluminum Co. of America.
In another sign of slowdown fears, investors dumped technology shares.
Many money managers are bracing for a decline in stocks of companies with big debt loads on their balance sheets.
"The junk bond market is being taken apart" because of recession fears, said J. David Mills, senior vice president at Boston Company Advisers.
"Under this scrutiny, the first thing you do is sell your cyclical stocks and the second thing you do is sell your over-leveraged companies."
In fact, much of the buying in blue chips yesterday was a pursuit of companies with lower debt levels.
In a recent investment letter entitled "Winners of the `Leverage Wars,' " Edward Kerschner, chairman of PaineWebber's investment policy committee, suggested that investors buy stocks of companies that have avoided loading up on debt.
"We're saying companies have to pay increasing attention to balance sheets," said Mr. Kerschner.
He suggested that investors buy the shares of Great Atlantic & Pacific Tea, J. Baker, McDonald's, Philip Morris and Sara Lee.
He said that all of these companies will be able to compete fiercely in an economic downturn.
McDonald's has long-term debt equaling 91% of shareholder equity currently, but Mr. Kerschner said the company is carrying real estate assets at about $2.6 billion below their real value.
Coca-Cola climbed 1 3/8 to 72 1/8; McDonald's added 1 to 31 3/8, and Procter & Gamble gained 3/4 to 130 5/8.
A&P fell 1 1/4 to 57 5/8, and J. Baker gained 3/8 to 21 1/4.
Philip Morris slipped 1/2 to 43 7/8, while Sara Lee closed unchanged at 60 1/8.
According to Salomon Brothers' "stub" stock index of 20 companies whose debt is giant compared with shareholder equity, investors are already beginning to retreat from shares of debt-laden companies.
From January to early September, the index of stub stocks -- the tiny portion of equity that's publicly traded following a recapitalization -- outperformed Standard & Poor's 500-stock index by about 20%.
But starting in early September, the index started to slide and now stands about even with the S&P 500.
"Stocks that have a high default risk have started to underperform those stocks that have a lower default risk," said Eric Sorenson, director of quantitative analysis at Salomon Brothers.
"Companies that have the most exposure to the business cycle have underperformed since late last summer."
Union Carbide, whose third-quarter earnings dropped about 35% from a year earlier and fell short of analysts' expectations, declined 1/2 to 24 1/2.
Also, Exxon went down 3/8 to 45 3/4 and Allied-Signal lost 7/8 to 35 1/8 even though the companies' results for the quarter were in line with forecasts.
Other weak blue-chip issues included Chevron, which went down 2 to 64 7/8 in Big Board composite trading of 1.3 million shares; Goodyear Tire & Rubber, off 1 1/2 to 46 3/4, and American Express, down 3/4 to 37 1/4.
Texas Instruments, which had reported Friday that third-quarter earnings fell more than 30% from the year-ago level, went down 2 1/8 to 33 on 1.1 million shares.
Motorola, another major semiconductor producer, dropped 1 1/8 to 57 1/2.
Pinnacle West Capital, whose earnings have been hurt by continued problems at its MeraBank unit, fell 1 5/8 to 9 1/8 on 2.1 million shares to lead the Big Board's list of most active issues.
Growing pressures on the Arizona real-estate market are affecting the thrift; Pinnacle West told Dow Jones Professional Investor Report it may consider filing for Chapter 11 bankruptcy protection if it can't reach an agreement with federal regulators to provide additional capital to MeraBank.
Hercules dropped 2 5/8 to 41 3/4 on one million shares -- about six times its average daily trading volume -- after a disappointing third-quarter earnings report.
Merrill Lynch and Prudential-Bache Securities both lowered the stock's investment rating immediately after the results were issued Friday, according to PIR.
Elsewhere in the chemicals sector, Dow Chemical fell 1 1/4 to 97 1/2, Monsanto lost 1 7/8 to 118, B.F. Goodrich slipped 2 1/4 to 44 3/4 and Olin slid 1 to 57 3/4.
Other stocks hurt by earnings-related selling included Tandy, which dropped 1 3/8 to 44, and Eaton, which retreated 2 1/2 to 57 1/2.
Third-quarter earnings at both companies were below analysts' forecasts.
After declining about 41% last week, UAL advanced 9 7/8 to 178 3/8 on 1.1 million shares on anticipation of a revised takeover offer from a labor-management group for the parent company of United Airlines.
However, Delta Air Lines fell 1 1/2 to 67 1/2 and USAir Group dropped 3/4 to 42 1/2.
Ramada gained 7/8 to 11 1/4 after revamping the terms of its restructuring plan, which calls for the company to sell its hotel operations for $540 million and spin off its casino business to shareholders.
The revision follows last month's withdrawal of a $400 million junk-bond offering for the new casino company, Aztar Corp.
Mead gained 1 to 37 7/8.
USA Today reported that the Rales brothers, Washington, D.C.-based investors who made an unsuccessful offer to acquire Interco last year, have bought nearly 3% of Mead's common shares.
Entertainment and media stocks generally escaped the market's slide as well.
Paramount Communications rose 5/8 to 58 3/4, Time Warner climbed 1 7/8 to 138 5/8, Walt Disney advanced 3 1/8 to 127 1/2, MCA rose 1 1/8 to 65 5/8 and McGraw-Hill added 1/2 to 67 1/8.
The American Stock Exchange Market Value Index lost 3.11 to 379.46.
Volume totaled 10,450,000 shares.
Carnival Cruise Lines Class A fell 1 3/4 to 20 3/4.
The company said it had been notified unofficially that Waertsilae Marine Industries, a Finnish shipyard building three cruise ships for the company, is having financial trouble and may already have filed for bankruptcy.
"Hacksaw" and "Bonecrusher" are the sort of nicknames normally associated with linebackers and heavyweight contenders.
Who'd have thought that the next group of tough guys carrying around reputations like that would be school superintendents?
Chicago's new school chief is the hard-nosed Ted Kimbrough.
At his old job in Compton, Calif., he took a bitter teachers' strike and nearly came to blows with a school-board member.
At his first Chicago press conference, he berated the reporters.
In New York City, the new Chancellor, Joseph Fernandez, has landed like a 16-inch shell in the middle of a system that has been impervious to serious reform.
Both men fit the mood of the times -- the mood being one of a public fed up with officials' rationalizations for why their schools don't work.
Former Patterson, N.J., principal Joe Clark was no doubt the general public's first experience with this new breed of no-nonsense administrator.
The subject of the movie "Lean on Me," Mr. Clark controlled his school with a bullhorn and a baseball bat.
He may have gone overboard in his pursuit of good discipline, but isn't it interesting that some of the country's biggest, most troubled school districts are choosing new chiefs from the same gravel-chewing mold?
Elena Scambio, the woman assigned to run the Jersey City school system that was taken over by the state, says her top priority will be to "cut through the dead hand of bureaucracy."
Mr. Fernandez doesn't take control in New York until January, but already he's roiling the waters.
He's attacked the concept of "building tenure," one of the most disgraceful institutions in American public schools.
It means it is virtually impossible to fire or even transfer incompetent principals.
Once they are in the building, they stay.
One South Bronx principal kept his job for 16 years, despite a serious drinking problem and rarely showing up for work.
He was finally given leave when he was arrested for allegedly buying crack.
Naturally, the principals' union loves building tenure, and tenure has withstood previous challenge.
We suggest that Mr. Fernandez find an incompetent principal, toss him out of the building and let the forces of the status quo explain to the parents whatever it is they're defending.
In his old job, as Dade County chief, Mr. Fernandez forced out 92 teachers and reshuffled 48 principals.
He cut the dropout rate by 5.5%.
But the no-more-nonsense superintendents are going to have to be judicious as well; incompetent principals and administrators should go, but the good ones ought to be left alone.
The situation will be especially delicate for Mr. Kimbrough.
He takes over a school system in the midst of radical reform.
Chicagoans have just elected 540 neophyte school boards, one for each school.
This of course led to disaster in New York City.
Getting a community of parents to care again about its schools is essential, but in Chicago the new boards will make mistakes and Mr. Kimbrough will have to identify them.
The rise of superintendents such as Joseph Fernandez and Ted Kimbrough suggests plainly the process of disintegration in many school systems.
The schools' central mission, educating children, became subsumed by the competing interests of bureaucrats, politicians and unions.
The classroom itself operated on the periphery of this awful system, discipline collapsed, and kids stopped learning.
Mr. Chips was a nice fellow, and maybe some day he'll return.
Until then, it's clear that some of the people who've been keeping big-city schools down are going to be dealing with the Terminator.
Ingersoll Publications Co. agreed to buy the New Haven Register in a transaction valued at $275 million from Goodson Newspaper Group Inc.
As part of the agreement, Goodson also terminated the contract under which Ingersoll manages Goodson's 66 newspapers, ending a long association between the two companies that has turned increasingly bitter recently.
Goodson has accused Ingersoll of paying less attention to its properties and more to such ventures as the recent launch of the St. Louis Sun.
Under the terms of the accord, Ingersoll will pay about $255 million for the Register, a daily that Goodson bought for about $170 million in 1986.
Goodson will pay the additional $20 million in settlement of the management contract.
Goodson also announced that it hired the former president and senior vice president of Ingersoll to run the Goodson papers.
Both executives left the company after clashes with Chairman Ralph Ingersoll Jr.
Goodson, which is based here, will use part of the proceeds to pay down debt associated with its purchase of the Morristown Daily Record for $155 million in 1987.
The New Jersey paper, like the New Haven, Conn., paper, was purchased by Ingersoll on Goodson's behalf as part of the management contract.
Industry analysts have said that the purchase price for the paper was too high, causing a strain on Goodson's finances.
Investment bankers familiar with the company said Goodson is seeking a new bank credit line of $190 million and may have to sell additional newspapers.
David N. Hurwitz, president and chief operating officer of Goodson, said in a telephone interview that the company doesn't currently have any plans to sell additional newspapers.
Goodson said David Carr, former president of Ingersoll Publications, and Ray Cockburn, former senior vice president, would head the new in-house management team at Goodson, which had revenue of $225 million in 1988.
The association between the two companies stretches back thirty years to a friendship between television producer Mark Goodson and Ingersoll founder Ralph Ingersoll.
The latter's son, Ralph Ingersoll Jr., took over the company and has been managing the Goodson properties and acting as an agent in the purchase of newspapers for Goodson.
But in recent years, Mr. Ingersoll began focusing more on expanding his own newspaper empire in partnership with investment banking firm Warburg, Pincus & Co.
Ingersoll has 28 dailies and 200 other non-daily papers in the U.S. and Europe.
The company said its revenue will exceed $750 million this year.
Ingersoll President Robert M. Jelenic said in a statement that the company is "delighted by the conclusion of the Goodson relationship" and will be able to "concentrate all our energies" on Ingersoll's own papers.
Mr. Goodson, in his own statement, was less upbeat, saying "unfortunately over the past few years, it has become increasingly clear that Ralph and I have different agendas," and that he feels "more comfortable with a management team whose sole interest and responsibility is in the Goodson papers.
Just five months after Ogilvy Group was swallowed up in an unsolicited takeover, Kenneth Roman, Ogilvy's chairman and chief executive officer, said he is leaving to take a top post at American Express Co.
Mr. Roman, 59 years old, abruptly announced he will leave the venerable ad agency, whose largest client is American Express, to become American Express's executive vice president for corporate affairs and communications.
He will succeed Harry L. Freeman, 57, who has said he will retire in December.
Mr. Freeman said in August that he would retire by the end of this year to take "executive responsibility" for an embarrassing effort to discredit banker Edmond Safra.
American Express representatives apparently influenced the publication of unfavorable articles about Mr. Safra.
The company later apologized and agreed to make $8 million in contributions to charities chosen by him.
Although Mr. Freeman is retiring, he will continue to work as a consultant for American Express on a project basis.
Ad industry executives weren't surprised by Mr. Roman's decision to leave Ogilvy.
The agency, under his direction, bitterly fought a takeover attempt by WPP Group PLC of London before succumbing in May.
And although Mr. Roman and WPP's chief executive, Martin Sorrell, have gone out of their way to be publicly supportive of each other, people close to Mr. Roman say he was unhappy giving up control of the company.
Some executives also cite tension because of efforts by Mr. Sorrell, a financial man, to cut costs at the agency.
Mr. Roman will be succeeded as the head of Ogilvy's flagship ad agency, Ogilvy & Mather Worldwide, by Graham Phillips, 50, who had been president of North American operations and who, like Mr. Sorrell, is British.
Alexander Brody, 56, will take on the newly created position of president of the world-wide agency and chief executive of its international operations.
He had been president of the international operations.
Mr. Roman also had overseen Ogilvy Group's two other units, the Scali McCabe Sloves advertising agency and its research division, but those units will now report directly to WPP.
Mr. Roman appears custom-made for the American Express job.
Known as a traditional executive, he is very much in the conservative American Express mold.
Moreover, after 26 years at Ogilvy he had honed a reputation for being squeaky-clean and a straight arrow -- which can only help American Express in the wake of the Safra incident.
He also is close to American Express's chairman and chief executive officer, James D. Robinson III.
Aside from working with Mr. Robinson on the American Express advertising account for about 11 years, Mr. Roman serves on several of the same charities and boards as Mr. Robinson.
The abrupt management change sparked widespread speculation that Mr. Roman had been pushed out of Ogilvy's top spot by Mr. Sorrell.
But Mr. Roman flatly denied the speculation, saying Mr. Sorrell had tried several times to persuade him to stay, offering various incentives and in one instance sending a note with a case of wine (The wine, naturally, was Seagram's brand, an Ogilvy client).
"He asked me not to resign.
The implication that I was pushed aside wouldn't be accurate," Mr. Roman said.
Mr. Sorrell, traveling in the Far East, couldn't be reached.
Mr. Roman said American Express's Mr. Robinson first approached him about the job in late September.
According to industry executives, Peter Sutherland, a former European Community commissioner from Ireland, was also a serious contender for the American Express job.
Although it ultimately wasn't offered to him, he will be on retainer to American Express as an adviser on international matters.
After talking on and off for the past four weeks, Mr. Roman said, he agreed to take the job because "it's the right time, it's a terrific opportunity, and I think I leave the company in very strong hands.
It was my decision, not anyone else's."
Mr. Roman also brushed aside reports about infighting between him and Mr. Phillips, his successor at Ogilvy.
The two executives could hardly be more different.
Mr. Roman comes across as a low-key executive; Mr. Phillips has a flashier personality.
During time off, Mr. Roman tends to his garden; Mr. Phillips confesses to a fondness for, among other things, fast cars and planes.
Industry executives say that although the two executives used to clash more frequently, the WPP takeover brought them closer together.
"I'm the guy who made him head of New York, head of the U.S., president of North America, and recommended him {to Mr. Sorrell} as my successor.
Would I have done all those things successively if I didn't think he was the right guy?" Mr. Roman asked.
He labeled reports of friction "ridiculous," and said that he spent part of the weekend on Mr. Phillips's boat in Connecticut.
Mr. Roman will oversee American Express's public relations and government affairs, among other things, but he won't be involved in its advertising, which is handled by the operating units.
"I consider this a second career," he said.
He also will sit on the company's corporate planning and policy committee, made up of the top corporate and operating executives.
Mr. Roman's departure isn't expected to have any enormous repercussions at Ogilvy.
American Express, Kraft General Foods, and Mattel executives said the move won't affect their relationships with the ad agency.
"General Foods's relationships with its agencies are based on the agencies' work, and will continue to be," said David Hurwitt, a vice president of Kraft General Foods.
But some clients and analysts expressed concern that Mr. Phillips isn't as well-known to many clients.
"Ken was my key contact," said J. Nicholas Hahn, president and chief executive officer of Cotton Inc., which represents cotton producers.
"I don't know {Mr. Phillips} all that well.
I haven't seen or talked to him in several years."
And some analysts questioned whether Mr. Phillips would have the skills Ogilvy needs to turn the agency around.
While the agency has done well in many parts of the world, its flagship New York office has had a dismal track record recently; it has won few new accounts while losing big ones, including Maxwell House.
"I think {Mr. Phillips} is going to need some help.
I think they need creative leadership, and I don't think they have it," said Emma Hill, an analyst with Wertheim & Co.
Ogilvy & Mather's top creative executive, Norman Berry, left the agency earlier this year.
"Norm Berry was a creative inspiration at the company, and nobody has filled that void," said Ms. Hill.
But other analysts said that having Mr. Phillips succeed Mr. Roman would make for a smooth transition.
"Graham Phillips has been there a long time, knows the culture well, is aggressive, and apparently gets along well with" Mr. Sorrell, said Andrew Wallach, an analyst with Drexel Burnham Lambert.
"It's probably a reasonable transition.
Hopefully, he'll be the answer to the problems they've had in New York."
Sale of Saatchi Unit Close
Computer Sciences Corp., El Segundo, Calif., said it is close to making final an agreement to buy Cleveland Consulting Associates from Saatchi & Saatchi
Computer Sciences wouldn't disclose the proposed purchase price for Cleveland Consulting, which counsels companies on logistics and supply.
But David Lord, managing editor of Consultants News, an industry publication based in Fitzwilliam, N.H., said an industry standard would suggest a purchase price of between one and two times Cleveland Consulting's approximately $15 million annual revenue.
Both Saatchi & Saatchi, which announced its intention to sell off most of its consulting business in June, and Cleveland Consulting declined to comment on the proposed sale.
Ad Notes. . . .
NEW ACCOUNT:
AmBase Corp., New York, awarded the ad account for its Home Insurance Co. unit to Biederman, Kelly & Shaffer, New York.
Billings weren't disclosed. . . .
Puerto Rico Telephone Co. awarded its $3 million account to West Indies & Grey, Grey Advertising's office in Puerto Rico.
DIET COKE:
Coca-Cola Co. yesterday said singer Elton John signed to appear in an ad for Diet Coke.
Details of the commercial, which will be part of the brand's 1990 advertising campaign, weren't disclosed.
Mr. John becomes the latest of many music stars, including George Michael and Whitney Houston, to appear in ads for the diet drink.
Turner Broadcasting System Inc. said it formed a unit to make and distribute movies to theaters overseas and, eventually, to U.S. theaters, too.
The operator of cable-television networks said the new Turner Pictures unit will produce movies that will premiere on Turner Broadcasting's Turner Network Television channel, or TNT, and then will be released internationally in movie theaters.
The unit's first two offerings are slated to be "The Secret Life of Ian Fleming," a dramatization about the former British spy who wrote the James Bond novels, and "Treasure Island," produced by Charlton Heston, who also stars in the movie.
Ted Turner, Turner Broadcasting's chairman, was named chairman of Turner Pictures, and Gerry Hogan, president of Turner Entertainment Networks, was named president of the unit.
In an interview, Mr. Hogan said the subsidiary's primary mission will be to make movies for TNT and to distribute them internationally.
But he said Turner Broadcasting already has found some ideas that might work well as films for theatrical release in the U.S.
"When that occurs, and when the time is right, we'll release the films in the U.S.," he said, adding that Turner Pictures may develop such movies next year for domestic release in 1991.
Turner has made several movies, docudramas and documentaries for its networks in recent years, but the company has never acted as a full-fledged movie studio and released its own pictures to theaters.
Mr. Hogan said "The Secret Life of Ian Fleming" and "Treasure Island" cost more than $6 million each to make, which is only about one-third the cost of most movies made for theatrical release.
The Turner move is in line with a cable-TV trend toward more original programming -- and toward finding more ways to amortize the high cost of producing films.
In July, Viacom Inc. formed Viacom Pictures to produce 12 low-budget movies a year that will premiere on Showtime network and be distributed later in various markets, including foreign theaters.
In a sign the stock slump hasn't quieted Europe's takeover fever, Cie. Financiere de Paribas said it intends to bid for one of France's other large financial and industrial holding companies, Cie. de Navigation Mixte.
Paribas said that once it receives the go-ahead from French stock market authorities, it will offer to boost its Navigation Mixte stake to 66.7% from the current 18.7%.
Its cash-or-shares bid values Navigation Mixte at about 22.82 billion francs ($3.62 billion), making this one of France's largest-ever attempted takeovers.
The cost of buying the additional 48% stake would be 10.95 billion francs ($1.74 billion).
The move would greatly boost Paribas's stake in the insurance, transport and food businesses, where Navigation Mixte is strong.
It also would make Paribas a major French ally of West Germany's Allianz AG insurance group.
Allianz holds a 50% stake in Navigation Mixte's insurance interests, acquired three weeks ago.
Those include Rhin et Moselle Vie and Via Assurances.
Long considered a potential takeover target, Navigation Mixte had hoped Allianz would help protect it from raiders.
That idea may have backfired.
Paribas is Allianz's main French bank, and the Munich-based group said it intends to stay neutral.
Navigation Mixte said it wouldn't have any comment until its board meets Wednesday.
But Navigation Mixte is loosely held and hard to defend.
"The defensive options are limited," says Philippe Braye, a partner in portfolio management concern France Finance Quatre.
"Who would bid against Paribas?"
If the Paribas bid succeeds, it will be the second time in two months a big French investment banking group has snapped up an insurance group.
Last month, Paribas's archrival, Cie. Financiere de Suez, won a battle for Groupe Victoire, France's second-largest private-sector insurer, which itself had just acquired West Germany's Colonia Versicherung AG.
That complex bid was billed as France's largest takeover ever (this one is slightly smaller).
Moreover, Suez had just finished winning an even larger battle last year for control of Societe Generale de Belgique.
Paribas officials, once considered France's toughest bankers, felt abashed at Suez's success and its rapid growth.
Although Paribas denies it, analysts say the new bid in part simply reflects the continuing rivalry between France's two largest investment banking groups.
It also reflects the broader pressure on companies in Europe to keep up as the European Community prepares to reduce internal trade barriers by 1992.
Although Paribas Chairman Michel Francois-Poncet wouldn't rule out eventually selling all of Navigation Mixte's insurance operations to Allianz, he stressed the potential for the two groups instead to cooperate.
He also told reporters the acquisition would give Paribas fresh diversity, bringing it properties in food and transport where it has been weak.
Navigation Mixte has investments in a sugar company, a food and canning concern, a bakery and bus and trucking firms, among others.
And Navigation Mixte has a huge hidden attraction.
Payment by Allianz for the insurance interests it has just bought will help swell the French concern's treasury to an estimated 11 billion francs.
Paribas said it will bid 1,850 francs a share for Navigation Mixte shares that qualify for a full yearly dividend, and 1,800 francs for those created July 1, which are eligible for partial dividends.
Alternatively, it said it would offer three Paribas shares, themselves eligible for dividends as of next Jan. 1, for one Navigation Mixte share.
Paribas shares closed down 30 francs at 610 francs, and Navigation Mixte shares were suspended at 1,800 francs pending the outcome of the bid.
Paribas said it would publish details of its bid once authorities clear it.
This is one of the first bids under new takeover rules aimed at encouraging open bids instead of gradual accumulation of large stakes.
Some financial sources said privately that Paribas blundered in failing to move sooner for the insurance and industrial group, bidding only after speculation had pushed up the price.
Mr. Francois-Poncet responded that his group initially intended to take only a minority stake, striking an alliance with current management.
When notoriously independent-minded Navigation Mixte Chairman Marc Fournier rejected Paribas's offer and began buying Paribas shares in retaliation, Mr. Francois-Poncet said, he felt obliged to bid for control.
He told reporters he had information that Mr. Fournier was preparing to buy as much as 20% of Paribas, up from less than 5% currently.
A bid against Paribas couldn't be ruled out.
France's second-largest government-owned insurance company, Assurances Generales de France, has been building its own Navigation Mixte stake, currently thought to be between 8% and 10%.
Analysts said they don't think it is contemplating a takeover, however, and its officials couldn't be reached.
Crude oil futures prices fell further as analysts and traders said OPEC oil producers aren't putting the brakes on output ahead of the traditionally weak first quarter.
In trading on the New York Mercantile Exchange, the U.S. benchmark West Texas Intermediate crude fell 39 cents a barrel to $19.76 for December delivery.
Petroleum products prices also declined.
Analysts pointed to reports that the Organization of Petroleum Exporting Countries is producing substantially more than its official limit of 20.5 million barrels a day, with some accounts putting the 13-nation group's output as high as 23 million barrels a day.
That level of production didn't take its toll on futures prices for the fourth quarter, when demand is traditionally strong.
But because first-quarter demand is normally the weakest of the year, several market participants say, OPEC production will have to decline to keep prices from eroding further.
The group plans to meet in a month to discuss production strategy for early 1990.
With prices already headed lower, news of a series of explosions at a major Phillips Petroleum Co. chemical facility on the Houston Ship Channel also was bearish for prices.
Even though such facilities use a relatively small amount of crude, analysts say, now the facility won't need any, at a time of already high availability.
The Phillips plant makes polyethylene, polypropylene and other plastic products.
A company official said the explosions began when a seal blew out.
Dozens of workers were injured, authorities said.
There was no immediate estimate of damage from the company.
Some petroleum futures traders say technical considerations now will help to put downward pressure on futures prices.
For instance, one trader said that prices inevitably will go lower now that they've fallen below $20 a barrel.
"Our technician is a little bearish now that we've taken out $20," he said.
In other commodity markets yesterday:
COPPER:
The selling that started on Friday continued yesterday.
The December contract fell 3.85 cents a pound to $1.1960.
London Metal Exchange warehouse stocks were down only 4,800 metric tons for the week to 84,500 tons; expectations late last week were a drop of 10,000 to 15,000 tons.
The New York market made its high for the day on the opening and when it dropped below the $1.23-a-pound level, selling picked up as previous buyers bailed out of their positions and aggressive short sellers -- anticipating further declines -- moved in.
Fund selling also picked up at that point.
According to Bernard Savaiko, senior commodity analyst at PaineWebber, the only stability to the market came when short sellers periodically moved in to cover their positions by buying contracts.
This activity produced small rallies, which in turn attracted new short selling.
Mr. Savaiko noted that copper had a steep fall in spite of a weak dollar, which would normally support the U.S. copper market.
Such support usually comes from arbitragers who use a strong British pound to buy copper in New York.
"The sell-off would probably have been worse if the dollar had been strong," he said.
Copper has been stuck in a trading range of $1.19 to $1.34.
Mr. Savaiko believes that if copper falls below the bottom of this range the next significant support level will be about $1.04.
PRECIOUS METALS:
Platinum and palladium struggled to maintain their prices all day despite news stories over the weekend that recent cold fusion experiments, which use both metals, showed signs of producing extra heat.
January platinum closed down $2.80 an ounce at $486.30, nearly $4 above its low for the day.
December palladium was off $1.55 an ounce at $137.20.
Platinum is believed to have good support around $480 and palladium at around $130.
Some traders were thought to be waiting for the auto sales report, which will be released today.
Such sales are watched closely by platinum and palladium traders because both metals are used in automobile catalytic converters.
Mr. Savaiko theorized that the news on cold fusion didn't affect the market yesterday because many traders have already been badly burnt by such stories.
He said the traders are demanding a higher level of proof before they will buy palladium again.
Also weighing on both metals' prices is the role of the chief supplier, the Soviet Union.
Many analysts believe that the Soviets' thirst for dollars this year to buy grain and other Western commodities and goods will bring them to the market whenever prices rally very much.
GRAINS AND SOYBEANS:
Prices closed mixed as contracts reacted to largely offsetting bullish and bearish news.
On the Chicago Board of Trade, soybeans for November delivery closed at $5.63 a bushel, down half a cent, while the December wheat contract rose three-quarters of a cent to $4.0775 a bushel.
Supporting prices was the announcement late Friday of additional grain sales to the Soviet Union.
But acting as a drag on prices was the improved harvest weather over the weekend and the prospect for continued fair weather this week over much of the Farm Belt.
Strong farmer selling over the weekend also weighed on prices.
SUGAR:
World prices tumbled, mostly from their own weight, according to analysts.
The March contract ended at 13.79 cents a pound, down 0.37 cent.
For the past week or so, traders have been expecting India to buy between 150,000 and 200,000 tons of refined sugar, and there have been expectations of a major purchase by Japan.
But with no reports of either country actually entering the market, analysts said, futures prices became vulnerable.
Developing countries such as India, some analysts said, seem to have made it a point to stay away whenever sugar reached the top of its trading range, around 14.75 cents, and wait for prices to return to the bottom of the range, around 13.50 cents.
But Erik Dunlaevy, a sugar analyst with Balfour Maclaine International Ltd., said the explanation for the latest drop in sugar prices is much simpler: Speculators, he said, "got too long too soon and ran into resistance around the old contract highs."
A PaineWebber analyst said that in light of a new estimate of a production increase of four million metric tons and only a modest increase in consumption, sugar isn't likely to rise above the top of its trading range without a crop problem in a major producing country.
COCOA:
Futures rallied modestly.
The December contract rose $33 a metric ton to $1,027, near its high for the day.
Gill & Duffus Ltd., a British cocoa-trading house, estimated that the 1989-90 world cocoa surplus would be 231,000 tons, down from 314,000 tons for the previous year.
Market technicians were encouraged by the price patterns, which in the past have preceded sharp rallies.
Recent prices for cocoa have been near levels last seen in the mid-1970s.
At such prices, according to Mr. Savaiko, bargain hunting and short-covering -- buying back of contracts previously sold -- by speculators isn't uncommon.
But Mr. Savaiko expects stepped-up producer selling at around the $1,040 to $1,050 level.
He also noted that a strong sterling market yesterday might have helped cocoa in New York as arbitragers took advantage of the currency move.
Sandra Kaul, research analyst at Shearson Lehman Hutton, said the market pushed higher mainly in anticipation of a late harvest in the Ivory Coast, a major cocoa producer.
Rockwell International Corp. bought out Ikegai Corp.'s interest in Ikegai-Goss, a joint venture of the two companies based in Tokyo.
The price was 3.6 billion yen ($25 million).
The agreement provides that Ikegai Corp. will remain a supplier to Ikegai-Goss, which makes printing presses for the newspaper industry.
The purchase was made by Rockwell Graphic Systems, a Chicago subsidiary of the El Segundo, Calif., concern.
Ikegai-Goss, which has about 200 employees, is among the industry leaders in keyless inking technology, which reduces time and materials waste when preparing a press for printing.
The bond market, which sometimes thrives on bad news, cheered yesterday's stock market sell-off and perceptions that the economy is growing weaker.
Early in the day, bonds rose modestly on economists' forecasts that this week's slate of economic data will portray an economy headed for trouble.
Such news is good for bonds because economic weakness sometimes causes the Federal Reserve to lower interest rates in an effort to stimulate the economy and stave off a recession.
For example, today the Department of Commerce is scheduled to release the September durable goods report.
The consensus forecast of 14 economists surveyed by Dow Jones Capital Markets Report is for a 1.2% drop in September orders.
That would follow a 3.9% advance in August.
Bonds received a bigger boost later in the day when stock prices moved broadly lower.
The Dow Jones Industrial Average fell 26.23 points to 2662.91.
"Bond investors have been watching stocks closely," said Joel Marver, chief fixed-income analyst at Technical Data Global Markets Group.
"When you get a big sell-off in equities, money starts to shift into bonds," which are considered safer, he said.
The Treasury's benchmark 30-year bond ended about 1/2 point higher, or up about $5 for each $1,000 face amount, while the yield slid to 7.93% from 7.98% Friday.
Municipals ended mixed, while mortgage-backed and investment-grade corporate bonds rose.
Prices of high-yield, high-risk corporate securities ended unchanged.
In more evidence of the growing division between "good" and "bad" junk bonds, a $150 million issue by Imo Industries Inc. was snapped up by investors while underwriters for Beatrice Co.'s $350 million issue are considering restructuring the deal to attract buyers.
In the Treasury market, analysts expect bond prices to trade in narrow ranges this week as the market takes in positive and negative news.
"On the negative side, the market will be affected by constant supply in all sectors of the market," said William M. Brachfeld, economist at Daiwa Securities America Inc.
"On the other hand, we have economic news that is {expected to be} relatively positive for the bond market.
We will go back and forth with a tilt toward slightly lower yields," he said.
Today, the Treasury will sell $10 billion of new two-year notes.
Tomorrow, Resolution Funding Corp., a division of a new government agency created to bail out the nation's troubled thrifts, will hold its first bond auction at which it will sell $4.5 billion of 30-year bonds.
So far, money managers and other bond buyers haven't shown much interest in the Refcorp bonds.
Analysts have mixed views about the two-year note auction.
While some say the auction should proceed smoothly, others contend that yesterday's sale of $2.58 billion of asset-backed securities by Ford Motor Credit Corp. may have siphoned some potential institutional buyers from the government's note sale.
The division of auto maker Ford Motor Co. made its debut in the asset-backed securities market with the second-largest issue in the market's four-year history.
The company offered securities backed by automobile loans through an underwriting group headed by First Boston Corp.
The issue yields 8.90% and carries a guarantee covering 9% of the deal from the company.
First Boston sweetened the terms from the original yield estimate in an apparent effort to place the huge offering.
The issue was offered at a yield nearly one percentage point above the yield on two-year Treasurys.
The only asset-backed deal larger than Ford's was a $4 billion offering by General Motors Acceptance Corp. in 1986.
Treasury Securities
Treasury bonds were 1/8 to 1/2 point higher yesterday in light trading.
The benchmark 30-year bond ended at a price of 102 3/32, compared with 101 17/32 Friday.
The latest 10-year notes were quoted late at 100 17/32 to yield 7.90%, compared with 100 3/32 to yield 7.97%.
The latest two-year notes were quoted late at 100 28/32 to yield 7.84%.
Short-term rates rose yesterday at the government's weekly Treasury bill auction, compared with the previous bill sale.
The Treasury sold $7.81 billion of three-month bills with an average discount rate of 7.52%, the highest since the average of 7.63% at the auction on Oct. 10.
The $7.81 billion of six-month Treasury bills were sold with an average discount rate of 7.50%, the highest since the average of 7.60% at the Oct. 10 auction.
The rates were up from last week's auction, when they were 7.37% and 7.42%, respectively.
Here are auction details:
Rates are determined by the difference between the purchase price and face value.
Thus, higher bidding narrows the investor's return while lower bidding widens it.
The percentage rates are calculated on a 360-day year, while the coupon-equivalent yield is based on a 365-day year.
Both issues are dated Oct. 26.
The 13-week bills mature Jan. 25, 1990, and the 26-week bills mature April 26, 1990.
Corporate Issues
Investment-grade corporates closed about 1/4 point higher in quiet trading.
In the junk bond market, Imo Industries' issue of 12-year debentures, considered to be one of the market's high-quality credits, was priced at par to yield 12%.
Peter Karches, managing director at underwriter Morgan Stanley & Co., said the issue was oversubscribed.
"It's a segmented market, and if you have a good, strong credit, people have an appetite for it," he said.
Morgan Stanley is expected to price another junk bond deal, $350 million of senior subordinated debentures by Continental Cablevision Inc., next Tuesday.
In light of the recent skittishness in the high-yield market, junk bond analysts and traders expect other high-yield deals to be sweetened or restructured before they are offered to investors.
In the case of Beatrice, Salomon Brothers Inc. is considering restructuring the reset mechanism on the $200 million portion of the offering.
Under the originally contemplated terms of the offering, the notes would have been reset annually at a fixed spread above Treasurys.
Under the new plan being considered, the notes would reset annually at a rate to maintain a market value of 101.
Price talk calls for the reset notes to be priced at a yield of between 13 1/4% and 13 1/2%.
Mortgage-Backed Securities
Activity in derivative markets was strong with four new real estate mortgage investment conduits announced and talk of several more deals in today's session.
The Federal National Mortgage Association offered $1.2 billion of Remic securities in three issues, and the Federal Home Loan Mortgage Corp. offered a $250 million Remic backed by 9% 15-year securities.
Part of the reason for the heavy activity in derivative markets is that underwriters are repackaging mortgage securities being sold by thrifts.
Traders said thrifts have stepped up their mortgage securities sales as the bond market has risen in the past two weeks.
In the mortgage pass-through sector, active issues rose but trailed gains in the Treasury market.
Government National Mortgage Association 9% securities for November delivery were quoted late yesterday at 98 10/32, up 10/32; and Freddie Mac 9% securities were at 97 1/2, up 1/4.
The Ginnie Mae 9% issue was yielding 8.36% to a 12-year average life assumption, as the spread above the Treasury 10-year note widened slightly to 1.46 percentage points.
Municipals
A $575 million San Antonio, Texas, electric and gas system revenue bond issue dominated the new issue sector.
The refunding issue, which had been in the wings for two months, was one of the chief offerings overhanging the market and limiting price appreciation.
But alleviating that overhang failed to stimulate much activity in the secondary market, where prices were off 1/8 to up 3/8 point.
An official with lead underwriter First Boston said orders for the San Antonio bonds were "on the slow side."
He attributed that to the issue's aggressive pricing and large size, as well as the general lethargy in the municipal marketplace.
In addition, he noted, the issue would normally be the type purchased by property and casualty insurers, but recent disasters, such as Hurricane Hugo and the Northern California earthquake, have stretched insurers' resources and damped their demand for bonds.
A $137.6 million Maryland Stadium Authority sports facilities lease revenue bond issue appeared to be off to a good start.
The issue was oversubscribed and "doing very well," according to an official with lead underwriter Morgan Stanley.
Activity quieted in the New York City bond market, where heavy investor selling last week drove yields on the issuer's full faith and credit backed bonds up as much as 0.50 percentage point.
Foreign Bonds
Japanese government bonds ended lower after the dollar rose modestly against the yen.
The turnaround in the dollar fueled bearish sentiment about Japan's bond market.
The benchmark No. 111 4.6% bond due 1998 ended on brokers' screens at a price of 95.39, off 0.28.
The yield rose to 5.38%.
West German bond prices ended lower after a day of aimless trading.
The benchmark 7% bond due October 1999 fell 0.20 point to 99.80 to yield 7.03%, while the 6 3/4% notes due July 1994 fell 0.10 to 97.65 to yield 7.34%.
British government bonds ended slightly higher in quiet trading as investors looked ahead to today's British trade report.
The benchmark 11 3/4% Treasury bond due 2003/2007 rose 1/8 to 111 21/32 to yield 10.11%, while the 12% issue of 1995 rose 3/32 to 103 23/32 to yield 11.01%.
"The croaker's done gone from the hook --
damn!
My language sure goes to pot down here on the coast."
The husky blond guide with the Aggie cap twists his face in mock fury.
"I got to get back to school and straighten out my English."
He has two more years at Texas A&M.
Right now he takes people out to fish in the bays behind the barrier islands that curve for hundreds of miles along the eastern coast of Texas, enclosing milky green lagoons behind ridges of sand and grassy scrub that rim the deep blue of the Gulf beyond.
There have been three days of hot, wind-swept rain, and now with the first sun we are after speckled seatrout, which with redfish provides most of the game fishing hereabouts.
The little radio fizzes as other boats want to see if we have found any fish -- spotting location is everything in this sport.
Negative answers crackle back.
The fish often are plentiful around the pilings of the old gas wells that dot the flat surface like the remains of sunken ships.
We go from one to the other.
The sun is hot now though it's only 8 in the morning.
The great silver clouds on the horizon build themselves on the pale water.
We cruise toward another set of pilings.
The guide scoops into a pail and puts a frantically wiggling croaker on the hook.
Then he casts out.
"Just wait for that tap-tap, that thump-thump.
It comes real gentle before it pulls.
Don't forget, trout have very soft mouths."
The radio queries again.
"Pickin' one or two," says the guide, chuckling.
"You can tell they've got nothin'."
A pair of black skimmers zig-zag past close to the surface.
Soon we have our limit of the shimmering fish stippled in rose-gold and black.
And we are the first back at the dock, where the great blue herons stand waiting by the cleaning benches.
The guide is young and he knows this business but he wants a different life after college, such as working for IBM and wearing a necktie.
This must be the last big stretch of the American seacoast that is "undeveloped."
There are a few ramshackle fishing towns with quiet atolls of resort houses nearby.
People are not apt to be self-conscious about the place or themselves.
Texas is big and beautiful and they live here, that's all.
Jutting out just to the north of us is the Blackjack Peninsula (after the oak, not the game) which forms the core of the Aransas Wildlife Refuge.
It is famous as the winter home of the whooping crane, that symbol of the destruction of wild America.
Last year a gunner shot a whooper by mistake thinking that it was a snow goose.
He paid an immense fine and was lucky, according to a local wag, to escape the gas chamber.
The peninsula comes off the vast southeastern alluvial plain with fields of rice and cotton and sorghum as far as the eye can see.
Near the coast there are dense coverts of live oak interspersed with marshes and prairies.
Deer, wild hog, armadillos and alligators are the glamour quadrupeds and the birds are innumerable, especially the herons and the spoonbills.
Above the blossoms of lantana and scarlet pea the inky-brown and golden palamedes butterfly floats on its lazy wingbeat.
Inland a few miles from the refuge there is a place called Tivoli, with a white church, a gas station and a grocery, the houses relatively close together for such a settlement in these parts.
"Tivoli Motel," I read a sign in the usual pronunciation of the name as we whoosh through.
"Here in south Texas we say Tie-vole-ee," my host gently corrects.
Mr. King is the director of the Foreign Press Center in New York.
AEG AG and Siemens AG said they will launch their previously announced joint venture for power semiconductors in January.
The two West German electronics concerns said they have set up European Power Semiconductor Co. to merge their activities in the field.
AEG and Siemens each will hold a 50% stake in the venture.
The joint venture will have nominal capital of 50 million marks ($26.9 million) and 700 employees.
It will develop, produce and market high-performance electronic parts.
Siemens is West Germany's largest electronics group.
AEG is 80% owned by Daimler-Benz AG, the country's biggest industrial concern.
Dana Corp. said its third-quarter net income fell 27% to $29.6 million, or 72 cents a share, from $40.7 million, or $1 a share, a year earlier.
Sales dropped 4% to $1.12 billion from $1.17 billion.
The company, which supplies transmissions and other drive-train parts to auto makers, said about half the earnings drop came from the "virtual collapse" of the Venezuelan auto industry.
The Venezuelan currency plummeted this year, making it difficult for auto makers there to afford imported parts.
Dana also said it was hurt by slumping U.S. truck sales and by a strike at a parts supplier.
The company, based in Toledo, Ohio, had said it expected reduced third-quarter profit.
Mary Anne Sudol, an analyst at Fitch Investors in New York, said automotive suppliers were reporting lower profit almost "across the board."
Southwood J. Morcott, Dana's president, said the company's decision to approve its normal fourth-quarter dividend indicated its underlying strength.
Norimasa Furuta, president of Japan's Mazda Motor Corp., said the Japanese car maker is planning joint production with Ford Motor Co. in Europe ahead of the European Community's 1992 integration.
Mr. Furuta didn't disclose further details of the arrangement at a news conference, but said the project would be undertaken with Ford's European subsidiary.
A Ford official confirmed in Tokyo that the U.S. motor vehicle maker is studying such an arrangement.
At age eight, Josephine Baker was sent by her mother to a white woman's house to do chores in exchange for meals and a place to sleep -- a place in the basement with the coal.
At age 19, she was a Paris sensation, transformed from unwanted child to international sex symbol in just over a decade.
It is the stuff of dreams, but also of traumas.
Only the bravest spirits survive such roller coasters.
And, for Ms. Baker, the ride was far from over.
Her bare breasts, her dancing, her voice, her beauty and, perhaps most famously, her derriere, were prominent attractions, but courage of a rare sort made her remarkable life possible.
Bricktop, another American black woman who found a measure of fame in Paris, said: "I don't think I've ever known anyone with a less complicated view of life, or whose life was more complicated than Josephine's."
Men were a constant complication.
Baker had lots of them.
But she didn't trust them and didn't reward trust.
As she saw one key love affair, the problem wasn't her infidelity, it was his jealousy.
Her appetite for children also was large.
She adopted 12 of assorted races, naming them the Rainbow Tribe, and driving her husband first to despair and then to Argentina.
She made money, but spent more.
Friends pitched in.
Finally, Prince Rainier and Princess Grace saved her with the offer of a house in Monaco.
Another lifelong complication, as Phyllis Rose makes clear in "Jazz Cleopatra: Josephine Baker in Her Time" (Doubleday, 321 pages, $22.50), was racism.
Baker had the good luck to arrive in 1925 Paris, where blacks had become exotic.
African art was in vogue and some intellectuals were writing breathlessly of a dawning age to be inspired by blacks.
To be exotic was to be patronized as well as prized, but for the most part Paris was a friendly island in a racist world.
Baker had bitter experience of bigotry from her St. Louis childhood and her days in New York theater, where she was judged too dark for an all-black chorus line (performing of course for all-white audiences).
Paris loved her at first sight.
"She just wiggled her fanny and all the French fell in love with her," sniffed the literary world's Maria Jolas, not entirely inaccurately.
"One can hardly overemphasize the importance of her rear end," Ms. Rose writes.
Ms. Rose, who teaches literature at Wesleyan University, quickly proceeds to overemphasize, claiming that Baker's dancing "had uncovered a new region for desire" and thereby ignoring centuries of tributes to the callipygous.
"Jazz Cleopatra" contains other, more important, false notes that undermine what is, for the most part, a lively account of a life already familiar from earlier works.
It is easy to see why Baker, a free spirit who broke many of the restraints convention places on women, attracts Ms. Rose, the author of "Parallel Lives," a wonderful study of Victorian marriage.
Still, even the title raises questions about the author's vision of her subject.
Baker's art was jazz only by the widest stretch of the term.
To find parallels, other than sexual appeal, with Cleopatra, requires an equal stretch.
Baker was 68 years old when she died in Paris, two days after the sold-out opening of her newest show: a movie-like ending to what was a cinematic life.
In fact, Ms. Baker played scenes in Casablanca that could have made it into "Casablanca."
During World War II, her uncomplicated view of life led her to the conclusion that the Nazis were evil and must be resisted, a decision made by only about 2% of French citizens.
She was devoted to Charles de Gaulle's cause, accepting great financial sacrifice and considerable risk to become first a spy and then a one-woman USO tour for the forces of Free France.
In Humphrey Bogart's nightclub, Victor Laszlo leads Free French sympathizers in "La Marseillaise" to drown out the Nazis.
The night the Germans occupied all of France, Baker performed in Casablanca.
The Free French wore black arm bands, and when she sang "J'ai deux amours" they wept.
Ms. Rose is best on the early years and World War II.
In her introduction, Ms. Rose writes that she feels she has much in common with Baker, but as "Jazz Cleopatra" goes on, it seems more rushed, as though the author were growing less interested.
It doesn't help that sometimes Ms. Rose's language fails to deliver the effect she appears to want.
One chapter opens: "World War II was not one of France's glorious moments."
Elsewhere, in an attempt to explain without stating it plainly that Baker had a large gay following later in her career when she was an overdressed singer rather than underdressed dancer, Ms. Rose writes: "She was a female impersonator who happened to be a woman."
One devoted fan who fell under Baker's spell in 1963 and began collecting Baker memorabilia was Bryan Hammond.
In "Josephine Baker" (Jonathan Cape, 304 pages, $35), which was published in Britain last year and distributed in the U.S. this month, Mr. Hammond has used his collection to produce an album of photographs and drawings of the star.
The text by Patrick O'Connor is a tough read, but the pictures make her magnetism clear and help explain why Ernest Hemingway called Baker "The most sensational woman anybody ever saw.
Or ever will."
Mr. Lescaze is foreign editor of the Journal.
Manville, having rid itself of asbestos, now sells fiberglass, forest products, minerals and industrial goods.
Heady stuff it's not.
But Manville's ownership is unusual, and it has caught the eye of some canny -- and patient -- investors.
The Denver-based concern, which emerged from bankruptcy-law proceedings late last year, is controlled by the Manville Personal Injury Settlement Trust.
The trust, which owns 80% of Manville's stock on a fully diluted basis, is a separate legal entity that is settling claims with asbestos victims.
When and if the trust runs out of cash -- which seems increasingly likely -- it will need to convert its Manville stock to cash.
But as an 80% owner, if it tried to sell much of its stock in the market, it would likely depress the price of its shares.
Some investors say there is a good chance that the trust will, instead, seek to convert the company's shares to cash, in some sort of friendly restructuring that wouldn't involve just dumping stock on the market.
"Their principal asset is Manville common stock," says Jeffrey Halis, who runs Sabre Associates, an investment fund that owns Manville shares.
"If they tried to sell, they'd be chasing their own tail.
What makes the most sense is to find someone who wants to buy the whole company or cause a recapitalization of all shares."
The trust isn't commenting on when it might need to liquefy its Manville stock.
However, the trust's cash flow from investments is far short of its payments to asbestos victims.
Its cash and liquid securities fell by $338 million in the first six months of 1989.
The trust also will receive $75 million a year starting in 1991 on a bond it holds from Manville.
And, beginning in 1992, it will have a claim on as much as 20% of Manville's annual net income.
Even so, the trust would seem to be facing a cash crunch.
As of June 30, it had settled only about 15,000 of the 81,000 received claims from asbestos victims, for an average of $40,424 each.
(The average should drop over time, since the most expensive claims are being settled first).
And as of midyear, settled but unpaid claims amounted to $136 million -- more than half the trust's total of $268 million in cash and marketable securities.
"At some point, we're going to need an infusion of funds," a person close to the trust says.
Even before then, the trust may be eager to unload Manville stock.
It doesn't pay a dividend, and this trust needs income.
Moreover, with 88% of its assets tied up in Manville, the trust is badly in need of diversification.
"Obviously, a diversified portfolio would have less risk," the person close to the trust says.
Manville itself doesn't rule out a restructuring.
Though the ink is barely dry on its new, post-bankruptcy law structure, Bill Bullock, Manville's head of investor relations, says the company is continually pondering "whether there is a better way to be structured.
We understand that the trust is ultimately going to need to sell some of our shares," he says.
Of course, one option would be for Manville to buy out the trust's shares -- which would do little to benefit public stockholders.
But the trust, in most cases, is forbidden from seeking a buyer for only its shares before November 1993.
And both the trust and Manville are seeking to avoid the bad publicity that, in the asbestos era, tarred the Manville name.
Thus, analysts say, the trust is unlikely to do anything that would hurt Manville's other shareholders.
"This is a rare case of a company with a big majority holder which will probably act in the interests of the minority holders," one investor says.
Even if there is no restructuring, Manville seems to be attractive long-term.
Its stock, at 9 5/8, trades at about 8 1/2 times estimated 1989 earnings -- an appropriately low multiple for a company with recession-sensitive customers.
Mr. Bullock says 45% of revenues are tied to construction.
Analysts predict little or no near-term growth.
They are, nonetheless, high on Manville's management.
"It's one of the best in the business," says Salomon Brothers analyst Stephen Dobi.
And he says Manville has the financial flexibility to buy other companies at the best possible momentwhen other construction-related firms are hurting and selling cheap.
With a conservative debt-to-equity ratio of 1-to-1 -- and $329 million in cash -- Manville is indeed actively on the prowl.
So far, as a price-conscious shopper, Manville hasn't bought much.
Paul Kleinaitis, an analyst at Duff & Phelps, says, "Even though they have borrowing power, they have been disciplined about acquisitions."
And Mr. Kleinaitis says that with 80% of its stock in friendly hands, Manville is the rare publicly traded company that can ignore short-term stock fluctuations and plan for the long haul.
Manville (NYSE; Symbol: MVL)
Business: Forest products and roofing
Year ended Dec. 31, 1988: Sales: $2.06 billions Net loss: $1.30 billion*
Third quarter, Sept. 30, 1989: Per-share earnings: 30 cents vs. 44 cents**
Average daily trading volume: 74,351 shares
Common shares outstanding: 120 million
*Includes $1.29 billion extraordinary charge.
**Year ago figure is restated.
Emerson Electric Co. and Robert Bosch G.m.b.H. said the Federal Trade Commission has requested additional information from the two companies about their announced intention to acquire Vermont American Corp. for $40 a share, or about $440 million.
Yesterday, in composite trading on the American Stock Exchange, Vermont American common closed at $39.75, off 25 cents.
The FTC's request was "not unusual" and Emerson will make a "full and prompt" response, according to a spokesman.
Spokesmen for Emerson and Vermont American, which has agreed to be acquired, said they don't anticipate "any problems" with the completion of the transaction.
An FTC spokesman said the matter is "in a non-public posture at this time" and declined to comment further.
Emerson and Bosch, through their joint acquisition arm, Maple Acquisition, have begun a cash tender offer for all of Vermont's common shares outstanding.
The offer, set to expire Nov. 1, may be extended pending the timing and resolution of the FTC request, the companies said.
St. Louis-based Emerson and Stuttgart-based Bosch make electrical and electronic products, including power tools.
The Vermont American acquisition is designed to enhance their position in the accessories portion of the power-tool industry.
Santa Fe Pacific Corp. is preparing a plan to sell a 20% stake in its large real estate unit to a California public employee pension fund for $400 million, after which it would spin off the realty operation to shareholders.
The plan places an indicated value on the real estate operation, Santa Fe Pacific Realty Corp., of $2 billion.
Santa Fe Pacific directors are expected to review the plan at a meeting today, according to people familiar with the transaction.
If approved, the sale is expected to close by year's end, with the spinoff occurring by the end of 1992.
In composite trading on the New York Stock Exchange yesterday, Santa Fe Pacific closed at $20.625, down 25 cents.
Santa Fe Pacific Realty is a major California land and building owner whose prime properties include 1,850 undeveloped acres in the San Francisco Bay area, and several office sites.
A spokesman said the properties survived without significant damage in last week's Northern California earthquake.
As a result of the partial sale and spinoff, the $56 billion California Public Employees Retirement System would obtain two seats on the board of the real estate operation, according to officials of the fund, who described the plan.
A spokesman for Chicago-based Santa Fe Pacific confirmed that negotiations were being held with the fund.
Also holding two seats each on the board, they said, would be Olympia & York Developments Ltd., controlled by the Reichmann family of Canada, and Itel Corp., controlled by Chicago businessman Sam Zell.
The Reichmanns and Mr. Zell, the largest holders of Santa Fe Pacific stock, have been looking for ways to raise the value of their investments, including possible spinoffs.
Itel bought a 17% stake in Sante Fe Pacific last year and Olympia & York later purchased about a 20% stake; they would have interests in the new realty company in line with their holdings in Sante Fe Pacific.
The sale and spinoff of the real estate unit is the first phase of what could lead to the breakup of Santa Fe Pacific into free-standing companies for its railroad and energy operations, as well as real estate.
The debt-laden parent has been under pressure from large shareholders to boost the company's share price.
At the same time it has been caught in an earnings squeeze.
The California pension fund's planned investment in the real estate unit is unusual.
Pension funds rarely own as much as a 20% stake in what is expected to be a publicly traded company.
In addition, pension funds are rarely given seats on company boards and most often try to avoid them because of legal concerns.
But fund officials said the Santa Fe Pacific Realty investment provides an opportunity to buy a stake in a large real estate portfolio heavily weighted with California properties.
It also marks a "major commitment to {real estate} development, which we haven't been involved with before," said Dale Hanson, the fund's executive director.
Under the proposed plan, the fund would also lend Santa Fe Pacific Realty $75 million in the form of a note that would be convertible into additional shares of the realty company after the second year at the then-prevailing market price.
The note would accrue interest at the rate of 13.5% a year, which would be payable to the fund after five years, according to Stephen E. Roulac, a real estate consultant working for the fund.
The purpose of the note is to provide added capital for the spun-off company in a form that will save it spending cash on immediate interest payments, Mr. Roulac said.
The spun-off concern "clearly will be one of the dominant real estate development companies with a prime portfolio," he said.
For the last year, Santa Fe Pacific has redirected its real estate operations toward longer-term development of its properties, hurting profits that the parent had generated in the past from periodic sales from its portfolio.
Real estate operating income for the first nine months fell to $71.9 million from $143 million a year earlier, the company said.
In a statement late yesterday, Santa Fe Pacific's chairman, Robert D. Krebs, said that Santa Fe Pacific Realty would repay more than $500 million in debt owed to the parent before the planned spinoff.
That would help reduce Santa Fe Pacific's remaining debt to about $600 million from a high of $3.7 billion in early 1988.
It wasn't clear where Santa Fe Pacific expected to obtain the payment of more than $500 million, which would be well above the $400 million that California pension fund officials say they plan to provide.
The realty unit might take on new debt or obtain additional investors, among other possibilities.
The Santa Fe Pacific spokesman declined to comment on that aspect, saying the deal was still under negotiation.
Santa Fe Pacific Realty owns 2.8 million acres of property, including 219 buildings with more than 11 million square feet of space.
It also holds nearly 40,000 acres of raw land with development potential, but under a previously announced strategy, the company has targeted building on 5,400 acres in California, Arizona and the Chicago area.
Among those are the 1,850 acres in the San Francisco Bay area, including 208 acres in the Mission Bay area.
The California pension fund, which has $16 billion already invested in real estate and mortgages, could be a valuable funding source for that development, although it isn't obliged to make further investments.
The fund is the nation's largest public employee fund, and it has a growing cash flow now topping $3 billion a year.
Fund officials negotiated the final structure of the proposed deal with Santa Fe Pacific, but they were approached with the idea by real estate brokers JMB Realty Corp. of Chicago.
JMB officials are expected to be hired to represent the pension fund on the Santa Fe Pacific Realty board, Mr. Roulac said, to insulate the fund from potential liability problems.
GAF, Part III is scheduled to begin today.
After two mistrials, the stakes in the stock manipulation trial of GAF Corp. and its vice chairman, James T. Sherwin, have changed considerably.
The first two GAF trials were watched closely on Wall Street because they were considered to be important tests of the government's ability to convince a jury of allegations stemming from its insider-trading investigations.
In an eight-count indictment, the government charged GAF, a Wayne, N.J., chemical maker, and Mr. Sherwin with illegally attempting to manipulate the common stock of Union Carbide Corp. in advance of GAF's planned sale of a large block of the stock in 1986.
The government's credibility in the GAF case depended heavily on its star witness, Boyd L. Jefferies, the former Los Angeles brokerage chief who was implicated by former arbitrager Ivan Boesky, and then pointed the finger at Mr. Sherwin, takeover speculator Salim B. Lewis and corporate raider Paul Bilzerian.
The GAF trials were viewed as previews of the government's strength in its cases against Mr. Lewis and Mr. Bilzerian.
Mr. Jefferies's performance as a witness was expected to affect his sentencing.
But GAF's bellwether role was short-lived.
The first GAF trial ended in a mistrial after four weeks when U.S. District Judge Mary Johnson Lowe found that a prosecutor improperly, but unintentionally, withheld a document.
After 93 hours of deliberation, the jurors in the second trial said they were hopelessly deadlocked, and another mistrial was declared on March 22.
Meanwhile, a federal jury found Mr. Bilzerian guilty on securities fraud and other charges in June.
A month later, Mr. Jefferies was spared a jail term by a federal judge who praised him for helping the government.
In August, Mr. Lewis pleaded guilty to three felony counts.
Nevertheless, the stakes are still high for the players directly involved in the GAF case.
The mistrials have left the reputations of GAF, Mr. Sherwin and GAF Chairman Samuel Heyman in limbo.
For Mr. Sherwin, a conviction could carry penalties of five years in prison and a $250,000 fine on each count.
GAF faces potential fines of $500,000 for each count.
Individuals familiar with the case said that throughout September, defense attorneys were talking with the government in an effort to prevent a trial, but by the end of the month the talks had ended.
There is much speculation among attorneys not involved that the strategy of GAF's attorney, Arthur Liman, and Mr. Sherwin's counsel, Stephen Kaufman, will include testimony by Mr. Sherwin or Mr. Heyman.
Neither testified at the previous trials.
For now, defense attorneys are tight-lipped about their plans.
Max Gitter, another GAF defense attorney, said yesterday, "As we go in for the third time, Yogi Berra's famous line is apt: `It's deja vu all over again.'"
DALKON SHIELD CLAIMANTS hope to stop reorganization-plan appeal.
Attorneys for more than 18,000 women who claim injuries from the Dalkon Shield contraceptive device have asked the U.S. Supreme Court to refuse to hear an appeal of the bankruptcy-law reorganization plan for A.H. Robins Co., which manufactured the device.
The dispute pits two groups of claimants against each other.
Baltimore attorney Michael A. Pretl and 17 other attorneys representing 18,136 claimants in the U.S. and abroad argue that the appeal would delay -- and perhaps even destroy -- a $2.38 billion settlement fund that is the centerpiece of the reorganization plan.
The bankruptcy-court reorganization is being challenged before the Supreme Court by a dissident group of claimants because it places a cap on the total amount of money available to settle claims.
It also bars future suits against Robins company officials, members of the Robins family and Robins's former insurer, Aetna Life & Casualty Co.
The latter provision is "legally unprecedented," said Alan B. Morrison, a public interest lawyer in Washington, D.C., who is challenging the plan on behalf of 900 claimants.
More than 100,000 claims against Robins are pending.
The company made and marketed the Dalkon Shield in the early 1970s amid mounting evidence that it could cause serious injuries.
Robins has been in proceedings under Chapter 11 of the U.S. Bankruptcy Code since August 1985; such proceedings give it protection from creditor lawsuits while it works out a plan for paying its debts.
American Home Products Corp. wants to acquire Robins, but only if all legal challenges to the plan are exhausted.
In a brief filed with the Supreme Court last week, Mr. Pretl criticizes the appeal for raising "abstract" and "theoretical" legal issues, while jeopardizing the proposed reorganization and the settlement payments to claimants.
The Supreme Court is scheduled to consider the case Nov. 3 and may issue a decision as early as Nov. 6.
JURY'S CRIMINAL CONVICTION under Superfund law is a first.
Charles A. Donohoo, sole proprieter of a Louisville, Ky., demolition company, was found guilty of violating the Superfund law as well as the Clean Air Act.
Criminal convictions under the federal Superfund law are rare, and the decision is the first jury verdict in such a case.
Under Superfund, those who owned, generated or transported hazardous waste are liable for its cleanup, regardless of whether their actions were legal at the time.
Environmental lawyers say virtually all of the Superfund cases to date have involved civil penalties designed to insure cleanup of past polluting activities.
But Superfund also contains a criminal provision concerning the release of toxic substances into the environment.
In 1986 Congress strengthened the penalty by making it a felony.
Mr. Donohoo was convicted in Louisville late last month of violating Superfund by failing to report the release of asbestos into the environment from a building he was demolishing.
He was also convicted of failing to properly remove asbestos from the building, a violation of the Clean Air Act.
The government sought a criminal penalty because "no cleanup is possible here.
Once {asbestos} is released into the environment, it can lodge anywhere," says Richard A. Dennis, the assistant U.S. attorney who prosecuted the case.
Mr. Donohoo is scheduled to be sentenced Dec. 11.
His lawyer could not be reached for comment.
Mr. Donohoo faces as much as three years in prison and a $250,000 fine for the Superfund conviction and as much as one year in prison and a $100,000 fine for the violation of the Clean Air Act.
TED BUNDY'S LAWYERS switch to victims' side in death-sentence case.
Wilmer, Cutler & Pickering, the Washington, D.C., law firm that spent over $1 million fighting the execution of mass-murderer Ted Bundy -- who eventually was executed -- has taken on another death penalty case before the Supreme Court, this time on the side of the family of four murder victims in Arkansas.
The law firm has filed a friend-of-the-court brief jointly with the Washington Legal Foundation, a conservative legal group.
The key issue in the case, which the law firm is handling without a fee, or pro bono, is whether a person sentenced to death can voluntarily waive his rights of appellate review.
The murderer, Ronald Gene Simmons, was convicted of killing 14 people.
Another murderer on death row has appealed Mr. Simmons's death sentence in a "next friend" capacity.
Wilmer Cutler's brief argues that there is no mandatory appellate review of capital sentences and that the inmate who filed the appeal lacks proper standing.
P.J. Mode, Wilmer Cutler's managing partner, says the trial team that represented Mr. Bundy was asked by the firm's pro bono committee whether the new case posed a conflict and that no objections were raised.
The coupling of the law firm and the Washington Legal Foundation is odd also, because Wilmer Cutler was one of the firms singled out for criticism two years ago by the conservative legal group for displaying a liberal bias in its pro bono work.
"We give them a lot of credit for taking this case," says WLF's Alan Slobodin.
THE CASE OF THE FAKE DALIS:
In federal court in Manhattan, three defendants pleaded guilty to charges of fraud in connection with the sale of fake Salvador Dali lithographs.
James Burke and Larry Evans, formerly owners of the now-defunct Barclay Gallery, and Prudence Clark, a Barclay sales representative, were charged with conducting high-pressure telephone sales in which they misrepresented cheap copies of Dali artwork as signed, limited-edition lithographs.
The posters were sold for $1,300 to $6,000, although the government says they had a value of only $53 to $200 apiece.
Henry Pitman, the assistant U.S. attorney handling the case, said about 1,000 customers were defrauded and that Barclay's total proceeds from the sales were $3.4 million.
Attorneys for Messrs. Burke and Evans and Ms. Clarke said that although their clients admitted to making some misrepresentations in the sales, they had believed that the works were authorized by Mr. Dali, who died in January.
The posters were printed on paper pre-signed by Mr. Dali, the attorneys said.
Westamerica Bancorp. said Richard W. Decker resigned as president and chief executive officer after only a year on the job because of "differences" with the board.
The banking company couldn't be reached to comment beyond a written announcement.
It didn't specify the nature of the differences, saying only that they related to "management style" and "strategic objectives."
Westamerica said Mr. Decker's posts were assumed by David Payne, Westamerica's chairman, who at 34 years of age becomes one of the youngest chief executives of a sizable bank in the country.
Mr. Decker is about 45 years old.
Neither Mr. Payne nor Mr. Decker could be reached to comment.
Westamerica has about $1.3 billion of assets and is the largest independent bank in northern California.
It controls about 35% of the affluent Marin County market across the Golden Gate bridge from San Francisco.
Mr. Decker's resignation surprised many industry officials.
He was brought to the company in September 1988 after 15 years at Los Angeles-based First Interstate Bancorp.
The bank had been suffering in late 1987 from a slew of bad real estate loans made in Arizona.
When he was hired, Mr. Payne lauded Mr. Decker's "extraordinary . . . skills" and his "outstanding reputation as one of the West's brightest bankers."
Though the bank isn't performing as well as some of its competitors in the lucrative California market, its condition has improved since Mr. Decker took over.
For the six months ended June 30, it earned $3.1 million, or 61 cents a share, compared with net income of $2.4 million, or 41 cents a share, a year earlier.
Its stock also has risen lately, at least partly because it is considered a possible takeover candidate.
Interstate banking is scheduled to begin in California in 1991, and larger California banks, such as Wells Fargo & Co., have been paying fat premiums to buy smaller banks to control markets before any out-of-state banks enter the fray.
In American Stock Exchange composite trading yesterday, Westamerica closed at $22.25 a share, down 75 cents.
Varian Associates Inc., Palo Alto, Calif., reported fiscal fourth-quarter profit plunged more than 95% to $1 million, or five cents a share, from $24.2 million, or $1.10 a share, in the year-earlier quarter.
The diversified electronics company blamed the decline in the quarter ended Sept. 29, on previously reported operating problems in its Electron Devices & Systems Group.
For the full fiscal year, Varian posted a 13% profit rise to $31.5 million, or $1.53 a share, up from $27.8 million, or $1.27 a share, last year.
Sales for the year rose almost 15% to $1.34 billion from $1.17 billion last year.
A profit last year in both the quarter and year included a net gain of $9.6 million, or 44 cents a share, from the sale of a division.
Additionally, the full-year profit last year reflected an after-tax restructuring charge of $22.8 million, or $1.04 a share.
Shares of Varian, which last month warned there would be a fourth-quarter plunge, closed at $22.75, down 62.5 cents in composite trading on the New York Stock Exchange.
Sales rose 18% in the fiscal fourth quarter to $364.1 million from $307.9 million on the strength in semiconductors and other products.
In a last-ditch effort to keep its sales force and customer base, Integrated Resources Inc. said it agreed in principle to transfer ownership of its broker-dealer subsidiary to two of its top executives.
The financial-services firm, struggling since summer to avoid a bankruptcy-law filing after missing interest payments on about $1 billion of debt, will retain the right to regain the subsidiary.
It said it will exercise that right only if it sells substantially all of its other core businesses.
It also can sell the right to regain the subsidiary to another party.
Also, the broker-dealer subsidiary, Integrated Resources Equity Corp., was renamed Royal Alliance Associates Inc.
Because of Integrated's widely reported troubles, the unit's representatives had been requesting a name change.
Royal Alliance, to which the 3,900 representatives' licenses will be transferred, is a shell company Integrated owns.
In the transaction, Integrated will transfer 100% ownership of the subsidiary to Gerard M. Lavin, executive vice president of Integrated and head of back-office operations at the subsidiary, and Gary W. Krat, executive vice president of the parent and president of the subsidiary.
Integrated will pump $3.5 million to $4 million into Royal Alliance as initial funding.
In an interview, Mr. Krat said that based on criteria yet to be determined, he expects to distribute 49% of Royal Alliance to the representatives, who sell Integrated's insurance and mutual-fund products.
If Integrated regains Royal Alliance, the representatives will retain their 49% ownership.
Mr. Krat indicated that completion of the transaction could take several weeks, and it wasn't immediately clear what would happen to the broker-dealer subsidiary if Integrated files for bankruptcy-law protection in the meantime.
The subsidiary isn't expected to be profitable for at least one year.
If Integrated regains the unit, it would receive any profit the unit reports, even while the unit is independent.
If the deal closes, the two officers will draw salaries from the independent operation, not from Integrated.
Many aspects of the agreement were worked out Wednesday in Chicago, when Integrated senior managers met with about 150 representatives.
"I think it was something that we and they thought was constructive," said Stephen D. Weinroth, chairman and co-chief executive officer of Integrated.
Integrated made its announcement after the market closed.
In New York Stock Exchange Composite trading, Integrated shares closed at $1.125, up 12.5 cents.
The dollar weakened in indecisive trading as foreign-exchange dealers awaited fresh economic news that they hope will jolt the U.S. unit out of its narrow ranges.
The Canadian dollar climbed to its highest level against the U.S. dollar since late August, prompting the Bank of Canada to sell the Canadian currency on the market.
Traders say that after a week of nervously tracking every development on Wall Street, the foreign-exchange market has settled back to catch its breath ahead of new U.S. economic data.
They noted, however, that a 26-point drop in the Dow Jones Industrial Average gave the dollar a sharp nudge downward late in the day.
In late New York trading yesterday, the dollar was quoted at 1.8470 marks, down from 1.8578 marks late Friday, and at 141.90 yen, down from 142.43 yen late Friday.
Sterling was quoted at $1.6030, up from $1.5885 late Friday.
In Tokyo Tuesday, the U.S. currency opened for trading at 141.80 yen, down from Monday's Tokyo close of 142.40 yen.
The market's attention is especially focused on a preliminary report on the U.S. third-quarter gross national product, due out Thursday, which could show the economy is continuing to expand at a relatively brisk pace.
The consensus view on real GNP, the total value of the U.S. output of goods and services adjusted for inflation, calls for a 2.3% gain on an annual basis, slowing somewhat from the second quarter's 2.5%, but still fairly strong.
Few market participants expect the U.S. unit to rally sharply on the news, if it turns out as expected.
Many contend that the report may overstate the economy's health and predict the third-quarter figures may be the last vigorous statistics for some time to come.
"Everyone is waiting for GNP," says Walter Simon, an assistant treasurer with Bank Julius Baer & Co.
"Yet even a relatively strong number -- 2.8% to 2.9% -- won't alter the market's view that the economy is softening."
Hubert Pedroli, managing director of foreign exchange at Credit Suisse in New York, adds, "The market sees this as the last piece of good news."
Mr. Pedroli notes that the GNP deflator, a measure of inflation, is expected to slow, which would give the Federal Reserve more room to ease key U.S. rates.
Analysts predict a 3.5% rise in the deflator, after climbing 4.6% in the second quarter.
They note that when an unexpectedly sharp widening in the U.S. trade gap in August was reported earlier this month, hopes for a sustained narrowing of the trade deficit were dashed and sentiment gripped the market that the U.S. economy was losing its momentum.
A 190-point plunge in U.S. stock shares compounded the view, they say.
"Everyone is extremely convinced the economy is slowing," says one senior New York dealer.
"If we're not headed for a recession, we're certainly headed for a major slowdown."
While the market expects little reaction from news of U.S. durable goods orders, scheduled for release today, participants note that the figures will probably serve to reinforce this bearish sentiment.
U.S. durable goods orders are expected to show a decline of 1.2% in September, according to economists.
The anticipated drop follows a 3.9% rise in August.
Traders, however, are quick to point out that while there is little enthusiasm for buying dollars, the U.S. unit has found a "natural bottom" at about 1.85 marks and 140 yen.
Its resilience around these levels is pegged to persistent investor demand for the greenback, especially in Japan.
On the Commodity Exchange in New York, gold for current delivery settled at $367 an ounce, down 30 cents.
Estimated volume was a very light one million ounces.
In early trading in Hong Kong Tuesday, gold was quoted at $366.79 an ounce.
Liz Claiborne Inc., New York, said its third-quarter net income jumped 62%, citing continued strength in apparel sales and the start of shipments of its new product lines: a men's fragrance, large-size women's apparel and casual knitwear.
The big apparel maker and retailer said that its net income in the latest quarter increased to $51.1 million, or 58 cents a share, from $31.7 million, or 36 cents a share, a year earlier.
Sales in the quarter gained 29% to $410.4 million from $317.7 million a year earlier.
Claiborne shares closed yesterday at $25.125, up 50 cents, in national over-the-counter trading.
Claiborne's directors also declared its regular cash dividend payment of five cents a share payable on Dec. 5 to shareholders of record at the close of business on Nov. 13.
For the nine months, net income rose 48% to $124.2 million, or $1.41 a share, from $83.8 million, or 96 cents a share a year earlier.
Sales gained 16% to $1.03 billion from $894 million.
Tokyo stocks closed firmer Monday, with the Nikkei index making its fifth consecutive daily gain.
Stocks also rose in London, while the Frankfurt market was mixed.
In Tokyo, the Nikkei index added 99.14 to 35585.52.
The index moved above 35670 at midmorning, nearly reaching the record of 35689.98 set Sept. 28.
But the market lost part of the early gains on index-linked investment trust fund selling.
In early trading in Tokyo Tuesday, the Nikkei index rose 1.08 points to 35586.60.
On Monday, traders noted that some investors took profits against the backdrop of the Nikkei's fast-paced recovery following its plunge last Monday in reaction to the Oct. 13 drop in New York stock prices.
But overall buying interest remained strong through Monday, with many observers saying they expect the Nikkei to continue with moderate gains this week.
Turnover remained relatively small.
Volume on the first section was estimated at 600 million shares, down from 1.03 billion shares Friday.
The Tokyo stock price index of first section issues was up 7.81 at 2687.53.
Relatively stable foreign currency dealings Monday were viewed favorably by market players, traders said.
But institutional investors may wait a little longer to appraise the direction of the U.S. monetary policy and the dollar, traders said.
Hiroyuki Wada, general manager of the stock department at Okasan Securities, said Monday's trading was "unfocused."
He said investors were picking individual stocks based on specific incentives and the likelihood of a wider price increase over the short term.
The selective approach blurred themes such as domestic-demand issues, large-capitalization issues or high-technology shares, which had been providing at least some trading direction over the past few weeks, Mr. Wada said.
Investors took profits on major construction shares, which advanced last week, shifting their attention to some midsize companies such as Aoki Corp., Tobishima and Maeda.
Aoki gained 60 yen to 1,480 yen ($10.40).
Some pharmaceutical shares were popular on rumors related to new products to be introduced at a cancer conference that opened in Nagoya.
Teijin was up 15 at 936, and Kyowa Hakko gained 30 to 1,770.
Mochida advanced 40 to 4,440.
Fujisawa continued to attract investors because of strong earning prospects stemming from a new immune control agent.
Fujisawa gained 50 to 2,060.
Kikkoman was up 30 to 1,600, receiving investor interest for its land property holdings near Tokyo, a trader said.
London prices closed modestly higher in the year's thinnest turnover, a condition that underscored a lack of conviction ahead of a U.K. balance of payments report Tuesday.
Limited volume ahead of the September trade data showed the market is nervous, but dealers added that the day's modest gains also signaled some support for London equities.
They pegged the support largely to anticipation that Britain's current account imbalance can't be much worse than the near record deficits seen in July and August.
"It's a case of the market being too high to buy and too afraid to sell," a senior dealer with Kleinwort Benson Securities said.
"It's better to wait."
The Financial Times 100-share index finished 10.6 points higher at 2189.7.
The 30-share index closed 11.6 points higher at 1772.6.
Volume was 276.8 million shares, beneath the year's previous low of 280.5 million shares Sept. 25, the session before the August trade figures were released.
Analysts' expectations suggest a September current account deficit of #1.6 billion ($2.54 billion), compared with August's #2.0 billion deficit.
Dealers, however, said forecasts are broadly divergent with estimates ranging between #1 billion and #2 billion.
"The range of expectations is so broad," a dealer at another major U.K. brokerage firm said, "the deficit may have to be nearer or above #2 billion for it to have any impact on the market."
Lucas Industries, a British automotive and aerospace concern, rose 13 pence to 614 pence after it said its pretax profit for the year rose 28%.
Share prices on the Frankfurt stock exchange closed narrowly mixed in quiet dealings after recovering most of their early losses.
The DAX index eased 0.99 point to end at 1523.22 after falling 5.5 points early in the session.
Brokers said the declines early in the day were partly caused by losses of the ruling Christian-Democratic Union in communal elections in the state of Baden-Wuerttemberg.
The start of a weeklong conference by the IG Metall metal worker union in Berlin is drawing attention to the impending wage negotiations, which could boost companies' personnel costs next year, they said.
But there was little selling pressure, and even small orders at the lower levels sufficed to bring the market back to Friday's opening levels.
Traders said the thin trading volume points to continued uncertainty by most investors following last Monday's record 13% loss.
The market is still 4% short of its level before the plunge, and analysts aren't sure how long it will take until the DAX has closed that gap.
But Norbert Braeuer, chief trader at Hessische Landesbank Girozentrale (Helaba), said he expects share prices to move upward in the coming weeks.
Banking stocks were the major gainers Monday amid hope that interest rates have peaked, as Deutsche Bank and Dresdner Bank added 4 marks each to 664 marks ($357) and 326 marks, respectively.
Commerzbank gained 1 to 252.5.
Auto shares were mixed, as Daimler-Benz firmed 2 to 723, Bayerische Motoren Werke lost the same amount to 554, and Volkswagen inched down 1.4 to 451.6.
Elsewhere, prices closed higher in Amsterdam, lower in Zurich, Stockholm and Milan, mixed in Brussels and unchanged in Paris.
Shares closed higher in Hong Kong, Singapore and Manila, and were lower in Sydney, Seoul and Taipei.
Wellington was closed.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
Enviropact Inc. said it entered into an agreement in principle to sell its pump and tank division and drilling division to GSX Chemical Services for $4 million.
The Miami-based environmental engineering concern said GSX Chemical also will assume about $1.6 million in debt related to those divisions.
Further, GSX will buy $1 million of Enviropact common stock, at $2.625 a share, plus an option to acquire an additional $1.5 million of common at the same price, the company said.
In American Stock Exchange composite trading yesterday, Enviropact closed at $3 a share, up 25 cents.
Enviropact said the two divisions account for about $8 million of the company's $20 million in annual revenue.
The transaction is expected to close within about 20 days, the company added.
Enviropact said the proceeds will be used as working capital for expansion and to pay its existing tax liability of about $1.5 million that was due Sept. 15.
GSX is a unit of Laidlaw Transportation Ltd. of Burlington, Canada.
Monday, October 23, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 8 3/4% high, 8 11/16% low, 8 11/16% near closing bid, 8 3/4% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.50% 2 to 44 days; 8.25% 45 to 69 days; 8.40% 70 to 89 days; 8.20% 90 to 119 days; 8.05% 120 to 149 days; 7.90% 150 to 179 days; 7.50% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.575% 30 days; 8.50% 60 days; 8.45% 90 days.
CERTIFICATES OF DEPOSIT: 8.09% one month; 8.09% two months; 8.06% three months; 8% six months; 7.94% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market:8.60% one month; 8.60% three months; 8.40% six months.
BANKERS ACCEPTANCES: 8.50% 30 days; 8.32% 60 days; 8.32% 90 days; 8.16% 120 days; 8.05% 150 days; 7.96% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 3/4% to 8 5/8% one month; 8 11/16% to 8 9/16% two months; 8 3/4% to 8 5/8% three months; 8 5/8% to 8 1/2% four months; 8 9/16% to 8 7/16% five months; 8 9/16% to 8 7/16% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 3/4% one month; 8 3/4% three months; 8 9/16% six months; 8 1/2% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
Results of the Monday, October 23, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.52%, 13 weeks; 7.50%, 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.86%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par). 9.80%, standard conventional fixed-rate mortgages; 8.75%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.56%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Bankers Trust New York Corp., as expected, reported a third-quarter loss of $1.42 billion, or $17.39 a share, following its $1.6 billion boost in reserves for losses on loans to less-developed countries.
The loss compares with net income of $162.1 million, or $2.01 a share, in the year-earlier period.
Interest income rose 29% to about $1.35 billion from $1.05 billion.
The New York bank holding company's assets at Sept. 30 climbed to $59.4 billion from $57.9 billion.
Excluding the increase in loan-loss reserves, Bankers Trust said third-quarter net income would have increased 11% to $180 million.
A number of major banks have posted big losses after sharply increasing loan-loss reserves.
Most of the loans in question are to Third World countries in South America.
In New York Stock Exchange composite trading yesterday, Bankers Trust fell 12.5 cents to $50.50.
BRISTOL-MYERS SQUIBB Co. (New York) --
Gerald C. Beddall, 47 years old, was named president of the Clairol division of this pharmaceuticals and health-care company.
He succeeds C. Benjamin Brooks Jr., who will retire Nov. 1.
Mr. Brooks declined to give his age, but he said his leaving is a normal retirement.
Mr. Beddall had been executive vice president of the division since April.
Clairol, which makes hair and skin products, was a division of Bristol-Myers Co. before that company's merger with Squibb Corp.
Annualized interest rates on certain investments as reported by the Federal Reserve Board on a weekly-average basis:
a-Discounted rate.
b-Week ended Wednesday, October 18, 1989 and Wednesday October 11, 1989.
c-Yields, adjusted for constant maturity.
American Telephone & Telegraph Co. said it will spend $20 million to build a factory in Guadalajara, Mexico, to make telephone answering machines.
Construction of the 265,000-square-foot facility will begin next year, with production expected to start in late 1991.
When fully operational, the Guadalajara factory will employ about 1,500 workers and have annual operating expenses of $5 million to $6 million.
An AT&T representative said that the Guadalajara factory will make a full line of answering machines.
AT&T already has a factory in Matamoros, Mexico, to make electrical devices.
It also purchases data systems products from a manufacturer based in Monterrey.
Lucas Industries PLC, a British maker of industrial parts and systems, reported a 28% rise in pretax profit for the year to July 31, helped in particular by a 32% jump in operating profit at its aerospace division.
Pretax profit in the latest year climbed to #187.1 million ($297.1 million) from #146.3 million ($232.3 million).
Profit after taxes and minority interests but before extraordinary items climbed 27% to #143.4 million from #112.5 million, with earnings per share rising to 85.1 pence ($1.35) from 79.4 pence ($1.26).
The results were at the upper end of market expectations, which ranged from #185 million to #188 million.
TW Services Inc. posted a $3.3 million third-quarter net loss, compared with a $24.9 million profit, reflecting $60 million of expenses related to its much-publicized proposed takeover by Coniston Partners.
The per-share loss for the Paramus, N.J., food-services concern totaled seven cents, compared with earnings of 51 cents a share a year earlier.
Revenue rose 5% to $981.7 million from $934.7 million.
Coniston, a New York investment partnership, awaits a vote by TW's shareholders, scheduled for Friday, on Coniston's $34-a-share, or $1.66 billion, offer for TW.
Nine-month net income dropped 47% to $26.3 million, or 54 cents a share, from $49.7 million, or $1.02 a share.
Revenue rose 6% to $2.79 billion from $2.63 billion.
Cummins Engine Co., Columbus, Ind., hurt by a drop in engine orders from heavy-truck makers, reported a third-quarter loss of $39.7 million, or $4.12 a share, on essentially flat sales of $807.6 million.
In the year-earlier period, the maker of diesel engines and parts had a narrower deficit of $17.6 million, or $1.84 a share, with sales of $808.3 million.
A spokeswoman said shipments of truck engines, which provide a higher margin than most of the company's other products, declined 16% from a year earlier.
Although Cummins's stock stumbled last month after the company projected a "substantial" third-period loss, the stock also fell $1.125 in composite New York Stock Exchange trading yesterday, to $51.75.
It traded as high as $64 a month ago, before the loss projection.
For the nine months, the latest loss trimmed net income to $3.6 million, which after payment of preferred dividends represented a 31-cent loss a common share.
The year-before loss was $8.4 million, or $1.36 a common share.
Exxon Corp. filed suit against the state of Alaska, charging state officials interfered with the oil company's initial efforts to treat last spring's giant oil spill.
The action is a counterclaim to a suit filed by Alaska in August against Exxon and six other oil companies.
The state's suit alleges that Exxon's response to the spill failed to prevent contamination of hundreds of miles of shoreline along Prince William Sound.
That suit and Exxon's countersuit were filed in a state court in Anchorage.
Neither suit lists specific dollar claims, largely because damage assessment hasn't yet been completed.
Legal strategists say that damage claims against the oil giant and others could well exceed $1 billion.
Litigation, if not settled out of court, could drag on for years.
Exxon said in its suit that it will seek reimbursement from the state for that part of the cleanup costs and damage claims it says resulted from the state's conduct.
The oil company claims that Alaskan officials prevented Exxon from spraying dispersant onto the almost 11 million gallons of oil dumped when one of its tankers ran into an underwater reef.
Craig Tillery, an Alaska assistant attorney general, said in an interview last night that Exxon's accusations "are not new.
Exxon has made them before, at which point the state demonstrated they were untrue.
The state will vigorously defend against any counterclaim."
Since the spill last March, Exxon and the state have been wrangling over whether spraying dispersant on the oil in the first hours after the spill, when the weather was clear and calm, would have helped limit the environmental damage.
Exxon claims that use of dispersants, which break an oil slick into microscopic droplets, was a crucial part of its immediate-response plan and that state officials banned their use during the two days of fair weather following the spill.
The oil company claims that it had permission from the U.S. Environmental Protection Agency prior to the spill to use dispersant during such an incident at the discretion of the U.S. Coast Guard.
The state's opposition to the use of dispersants, Exxon says, caused the Coast Guard "to delay granting permission."
Alaskan and Coast Guard officials say Exxon's charges aren't relevant because tests conducted during the first two days following the spill showed that the dispersant wasn't working anyway.
Use of dispersants was approved when a test on the third day showed some positive results, officials said.
Meson Investment Ltd., a Vancouver, B.C.-based investment firm, said it raised its stake in Verit Industries to 8.9% of the common shares outstanding.
In a Securities and Exchange Commission filing, Meson said it holds 67,400 Verit common shares, including net purchases of 8,100 shares bought from Oct. 10, 1988, to Oct. 11, 1989, for $3.875 to $7 each.
Meson is the personal holding company of Steven Morfey, a Vancouver securities dealer.
He said the transaction was made for investment purposes.
Officials for Sun Valley, Calif.-based Verit couldn't be reached for comment.
In composite trading on the American Stock Exchange, Verit closed unchanged yesterday at $3.875 a share.
The House Appropriations Committee approved an estimated $2.85 billion in emergency funding to assist California's recovery from last week's earthquake and to extend further aid to East Coast victims of Hurricane Hugo.
The package was termed excessive by the Bush administration, but it also provoked a struggle with influential California lawmakers who sought unsuccessfully to add nearly $1 billion more and waive current restrictions to expedite the distribution of funds.
By a 26-7 margin, the committee scuttled the more expensive alternative, and the debate forced a strained confrontation between Appropriations Committee Chairman Jamie Whitten (D., Miss.) and his party's largest state delegation in the House.
"I have no regrets about going forward," said Rep. Vic Fazio (D.,Calif.), who sought later to play down the sometimes hostile tone of the long evening meeting.
"We are the Golden State," Mr. Fazio said, "and there is a certain amount of jealousy."
The $2.85 billion package incorporates $500 million for small-business loans, $1 billion in highway construction funds, and $1.35 billion divided between general emergency assistance and a reserve to be available to President Bush to meet unanticipated costs from the two disasters.
The funding is attached to a stopgap bill to keep most of the government operating through Nov. 15.
The measure is expected to come before the House today, and Congress is under pressure to complete action before midnight EDT tomorrow, when the current continuing resolution expires.
Given California's size and political importance, the White House is eager to appear generous.
But in private meetings yesterday, Budget Director Richard Darman argued that only $1.5 billion in new federal appropriations are needed to supplement existing resources.
A White House budget office analysis estimates that $500 million -- or half the level in the committee bill -- is needed for highway assistance to meet California's needs, and the administration rejects the notion that new appropriations are needed to finance disaster loans by the Small Business Administration.
"Everybody appreciates that it is a national disaster and that we've got to address it," said Mr. Darman, who came to the Capitol to meet with Mr. Whitten and California lawmakers before the committee session.
"I would hope very much that we wouldn't end up in a kind of situation where you have a bidding war and then a veto threat."
Although this White House pressure was clearly a factor among committee Republicans, no single influence was greater than Mr. Whitten.
A master of pork-barrel politics, he had crafted the $2.85 billion package in vintage style and used the full force of his chairmanship to keep the proposal intact and dismiss any alternative.
When Mr. Fazio offered the California-backed $3.84 billion plan, Mr. Whitten insisted that the full 14 pages be read aloud by the panel's clerk to underscore the range of legislative changes also sought by the delegation.
On the chairman's motion, the California package was subsequently reduced to less-binding report language, and even when this was accepted as such on a voice vote, Mr. Whitten pointedly opposed it.
More important than money in many cases are waivers California is seeking on current restrictions covering federal highway funds, such as a $100 million cap on how much any single state can receive in emergency funds in a year.
Mr. Whitten's package appears to accomplish this purpose, but the state faces more resistance in its bid for an extended waiver on having to put up any matching funds on repairs completed in the next six months.
A member in the House leadership and skilled legislator, Mr. Fazio nonetheless found himself burdened not only by California's needs but by Hurricane Hugo amendments he accepted in a vain effort to build support in the panel.
The California Democrat appeared embarrassed by provisions inserted on behalf of owners of private beaches in the Virgin Islands, and lumber interests sought to add another $100 million in federal aid to plant timber on private land in North and South Carolina.
California's high-priced real estate puts it in an awkward position, too.
One provision last night would have raised the cap on disaster loans to $500,000 from $100,000 per household to accommodate San Francisco losses.
Kurzweil Music Systems Inc. said it retained Kidder, Peabody & Co. to study financial alternatives, including the possible sale of the financially struggling company.
Kurzweil, Waltham, Mass., makes digital electronic keyboard instruments used by professional recording musicians.
It recently introduced a line for the home market.
However, Raymond C. Kurzweil, chairman and chief executive, said "The company continues to require additional funding to realize the potential of its technology."
In the year's first six months, Kurzweil had a loss of $6.9 million on sales of $11.2 million.
Last month its president, John S. Donnelly, resigned citing "management differences" with Mr. Kurzweil.
Amtech Systems Inc., Tempe, Ariz., said its preliminary year-end results of operations indicate "substantial improvement" over the previous fiscal year.
Amtech, which makes an automated process system that improves the yields of semiconductor manufacturers, said profit for the year ended Sept. 30 rose to more than $800,000 from $446,000 last year.
Per-share earnings are estimated at more than 40 cents, up from 22 cents for fiscal 1988.
Total revenue is expected to double to more than $22 million from $10.8 million.
Amtech, which also provides technical temporary employment services to aerospace, defense, computer and high-tech companies in the Southwest and Baltimore-Washington areas, said its final audited results are due in late November.
The company attributed the improvement to strong demand in the semiconductor equipment segment as well as the acquisition of Echelon Service Co. and the inclusion of a full year's results of operations for RTS Inc., compared with seven months' results for the prior year.
LDI Corp., Cleveland, said it will offer $50 million in commercial paper backed by lease-rental receivables.
The program matches funds raised from the sale of the commercial paper with small to medium-sized leases.
LDI termed the paper "non-recourse financing," meaning that investors would be repaid from the lease receivables, rather than directly by LDI Corp.
LDI leases and sells data-processing, telecommunications and other high-tech equipment.
SHEVARDNADZE ADMITTED that Moscow violated the 1972 ABM treaty.
In a foreign-policy address before the Soviet legislature, the foreign minister conceded that the radar station in Krasnoyarsk breached the superpower Anti-Ballistic Missile treaty and said it would be dismantled.
Shevardnadze said it took Gorbachev's government four years to determine that the station's location in Siberia violated the accord, as Western arms-control officials have long contended.
He also denounced Moscow's nine-year involvement in the war in Afghanistan, saying it involved "gross violations of . . . civil norms and ethics."
Secretary of State Baker, in his first major arms-control speech, called for a new military relationship with Moscow to reduce "first strike" nuclear arms.
BAY AREA COMMUTERS BATTLED earthquake-related transportation snarls.
Travelers crowded into subways, sat in traffic jams on major freeways or waited for buses in the rain, but the massive gridlock anticipated by officials in the San Francisco Bay area never materialized.
As the death toll from last week's temblor climbed to 61, the condition of freeway survivor Buck Helm, who spent four days trapped under rubble, improved, hospital officials said.
Rescue crews, however, gave up hope that others would be found alive under the collapsed roadway.
The House Appropriations Committee approved a $2.85 billion aid package for the quake region, less than the $3.8 billion sought by California officials.
Hungary declared itself a democracy and for the first time openly commemorated the anniversary of the 1956 anti-Stalinist uprising that was crushed by the Soviet Union.
A crowd estimated at 100,000 held a torch-lit march through Budapest as Acting President Szuros delivered a nationally televised address rejecting communist dominance.
About 200,000 East Germans marched in Leipzig and thousands more staged protests in three other cities in a fresh challenge to the Communist leadership to introduce democratic freedoms.
In an East Berlin suburb, meanwhile, employees at an electronics plant formed an independent trade union called Reform, a worker spokesman said.
The space shuttle Atlantis landed at a desert air strip at Edwards Air Force Base, Calif., ending a five-day mission that dispatched the Jupiter-bound Galileo space probe.
The five astronauts returned to Earth about three hours early because high winds had been predicted at the landing site.
Fog shrouded the base before touchdown.
Explosions shook a Phillips Petroleum Co. plastics plant near Pasadena, Texas, hurling debris and causing a fire visible from 10 miles away.
More than 100 people were injured, and a number of workers were missing.
Parts of the Houston Ship Channel were closed.
The White House said Bush is conferring with leaders of the Senate Intelligence Committee to ease differences over guidelines for CIA agents.
The statement came after officials said Bush complained at a private meeting last week that a strict interpretation of a policy requires the U.S. to notify foreign dictators of certain coup plots.
Lebanon's Gen. Aoun placed Christian military forces on alert in case of renewed fighting with Syrian-backed Moslems after Lebanon's two main Shiite militias rejected an Arab-sponsored peace accord.
The plan, approved by lawmakers and rejected Sunday by Aoun, includes political changes aimed at ending the 14-year-old civil war.
NATO defense ministers are expected to call for a reduction in nuclear forces in Europe when the alliance's nuclear planning group convenes a two-day session today in Portugal.
The ministers are to reshape NATO's defenses in Western Europe amid fast-paced changes in the Soviet bloc.
Iran's President Rafsanjani offered to help gain freedom for Western hostages in Lebanon, but said the assistance was contingent on U.S. aid in resolving the cases of three Iranians kidnapped in Lebanon in 1982 or the release of frozen Iranian assets.
Washington rejected the bid, saying the hostages weren't linked to other issues.
PLO leader Arafat asked Egypt to seek clarifications from the U.S. on Secretary of State Baker's plan for Mideast peace talks, an aide to Egyptian President Mubarak said.
The official stressed that the PLO hasn't rejected the five-point formula.
Commonwealth leaders turned to issues ranging from drugs to the world economy after Zimbabwe's President Mugabe called Thatcher's views on South Africa "despicable."
At a meeting in Malaysia, Australia and Canada also assailed the British prime minister for criticizing the 49-nation group's call for Pretoria to ease apartheid.
CMS Enhancements Inc. said it estimates that sales and earnings for the fiscal first quarter ended Sept. 30 fell somewhat from the year-earlier period.
Jim Farooquee, chief executive officer of the Tustin, Calif., computer accessories supplier, said he was "comfortable" with analysts' expectations that CMS would earn between six cents and eight cents a share on revenue of about $42 million.
A year earlier, CMS posted profit of $1.1 million, or 13 cents a share, on sales of $48 million.
This time, there are 30% more shares outstanding.
Mr. Farooquee attributed the decline to an industrywide softening of demand for computer enhancement products.
Property Capital Trust said it dropped its plan to liquidate because it wasn't able to realize the value it had expected.
It said it will buy back two million shares, or 18.4%, of the total outstanding, and continue operations buying and managing real estate.
Property Capital, which is based in Boston, had told shareholders it expected to distribute at least $21 a share, or $229 million, in a liquidation, based on an expected asset sale price of $290 million or more.
The company said it didn't receive an offer it wanted to accept.
As a result of dropping the liquidation plan, shareholders will have to treat dividends received this year as ordinary income or capital gains rather than as tax free returns of capital, the company said.
The share repurchase will be funded mostly from borrowings.
A.H. Belo Corp. said its net income was $3.1 million, or 15 cents a share, in the third quarter, more than four times its profit of $663,000, or three cents a share, last year.
Included in the results was an adjustment to the Dallas-based company's tax rate that reduced net income by about 10 cents a share, or approximately $2 million.
Belo said it increased its effective tax rate to 52% from 47% to account for potential liabilities related to an Internal Revenue Service investigation of its tax returns for the years 1984 through 1988.
The newspaper and television owner said it expects the tax adjustment to reduce its net income for the full year by 14 cents, or approximately $2.8 million based on its 20.2 million shares outstanding.
For the third quarter, Belo said its revenue increased 11%, to $101.5 million from $91.2 million last year.
For the nine months, the company had net income of $15.1 million, or 74 cents a share, up 98% from $7.6 million, or 38 cents a share last year.
Revenue grew almost 8% to $301.9 million from $279.8 million last year.
A federal judge granted a temporary stay of the California Student Aid Commission's emergency action to stop guaranteeing loans for National Technical Schools, a unit of United Education & Software Inc.
The California Student Aid Commission took the action Oct. 15 after a government audit cited National Technical Schools for having courses too short to be eligible for the educational loan program and having a student drop-out rate far in excess of federal standards, and it alleged other serious violations of law and regulations.
United Education & Software, a Los Angeles education services company, called the commission's action "precipitous and unwarranted."
The court set a hearing on the emergency action for Oct. 30.
United Education & Software posted a $250,000 bond against potential losses to the student aid commission and to taxpayers in guaranteeing any more loans for National Technical Schools students prior to the hearing.
A decline in Allied-Signal Inc.'s automotive business contributed to flat sales and only slightly higher earnings in the third quarter.
Allied-Signal reported that net rose 1.7% to $121 million, or 81 cents a share, from $119 million, or 80 cents a share, the year earlier.
Sales slipped 1.3% to $2.82 billion from $2.86 billion.
For the nine months, the Morris Township, N.J.-based company, with businesses in aerospace, automotive products and engineered materials, earned $413 million, or $2.77 cents a share, up 15% from $359 million, or $2.40 a share.
Sales eased 0.2% to $8.88 billion from $8.90 billion.
Chairman Edward L. Hennessy Jr. said that a drop in sales of auto and truck parts contributed to lower earnings in the automotive unit.
He also cited unfavorable foreign-exchange rates and a lower tax rate.
Earnings for the group declined to $11 million from $33 million last year.
Earnings at Allied-Signal's aerospace business rose to $55 million from $41 million a year ago, primarily on higher sales and profit in its engines and auxiliary power units.
In New York Stock Exchange composite trading yesterday, Allied-Signal shares closed at $35.125, off 87.5 cents.
The National Highway Traffic Safety Administration said it will start enforcing stiffer regulations Jan. 31 for so-called gray-market imports of vehicles.
The regulations, required under legislation enacted by Congress last year, will apply to imports of vehicles that weren't built to meet U.S. government auto safety standards and were intended for use in Europe or elsewhere abroad.
U.S. officials estimated that gray-market imports total about 2,100 units a year, a small part of the more than three million vehicles exported to the U.S. each year.
According to the NHTSA, the new regulations will prohibit anyone other than an importer that has registered with the U.S. government, or a person who has a contract with a registered importer, from permanently importing a vehicle that doesn't meet the U.S. auto safety standards.
The registered importer would be required to bring such vehicles into compliance with the U.S. safety standards, compared with the current situation in which anyone can bring in such vehicles and modify them to meet the U.S. standards.
Congress tightened auto safety standards for gray-market imports after U.S. auto dealers, including franchised foreign-car dealers, complained that they often were blamed when the second and third buyers of such vehicles found that the cars couldn't meet U.S. auto safety standards.
Legent Corp. said it expects to report net income between $6.4 million and $6.9 million, or between 32 cents and 34 cents a share, for its fourth quarter ended Sept. 30.
In the year-ago quarter, the software developer reported pro forma earnings of $4.8 million, or 24 cents a share.
Vienna, Va.-based Legent said it expects to post revenue for the quarter of more than $31 million, compared with pro forma revenue of $25.2 million in 1988.
For the fiscal year, the company said it anticipates reporting earnings of $23 million, or about $1.15 a share, including a charge of about $5.9 million, or 22 cents a share, related to the merger that created Legent out of Duquesne Systems Inc. and Morino Inc. in March 1989.
Revenue for fiscal 1989 is expected to exceed $124 million.
Pro forma earnings for fiscal 1988 were $19.6 million, or 99 cents a share, on revenue of $97.2 million.
The company attributed much of the growth in earnings to increased demand for its systems productivity software.
Archive Corp. said it expects to report net income for its fiscal year ended Sept. 29 of a record $15 million, or $1.15 a share, up 43% from $10.5 million, or 80 cents a share, for the prior year.
The Costa Mesa, Calif., maker of computer tape drives also projected record revenue for the year of $181 million, up from $122.7 million for the previous year.
Archive attributed the gains to strong demand for its products, continued growth of the reseller market and the acquisition of Maynard Electronics in February, which accounted for about 14% of the company's revenue.
Detrex Corp. said a reserve it is establishing to cover expected pollution cleanup costs at an Ohio plant reduced its third-quarter net income by $1.9 million.
Detrex, which has annual sales of about $100 million, declined to say if it would post a loss in the third quarter.
The Southfield, Mich.-based company earned $774,000 in the quarter last year.
Detrex is setting aside $3.1 million for the cleanup, but said the reserve reduced its quarterly income by only $1.9 million because of tax considerations.
In addition, the manufacturer said it signed a consent decree with Ohio to build a $1.4 million pollution-control facility at the Ashtabula chemical manufacturing plant by Aug. 1, 1990.
Detrex said it is one of at least 17 companies notified by the Environmental Protection Agency that they may be potentially responsible for cleaning up the Fields Brook watershed near Detrex's Ashtabula plant at a total cost the EPA estimates at $48 million -- a figure Detrex said the companies dispute.
First Executive Corp. said about 96% of the rights to purchase its depositary shares and warrants have been exercised.
Of the 17.6 million rights units issued, just under 17 million were exercised before the Oct. 10 expiration of the offering, the insurance holding company said.
Remaining units will be sold to the underwriters, Drexel Burnham Lambert Inc. and Kidder, Peabody & Co., which will also purchase an over-allotment of 2.3 million additional units.
First Executive said the offering will raise about $299 million -- minus underwriting fees and other expenses -- that the company plans to use to write new life insurance and annuity business.
In addition, analysts have viewed the rights offering as a takeover defense that prospectively balloons the number of shares outstanding.
Each of the units consists of two warrants, each of which could be used to purchase a half-share of common stock, and one depositary preference share.
Depositary shares are convertible into common stock on a 1-to-1 basis.
Currently, the company has about 88.1 million common shares outstanding.
In over-the-counter trading Monday, the stock closed at $10.625, off 37.5 cents.
UNITED AIR'S PARENT quashed any prospects for an immediate revival of the labor-management buy-out, saying UAL should remain independent for now.
Also, UAL Chairman Stephen Wolf pulled out of the buy-out effort to focus on running the company.
The two developments leave the airline with several problems, including an unsettled labor situation.
Stock prices fell and bonds rose as worries mounted about the economy and the junk bond market.
The Dow Jones industrials sank 26.23 points, to 2662.91.
The dollar also declined.
The turmoil in junk bonds may last for years, investors and traders say.
Even Drexel is pulling back.
Santa Fe Pacific plans to sell 20% of its large real estate unit to a California pension fund for $400 million and spin the rest off to shareholders.
The proposal values the company's real estate operation at $2 billion.
Time Warner reported a $176 million loss for the third quarter, reflecting the cost of the recent merger and a method of accounting for the deal.
Thrifts continued to shed assets in August, mainly to comply with stiffer capital rules under the S&L bailout law.
Also, withdrawals exceeded deposits by $5.1 billion in the month.
Exxon's profit fell 9% in the third quarter, hurt by sagging results at two of its three main businesses.
Phillips and Arco posted declines.
Ashland had a loss.
Amerada Hess and Occidental Petroleum had gains.
Ogilvy's chairman, Kenneth Roman, is leaving to take a top post at American Express.
His resignation follows a hostile takeover of the ad agency in May by WPP of Britain.
The Justice Department took steps that could restrict the use by prosecutors of criminal racketeering charges against white-collar defendants.
Shearson was sued by money manager George Soros, who claimed one of his funds was defrauded out of $60 million during stock-index futures trading just after the 1987 crash.
Drexel's efforts to settle its legal troubles are being resisted by at least 10 states.
Some may try to revoke the firm's license to sell securities.
Prime Computer plans to dismiss 20% of its work force to cut costs following its recent leveraged buy-out.
The action renews concern about buyouts in high-tech industries.
Paribas plans a bid for another big French financial and industrial firm, Navigation Mixte, a sign Europe's takeover fever hasn't cooled.
Qintex Australia unveiled plans to restructure and sell assets to try to ease its financial problems.
Union Carbide's earnings plunged 35% in the third quarter, reflecting weakness in the company's core chemicals and plastics businesses.
Japan's Daiwa Securities named Masahiro Dozen president.
The rapid advance of the 52-year-old executive surprised many at the company.
Markets --
Stocks: Volume 135,860,000 shares.
Dow Jones industrials 2662.91, off 26.23; transportation 1236.66, up 5.86; utilities 215.35, off 0.13.
Bonds: Shearson Lehman Hutton Treasury index 3411.08, up
Commodities: Dow Jones futures index 129.49, off 0.13; spot index 131.64, up 0.30.
Dollar: 141.90 yen, off 0.53; 1.8470 marks, off 0.0108.
The Justice Department has revised certain internal guidelines and clarified others in a move that could restrict the use of criminal racketeering charges against white-collar defendants.
The most significant changes in department policy are new requirements that federal prosecutors avoid disrupting "the normal business functions" of companies charged under the racketeering law, a senior department official said.
Another important revision of department policy is a new guideline warning prosecutors "not to take steps that would harm innocent third parties" in a case brought under the racketeering law, the official, David Runkel, said.
The department distributed the revisions and clarifications to U.S. attorneys around the country this summer as part of a routine process of updating prosecutorial guidelines, Mr. Runkel said.
The changes apply to prosecutions brought under the Racketeer Influenced and Corrupt Organizations law.
Under that law, defendants who allegedly commit a pattern of crimes by means of a "criminal enterprise" may be charged with racketeering and forced to forfeit the proceeds of the enterprise.
The RICO law has come under criticism from some defendants and defense lawyers.
They argue that the rights of RICO defendants and third parties not named in RICO indictments have been unfairly damaged.
The department's most significant clarification of existing RICO policy is a directive to prosecutors that they should seek to seize assets from defendants "in proportion" to the nature of the alleged offense, Mr. Runkel said.
"That means that if the offense deals with one part of the business, you don't attempt to seize the whole business; you attempt to seize assets related to the crime," he explained.
In general, the thrust of the department's directive is to encourage prosecutors to limit pretrial asset seizures if there are less intrusive means of protecting assets the government may subsequently be able to seize after a conviction, Mr. Runkel said.
It was the kind of snubbing rarely seen within the Congress, let alone within the same party.
Sen. Alan Cranston trekked over to the House side of Capitol Hill a few days ago and volunteered his testimony to fellow Democrat Rep. Henry Gonzalez.
It was offered as an expression of cooperation to Mr. Gonzalez, who is investigating the $2.5 billion failure of Lincoln Savings & Loan Association.
But instead of thanks, Sen. Cranston was treated with cool formality.
"Every witness receives a formal subpoena," Rep. Gonzalez told him.
Seldom have House hearings caused so much apprehension in the Senate, where California Sen. Cranston and four other senators were already writhing in the glare of unfavorable publicity over the alleged looting of Lincoln by their friend and political benefactor, Charles Keating Jr., principal stockholder of Lincoln's parent company, American Continental Corp. of Phoenix, Ariz.
At the first day of the House Banking Committee's hearings last week, William Seidman, chairman of the Resolution Trust Corp., the federal agency created to sell sick thrifts, said the agency is investigating whether Lincoln made illegal political contributions.
Mr. Keating arranged nearly $1 million in donations to Sen. Cranston and his various political causes, and hundreds of thousands more to other lawmakers.
Future witnesses include a former federal S&L regulator who has accused the five senators of attempting to "subvert" the regulatory process by intervening on behalf of Mr. Keating.
Unlike many lawmakers, Chairman Gonzalez says he considers intervening with regulators to be improper.
"When you reach a point where a policy-making body is trying to shape administrative decisions, then that's a no-no in my book," the Texas lawmaker says.
And he has attached himself to the Lincoln story tenaciously.
"Unless the questions are answered, I will keep on going."
Lawmakers often are reluctant to embarrass colleagues, even those of opposing political parties.
In the recent Housing and Urban Development Department scandal, for example, Rep. Thomas Lantos, the California Democrat who led the hearings, tiptoed through embarrassing disclosures about HUD grants secured by Sen. Alfonse D'Amato, a New York Republican.
But Chairman Gonzalez is a genuine maverick.
He comes from the same political line as Wright Patman, a bank-baiting Texas populist who chaired the Banking Committee until 1974.
Mr. Gonzalez is also a stickler for ethical standards who refuses to accept honorariums and who believes in conducting official business in the open.
Early in his political career, as a city councilman in San Antonio, he walked out of a meeting when political supporters asked that the police chief be replaced, denouncing the closed-door affair publicly as a "bat-roost meeting."
The immediate target of Rep. Gonzalez's inquiry is Danny Wall, chairman of the Office of Thrift Supervision.
As the principal regulator of the thrift industry, Mr. Wall delayed seizing Lincoln S&L for more than two years after his staff told him that the California thrift was insolvent and that potential losses to taxpayers were growing rapidly.
Rep. Gonzalez seems primed to lash out at Mr. Wall when hearings resume Thursday with testimony by two federal regulators from San Francisco, William Black and Mike Patriarca.
Mr. Wall relieved them of responsibility for supervising Lincoln in 1988.
Mr. Gonzalez expressed concern over a report that the two had been summoned to Washington by Mr. Wall last week to discuss their testimony in advance.
"I think he is trying to improperly influence a witness, and by God I'm not going to tolerate it," he says.
Mr. Wall, however, is a self-proclaimed "child of the Senate" and former staff director of its Banking Committee.
An inquiry into his handling of Lincoln S&L inevitably will drag in Sen. Cranston and the four others, Sens. Dennis DeConcini (D., Ariz.), John McCain (R., Ariz.), John Glenn (D., Ohio) and Donald Riegle (D., Mich.).
They all attended a meeting in April 1987 questioning why a federal audit of Lincoln S&L had dragged on for two years.
"I'm certain that in the course of the hearings the names {of the senators} will be brought out," Mr. Gonzalez says.
This is raising eyebrows.
"When I first got a glimpse at the witness list, I couldn't believe that they were going to go ahead and do this," says Michael Waldman, director of Congress Watch, a consumer group.
"There are some witnesses who will be forced to testify about their meetings with senators."
And a Democratic aide to a Banking Committee member remarks, "I too am astounded by it, because Gonzalez has certainly placed a lot of Democratic senators in a very bad position."
All the senators say they merely were trying to ensure fairness for a constituent.
Mr. Keating lives in Phoenix, and the California thrift's parent is an Ohio-chartered corporation with holdings in Michigan.
Chairman Gonzalez expresses sympathy for Sen. Riegle, his counterpart as chairman of the Senate Banking Committee.
"He's wise, he's good and I know he's an honest man," the Texan says.
But at the same time, Mr. Gonzalez hasn't forgotten a confrontation over Mr. Wall during House-Senate negotiations over S&L bailout legislation during the summer.
The Senate negotiators included Sens. Cranston and Riegle and Mr. Wall's principal sponsor, Republican Sen. Jake Garn of Utah.
They were willing to trade important provisions in the bailout legislation to preserve Mr. Wall's job and to avoid a reconfirmation hearing in which he would be called upon to testify about Lincoln S&L.
Most importantly, the Senate traded away the Bush administration's controversial plan to finance the bailout, which was partly reinstated later.
At the time, Mr. Gonzalez said several senators told him that they "could get some roadblocks out of the way if there could be some understanding on Garn's insistence on Wall."
Now Mr. Gonzalez is holding the equivalent of reconfirmation hearings anyway, under the guise of the Lincoln investigation.
"In a way, that's what this is," Mr. Gonzalez concedes.
Even some House Banking Committee members could suffer from the fallout.
Mr. Keating raised $20,000 for Rep. Doug Barnard's 1986 re-election campaign while the Georgia Democrat was taking his side against regulators who wanted to curb risky investments and wholesale deposit brokering.
He recently voted "present" when the committee authorized a subpoena to compel Mr. Keating to testify, then changed his vote to yes.
But the chairman's supporters have the upper hand as federal regulators press a $1.1 billion fraud suit against Mr. Keating and others.
Rep. Jim Leach (R., Iowa) says the Lincoln S&L affair is "the biggest bank heist in history," and adds: "The great question that remains to be resolved is whether we have a congressional Watergate in the making."
A witness set to testify on Thursday was quoted in a news report over the weekend as saying Lincoln "laundered" campaign contributions illegally.
But the witness, William Crawford, California's chief state thrift regulator, denies saying that.
"I don't know whether it was done properly or not, because I'm not a lawyer," he said in a telephone interview yesterday.
But he said he is prepared to testify that executives of Lincoln and its parent corporation got unusually high salaries and frequent calls directing them to make specific contributions.
The committee also has summoned Mr. Wall's predecessor, Edwin Gray.
He has characterized the five senators' roles as "tantamount to an attempt to subvert the . . . regulatory process," and he isn't expected to back down even though the five senators have disputed his account of a 1987 meeting.
So the senators must brace themselves.
Sen. Cranston, as he returned to the capital last week from a one-day trip to inspect earthquake damage in San Francisco, sighed to an aide: "Well, back to Keatingland.
When Anne Volokh and her family immigrated to the U.S. 14 years ago, they started life in Los Angeles with only $400.
They'd actually left the Soviet Union with $480, but during a stop in Italy Ms. Volokh dropped $80 on a black velvet suit.
Not surprisingly, she quickly adapted to the American way.
Three months after she arrived in L.A. she spent $120 she didn't have for a hat.
("A turban," she specifies, "though it wasn't the time for that 14 years ago.
But I loved turbans.")
Since then she has become wealthy.
Her husband and older son -- a computer prodigy profiled in The Wall Street Journal in 1981, when he was 13 -- run a software company with expected sales this year of $10 million.
Most recently, she has become the publisher of Movieline, a four-year-old Los Angeles magazine that began national distribution last month, with an initial press run of 100,000 copies.
Distributed by the Hearst Corp.'s Eastern News, the glossy publication melds Vanity Fair's gossipy archness and Premiere's earnest delving into behind-the-scenes minutiae, with a special emphasis on Tinseltown as fashion trendsetter.
It's being sold through bookstores, newsstands and some video stores.
Though Ms. Volokh is a small woman, she has an outsized personality and dramatic flair that seem perfectly suited to capitalism as it is practiced in Hollywood.
Certainly life for her has changed considerably since the days in Kiev, when she lived with her parents, her husband and her two sons in a 2 1/2-room apartment in what she calls "silent internal immigration," dreaming of escape.
Now, for example, she owns 48 hats.
However, she remembers the lean years and recalls with relish wearing her first major American purchase -- that turban10 years later and having a Los Angeles boutique owner ask her if it was a Chanel.
With obvious satisfaction, she says she told him: "No darling, I just give it a Chanel look."
She keeps track of the rest of her hats by stapling Polaroid snapshots to the outside of each hatbox.
Are the hats merely part of her new L.A. persona, along with the many ultra-thin Capri cigarettes she smokes, the parties she throws for 500 people, the Chekovian feasts she offers guests at her weekend place in Santa Barbara?
"No, darling," she said recently in her fluent, slightly affected English, during a trip East to promote Movieline's national expansion.
"You have to be born with it.
I used to wear hats in Russia, but I had to make them and my dresses.
On the hat side I wasn't getting what I wanted."
Now 48 years old, Ms. Volokh has definite ideas about what she wants.
At Movieline, she wants "specific paragraphing, specific tone, a specific attitude -- bright and bold and tongue-in-cheek."
In restaurants (in this case, the Russian Samovar, a New York restaurant operated by and for Soviet emigres), she didn't want the chirpy, folkish music bouncing through the room.
"You people here think this is Russian music," she said with disdain, and called over to the waitress: "Could you turn it off?"
That done, Ms. Volokh spoke with rampant eloquence about the many attributes she feels she was born with: an understanding of food, business, Russian culture, human nature, and parties.
"Parties are rather a state of mind," she said, pausing only to taste and pass judgment on the Georgian shashlik ("a little well done, but very good").
"If you are born to give parties, you give parties.
Even in Russia we managed to give parties.
In Los Angeles, in our lean years, we gave parties."
As publisher of a magazine devoted to movies as guideposts for fashion and other fantasies, Ms. Volokh sees her party-giving as an important part of business.
She has thrown extravagant soirees for crowds of people, but prefers more intimate gatherings.
"At American cocktail parties everyone's always looking over your shoulder to see who they can talk to next.
I like rather tea, because it is at the end of the day."
She serves high Russian tea, at 5 p.m.
"It's supposed to be later but I just moved it.
In Los Angeles, it's important to catch people just after work."
She also frequently invites directors, producers, actors, writers and other show business people for "coffee and clips in the pleasure dome."
Guests bring movies on tape, and show their favorite three-to-five minute segments on the screen that unrolls from the ceiling of the Volokhs' art-nouveau library ("the pleasure dome").
They eat "sinful and sensual things" -- and explain their clips.
"It's very revealing and soul baring," said Ms. Volokh.
The idea for Movieline actually was dreamed up by an old friend of the Volokhs, Boris Krutchensky (who has the title of co-publisher), and Laurie Halpern Smith, now the magazine's co-editor.
Mr. Krutchensky approached Ms. Volokh five years ago about backing the publication, which started out as a listing guide.
She was interested only if she could guide it editorially as well.
"Anne doesn't believe in blandness," said Ms. Smith.
"She wants things to be exciting.
And she has this inexhaustible energy.
She'll think of an idea the editorial people think is impossible, then she'll have us make it work."
In fact, Ms. Volokh wasn't just a rich lady who needed a hobby.
Back in the Soviet Union she was a respected journalist, writing a weekly column about the national cuisine for Sunday Izvestia.
Those columns -- vivid discussions of the cultural and literary reverberations of food as well as practical advice on how to glamorize dreary Sovietized meals -- became the basis for her erudite and entertaining cookbook, "The Art of Russian Cuisine," brought out in 1983 by Macmillan Publishing Co.
"I don't trust people who don't eat," said Ms. Volokh, though she herself stopped eating lunch a few years ago to drop 25 pounds.
"Look at Dostoevski and Kafka.
No one ever eats in their books and look at them. . . .
Tolstoy's characters eat, Pushkin's, Gogol's."
In her cookbook, which Macmillan is bringing out in soft cover this month (with the blini recipe revised so it works), she introduces each chapter with appropriate quotations from Russian literature: Pushkin on blini, Goncharov on piroghi.
In life, she offers practical dieting advice: "Divide your meals into important and unimportant.
In a great restaurant, don't deprive yourself.
The other meals don't matter."
Amusing as she is, and frivolous as she can seem, this is a serious person with some difficult memories.
She was the child of relative privilege.
Her mother was a translator; her father was "the eternal vice director."
"I emigrated to wear better hats, do better parties," she said with a giggle.
"But we shouldn't leave out political reasons, number one.
You try to maintain your dignity under difficult circumstances.
One cannot imagine how you live when you live those double and triple lives."
By 1973, after their second child was born, it had become clear to Ms. Volokh and her husband Vladimir, a computer scientist, that they wanted to leave the U.S.S.R.
Ms. Volokh quit her job, to remove herself from the public eye.
The wait was miserable.
Before granting Ms. Volokh's parents a visa, the government required her mother to obtain permission from her first husband, whom she had divorced 38 years earlier.
Mr. Volokh was fired from his job, and had to endure hours of organized verbal abuse from his co-workers, accusations of sabotage and counterrevolutionary activities.
The Volokhs were afraid that they'd end up like a friend of theirs who'd applied for a visa and waited for 10 years, having been demoted from his profession of theoretical mathematician to shipping clerk.
They didn't.
Their visa came in relatively short order, and they moved to Los Angeles.
Mr. Volokh soon found work in his field, but Ms. Volokh refused the obvious and available occupation-as translatorfor a Russian who spoke fluent English.
"That's always looking back," she said.
"I wanted to be in business."
On the way to that goal, she received her first U.S. paycheck for proofreading a book of Polish poetry, attended secretarial school, then went to work for a fund-raising organization.
Soon she was running the office.
When her husband and son founded their computer company, Vesoft, she worked as business manager, bookkeeper and publicist.
Now Movieline is located in the same building as Vesoft.
"Things work out unexpectedly in life," said Ms. Volokh.
"You never know if you'll be chosen to be the scapegoat or the lucky one.
We were lucky.
William D. Forrester, president of the U.S.-U.S.S.R. Trade and Economic Council, has a warning for U.S. companies trying to do business in the Soviet Union.
"It's an extremely complex market, and you have to be prepared to make a big commitment," Mr. Forrester says.
"We are not trying to encourage everyone."
Undeterred by such words of caution, corporate America is flocking to Moscow, lured by a huge untapped market and Mikhail Gorbachev's attempt to overhaul the Soviet economy.
Doing business with the Russians, once the pursuit of a handful of hardened veterans, has become the goal of such major companies as General Motors Corp., Federal Express Corp. and Procter & Gamble Co., as well as a cluster of smaller firms.
Reflecting the new-found interest, more than 140 U.S. companies are taking part in a Moscow exhibition organized by Mr. Forrester's trade group.
But while U.S. interest may be big and growing, the difficulties that have stymied deals in the past show no sign of abating.
Alongside the old problems of a non-convertible currency and an inpenetrable bureaucracy, Western business executives must now grapple with new complexities linked to perestroika, the restructuring of the Soviet economy.
Executives say Mr. Gorbachev's moves to break up the government's foreign trade monopoly have created uncertainties as well as opportunities.
Changing legislation has opened the field to thousands of inexperienced Soviet players, many who promise more than they can deliver.
And some foreign firms are finding that even when they manage to overcome such hurdles, their ventures now have to be endorsed by such unpredictable bodies as the Soviet parliament and the governments of the nation's republics.
"You have to go out to all your constituents," says James H. Giffen, who is spearheading the most ambitious attempt by U.S. firms to break into the Soviet market, involving investment of more than $5 billion in some two dozen joint ventures.
As part of that attempt, by the American Trade Consortium, Mr. Giffen says he spends a lot of time lobbying.
Growing public fears about the Soviet environment is one new factor affecting some joint-venture plans.
Over the past two years, Soviet ministries have been talking to international firms, including Occidental Petroleum Co. and Combustion Engineering Inc. of the U.S., Montedison S.p.A. of Italy and several Japanese groups, about jointly building and operating several big petrochemical plants.
The plans have come under fire from Soviet environmentalists, and officials say many are likely to be scaled back or dropped.
Whatever the difficulties, Mr. Gorbachev remains committed to increasing foreign trade.
For political as well as economic reasons, U.S. companies are at the top of his priorities -- a point he underscored by spending two hours walking around the U.S. trade show last week.
Talking to a small group of U.S. executives afterwards, Mr. Gorbachev appeared impatient for a big expansion in U.S.-Soviet trade, which now amounts to a meager $3 billion annually.
The U.S. ranks fourth of countries that have concluded joint ventures, behind West Germany, Finland and Italy.
According to several people present at the meeting, Mr. Gorbachev also supported the idea of concluding several commercial accords with the U.S., possibly at his next summit meeting with President Bush.
Judging by the crush at the exhibition, deprived Soviet consumers are more than ready for U.S. products.
Hundreds of people lined up every day at the Colgate-Palmolive Co. stand to receive a free tube of toothpaste, a commodity in chronically short supply here.
And unruly crowds at RJR Nabisco Inc.'s booth almost knocked over a glass showcase in the rush to get a free Camel cigarette sticker.
Some U.S. products are filtering into the Soviet market under an emergency import program.
Both Colgate and Procter & Gamble have received big orders for toothpaste, soap and detergents.
The American Trade Consortium says it is planning to ship some $500 million of consumer goods, financed by bank credits, in the first few months of next year.
But the current Soviet purchasing spree may be a one-time affair.
The goal of most U.S. firms -- joint ventures -- remains elusive.
Because the Soviet ruble isn't convertible into dollars, marks and other Western currencies, companies that hope to set up production facilities here must either export some of the goods to earn hard currency or find Soviet goods they can take in a counter-trade transaction.
International competition for the few Soviet goods that can be sold on world markets is heating up, however.
Shelley M. Zeiger, an entrepreneur from New Jersey who buys Soviet porcelain and "matryoshka" nesting dolls for export to the U.S., says West German companies already have snapped up much of the production of these items.
Seeking to overcome the currency problems, Mr. Giffen's American Trade Consortium, which comprises Chevron Corp., RJR, Johnson & Johnson, Eastman Kodak Co., and Archer-Daniels-Midland Co., has concocted an elaborate scheme to share out dollar earnings, largely from the revenues of a planned Chevron oil project.
Several medical concerns, including Pfizer Inc., Hewlett-Packard Co., Colgate and Abbott Laboratories intend to pursue a similar consortium approach.
"It's hard to invest capital here on the same basis as investing in other countries," says Dennis A. Sokol, president of Medical Service Partners Inc., who is putting the medical consortium together.
Some U.S. entrepreneurs operate on a smaller scale.
One group seeks to publish a U.S.-Soviet medical journal in conjunction with the U.S.S.R. Ministry of Health.
According to Richard P. Mills, a Boston-based official of the U.S. partner, 10,000 copies of the quarterly will be printed in Russian from next year.
It will be financed by advertisements from U.S. companies and by simultaneous publication of an English-language journal containing details of Soviet medical advancements.
"We found a market niche," Mr. Mills boasts.
"It's truly entrepreneurial.
General Electric Co. was given an $89.6 million Navy contract for nuclear propulsion parts.
Westinghouse Electric Corp. also won a $75.5 million Navy contract for nuclear propulsion parts.
Federal Data Corp. was issued a $14.5 million Navy contract for computer systems.
American Telephone & Telegraph Co. was awarded an $11.5 million Navy contract for oceanographic services.
Cray Research Inc. said it sold one of its newest and largest computer systems, the Cray Y-MP/832, to the United Kingdom Meteorological Office.
The system is the first to be sold through the joint marketing agreement between Cray and Control Data Corp.
The supercomputer, which lists for $18.5 million, will be installed in the first quarter of 1990 in the meteorological office's headquarters in Bracknell, England.
Shareholders of Nuovo Banco Ambrosiano S.p.A. voted to accept a bid of 5,500 lire ($4.03) a share by France's Credit Agricole for 13.32% of the bank, rejecting an earlier, equal offer by Italy's Assicurazioni Generali S.p.A.
The move will give Nuovo Banco a badly needed foreign presence, and make Credit Agricole the bank's largest shareholder.
It also opens a rift in the bank's shareholders' syndicate that could lead to a battle for control of the concern.
Nuovo Banco will become Italy's biggest private-sector bank when it completes its scheduled merger with Banca Cattolica del Venetoen by year end.
Credit Agricole asked a Milan court to sequester the Nuovo Banco shares, the Italian news agency ANSA reported.
The tribunal is scheduled to rule on the request Friday.
No reason for the request was given.
Credit Agricole officials couldn't be immediately reached for comment.
The decision to accept Credit Agricole's bid, valued at 283.3 billion lire ($207.4 million), came after a stormy weekend meeting.
Nuovo Banco's second largest shareholder, the Fiat S.p.A.-controlled investment concern, Gemina S.p.A., fought to have Generali's offer approved.
Gemina, which owns 13.26% of Nuovo Banco, abstained in the final vote on Credit Agricole, which was nonetheless approved by a majority of shareholders.
The linkup with Credit Agricole will give Nuovo Banco its first foreign presence since it was formed from the wreck of the old Banco Ambrosiano, which collapsed amid scandal after the death of Chairman Roberto Calvi in 1982.
Since then, the bank has strengthened its Italian network, and has posted strong results.
"The shareholders felt we needed a foreign presence more than we needed links with an insurance company," an Ambrosiano spokeswoman said.
Gemina said in a statement that "it reserves the right to take any action to protect its rights as a member of the syndicate."
A company spokeswoman said the company hadn't decided what measures to take, but didn't rule out legal action.
Generali, Italy's biggest insurer, last month offered 5,500 lire a share for the Nuovo Banco stake held by Banco Popolare di Milano, the bank's largest shareholder, which announced plans to sell the holdings earlier this year.
A Generali spokesman declined to comment on Nuovo Banco's rejection of the insurer's offer.
On the Milan stock exchange, Nuovo Banco's shares jumped to 4,830 lire each from 4,695 lire Friday.
Qintex Australia Ltd., a media and resorts concern controlled by Australian entrepreneur Christopher Skase, announced a plan to restructure and sell assets to try to ease its financial problems.
Mr. Skase, a 41-year-old former newspaper reporter who chairs the company, said in a statement that Qintex will sell its 51% stake in its upscale Mirage resorts in Australia and Hawaii as well as three Australian television stations.
The sales are expected to raise more than 600 million Australian dollars (US$462.2 million), Mr. Skase said.
Qintex Australia hasn't disclosed its borrowings, but analysts estimate the company's debt at A$1.2 billion.
Mr. Skase also said the restructuring plan calls for the merger of Qintex Australia with Qintex Ltd., which owns 55% of Qintex Australia.
He said the move will "significantly reduce administrative and operating costs," but he didn't provide details of the merger.
Company officials said over the weekend that Qintex Australia's bank creditors have become concerned about a barrage of bad news at the company, including a failed US$1.5 billion plan to buy MGM/UA Communications Co., a Beverly Hills, Calif., movie and television production concern.
Friday, Qintex Entertainment Inc., a 43%-owned U.S. affiliate, filed for protection from creditor lawsuits under Chapter 11 of the U.S. Bankruptcy Code.
Analysts predicted that the move would further shake creditor confidence in Qintex Australia and force it to sell assets.
The company's latest moves were disclosed after the Australian Stock Exchange suspended trading in shares of Qintex Australia and Qintex Ltd. because the companies hadn't answered an exchange inquiry about the extent of their loans, investments and deposits at Qintex Entertainment.
Mr. Skase's statement was addressed to the stock exchange and appeared to be a response to the inquiry.
It said Qintex Entertainment owes Qintex Australia US$38.1 million in loans not secured by specific assets.
Qintex Australia also said it has an investment of A$83.3 million in Qintex Entertainment shares.
In the statement, Mr. Skase said that on the basis of current interest rates in Australia, the company's asset sales would reduce interest expense by about A$120 million a year in addition to eliminating certain liabilities.
In March, Qintex sold 49% of the three Mirage resorts to Japan's Nippon Shinpan Co. and Mitsui & Co. for A$433 million.
Yesterday's statement didn't say whether the Japanese companies will acquire Qintex's remaining stake in the resorts.
Before its shares were suspended from trading, Qintex Australia plunged to 16 Australian cents (12 U.S. cents) a share yesterday from 33 Australian cents Friday.
The shares traded at about A$1.50 in March, when the plan to acquire MGM/UA was announced.
Qintex Ltd. shares sank to A$1.50 yesterday from A$3.05 Friday.
Mr. Skase's statement cited four recent problems that he said had cut group cash flow by more than A$200 million.
They were what he called an "unlawful termination" by MGM/UA of the acquisition agreement with Qintex, high Australian interest rates, a pilots' strike at Australian domestic airlines that cut revenue at the company's Australian resorts and delays in completing a sale of two regional TV stations in Queensland state.
MGM/UA has sued Qintex Australia for breach of contract and fraud over the collapsed acquisition agreement, and Qintex Australia has threatened a countersuit.
Qintex Australia hasn't yet reported results for the fiscal year ended July 31.
In his statement, Mr. Skase said preliminary accounts showed that group profit before interest, tax and depreciation "will exceed A$170 million."
He gave no further details.
Shareholders' funds as of July 31 were estimated at more than A$1 billion, Mr. Skase said, compared with A$725 million a year earlier.
The company will make "adequate provisions" to cover costs of the dispute with MGM/UA and any loss from the investment in Qintex Entertainment, he said.
Mr. Skase also disclosed a disagreement among directors of Qintex Australia over certain fees claimed by Qintex Group Management Services Pty., a management-services concern in which Qintex Australia executives have an interest.
Qintex Australia paid the management company A$32.6 million in the latest fiscal year.
Mr. Skase said most of the money went to other parties for expenses such as rent and travel, but a smaller portion is owed to senior executives and others for management services.
Non-executive directors of Qintex Australia, who must approve payments to the senior executives, balked at the amount.
Two of the directors resigned, Mr. Skase said, so the payments haven't yet been approved.
Chip's Memory Is Here Today, Here Tomorrow
TWO COMPANIES plan to market a new chip with ceramic circuits that store data even when the power is off.
Today's most widely used data-storing chips have "volatile" memories -- their data disappear if they aren't fed a steady diet of electricity, so they need external power supplies.
National Semiconductor Corp. and a start-up named Ramtron Corp. plan to start shipping so-called ferroelectric memories, which can remember data for at least 10 years without any current flowing to them.
The chips use materials, such as lead zirconate titanate, to form microscopic switches that retain their data without electricity.
Developers caution that broad applications are several years away because the technology isn't fully refined.
But Ramtron of Colorado Springs, Colo., plans to start shipping commercial quantities of simple ferroelectric chips in December.
The company expects the chips eventually to be used in devices that mimic a whole range of computer memory equipment, including floppy-disk and hard-disk drives.
National Semiconductor is getting ferroelectric technology from Krysalis Corp. in Albuquerque, N.M.
National says it agreed to acquire Krysalis's assets and will start shipping commercial quantities of its first chips, including a 4-kilobit memory, next year.
Once production hurdles are overcome, the chips could take over a significant part of the market.
In addition to not needing an outside power source, they are potentially cheaper to make because they require fewer manufacturing steps than conventional chips.
Military buyers have shown interest, National says, because ferroelectric chips resist atomic radiation.
And while today's non-volatile chips -- such as electronically erasable programmable read-only memory chips -- can't be used in a computer's central memory because they "learn" data slowly, ferroelectric chips accept data at very high speeds.
Showing Up in Court Without Being There
AN AUSTIN, Texas, company plans to make it easy for you show up in court a thousand miles away without leaving town.
Witnesses often must travel long distances to give face-to-face depositions before lawyers and court reporters.
That means huge travel bills.
And telephone or videotape depositions just don't match physical encounters.
That could change, thanks to lower long-distance rates and cheaper electronics.
Video Telecom Corp., which markets videoconferencing systems, is working with court reporters to wire a nationwide network to allow depositions by live television.
The company installed a prototype system that connects Dallas with Miami over digital phone lines.
And it is preparing to set up shop in Chicago, New York and 10 other cities where court-reporting agencies can tie conference rooms into the network.
While lawyers arranged individual tie-ups before, the formal network of court reporters should make things easier and cheaper.
An attorney will be able to use the network for an hourly fee of between $200 and $400, depending on the quality of the picture, to take depositions from witnesses in any of the connected cities.
Japanese Reverse Tack On Patent Protection
JAPAN'S MISUSE of U.S. patents has been a sore point for American chip makers.
Now at least one Japanese company is turning the courtroom tables.
Until now, most Japanese charges have been responses to suits against them.
But last year Hitachi Ltd. surprised Japan's electronics industry when it accused Korea's Samsung Electronics Co. of using Hitachi technology to make dynamic random-access memory chips.
(A settlement was reached but wasn't made public.)
And Hitachi went on the offensive against the U.S.'s Motorola Inc. earlier this month with a suit charging that Motorola's new MC88200 chip infringes on a Hitachi patent.
Another recent Hitachi suit accuses Motorola of reverse engineering a Hitachi technology -- a turnabout from a nation of champion reverse engineers.
The moves illustrate the more aggressive attitude toward patent protection that patent experts say Japan is starting to take.
Hitachi made the reverse-engineering charges in an amendment to a counterclaim filed in a federal district court in Texas after Motorola sued Hitachi for patent violation.
Hitachi charges Motorola "has engaged in fraudulent and inequitable conduct in the procurement of certain Motorola patents" used in Motorola's MC68030 microprocessor chip.
Translation: Motorola appears to have taken a Hitachi technology that is patented in the U.S., Hitachi says, and "tried to make it look like a new technology."
Motorola either denied or wouldn't comment on the various charges.
Odds and Ends
COMPUTER chips that simulate human vision have been developed by Japan's Sharp Corp.
They mimic the brain by "looking" at an image, extracting the fundamentals -- boundaries, corners and lines -- and translating them into computer data.
Sharp says the set of chips could improve fax machines, graphics computers or identification systems that recognize facial features. . . .
An N.V. Philips unit has created a computer system that processes video images 3,000 times faster than conventional systems.
Using reduced instruction-set computing, or RISC, chips made by Intergraph of Huntsville, Ala., the system splits the image it "sees" into 20 digital representations, each processed by one chip.
Tandy Corp., citing sluggish sales of consumer-electronics goods, said net income dropped 3.3% for the first quarter ended Sept. 30.
The results, which represented the fifth consecutive quarter of flat-to-lower earnings for the big electronics retailer, disappointed analysts and traders.
Tandy's stock fell $1.375 a share to close at $44 in New York Stock Exchange composite trading.
Net for the quarter was $62.8 million, or 73 cents a share, down from $64.9 million, or 72 cents a share, a year earlier.
The company said earnings would have increased if it hadn't been actively repurchasing its shares, thus increasing its interest expense and reducing its interest income.
Tandy had 86.3 million shares outstanding at Sept. 30, down from 90 million a year earlier.
Revenue rose 5% to $986 million from $937 million.
Tandy said consumer electronics sales at its Radio Shack stores have been slow, partly because of a lack of hot, new products.
"Radio Shack continues to be lackluster," said Dennis Telzrow, analyst with Eppler, Guerin & Turner in Dallas.
He said Tandy "has done a decent job" increasing sales by manufacturing computers for others and expanding sales of its Grid Systems Corp. subsidiary, which sells computers to bigger businesses, but "it's not enough to offset the problems at Radio Shack."
Sales at Radio Shack stores open more than a year grew only 2% in the quarter from a year earlier, he said.
As a result, Mr. Telzrow said he cut his fiscal 1990 per-share earnings estimate for Tandy to $4.05 from $4.20.
Tandy earned $88.8 million, or $3.64 a share, in the year ended June 30.
Barry Bryant, an analyst with Drexel Burnham Lambert Inc., said Tandy also has suffered from lethargic sales of its computers aimed at the home and small-office market, which are less-advanced and cheaper than computers aimed at the corporate market.
Tandy has added several new products to that line, including a laptop computer priced around $1,000, and is focusing its advertising on the easy-to-use software that is packaged with its machines.
Mr. Bryant and other analysts hope all those moves will combine to help Tandy's results improve in the important Christmas quarter.
"They've been promising 13% to 15% growth based on the strategic moves they've made," he said.
"If the earnings acceleration is to take place, that should be the quarter.
At a private dinner Thursday, Drexel Burnham Lambert Inc. chief executive Frederick Joseph delivered a sobering message about the junk bond market to officials of Prudential Insurance Co. of America.
Mr. Joseph conceded the junk market was in disarray, according to people familiar with the discussion.
He said Drexel -- the leading underwriter of high-risk junk bonds -- could no longer afford to sell any junk offerings if they might later become troubled because Drexel risked losing its highly lucrative junk franchise.
The dinner was a stark confirmation that 1989 is the worst year ever for the $200 billion junk market.
And investors and traders alike say the current turmoil could take years to resolve.
Amid the market disorder, even Drexel, which has the widest and most loyal following of junk bond investors, is pulling in its horns.
Although the big investment bank still dominates the junk market, Drexel has been unable to stem the fallout from growing junk bond defaults, withdrawn new offerings, redemptions by shareholders in junk bond mutual funds and an exodus of once-devoted investors.
For many money managers, the past four months have been humiliating.
"This is the worst shakeout ever in the junk market, and it could take years before it's over," says Mark Bachmann, a senior vice president at Standard & Poor's Corp., a credit rating company.
In the third quarter, for example, junk bonds -- those with less than an investment-grade rating -- showed negative returns, the only major sector of the bond market to do so.
Since the end of last year, junk bonds have been outperformed by all categories of investment-grade bonds, including ultra-safe Treasury securities.
The junk market, which mushroomed to $200 billion from less than $2 billion at the start of the decade, has been declining for months as issuers have stumbled under the weight of hefty interest payments.
The fragile market received its biggest jolt last month from Campeau Corp., which created its U.S. retailing empire with more than $3 billion in junk financing.
Campeau developed a cash squeeze that caused it to be tardy on some interest payments and to put its prestigious Bloomingdale's department store chain up for sale.
At that point, the junk market went into a tailspin as buyers disappeared and investors tried to sell.
In an interview, Mr. Joseph says his dinner discussion with the Prudential executives acknowledged problems for junk.
"What I thought I was saying is that the market is troubled but still viable and, appropriately enough, quite quality-conscious, which is not at all bad," he says.
"Nobody's been perfect in their credit judgments the past couple years, and we're going to make sure our default rates are going to be in the acceptable parameters of the market."
What has jolted many junk buyers is the sudden realization that junk bonds cannot necessarily be bought and sold with the ease of common stocks and many investment-grade bonds.
Unlike the New York Stock Exchange, where buyers and sellers are quickly matched, the junk market, where risky corporate loans are traded, is sometimes closed for repairs.
At closely held Deltec Securities Corp., junk bond money managers Amy K. Minella and Hannah H. Strasser say the problems of the junk market go deeper than a temporary malaise.
In recent months, they say, there has been heavy selling of junk bonds by some of the market's traditional investors, while new buyers haven't materialized to replace them.
Wall Street securities firms, "the primary source of liquidity for the high yield market," have been net sellers of junk bonds because of trading losses, Deltec said in a recent, grim report to customers.
Mutual funds have also been net sellers of junk bonds as junk's relatively poor performance and negative press coverage have produced "above-normal" redemptions by shareholders, Deltec said.
Investors, trying to raise cash, have sold "large liquid issues" such as RJR Holdings Corp. and Kroger Co.; declines in these benchmark issues have contributed to the market's distress.
And, Deltec said, buying has been severely reduced because savings and loans have been restricted in their junk purchases by recently passed congressional legislation.
"In fact, savings and loans were sellers of high yield holdings throughout the quarter," Deltec said.
Ms. Minella and Ms. Strasser say they are managing their junk portfolios defensively, building cash and selectively upgrading the overall quality.
Meanwhile, Prudential, the nation's largest insurer and the biggest investor in junk bonds, has seen the value of its junk bond portfolio drop to $6.5 billion from $7 billion since August because of falling junk prices.
"We certainly do have a lack of liquidity here, and it's something to be concerned about," says James A. Gregoire, a managing director.
"I have no reason to think things will get worse, but this market has a knack for surprising us.
This market teaches us to be humble."
The junk market's "yield hogs are learning a real painful lesson," he says.
Although the majority of junk bonds outstanding show no signs of default, the market has downgraded many junk issues as if they were in trouble, says Stuart Reese, manager of Aetna Life & Casualty Insurance Co.'s $17 billion investment-grade public bond portfolio.
"But we think the risks are there for things getting a lot worse.
And the risks aren't appropriate for us," he says.
The big insurer, unlike Prudential, owns only about $150 million of publicly sold junk bonds.
The string of big junk bond defaults, which have been a major cause of the market's problems this year, probably will persist, some analysts say.
"If anything, we're going to see defaults increase because credit ratings have declined," says Paul Asquith, associate professor at the Massachusetts Institute of Technology's Sloan School of Management.
Mr. Asquith, whose study on junk bond defaults caused a furor on Wall Street when it was disclosed last April, says this year's junk bond defaults already show a high correlation with his own findings.
His study showed that junk bonds over time had a cumulative default rate of 34%.
One indication of a growing number of junk defaults, Mr. Asquith says, is that about half of the $3 billion of corporate bonds outstanding that have been lowered to a default rating by S&P this year are junk bonds sold during the market's big issue years of 1984 through 1986.
These bonds, now rated single-D, include junk offerings by AP Industries, Columbia Savings (Colorado), First Texas Savings Association, Gilbraltar Financial Corp., Integrated Resources Inc., Metropolitan Broadcasting Corp., Resorts International Inc., Southmark Corp. and Vyquest Inc.
"Obviously, we got a lot more smoke than fire from the people who told us the market wasn't so risky," says Bradford Cornell, professor of finance at University of California's Anderson Graduate School of Management in Los Angeles.
Mr. Cornell has just completed a study that finds that the risks and returns of junk bonds are less than on common stocks but more than on investment-grade bonds.
Mr. Cornell says: "The junk market is no bonanza as Drexel claimed, but it also isn't a disaster as the doomsayers say."
Despite the junk market's problems, Drexel continues to enjoy a loyalty among junk bond investors that its Wall Street rivals haven't found.
During the past three weeks, for example, Drexel has sold $1.3 billion of new junk bonds for Turner Broadcasting Co., Uniroyal Chemical, Continental Air and Duff & Phelps.
Still, the list of troubled Drexel bond offerings dwarfs that of any firm on Wall Street, as does its successful offerings.
Troubled Drexel-underwritten issues include Resorts International, Braniff, Integrated Resources, SCI TV, Gillette Holdings, Western Electric and Southmark.
"Quality junk bonds will continue to trade well," says Michael Holland, chairman of Salomon Brothers Asset Management Inc.
"But the deals that never should have been brought have now become nuclear waste.
As Helen Boehm, who owns an art porcelain company, sipped her luncheon cocktail, she reeled off the names of a few pals -- Prince Charles, Princess Diana, Sarah Ferguson, John Kluge, Milton Petrie.
Then, flashing a diamond ring as big as the Ritz ("my day diamond, darling"), she told her two companions that she is on the "board" of the Vatican Museum in Rome.
As it turns out, the board has a lot of important members, including Winton Blount (former postmaster general of the U.S.), Mrs. Henry Gaisman (widow of the inventor of auto-strop razor) and Vincent Murphy (an investment banker at Merrill Lynch & Co.)
But Mrs. Boehm didn't mention any of them.
"Helen Boehm has a way with names," says James Revson, a gossip columnist for Newsday (and son of Joseph Revson, a founder of Revlon).
Like which are droppable and which are not.
With the fall social season well under way, name-droppers are out in force, trying to impress their betters and sometimes put down their lessers.
But the truth is that almost everyone, from real-estate agents to city fathers, name-drops; and a surprising number of people have an ancient uncle who claims he lived next door to the cartoonist who did the Katzenjammer Kids.
(In case you have forgotten, his name was Rudolph Dirks.)
"Name-dropping is pervasive and getting more so as society becomes more complex and alienating," says Herbert Freudenberger, a New York psychoanalyst, with a high-powered clientele.
"It can be an avenue of entrance to a certain sector of society. . . .
It provides some people a needed sense of affiliation and can help open up a conversation with someone you don't know."
Like the Long Island matron in the theater district the other day who swore to a stranger that she once met Liza Minnelli.
"I was having a drink in Sardi's, when all of a sudden I saw a woman's backside coming up the steps on the second floor and she was wearing sequined slacks.
I knew it was someone important, so I followed her into the ladies room and sure enough, it was Liza.
So I said, `Hello.'
And she said, `Hello.'
Can you imagine?
Liza said hello to me."
Some people must drop names -- call it an irresistible impulse.
"They can't help talking about the big important people they know, even if they don't really know them," says Dr. Freudenberger.
Beauregard Houston-Montgomery, a New York writer who changed his name from William Stretch in 1980, is an inveterate name-dropper.
"I do it innately and pathologically, and while it may occasionally get me into trouble, it's also gotten me access to parties and society," he says.
Name-dropping recently helped Mr. Houston-Montgomery crash a party Fame magazine threw for 100 of the 2,809 people mentioned in the diaries of the late Andy Warhol.
"I guess I might have asked Beauregard to leave, but he drops so many good names, we decided to let him stay," says Steven Greenberg, publisher of Fame.
"After all, Warhol was the ultimate namedropper, dropping five a day in his diaries.
And Beauregard was mentioned twice -- although very briefly and in passing."
Mr. Houston-Montgomery says that at the party he waved to Malcolm Forbes, publisher of Forbes magazine ("We've been in the columns together"), Mary Boone, a New York art dealer ("I think she knows me, but I'm not sure ") and Bridget Fonda, the actress ("She knows me, but we're not really the best of friends").
Mr. Revson, the gossip columnist, says there are people who actually plan whose names they are going to drop before attending a party.
These droppers don't flaunt only their friendships with the Trumps, Brooke Astor or Georgette Mosbacher.
"They even drop semi-obscure names like Wolfgang Flottl, whom everybody these days apparently has heard of but no one really knows," says Mr. Revson.
"It's the one-upsmanship of name-dropping that counts."
But name-dropping has other benefits, often civic.
In the name of civic pride and from the desire to nullify a negative image, some city promoters seek to link their municipality with the most recognizable names the city has to offer.
Take Cleveland.
It has gotten a bad rep because its once heavily polluted Cuyahoga River caught fire, because former Mayor Ralph Perk set his hair on fire with an acetylene torch and because its proposed Rock 'n' Roll Hall of Fame was recently refused an urban-development grant.
Some people call it "The Mistake on the Lake" -- Lake Erie, that is.
"It helps to point out how many important people came through Cleveland on their way to the top," says George Miller, executive director of the New Cleveland Campaign, a nonprofit organization devoted to citing the city's strengths.
Mr. Miller notes that actor Paul Newman's family owned a sporting-goods store in Cleveland, that the late actress Margaret Hamilton, who played the bad witch in "The Wizard Of Oz," once ran a nursery school in Cleveland and that comedian Bob Hope's father, a stonemason, once worked on a church next to Severence Hall, Cleveland's main concert hall.
"Power names like that don't hurt the city's reputation," Mr. Miller says.
In Hollywood, an average family can gain cachet from moving into a home vacated by the famous or near famous.
"Why we even just sold a three-bedroom house in Van Nuys and were able to keep the price firm in a weak real-estate market by noting that the original Lone Ranger lived there," says David Rambo, a sales associate with Jon Douglas Co., a Los Angeles real-estate agency.
"Most people can't even remember his name."
(It is John Hart.)
Mr. Rambo says that a 3.2-acre property overlooking the San Fernando Valley is priced at $4 million because the late actor Erroll Flynn once lived there.
"If Flynn hadn't lived there, the property might have been priced $1 million lower," says Mr. Rambo, noting that Flynn's house has been bulldozed, and only the swimming pool remains.
Press agents and public-relations practitioners are notorious name-droppers.
And some even do it with malice aforethought.
Len Kessler, a financial publicist in New York, sometimes uses it to get the attention of journalists who try to avoid him.
He says that when Dan Dorfman, a financial columnist with USA Today, hasn't returned his phone calls, he leaves messages with Mr. Dorfman's office saying that he has an important story on Donald Trump, Meshulam Riklis or Marvin Davis.
He admits he has no story on any of them on these occasions.
"But it does get him to return my calls, and it makes me feel better for the times he's given me the brushoff," Mr. Kessler says.
There are, of course, obvious dangers to blatant, unsubstantiated name-dropping.
Jeffry Thal, a publicity agent for the Lantz Office in Los Angeles, warns that dropping the wrong name labels the dropper as a fake and a fraud.
"Get caught and you're dead in the water," says Mr. Thal.
Mr. Thal says that Elizabeth Taylor, a client, "hates being called `Liz.'. . .
If directors or producers phone me and say they know `Liz, ' I know they've never met her.
She prefers `Elizabeth.'"
In New York society, Pat Buckley, the very social wife of author William Buckley, has the nicknames "Mrs. Buckles" and "Patsy."
And her husband sometimes calls her "Ducky."
"But call her `Patty,' and it's a sure giveaway you're not in her circle, because she doesn't use that name," says Joan Kron, editor-in-chief of Avenue magazine, a monthly publication sent to all the right names.
John Spencer Churchill, a nephew of the late Sir Winston Churchill, former prime minister of Great Britain, isn't that impressed with most name-droppers he meets.
That's because they only drop "mere names," says Mr. Churchill.
Currently writing his memoirs, Mr. Churchill, an artist, tells how tycoons such as the late Jean Paul Getty, the oil billionnaire, were, in fact, known only by one initial, their last.
"When you're at the club, you ask whether they've spoken to `G.'
Now they know who you mean and you know who you mean.
But no one else does.
Now that's name-dropping, if you know what I mean.
Part of a Series}
SMYRNA, Ga. --
The auto-dealer strip in this booming suburb runs nearly five miles along Cobb Parkway, stretching from the Perimeter highway that circles Atlanta to the "Big Chicken," a pullet-roofed fast-food restaurant and local landmark.
Twenty years ago, in the infancy of suburban sprawl, just a handful of dealerships were here.
Now there are 23.
Alongside such long-familiar names as Chevrolet, Ford and Dodge are nameplates that didn't exist until three years ago: Acura, Sterling, Hyundai.
Under construction is the strip's 24th showroom, the future home of Lexus, a luxury marque launched by Toyota Motor Corp. just two months ago.
The 1980s have spawned an explosion of consumer choice in America, in everything from phone companies to colas.
And especially, as the Cobb Parkway strip attests, in cars.
Americans now can choose among 572 different models of cars, vans and trucks, up from just 408 when the decade began, according to Automotive News, a trade publication.
For car marketers, it has become a much tougher battle to keep loyal customers from defecting to one of the new makes on the block.
For American car buyers, the proliferation of choice is both liberating and confusing.
Malcolm MacDougall, vice chairman of the Jordan, McGrath, Case & Taylor advertising agency in New York, calls the proliferation "nameplate mania."
He says the number of automobile choices is causing stress among consumers today, and that people will simply ignore new models that lack a well-defined image.
"The winners," he predicts, "will be brands from car makers that have traditionally been associated with quality and value."
He says it's important for a new make to be as distinctive as possible while still retaining links to the parent company's quality image.
He applauds Toyota and Nissan Motor Co. for creating separate divisions for their new luxury models, rather than simply adding more nameplates to their standard car lines.
Some auto executives believe the benefits of more choice outweigh the drawbacks.
"There's more noise out there, and the consumer may have to work harder to cut through it," says Vincent P. Barabba, executive director of market research and planning at General Motors Corp.
"But the reward is that there's less need to make tradeoffs" in choosing one's wheels.
Jeanene Page, of North Salt Lake City, Utah, likes the broader selection.
She wants something big, and already has looked at the Chrysler New Yorker and Lincoln Town Car.
Now, the 55-year-old car shopper is zeroing in on a full-sized van, figuring that it's just the thing to haul nine grandchildren and pull a boat at the same time.
"That seems to be what all my friends are using to take the grandkids to the lake," she says.
Market segmentation in cars isn't new, but it's far more extensive than when Alfred P. Sloan Jr. conceived the idea 50 years ago.
The legendary GM chairman declared that his company would make "a car for every purse and purpose."
Now there are many cars for every purse and purpose.
Just four years ago, GM planners divided the combined car and truck market into seven segments.
Today, they identify 19 distinct segments for cars, and another 11 for trucks and vans.
The number of makes has mushroomed because the U.S. is the world's biggest and richest market for automobiles; virtually every auto maker wants to sell here.
For every brand like Renault or Fiat that has been squeezed out, others such as Isuzu, Daihatsu and Mitsubishi have come in.
Detroit tries to counter the foreign invasion with new brands of its own.
GM launched the Geo marque this year to sell cars made in partnership with foreign auto makers, and next year GM's long-awaited Saturn cars will make their debut.
Ford Motor Co. created the Merkur nameplate in 1985 to sell its German-made touring sedans in the U.S.
But slow sales forced Ford to kill the brand just last week.
When consumers have so many choices, brand loyalty is much harder to maintain.
The Wall Street Journal's "American Way of Buying" survey found that 53% of today's car buyers tend to switch brands.
For the survey, Peter D. Hart Research Associates and the Roper Organization each asked about 2,000 U.S. consumers about their buying habits.
Which cars do Americans favor most these days?
It's hard to generalize, but age seems to be the best predictor.
Adults under age 30 like sports cars, luxury cars, convertibles and imports far more than their elders do.
Three of every 10 buyers under 30 would prefer to buy a sports car, compared with just 16% of adults 30 and over, according to the Journal survey.
Young consumers prefer luxury cars by a 37% to 28% margin -- even though older buyers, because of their incomes, are more likely to actually purchase a luxury car.
Perhaps most striking, 35% of households headed by people aged 18 to 44 have at least one foreign car.
That's true of only 14% of households headed by someone 60 or older.
Generally, imports appeal most to Americans who live in the West and are well-educated, affluent and, especially, young.
"For many baby boomers, buying a domestic car is a totally foreign experience," says Christopher Cedergren, auto-market analyst with J.D. Power & Co. of Agoura Hills, Calif.
Such preferences persist even though many Americans believe differences between imported and domestic cars are diminishing.
Only 58% of Americans now believe that foreign cars get better gas mileage than domestic models, the Journal survey found, down from 68% in 1987.
Some 46% give foreign cars higher quality ratings, down from 50% two years ago.
On the other hand, only 42% say foreign cars are less comfortable than U.S. models, down from 55% in 1987.
People in the automotive business disagree over how susceptible younger Americans are to brand switching.
"Once buying habits are formed, they're very hard to break," declares Thomas Mignanelli, executive vice president for Nissan's U.S. sales operations.
But out on Cobb Parkway, Ted Negas sees it differently.
"The competition is so intense that an owner's loyalty to a dealership or a car is virtually nonexistent," says Mr. Negas, vice president of Ed Voyles Oldsmobile, one of the first dealerships to locate on the strip.
Thus the very fickleness of baby boomers may make it possible to win them back, just as it was possible to lose them.
The battle for customer loyalty is evident along the Cobb Parkway strip.
Ed Voyles Olds recently established a special section in the service department for owners whose cars are less than a year old, so they get quicker service.
Just down the street, Chris Volvo invites serious shoppers to test-drive a new Volvo to any other dealership along the strip, and compare the cars side-by-side.
Manufacturers, too, are stretching further to lure buyers.
GM's Cadillac division, ignoring Detroit's long-held maxim that safety doesn't sell, is airing television commercials touting its cars' safety features.
Cadillac may be on to something.
Some 60% of the survey respondents said they would buy anti-lock brakes even if they carry a medium or high price tag.
More than 50% felt the same way about air bags.
Both features appealed most to buyers under 45.
In contrast, dashboard computers, power seats and turbo-charged engines had little appeal.
But even a little appeal has a lot of attraction these days.
GM's Pontiac division is offering a turbo-charged V-6 engine on its Grand Prix model, even though it expects to sell only about 4,000 cars equipped with that option.
The reason: Items with narrow appeal can be important in a market as fragmented as today's.
Americans spent more than $190 billion on new cars and trucks last year, and just 1% of that market exceeded Polaroid Co.'s sales of $1.86 billion.
"Even if it's only 1%," says GM's Mr. Barabba, "would you throw away sales the size of Polaroid?"
American Telephone & Telegraph Co. said it will lay off 75 to 85 technicians here, effective Nov. 1.
The workers install, maintain and repair its private branch exchanges, which are large intracompany telephone networks.
It's a California crime saga worthy of an Erle Stanley Gardner title: The Case of the Purloined Palm Trees.
Edward Carlson awoke one morning last month to find eight holes in his front yard where his prized miniature palms, called cycads, once stood.
Days later, the thieves returned and dug out more, this time adding insult to injury.
"The second time," he says, "they left the shovel."
No garden-variety crime, palm-tree rustling is sprouting up all over Southern California, bringing big bucks to crooks who know their botany.
Cycads, the most popular of which is the Sago Palm, are doll-sized versions of California's famous long-necked palms, with stubby trunks and fern-like fronds.
Because the Sago is relatively rare and grows only a couple of inches a year, it's a pricey lawn decoration: A two-foot tall Sago can retail for $1,000, and taller ones often fetch $3,000 or more.
"Evidently, somebody has realized it's easy money to steal these things," says Loran Whitelock, a research associate specializing in cycads at the Los Angeles State and County Arboretum.
Just last week, would-be thieves damaged three Sagos at Mr. Whitelock's home in the Eagle Rock section before something frightened them off, foiled.
"It's hard to think someone is raping your garden," he says.
Police suspect that the criminals, who dig up the plants in the dead of night, are selling them to nurseries or landscapers.
The Sago has become a popular accent in tony new housing tracts, apparently giving the rustlers a ready market for their filched fronds.
Thieves are going to find "anybody who has enough bucks to plant these things in their front yard," says William Morrissey, an investigator with the police department in Garden Grove, Calif., where five such thefts have been reported in the past several weeks.
The department is advising residents to plant Sagos, if they must, in the back yard and telling nurseries to be on the lookout for anyone trying to palm one off.
But for those Californians who want exotic gardens out front where neighbors can appreciate them, there's always Harold Smith's approach.
After three Sagos were stolen from his home in Garden Grove, "I put a big iron stake in the ground and tied the tree to the stake with a chain," he says proudly.
"And you can't cut this chain with bolt cutters.
Program trading on the New York Stock Exchange in September rose to its highest recorded level as a percentage of total monthly trading volume.
September program trading amounted to 13.8% of average daily New York Stock Exchange volume of 151.8 million shares, the largest percentage since the exchange began making such figures public in July 1988.
A daily average of 20.9 million shares traded in program strategies in September, the second-highest level ever.
The highest level was in June 1989, when a daily average of 22.1 million shares traded in program strategies.
Average daily trading volume in June of 180.3 million shares was considerably higher than in September.
Program trading amounted to 12.3% of average daily volume in June.
The Big Board says program trading describes a variety of strategies involving the purchase or sale of a basket of 15 or more stocks.
The most controversial of these is stock-index arbitrage, in which traders buy or sell baskets of stocks and offset the position with an opposite trade in stock-index futures to lock in profits.
It's the most controversial form of program trading because it can create abrupt price swings in the stock market.
Salomon Brothers Inc. was the top program trader in September, but most of the firm's activity involved portfolio trading strategies other than stock-index arbitrage.
Overall, Salomon reported program trading volume of 75.2 million shares.
The top stock-index arbitrage firm last month was Morgan Stanley & Co.
Of Morgan Stanley's 66.8 million shares in program trades for the month, 53.1 million were in stock-index arbitrage trades.
Behind second-place Morgan Stanley were Kidder, Peabody & Co., Goldman, Sachs & Co. and CS First Boston Inc.'s First Boston Corp. unit.
A group of shareholders filed suit against Imperial Corp. of America, Drexel Burnham Lambert Inc., First Executive Corp. and others, charging them with artificially inflating Imperial's stock price to protect certain major investors.
The complaint, filed in federal district court, accuses Imperial and other defendants of issuing false and misleading financial data.
It also charges that Imperial, the holding company for Imperial Savings & Loan, experienced major losses and writedowns because of improper assessment of the risks of junk-bond investments and wholesale consumer loan packages.
The suit seeks unspecified damages.
Imperial is in the midst of reducing its junk-bond holdings and getting out of the investment banking business in order to return to traditional thrift activities.
The derivative suit is similar to a class-action complaint filed earlier this year.
Imperial said in a statement it expects other complaints to be filed in the wake of the original suit and a recent article in Barron's magazine that focused on the company's problems.
Although an Imperial spokesman said the company hadn't yet been served with the derivative suit, he reiterated the company's statement that it would vigorously defend itself against the class-action suit.
Spokesmen at Drexel and First Executive said the companies hadn't yet been served with the suit.
In a separate complaint also filed in federal court here, shareholder Max Grill of New York charged Imperial, its top executives and directors with breach of fiduciary duty and squandering the company's assets.
Imperial said it hadn't been served with this suit either.
Companies listed below reported quarterly profit substantially different from the average of analysts' estimates.
The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share.
Estimated and actual results involving losses are omitted.
The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days.
Otherwise, actual profit is compared with the 300-day estimate.
Rhone-Poulenc S.A., Paris, said it completed the purchase of the specialty chemicals operation of RTZ Corp., a British mining and industrial group.
Rhone-Poulenc, a chemical and pharmaceutical company, said RTZ Chemicals has annual sales of about $900 million.
It didn't release terms of the transaction.
Consumer spending in Britain rose 0.1% in the third quarter from the second quarter and was up 3.8% from a year ago, the Central Statistical Office estimated Friday.
A group including Gene E. Phillips, former chairman of Southmark Corp., and William S. Friedman, former vice chairman of Southmark, lowered its stake in the Dallas real estate concern to 7.7%, according to a filing with the Securities and Exchange Commission.
The group said it sold 455,410 Southmark common shares from Sept. 5 to Oct. 5 for 18.75 cents to 25 cents a share.
The filing said the group continues to hold 3,481,887 remaining shares.
Eastman Kodak Co., seeking to position itself in the potentially huge high-definition television market, unveiled a converter that can transform conventional motion-picture film into high-definition video.
The move also helps the Rochester, N.Y., photographic giant ensure that its motion-picture film business -- for which it holds a virtual monopoly, supplying every Hollywood movie company -- isn't made obsolete by the upstart HDTV business.
While the prototype converter is costly, it's being lauded by the infant HDTV industry as a way of increasing the number of high-quality shows that can be seen on the new medium.
"The industry has been waiting with bated breath for the machines to come along," says David Niles, president of Eleven Twenty Five Productions Inc., a New York pioneer in high-definition programming.
He notes that industry executives have until now worried that they would face a severe shortage of programs once consumers begin replacing their TV sets with HDTVs.
Japanese electronic giants, such as Sony Corp. and Hitachi Ltd., have focused almost entirely on HDTV hardware, and virtually ignored software or programs shot in high-definition.
And only a handful of small U.S. companies are engaged in high-definition software development.
It's estimated that just about 250 hours of HD programming is currently available for airing.
Kodak says its new CCD HDTV converter will help alleviate the problem by allowing programmers and broadcasters to convert movies and television programs shot in 35mm motion-picture film into high-definition video.
Consumers will be able to switch on their HDTV sets and get all the viewing benefits the high-tech medium offers.
Otherwise, they'd be watching programs that are no different in quality from what they currently view on color TVs.
It would be like "watching a black and white movie on a color TV set," says Malcolm G. Saull, chairman of the film and video department at the Rochester Institute of Technology.
The new converters are "a critical link between film and the television domain," says Joerg D. Agin, vice president and general manager of Kodak's Motion Picture and Audiovisual Products division.
Kodak won't disclose the cost or when its converter will be on the market, but it's estimated the machine may be available within two years.
A similar machine already on the market, made by Rank Sintel Ltd., a unit of Rank Organisation, costs about $500,000.
And the potential market is tremendous, industry experts say.
If HDTV takes off in the U.S., there will be demand for some 4,000 to 5,000 HDTV converters, known in the industry as telecines.
Demand will come first from programming production companies and then from television stations.
"The converter is head and shoulders above anything else I've seen," says Richard J. Stumpf, vice president-engineering and development at MCA Inc.'s Universal City Studios.
And Mr. Niles, the program producer, contends that Kodak's move is "a sound marketing decision.
They can't afford to stay out of HDTV."
Indeed, the stakes are high.
The U.S. electronics industry estimates that the HDTV market will total about $150 billion over the next two decades, with an additional $400 billion expected to go for related products.
HDTVs break down images into more than 1,100 lines, compared with 525 for today's televisions, providing considerably sharper detail.
And the sets are wider, resembling the dimensions of a movie screen.
But the financial rewards aren't expected soon, nor are they guaranteed.
Experts estimate the first sets of HDTVs won't be available for another five to 10 years, and will probably retail for more than $3,000 each in today's dollars.
Some critics say they won't be quickly embraced by consumers because of the high price.
Nevertheless, Kodak couldn't risk letting HDTV turn its motion-picture film business into a dinosaur.
"Kodak understands HDTV is where everybody is going," says RIT's Mr. Spaull.
Yet another political scandal is racking Japan.
But this time it's hurting opposition as well as ruling-party members.
And as it unfolds, it's revealing some of the more tangled and seamier aspects of Japanese society.
Already, ruling Liberal Democratic Party demands that opposition members testify under oath in parliament have stalled one budget committee session and forced the committee to plan a special two-day investigation at the end of the month.
But the scandal itself is so convoluted that ruling-party members are divided between those who want to pursue the matter in hope of undermining the opposition and those who favor leaving well enough alone.
"The opposition can be the most hurt because everyone already figures the LDP is that kind of beast," says Shigezo Hayasaka, former aide to LDP kingmaker Kakuei Tanaka and now an independent analyst.
But, he adds, "We can't tell where it will go at all because we're still in the middle of it."
This time, the scandal centers on donations made by the not-quite-mainstream pachinko parlor industry.
Pachinko, a kind of pinball, is Japan's favorite form of legal gambling.
The donations so far appear to be small, especially compared with the huge sums that changed hands in the Recruit Co. influence-peddling scandal that plagued the ruling party last year.
But the implications could be great.
Pachinko is slightly on the shady side, often linked to the lower ranks of Japan's underworld and regularly at the top of annual lists of tax evaders.
Recently the industry has faced the threat of new restrictions, and political donations may have been made with the intent to bribe.
Also, about 60% of pachinko parlor owners are Korean, many of whom maintain close ties with North or South Korean residents' organizations, and donations by such foreign groups are illegal in Japan.
To many Japanese, pachinko is benign or enticingly unsavory.
Garish neon pachinko marquees blaze from the main streets and narrow alleys of cities and towns across the country.
Devotees pass hours, watching the lights blink and listening to the metal balls ping, as much to gamble as to get a little time to be anonymous, alone with their thoughts.
At 500 yen ($3.60) for a handful of balls, pachinko is a common pastime, and has been since it took root as cheap entertainment in the years after World War II.
But the total of all those pinging balls has created an industry with a reported annual income of 13 trillion yen (almost $92 billion), or nearly the size of Japan's vaunted automobile industry.
And because the pachinko industry is regularly at the top of annual lists for tax evasion, some observers estimate the real income could be as much as 20 trillion yen.
If that money were being taxed, it could bring the government a badly needed several trillion yen.
In 1984, an attempt was made to crack down on the industry with tougher restrictions.
Then, in 1988, a proposal to keep better track of income by selling prepaid cards for pachinko was fielded in parliament.
The proposal split the industry in two, along the lines of national origin: North Koreans oppose the plan while South Koreans, Japanese and Taiwanese accept it or are neutral.
In August, a conservative weekly magazine reported that a pachinko industry organization donated money to Japan Socialist Party members.
The magazine alleged that in making the donations, the pachinko industry may have been offering bribes to win support in the battle against prepaid cards, or it may have been laundering money back and forth between the JSP and the North Korean residents' organization, the Chosen Soren.
The Chosen Soren and the JSP immediately denied the report.
And at first, neither the opposition nor the LDP wanted to pursue the issue.
But the press kept it alive; as with the Recruit scandal, lists began circulating with names of people who had received money.
Within a matter of weeks, less-conservative magazines reported that members of the ruling LDP had received much larger donations from pachinko organizations.
So far, though, there have been no allegations that the contributions the LDP members received amounted to bribes.
Then the two camps upped the ante: Reports that Chosen Soren had donated directly to JSP members were rapidly countered by statements that the South Korean residents' organization had long been donating directly to LDP members.
The JSP admitted Oct. 13 that its members received about eight million yen from the pachinko organization, and charged LDP members with receiving 125 million yen ($880,000) and other opposition parties with taking about 2.5 million yen.
On Friday, the chief cabinet secretary announced that eight cabinet ministers had received five million yen from the industry, including 450,000 yen ($3,175) by Prime Minister Toshiki Kaifu.
No one has alleged that the donations were by themselves illegal.
Direct donations from either of the residents' organizations would be illegal because the groups are defined as foreign, but both groups deny making direct donations.
They say its possible some of their members may be donating privately.
The issue is further complicated because although the organizations represent Korean residents, those residents were largely born and raised in Japan and many speak only Japanese.
That they retain Korean citizenship and ties is a reflection of history -- their parents were shipped in as laborers during the decades when Japan occupied Korea before World War II -- and the discrimination that still faces Koreans in Japanese society.
Many Japanese think it only natural that the organizations or their members would donate to politicians, the way many Japanese do, to win favor or support.
Both residents' organizations admit to receiving some funding from abroad.
But LDP members and supporters of the prepaid card idea tend to speak in innuendo about the JSP's alleged donations, implying that North Korean money would be more suspect than South Korean because North Korea is communist and South Korea is an ally.
When Robert McDuffie was 14, he got a chance to play in the starting lineup for his high school basketball team in Macon, Ga.
Unfortunately, his mother had tickets for a recital by Itzhak Perlman the same night, and she was adamant about his attending.
"I threw such a fit," says Mr. McDuffie, who had begun violin studies at the age of six.
"But once Perlman started playing, I didn't give a damn about basketball. . . .
Afterwards, I went home and practiced for three hours."
Today, it's obvious that the brawny, six-foot, one-inch musician made the right choice.
At 31, Mr. McDuffie has a rich, full-bodied tone, an admirable rhythmic precision and an increasingly busy schedule.
He's currently in the midst of a 17-city U.S. tour with Yehudi Menuhin and the Warsaw Sinfonia, with stops including Charleston, S.C. (Oct. 25), Sarasota, Fla. (Oct. 28), Tampa, Fla. (Oct. 29) and Miami (Oct. 31).
Later this season he gives a recital at Washington's Kennedy Center, and appears as soloist with several major orchestras.
Yet Mr. McDuffie's career has developed at a slower pace than those of some of his better known contemporaries.
During the late 1970s, he was part of a musical "brat pack" -- a group of budding virtuosos who studied at the Juilliard School with the noted pedagogue Dorothy DeLay.
His violin classmates included Shlomo Mintz, a protege of Isaac Stern who performed with major orchestras while still a student; Cho-Liang Lin, who joined the roster of ICM Artists Inc. at the age of 18; and Nadja Salerno-Sonnenberg, who launched her career by winning the 1981 Naumberg Competition.
"I thought I was over the hill at 22," recalls Mr. McDuffie, an outgoing man with pale blue eyes and a light Southern drawl.
"But I wasn't ready for a career at that time."
Young McDuffie's first violin teacher was Henrik Schwarzenberger, a Hungarian refugee who taught in the Macon public school system.
"He taught me how to play like a gypsy," jokes the musician.
"I didn't learn to count until I got to Juilliard."
After studies at that conservatory's Pre-College Division with an assistant to the legendary instructor Ivan Galamian, he switched at the college level to Miss DeLay, Mr. Galamian's longtime assistant and, ultimately, his rival.
"I think I had to prove myself to her," says Mr. McDuffie.
"But she was always encouraging.
She only put her foot down twice," he continues.
"In my freshman year, my roommate was known as a party animal.
She thought I wasn't getting my practicing done."
As the violinist tells it, his grandmotherly looking teacher "put her hands on her hips, stomped her foot and said, `You've just got to get the {expletive deleted} out of there.'"
The second incident took place after Mr. McDuffie gave an ambitious student recital and was feeling rather pleased with himself.
Miss DeLay requested that he come to her studio with a tape of the recital.
"We listened to the Chausson `Poeme,'" he recalls, "and she said, `You hear the first note, that B-flat?
That's the only note that's truly in tune . . .'."
"That's the most important experience I've had with any teacher," he says, "because she taught me how to listen.
Now, when I play with orchestras, the musicians often compliment me on my intonation."
It was also at Juilliard that Mr. McDuffie discovered his predilection for conservative, 20th-century American composers such as David Diamond and Samuel Barber.
After winning a school competition with a performance of the latter's "Violin Concerto," Mr. McDuffie was invited to play the work for the composer, who was dying of cancer.
"Barber was seated by the fireplace looking very pale," recalls the violinist, who performed the work with a piano accompanist at the composer's apartment.
"He didn't say much, but what he said was important because it's not in the score.
There's a beautiful, Coplandesque motif -- he'd kill me if he heard me say that -- throughout the first movement . . .
The only time the violin has it is right at the end.
It's written `marcato' in the score, and I played it that way, kind of gigue-like.
And he yelled out `dolce! dolce!' {`sweet! sweet!'}."
"So we did it over," he adds.
"I played very transparently, with the tip of the bow.
If a conductor is sensitive enough to bring down the orchestra {volume} at that point, it makes the piece magical.
I don't know why Barber never told anybody else.
On Isaac Stern's recording it's very biting."
Since leaving Juilliard, Mr. McDuffie has made some smart moves and some controversial ones.
His guest appearance on the NBC soap opera "Another World," scandalized musical elitists.
By contrast, he's won kudos for his espousal of William Schuman's "Violin Concerto," which he recently recorded for Angel/EMI along with Leonard Bernstein's engaging "Serenade for Violin Solo, Strings and Percussion."
Mr. McDuffie's sweet tone, heartfelt lyricism and rhythmic punch make him an ideal interpreter of both works.
Aided by the fluid playing of the St. Louis Symphony under Leonard Slatkin's direction, this "Serenade" really swings.
Mr. Schuman's "Violin Concerto," which sounds more like a mildly atonal rhapsody for solo violin with orchestral accompaniment, meanders until the propulsive "Agitato, fervente."
But there are ample rewards in its plaintive slow sections and virtuoso fireworks for soloist, brass and timpani.
At Avery Fisher Hall here, Mr. McDuffie was heard recently with Mr. Menuhin and the Warsaw Sinfonia in more conventional fare -- Bruch's overwrought "Violin Concerto in G Minor."
His performance was so effusive and driven that the phrases rarely breathed.
The 35-member Sinfonia played adroitly with a big, lush sound that belied its size.
Whatever he plays, Mr. McDuffie finds satisfaction in the music itself -- "something greater out there than me," as he puts it during an interview at the Manhattan apartment he shares with wife, Camille, a literary publicist.
"A normal person did not write the Beethoven `Violin Concerto,'" he declares.
"Even when I hear it played badly, I'm still humbled by the piece.
If I could ever feel I've contributed to it in some way, then all the hard work has been worth it."
Ms. Jepson is a free-lance music writer in New York.
Are consumers too deep in hock?
A lot of observers think so, and, if they're right, the whole economy as well as the spendthrifts among us could be hurt.
A sudden, forced cutback by consumers, who normally account for about two-thirds of economic activity, would damp the economy at a time when plant-and-equipment spending is slowing and deficit-racked governments can't readily take up the slack.
And another wave of bad loans would further batter many already-shaky lending institutions.
The worriers cite some worrisome trends.
During the almost seven-year-old economic expansion, inflation-adjusted gross national product, disposable personal income and personal consumption expenditures have risen 30%, but inflation-adjusted consumer installment credit has surged 66%.
And the ratio of installment debt to disposable personal income -- personal income after taxes -- has hit a high of about 18 1/2%.
However, these figures don't seem to worry Thomas A. Durkin, an economist at the Federal Reserve Board.
In a paper presented at the recent annual meeting of the National Association of Business Economists in San Francisco, Mr. Durkin comments that "installment credit always grows rapidly in cyclical advances, and growth in this cycle is very typical of earlier experiences."
He adds: "We are now witnessing a slowdown which, if history is a guide, could persist for a while."
But what about the debt burden?
Mr. Durkin doubts that "there is some magic level" at which the ratio of installment debt to disposable income "indicates economic problems."
And, "more importantly," he says, "the debt burden measured other ways is not really in uncharted waters."
The chart below shows why (see accompanying illustration -- WSJ Oct. 23, 1989).
The ratio of consumer installment credit to disposable income, though up a bit, hasn't climbed steeply, and such debt as a percent of household assets is little changed.
Moreover, the burden of consumer credit payments relative to disposable income may be "lower in this cycle than earlier," Mr. Durkin says.
He notes that some "revolving credit-card credit is actually convenience credit" being used simply as a handy way of paying bills rather than a handy way of borrowing.
In addition, he says, "longer maturities on automobile and other forms of installment credit boost the stock of debt faster than the flow of repayments and the accompanying payment burden."
And if you "consider the changing distribution of credit," Mr. Durkin says, "much of the increase in debt in recent years is due to increasing credit use by higher-income families," that is, "those probably best able to handle it."
Citing figures on home-equity loans, he notes that "11% of homeowners had home-equity credit accounts, but the proportion rises to 16% of homeowners in the $45,000-$60,000 income range and 23% of homeowners with income above $60,000."
And much home-equity credit is used conservatively.
"The most frequent use is home improvement, which presumably improves the value of the property," Mr. Durkin says.
So, it isn't surprising that consumer-credit delinquencies at banks remain, as the chart shows, reassuringly below some earlier highs (see accompanying illustration -- WSJ Oct. 23, 1989).
A severe recession could, of course, raise delinquency rates, but so far the current levels of consumer debt don't seem to loom as a major threat.
In fact, the current weakness in auto buying and department-store sales and the gradual upturn in the household saving rate suggest that consumers, conservative as ever, are already clutching their purses a bit more tightly.
In July, consumer installment credit outstanding fell for the first time since January 1987.
"Consumers appear unwilling to add to their leverage to support their spending," Bruce Steinberg, a Merrill Lynch economist, says.
"As a result, household debt appears to be stabilizing at around 63% of GNP."
Consumers, credit cards in hand, aren't running amok through the shopping malls -- or putting the economy at any great risk.
Maidenform Inc. loves to be intimate with its customers, but not with the rest of the public.
The 67-year-old maker of brassieres, panties, and lingerie enjoys one of the best-known brand images, but its financial profile is closely guarded by members of the founding family.
"There are very few companies that can boast of such a close-knit group," says Robert A. Brawer, 52 years old, recently named president, succeeding Beatrice Coleman, his mother-in-law, who remains chairman.
"We are a vanishing breed," he muses.
Mrs. Coleman, 73, who declined to be interviewed, is the Maidenform strategist.
Sales have tripled during her 21-year tenure to about $200 million in 1988.
Maidenform says it is very profitable but declines to provide specifics.
The company sells image.
Its current ad campaign, on which Maidenform has spent more than $15 million since fall 1987, doesn't even show its underwear products, but rather men like Christopher Reeve, star of the "Superman" movies, talking about their lingerie turn-ons.
The Maidenform name "is part of American pop culture," says Joan Sinopoli, account supervisor of the campaign by Levine, Huntley, Schmidt & Beaver, a New York ad firm.
Maidenform generated such memorable campaigns as "I dreamed I . . . in my Maidenform bra," and "The Maidenform woman.
You never know where she'll turn up."
"Capitalizing on the brand is key," says Mr. Brawer, whose immediate plans include further international expansion and getting better control of distribution outside the U.S.
"The intimate apparel industry is perceived to be a growth industry and clearly {Maidenform} is a force to be reckoned with," says David S. Leibowitz, a special situations analyst at American Securities Corp. in New York.
Although working women are "forced to wear the uniform of the day, to retain their femininity they are buying better quality, more upscale intimate apparel," he said.
Although Mr. Brawer's appointment as president was long expected, the move on Sept. 25 precipitated the resignation of Alan Lesk as senior vice president of sales and merchandising.
Three days later, Mr. Lesk was named president and chief executive officer of Olga Co., a competing intimate apparel division of Warnaco Inc.
Warnaco also owns Warners, another major intimate apparel maker.
Mr. Lesk couldn't be reached to comment.
But Maidenform officials say that after spending 24 years at Maidenform, Mr. Lesk, 48, made it clear he wanted the top job.
"If you want the presidency of the company, this isn't the firm to work for," says James Mogan, 45, who was named senior vice president of sales, assuming some of the responsibilities of Mr. Lesk.
The company downplayed the loss of Mr. Lesk and split his merchandising responsibilities among a committee of four people.
"My style is less informal," Mr. Brawer says.
Top officers insist Maidenform's greatest strength is its family ownership.
"You can't go anywhere in this company and find an organizational chart," one delights.
"It is fun competing as a private company," Mr. Brawer says.
"You can think long range."
Other major players in intimate apparel apparently feel the same way.
Warnaco was taken private by Spectrum Group in 1986 for about $487 million.
And last year, Playtex Holdings Inc. went private for about $680 million.
It was then split into Playtex Apparel Inc., the intimate apparel division, and Playtex Family Products Corp., which makes tampons, hair-care items and other products.
Publicly traded VF Corp., which owns Vanity Fair, and Sara Lee Corp., which owns Bali Co., are also strong forces in intimate apparel.
Buy-out offers for Maidenform aren't infrequent, says Executive Vice President David C. Masket, but they aren't taken very seriously.
When he gets calls, "I don't even have to consult" with Mrs. Coleman, Mr. Masket says.
The company could command a good price in the market.
"Over the past three and a half years, apparel companies, many of whom have strong brand names, have been bought at about 60% of sales," says Deborah Bronston, Prudential-Bache Securities Inc. apparel analyst.
Mr. Brawer, along with Mrs. Coleman and her daughter, Elizabeth, an attorney who is vice chairman, are the family members involved in the operations of Maidenform, which employs about 5,000.
Mr. Brawer's wife, Catherine, and Robert Stroup, Elizabeth's husband, round out the five-member board.
Each has an equal vote at the monthly meetings.
"We are all very amiable," Mr. Brawer says.
Executives say Mrs. Coleman is very involved in the day-to-day operations, especially product development.
In the late 1960s she designed a lightweight stretch bra that boosted sales.
Her father, William Rosenthal, designed the then-dress making company's first bra in the 1920s, which he said gave women a "maiden form" compared with the "boyish form" they got from the "flat bandages" used for support at the time.
While Mr. Rosenthal introduced new undergarment designs, his wife, Ida, concentrated on sales and other financial matters.
The name Maidenform was coined by a third business partner, Enid Bissett.
The company has 14 plants and distribution facilities in the U.S., Puerto Rico, other parts of the Caribbean and Ireland.
Maidenform products are mainly sold at department stores, but the company has quietly opened a retail store of its own in Omaha, Neb., and has 24 factory outlets, with plans to add more.
Before joining Maidenform in 1972, Mr. Brawer, who holds a doctoral degree in English from the University of Chicago, taught at the University of Wisconsin.
As a senior vice president, he has headed the company's designer lingerie division, Oscar de la Renta, since its inception in 1988.
To maintain exclusivity of that designer line, it isn't labeled with the Maidenform name.
While the company has always been family-run, Mr. Brawer isn't the first person to marry into the family and subsequently head Maidenform.
Mrs. Coleman's husband, Joseph, a physician, succeeded Mrs. Rosenthal as president and served in that post until his death in 1968.
China could exhaust its foreign-exchange reserves as early as next year, a Western government report says, unless imports are cut drastically to help narrow the balance-of-payments deficit.
According to the report, completed last month, if China's trade gap continues to widen at the pace seen in the first seven months of this year, the reserves would be wiped out either in 1990 or 1991.
A country is considered financially healthy if its reserves cover three months of its imports.
The $14 billion of reserves China had in June would cover just that much.
The report by the Western government, which declines to be identified, concludes that "a near-term foreign-exchange payment problem can be avoided only if import growth drops to below 5% per annum."
According to Chinese customs figures, import growth has slowed in recent months, dropping to 16% in July and 7.1% in August from the year-earlier periods, compared with an average growth rate of 26% in the first half.
But before import growth slowed, China's buying spree in the first half already had taken its toll on foreign-exchange reserves.
The $14 billion level in June marked a drop from $19 billion at the end of April.
China's last big import binge sent reserves tumbling to $10.6 billion in June 1985 from $16.6 billion the previous September.
China might stave off a crisis if it acts as forcefully as it did to arrest the 1985 decline, when Beijing slammed the brakes on foreign-exchange spending and devalued the currency.
But this time, China faces a more difficult battle because of economic forces that have come into play since the Tiananmen Square killings June 4.
For example, China's hard-currency income is expected to suffer from the big drop in tourist arrivals since June 4.
Revenue from tourism this year is projected to total $1.3 billion, down from $2.2 billion last year.
Because of this and the huge trade gap, the deficit in China's current account, which measures trade in goods and services plus certain unilateral transfers of funds, is expected to widen sharply from the $3.8 billion deficit last year.
The Western government report suggests a number of scenarios for China's current-account balance, two of which are considered most likely.
In one, imports and exports continue to grow at the respective average rates of 25% and 5% recorded during the first seven months, and the current-account deficit widens to $13.1 billion.
In 1985, China had a record deficit of $11.4 billion.
The other scenario assumes that Beijing takes effective actions to curb imports in the coming months.
In this case, China would still finish the year with a current-account deficit of $8.7 billion, based on projections that imports for all of this year grow 20% and exports 10%.
If China were still on good terms with foreign lenders, it might be able to stem the drain on its foreign-exchange reserves by using some loan funds to offset the current-account deficit.
But since June, foreign bankers led by international financial institutions have virtually suspended their new loans to China.
Even if borrowing resumes, commercial bankers aren't expected to lend as much as before.
In addition, economists are forecasting a slowdown in foreign direct investments as businessmen become increasingly wary of China's deteriorating political and economic environment.
On top of all this, foreign-debt repayments are expected to peak in 1991 to 1992.
With less capital coming in, China's balance of payments would suffer.
The Western government report's first scenario assumes a 30% reduction in foreign borrowing and a 5% contraction in foreign direct investment.
In the second, foreign borrowing is projected to grow 10% and investment to drop 10%.
But in either case, the report says, China's balance of payments would rapidly dry up foreign reserves, which are used to finance the imbalance.
In the first scenario, the reserves would be exhausted next year, and in the second they would be wiped out in 1991.
Roche Holding AG, parent of the Swiss chemical and pharmaceutical group, said its group sales rose 22% in the first nine months of the year to 7.32 billion francs ($4.51 billion).
The company reported good gains in all of its divisions.
Roche also said it expects a "considerable rise" in 1989 group profit from the 641.5 million-franc ($396 million) net in 1988.
New Canaan Investments Inc. said it closed the acquisition of Carr-Lowrey Glass Co. from Newell Co., a Freeport, Ill., maker of do-it-yourself home products.
Terms weren't disclosed.
Carr-Lowrey, a maker of glass bottles for the cosmetics and toiletries industries, had sales last year of about $40 million.
New Canaan Investments is a closely held investment partnership with interests primarily in the packaging industry.
Ralph Brown was 31,000 feet over Minnesota when both jets on his Falcon 20 flamed out.
At 18,000 feet, he says, he and his co-pilot "were looking for an interstate or a cornfield" to land.
At 13,000 feet, the engines restarted.
But knowing that mechanics would probably ground him for repairs, Mr. Brown skipped his stop in nearby Chicago and set course to get his load -- a few hundred parcels -- to the Memphis package-sorting hub on time.
Had he been a little less gung-ho, "I'd have gotten the thing on the ground and headed for the nearest bar," Mr. Brown says.
But he flies for Federal Express Corp., perhaps the closest thing in corporate America to the Green Berets.
Federal's employees work long hours and seem to thrive on the stress of racing the clock.
Like Mr. Brown, they sometimes go to surprising lengths to meet that overarching corporate goal: delivering the goods on time.
They are a tribute to Federal's management which, since the company's founding 16 years ago, has had its way with its work force -- an unusual feat in the contentious transportation industry.
That may soon change.
This month, Federal's 2,048 pilots, including some 961 acquired along with Tiger International Inc. in February, will decide whether to elect the powerful Air Line Pilots Association as their bargaining agent.
The election, which would bring the first major union to Federal's U.S. operations, has pitted new hires against devoted veterans such as Mr. Brown.
It has also rattled Federal's strongly anti-union management, which is already contending with melding far-flung operations and with falling profits.
"A union, sooner or later, has to have an adversary, and it has to have a victory," Frederick W. Smith, Federal's chairman and chief executive, says with disdain.
"In our formula, we don't have any losers except the competition."
What managers really fear is that the pro-union movement could spread beyond the pilots.
Under federal transportation law, a government mediator is attempting to reconcile the melding of Tiger's job classifications into Federal's.
Depending on the outcome, the merged company may face union elections this fall among airplane mechanics, ramp workers, stock clerks and flight dispatchers.
These groups constitute up to 10% of its work force.
"Unions would have a profound effect on the whole culture of the company," says Bernard La Londe, a professor at Ohio State University at Columbus and a Federal consultant.
That culture, carefully crafted by Mr. Smith, leaves little, if any, room for unions.
Since founding the company, the charismatic Vietnam vet, who is still only 46 years old, has fostered an ethos of combat.
Flights are "missions."
Mr. Smith's managers have, at times, been called "Ho Chi Minh's Guerrillas."
The Bravo Zulu award, the Navy accolade for a "job well done," is bestowed on Federal's workers who surpass the call of duty.
Competitors are known as the "enemy."
To reinforce employees' dedication, Mr. Smith pays well.
He also lets workers vent steam through an elaborate grievance procedure and, as a perk, fly free in empty cockpit seats.
He gives pep talks in periodic "family briefings" beamed internationally on "FXTV," the company's own television network.
And, with many of his 70,000 workers, Mr. Smith's damn-the-torpedoes attitude has caught on.
James Cleveland, a courier who earned a Bravo Zulu for figuring out how to get a major customer's 1,100-parcel-a-week load to its doorstep by 8 a.m., considers himself far more than a courier.
"We don't just hand the customer the package.
That's just the beginning," he says.
"In essence, we run the show."
David Sanders, a longtime pilot, bristles at the mere suggestion that a union might tamper with his flight schedule.
"This is America," he says.
"Nobody has the right to tell me how much I can work."
Such attitudes have given Federal flexibility, not only to rapidly implement new technology but to keep its work force extraordinarily lean.
The company deliberately understaffs, stretching employees' schedules to the limit.
But though couriers work as many as 60 hours a week during the autumn rush, they leave early during slack times while still being assured of a minimum paycheck.
Pilots, as well, routinely fly overtime to ensure that none are furloughed during seasonal lows.
The operational freedom has also given Federal a leg up on archrival United Parcel Service Inc., the nation's largest employer of United Brotherhood of Teamsters members.
UPS won't discuss its labor practices, but, according to Mr. Cleveland, a former UPS employee, and others, union work rules prohibit UPS drivers from doing more than carrying packages between customers and their vans.
Because UPS drivers aren't permitted to load their own vehicles at the depot, say these couriers, packages often get buried in the load and are delivered late.
Labor problems are the last thing Mr. Smith needs right now.
Although the Tiger acquisition has brought Federal a long way toward becoming the global player it wants to be, it also has brought problems.
It more than doubled Federal's long-term debt to $1.9 billion, thrust the company into unknown territory -- heavy cargo -- and suddenly expanded its landing rights to 21 countries from four.
Federal, on its own, hadn't been doing very well overseas.
It had hemorrhaged in its attempt to get into Asia, where treaty restrictions forced it to fly some planes half-empty on certain routes.
On routes to South America, the company had no backup jets to ensure delivery when planes were grounded.
In Europe, business suffered as Federal bought several local companies, only to have the managers quit.
These and other problems squeezed Federal's profit margins last year to 8%, down from more than 13% annually in the first half of the decade.
Earnings have plummeted, too, in each of the past three quarters.
In the fiscal first period ended Aug. 31, profit fell 54% to $30.4 million, or 58 cents a share, mostly because of the Tiger merger, Federal says.
Federal's stock price, however, has held up well, driven in part by the general run-up of airline stocks, analysts say.
Since trading as low as $42.25 a share in May, Federal's shares have rallied as high as $57.87 in New York Stock Exchange composite trading.
They closed Friday at $53.25, down 50 cents on the day.
There's a certain irony in the fact that Federal Express faces its first union problems as a result of its Tiger purchase.
Tiger itself was founded by a band of gungho airmen who had airlifted supplies "over the Hump" from India to China during World War II.
In the early 1970s, Mr. Smith modeled his fledgling company on Tiger's innovation of hub-and-spoke and containerized-cargo operations.
But from early on, Tiger's workers unionized, while Federal's never have.
Federal Express officials acknowledge mistakes in their drive overseas but say it will pay off eventually.
Analysts expect Federal's earnings to improve again in its fiscal third quarter ending Feb. 28, when the company should begin benefiting from Tiger's extra flights, back-up planes and landing rights.
Until then, they expect the cost of integrating the two carriers to continue crimping profits.
For now, the union issue is the most nettlesome of Federal's Tiger problems, management believes.
Although encouraging dialogue between managers and workers, Mr. Smith doesn't countenance what he considers insubordination.
When a large group of pilots once signed petitions opposing work-rule and compensation changes, he called a meeting in a company hangar and dressed them down for challenging his authority.
He then made most of the changes, pilots say.
That sort of approach, however, hasn't worked since the addition of Tiger.
Its 6,500 workers, who had battled Tiger's management for years over givebacks, were union members until the day of the merger, when most of their unions were automatically decertified.
Soon after the merger, moreover, Federal's management asked Tiger's pilots to sign an agreement stating that they could be fired any time, without cause or notice.
When the pilots refused, the company retracted it.
Mr. Smith angered Federal's pilots, too.
In his haste to seal the deal with Tiger Chairman Saul Steinberg last August, Mr. Smith ignored a promise that he had made to his own pilots three years ago: that any fliers acquired in future mergers would be "end-tailed" -- put at the bottom of the pilot seniority list that determines work schedules, pay and career options.
The Tiger merger agreement stipulated that the lists be combined on the basis of tenure.
Mr. Smith is trying hard to allay the anger.
And even some pro-union pilots say his charisma and popularity among the many former military fliers could be tough to beat.
"A lot of people are identifying a vote for representation as a vote against Fred Smith," says J.X. Gollich, a Tiger-turned-Federal pilot and union activist.
Mr. Smith and other top Federal executives have met with Tiger workers in Los Angeles, Ohio, New York, Alaska, Asia and Europe.
Recently, they have appeared every few weeks in talk-show type videos, countering pro-union arguments.
In one video, Mr. Smith defended his agreement to merge the pilot-seniority lists.
He said Mr. Steinberg had insisted that the merger talks move quickly.
Regulators, as well, might have quashed the deal if Tiger's pilots hadn't been protected, he said.
Furthermore, Mr. Smith added, "our contract with our pilots says that we will manage our fleet operations with their advice.
It doesn't give any particular group the ability to veto change."
Already, the fight has been costly.
The seniority-list controversy, along with the job-classification dispute, has been turned over to the mediator.
Meanwhile, the company is operating with two separate pilot groups and seniority lists, and that is costing Federal "a big number," says James Barksdale, executive vice president and chief operating officer.
The issue has also cost Federal management a lot of good will among its old pilots.
"They were willing to mistreat us because we hadn't shown any moxie, any resistance," says William Queenan, a DC-10 pilot and 14-year Federal veteran.
Adds John Poag, a 727 captain and past chairman of the company-sponsored Flight Advisory Board: "They've made all these magnanimous gestures to the Flying Tiger pilots, and for us, nothing."
Such animosity could prove pivotal in the union vote.
A large majority of the 961 former Tiger fliers support the union, according to a union study.
But though most of the 1,087 Federal pilots are believed opposed, it is unclear just how much their loyalty to Mr. Smith has been eroded.
The fight has turned ugly and, among pilots at least, has shattered the esprit de corps that Mr. Smith worked so hard to build.
Anti-union pilots have held ballot-burning parties.
Some younger pilots say they have had to endure anti-union harangues by senior pilots while flying across the country.
And for now, at least, the competition isn't the only enemy.
Barney Barnhardt, a 727 captain and leader of the pro-union forces, said he has received two anonymous death threats and been challenged to a fight with tire irons by a colleague.
"The pilots are either for us or extremely against us," he says with a sigh.
Harsco Corp. said it obtained a $33.1 million export order for armored recovery vehicles and related support equipment.
Harsco declined to say what country placed the order.
The company said it received an order for 23 of the vehicles, which retrieve tanks and other heavy-tracked vehicles when they break down or are damaged, and an option for 16 more.
Delivery is to begin in early 1991.
Harsco produces products for defense, industrial, commercial and construction markets.
The Senate convicted U.S. District Judge Alcee Hastings of Florida of eight impeachment articles, removing the 53-year-old judge from his $89,500-a-year, lifetime job.
Mr. Hastings's case was particularly nettlesome because it marked the first time a federal official was impeached and removed from office on charges of which a jury had acquitted him.
In 1983, Mr. Hastings was found not guilty of accepting a $150,000 bribe in a case before him, the central charge on which the Senate convicted him.
He was only the sixth federal judge ever ousted from office after an impeachment trial.
With no floor debate, the Senate on Friday voted 69-26 to convict Mr. Hastings of perjury and conspiring to accept a bribe, five votes more than needed.
Conviction on any single impeachment article was enough to remove Judge Hastings from office.
He was found not guilty of three charges, involving accusations that he had improperly disclosed information about a sensitive, government investigation.
The Senate didn't vote on six lesser charges.
Although Mr. Hastings had been acquitted by a jury, lawmakers handling the prosecution in Congress had argued that the purpose of impeachment isn't to punish an individual.
Instead, they argued that impeachment aims to protect public institutions from people who have abused their positions of trust, irrespective of the outcome of prior criminal or civil cases.
Mr. Hastings faced the senators and sat impassively during the first two roll-call votes, then quickly left the chamber.
In an impromptu news conference on the Capitol steps, he denounced the senators' action.
"Their opinion is devoid of the wisdom of the forefathers' teaching regarding impeachment," Mr. Hastings said.
For the future, he said he would run for governor of Florida.
Mr. Hastings was appointed to the federal bench by President Carter in 1979 and was one of the few black federal judges in the country.
While he packed the Senate gallery with his supporters during some of the impeachment trial, most civil rights groups kept their distance from his case.
Following the impeachment conviction, Dr. Benjamin Hooks, executive director of the National Association for the Advancement of Colored People, issued a restrained statement, warning that the Hastings case could set a "dangerous precedent," but adding, "We must respect the considered judgment of the Senate.
When last we left him, FBI Agent Nick Mancuso had solved a murder mystery, unraveled a Washington political scandal, and racked up some pretty good ratings numbers in the miniseries "Favorite Son."
What next for the crusty FBI agent with the heart of gold?
A spinoff series, of course.
There are plenty of worse inspirations for shows -- and most of them had already made the fall lineup:
a nun raising some lovable orphans.
A den mother raising some lovable teen models.
A bunch of tans and bathing suits posing as lovable lifeguards.
In that context, Robert Loggia's riveting performance as the unlovable -- even crotchety -- veteran agent seems a better franchise for a series than most.
Week by week on "Mancuso FBI" (NBC, Fridays, 10 p.m. ET), he pokes around the crime styles of the rich, famous and powerful of the Washington scene -- a loose cannon on deck at the FBI.
Over the first few weeks, "Mancuso FBI" has sprung straight from the headlines, which is either a commendable stab at topicality, or a lack of imagination, or both.
The opening show featured a secretary of defense designate accused of womanizing (a la John Tower).
When his secretary is found floating dead in the pol's pool, Mancuso is called in to investigate.
Last week, a young black girl claimed she had been raped by a white police officer (a la Tawana Brawley).
In this week's show, there's an unsafe nuclear weaponsmaking facility (a la Rocky Flats).
Along the way, we're introduced to the supporting cast: a blond bombshell secretary (Randi Brazen -- her real name, honest), a scheming young boss (Fredric Lehne), another blonde bombshell who's also an idealistic lawyer (Lindsay Frost), and a forensics expert (Charles Siebert).
If all of this seems a little stale, it's redeemed in part by some tricky plot twists:
The usual suspects are found to be guilty, then not guilty, then guilty -- but of a different crime.
(In last week's rape case, for example, the girl turns out to have been a victim of incest, and the biggest villains are the politicians who exploit the case.)
Most of all though, the show is redeemed by the character of Mancuso.
What makes the veteran FBI man so endearing is his hard-bitten cynicism -- earned, we discover, when he was assigned to the civil rights movement back in the 1960s.
He wasn't protecting the Freedom Marchers; he was tailing them as subversives.
This is not the "Mississippi Burning" scenario that thrills his young colleagues: "Kid, you've been reading Classic Comics too long," Mancuso says.
"Back in 1964, the FBI had five black agents.
Three were chauffeurs for J. Edgar Hoover, and two cleaned his house."
At the core of Mr. Loggia's Mancuso is his world-weary truculence.
He describes a reporter as "Miss First Amendment."
He describes a drowned corpse as "Esther Williams."
And when he's told "Try a little tenderness," he shoots back "I'm going home to try a little linguine."
Yet for all his cynicism, he's at heart a closet idealist, a softy with a secret crush on truth, justice and the American Way.
He's the kind of guy who rescues trampled flags.
If "Mancuso FBI" has an intriguing central character, it also has a major flaw:
It's wildly overwritten.
Executive Producers Steve Sohmer and Jeff Bleckner (and writer/producers Ken Solarz and Steve Bello) have revved this show up to the breaking point.
To start, there's always a crisis -- and someone always worries, "What if the press gets a hold of this?"
At least once an episode we see protestors marching around screaming slogans.
At least once Mancuso's boss yells "In here -- now," and proceeds to dress his investigator down:
"You are a dinosaur . . . a hangover in a $10 suit . . .
One more word and you are out on a park bench, mister."
Finally, of course, the boss gives in, but he's still yelling: "I find myself explaining anything to Teddy Kennedy, you'll be chasing stolen cars in Anchorage."
In fact, throughout "Mancuso FBI," we don't get words or lines -- we get speeches.
Witnesses shout, scream, pontificate: ". . . a dream that the planet could be saved from itself and from the sadistic dumb creatures who try to tear down every decent man who raises his voice."
And Mancuso himself is investigating at the top of his lungs: "How the hell can you live with yourself?" he erupts at a politician.
"You twist people's trust.
You built your career on prejudice and hate.
The scars will be here years after the polls close."
In each show, Mancuso gets to unleash similar harangues:
"Where the hell are they gonna live when people like you turn the world into a big toxic waste dump?
You're the real criminal here . . . and what you did wasn't just a murder -- it was a crime against humanity."
And, at least once a show, someone delivers the line "Get off that soapbox."
Now that's advice the writers should take to heart.
They have a series with a good character, some interesting, even occasionally surprising plot lines, and they're ruining it.
Why, when a key witness disappears, does Mancuso trash her apartment, tearing down drapes, smashing walls?
It's a bizarre and totally inappropriate reaction, all to add more pizzazz to a script that's already overdosing on pizzazz.
That's not plot.
That's not character.
That's hyperventilating.
There is a scene at the end of the first week's show where Mancuso attends the unveiling of the memorial to his dead partner David.
Asked to say a few words, he pulls out his crumpled piece of paper and tries to talk, but he's too choked up to get the words out.
He bangs on the piece of paper in frustration, then turns and walks away.
It was a profoundly moving moment for series television, and Robert Loggia's acting resonated in the silence.
There's a pretty good program inside all the noise of "Mancuso FBI."
If the show's creators could just let themselves be quiet for a little, they might just hear it.
With a Twist of the Wrist Boys with tops, and Frisbee tossers, And P.R. types with bees in their bonnet, Have a goal in common, all of them try To put the right spin on it.
-- George O. Ludcke.
Net Gain
Investment letters now abound, I really like to read them; If I peruse enough, I've found I've no time left to heed them!
-- Bern Sharfman.
Daffynition
TV evangelist: salesparson.
-- Marguerite Whitley May.
Texaco Inc. has purchased an oil-producing company in Texas for $476.5 million, its first major acquisition since its legal brawl with Pennzoil Co. began more than four years ago.
The White Plains, N.Y., oil company said Friday that it had acquired Tana Production Corp., a subsidiary of TRT Energy Holdings Inc., for $95.1 million in cash, with the rest to be paid in shares of a new, non-voting issue of preferred stock.
Tana, which holds properties in 17 oil and gas fields in south Texas, will provide Texaco with mostly gas reserves.
The fields contain recoverable reserves of 435 billion cubic feet of natural gas and four million barrels of oil.
"This acquisition is another indication of Texaco's commitment to increase the company's reserve base," said Chief Executive Officer James W. Kinnear.
Texaco has also been attempting to sell oil properties.
At least two years ago, the company put 60 million barrels of oil reserves on the block.
They were either too small or uneconomic to maintain, the company said.
Not all of those parcels have yet been sold.
Texaco acquired Tana before it completed those sales because Tana's properties are high quality and near other fields Texaco already owns, a company spokeswoman said.
Texaco, like many other oil companies, has been struggling to replace its falling oil and gas reserves.
Texaco's situation had become particularly complex because much of its effort had for years been focused on its brawl with Pennzoil and then on New York investor Carl C. Icahn's attempt to take over the company.
Pennzoil had sued Texaco for improperly interfering with its acquisition of a portion of Getty Oil Co.
Eventually, Texaco, which was forced into bankruptcy proceedings by that litigation, settled its fight with Pennzoil for $3 billion in 1986.
Mr. Icahn, who played a key role in the settlement and attempted subsequently to take control of the company, sold his stake in Texaco just last summer.
Completion of Texaco's acquisition of Tana is subject to government approval under the Hart-Scott-Rodino Antitrust Improvements Act.
CRI Inc. said it reduced the estimated cash distribution for its Capital Housing and Mortgage Partners Inc. trust to between 71 cents and 74 cents a share, from between 75 cents and 80 cents, for the year ending June 9, 1990.
The change in expected cash distributions from the Champs real estate investment trust stems from a revised estimate of administrative costs, said Jay R. Cohen, Champs executive vice president.
CRI, which sponsors Champs, is a world-wide real estate investment firm.
H&R BLOCK Inc. had net income of $100.2 million, or $1.90 a share, in the fiscal year ended April 30.
The figure was incorrectly shown as a net loss in a chart accompanying Friday's Heard on the Street column.
Your Oct. 2 article on Daniel Yankelovich cited the quote "A good name is better than great riches" as being from Cervantes' "Don Quixote."
Actually, Cervantes borrowed that quote from a writer of some 25 centuries earlier: Israel's King Solomon wrote those words in the Book of Proverbs (22:1).
Michael E. Hill
Japan had an unadjusted trade surplus of $1.82 billion for the first 10 days of October, down from $3.16 billion a year earlier, the Finance Ministry said.
The latest drop shows the narrowing in the nation's trade gap reflected in successive full monthly reports is continuing.
The report follows five-consecutive declines in full monthly figures.
Imports rose sharply in the period, to $5.19 billion from $4.04 billion a year earlier, a change of 28%.
Exports during the period were $7.01 billion, 2.6% below $7.20 billion a year ago.
Groupe AG's chairman said the Belgian insurer is prepared to give up some of its independence to a white knight if necessary to repel a raider.
Amid heavy buying of shares in Belgium's largest insurer, Maurice Lippens also warned in an interview that a white knight, in buying out a raider, could leave speculators with big losses on their AG stock.
Since the beginning of the year, the stock has nearly doubled, giving AG a market value of about 105 billion Belgian francs ($2.7 billion).
The most likely white knight would be Societe Generale de Belgique S.A., which already owns 18% of AG and which itself is controlled by Cie. Financiere de Suez, the acquisitive French financial conglomerate.
But Mr. Lippens said a rescue also could involve Asahi Mutual Life Insurance Co., which owns 5% of AG.
AG is hardly alone in its anxiety.
A rambunctious shake-up is quickly reshaping Europe's once-stately insurance business.
Worried by European Community directives that will remove many of the barriers to cross-border insurance services, starting in mid-1990, insurers are rushing to find partners and preparing for price wars.
In West Germany and the Netherlands, insurers are flirting with banks.
In France, Suez and Axa-Midi Assurances S.A. both have been on the prowl for giant acquisitions; Suez last month acquired control of Groupe Victoire, the sixth-largest European insurance company, after a takeover battle with Cie. Industrielle.
Mr. Lippens said the volume of shares changing hands has grown significantly since mid-September.
But he estimated that a raider would have been able to amass no more than 4% of the shares in recent months.
Aside from exploring plans for joint ventures or acquisitions, Mr. Lippens has called top managers of companies rumored as potential raiders -- among them, Axa-Midi, Union des Assurances de Paris and Suez, all based in France.
They have all "very clearly stated that they have not acquired and are not acquiring shares of AG," he said.
Any raider would find it hard to crack AG's battlements.
A "syndicate" of shareholders holds just under 50% of AG, Mr. Lippens said, and members have agreed to give one another the right of first refusal should they sell any AG shares.
Aside from Generale de Belgique and Asahi, the syndicate includes Antwerpsche Hypotheekkas, a Belgian savings bank, and various family interests.
A Generale spokesman confirmed that the giant Belgian holding company would be willing to raise its stake in AG should a raider seek control.
Asahi officials couldn't be reached for comment.
Even without bid talk, this year's surge in prices for Brussels real estate has excited interest in AG.
The company says those holdings constitute the third-biggest real-estate portfolio in Belgium.
With the dust settling from the failed coup attempt in Panama, one of the many lingering questions the Bush administration will ponder is this: Is the National Security Council staff big enough, and does it have enough clout, to do its job of coordinating foreign policy?
President Bush's national security adviser, Lt. Gen. Brent Scowcroft, came into office in January intent on making the NSC staff leaner and more disciplined than it had been during the Reagan administration.
Gen. Scowcroft was a member of the Tower Commission, which investigated the Iran-Contra affair.
He was all too aware of how a large, inadequately supervised NSC staff had spun out of control and nearly wrecked President Reagan's second term.
So, following both the style he pursued as President Ford's national security adviser and the recommendations of the Tower Commission, Gen. Scowcroft has pruned the NSC staff and tried to ensure that it sticks to its assigned tasks -- namely, gathering the views of the State Department, Pentagon and intelligence community; serving as an honest broker in distilling that information for the president and then making sure presidential decisions are carried out.
The Tower Commission specifically said that the NSC staff should be "small" and warned against letting "energetic self-starters" like Lt. Col. Oliver North strike out on their own rather than leaving the day-to-day execution of policies to the State Department, Pentagon or Central Intelligence Agency.
However, the Panama episode has raised questions about whether the NSC staff is sufficiently big, diverse and powerful to coordinate U.S. policy on tough issues.
During the coup attempt and its aftermath, NSC staffers were "stretched very thin," says one senior administration official.
"It's a very small shop."
Gen. Scowcroft doesn't plan to increase the staff right now, but is weighing that possibility, the official adds.
The NSC staff "doesn't have the horsepower that I believe is required to have an effective interagency process," says Frank Gaffney, a former Pentagon aide who now runs the Center for Security Policy, a conservative Washington think-tank.
"The problem with this administration, I think, is that by design it has greatly diminished, both in a physical sense and in a procedural sense, the role of the NSC."
The National Security Council itself was established in 1947 because policy makers sensed a need, in an increasingly complex world, for a formal system within the White House to make sure that communications flowed smoothly between the president and the State Department, Pentagon and intelligence agencies.
By law, the council includes the president, vice president and secretaries of state and defense.
In practice, the director of central intelligence and chairman of the Joint Chiefs of Staff also serve as unofficial members.
But the size, shape and role of the NSC staff have been left for each president and his national security adviser to decide.
That task is one of Washington's perennial problems.
In the Bush White House, the size of the NSC's staff of professional officers is down to about 50 from about 70 in 1987, administration officials say.
Administration officials insist that the size of the staff wasn't a problem during the Panama crisis.
But one clear problem during the coup attempt was that the NSC staffer most experienced in Latin America, Everett Briggs, was gone.
He had just resigned, at least in part because of a feud with Assistant Secretary of State Bernard Aronson over the administration's policy on Panama and support for Nicaragua's Contra rebels.
The absence of Mr. Briggs underscored the possible inadequacy of the current NSC staff.
Both Gen. Scowcroft and his deputy, Robert Gates, are experts in U.S.-Soviet affairs.
Gen. Scowcroft is particularly well-versed in arms control, and Mr. Gates has spent years studying Soviet politics and society.
Both have become confidants of President Bush.
But neither has an extensive background in Latin America, the Middle East or Asia.
In those areas, the role of NSC staffers under them therefore have become more important.
Gen. Scowcroft knows as well as anyone that one of the biggest dangers he faces is that NSC staffers working in relative anonymity will take over policy-making and operational tasks that are best left to bigger and more experienced State Department and Pentagon bureaus.
But just as every previous NSC adviser has, Gen. Scowcroft now will have to mull at what point the NSC staff becomes too lean and too restrained.
Japan's wholesale prices in the first 10 days of October fell 0.3% from the previous 10 days but rose 3.3% from a year ago, the Bank of Japan said.
The wholesale price index stood at 89.6 (1985 equals 100).
A former Sperry Corp. marketing executive, admitting his role in the Pentagon procurement scandal, pleaded guilty to bribery and conspiracy charges for helping funnel $400,000 to a midlevel Navy acquisition official during the early 1980s.
Frank Lavelle, who at the time was the marketing director for Sperry in Clearwater, Fla., admitted participating in a scheme to bribe Garland Tomlin, the Navy official.
Mr. Tomlin, who left the Navy in 1985, pleaded guilty earlier this year to related conspiracy, bribery and tax-evasion charges.
The bribery scheme took place between 1982 and 1985, according to documents filed by prosecutors in connection with Mr. Lavelle's guilty plea in federal district court in Alexandria, Va.
Sperry merged with Burroughs Corp. to become Unisys Corp. in late 1986.
Court documents filed by prosecutors indicate Mr. Tomlin tried to steer to Sperry a multimillion dollar contract to computerize maintenance of certain Navy electronics equiment.
Mr. Tomlin, among other things, illegally provided Mr. Lavelle with inside information and documents intended to give Sperry an unfair advantage in the competition, the documents said.
Sperry ultimately was eliminated from the competition without receiving the work.
Documents filed by prosecutors also indicate that Mr. Lavelle and his fellow conspirators requested and obtained "approval of the scheme" from more-senior Sperry officials "because the payment which {Mr.} Tomlin requested was so large."
Charles Gardner, a former Unisys vice president, and James Neal, a former company consultant, have admitted participating in this and other bribery schemes.
Unisys has said that all of the company officials who participated in improper activities have left the company.
Mr. Lavelle faces a maximum of 20 years in jail and a $500,000 fine.
The New York Stock Exchange said a seat was sold for $500,000, unchanged from the sale Thursday.
Seats are quoted at $430,000 bid and $525,000 asked.
Bureaucrats may deserve their bad reputation, after all.
Matthew Lesko, something of a professional defender of government, thought he had a sure-fire winner last summer when he offered $5,000 for the best "verifiable story of 250 words or less about how a government bureaucrat helped you."
He sent out thousands of news releases from his Kensington, Md., office.
He plugged the contest on Larry King's radio show, on Pat Sajak's television show and on the C-SPAN cable television network.
He talked about it in every speech he made as he roamed the country promoting his books, which dispense handy how-to advice on using government information for fun and profit.
Mr. Lesko figured he would be flooded with entries by now.
After all, he says, "we've got like 15 million bureaucrats."
And in addition to the $5,000, he has promised the winner a "My Favorite Bureaucrat" plaque and offered each of two runners-up $500.
So far, though, Mr. Lesko has received only one entry.
To make matters worse, the lone nomination came from another bureaucrat: A woman from the New York State Department of Taxation and Finance who nominated her boss.
Mr. Lesko, who is making the rules as he goes, has determined that bureaucrats are eligible for nomination by other bureaucrats.
But he says he would prefer to get nominations from rank-and-file folks.
He admits that he hasn't had much luck generating free publicity for his contest.
Newspapers, including this one, have generally ignored his news releases.
Talk show hosts quickly change the topic.
But Mr. Lesko's staff is beginning to wonder whether there isn't some larger phenomenon foiling the contest.
"Is the government not helping anybody?" asks Toni Murray, an assistant to Mr. Lesko.
Mr. Lesko himself isn't yet prepared to accept that explanation.
"People hate to write," he says.
"Maybe people don't believe I want to give this money away."
Maybe Americans are just so annoyed with government that they aren't interested in admitting that bureaucrats come in handy once in a while.
If he sponsored a contest on how a bureaucrat mishandled something, Mr. Lesko admits, "I'd get 5,000 entries."
Now there's an idea.
Ford Motor Co. and Saab-Scania AB of Sweden broke off talks about a possible alliance after Ford officials concluded that the cost to modernize Saab's car operations would outweigh the likely return.
With the collapse of the talks Friday, European analysts expect Ford to intensify its pursuit of British luxury car maker Jaguar PLC, which is scrambling to fend off a hostile Ford bid by negotiating a friendly alliance with Ford's archrival, General Motors Corp.
Saab, meanwhile, is left to continue its search for an ally to shore up its sagging car business.
Saab said last week it "has had and will continue to have contacts with other manufacturers."
Among the possible suitors is Italy's Fiat S.p. A, analysts said last week.
Ford and Saab officials declined to elaborate publicly on the announcement Friday that their negotiations failed to yield an agreement "that could make long-term business sense to both parties."
Individuals close to the Ford side of the negotiations said late last week that the No. 2 U.S. auto maker lost interest as it became clear that the Swedish auto maker's automotive operations had little to offer in the way of image or technology.
Ford originally had seen a Saab alliance as a way to expand its presence in the European and U.S. luxury car markets.
In addition, Ford and Saab had discussed a possible link between their heavy truck operations.
But the talks on a heavy truck alliance apparently didn't go far.
Some European analysts speculated that officials of Saab's highly profitable Scania truck operation balked at surrendering any of their autonomy.
Meanwhile, Ford officials became convinced they couldn't expect to recover the investment it would require to make Saab's cars competitive in the increasingly crowded luxury market.
Saab's problems were underscored Friday when the company announced that its car division had a 1.2 billion kronor ($186.1 million) loss during the first eight months of this year, slightly worse than Saab-Scania had forecast in its first-half report last month.
Overall, Saab-Scania's pretax profit during the first eight months of the year plunged 48.9% to 1 billion Swedish kronor ($155.1 million) from 1.96 billion kronor ($303.9 million) a year earlier.
Industry analysts in Europe said the most likely suitor for Saab now is Fiat.
Saab and Fiat have worked together in the past, in one case developing jointly a new auto chassis that became the foundation of Saab's 9000 model, Fiat's Croma and Lancia's Thema.
Last month, Saab-Scania Chief Executive Georg Karnsund said his company has had talks with Fiat about a broader alliance.
But the talks yielded "nothing so advanced that we needed to make a public announcement about it," he said.
As for Ford, analysts expect the end of the Saab play will allow the U.S. auto maker to focus its resources on the intensifying struggle with GM for a stake in Jaguar.
The failure of the Saab talks "makes it even more crucial for {Ford} to be victorious" in the Jaguar contest, said Stephen Reitman, European auto industry analyst at UBS-Phillips & Drew in London.
Ford faces an uphill fight for Jaguar, however.
Jaguar executives said last week they expect to have a friendly alliance with GM wrapped up by the end of the month.
GM, meanwhile, is hosting a delegation of members of the British Parliament who are touring the auto maker's headquarter operations in Detroit.
A GM spokesman said the visit isn't connected to the Jaguar situation.
But Ford clearly views Jaguar as a prize worth fighting for, since the company's gilded brand image would give Ford a badly needed leg up in the high end of the luxury markets in both Europe and the U.S.
Last week, Ford encountered a setback in its effort to broaden its U.S. luxury offerings when it was forced to abandon a four-year-old effort to market its German-built Scorpio sedan in the U.S. as a luxury import under the Merkur brand name.
So despite the GM-Jaguar romance, analysts say Ford by last Friday had boosted its Jaguar holding to about 11% of the luxury auto maker's shares outstanding from 10.4% early last week.
About 5.4 million Jaguar shares changed hands in active trading on London's stock exchange Friday, and Jaguar shares moved up 19 pence to 696 pence ($11).
On the U.S. over-the-counter market, Jaguar's American depositary receipts rose 12.5 cents to $11.125.
Joann S. Lublin contributed to this article.
The Dallas Cowboys are looking at a long-yardage situation, struggling to pull ahead of the Atlanta Falcons.
Up in his stadium box, their new and controversial owner, Jerral "Jerry" Jones, watches anxiously as the team bounds up to the scrimmage line.
Mr. Jones takes heart.
There in the center of the pack is quarterback Troy Aikman, the key to the Cowboys' comeback strategy.
So key, in fact, that Mr. Jones signed him in April for $11.4 million over the next six years -- a record for a rookie.
"He's a genuine Wheaties-box athlete," gushes Mr. Jones.
With three minutes left on the clock, Mr. Aikman takes the snap, steps back and fires a 21-yard pass -- straight into the hands of an Atlanta defensive back.
The crowd groans, Mr. Jones shakes his head, the Cowboys lose the game.
A few days after that Sept. 17 game, Mr. Aikman broke a finger, sidelining him for weeks.
Ah, the glamour of professional sports.
For Mr. Jones, losing his quarterback temporarily was just the latest in a string of setbacks that has beset the Dallas Cowboys -- and, this year, much of the National Football League.
Once fat and happy, the Cowboys now are losing games, fans and money.
Last year, the team ended up $2 million in the red on $30 million in revenue.
It has some of the highest costs in the league.
Its attendance is off 23% from six years ago.
At the very least, Mr. Jones, who cultivates the society circuit as eagerly as his bench, can take comfort in one fact: These days, he isn't alone.
Nearly half the owners of the 28 National Football League teams are losing money, the result of flat attendance, aging stadiums and -- more than anything -- skyrocketing salaries for star players like Mr. Aikman.
Last year, the top 12 players on each NFL team took home an average $536,000, a figure comparable to baseball and higher than in basketball.
First-round draft picks have done even better: Average salaries and bonuses for them rose to $685,000 this year, up 44% from 1987.
"It's a vicious circle," says Art Modell, owner of the Cleveland Browns.
"One team pays so much and the other pays more.
We just don't have that kind of income stream."
All this is causing convulsions in professional football.
Owners, largely complacent in the past, are now almost desperately looking for ways to lower costs and raise revenue -- embracing some revolutionary ideas in the process.
Though not intentionally, the Cowboys' Mr. Jones has come to represent this new breed of owner.
Shortly after buying 66% of the team from H.R. "Bum" Bright for $145 million, and mindful of the Cowboys' ragged bottom line, the 47-year-old Mr. Jones set about his own round of team cuts.
First, he unceremoniously sacked Tom Landry, the legendary coach who took the Cowboys to five Super Bowls and 20 consecutive winning seasons.
In Dallas, Mr. Landry has a standing just shy of sainthood.
Anti-Jones sentiment flooded the local press: "A crude obnoxious hick," said one writer; "a real oink," said another; "Who in the hell does he think he is?" wrote a third.
For Mr. Jones, it was just the beginning.
He quickly cut the team's bloated administrative staff by half, shut down a Cowboys-owned dance academy and, in July, announced plans to sell Valley Ranch, the team's 30-acre practice camp and the most lavish training facility in the NFL.
Mr. Jones calls the ranch "the Pentagon of Sportdom."
It is a maze of halls that connects film rooms, elaborate spas and weight-training centers that testify to a richer, more free-spending era.
He likes to tell the yarn of how he got lost on the expansive ranch during an early visit, took refuge in an office and called the front desk for help.
"I said, `Somebody come get me.
I'm at extension 29.'"
With a new day dawning on the sport, Mr. Jones doesn't see a place for this sort of luxury.
"It's just not cost efficient," he says.
The place costs nearly $2 million a year to maintain.
When he sells it, he says, the Cowboys will move to a more practical -- read affordable -- grass practice field near Texas Stadium.
And as for Tom Landry, well, in Mr. Jones's mind, he had played out his winning years.
After posting losing seasons in each of the last three years, the Cowboys needed a change, he says.
Football has long been Mr. Jones's passion, both on and off the field.
An Arkansas native, he started at guard on the undefeated 1964 University of Arkansas team that won a national championship.
After college, he worked at his father's insurance company in Little Rock, and in 1966 led an aborted attempt to buy the San Diego Chargers.
Years later, with cash from the sale of the insurance company, he founded Arkoma Production Corp., an oil and gas exploration company based in Little Rock.
So it wasn't surprising that Mr. Jones returned to his Arkansas roots when he went looking for a replacement for Mr. Landry.
He tapped Jimmy Johnson, a teammate on the 1964 University of Arkansas squad and the head coach at the University of Miami, where he led the Hurricanes to five winning seasons and a national championship in 1987.
Whatever Mr. Johnson's talents, in the hearts and minds of many Dallas fans, he is no Tom Landry.
Seven games (and, after a loss to the Kansas City Chiefs yesterday, seven losses) into the season, the "new" Cowboys aren't doing any better than the old.
In fact, the last time they played this badly was in 1960, their opening season.
Average attendance at their games, about 49,000 last year, continues flat.
Mr. Jones is attacking the problem on several fronts.
He continues to reshuffle the team, trading famed running back Herschel Walker to the Minnesota Vikings this month for a slew of players and future draft picks.
To try to draw more fans, he has dropped end-zone ticket prices from $25 to $19.
But the general trend, given rising costs in the league, has been to raise prices, and Mr. Jones is expected to eventually follow suit.
"It's simple," says Lamar Hunt, who owns the Kansas City Chiefs and last year raised ticket prices by $2.40 to an average $17.
"If we didn't increase prices, we'd be in the red."
Mr. Jones has also beefed up his marketing staff to sell the 118 luxury suites topping Texas Stadium (his deal with Bum Bright included operating rights for the stadium).
The suites are air-conditioned, have wet bars and plush seating, and offer a clear view of the field -- all for a sale price of $475,000 to $1 million, depending on their size and location.
Mr. Jones has been taking prospective suite owners onto the field during practice to let them rub elbows with players, and promises those who actually buy one of the rooms an insider's look at the team's strategy before game time.
The sales job seems to be paying off: When he bought the team, only six of the suites had been sold.
Today, 30 have.
Gate receipts are only the Cowboys' second largest source of cash.
The biggest is the NFL's contract with national television for broadcast of the league's games.
Last year, the Cowboys' share of that pie came to $17.6 million.
The team additionally earns between $2 million and $4 million for local radio and television broadcast rights.
Mr. Jones is currently trying to jack up the price for those local rights.
He is also trying to get more stations in Mexico, where the Cowboys have a following, to pick up the games.
Mr. Jones, whose twangy voice and folksy ways belie an intense businessman who works 16-hour days, is resigned to the hefty salaries he pays his players these days.
He calls the contracts "critical to winning in the NFL" and has played his part in the bidding wars.
Besides signing Mr. Aikman to a sizable contract, Mr. Jones has agreed to pay rookie quarterback Steve Walsh $4.1 million over the next four years.
This wage inflation is bleeding the NFL dry, the owners contend.
Soon, only large corporations will be able to afford to buy and run football teams, predicts John J. Veatch Jr., an investment banker with Salomon Brothers who handled the Cowboys sale.
To tackle the problem, NFL owners have proposed setting a rookie wage scale to try to rein in salaries.
Details of the plan, which would go into effect in 1993, are sketchy, but each player would apparently be paid a base salary keyed to his position and ability.
Bonuses would be paid based on playing time and performance.
The NFL Players Association, meanwhile, contends that athletes are paid a wage commensurate with their ability to draw fans, and that some owners are in financial trouble because of poor business management, not players' salaries.
The owners are trying to boost profit in other ways, too.
Many have launched promotions to attract new fans and are renegotiating dated stadium contracts.
Most of the owners must pay up to 10% of gross ticket sales for leases on stadiums they say are either too small or too old.
In Chicago, for example, size is the issue.
"We have the worst lease in the NFL," contends Michael B. McCaskey, the president of the Chicago Bears and a grandson of George Halas, who founded the NFL's predecessor organization.
"We're in a metro area with millions of Bear fans, and only a small number can be accommodated."
When the lease expires in 1999, he says, "It's got to be changed."
This year, the NFL also imposed an 80-player limit on teams going into training camp, down from 120, in a move meant to trim payroll costs.
And the league is trying to get more for its three-year national network contract, which expires after this season.
The current contract pays the NFL $1.4 billion.
Owners say they expect the league to demand a 50% increase, despite the fact that televised football games have had lackluster ratings.
An NFL spokesman also says the league will probably expand its offerings to cable TV companies like ESPN.
The changes haven't come easy.
Like the game of professional football, the NFL organization itself is in turmoil.
The new breed of team owner, Mr. Jones included, has been fighting the NFL bureaucracy for a greater say in league affairs, and the battle has produced a form of organizational gridlock.
In July, 11 NFL owners, almost all of them new, blocked an effort to install Jim Finks as a replacement for retiring league commissioner Pete Rozelle.
Mr. Finks is perceived by some owners as a standard-bearer for the Old Guard.
Earlier this month, another effort to choose a commissioner failed.
The owners meet again tomorrow.
For his part, Jerry Jones says he's in the business for the long haul, and his work style seems to support that.
He puts in busy six-day weeks (excluding game days), and on one recent afternoon fielded questions, in the course of an hour, from a TV producer, his luxury-suite marketing manager, a disgruntled customer and a roomful of Arkansas reporters.
To keep his schedule on track, he flies two personal secretaries in from Little Rock to augment his staff in Dallas.
"When I made this investment, I made it on a lifetime basis," he explains.
"I'm not here to make money by reselling the team later on.
While the Cowboys may not be the best investment now, I don't accept they can't be in the future."
Besides, to a large extent, Mr. Jones may already be getting what he wants out of the team, even though it keeps losing.
Owning the Cowboys has bought him entree to a glitzy life that drilling for oil in Arkansas just didn't provide.
There is the new private jet, the platoon of assistants, invitations to the best parties, and television appearances on shows such as "Prime Time Live."
A few weeks ago, Mr. Jones even entertained Elizabeth Taylor in his private suite at Texas Stadium.
"You're in the catbird seat every day in this job," he says.
How interestingly clever of Robert Goldberg to use the form of pretend advocacy journalism to explain his perception of "Days of Rage" in his television critique (Leisure & Arts, Sept 11).
He chastises Jo Franklin-Trout for her inept presentation of advocacy journalism, judging her project as "intellectually slipshod."
Was not the title very clear?
One example he gives: "She didn't ask" (why the Palestinian children are soldiers throwing stones).
Really now, did she have to ask?
Were not the pictures and happenings, which have been continuing news headlines, answers enough?
Mr. Goldberg contends that even as "propaganda" the film fails because it presents only one view.
Of course the Palestinians complain about their treatment; of course the Israelis feel put upon.
But his complaint that "Days of Rage" doesn't contain balanced comments from Israelis about how badly the Palestinians are behaving is irrelevant.
It's like doing a documentary on apartheid and insisting that equal time be given to how terrific white South Africans are.
This film did emphasize how long the Israeli/Palestinian stalemate has existed by tracing the conflict to the days of World War I when the British tried to guarantee both a Jewish state and a Palestinian state without specifying how it was to be done.
Well, "Days of Rage" airing with before-and-after packaging, and after repeated delays, was a beginning.
Every issue is multisided.
This film attempts to show a side rarely seen in our media.
Now we must endure a rash of critics who apparently wish to know details of one side only.
Salaam.
Shalom.
Charlotte Carpenter Bainbridge Island, Wash.
President Bush wants the Pentagon to get special treatment in coping with the across-the-board spending cuts that took effect last week.
Mr. Bush asked Congress to raise to $6 billion from $3 billion the amount of money Defense Secretary Dick Cheney may shift among the Pentagon's individual programs, projects and activities, allowing him to ease the pain that the Gramm-Rudman budget law was intended to inflict.
If the request is approved by both the House and Senate, Mr. Cheney would need only permission from the White House Office of Management and Budget to move the money, according to Senate budget analysts.
That would give the Pentagon flexibility that no other federal agency has.
"It's simply a way of making the cuts less onerous for defense than they are for domestic programs," said Chairman James Sasser (D., Tenn.) of the Senate Budget Committee, who said he would oppose the request.
"That isn't consistent with the kind of discipline that Gramm-Rudman is supposed to impose," he said.
The president's request didn't indicate how Mr. Cheney would shift the money.
A Pentagon official said the request was made to give the department "maximum flexibility" to deal with the cuts.
Last week, Budget Director Richard Darman structured the $16.1 billion spending reduction, half of which must come from defense, to "impose a little bit more discipline" by applying cuts to each individual program, project or activity in the budget.
That would give agencies "less ability . . . to fudge over things," he told reporters.
Under the deficit-reduction law, 4.3% of the Pentagon's money and 5.3% of other agencies' money has been canceled.
Lawmakers are expected to try to restore the funds once a pending deficit-cutting measure has been signed into law.
Rochester Telephone Corp. said it completed its purchase of Urban Telephone Corp., of Clintonville, Wis., the second-largest unaffiliated independent telephone company in that state.
Rochester Telephone said the acquisition was made in an exchange of its common shares for all the shares of Urban Telephone, but a price wasn't disclosed.
Urban is the company's first telephone subsidiary in Wisconsin.
Since June, Rochester Telephone signed letters of intent to purchase three other Wisconsin firms.
A bill that would permit the Securities and Exchange Commission to monitor the financial condition of securities firms' holding companies is facing tough opposition from some Wall Street firms, which argue that the legislation is unnecessary.
The legislation and other issues related to the stock market will be the focus of hearings this week by the House Telecommunications and Finance Subcommittee and the Senate Securities Subcommittee.
Richard Breeden, the new chairman of the SEC, hasn't taken a formal position on the bill, which would also require investors to disclose large trades and give the SEC additional authority during market emergencies.
However, he recently told the Senate Banking Committee that he believes the agency should have explicit authority to monitor debt levels at holding companies and affiliates of broker-dealers, which are frequently used to issue bridge loans.
The bridge loans are intended to provide temporary financing for acquisitions.
Since such loans are often refinanced through the sale of high-risk, high-yield junk bonds, the recent woes of the junk-bond market have renewed concerns among regulators about the risks associated with Wall Street firms issuing bridge loans.
But some Wall Street executives argue that such fears are unwarranted.
In a July 6 letter to the Senate Securities Subcommittee, First Boston Corp. argued that the fact that no retail brokerage firm failed during the 1987 market crash demonstrates that current rules are adequate.
First Boston, whose holding company, CS First Boston Group, is one of the larger issuers of bridge loans on Wall Street, said it is also concerned that once the SEC has the power to monitor holding companies, it will try to regulate their activities.
"The proposal, while well-intended, I think can be dangerously misleading because the likely consequence would be to weaken, rather than strengthen the control the SEC has exercised for 50 years over the financial adequacy and viability of broker-dealers," Michael Raoul-Duval, managing director of First Boston, said in an interview.
The bill would "divert scarce resources of the commission away from broker-dealers into areas which simply have no way of affecting broker-dealers," Mr. Raoul-Duval said.
Sources in the industry and on Capitol Hill say a compromise that would placate the industry while addressing the SEC's concerns may be possible.
An aide to the Senate Securities Subcommittee says some legislators support the concept of risk disclosure, but adds: "nobody is wedded to the language in the bill."
Edward O'Brien, president of the Securities Industry Association, said that the securities-industry trade group opposes the bill as it is written but that it is "hopeful a compromise can be reached to achieve the SEC's goals."
Mr. O'Brien will elaborate on the SIA's position in testimony before the House Telecommunications and Finance Subcommittee this week, a spokesman said.
This letter was inspired by David Asman's Sept. 25 editorial-page article about Fidel Castro, "Man in the Middle of Drug Trafficking."
I've organized a series of exchanges, exhibitions and other continuing projects between Cuban and American artists.
In any matters between us and the Cubans there can be no simplicity, consequently I've become familiar not only with Cuban art and artists, but also with Cuban bureaucrats and their counterparts in our own government.
Despite levels of obstruction, incompetence and ensuing frustration of mythic proportion, these projects all remain, in my mind, valuable and well worth the effort.
There is a simple reason for this: the Cuban people.
Let me immediately put limits to whatever nostalgic notions that may intimate.
Those "people" to whom I refer are not some heroic, indecipherable quantity; they are artists, critics, taxi drivers, grandmothers, even some employees of the Ministry of Culture, all of whom share a deep belief in the original principles of the Cuban Revolution, spelled out in terms such as equality among all members of the society, reverence for education and creative expression, universal rights to health and livelihood, housing, etc.
In fact, the generation of painters growing into maturity right now works with such profoundly held humanist assumptions and such passionate commitment to moral and ethical principles that it makes Che Guevara's famous linkages of art, idealism and revolution seem modest.
It is on behalf of these people, and out of my real respect for them, that I am responding to Mr. Asman's opinions of their country.
The Ochoa trial in July, with its revelations of deeply rooted and widespread corruption, and the summary trial and execution, was extremely disturbing to everyone who has ever considered himself a friend of Cuba.
However, unacceptable though those occurrences may have been, they still provide no excuse for wholesale departures from truth.
Mr. Asman should make distinctions among Fidel, the army and the Cuban people.
They are not interchangeable, since they are motivated to act based on their own circumstances.
It is naivete to equate a government's policies with the will of the people (as we well know), and it is even worse folly to merge the clearly divergent agendas of Fidel and the military and the state bureaucracy.
Mr. Asman is also annoyed that Mr. Castro has resisted collaboration with U.S. officials, even though by his own account that collaboration has been devised essentially as a mechanism for acts directly hostile to the Cuban regime, such as facilitating defections.
I think it's a little disingenuous to be surprised that Fidel doesn't invite the U.S. State Department to violate the jurisdiction of the Cuban government over its own territory.
We badly need to follow fact rather than the rhetoric of conventional wisdom.
Without this basic level of attention to reality, our policies on Cuba will continue to be as counterproductive as they have for 30 years.
From my own point of view, given the qualities of humanity, creativity and warm spirit in which the Cuban people excel, we deny ourselves access to things we hold dear, and which seem to run in such short supply these days.
There is no rational justification for such behavior.
Rachel Weiss Brookline, Mass.
ENGRAPH INC. recently reported third-quarter earnings, which were mistakenly shown in the Quarterly Earnings Surprises table in last Tuesday's edition to be lower than the average of analysts' estimates.
Zacks Investment Research didn't adjust one analyst's estimate for a stock split, which therefore was artificially high.
Engraph's third-quarter net income of 15 cents a share actually was 7% higher than the adjusted average of estimates.
Investors bailed out of New York City bonds in droves last week, driving prices lower and boosting yields.
One bond trader estimated that more than $50 million of New York City general obligation bonds were put up for sale Friday alone.
While that represents a small percentage of the city's public debt outstanding, Friday's selling followed a weeklong effort to unload the bonds by a broad spectrum of institutional and individual investors.
"I've never seen so many {New York City} G.O.'s up for sale," said another trader.
"Every broker has blocks of every size and maturity."
Municipal bond analysts said the sell-off was triggered by concerns about the city's financial health, rumors of a $900 million bond offering coming soon, and political uncertainty.
A spokesman for the city wouldn't confirm the size of the bond issue, but did say that a general obligation offering is in the works and should be priced sometime in the next two weeks, before the November mayoral election.
(General obligation bonds are backed by the city's overall revenues and credit.)
Although many investors were aware that a bond offering was being scheduled, many expected a much smaller amount of bonds to be sold.
The fact that the city will issue such a large amount of debt was interpreted as a sign that New York's budgetary problems are more serious than had been expected.
New York, one of the nation's largest issuers of tax-exempt bonds, sold $750 million of municipal bonds just a few weeks ago.
There have been reports for months that the city's economy is weakening, as the October 1987 stock market crash continues to make itself felt.
The recent sharp stock market decline exacerbated those concerns.
Meanwhile, tax revenues are falling while the city's spending needs are expanding.
Rumors persisted last week that New York's credit ratings -- single-A from Moody's Investors Service Inc. and single-A-minus from Standard & Poor's Corp. -- are at risk.
The weakness in New York City bonds follows a warning from New York state Comptroller Edward Regan that the 1987 crash seriously weakened the city's economy.
In a study, the comptroller said, "The city's glory days are over."
Mr. Regan warned mayoral candidates "to be prepared for limited options and constraints on service increases to address the city's problems in the next few years, due to the now-evident weakening in the New York City economy."
New York City's revised financial plan, due out later this month, is expected to include measures to balance the city's $27 billion budget.
At present, analysts project a budget gap on the order of $500 million to $600 million for the fiscal year ending June 30, 1990, although the city's own budget analysts project a narrower deficit.
Mark Page, New York's deputy director of finance, said that investors' concerns about the city's financial health are "unwarranted given our proven ability to manage ourselves."
He charges the city's critics with spreading "unfounded emotional rhetoric."
There are also questions about whether a new and inexperienced mayor can manage the city through what could become a financial crisis.
The leading contender for the mayoral office, Democrat David Dinkins, has been criticized recently for the way he handled his personal financial affairs.
And the controversy has led to uncertainty about the outcome of the election.
Until last week, Mr. Dinkins was considered a shoo-in.
"The market can adjust to good news or bad news, but uncertainty drives people wild," said Bernard B. Beal, chief executive of M.R. Beal & Co., a securities firm that specializes in the municipal market.
Until last week, "Everyone felt certain they knew the outcome of the election.
Now, there have been a number of questions raised."
Last week, yields on long-term New York City general obligation bonds jumped half a percentage point.
New York City's 6% bonds due 2018, for example, were quoted late Friday at a price to yield 7.80%, compared with 7.60% Thursday.
As the yield on New York general obligation bonds rose, the Bond Buyer 20-bond general obligation index, the mostly widely followed gauge of the tax-exempt market, held steady at 7.19% in the week ended Oct. 19.
Qintex Australia Ltd. encountered another setback Friday when its Los Angeles-based affiliate, Qintex Entertainment Inc., filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
Qintex Entertainment also said David Evans, its president and chief executive, and Roger Kimmel, a director, both resigned.
Neither could be reached for comment.
Earlier this month, Qintex Australia's $1.5 billion agreement to acquire MGM/UA Communications Co. collapsed because of a dispute over a $50 million letter of credit the Australian operator of television stations and resorts was to have supplied as security in the transaction.
Mr. Evans had been the de facto head of MGM/UA for months.
Qintex Entertainment, a producer and distributor of television programs most noted for its co-production of the hit miniseries "Lonesome Dove," said it filed for Chapter 11 protection after Qintex Australia failed to provide it with $5.9 million owed to MCA Inc. in connection with the distribution of "The New Leave It to Beaver Show."
Qintex Entertainment is 43% owned by Qintex Australia and said it relies on the Australian company for funding its working capital requirements.
After the announcement of the bankruptcy filing, Qintex Entertainment stock sank $2.625 in over-the-counter trading to close at $1.50 on heavy volume of more than 1.4 million shares.
The stock traded as high as $10 this past summer.
Jonathan Lloyd, executive vice president and chief financial officer of Qintex Entertainment, said Qintex Entertainment was forced to file for protection to avoid going into default under its agreement with MCA.
The $5.9 million payment was due Oct. 1 and the deadline for default was Oct. 19.
Mr. Lloyd said if Qintex had defaulted it could have been required to repay $92 million in debt under its loan agreements.
MCA on Friday said that as a result of Qintex's failure to make the required payment it was terminating the distribution agreement on "The New Leave It to Beaver" as well as other MCA properties.
Qintex Australia was "saying as recently as last weekend that they would take care of the situation.
They continued to represent that to the board," said Mr. Lloyd.
"We were reassured they would stand behind the company."
Mr. Lloyd said both Qintex Entertainment and Qintex Australia had attempted to secure a loan that would allow the company to make the $5.9 million payment but the request was turned down by an unidentified lender on Oct. 14.
At that point, he said, Qintex Australia stated it would "endeavor to arrange" the financing.
However a Qintex Australia spokesman said his firm had never "promised or guaranteed" to make the payment.
In a prepared statement from Australia, the company also said that, following the breakdown of the MGM talks, it "had been re-evaluating its position as a significant shareholder and a substantial creditor of Qintex Entertainment" and had "resolved to minimize the degree of further loans to Qintex Entertainment in excess of that previously made."
The Qintex Australia spokesman added that his company had opposed the Chapter 11 filing.
He said the company believed Qintex Entertainment's financial problems could have been resolved by other means.
The report of the bankruptcy filing stunned Hollywood executives and investors.
"It's a shocker," said Joseph Di Lillo, chairman of Drake Capital Securities, a brokerage firm that has an investment in Qintex Entertainment.
Qintex Australia was "going to pay more than $1 billion for MGM/UA and then they couldn't come up with the far smaller sum of $5.9 million."
Qintex said Mr. Evans, the former president, resigned for "personal reasons" and that Mr. Kimmel, an attorney, resigned because his participation in evaluating the company's role in buying MGM/UA was no longer necessary.
Mr. Kimmel was a director of the company and a predecessor firm since 1980.
The announcement seemed to further damp prospects that talks between Qintex Australia and MGM/UA might be revived.
It's understood that MGM/UA recently contacted Rupert Murdoch's News Corp., which made two failed bids for the movie studio, to see if the company was still interested.
However, "we aren't currently doing anything.
It isn't a current topic of conversation at the company," said Barry Diller, chairman and chief executive officer of the Fox Inc. unit of News Corp.
Financial printer Bowne & Co. said it formed a business translation service, which will provide legal, financial and other services in most major languages, including Japanese, Chinese and Russian.
Japan's Finance Ministry strongly denied playing any role in the New York stock-price free fall.
Makoto Utsumi, vice minister for international affairs, said the ministry didn't in any way suggest to Japanese banks that they stay out of the UAL Corp. leveraged buy-out.
The ministry has never even suggested that Japanese banks be cautious about leveraged buy-outs in general, Mr. Utsumi said.
"There are no facts {behind the assertions} that we sent any kind of signal," he declared in an interview.
The comments were the ministry's first detailed public statement on the subject, and reflect the ministry's concern that foreigners will think Japan is using its tremendous financial power to control events in foreign markets.
A number of accounts of the events leading to the 190 point drop in New York stock prices on Oct. 13 accused the ministry of pulling the plug on the UAL deal for one reason or another.
Mr. Utsumi said the most the ministry had ever done was ask Japanese banks about "the status of their participation" in one previous U.S. leveraged buy-out.
The ministry inquired about that deal -- which Mr. Utsumi declined to identify -- because the large presence of Japanese banks in the deal was "being strongly criticized in the U.S. Congress" and it was "necessary for us to grasp the situation."
He said the inquiry wasn't made in a way that the banks could have interpreted as either encouraging or discouraging participation, and he added that none of the Japanese banks changed their posture on the deal as a result of the inquiry.
Mr. Utsumi also said some Japanese banks were willing to participate in the UAL financing up to the very end, which would suggest at the very least that they weren't under orders to back out.
In general, Mr. Utsumi said, Japanese banks are becoming more "independent" in their approach to overseas deals.
"Each Japanese bank has its own judgment on the profits and risks in that {UAL} deal," he said.
"They are becoming more independent.
It's a sound phenomenon."
Sanwa Bank Ltd. is one Japanese bank that decided not to participate in the first UAL proposal.
A Sanwa Bank spokesman denied that the finance ministry played any part in the bank's decision.
"We made our own decision," he said.
Still, Mr. Utsumi may have a hard time convincing market analysts who have rightly or wrongly believed that the ministry played a role in orchestrating recent moves by Japanese banks.
All week there has been much speculation in financial circles in Tokyo and abroad about the ministry's real position.
Bank analysts say ministry officials have been growing increasingly concerned during the past few months about Japanese banks getting in over their heads.
"The {ministry} thinks the banks don't know what they are doing, that they have very little idea how to cope with risk," said one foreign bank analyst who asked not to be identified.
"The {ministry} wants to see the Japanese banks pull in their horns" on leveraged buy-outs, he added.
Although some of the Japanese banks involved in the first proposed bid for UAL bowed out because they found the terms unattractive, observers here say they have a hard time believing that commercial considerations were the only reason.
Japanese banks are under "political pressure" as well, the analyst said.
Moreover, analysts point out that Japanese banks have a reputation for doing deals that aren't extremely profitable if they offer the chance to build market share, cement an important business relationship or curry favor with powerful bureaucrats.
Clearly, some financial authorities are concerned about the Japanese banks role in leveraged buy-outs.
At a news conference this week, Bank of Japan Gov. Satoshi Sumita cautioned banks to take a "prudent" stance regarding highly leveraged deals.
Despite Mr. Sumita's statements, it is the Finance Ministry, not the central bank, that makes policy decisions.
While recent events may cool some of the leveraged buy-out fever, Japanese banks aren't likely to walk away from the game.
Despite the risks, the deals can be an attractive way for Japanese banks to increase their presence in the U.S. market, bank analysts say.
Flush with cash at home, but with fewer customers to lend to, leading banks are eager to expand overseas.
Jumping in on big deals is a high profile way to leapfrog the problem of not having a strong retail-banking network.
France's national tobacco company, known for making brown-tobacco cigarettes such as Gauloises and Gitanes, is branching out.
Concerned by dipping demand for its traditional products, it is moving not only into blonde cigarettes, but also into electronic car-parking payment cards to be sold in neighborhood tobacco stores.
Brown tobacco in France is a more pungent, stronger grade than the lighter grade, or blonde tobacco, used in so-called American-style cigarettes.
"We aren't Philip Morris Cos.," says Bertrand de Galle, chairman of government-owned Societe Nationale d'Exploitation Industrielle des Tabacs & Allumettes S.A., known as Seita.
He says that because Seita's profits are limited by government-controlled cigarette prices, he doesn't have the cash to diversify as heavily into food and drink as the U.S. concern has done.
(Last year, for example, Seita's net profit soared 150% to 461.6 million French francs ($73.5 million) on sales of FFr27.68 billion-a 1.7% profit margin.)
Instead, he said in an interview, he is looking for ways to exploit France's network of 39,000 tobacco agents, most of them cafes.
While Seita doesn't own the French tabacs, its close alliance with them offers distribution possibilities.
One proposal is to introduce a new payment system for parking in Paris.
Instead of paying for parking by putting money in the existing machines, which deliver little paper receipts, drivers would be able to buy electronic cards in local tobacco shops.
Once activated, the card would sit in the car's window, showing traffic wardens how much time the motorist could remain.
When the motorist returned to his car he could turn the card off and, if it showed time remaining, save it for later.
Seita is a partner in the project, which was developed by Matra SA using Japanese technology.
Seita and Matra currently are negotiating with city officials for the right to begin service.
And Seita is considering further diversification.
It wanted to buy RJR Nabisco Inc.'s French cracker subsidiary, Belin, in hopes of selling its products in tobacco stores, but lost the bidding to food group BSN SA.
It currently is considering bidding for Swedish Match Co.
And it retains an interest in acquiring candies and other articles that might be sold in tobacco shops.
It also is trying to shore up its tobacco business.
Brown-tobacco cigarettes such as Gauloises now make up just 40% of the French tobacco market, half the level of about two decades ago.
While Seita retains a manufacturing monopoly in France, it is being hurt by rising imports and from waning cigarette demand.
So Seita has introduced blonde cigarettes under the Gauloises label, and intends to relaunch the unsuccessful Gitanes Blondes in new packaging, similar to the slide-packs used by brown-tobacco Gitanes.
The aim, says Mr. de Galle, is to win market share from imported cigarettes, and to persuade smokers who are switching to blonde cigarettes to keep buying French.
When the Supreme Court upheld Missouri's abortion restrictions last July, the justices almost certainly didn't have drunk driving, trespassing and false imprisonment on their minds.
But the 5-4 ruling may have had as much immediate impact on those activities -- especially trespassing -- as on abortion rights.
The decision, Webster vs. Reproductive Health Services, illustrates how Supreme Court rulings often have a ripple effect, spreading into areas of law and policy that weren't part of the actual cases decided and that never were contemplated by the justices.
In the Missouri case, unforeseen consequences may have arisen because the high court reinstated the preamble of the state's 1986 abortion law.
The preamble says that human life begins at conception and that unborn children have rights protected by the Constitution.
Last year, a federal appeals court in St. Louis said the preamble was unconstitutional, citing an earlier Supreme Court ruling that states can't justify stricter abortion curbs by changing the definition of when life begins.
But the Supreme Court concluded that it was premature to rule on the constitutionality of the preamble because the definition of human life hadn't yet been used to restrict abortion services.
The high court majority said it was up to the state courts for now to decide whether the definition has any bearing on other state laws.
Already, local Missouri judges have relied on the restored preamble in two separate cases to throw out criminal trespass charges against anti-abortion demonstrators who blocked access to Reproductive Health Services, an abortion clinic in St. Louis.
The protesters said their actions were justified by the desire to save the lives of unborn children.
Under a 1981 Missouri law, persons accused of some crimes, including trespassing, may offer a defense that their actions were justified "as an emergency measure to avoid an imminent public or private injury."
Relying on the preamble's statement that a fetus is an unborn child, the two St. Louis County Circuit Court judges in August accepted the justification that the abortion clinic protesters were trying to save lives.
In another case, a protester, Ann O'Brien, was convicted of trespass before the Supreme Court's Webster ruling.
Last week, when her appeal was argued before the Missouri Court of Appeals, her lawyer also relied on the preamble.
"The effect of the Supreme Court Webster opinion is that it left room for grass to grow in the cracks of Roe vs. Wade, and I think this is one of the cracks," said Mark Belz, a St. Louis lawyer who represented Ms. O'Brien and the other St. Louis protesters.
Roe vs. Wade was the Supreme Court's 1973 decision that recognized a woman's right to abortion.
Mario Mandina, president of Kansas City Lawyers for Life, says that if abortion foes succeed in using the preamble to escape prosecution for trespass, "This will shut down abortion in Missouri.
There's no risk to the protesters, and you can't keep an abortion clinic open if there are 3,000 people standing outside every day."
That would be an ironic result of a case in which the Supreme Court expressly stopped short of overruling Roe vs. Wade.
In two other cases, the possible consequences of the Supreme Court ruling appear even more unintended.
In one, the lawyer for a 20-year-old resident of Columbia, Mo., who was charged with drunk driving, argued that his client should be treated as a 21-year-old adult because his actual age should be calculated from conception, not from birth.
In Missouri, those caught drinking and driving between the ages of 16 and 21 may have their licenses revoked for one year, while those 21 or older suffer only a 30-day suspension.
A Boone County judge rejected the motion, but Daniel Dodson, a Jefferson City lawyer, says he has appealed.
And in a case filed in federal court in August, a lawyer is arguing that Missouri authorities are wrongfully imprisoning the fetus of a pregnant woman who is in jail for theft and forgery.
In terms of sheer brutality, the Somali regime of Siad Barre may rank as No. 1 in the world.
The only reason that Somalia remains in obscurity is numbers: a sparsely populated wasteland of 8.5 million people spread out over an expanse nearly the size of Texas.
The Barre dictatorship simply is limited in the amount of people it can torture and kill.
Beheading small children, stabbing elderly people to death, raping and shooting women, and burying people alive are just a few of the grisly activities that the Somali armed forces have been engaged in over the past two years.
Up to 500,000 Somalis have escaped to the relative safety of Marxist Ethiopia because of the behavior of President Barre's troops.
In the port of Berbera, for example, hundreds of men of the rival Issak clan were rounded up in May 1988, imprisoned, and then taken out at night in groups of five to 50 men to be executed without any judicial process whatsoever.
Guns were never used: Each man was stabbed to death with a large knife.
The horrific details are only now emerging from a painstakingly documented report, based on hundreds of interviews with randomly selected refugees.
The study was done by Robert Gersony, a consultant to the U.S. State Department who has years of experience in investigating human-rights abuses on both sides of the left-right ideological divide.
What gives these events particular significance, however, is the fact that they are part of a wider drama affecting the strategic positions of both the U.S. and the Soviet Union on the horn of Africa.
Not since the late 1970s has the horn been so up for grabs as it has suddenly become in just the past few weeks.
Mr. Barre's rule is crumbling fast.
Mutinies wrack his armed forces (really just an armed gang), which control less than half the country.
Inflation is at record levels.
Desperate, he has called in the Libyans to help fight the rebels of the Somali National Movement in the north, which is only one of several groups picking away at the regime in the capital of Mogadishu.
Seventy years old and a self-declared "scientific socialist," President Barre has a power base, composed only of his minority Mareham clan, that according to observers is "narrowing."
The U.S.'s interest in Somalia consists of a single runway at the port of Berbera, which U.S. military aircraft have the right to use for surveillance of the Gulf of Aden and the Indian Ocean.
That strip of concrete is backed up by a few one-story, air-conditioned shacks where a handful of American nationals -- buttressed by imported food, cold soft drinks and back issues of Sports Illustrated -- maintain radio contact with the outside world.
In the past two years, the desert behind them has become a land of mass executions and utter anarchy, where, due to Mr. Barre's brutality and ineptitude, nobody is any longer in control.
As long as the rival Soviet-backed regime of Mengistu Haile Mariam held a total gridlock over neighboring Ethiopia, the U.S. was forced to accept that lonely Berbera runway as a distant No. 2 to the Soviets' array of airfields next door.
But due to dramatic events on the battlefield over the past few days and weeks, those Soviet bases may soon be as endangered and as lonely as the American runway.
On Sept. 7, I wrote on these pages about the killing and capturing of 10,000 Ethiopian soldiers by Eritrean and Tigrean guerrillas.
Recently, in Wollo province in the center of Ethiopia, Tigrean forces have killed, wounded and captured an additional 20,000 government troops.
(Think what these numbers mean -- considering the headline space devoted to hundreds of deaths in Lebanon, a small country of little strategic importance!)
Tigrean armies are now 200 miles north of Addis Ababa, threatening the town of Dese, which would cut off Mr. Mengistu's capital from the port of Assab, through which all fuel and other supplies reach Addis Ababa.
As a result, Mr. Mengistu has been forced to transfer thousands of troops from Eritrea just to hold the town, thereby risking the loss of even more territory in Eritrea only to keep the Tigreans at bay.
Mr. Mengistu is in an increasingly weak position: Half his army is tied down defending the northern city of Asmara from the Eritreans.
The weaker he gets, the more he turns toward the U.S. for help.
While the Tigreans are communists, like the Eritreans they are among the most anti-Soviet guerrillas in the world, having suffered more than a decade of aerial bombardment by the Soviet-supplied Mengistu air force.
What this all means in shorthand is that Soviet dominance in Ethiopia is collapsing as fast as President Barre's regime in Somalia is.
The U.S., therefore, has a historic opportunity both to strike a blow for human rights in Somalia and to undo the superpower flip-flop of the late 1970s on the Horn of Africa.
Back to Somalia:
The State Department, to its credit, has already begun distancing itself from Mr. Barre, evinced by its decision to publish the Gersony report (which the press has ignored).
What's more, the U.S. has suspended $2.5 million in military aid and $1 million in economic aid.
But this is not enough.
Because the U.S. is still perceived to be tied to Mr. Barre, when he goes the runway could go too.
Considering how tenuous the security of that runway is anyway, the better option -- both morally and strategically -- would be for the Bush administration to blast the regime publicly, in terms clear enough for all influential Somalis to understand.
It is a certainty that Mr. Barre's days are numbered.
The U.S. should take care, however, that its own position in the country does not go down with him.
Nobody is sure what will come next in Somalia or whom the successor might be.
But as one expert tells me: "Whoever it is will have to work pretty damn hard to be worse than Barre."
While the State Department positions itself for the post-Barre period in Somalia, it should continue to back former President Carter's well-intentioned role as a mediator between Mr. Mengistu and the Eritrean guerrillas in Ethiopia, while concomitantly opening up channels of communications with the Tigrean rebels through neighboring Sudan.
Ethiopian politics are the most sophisticated, secretive and Byzantine in all of black Africa.
Remember that it took Mr. Mengistu many months, in what became known as the "creeping coup," to topple Emperor Haile Selassie in 1974 and 1975.
There is simply no way to engineer a succession covertly, as is sometimes possible elsewhere on the continent.
But the U.S. has one great advantage: The Soviets are universally loathed throughout Ethiopia for what they did to the country this past decade -- famine and all.
It's not just in Eastern Europe where the march of events is finally on the U.S. side, but on the horn of Africa as well.
The only U.S. liability in the region is what remains of the link to Mr. Barre, and that should be cut fast.
Mr. Kaplan, author of "Surrender or Starve: The Wars Behind the Famine" (Westview Press, 1988), lives in Lisbon.
Translant Inc., Rancho Cucamonga, Calif., got an $86 million Navy contract for missile-launch systems.
General Electric Co. received a $30.6 million Air Force contract for MX-missile nose cones.
Goodyear Tire & Rubber Co. was awarded a $19.1 million Army contract for armored-vehicle parts.
Analytic Sciences Corp. was awarded a $10.1 million Air Force contract for technical support.
McCormick Capital Inc. said the final proration factor was 0.628394 on its oversubscribed, $3-a-share tender offer to buy back as many as 1.1 million of its common shares.
Payment will begin "as soon as Oct. 25," the company said.
McCormick is a developer and manager of futures-investment limited partnerships.
Through a separate agreement between Peter Dauchy, president, and a group of selling shareholders, the company said, Mr. Dauchy will on Oct. 30 buy 231,405 shares from the group, boosting his stake to about 717,000 shares, or 50.7% of the total after the buy-back.
Canada's consumer price index rose a seasonally adjusted 0.2% in September from August, Statistics Canada, a federal agency, said.
The rise followed boosts of 0.1% in August, 0.7% in July and 0.6% in June.
OPEC's ability to produce more petroleum than it can sell is beginning to cast a shadow over world oil markets.
Output from the Organization of Petroleum Exporting Countries is already at a high for the year and most member nations are running flat out.
But industry and OPEC officials agree that a handful of members still have enough unused capacity to glut the market and cause an oil-price collapse a few months from now if OPEC doesn't soon adopt a new quota system to corral its chronic cheaters.
As a result, the effort by some oil ministers to get OPEC to approve a new permanent production-sharing agreement next month is taking on increasing urgency.
The organization is scheduled to meet in Vienna beginning Nov. 25.
So far this year, rising demand for OPEC oil and production restraint by some members have kept prices firm despite rampant cheating by others.
But that could change if demand for OPEC's oil softens seasonally early next year as some think may happen.
OPEC is currently producing more than 22 million barrels a day, sharply above its nominal, self-imposed fourth-quarter ceiling of 20.5 million, according to OPEC and industry officials at an oil conference here sponsored by the Oil Daily and the International Herald Tribune.
At that rate, a majority of OPEC's 13 members have reached their output limits, they said.
But it is estimated that at least three million barrels a day -- and possibly as much as seven million barrels a day -- of spare capacity still exists within OPEC.
Most is concentrated in five Persian Gulf countries, including his own, Issam Al-Chalabi, Iraq's oil minister, told the conference Friday.
He puts OPEC's current capacity at 28 million to 29 million barrels a day.
That's higher than some other estimates.
Ali Khalifa Al-Sabah, Kuwait's oil minister, recently estimated OPEC capacity at 25 million barrels a day.
Either way, the overhang is big enough to keep delicately balanced oil markets on edge.
Even modest amounts of additional output by those with the huge extra capacity and reserves, such as Saudi Arabia and Iraq, could upset the market.
The Iraqi oil minister and Saudi oil minister Hisham Nazer insisted in their comments to the conference that their countries would act responsibly to maintain a stable market.
However, in interviews later, both ministers stressed that they expect future OPEC quotas to be based mainly on the production capacity and reserves of each member.
Under that approach, countries with the most unused oil capacity would get bigger shares of any future increases in OPEC's production ceiling than they would under the current system.
"If you are already producing at 95% or 100% of your capacity, what's the good to be told you can produce at 105% of capacity?" asked Mr. Al-Chalabi.
At an inconclusive Geneva meeting late last month, OPEC's oil ministers halfheartedly approved another increase of one million barrels a day in their production ceiling.
They doled it out using the existing formula, however, which meant that even those countries that couldn't produce more received higher official allotments.
The main effect of the ceiling boost was to "legitimize" some of the overproduction already coming from the quota cheaters.
Still, there was a breakthrough at Geneva.
Previously, no OPEC member had been willing to accept a reduction in its percentage share of the group's total output target, or ceiling.
But the concept of disproportionate quotas for those with unused capacity, advanced there in an Iranian proposal, was generally endorsed by the ministers.
In the end politics got in the way.
Libya accepted Iran's proposal only so long as it was promised production parity with Kuwait.
And the United Arab Emirates, a chronic quota cheater, refused to give any guarantee it would change its ways.
But the oil ministers continue to study the plan, and it will probably be the basis for discussion at next month's meeting.
It's understood several compromises already have been worked into the plan.
The ceiling would be lifted to 21.5 million barrels to provide Kuwait and the United Arab Emirates much higher official quotas while reducing percentage shares of some others.
Libya's previous conditions are no longer considered a problem, although the United Arab Emirates is still an issue.
Saudi Arabia, OPEC's kingpin, also has surfaced as a possible obstacle, some OPEC sources said.
Insisting on a 24.5% share of any ceiling, Saudi officials have long pressed for the pro rata distribution of increases to all members.
In Geneva, however, they supported Iran's proposal because it would have left the Saudi percentage of the OPEC total intact, and increased actual Saudi volume to nearly 5.3 million barrels daily from five million.
Some of the proposed modifications since, however, call on Saudi Arabia to "give back" to the production-sharing pool a token 23,000 barrels.
Though tiny, that's a reduction in its share.
Mr. Nazer, the Saudi oil minister, reiterated here that the kingdom would insist on maintaining its percentage share of OPEC production under any quota revisions.
"Under any circumstances, Saudi Arabia should get more" rather than less, Mr. Nazer said.
In a blow to France's Rafale jet fighter, the French navy for the first time publicly stated its desire to buy 15 McDonnell Douglas Corp. F-18 Hornets to defend its aircraft carriers.
The statement is likely to sharpen the debate within France's military establishment over the Rafale, which is made by Avions Marcel Dassault-Breguet Aviation SA.
In an interview in the navy's official weekly magazine Cols Bleus, the navy's second-in-command, Adm. Yves Goupil, said the navy still intends to buy 86 Rafales as scheduled in the late 1990s and early 21st century.
The air force is to take at least 250 more.
Adm. Goupil said the navy can't wait until 1998, when the naval Rafale becomes available, to replace its obsolete fleet of American-made Crusaders, used since the 1950s to protect carriers from attack.
Rather than renovate the Crusaders, which Dassault is proposing to do for around 1.8 billion French francs ($286.6 million), Adm. Goupil said the navy wants to buy used F-18s from the U.S. Navy.
Officially, the statement isn't an attack on the Rafale.
Adm. Goupil said that when the F-18s wear out, the navy is prepared to take Rafales to replace them.
But unofficially, senior navy officials sharply criticize the Rafale as an air force plane ill-suited to carrier use.
Although they never said so publicly, they have made no secret of their preference for the F-18 on operational grounds.
Adm. Goupil's comments are likely to inflame the broader dispute within the military establishment here over the role of Dassault.
Although government-controlled, Dassault still is run by the founder's son, Chairman Serge Dassault, who has fiercely protected his company's independence.
The Rafale project is the result of France's inability jointly to develop a plane with other countries, and French officials question whether the state can continue paying for expensive independent programs.
So far, Mr. Dassault has resisted pressure to change.
What brought the naval issue to a head is that the Crusaders are literally falling apart, without any immediate plan to replace them.
Adm. Goupil, a former Crusader squadron leader, said that the last other country to use Crusaders, the Philippines, retired its last ones two years ago.
A French Crusader crash a few months ago heightened pressure for new planes here.
Adm. Goupil rejected Dassault's proposal to renovate the Crusaders, saying the cost was impossible to estimate.
Even modernized, he said, the Crusaders represent an obsolete and dangerous protection for the aircraft carriers France has sent to meet such crises as the wars in Lebanon and the Persian Gulf.
Defense Minister Jean-Pierre Chevenement told a meeting of the Anglo-American Press Association that the question of modernizing the Crusaders or buying used F18s is a "political" decision that he will make in due time.
THE SUPREME COURT ruling upholding Missouri's restrictive abortion law was Webster vs. Reproductive Health Services.
The citation was misstated in Friday's edition.
Spending by average Japanese households in August fell an adjusted 1.9% from a year earlier, the Statistics Bureau of the Prime Minister's Office said.
The bureau cited typhoons in the month that discouraged shopping and leisure opportunities.
Spending by Japanese households averaged 290,782 yen ($2,052.10) in August.
In nominal terms it rose 0.6% from a year earlier before adjustment.
August adjusted spending by wage-earning families was down 0.6% to 309,381 yen from a year earlier.
The real income of wage-earning families in the month eased 1.2% to 438,845 yen from the previous year.
For Cathay Pacific Airways, the smooth ride may be ending.
The first signs of trouble came last month when the Hong Kong carrier, a subsidiary of Swire Pacific Ltd., posted a 5% drop in operating profit for the first six months and warned that margins will remain under pressure for the rest of the year.
Securities analysts, many of whom scrapped their buy recommendations after seeing Cathay's interim figures, believe more jolts lie ahead.
Fuel and personnel costs are rising, and tourism in and through Hong Kong remains clouded by China's turmoil since the June 4 killings in Beijing.
In addition, delivery delays for the first two of as many as 28 Boeing 747-400s that the carrier has ordered have raised costs because personnel had been hired to man the planes.
And tough competition in the air-freight market is cutting into an important sideline.
There also is concern that once Hong Kong reverts to China's sovereignty in 1997, Cathay will be forced to play second fiddle to China's often-disparaged flag carrier, Civil Aviation Administration of China, or CAAC.
"The sense is we would never be in a position again where everything works for us the way it did before," says Rod Eddington, Cathay's commercial director.
Sarah Hall, an analyst at James Capel (Far East) Ltd., says there isn't much Cathay can do about rising costs for jet fuel, Hong Kong's tight labor market, or the strengthening of the local currency, which is pegged to the U.S. dollar.
These factors are further complicated by the airline's push to transform itself from a regional carrier to an international one, Ms. Hall says.
Ms. Hall expects Cathay's profit to grow around 13% annually this year and next.
In 1988, it earned $2.82 billion Hong Kong (US$361.5 million) on revenue of HK$11.79 billion.
Cathay is taking several steps to bolster business.
One step is to beef up its fleet.
In addition to aircraft from Boeing Co., Cathay announced earlier this year an order for as many as 20 Airbus A330-300s.
The expansion, which could cost as much as US$5.7 billion over the next eight years, will expand the fleet to about 43 planes by 1991, up from 30 at the end of last year, according to Sun Hung Kai Securities Ltd.
The fuel-efficient Airbus planes will be used largely to replace Cathay's aging fleet of Lockheed Tristars for regional flights, while the Boeing aircraft will be used on long-haul routes to Europe and North America.
Cathay also is moving some of its labor-intensive data-processing operations outside Hong Kong.
Fierce bidding for young employees in Hong Kong is pushing up Cathay's labor costs by 20% a year for low-level staff, while experienced, skilled employees are leaving the colony as part of the brain drain.
Some jobs already have been moved to Australia, and there are plans to place others in Canada.
David Bell, a spokesman for the airline, says the move is partly aimed at retaining existing staff who are leaving to secure foreign passports ahead of 1997.
Cathay is working to promote Hong Kong as a destination worth visiting on its own merits, rather than just a stopover.
Although the June 4 killings in Beijing have hurt its China flights, Cathay's other routes have retained high load factors.
Mr. Eddington regards promoting Hong Kong as an important part of attracting visitors from Japan, South Korea and Taiwan, where the number of people looking to travel abroad has surged.
There also has been speculation that Cathay will be among the major private-sector participants in the Hong Kong government's plans to build a new airport, with the carrier possibly investing in its own terminal.
Cathay officials decline to comment on the speculation.
Mr. Eddington sees alliances with other carriers -- particularly Cathay's recent link with AMR Corp.'s American Airlines -- as an important part of Cathay's strategy.
But he emphasizes that Cathay hasn't any interest in swapping equity stakes with the U.S. carrier or with Lufthansa, the West German airline with which it has cooperated for about a decade.
Analysts believe Cathay is approached for such swaps by other carriers on a regular basis, particularly as the popularity of share exchanges has grown among European carriers.
"We think alliances are very important," Mr. Eddington says.
"But we'd rather put funds into our own business rather than someone else's.
I'm not sure cross-ownership would necessarily make things smoother."
In a pattern it aims to copy in several key U.S. destinations, Cathay recently announced plans to serve San Francisco by flying into American Airlines' Los Angeles hub and routing continuing passengers onto a flight on the U.S. carrier.
"We'll never have a big operation in the U.S., and they'll never have one as big as us in the Pacific," Mr. Eddington says.
"But this way, American will coordinate good extensions to Boston, New York, Chicago and Dallas.
We'll coordinate on this end to places like Bangkok, Singapore and Manila."
Asian traffic, which currently accounts for 65% of Cathay's business, is expected to continue as the carrier's mainstay.
Cathay has long stated its desire to double its weekly flights into China to 14, and it is applying to restart long-canceled flights into Vietnam.
Further expansion into southern Europe is also possible, says Mr. Bell, the spokesman.
While a large number of Hong Kong companies have reincorporated offshore ahead of 1997, such a move isn't an option for Cathay because it would jeopardize its landing rights in Hong Kong.
And Mr. Eddington emphatically rules out a move to London: "Our lifeblood is Hong Kong traffic rights."
He says the airline is putting its faith in the Sino-British agreement on Hong Kong's return to China.
A special section dealing with aviation rights states that landing rights for Hong Kong's airlines, which include the smaller Hong Kong Dragon Airlines, will continue to be negotiated by Hong Kong's government.
But critics fret that post-1997 officials ultimately will be responsible to Beijing.
"My feeling is {Cathay doesn't} have a hope in the long run," says an analyst, who declines to be identified.
"Cathay would love to keep going, but the general sense is they're going to have to do something."
Mr. Eddington acknowledges that the carrier will have to evolve and adapt to local changes, but he feels that the Sino-British agreement is firm ground to build on for the foreseeable future.
"We're confident that it protects our route structure," he says, "and our ability to grow and prosper.
Falcon Cable Systems Co. said it proposed an amendment that would allow it to increase its debt cap to 65% of the company's fair market value from the 40% currently allowed.
Falcon, a limited partnership, said it wanted the increase in order to continue its $2.15-per-unit annual payment, and for expansion and acquisitions.
A spokesman for the company said a meeting would be held for shareholders to vote on the amendment before year's end.
Friday, October 20, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 8 3/4% high, 8 5/8% low, 8 11/16% near closing bid, 8 3/4% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.50% 15 to 44 days; 8.25% 45 to 72 days; 8.375% 73 to 96 days; 8.125% 97 to 119 days; 8% 120 to 149 days; 7.875% 150 to 179 days; 7.50% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.55% 30 days; 8.45% 60 days; 8.40% 90 days.
CERTIFICATES OF DEPOSIT: 8.05% one month; 8.02% two months; 8% three months; 7.98% six months; 7.95% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market: 8.55% one month; 8.50% three months; 8.40% six months.
BANKERS ACCEPTANCES: 8.45% 30 days; 8.33% 60 days; 8.32% 90 days; 8.15% 120 days; 8.06% 150 days; 7.96% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 11/16% to 8 9/16% two months; 8 11/16% to 8 9/16% three months; 8 5/8% to 8 1/2% four months; 8 9/16% to 8 7/16% five months; 8 1/2% to 8 3/8% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 3/4% one month; 8 11/16% three months; 8 9/16% six months; 8 1/2% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 8.50%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS: Results of the Monday, October 16, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.37% 13 weeks; 7.42% 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.84%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.78%, standard conventional fixed-rate mortgages; 8.75%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.52%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
In the hard-hit Marina neighborhood, life after the earthquake is often all too real, but sometimes surreal.
Some scenes: -- Saturday morning, a resident was given 15 minutes to scurry into a sagging building and reclaim what she could of her life's possessions.
Saturday night she dined in an emergency shelter on salmon steaks prepared by chefs from one of the city's four-star restaurants.
-- Mayor Art Agnos stands in the glare of television lights trying to explain for the 20th time why the city is severely restricting access to badly damaged structures.
A couple in fashionable spandex warm-up suits jogs by, headphones jauntily in place, weaving their way along a street of fractured and fallen houses.
At a nearby corner, they swerve perilously close to a listing apartment house, oblivious to any danger.
A policeman shakes his head in amazement as he steers them away.
-- A young woman who has been out of town shows up at the Marina Middle School to learn that her apartment is on the condemned list.
She is told she can't enter unless she is accompanied by an inspector.
She bursts into tears and walks away.
Nearby, five temporary residents of the school shelter sit on stools, having their necks and backs kneaded by volunteer masseuses.
The Marina rescue center offered a very San Franciscan response to the disaster.
In addition to free massages, there was free counseling, phone calls and a free shuttle bus to a health club, which offered up its showers, saunas and hot tubs.
The cafeteria offered donated croissants and brie for breakfast, and for dinner, pasta salad and chocolate mousse torts along with the salmon.
"This has been a 15-pound earthquake for me," said resident Joan O'Shea, who works in an acupuncturist's office.
She and some friends are considering offering earthquake victims free yoga classes and "aroma therapy" -- massages with scented oils.
She finds the response of Marina residents -- primarily yuppies and elderly people -- to the devastation of their homes "incredible.
People have been very respectful of each other.
I don't know if this would have happened somewhere else."
Out on the streets, some residents of badly damaged buildings were allowed a 15-minute scavenger hunt through their possessions.
"It's so weird to have to decide what's really important to you," said Barbara May.
She went first for personal mementos.
In post-earthquake parlance, her building is a "red."
After being inspected, buildings with substantial damage were color-coded.
Green allowed residents to re-enter; yellow allowed limited access; red allowed residents one last entry to gather everything they could within 15 minutes.
Reds and yellows went about their business with a kind of measured grimness.
Some frantically dumped belongings into pillowcases, others threw goods out windows.
It didn't help that on Saturday, after three days of sunshine, it rained.
"The guys are going for their skis, their stereos, their personal computers," said Frank Fitzgerald, who helped others empty their apartments.
"The women wanted photo albums, a certain brooch, kind of sentimental things."
He showed an unbroken, still-ticking pocket watch that he retrieved for one woman.
It belonged to her grandfather.
Some residents defied orders and returned to "red" buildings to retrieve goods.
One building was upgraded to red status while people were taking things out, and a resident who wasn't allowed to go back inside called up the stairs to his girlfriend, telling her to keep sending things down to the lobby.
A policewoman had to be called in to make her leave; the policewoman helped carry out one last load.
Enforcement of restricted-entry rules was sporadic, residents said.
One man trying to remove his car was told by officials to get out of his garage.
When he sneaked back later to try again, a different policeman offered to help him get the car out.
The Marina also has become the focal point of city efforts to reunite residents with any pets that may have fled or become lost during the earthquake.
On lampposts along Fillmore Street, a major Marina artery, posters were offering a $100 reward for a cat lost during the quake.
The San Francisco Society for the Prevention of Cruelty to Animals also has been providing medical care, food, water and foster homes for quake-displaced animals.
The SPCA says it has received more than 100 requests for foster homes on behalf of dogs and cats, though some people have sought temporary homes for birds and fish.
For example, one parakeet owner returning home found that her apartment, like many others in the Marina, didn't have heat.
"She can stay there with no heat, but for a parakeet, that can be deadly," says Daralee Konowitch, animalcare services manager for the SPCA.
A warm foster home has been found.
The neighborhood around Alexander Haagen Co.'s Vermont-Slauson Shopping Center in the Watts section of Los Angeles resembles the crime-ridden, deteriorating sections of many inner cities and certainly isn't the sort of area one would choose to visit.
But turn into the shopping center's parking lot, and one could be in the safe, busy mall of a prosperous suburb.
Only it is safer, and busier.
Over the past year there have been only one burglary, three thefts of or from autos, no purse-snatchings, and one attempted robbery in the mall, which opened in late 1981.
A shopping center of similar size in an affluent Los Angeles suburb would, per year, be expected to have eight burglaries, 70 thefts of or from autos, and four robberies.
The Watts mall has annual sales of more than $350 per leasable square foot; the figure for a comparable suburban shopping center would be $200.
Three other Haagen shopping centers in the Watts area are doing almost as well.
A successful low-crime mall in a high-crime area violates the more typical inner-city pattern, in which commercial areas are taken over by unruly youth, gangs, and the criminal element, with an erosion of the customer base, development capital, and insurability.
Major regional and national chain stores are replaced by mom-and-pop operations offering poorer-quality merchandise at higher prices.
Along with the exodus of shopping opportunities is an exodus of the jobs that the major chains used to provide to community residents.
Thus there is even more to the Vermont-Slauson Center than a good place to shop.
This defensible commercial zone becomes, for the residents, a secure oasis in a barren urban landscape, evidence that community decay is not inevitable and that the gangs are not invincible.
The center improves the community image to outsiders as well, and may help to arrest, or even reverse, the exodus of capital and investment.
An additional benefit is the creation of jobs.
This starts in the construction phase through the use of minority contractors and local workers.
It continues through the life of the center; the Vermont-Slauson Center has created 500 permanent private-sector jobs at a one-time cost in public funds of only $2,500 per job.
As many of these jobs are filled by local residents, who move from the welfare rolls to the tax rolls, the $2,500-per-job public investment should repay itself in a few years.
And that is before consideration of increased state and local revenues from taxes and fees on sales, real estate, licenses and the like.
Profits are also plowed back into the community; the non-profit Vermont-Slauson Economic Development Corp. receives 60% of the profits from the Vermont-Slauson Center and uses the money to provide moderate and low-cost housing in the community -- now running into the hundreds of units -- as well as commercial and industrial development projects.
Bradford Crowe, director of the mayor's City Economic Development Office, says: "There is no question that Vermont-Slauson had a halo effect on the surrounding neighborhood.
What had been a deteriorated area with nothing but wig shops and shoe shops is now experiencing a major upgrading in the housing and commercial stock, thanks to a continuously replenished source of revitalization capital that Vermont-Slauson yields."
Another benefit is that substantial percentages of the proprietors in these centers are minority businessmen and women.
In the Grand Boulevard Plaza developed by Matanky Realty Group in Chicago's Third Ward, opposite the Robert Taylor Homes, 29% of the stores to date have been leased to blacks and 14% to members of other minority groups.
Children from the community will have worthier role models than the drug kingpins.
So what's the catch?
Primarily that putting one of these inner-city deals together takes time, patience, breadth of vision and negotiating skills that not all developers possess.
Security costs are also quite high.
One of these centers can involve years of negotiating with numerous public agencies, local political leaders, and citizen groups, and with prospective tenants and sources of financing.
Suburban deals are not without their delays and complications -- inner-city deals just have more of them.
Security at a typical Haagen inner-city center is impressive, but unobtrusive.
The entire site is enclosed by a 6-to-8-foot-high ornamental iron fence with a small number of remote-controlled gates.
Shrubs and flowers give it a pleasing and non-fortress-like appearance.
Infrared motion detectors and closed-circuit TV cameras monitor the entire center; lighting levels are three to five times the industry standard.
The security command post, camouflaged as second-story retail space, has its own "crow's nest" above the roofs of the other buildings, with a panoramic view of the entire center.
Local law enforcement is present in a sub-station occupying space donated by the center.
These features are also used in Matanky Realty Group's Grand Boulevard Plaza.
Haagen has its own large security force of well-trained and well-paid personnel on round-the-clock duty at each center.
Security is 60% to 70% of the common area charges of these centers, vs. an industry average of about 15%.
These security costs are kept off-budget because the centers' site acquisition, construction, and financing costs were reduced by such programs as Urban Development Action Grants, Economic Development Administration Grants, Community Development Block Grants, tax-free Industrial Development Bonds, Enterprise Zone tax write-offs, city infrastructure grants, and tax increment financing.
Many of these programs no longer exist, or have been severely cut back.
However, since these centers appear to pay for themselves, there is nothing to prevent state and local governments from enacting legislation with similar provisions.
Many states already have Enterprise Zones and legislation that combines tax incentives, loans, and grants to encourage investment in depressed areas with requirements for the hiring of the unemployed and minorities.
These programs could be expanded to focus on funds for project planning, identifying sources of funds, and for acquiring a site and preparing it.
Combatting crime and the fear of it in inner-city commercial areas should give Enterprise Zones more success than most have enjoyed to date.
With many suburban areas basically overbuilt with shopping centers, inner-city areas may represent a major new untapped market for investment.
New approaches to mall design and operation make it possible to tap these markets.
If the risks and rewards are reasonable, developers will respond.
Government officials who wonder how important it is for them to encourage development in high-risk areas should visit Vermont-Slauson and Grand Boulevard Plaza and decide for themselves.
The answer will be obvious.
Mr. Titus is a researcher at the Justice Department's National Institute of Justice.
ATHLONE INDUSTRIES Inc. said that on Dec. 21 it will redeem $10 million face amount of its $59.3 million of 15.625% subordinated notes outstanding, due June 1, 1991.
For each $1,000 of notes, the maker of specialty metals, industrial fasteners and consumer products will pay $1,026.46 plus $8.68 of interest accrued from Dec. 1.
The company will notify holders of the notes to be redeemed.
Manufacturers Hanover Trust Co. is redemption agent.
One company recently was listed on the New York Stock Exchange, and another will join the Big Board from the over-the-counter market this week.
Putnam Investment Grade Municipal Trust, Boston, was listed with the symbol PGM.
The new closed-end management investment company trades shares of beneficial interest.
It invests primarily in tax-exempt municipal securities.
Hibernia Corp., a New Orleans bank holding company, will join the Big Board Thursday under HIB.
Three companies began trading over the counter.
Exabyte Corp., a Boulder, Colo., maker of high-capacity tape cartridge systems used to back up computer disk drives, started OTC trading with the symbol EXBT.
Rally's Inc., a Louisville, Ky., restaurant franchisor, started trading under RLLY.
Sierra Tucson Cos., Tucson, Ariz., started trading under STSN.
It operates various types of addiction-treatment facilities.
Separately, on the Pacific Stock Exchange, put and call options on the common stock of Aldus Corp. started trading.
Aldus, Seattle, makes computer software products.
Options give a holder the right, but not the obligation, to buy or sell a security at a set price within a set period of time.
Dow Chemical Co. said its Destec Energy Inc. unit has agreed to buy PSE Inc., a Houston energy company, in a deal valued at about $115 million.
Dow, of Midland, Mich., said its unit will begin by Thursday a tender offer of $12.25 a share for all PSE common shares outstanding.
Among other conditions, the offer depends on the Dow unit acquiring at least 66 2/3% of the PSE shares outstanding, the companies said in a joint statement Friday.
PSE has about 9.2 million shares outstanding.
The company said the approximately $115 million acquisition price includes its total $33 million of long-term debt outstanding.
Dow said it already has agreements with Albert J. Smith Jr., chairman and chief executive officer of PSE, and certain other officers of the company under which Dow may buy about 40% of the PSE common shares outstanding.
PSE is a designer and operator of energy-cogeneration facilities and had 1988 sales of $234 million.
The company is owner and operator, or an equity partner, in six cogeneration facilities -- two in Texas and four in California.
The company said recently it expects third-quarter earnings will be in range from $1.3 million to $1.7 million, or 14 cents to 18 cents a share, compared with $326,000, or four cents a share, a year ago.
If growth regains its glamour among investors, a sluggish segment of the Nasdaq over-the-counter market could show some flash.
Some stock pickers already are targeting the OTC market, where, they say, await plenty of small- and medium-sized growth stocks.
Best of all, they add, these growth issues, unlike their big blue-chip cousins on the New York Stock Exchange, are languishing at depressed prices.
Growth stocks will return to favor, some analysts and money managers think, because of the jitters caused by the market's steep slide on Oct. 13, and because of the current swell of disappointing earnings announcements.
Against such a backdrop, companies with proven track records of earnings gains of 20% or so annually have extra appeal.
"The market will have to look for a new theme now and that theme will be a return to growth," declares Mary Farrell, a PaineWebber analyst.
Among her OTC picks are Oshkosh B'Gosh and A&W Brands.
Like many OTC growth issues, they have market values -- as measured by stock price times shares outstanding -- of roughly $100 million to $500 million.
Some like to specialize in growth companies whose shares haven't traded publicly very long.
These are sometimes dubbed "emerging" growth companies, though they also have expanding-profit track records.
While many growth stocks are small, not all small stocks have earnings-growth momentum.
That's an important distinction because some analysts and brokers, who perennially predict that small stocks are about to outperform bigger issues, may use any spurt in growth issues to help them sell all small stocks.
"You can find some good, quality companies over the counter," but investors should be selective, says John Palicka, chief portfolio manager at Midco Investors, a Newark, N.J., money management company with about $900 million invested in growth stocks of varying sizes.
Mr. Palicka's picks from the OTC market include Legent, Mail Boxes Etc., and Payco American.
The main argument for growth stocks is their usually superior performance in a slowing economy.
"If the market refocuses on earnings, we should get better valuations of growth stocks," says L. Keith Mullins, a growth-stock analyst at Morgan Stanley.
Eventually, he believes, investors will be willing to pay higher prices for companies with proven track records of earnings growth.
In anticipation of that shift, he and other analysts are encouraging their clients to buy such issues now.
Understandably, smaller growth stocks haven't been in favor recently.
The average issue on Standard & Poor's 500-stock Index gained 35% last year, Ms. Farrell of PaineWebber says.
Smaller-stock earnings, by comparison, rose between 15% and 20%.
In addition, earnings growth took a back seat to cash flow, restructuring and takeover potential, and breakup value as the preferred stock-picking standards for much of the year.
Also, the smaller growth stocks aren't widely traded, and so are harder to buy and sell quickly than blue chips.
As a result, Morgan Stanley's Index of 40 Emerging Growth Stocks -- most of which are in the OTC market -- is up only 13% for the year, while the Dow Jones Industrial Average has leaped 24% and the S&P 500 has grown 25%.
The Nasdaq Composite has gained 23% this year, but that's largely due to the 100 largest nonfinancial stocks, which have soared 30%.
Some investors are skeptical of growth stocks because investing in them means ignoring that maxim found in the fine print of some investment advertisements -- that past performance isn't indicative of future results.
"People are naturally suspicious of them," says Mr. Mullins of Morgan Stanley.
Among his favorites in his firm's index are Legent, Silicon Graphics and Novell.
However, more money managers are reassured that profit is regaining importance.
Mark Schoeppner, portfolio manager at Pittsburgh-based Quaker Capital Management, says that in reaction to nervousness about debt-laden buy-out transactions, analysts and investors now appear to be "valuing stock based on future earnings as opposed to the amount of debt the company can support."
Barney Hallingby, managing director of research at Hambrecht & Quist, also believes earnings growth is beginning to play a greater part in investors' buying decisions.
On Friday, Hambrecht & Quist added St. Jude Medical to the list of 20 stocks it strongly recommends.
The opinion is largely based on the company's earnings momentum, Mr. Hallingby says.
St. Jude's market value on Nasdaq exceeds $1 billion, so it isn't a small stock.
The medical devices maker's earnings rose nearly 35% in 1987 from 1986, and 75% in 1988.
Kurt Kruger, who follows the stock for Hambrecht & Quist, anticipates that the company's net income will grow 51% to $2.15 a share this year.
St. Jude finished up 1/4 to 44 1/2 on Friday.
Friday's Market Activity
The Nasdaq Composite Index eased 0.13 to 470.67.
The composite finished up 0.7% from last Friday's close.
It was a busy week for OTC stocks.
Friday's volume totaled 158.2 million shares; the daily average for the week was a bustling 176.7 million.
Valley National lost 1 3/8 to 17 1/8 on volume of 1.9 million shares.
The company reported a big third-quarter loss on Thursday.
Merchants Bank of New York lost 1 to 106 after reporting that its third-quarter net income fell to $1.62 a share from last year's $1.67 a share.
Eliot Savings Bank lost 7/8 to 1 5/8 after reporting that it had a $4.8 million loss in the latest third quarter mostly because of loan-loss provisions.
In the 1988 quarter, the bank earned $1.1 million.
One bank stock was a winner.
BanPonce jumped 4 1/2 to 47 3/4 after agreeing to be acquired by Banco Popular de Puerto Rico for $56.25 a share.
Banco Popular, meanwhile, dropped 1 1/4 to 21 1/2.
Sierra Tucson, an initial public offering, made the most active list.
The company's shares began trading at 12 1/2, up from its initial offering price of 12, and closed at 13.
Sierra Tucson operates an addiction treatment center.
Among declining issues, a weak earnings outlook drove Groundwater Technology down 6 1/4 to 24.
The company said results for its second quarter ended Oct. 28 could drop as much as 20% below the 30 cents a share reported in the year-earlier quarter.
Medstone International plummeted 3 1/4 to 7 1/4.
A Food and Drug Administration advisory panel has asked that Medstone perform more studies on its device to treat gallstones.
Qintex Entertainment dropped 2 5/8 to 1 1/2 after seeking protection from creditor lawsuits under Chapter 11 of the federal Bankruptcy Code for itself and its two operating subsidiaries, Hal Roach Studios and Qintex Productions.
Raymond Corp. lost 1 to 10 after it said late Thursday that it will take a $4.4 million charge in its third quarter for reserves to cover potential charges in connection with the closing and sale of a manufacturing plant.
As a result, the company has suspended its quarterly dividend.
McCaw Cellular Communications and its target, LIN Broadcasting, were active.
LIN added 5/8 to 110 5/8 and McCaw lost 1/4 to 41.
McCaw said it has secured commitments from three banks to help finance its $125-a-share bid for 22 million of Lin's shares.
McCaw has called for a "fair auction" of LIN, which earlier entered a stock-swap merger pact with BellSouth.
Following the release of the company's fourth-quarter earnings, Apple Computer dropped 3/4 to 48 on volume of more than 2.3 million shares.
Apple earned $161.1 million, or $1.24 a share, in the quarter, including $48 million from the sale of its Adobe Systems stock.
The following were among Friday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
Chicago & North Western Acquisition Corp. -- $475 million of senior subordinated resettable debentures, due Oct. 15, 2001, priced at par to yield 14.75%.
The coupon will be reset in one year at a rate that will give the issue a market value of 101.
However, the maximum coupon rate on the issue when it is reset can only be 15.5%.
Debenture holders will also receive the equivalent of 10% of the common stock of CNW Holdings.
The equity kicker is not attached to the offering, but underwriters said it will be offered after a filing for 68,548 common shares of CNW Holdings is declared effective by the Securities & Exchange Commission.
The issue is noncallable for five years and has a sinking fund starting in 2000 to retire 50% of the issue before maturity.
Rated single-B-2 by Moody's Investors Service Inc. and single-B-minus by Standard & Poor's Corp., the issue will be sold through underwriters led by Donaldson Lufkin & Jenrette Securities Corp.
Tokuyama Soda Co. (Japan) -- $200 million of Eurobonds due Nov. 9, 1993, with equity-purchase warrants, indicating a 4% coupon at par, via Nomura International Ltd.
Each $5,000 bond carries one warrant, exercisable from Nov. 28, 1989, through Oct. 28, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Oct. 27.
For bankers and regulators, Arizona is looking more like Texas every day.
On Friday, Los Angeles-based First Interstate Bancorp said it expects a net loss of $16 million for the third quarter of 1989 because of hemorrhaging at its First Interstate Bank of Arizona unit.
First Interstate said the unit, bludgeoned by Arizona's worsening real-estate woes, will have a $174 million loss for the quarter.
First Interstate took a huge $350 million provision for loan losses at the Arizona bank.
It charged off an estimated $200 million of Arizona loans, leaving the unit with a reserve for future losses of $255 million, about 61% of its $416 million of troubled loans and repossessed real estate.
First Interstate made the move under pressure from regulators.
The action capped a spurt of grim Arizona banking news for the third quarter, and emphatically signaled that Arizona is challenging Texas's long reign as banking's busiest graveyard.
Earlier last week, Valley National Corp., the state's largest locally owned banking company, reported a $72.2 million loss and suspended its dividend.
Pinnacle West Capital Corp., which has been wrangling with regulators for months over what to do about Pinnacle's moribund Merabank thrift unit, suspended its dividend and reported a 91% plunge in third-quarter net income.
Security Pacific Corp. said third-quarter credit losses surged a third to $109 million, mainly because of sour Arizona real-estate loans.
New York-based Chase Manhattan Corp. took an $85 million Arizona-related charge.
Furthermore, the regulatory maneuvering behind First Interstate's loss suggests regulators have concluded that lenders' reserves are far too low to absorb their future Arizona losses and are forcing bankers to do something about it.
Examiners from the Office of the Comptroller of the Currency had been combing through First Interstate's real-estate portfolio since last month; they first recommended that First Interstate take a provision that was less than the eventual $350 million third-quarter hit.
When First Interstate balked, arguing that the figure was too high, regulators responded by raising their recommendation to $350 million.
"At that point, {First Interstate} decided it was the better part of valor not to negotiate further," said one industry official close to the talks.
Thomas P. Marrie, chief financial officer, wouldn't comment about the details of the negotiations.
He said the provision "wasn't forced upon us, but the regulators made it very clear what they thought was an appropriate number."
The tough regulatory stance portends large future losses, especially at the state's thrifts.
At least six of Arizona's 12 savings and loan institutions have either been taken over by the government's conservatorship program or are essentially insolvent; they are sitting on enormous unrecognized losses.
For example, Western Savings & Loan Association, which is now in conservatorship, had tangible capital-assets minus liabilities -- of a negative $357.4 million at June 30.
It had a $258.9 million loss in the second quarter.
Yet it still held $916.3 million of repossessed real estate, for which it maintains no reserves whatsoever.
It also had $479.7 million of past-due loans; its level of reserves against those wasn't immediately available, though it is believed to be small.
The rapid deterioration of the Arizona thrifts only adds to the ever-swelling cost of the government's massive thrift bailout, officially estimated at about $166 billion.
Together, the six government-controlled or essentially insolvent Arizona thrifts have tangible capital of a negative $1.5 billion, foreclosed property of $1.8 billion and pastdue loans of $1.63 billion.
They have no reserves against the real estate, and their reserves against the loans are miniscule compared with the levels of reserves banks are moving to set up.
The thrifts had a combined loss of $487.8 million in the second quarter.
Other lenders have been recovering only 50 cents to 60 cents on the dollar on foreclosed Arizona property, if they can sell it at all.
All this havoc is the result of one of the worst busts in Arizona's boom-and-bust history, compounded by some of the usual suspects in 1980s banking debacles: greed, fraud and plain bad banking.
In the late 1970s and early 1980s, lenders and developers poured money into office buildings, condominiums and massive tracts of raw desert land, confident that Arizona's population would grow at annual rates of 4% to 6% for years to come.
Now, annual population growth is running at about 2% a year, some desert tracts bought three years ago for $90,000 an acre are being sold at $25,000 an acre and Phoenix has a seven-year supply of unoccupied office space.
"It's horrible to say, but it's unfortunate that earthquake wasn't in Phoenix -- it might have knocked out some of our empty buildings," said C.W. Jackson, a prominent Arizona businessman with interests in real estate, banking and many other businesses.
Many Arizona real-estate experts think the worst may be yet to come.
Ralph Shattuck, publisher of Foreclosure Update newsletter, said foreclosures have climbed to about 1,482 a month just in Maricopa County, where Phoenix is located.
That's up from about 687 a month in 1985, and it's accelerating: So far this month, foreclosures are averaging about 85 a day.
"It's frightening," Mr. Shattuck said.
Moreover, Mr. Shattuck and others said residential real estate, which had remained fairly strong through most of the downturn, is beginning to comprise more and more of the foreclosures.
And the generally frail condition of Arizona's lenders means there is little capital available in the state to shore up the economy and slow down the slide.
"It's reasonable to say there is not a solvent S&L in the state and the amount of viable bank capital is very low," said Mr. Jackson.
"We're going to see another big wave of failures and defaults between now and year-end. . . .
The only thing a lot of these lenders can get out of their mouth now is: `Pay me in 60 days.'"
First Interstate had a $214.4 million loss in 1988's third quarter, mainly from writedowns and reserves connected with its Texas operations.
For the six months ended June 30, it reported net income of $234.3 million, or $4.83 a share, including $46 million from tax credits and accounting changes.
The bank's Arizona unit holds about $6 billion of First Interstate's $50 billion of assets.
Mr. Marrie said the bank expects Arizona real-estate prices, which plummeted 40% over the last year, to fall another 20% before stabilizing.
Some in Arizona think that may be optimistic.
First Interstate said its operations outside of Arizona "achieved results as expected for the quarter," but didn't specify the results.
First Interstate stock closed at $57.625, down 25 cents, in composite trading Friday on the New York Stock Exchange.
Since its unsuccessful bid for BankAmerica Corp. in 1986, the bank has undertaken a major restructuring in an effort to cut costs and boost performance, but many industry officials believe it may be ripe for a takeover bid, especially with interstate banking set to begin in California in 1991.
Mr. Marrie said the problems in Arizona have only "increased our resolve to continue to make our restructuring even more effective."
Separately, Standard & Poor's Corp. lowered its ratings on Valley National Corp.'s senior debt to double-B from double-B-plus, affecting about $300 million of long-term debt.
S&P also lowered ratings on unsecured deposits and issues backed by a letter of credit from the bank holding company's principal unit, Valley National Bank of Arizona.
The ratings service said the downgrades reflect the continued slide in the company's financial condition.
A spokesman for Phoenix, Ariz.-based Valley National, said the concern will be able to withstand the current downturn in Arizona real estate.
Commercial paper holders have reinvested their funds, he said, and consumer deposits have been up in the last few days.
Immunex Corp. said its scientists isolated a molecule which may hold potential as a treatment for disruptions of the immune-system, ranging from organ-transplant rejection, to allergies and asthma.
The molecule is the mouse version of a protein called the interleukin-4 receptor.
IL-4 is a hormone which directs the growth and function of white blood cells involved in the body's immune response.
The IL-4 receptor on the surface of such cells receives the hormone's message to rally the body's defense.
But in certain conditions such as autoimmune diseases and allergies and transplant rejection, doctors would like to damp the immune response so such cells don't touch off harmful inflammatory reactions or cell destruction.
A soluble form of the receptor might turn off a specific part of the immune response without general immune suppression, the company said.
The IL-4 receptor is one of five such receptors to be developed and tested by Receptech Corp., a spinoff of Immunex, through a proposed $30 million initial public offering.
Immunex will contract with the spinoff to provide the research, development and initial testing of the new agents.
Immunex will have the option to buy back Receptech shares after five years.
The following issues were recently filed with the Securities and Exchange Commission:
Heller Financial Inc., an indirect subsidiary of Fuji Bank Ltd., shelf offering of up to $1 billion debt securities and warrants.
Jason Overseas Ltd., proposed offering of five million common shares, via Smith Barney & Co. and Mabon Nugent & Co.
MCI Communications Corp., shelf offering of up to $750 million of debt securities via Merrill Lynch Capital Markets, Drexel Burnham Lambert Inc., Goldman, Sachs & Co., and Salomon Brothers Inc.
Millicom Inc., offering of $60 million subordinated exchangeable debentures, via Bear, Stearns & Co. Inc.
Union Tank Car Co., offering of $100 million of equipment trust certificates, via Salomon Brothers.
Conner Peripherals Inc., which has a near-monopoly on a key part used in many portable computers, is on target to surpass Compaq Computer Corp. as the fastest-growing start-up manufacturing firm in U.S. business history.
Conner dominates the market for hard-disk drives used to store data in laptop computers.
It said yesterday that net income for its third quarter soared 72% to $11.8 million, or 28 cents a share, from $6.8 million, or 19 cents a share, in the year-ago period.
Its revenue totaled $184.4 million, an increase of 172% from $67.8 million a year ago.
For the nine months, the San Jose, Calif.-based company said net income jumped 84% to $26.9 million, or 69 cents a share, from $14.6 million, or 43 cents a share.
Revenue nearly tripled to $479 million, from $160 million.
Analysts expect Conner's earnings to reach roughly $40 million, or $1 to $1.05 a share, on sales of $650 million, for 1989, the company's third full year in business.
That's a faster growth rate than reported by Compaq, which didn't post similar results until its fourth year, in 1986.
But Compaq had achieved that level of sales faster than any previous manufacturing start-up.
Conner's performance is closely tied to the burgeoning demand for battery-operated computers, the computer industry's fastest-growing segment.
Since its inception, Conner has both benefited from and helped make possible the rapid spread of portable computers by selling storage devices that consume five to 10 times less electricity than drives used in desktop machines.
Today, Conner controls an estimated 90% of the hard-disk drive market for laptop computers.
The company supplies drives to Compaq and Zenith Data Systems, the top two U.S. manufacturers of laptops, and to Toshiba Corp., NEC Corp. and Sharp Corp., the leading Japanese laptop makers.
"They've had this field to themselves for over a year now, and they've been greatly rewarded," said Bob Katsive, an analyst at Disk/Trend Inc., a market researcher in Los Altos, Calif.
In the coming months, however, this is likely to change.
Next month, Seagate Technology, which is the dominant supplier of hard-disk drives for personal computers, plans to introduce its first family of low-power drives for battery-operated computers.
And the Japanese are likely to keep close on Conner's heels.
"They are going to catch up," said David Claridge, an analyst with Hambrecht & Quist.
Both Toshiba and NEC already produce hard-disk drives, and Sony also is studying the field, Mr. Claridge said.
But Conner isn't standing still.
Yesterday, the company introduced four products, three of which are aimed at a hot new class of computers called notebooks.
Each of the three drives uses a mere 1.5 watts of power and one weighs just 5.5 ounces.
"Most of our competitors are announcing products based on our (older) products," said Finis Conner, chief executive officer and founder of the firm that bears his name.
"We continue to develop products faster than anyone else can."
These new products could account for as much as 35% of the company's business in 1990, Mr. Conner estimated.
"We're not afraid of obsoleting some of our old stuff to stay ahead of the competition," he said.
Conner already is shipping its new drives.
Last week, for instance, Compaq introduced its first notebook computer to rave reviews.
Conner is supplying hard-disk drives for the machine, which weighs only six pounds and fits in a briefcase.
From its inception, Conner has targeted the market for battery-operated machines, building hard-disk drives that are smaller and use far less power than those offered by competitors such as Seagate.
The availability of these drives, in turn, boosted demand for laptop computers, whose usefulness had been limited because of lack of storage.
Conner also makes hard-disk drives for desktop computers and is a major supplier to Compaq, which as of July owned 40% of Conner's stock.
Sales to Compaq represented 26% of Conner's business in its third quarter, compared with 42% in the year-ago period.
Move over, pornographic phone services: A legal service with a "900" number has been launched in California.
A Newport Beach law firm started the pay-as-you-go legal service, called Telelawyer, using MCI Communication Corp.'s toll-tele-phone service.
Cane & Associates touts its $2-a-minute service as the "cheapest legal hour you'll ever find."
Though the service is available only in California, Telelawyer founder Michael Cane says he plans to franchise it in other states.
He says his aim is to reach people who are bedridden, have no access to transportation, can't find a lawyer to take their case or simply can't afford lawyers' consultation fees.
Mr. Cane stresses that he isn't using the telephone to lure clients to his doorstep.
"We will only deal with clients on the phone," he says.
"We have no in-office business."
Telelawyer is apparently the only telephone service that offers the telephone equivalent of an office visit.
Local bar associations in some states have numbers that provide free tape-recorded messages explaining certain areas of the law.
There also are "800" hotlines which refer people to lawyers, usually personal-injury specialists, for in-office consultation.
When a caller reaches Telelawyer by dialing 900-TELELAW, a receptionist refers the call to one of six attorneys.
In an effort to determine whether a caller has reason to sue, Cane lawyers review documents and perform research, if necessary, with the help of three law clerks and several support staffers.
There is no charge for research -- only for time on the phone.
If the matter requires further legal work or litigation, Mr. Cane says, his lawyers may refer the client to a law firm.
But he says Cane & Associates doesn't receive referral fees.
So far, says Mr. Cane, most calls have involved landlord-tenant problems, tax problems, divorce, and probate questions.
The firm is getting about 50 calls a day, and the average call lasts about 15 minutes.
Out of the $2 charge, the law firm pockets about $1.55.
JURY CONVICTS congressman in connection with Wedtech Corp. scandal.
A federal court jury in New York found U.S. Rep. Robert Garcia (D., N.Y.) and his wife, Jane Lee Garcia, guilty of extorting $76,000 from Wedtech in return for official acts by the congressman.
The jury also convicted them of extortion in obtaining a $20,000, interest-free loan from a Wedtech officer.
The jury found them guilty of conspiracy in obtaining the payments, some of which were disguised as fees for consulting services from Mrs. Garcia.
Wedtech, which became embroiled in political-corruption cases that eventually led to its demise, formerly was a minority-owned South Bronx, N.Y., defense contractor.
Edward J.M. Little, one of the assistant U.S. attorneys who prosecuted the case, said the Garcia trial "is the last of the Wedtech prosecutions."
Mr. Little said more than 20 people have been convicted in the Wedtech cases, including former U.S. Rep. Mario Biaggi (D., N.Y.).
Lawyers for the Garcias said they plan to appeal.
Mr. Garcia, who represents New York's 18th congressional district, which includes the Bronx, said he hasn't decided whether he will resign.
"In the next few weeks, I will be consulting with my political advisers and with the Democratic leaders about the best way of preserving the interests of my constituents," said Mr. Garcia, 56 years old.
Mrs. Garcia, 49, formerly was a member of Mr. Garcia's congressional staff.
The Garcias were cleared of four other felony counts, involving the receipt of bribes and gratuities.
U.S. Judge Leonard B. Sand set the Garcias' sentencing for Jan. 5.
FIVE SHEA & GOULD PARTNERS are leaving to form a new firm.
The new firm, Hutton Ingram Yuzek Gainen Carroll & Bertolotti, will be based in New York.
The five partners who resigned from Shea & Gould late last week are Tom Hutton, Sam Ingram, Dean Yuzek, Daniel Carroll and Ernest Bertolotti.
They will be joined by Larry Gainen, who resigned from the firm of LePatner, Gainen & Block.
Howard Rubenstein, a New York publicist who represents Shea & Gould, said, "Shea & Gould understands they're leaving because they wanted a different environment -- a smaller firm they would be principals of."
Mr. Rubenstein said the five, who weren't on Shea & Gould's management committee, "are leaving on good terms."
He said Shea & Gould held a number of discussions with the five partners during the past few weeks to get them to stay but that the five were firmly committed to running their own firm.
Hutton Ingram will have a general corporate, securities, real-estate and litigation practice, and a substantial practice serving the professional-design community.
DISCIPLINARY PROCEEDINGS against lawyers open to public in Illinois.
While investigations into lawyer misconduct will remain secret, the public will be notified once a formal complaint is filed against an attorney.
The actual disciplinary hearings will be public.
In addition, Illinois attorneys will lose the right to sue clients who file malicious complaints against them.
Non-lawyers will be added to the inquiry panels that look into allegations of misconduct.
Illinois joins 36 other states that allow public participation in attorney-disciplinary proceedings and 32 states that open disciplinary hearings to the public, according to the American Bar Association.
One vocal critic of the changes, Chicago lawyer Warren Lupel, says non-lawyers shouldn't be on the inquiry panels because they are unlikely to appreciate the nuances of attorney-client relationships.
In addition, he says, publishing the names of lawyers who are facing charges unnecessarily subjects them to public derogation.
Nevertheless, Mr. Lupel anticipates no legal action to reverse the Illinois Supreme Court's decision to institute the changes.
"There's no constitutional right involved in the rule change," he says.
"You don't have a right to practice.
You only have a privilege to practice."
DREXEL BURNHAM LAMBERT Inc. agreed to pay a $50,000 fine to Delaware, the 26th state to settle with Drexel in the wake of the firm's guilty plea to federal insider-trading charges.
Drexel doesn't have a Delaware office, but the New York firm has been negotiating settlements that would allow it to operate freely nationwide despite its record as an admitted felon.
The firm has said it expects to pay $11.5 million overall to settle with states.
Drexel pleaded guilty in September to six felony counts of securities and mail fraud; it also made a $650 million civil settlement with the Securities and Exchange Commission.
Philip Morris Cos., whose Benson & Hedges cigarette brand has been losing market share, has asked at least one other agency to try its hand at creative work for the big account, which has been at Wells Rich Greene Inc. since 1966.
Executives close to Philip Morris said that the tobacco and food giant has asked Backer Spielvogel Bates Worldwide Inc., a unit of Saatchi & Saatchi Co., and possibly others to work on creative ideas for the account.
Several executives said another potential contender is WPP Group's Ogilvy & Mather agency, which works on some other Philip Morris products.
Both Philip Morris and Backer Spielvogel declined to comment.
A spokeswoman for Ogilvy & Mather said the agency doesn't comment on "idle speculation."
Also mentioned as a contender was TBWA Advertising, but the company denied it was participating.
The loss of the cigarette account would be a severe blow to Wells Rich.
Benson & Hedges has been one of its most high-visibility campaigns, as well as one of its largest clients.
The account billed almost $60 million last year, according to Leading National Advertisers.
But Philip Morris has scaled back ad spending on the brand over the past year, industry executives said, and it now bills about $30 million to $40 million.
Industry executives said Philip Morris had asked the other agencies to create campaigns in a bid to stop the brand's slipping market share.
According to John Maxwell, an analyst at Wheat First Securities, Richmond, Va., Benson & Hedges has slipped from 4.7% of the cigarette market in 1985 to just 4.1% after the second quarter of this year.
The brand is No. 7 overall in the cigarette business, Mr. Maxwell said.
The slip has come despite high-profile ads created by Wells Rich, including one picturing a young man clad only in pajama bottoms interrupting a festive brunch.
That ad generated so much publicity that a trade magazine launched a contest for its readers to guess who the guy was and what he was doing.
Wells Rich first popularized the Benson & Hedges brand more than 20 years ago with ads portraying, among other things, an elevator door closing on a passenger's cigarette.
The brand early on achieved an upscale appeal -- a trait that some analysts believe is partly responsible for its staid performance.
Philip Morris, trying to revive the Benson & Hedges franchise, put the account up for review in 1986.
Wells Rich Greene, however, in an effort directed by Mary Wells Lawrence, emerged the victor of the review and retained the business.
Kenneth Olshan, Wells Rich's chairman, didn't return phone calls seeking comment.
While Wells Rich recently picked up Hertz Corp.'s $25 million to $30 million account, it has lost a number of big accounts this year, including the $20 million to $25 million Cadbury-Schweppes Canada Dry and Sunkist accounts, the $18 million Procter & Gamble Co. Sure deodorant account and the $10 million Polo/Ralph Lauren business.
Its victories include more than $30 million in Sheraton Corp. business and an assignment from Dun & Bradstreet worth $5 million to $10 million.
This city is girding for gridlock today as hundreds of thousands of commuters avoid travel routes ravaged by last week's earthquake.
Estimates of damage in the six-county San Francisco Bay area neared $5 billion, excluding the cost of repairing the region's transportation system.
The Bay Bridge, the main artery into San Francisco from the east, will be closed for at least several weeks.
Part of the bridge collapsed in the quake, which registered 6.9 on the Richter scale.
The bridge normally carries 250,000 commuters a day.
Also, most of the ramps connecting the city to its main link to the south, the 101 freeway, have been closed for repairs.
The Bay Area Rapid Transit system, which runs subway trains beneath the bay, is braced for a doubling of its daily regular ridership to 300,000.
BART has increased service to 24 hours a day in preparation for the onslaught.
Most unusual will be water-borne commuters from the East Bay towns of Oakland and Berkeley.
For the first time in 32 years, ferry service has been restored between the East Bay and San Francisco.
The Red and White Fleet, which operates regular commuter ferry service to and from Marin County, and tourist tours of the bay, is offering East Bay commuters a chance to ride the waves for the price of $10 round-trip.
That tariff is too stiff for some Financial District wage earners.
"I'll stay with BART," said one secretary, swallowing her fears about using the transbay tube.
Officials expect the Golden Gate Bridge to be swamped with an extra load of commuters, including East Bay residents making a long detour.
"We're anticipating quite a traffic crunch," said one official.
About 23,000 people typically travel over the Golden Gate Bridge during commute hours.
About 130,000 vehicles cross during a 24-hour period.
Meetings canceled by Apple Computer Inc.'s European sales force and by other groups raised the specter of empty hotel rooms and restaurants.
It also raised hackles of the city's tourism boosters.
"Other cities are calling {groups booked here for tours and conferences} and -- not to be crass -- stealing our booking list," said Scott Shafer, a spokesman for Mayor Art Agnos.
City officials stuck by their estimate of $2 billion in damage to the quake-shocked city.
The other five Bay area counties have increased their total damage estimates to $2.8 billion.
All estimates exclude highway repair, which could exceed $1 billion.
Among the expensive unknowns are stretches of elevated freeway in San Francisco that were closed because of quake-inflicted damage.
The most worrisome stretch is 1.2 miles of waterfront highway known as the Embarcadero Freeway.
Until it was closed Tuesday, it had provided the quickest series of exits for commuters from the Bay Bridge heading into the Financial District.
Engineers say it will take at least eight months to repair the Embarcadero structure.
As part of the quake recovery effort, the city Building Department has surveyed about 3,000 buildings, including all of the Financial District's high-rises.
The preliminary conclusion from a survey of 200 downtown high-rises is that "we were incredibly lucky," said Lawrence Kornfield, San Francisco's chief building inspector.
While many of these buildings sustained heavy damage, little of that involved major structural damage.
City building codes require construction that can resist temblors.
In England, Martin Leach, a spokesman for Lloyd's of London, said the insurance market hasn't yet been able to estimate the total potential claims from the disaster.
"The extent of the claims won't be known for some time," Mr. Leach said.
On Friday, during a visit to California to survey quake damage, President Bush promised to "meet the federal government's obligation" to assist relief efforts.
California officials plan to ask Congress for $3 billion or more of federal aid, in the form of grants and low-interest loans.
The state has a $1 billion reserve, and is expected to add $1 billion to that fund in the next year.
Some of that money will be available for highway repair and special emergency aid, but members of the legislature are also mulling over a temporary state gasoline tax to raise money for earthquake relief.
However, state initiatives restrict the ability of the legislature to raise such taxes unless the voters approve in a statewide referendum.
G. Christian Hill and Ken Wells contributed to this article.
Bond Corp. Holdings Ltd. posted a loss for fiscal 1989 of 980.2 million Australian dollars (US$762.4 million), the largest in Australian corporate history.
That loss compared with a year-earlier profit of A$273.5 million.
In preliminary, unaudited results reported Friday, Bond Corp. also posted an operating loss of A$814.1 million for the year ended June 30, compared with operating profit of A$354.7 million a year earlier.
Operating revenue rose 69% to A$8.48 billion from A$5.01 billion.
But the net interest bill jumped 85% to A$686.7 million from A$371.1 million.
Bond Corp. has interests in brewing, media and communications, natural resources and property.
Much of Bond Corp.'s losses stemmed from one-time write-downs of the value of some of Bond Corp.'s assets and those of its units.
The results included a A$453.4 million write-off of future income-tax benefits and a provision for a loss of A$149.5 million on the sale of a stake of about 20% in Lonrho PLC.
However, Bond Corp. said the tax benefits remain available and might be used later.
Earnings before interest and tax from brewing dived 50% to A$123.8 million from A$247.3 million.
The company said the general financial performance of its U.S. brewing operations, G. Heileman Brewing Co., was "disappointing, and this has been reflected in the results."
Bond Corp.'s shares closed Friday before news of the results at 28 Australian cents a share, up one Australian cent.
The staggering losses cap a tumultuous year for Alan Bond and his flagship, Bond Corp.
Only a year ago, the chairman of Bond Corp., who controls about 58% of the company, appeared to be building a war chest to attack some big companies.
Now Bond Corp. has agreed to sell at least half its Australian brewing assets.
It has sold billions of dollars of other assets and has more on the block.
But in a TV interview Sunday Mr. Bond said, "We've taken a big loss.
We've taken it on the chin.
But we're out there and we're going to stay in business.
Bond Corp. signaled it will focus on building its domestic and international media and communications businesses.
It said it will look at opportunities in brewing, property and energy resources to the extent consistent with the dominant objective of manageable debt-to-assets ratios.
The result "will ultimately be a very different group in size and structure," Bond Corp. directors said in a statement.
Some analysts contend the total writeoffs should have been much greater, and Bond Corp.'s auditors cited a list of several assets and deals about which there is "uncertainty" regarding the current value and potential impact on the firm.
Bond Corp. said the acknowledged losses mean net asset backing is in the red to the tune of 53 Australian cents a share, vs. positive asset backing of A$1.92 a share a year ago.
Still, the directors said, "Having fully considered all aspects of the company's state of affairs and future cash flows, the directors confirm absolutely that the company is solvent."
Indeed, in a note to the results, directors said if the "true worth" of some of the group's assets were taken into account instead of using book values, the negative net asset backing a share would turn into "a substantial positive" one.
The Bakersfield Supermarket went out of business last May.
The reason was not high interest rates or labor costs.
Nor was there a shortage of customers in the area, the residential Inwood section of northern Manhattan.
The business closed when the owner was murdered by robbers.
The owner was Israel Ortiz, a 29-year-old entrepreneur and father of two.
In his first year of operating the store he bought for $220,000, Mr. Ortiz was robbed at least twice at gunpoint.
The first time he was shot in the hand as he chased the robbers outside.
The second time he identified two robbers, who were arrested and charged.
Two weeks later -- perhaps in retaliation -- Mr. Ortiz was shot three times in the back, during what police classified as a third robbery attempt.
That was his reward for working until 11 p.m. seven days a week to cover his $3,000 a month rent.
For providing what his customers described as very personal and helpful service.
For creating a focus for neighborhood life.
Israel Ortiz is only one of the thousands of entrepreneurs and their employees who will be injured or killed by crime this year.
The U.S. Bureau of Justice Statistics reports that almost 2% of all retail-sales workers suffer injuries from crime each year, almost twice the national average and about four times the rate for teachers, truck drivers, medical workers and door-to-door salespeople.
Only a few other occupations have higher reported rates of criminal injury, such as police, bartenders and taxi drivers.
Yet these figures show only the most visible part of the problem.
Recent data from New York City provide more of the picture.
While by no means the highest crime community in the country, New York is a prime example of a city where crime strangles small-business development.
A survey of small businesses there was conducted this spring by Interface, a policy research organization.
It gave 1,124 businesses a questionnaire and analyzed 353 responses.
The survey found that over a three-year period 22% of the firms said employees or owners had been robbed on their way to or from work or while on the job.
Seventeen percent reported their customers being robbed.
Crime was the reason that 26% reported difficulty recruiting personnel and that 19% said they were considering moving.
More than one-third of the responding businesses said they suffer from drug dealing and loitering near their premises.
In Brooklyn and the Bronx, one out of four commercial firms is burglarized each year.
Industrial neighborhoods fare even worse, with burglary rates twice the citywide average.
Crime is clearly more deadly to small-scale entrepreneurship than to big businesses.
Two decades ago, the Small Business Administration reported Yale Prof. Albert Reiss's landmark study of crime against 2,500 small businesses drawn from national IRS records.
He found that monetary crime losses, as a proportion of gross receipts, were 37 times higher for small businesses than for large ones.
The New York study's companies averaged 27 employees; their annual crime losses averaged about $15,000, with an additional $8,385 annual cost in security -- enough money to hire at least one more worker.
The costs of crime may also be enough to destroy a struggling business.
Whatever the monetary crime losses, they may not be nearly as important to entrepreneurs as the risk of personal injury.
After repeated gun robberies, some entrepreneurs may give up a business out of fear for their lives.
One Washington couple recently sold their liquor store after 34 years in business that included four robbery deaths and 16 robberies or burglaries on the premises.
These findings illustrate the vicious cycle that National Institute of Justice Director James K. Stewart calls "crime causing poverty."
Underclass neighborhoods offer relatively few employment opportunities, contributing to the poverty of local residents.
Small neighborhood businesses could provide more jobs, if crime were not so harmful to creating and maintaining those businesses.
This may help explain why small businesses create 65% of all jobs nationally, but only 22% of jobs in a crime-ridden city like New York.
Bigger business can often better afford to minimize the cost of crime.
The New York study found that the cost of security measures in firms with fewer than five employees was almost $1,000 per worker, compared with one-third that amount for firms with more than 10 employees.
The shift of retailing to large shopping centers has created even greater economies of scale for providing low-crime business environments.
Private security guards and moonlighting police can invoke the law of trespass to regulate access to these quasi-public places.
Since 1984, in fact, revenues of the 10 largest guard companies, primarily serving such big businesses, have increased by almost 62%.
Few small neighborhood businesses, however, can afford such protection, even in collaboration with other local merchants.
In the neighborhoods with the highest crime rates, small business generally relies on the public police force for protection.
This creates several problems.
One is that there are not enough police to satisfy small businesses.
The number one proposal for reducing crime in the New York survey was to put more police on foot or scooter patrol, suggested by more than two-thirds of the respondents.
Only 22% supported private security patrols funded by the merchants themselves.
A second problem is the persistent frustration of false alarms, which can make urban police less than enthusiastic about responding to calls from small businesses.
Only half the New York small businesses surveyed, for their part, are satisfied with the police response they receive.
Some cities, including New York, have experimented with special tax districts for commercial areas that provide additional patrols funded by local businesses.
But this raises added cost barriers to urban entrepreneurship.
Another solution cities might consider is giving special priority to police patrols of small-business areas.
For cities losing business to suburban shopping centers, it may be a wise business investment to help keep those jobs and sales taxes within city limits.
Increased patrolling of business zones makes sense because urban crime is heavily concentrated in such "hot spots" of pedestrian density.
With National Institute of Justice support, the Minneapolis police and the Crime Control Institute are currently testing the effects of such a strategy, comparing its deterrence value with traditional random patrols.
Small-business patrols would be an especially helpful gesture whenever a small-business person is scheduled to testify against a robbery suspect.
While no guarantee, an increased police presence might even deter further attacks.
It might even have saved the life, and business, of Israel Ortiz.
Mr. Sherman is a professor of criminology at the University of Maryland and president of the Crime Control Institute in Washington, D.C.
ENFIELD Corp. said in Toronto that it hopes to raise 56 million Canadian dollars (US$47.7 million) through a rights offering to shareholders.
Under the offer, shareholders can purchase one Enfield share at C$6.27 for each five shares held.
In Toronto Stock Exchange trading Friday, Enfield closed at C$6.75, down 37.5 cents.
The holding company said the rights offering should reduce its C$171 million debt to "more manageable levels" before Dec. 31 and allow it to finance future investments with equity capital.
At last report, Enfield had about 44.5 million shares outstanding.
Former U.N. Ambassador Jeane Kirkpatrick, in a CNN "Capital Gang" discussion Oct. 7 of House action on federal catastrophic-illness insurance:
I think this repeal was kind of a thoughtless action, as a matter of fact. . . .
They will have to revisit this issue, and they'll have to revisit it before long.
Diversification pays.
That's a fundamental lesson for investors, but its truth was demonstrated once again in the performance of mutual funds during and after the stock market's Friday-the-13th plunge.
Stock funds, like the market as a whole, generally dropped more than 2% in the week through last Thursday, according to figures compiled by Lipper Analytical Services Inc.
That reflects the huge drop a week ago Friday, last Monday's rebound and the dips and blips that followed.
But several other types of funds shielded investors from the worst of the market's slide.
Funds that invest internationally were the top-performing stock and fixed-income funds.
"More than ever, people should realize they should have a diversified portfolio," said Jeremy Duffield, a senior vice president of Vanguard Group.
"That means stocks, bonds, money market instruments and real estate."
One week's performance shouldn't be the basis for any investment decision.
But the latest mutual fund performance figures do show what can happen when the going gets rough.
"You want to know how a fund did when the market got hammered," said Kurt Brouwer, an investment adviser with Brouwer & Janachowski in San Francisco.
"It's like kicking the tires of a car . . . .
What you want to know is when the road's rough, when there's snow and ice, how's this car going to perform?"
General equity funds fell an average of 2.35% in the week ended Thursday, compared with a 2.32% slide for the Standard & Poor's 500-stock index.
But Lipper Analytical's figures show that there were a number of ways investors could have cushioned themselves from the stock market's gyrations.
Gold-oriented funds, for instance, which invest in companies that mine and process the precious metal, posted an average decline of 1.15%.
Flexible portfolio funds, which allocate investments among stocks, bonds and money-market instruments and other investments, declined at about half the rate of stock funds -- an average drop of 1.27%, according to Lipper.
Global allocation funds take the asset-allocation concept one step further by investing at least 25% of their portfolios outside the U.S.
This gives them the added benefits of international diversification -- including a foreign-exchange boost during periods, like the past week, when the dollar declines against other major currencies.
With all that going for them, global flexible portfolio funds declined only 1.07% in the week through last Thursday.
But while the merits of diversification shine through when times are tough, there's also a price to pay: A diversified portfolio always underperforms an undiversified portfolio during those times when the investment in the undiversified portfolio is truly hot.
And Friday the 13th notwithstanding, stocks have been this year's hot investment.
Thus, even including the latest week, the average general stock fund has soared more than 24% so far this year, the Lipper Analytical figures show.
By comparison, global asset allocation funds have turned in an average total return of about 19%, while domestic flexible portfolios are up about 17%.
Fixed-income funds have returned 8.2%, while gold funds, which tend to be volatile, have risen just 4.55%, on average.
"That's the problem with trying to hedge too much," said Mr. Brouwer.
"You don't make any real money."
Over the last 20 years, for example, Mr. Brouwer says, an investor putting $5,000 a year in the S&P 500 would have made nearly twice as much than if it were invested in Treasury bills.
Some equity funds did better than others in the week that began on Friday the 13th.
The $4 million Monetta Fund, for instance, was the seventh top performing fund for the week, with a 2.65% return.
Its return so far this year has been a credible 21.71%.
The fund's strategy is to sell when a stock appreciates 30% over its cost.
By the time the market plummeted 10 days ago, Monetta was 55% in cash, said Robert Bacarella, president and portfolio manager.
Last Monday, he started "buying the high-quality growth companies that people were throwing away at discount prices."
Among Mr. Bacarella's picks: Oracle Systems, Reebok International Ltd. and Digital Microwave Corp.
The fund's cash position is now about 22%, which Mr. Bacarella calls "still bearish."
Among the big stock funds, Dreyfus Fund, with more than $2 billion in assets, had a decline of just 1.49% for the week and a return of 21.42% for the year.
Howard Stein, chairman of Dreyfus Corp., said the fund was about half invested in government bonds on Oct. 13, and about 10% in cash.
"In a downward market, bonds act better," he said.
"We still think there's a lot of unsettlement in this market.
We believe interest rates will continue to trend lower, and the economy will slow around the world."
Many of the funds that did best in the last week are heavily invested overseas, giving them the benefit of foreign currency translations when the dollar is weak.
From its high point on Thursday, Oct. 12, to where it traded late in New York a week later, the dollar fell 3.6% against the West German mark, 3.4% against the British pound and 2.1% against the Japanese yen.
Three International Cash Portfolios funds, which invest almost exclusively in bonds and money-market instruments overseas, were among the four top-performing funds in the latest week.
Because the funds' investments are denominated in foreign currencies, their value expressed in dollars goes up when those currencies rise against the dollar.
But when the dollar rises against major foreign currencies, as it did for much of this year, the dollar value of these funds declines.
All three funds posted negative returns for the year to date.
Of the funds that fared the worst in the post-Oct. 13 week, two are heavily invested in airlines stocks, which led the market slide following problems with financing for the UAL Corp. buy-out plan.
Reflecting airline takeover activity, however, both the Fidelity Select Air Transportation Portfolio and the National Aviation & Technology fund posted better-than-average returns for the the year to date: 30.09% for the Fidelity Air Transportation fund and a whopping 47.24% for National Aviation & Technology.
The small drop in equity funds in general in the latest week may not necessarily be a good sign, said A. Michael Lipper, president of Lipper Analytical.
Noting that equity funds are up nearly 60% from their post-crash low on Dec. 3, 1987, he said that what happened last week "may not be enough of an adjustment.
There's either more to come or an extremely long period of dullness."
But investors don't seem to think so.
Several big mutual fund groups said last week that cash flows into stock funds were heavier than usual after heavy outflows on the 13th.
Vanguard Group said it had a more than $50 million net inflow into its stock funds last week.
"There certainly hasn't been a panic reaction," said Steven Norwitz, a vice president at T. Rowe Price Associates.
"People showed some staying power and, in fact, interest in buying equities."
Source: Lipper Analytical Services Inc.
*Not counting dividends
**With dividends reinvested
Sources: Lipper Analytical Services Inc.; Standard & Poor's Corp.
Guardian Royal Exchange Assurance PLC, a major British composite insurer, said it is taking a stake in Nationwide Anglia Building Society's estate agency business as part of a plan to create a range of commercial linkages in the U.K. and Europe.
Officials declined to disclose the value of the transaction or the exact stake that GRE will hold in Nationwide Anglia Estate Agents.
But the companies said that Nationwide Anglia Estate Agents will market GRE life insurance, pension and investment products through its more than 1,000 retail outlets in the U.K.
Besides the marketing agreement, GRE said Nationwide Anglia has agreed to develop life insurance products with the composite insurer.
Sitting at the bar of the Four Seasons restaurant, architect William McDonough seems oblivious to the glamorous clientele and the elegant setting.
He is ogling the curtains rippling above the ventilation ducts.
"Look how much air is moving around!" he says.
"The ventilation here is great!"
You may be hearing more about the 38-year-old Mr. McDonough and his preoccupation with clean air.
After years of relative obscurity, he is starting to attract notice for the ecological as well as the aesthetic quality of his architecture.
Mr. McDonough believes that the well-being of the planet depends on such stratagems as opening windows to cut indoor air pollution, tacking down carpets instead of using toxic glues, and avoiding mahogany, which comes from endangered rain forests.
He has put some of his aesthetic ideas into practice with his design of the four-star Quilted Giraffe restaurant -- "architecturally impeccable," Progressive Architecture magazine called it -- and his remodeling of Paul Stuart, the Madison Avenue clothing store.
He has designed furniture and homes as well as commercial and office space.
He is now designing a Broadway stage set for a show by the band Kid Creole and the Coconuts.
What really stirs his muse, though, is aerobic architecture.
Now the question is: Is Poland ready for it?
Mr. McDonough is about to tackle his biggest clean-air challenge yet, the proposed Warsaw Trade Center in Poland, the first such center in Eastern Europe.
The project has already acquired a certain New York cachet.
Bloomingdale's plans to sell a foot-tall chocolate model of the center during the holidays.
Some of the sales proceeds will go to the Design Industries Foundation for AIDS.
A cake topped with a replica of the center will be auctioned at an AIDS benefit at Sotheby's in December.
If Mr. McDonough's plans get executed, as much of the Polish center as possible will be made from aluminum, steel and glass recycled from Warsaw's abundant rubble.
A 20-story mesh spire will stand atop 50 stories of commercial space.
Solar-powered batteries will make the spire glow.
The windows will open.
The carpets won't be glued down, and walls will be coated with nontoxic finishes.
To the extent that the $150 million budget will allow it, Mr. McDonough will rely on solid wood, rather than plywood or particle board, to limit the emission of formaldehyde.
If Mr. McDonough has his way, the Poles will compensate for the trade center's emissions of carbon dioxide, a prime suspect in the global atmospheric warming many scientists fear.
The Poles would plant a 10-square-mile forest somewhere in the country at a cost of $150,000, with the center's developer footing the bill.
The news hasn't exactly moved others in Mr. McDonough's profession to become architectural Johnny Appleseeds.
All architects want to be aware of the ecological consequences of their work, says John Burgee, whose New York firm is designing the redevelopment of Times Square, "but we can't all carry it to that extreme."
Karen Nichols, senior associate at Michael Graves's architecture firm in Princeton, N.J., says: "We're really at the mercy of what the construction industry can and will do readily."
Mr. McDonough responds: "I'm asking people to broaden their agendas."
The son of a Seagram's executive who was stationed in many countries around the world, Mr. McDonough was born in Tokyo and attended 19 schools in places ranging from Hong Kong to Shaker Heights, Ohio, before entering Dartmouth College.
He earned a master's degree in architecture from Yale.
His interest in the natural environment dates from his youth.
He and his father still spend time each summer fly-fishing for salmon in Iceland.
Living in Hong Kong, he says, made him sensitive to the limits on food, power and water supplies.
At his first school in the U.S. he was thought a little strange for shutting off open water taps and admonishing his schoolmates to take only brief showers.
He and a Dartmouth roommate established a company that restored three hydroelectric power plants in Vermont.
At Yale, he designed one of the first solarheated houses to be built in Ireland.
Mr. McDonough's first professional project fully to reflect his environmental ardor was his 1986 design for the headquarters of the Environmental Defense Fund in New York.
The offices took 10,000 square feet of a building with 14-foot ceilings and big, operable windows.
Since the 1970s energy crisis, some efforts to conserve energy by sealing buildings have had an unintended side effect: high indoor pollution.
To reduce it at the fund's building, workers rubbed beeswax instead of polyurethane on the floors in the executive director's office.
Jute, rather than a synthetic material, lies under the tacked-down carpets, and the desks are of wood and granite instead of plastic.
The budget was only $400,000.
"Athens with Spartan means," Mr. McDonough says.
The fund's lawyers work in an Athenian grove of potted trees.
Economists and administrators sit along a "boulevard" with street lamps and ficus trees.
In offices, triphosphorous bulbs simulate daylight.
Offices with outside windows have inside windows, too, to let in more real daylight.
"We proved a healthy office doesn't cost more," says Frederic Krupp, executive director of the fund.
It "really looks beautiful and is very light," says Ann Hornaday, a free-lance writer who has visited the office for lunch meetings.
But, she says, "I guess I didn't really notice the trees.
Maybe they were hidden by all the people."
Neither the Quilted Giraffe nor the Paul Stuart renovation reflects much of Mr. McDonough's environmental concern.
The restaurant was conceived as a sparkling, crystalline "geode."
It makes extensive use of stainless steel, silver and aluminum that sets off black granite table tops and a gray terrazzo with zinc-strip floors.
To more than replace the wood from two English oaks used for paneling at Paul Stuart, however, Mr. McDonough and friends planted 1,000 acorns around the country.
The ambitious Warsaw project still awaits approval by city officials.
Its developer is a Polish American, Sasha Muniak.
He had worked with Mr. McDonough on an earlier project and recruited him as architect for the trade center.
The center will provide space for computer hardware and facsimile and other telecommunications equipment, not readily accessible in Poland now, for a growing number of Westerners doing business in Eastern Europe.
Mr. McDonough thinks of the center as the "Eiffel Tower of Warsaw" and "a symbol of the resurgence of Poland."
If any nation can use environmentally benign architecture, it is Poland.
Jessica Mathews, vice president of World Resources Institute in Washington, D.C., says that perhaps a quarter of Poland's soil is too contaminated for safe farming because of air pollution.
The pollution is also killing forests and destroying buildings that date back to the Middle Ages.
The future of the forest remains uncertain.
Mr. Muniak's company, Balag Ltd., has agreed to set aside the money to plant and maintain it, but discussions are still going on over where to place it and how to ensure that it will be maintained.
After all, Mr. Muniak says, "in Poland there aren't too many people worried about the environment.
They're more worried about bread on the table.
Pittston Co.'s third-quarter net income plunged 79%, reflecting the impact of a prolonged and bitter labor strike at its coal operations.
Net sank to $3.1 million, or eight cents a share, including $789,000, or two cents a share, reflecting a tax-loss carry-forward.
In the year-ago quarter, net totaled $14.7 million, or 38 cents a share, including $4 million, or 10 cents a share, reflecting a tax-loss carry-forward.
Revenue slipped 0.7% to $395.3 million from $398.3 million.
Pittston also owns Brink's Inc., the security service, and Burlington Air Express, the air-freight concern.
In addition to expected losses tied to the labor strike, the coal group has spent almost $20 million since the strike began for security, the company said.
As a result, the group's third-quarter loss widened to $9.8 million from the second quarter's $3.6 million.
Pittston continues to hire replacement workers, the company said.
Burlington's operating profit grew to $9.2 million from $3.8 million a year earlier, Pittston said.
While "the tone" of domestic and international air-freight markets remains sound, seasonal factors are likely to hinder Burlington Air from matching third-quarter results in the fourth quarter, Pittston said.
Brink's operating profit was about flat with the year-earlier period, reflecting continued pricing and cost pressures.
In New York Stock Exchange composite trading Friday, Pittston closed at $18.50 a share, down 12.5 cents.
Doesn't anybody here want to win this mayor's race?
As they stumble and bumble toward election day two weeks from tomorrow, both Democrat David Dinkins and Republican Rudolph Giuliani are in trouble.
Mr. Dinkins, the Manhattan borough president, can afford more bumbling and stumbling because he holds a comfortable 20-point lead in most of the public-opinion polls.
But, in the past 10 days, he has taken a series of body blows to his pride and his reputation that could adversely affect his ability to govern this tumultuous city should he become New York's first black mayor.
Ordinarily, a clever opponent would find a way to capitalize on the other side's misfortunes.
But Mr. Giuliani, a celebrated prosecutor, has had difficulty switching from his crime-busting, finger-pointing mode to a political stance that suggests he might know something about running this big, troubled city.
And now, at the crucial moment, he's running out of money.
This is the nation's biggest city and, traditionally, its mayor is the nation's best-known urban politician.
Democrats hoped that Mr. Dinkins could become a highly visible national leader.
Republicans figured that in Mr. Giuliani, the nation's best-known prosecutor, they had a chance for a huge upset in the heart of Democratic territory and that they would pick up a new political star.
But it hasn't worked out that way.
"Dinkins is a decent but sloppy guy," says David Garth, veteran campaign consultant here who has always worked for Mayor Edward Koch, defeated by Mr. Dinkins in the Sept. 12 Democratic primary.
"The alternative -- Giuliani -- is ghastly."
"I guess we'll reluctantly go ahead and do it, vote for Dinkins," says Richard Wade, a politically active professor who supported Richard Ravitch, an also-ran in the Democratic primary.
"There's nothing on the other side."
"We're picking up steam," insists Roger Ailes, Mr. Giuliani's media consultant, whose last big campaign helped put George Bush in the White House.
He adds: "It just hasn't gotten down to the engine room yet."
But the steam may never reach the engine room.
For, just as Mr. Giuliani latches on to an issue that has Mr. Dinkins reeling, his campaign desperately needs cash to keep Mr. Ailes's commercials on the air beyond Wednesday or Thursday.
To help out this week, the White House is dispatching chief of staff John Sununu and three Cabinet members -- HUD's Jack Kemp, Transportation's Samuel Skinner and Treasury's Nicholas Brady, according to Peter Powers, the Giuliani campaign manager.
For Republicans who began this campaign with such high hopes, all of this is deeply frustrating.
Historically, New York is almost always in trouble.
But the trouble it faces now under Democratic rule seems bigger and more daunting than anything it has faced in the past.
This year, the city faces a budget deficit that could become even bigger next year.
And hardly surprising, many residents trying to cope with the city's other problems are constantly on edge, one ethnic group scrapping with another.
"People weren't so happy in the 1930s," says Thomas Lessner, another local professor and the biographer of the legendary Fiorello LaGuardia, the city's fusion mayor who built a coalition Mr. Giuliani hopes to emulate.
"But, at least, back then they didn't generally direct their anger at each other."
The 62-year-old Mr. Dinkins, an ex-Marine, has served as the city clerk and as Manhattan borough president, a job with limited executive responsibilities
("I defy you to come up with one major accomplishment of David Dinkins," says Mr. Giuliani.)
He defeated the contentious Mr. Koch in the Democratic primary partly because he seemed to offer hope he could heal the city's racial and ethnic wounds.
His general-election campaign is almost Reagan-like, all muted pictures and comforting words.
His theme is unity, decency, humanity, bringing New York together again.
Both candidates are negotiating about holding debates, but Mr. Dinkins is widely seen as the major obstacle for scheduling them.
The 45-year-old Mr. Giuliani has run a negative campaign to pick up votes leaning to Mr. Dinkins.
"He's got to get Dinkins's negatives up," says Lee Miringoff, director of the Marist College Institute of Public Opinion.
"But our polls show voters don't like the attack stuff.
Why, even 20% of the Republican vote is going to Dinkins."
"It's assault-weapons politics," says John Siegal, Mr. Dinkins's issues director, insisting there is a strong racist undertone to the Giuliani effort.
For the Giuliani forces, it's a conundrum.
On the one hand, Mr. Giuliani wants to cut into Mr. Dinkins's credibility.
On the other, he seeks to convince voters he's the new Fiorello LaGuardia -- affable, good-natured and ready to lead New York out of the mess it's in.
It hasn't helped that he's waffled on abortion and gay rights, sought the support of both the Liberal and Conservative parties (he won the Liberal endorsement) and that he turned to comedian Jackie Mason for help with Jewish voters.
Mr. Mason left the campaign after telling reporters Mr. Dinkins is "a fancy 'shvartzer' with a moustache."
Shvartzer is a derogatory Yiddish word for a black person.
Mr. Dinkins concedes nothing in his ability to stumble and bumble.
He can match Jackie Mason with his own Robert "Sonny" Carson, an angry street organizer who was convicted of kidnapping in 1974.
The Dinkins campaign paid Mr. Carson close to $10,000 to get out the vote on primary-election day.
Paper work on how it was spent is incomplete.
Mr. Carson has been charged with being anti-Semitic.
Asked about that the other day, he replied, "Anti-Semitic?
I'm anti-white."
More troubling for Mr. Dinkins is his record in personal accounting.
It began in 1973, when he was being considered for deputy mayor, and a routine check unearthed the extraordinary fact that he hadn't paid his income tax for the previous four years.
"I was always going to do it tomorrow," he explained at the time.
And now he's busily trying to explain an arrangement in which he sold stock in Inner City Broadcasting Co., headed by his old friend and patron, Percy Sutton, to his son, David Dinkins Jr., for $58,000.
He had valued the shares at more than $1 million two years earlier.
He says he sold the stock to avoid conflict-of-interest problems in his role as a voting member of the city's Board of Estimate.
He says his son hasn't paid for the shares.
"It looks like serious tax evasion," says Mr. Ailes, the Giuliani media consultant.
"It follows the same pattern as his tax returns.
He waits to talk about it until after he gets caught."
"He simply hasn't explained why something worth a million dollars ended up worth $58,000 two years later," says Mr. Powers, the Giuliani campaign manager.
"It's ludicrous for him to suggest it's the difference between the 'breakup' value of the shares and their market value."
So far though, no one -- not even former U.S. attorney Giuliani -- has been able to pinpoint just what law Mr. Dinkins has broken or just what tax he has evaded.
"The crime goes to character," says Ron Maiorana, a consultant to the Giuliani campaign.
"It's serious stuff.
He evades and ducks.
He's had a history of deception and this is the latest chapter."
"It makes people think, maybe this guy isn't so squeaky clean after all," says Mr. Garth, Mayor Koch's media consultant.
"The result may turn out to be a lot closer than people think.
The long-running scandal surrounding the 1982 collapse of Banco Ambrosiano was reignited by the arrest last week of Rome businessman Flavio Carboni on fraud charges.
Rome magistrates accuse Mr. Carboni and several other people of trying to extort 1.2 billion lire ($880,000) from the Vatican in return for documents contained in the briefcase of Roberto Calvi, the Ambrosiano chairman found hanged under London's Blackfriar's Bridge shortly before the bank's collapse.
Banco Ambrosiano, which was Italy's largest private-sector bank, collapsed in 1982 with $1.3 billion of debts.
Most of the money was lent to a series of shell companies in Panama and Luxembourg that were owned, directly or indirectly, by the Vatican bank.
The Vatican, which denies any wrongdoing, paid $250 million to the Milan bank's creditors as a "goodwill gesture" in 1985.
Italian news reports said Mr. Carboni and a colleague obtained 1.2 billion lire in checks from a Vatican official, Pavel Hnilica.
Italian papers speculated the briefcase contained papers either exonerating the Vatican bank from blame in the scandal, or showing that the bank, known as the Istituto per le Opere di Religione, channeled funds to East bloc groups such as Solidarity in Poland.
Neither Mr. Hnilica, Mr. Carboni nor Vatican officials could be reached for comment over the weekend.
This business trust company said its board elected Kieran E. Burke, a consultant to Drexel Burnham Lambert Group Inc., as chief executive officer, a new post, and as president.
Mr. Burke succeeds Richard D. Manley, who will remain as a consultant to the company.
Both men were unavailable to comment.
The company also named Michael E. Gellert, a director and a major shareholder, to fill the vacant seat of chairman.
Britain's Serious Fraud Office said it will investigate the circumstances surrounding alleged phantom contracts at Ferranti International Signal PLC's International Signal & Control unit.
The investigation, which will be coordinated with one already under way in the U.S., follows the discovery of what Ferranti has called a "serious" fraud involving its U.S. subsidiary.
International Signal & Control, Lancaster, Pa., a defense-equipment manufacturer, was bought by Ferranti in 1987 for #420 million ($670.3 million).
Ferranti has said that it would be forced to write off #185 million against the phantom contracts, reducing its net asset value by more than half.
The Serious Fraud Office, a division of London's Metropolitan Police responsible for investigating financial crimes, said its work would take in "allegations of fraud prior to, surrounding and subsequent to the merger."
Ferranti said that it welcomes the investigation and that it will "cooperate fully."
Derek Alun-Jones, Ferranti's chairman, has said he hoped to pursue legal action against those responsible.
The British defense electronics group has said it will sell #100 million in assets and may seek a merger to strengthen itself in the wake of its troubles.
Chicago businessmen Bertram M. Lee and Peter Bynoe signed a new agreement to purchase the Denver Nuggets basketball team, but not as principal owners.
On Saturday, the partners said the team would be purchased for $54 million by a new group including Comsat Video Enterprises Inc., a unit of Communications Satellite Corp. based here.
Comsat Video will pay $17 million for a 62.5% interest, with Messrs. Lee and Bynoe putting up $8 million for a 37.5% stake in the team.
Under terms of the sale, Nuggets owner Sidney Shlenker could receive up to $11 million in additional payments from the franchise's future earnings.
Messrs. Lee and Bynoe last July announced a deal that would have made them the first black principal owners of a major professional sports franchise.
But the deal fell apart last week for lack of financing.
Comsat Video is headed by Robert Wussler, who resigned his No. 2 executive post with Turner Broadcasting System Inc. just two weeks ago to take the Comsat position.
Comsat Video, which distributes pay-per-view programs to hotel rooms, plans to add Nuggets games to their offerings, as Mr. Turner did successfully with his Atlanta Hawks and Braves sports teams.
Messrs. Lee and Bynoe will manage the Nuggets' day-today affairs.
Royal Business Group Inc. said it filed suit in federal court here charging Realist Inc. and its directors with violating federal securities laws "by engaging in a scheme to prevent" Royal from acquiring Realist.
Royal, which makes and distributes business forms, owns an 8% stake in Realist.
Royal contends that Realist failed to disclose material information, including Realist's negotiations to acquire Ammann Laser Technik AG, to stockholders prior to Realist's June 6 annual meeting.
Royal's suit contends that the Ammann acquisition was "designed to entrench management and thwart Royal's offer."
Royal withdrew its offer to buy Realist, a maker of optical and electronic products based in Menomonee Falls, Wis., for $14.06 a share in July after Realist disclosed the Ammann purchase.
The suit seeks "in excess of $350,000 in damages."
A Realist official said the company hadn't yet received the full complaint and wouldn't have a response until it had an opportunity to review it.
Winnebago Industries Inc., battered by a deepening slowdown in recreational vehicle industry sales, reported a widened fourth-quarter loss and slashed its dividend in half.
The Forest City, Iowa, maker of motor homes said it had a loss of $11.3 million, or 46 cents a share, in the quarter ended Aug. 26.
A year earlier, the company had a deficit of $1.5 million, or six cents a share.
The cut in the dividend to 10 cents a share semiannually, from 20 cents, "would indicate to me they don't see the problems being fixed real quick," said Frank Rolfes, an analyst at Dain Bosworth Inc. in Minneapolis.
Indeed, Winnebago said it started "several promotional programs" to spur retail sales in the fall and winter.
The year was already shaping up as a difficult one for the recreational vehicle industry, which makes products such as motor homes, travel trailers, folding campers and van conversions.
With the exception of van conversions, the industry has seen a decline from 1988's robust sales.
But the rate of the decline snowballed in August, with unit sales to dealers for the month down 10.5% from a year earlier, according to the Recreation Vehicle Industry Association.
At Winnebago, sales for the quarter fell 6% to $89.5 million from $95.4 million a year earlier.
The company attributed the decline to consumers' concern over interest rates and gas prices -- two key expenses for RV buyers.
"It's a large-ticket discretionary purchase," said Robert Curran, who follows the industry for Merrill Lynch & Co.
"So when there's talk and concern about the economy, it's not unreasonable for a portion of the buying public to defer purchases."
Mr. Curran expects industry RV sales for all of 1989 to fall about 5% from 1988, when sales of 427,300 units were the highest since 1978.
And he said the weakness could continue in the first half of next year.
But he said the industry has "a good decade ahead," particularly if aging baby boomers fulfill the industry's dreams by buying RVs.
Winnebago was hit especially hard in the latest downturn because unit sales in its bread-and-butter motor home business tumbled 25% industrywide in August, and 10.4% in the first eight months of the year.
The company said it also suffered in the quarter from incentive programs, losses from discontinuing a motor home line and costs of developing a new commercial vehicle, among other things.
The news sent Winnebago stock falling 62.5 cents, to $5.25, in New York Stock Exchange composite trading-a 52-week low.
The dividend cut will prove most costly for John K. Hanson, Winnebago's founder and chairman.
Based on his control of about 45% of Winnebago's 24.7 million shares, his annual dividend income would be cut to about $2.2 million from $4.4 million.
For the year, Winnebago had a loss of $4.7 million, or 19 cents a share, following profit of $2.7 million, or 11 cents a share, a year earlier.
Sales rose 2% to $437.5 million from $430.3 million.
Bullish bond market sentiment is on the rise again.
As the government prepares to release the next batch of economic reports, the consensus among economists and money managers is that the news will be negative.
And that, they say, will be good for bonds.
"Recent data have indicated somewhat weaker economic activity," said Elliott Platt, director of economic research at Donaldson, Lufkin & Jenrette Securities.
Mr. Platt is advising clients that "the near-term direction of bond prices is likely to remain upward."
Analysts insist that even without help from a shaky stock market, which provided a temporary boost for bonds during the Oct. 13 stock market plunge, bond prices will start to climb on the prospects that the Federal Reserve will allow interest rates to move lower in the coming weeks.
That would be comforting to fixed-income investors, many of whom were badly burned in the third quarter by incorrectly assuming that the Fed would ease.
Investors rushed to buy bonds during the summer as prices soared on speculation that interest rates would continue to fall.
But when it became clear that rates had stabilized and that the Fed's credit-easing policy was on hold, bond yields jumped and prices tumbled.
Long-term bonds have performed erratically this year.
For example, a group of long-term Treasury bonds tracked by Merrill Lynch & Co. produced a total return of 1% in the first quarter, 12.45% in the second quarter and -0.06% in the third quarter.
Total return is price changes plus interest income.
Now some investment analysts insist that the economic climate has turned cold and gloomy, and they are urging clients to buy bonds before the rally begins.
Among other things, economists note that consumer spending is slowing, corporate profit margins are being squeezed, business confidence is slipping and construction and manufacturing industries are depressed.
At the same time, last week's consumer price index showed that inflation is moderating.
Add it all up and it means "that the Fed has a little leeway to ease its credit policy stance without the risk of rekindling inflation," said Norman Robertson, chief economist at Mellon Bank Corp., Pittsburgh.
"I think we will see a federal funds rate of close to 8 1/2% in the next two weeks and 8% by year end."
The federal funds rate, which banks charge each other on overnight loans, is considered an early signal of changes in the Fed's credit policy.
Economists generally agree that the rate was lowered by the Fed from around 9%, where it had been since July, to about 8 3/4% in early October on the heels of a weak employment report.
Although the rate briefly drifted even lower following the stock market sell-off that occurred Oct. 13, it ended Friday at about 8 11/16%.
James Kochan, chief fixed-income strategist at Merrill Lynch, is touting shorter-term securities, which he says should benefit more quickly than longer-term bonds as interest rates fall.
"Given our forecast for lower rates, purchases made now should prove quite rewarding before year end," he said.
Mr. Kochan also likes long-term, investment-grade corporate bonds and long-term Treasurys.
He says these bonds should appreciate in value as some investors, reacting to the recent turmoil in the stock and high-yield junk bond markets, seek safer securities.
"If the {Tennessee Valley Authority} sale is any guide, there appears to be good demand for top-quality, long-term paper from both domestic and overseas accounts," he said.
TVA, in its first public debt offering in 15 years, sold $4 billion of long-term and intermediate-term securities last week.
Strong investor demand prompted the utility to boost the size of the issue from $3 billion.
TVA, which operates one of the nation's largest electric power systems, is a corporation owned by the federal government.
But persuading investors to buy bonds may be especially tough this week, when the U.S. government will auction more than $30 billion of new securities.
Today, the Treasury Department will sell $15.6 billion of three-month and six-month bills at the regular weekly auction.
Tomorrow, the Treasury will sell $10 billion of two-year notes.
Resolution Funding Corp., known as Refcorp, a division of a new government agency created to bail out the nation's troubled savings and loan associations, will hold its first bond auction Wednesday, when it will sell $4.5 billion of 30-year bonds.
All of this comes ahead of the government's big quarterly refunding of the federal debt, which takes place sometime in November.
So far, investors haven't shown much appetite for Refcorp's initial bond offering.
Roger Early, a portfolio manager at Federated Investors Corp., said that yields on the so-called bailout bonds aren't high enough to attract his attention.
"Why should I bother with something that's an unknown for a very small pickup in yield?" he said.
"I'm not going to jump on them the first day they come out."
He seems to be typical of many professional money managers.
When the size of the Refcorp offering was announced last week and when-issued trading activity began, the bailout bonds were yielding about 1/20 percentage point more than the Treasury's benchmark 30-year bond.
On Friday, the yield was quoted at about 1/4 percentage point higher than the benchmark bond, an indication of weak demand.
Some economists believe that yields on all Treasury securities may rise this week as the market struggles to absorb the new supply.
But once the new securities are digested, they expect investors to focus on the weak economic data.
"The supply is not a constraint to the market," said Samuel Kahan, chief financial economist at Kleinwort Benson Government Securities Inc.
"If one thinks that rates are going down, you don't care how much supply is coming."
Friday's Market Activity
Most bond prices fell on concerns about this week's new supply and disappointment that stock prices didn't stage a sharp decline.
Junk bond prices moved higher, however.
In early trading, Treasury bonds were higher on expectations that a surge in buying among Japanese investors would continue.
Also providing support to Treasurys was hope that the stock market might see declines because of the expiration of some stock-index futures and options on indexes and individual stocks.
Those hopes were dashed when the stock market put in a relatively quiet performance.
Treasury bonds ended with losses of as much as 1/4 point, or about $2.50 for each $1,000 face amount.
The benchmark 30-year bond, which traded as high as 102 1/4 during the day, ended at 101 17/32.
The yield on the benchmark bond rose slightly to 7.98% from 7.96%.
In the corporate bond market, traders said the new-issue market for junk bonds is likely to pick up following Chicago & North Western Acquisition Corp.'s $475 million junk bond offering Friday.
Today, for example, underwriters at Morgan Stanley & Co. said they expect to price a $150 million, 12-year senior subordinated debenture offering by Imo Industries Inc.
Traders expect the issue to be priced to yield 12%.
Shearson Lehman Hutton Inc. said that a $150 million senior subordinated discount debenture issue by R.P. Scherer Drugs is expected by the end of the month.
However, despite the big new-issue calendar, many junk bond investors and analysts are skeptical the deals will get done.
"There are about a dozen more deals coming," said Michael McNamara, director of fixed-income research at Kemper Financial Services Inc.
"If they had this much trouble with Chicago & North Western, they are going to have an awful time with the rest."
Last week, underwriters were forced to postpone three junk bond deals because of recent weakness in the market.
And pressure by big investors forced Donaldson Lufkin & Jenrette Securities Corp. to sweeten Chicago & North Western's $475 million junk bond offering.
After hours of negotiating that stretched late into Thursday night, underwriters priced the 12-year issue of resettable senior subordinated debentures at par to yield 14.75%, higher than the 14.5% that had been expected.
The coupon on the issue will be reset in one year at a rate that will give the issue a market value of 101.
However, the maximum coupon rate on the issue when it is reset is 15.50%.
Debenture holders also will receive the equivalent of 10% of the common stock in Chicago & North Western's parent company.
"The coupon was raised to induce some of the big players on the fence to come in," said a spokesman for Donaldson.
"We put a price on the deal that the market required to get it done."
The spokesman said the issue was sold out and met with strong interest abroad, particularly from Japanese investors.
In the secondary, or resale, market, junk bonds closed 1/2 point higher, while investment-grade corporate bonds fell 1/8 to 1/4 point.
Sotheby's Inc.'s gamble in the art-dealing business appears to have paid off.
The New York arm of the London-based auction house auctioned off the estate of John T. Dorrance Jr., the Campbell's Soup Co. heir, for $131 million last week, a record for a single-owner art collection.
That total was below the $140 million the auction house estimated the collection might sell for, but was enough to ensure that an unprecedented financial arrangement Sotheby's had made with the Dorrance family proved profitable to the auction house.
Sotheby's provided the Dorrance family a guarantee of at least $100 million, and as much as $120 million, to obtain the collection, people familiar with the transaction said, thus taking a greater than usual financial interest in the property to be sold.
The Dorrance estate, auctioned off in a series of sales held over four days, included porcelains, furniture and paintings.
An Henri Matisse, auctioned last Wednesday, fetched $12.4 million, a world record for the artist.
In addition, a handful of paintings from the Dorrance collection remain to be sold at Sotheby's annual old masters paintings auction in January.
The Better Business Bureau of San Diego and the state Attorney General's office entered into a settlement stemming from an investigation of bureau-sponsored business directories published by an outside firm, Better Book Inc.
The settlement stems from charges that Better Book, now defunct, made misrepresentations in selling advertising for the directories and memberships in the bureau from 1984 to 1986.
Without admitting any guilt, the bureau agreed to several conditions if it again contracts with an outside firm to publish its directories.
The conditions include not misrepresenting how many directories will be distributed, and agreeing to make refunds to directory advertisers if any misrepresentations are involved in the sale.
The Attorney General's investigation was sparked by lawsuits and charges by angry California businesspeople that they were swindled in a bureau-sponsored directory project contracted by Better Book.
The uproar led to the closing of the Los Angeles Better Business Bureau in late 1987.
McCaw Cellular Communications Inc. said it obtained "firm" financing commitments from three major banks in regard to its offer for 50.3% of LIN Broadcasting Corp.
Morgan Guaranty Trust, Toronto-Dominion Bank and Provident National Bank, an affiliate of PNC Financial Corp., jointly committed $1.2 billion of financing, subject to certain conditions, McCaw said.
Further, McCaw said the banks expressed confidence that the balance of the $4.5 billion bank facility will be committed within the next several weeks by a syndicate of foreign and domestic banks.
Morgan, Toronto-Dominion and Provident are leading that syndicate.
McCaw is offering to buy 22 million shares of LIN for $125 each in cash, which would result in McCaw owning 50.3% of the cellular-phone and broadcasting concern.
The offer is in limbo, however, because LIN has agreed to merge its cellular-phone businesses with BellSouth Corp.
In national over-the-counter trading Friday, LIN shares rose 62.5 cents to close at $110.625.
Beijing lawmakers have called for jails to be built to house prostitutes and for severe punishment, including the death sentence, for anyone who induces or coerces women into prostitution.
The official Xinhua News Agency said the municipal government was discussing a draft bill to give the capital its first anti-prostitution statutes.
It quoted Liu Changyi, deputy director of the Beijing Public Security Bureau, as saying that there were many more people involved in prostitution now than in 1985, when there were about 100 cases.
Foreigners involved in prostitution will be punished according to the law, and those with sexually transmitted diseases will be expelled from the country, according to the regulations.
The Communists nearly succeeded in eliminating prostitution after taking over in 1949, but the practice has returned in recent years with the country's increased exposure to the outside world.
Japan agreed to enforce a decision by an international wildlife conference to ban all trade in ivory, a spokesman for the Ministry of International Trade and Industry said.
Earlier, Japan had said it might file a reservation against the ivory ban decided by ballot at the 103-nation United Nations Conference on International Trade in Endangered Species in Switzerland last week.
The Japanese use 40% of the world's ivory.
Italy should close the Leaning Tower of Pisa because it's a danger to tourists, government-appointed experts said.
"In some places the stonework is so damaged it shows signs of breaking off," scientists and technicians said in a report to Public Works Minister Giovanni Prandini.
Each year, nearly a million people pay about $3 to make the spiral climb up 294 steps to the top of the 800-year-old marble tower.
East Germany pledged to reduce alcohol consumption by boosting production of soft drinks and fruit juices.
Trade and Supply Minister Gerhard Briksa said in a letter published in the youth daily Junge Welt that the rise in alcohol consumption in East Germany had been halted; but to reduce it further, he said, production and supply of other beverages, including fruit juices, should be stepped up.
He added that shops will have to continue reducing their stocks of liquor and avoid displaying them too prominently in the window.
Hong Kong has built a detention center for illegal immigrants from China because China has refused for the past two weeks to accept them back.
The center, close to Hong Kong's border with China, will be ready today and will be able to house 1,000 inmates, Police Deputy Director Peter Wong said.
The dispute started when China, angry that Hong Kong had allowed dissident swimmer Yang Yang to flee to the U.S., halted the usual daily transfer of illegal immigrants caught in this British colony, which reverts to Beijing's control in 1997.
Sweating under the glare of newly installed television lights, British members of Parliament demanded a halt to the experimental televising of debates.
A group of senior Conservative legislators, complaining the House of Commons was like a sauna, demanded that the experiment be stopped unless the intensity of the lights is reduced.
One Conservative MP, David Wilshire, said: "I should have a wonderful suntan by Christmas."
Debates are due to be broadcast nationally starting Nov. 21 in a six-month experiment.
A majority of Japanese banks are said to be wary of making new loans to Mexico under the Brady plan because they're uncertain the Mexican economy will remain stable.
Instead, many small and medium-sized banks, and some larger ones, are likely to take one of the other two options open to them under the plan, Japanese banking officials said.
The plan, proposed by U.S. Secretary of State Nicholas Brady, calls for banks either to make new loans or to reduce the principle on existing loans or to cut the interest rate on those existing loans.
The officials said that most Japanese banks prefer the losses they'd suffer in either of the latter options to the risk of new lending.
But an official at a long-term credit bank explained that since some larger banks have already taken loss provisions for loans to other Third World nations, further write-offs could be viewed as intolerable.
"They can't take the hit" to their earnings, he said.
As a result, the official said, they may be forced into a no-win situation in which they make risky loans that they could have to write off later.
A poll in male-dominated South Korea put Margaret Thatcher first on a list of most-respected foreign leaders.
The British prime minister was the only woman singled out by respondents, who put Soviet President Mikhail Gorbachev in second place. . . .
The Soviet newspaper Trud reported that Mickey Mouse will appear in a Russian-language comic book to be issued four times a year by Soviet publisher Fizkultura i Sport and Denmark's Gutenberghus Group.
The comic book will cost about $2.
Ekco Group Inc., Nashua, N.H., expects to report that net income in the third quarter, ended Oct. 1, fell 50% to 60% from $2.1 million, or 11 cents a share, a year earlier.
Robert Stein, president and chief executive officer, attributed the expected decline partly to the effects of a two-week strike last month at the company's Masillon, Ohio, bakeware facility.
Softer-than-expected orders in early September also played a role, he said in an interview.
But Mr. Stein said he is "reasonably confident" that earnings for the full year will exceed the $3.1 million, or 17 cents a share, in 1988.
That would require fourth-quarter net of more than about 22 cents to 24 cents a share, assuming that Mr. Stein's third-quarter estimate proves accurate.
In the year-earlier fourth quarter, the company had profit of $2.7 million, or 15 cents a share.
Third-quarter revenue is expected to be $40 million to $45 million, up from $38.2 million a year earlier, according to Neil Gordon, treasurer.
The year-earlier periods don't reflect results of the company's Woodstream Corp. unit, acquired last January, but include some Canadian operations that were sold at the end of 1988.
August through October traditionally is the busiest season for the bakeware business, as many retailers use the goods as autumn promotional items.
Mr. Stein said some retailers -- perhaps anxious about minimizing inventories -- appear to have held back on orders in September but have been ordering more heavily in October.
Mr. Stein said Woodstream is "marginally profitable" but hasn't performed as well as expected.
Woodstream's Victor-brand mousetraps and other pest-control products are "doing very well," and its plastic storage-case products "are poised for growth," he said.
But the unit's third segment, wildlife traps, is suffering from a "depressed market," and Ekco is seeking to sell that segment, he said.
Mr. Stein said he expects profit to be higher in 1990 than in 1989, reflecting a number of measures taken since the acquisition of Ekco Housewares in late 1987.
(Prior to acquiring the housewares business, the company was known as Centronics Corp.; Centronics had been a maker of computer printers, but Mr. Stein and other officers decided to sell that business after Japanese competitors grabbed a dominant share of the market.)
Mr. Stein said tighter operating controls have enabled Ekco to reduce inventory levels 25% to 30%; improve on-time delivery of orders to about 95% from around 70%; and to lower the number of labor hours required to produce a unit.
By moving the design of new products in-house -- instead of contracting out the work -- the company also has been able to come up with designs that can be manufactured more efficiently, he said.
In addition to those measures, the company spent heavily earlier this year to install displays at its customers' retail outlets -- a strategy that Mr. Stein said has helped bolster awareness of the company's brands.
Ekco's housewares operation makes kitchen tools and gadgets, as well as bakeware, at factories in the U.S. and Canada.
The main issue in the strike at the Ohio facility was health-care benefits, Mr. Stein said.
The strike ended Oct.
Ekco continues to seek further acquisitions in the consumer-products industry, Mr. Stein said.
He indicated that Ekco may be interested in acquiring another company with revenue in the range of $75 million to $100 million, partly because mass merchandisers increasingly want to rely on larger, and fewer, suppliers.
After several years of booming business with China, foreign traders are bracing for the biggest slump in a decade.
The imposition of austerity measures, starting last October, already had begun to pinch when the massacre in Tiananmen Square on June 4 and subsequent events tugged the belt far tighter.
Foreign lending has been virtually suspended since then, choking liquidity and hobbling many projects.
And Beijing has pulled back on domestic loans and subsidies, leaving many domestic buyers and export-oriented plants strapped for cash.
Givaudan Far East Ltd., a Swiss concern that sells chemicals to shampoo and soap factories in China, typifies the problems.
Last year's retrenchment dried up the working capital of Chinese factories.
The company's sales flattened during 1989's first half.
The June killings magnified the problems.
In Canton, Givaudan's representative office received no orders in June.
At first it attributed the slump to temporary business disruptions, but when no orders were logged in August and September, manager Donald Lai became convinced that business would be bad for many months.
"Things have grown worse since June 4," Mr. Lai says.
He predicts that sales will drop between 30% and 40% from last year's $3 million.
The consumer-products and light-industrial sectors are bearing the brunt of China's austerity measures, and foreign companies such as Givaudan that deal with those industries are being hit the hardest.
But in general, all foreign-trading companies are feeling the pinch.
"The import pie will shrink," says John Kamm, first vice president of the American Chamber of Commerce in Hong Kong and a China trade specialist.
"On the down side, sales could fall as much as 90% for some companies; on the upper side, sales will be flat."
China's foreign trade has gone in cycles during the past decade.
The last time that traders experienced a trough was during 1985-86, when Beijing imposed tough measures to curb imports and conserve foreign exchange.
The current trough is expected to be much deeper, because Beijing has cut off domestic funds from factories for the first time to slow inflation.
In addition, the suspension of loans and export credits from foreign governments and institutions following the June killings have been a big setback.
"The freeze on new lending is dealing the single biggest blow to trading," says Raymond Wong, China manager for Mannesmann AG, a West German machinery-trading company.
Import growth from the year-earlier months slowed to 16% in July and 7.1% in August, compared with an average growth rate of 26% in the first half.
In the first eight months of 1989, imports grew 21%, to $38.32 billion, down slightly from a growth rate of 23% a year earlier.
The picture for China's exports is just as bleak, mainly because of the domestic credit squeeze.
Exports in the first eight months grew only 9%, to $31.48 billion, compared with a growth rate of 25% a year earlier, according to Chinese customs figures.
The threat to China's balance of payments is further aggravated by the plunge in its foreign-exchange reserves, excluding gold holdings.
The reserves dropped for the first time in recent years, to $14 billion in June from $19 billion in April.
The trend has prompted Beijing to intensify efforts to curb imports.
In recent weeks, China's leaders have recentralized trading in wool and scores of chemical products and commodities.
The Ministry of Foreign Economic Relations and Trade set up a special bureau last month to monitor the issue of import and export licenses.
Beijing's periodic clampdowns on imports have taught many trading companies that the best way to get through the drought is by helping China export.
For example, Nissho Iwai Corp., one of the biggest Japanese trading houses, now buys almost twice as many goods from China as it sells to that country.
Three years ago, the ratio was reversed.
But the strategy isn't helping much this time.
"Both sectors of imports and exports look just as bad," says Masahiko Kitamura, general manager of Nissho Iwai's Canton office.
He expects the company's trading business to drop as much as 40% this year.
For a short time after June 4, it appeared that the trade picture would remain fairly bright.
Many foreign trading offices in Hong Kong were swamped with telexes and telephone calls from Chinese trade officials urging them not to sever ties.
Even the Bank of China, which normally took weeks to process letters of credit, was settling the letters at record speed to dispel rumors about the bank's financial health.
But when foreign traders tried to do business, they discovered that the eagerness of Chinese trade officials was just a smokescreen.
The suspension of foreign loans has weakened the buying power of China's national trading companies, which are among the country's biggest importers.
Business isn't any better on the provincial or municipal level, foreign traders say.
Shanghai Investment & Trust Co., known as Sitco, is the city's main financier for trading business.
Sitco had customarily tapped the Japanese bond market for funds, but it can't do that any longer.
Foreign traders say the company is strapped for cash.
"It has difficulties paying its foreign debts," says a Hong Kong executive who is familiar with Sitco's business.
"How can it make available funds for purchases?"
Foreign traders also say many of China's big infrastructural projects have been canceled or postponed because of the squeeze on domestic and foreign credit.
Albert Lee, a veteran trader who specializes in machinery sales, estimates that as many as 70% of projects that had obtained approval to proceed have been canceled in recent months.
"There are virtually no new projects, and that means no new business for us," he says.
Even when new lending resumes, foreign exchange would still be tight because Beijing will likely try to rein in foreign borrowing, which has grown between 30% and 40% in the past few years.
And foreign creditors are likely to be more cautious about extending new loans because China is nearing a peak repayment period as many loans start falling due in the next two to five years.
Another reason for the intensity of the trade problems is that Beijing has extended the current clampdown on imports beyond the usual target of consumer products to include steel, chemical fertilizers and plastics.
These have been among the country's leading imports, particularly last year when there were shortages that led many traders to buy heavily and pay dearly.
But the shortages also spawned rampant speculation and spiraling prices.
To stem speculation, Beijing imposed ceiling prices that went into effect earlier this year.
Traders who had bought the goods at prices above the ceiling don't want to take a loss on resales and are holding onto their stock.
The resulting stockpiling has depressed the market.
But Beijing can't cut back on such essential imports as raw materials for too long without hampering the country's export business.
Mr. Kamm, the China trade expert, estimates that as much as 50% of Guangdong's exports is made up of processed imported raw materials.
Oil Spill Case Shows Liability Fund Flaws
AN UNRESOLVED two-year-old dispute stemming from an Alaskan oil spill has helped spur a drive for tougher federal laws to protect victims of such accidents.
The class-action suit highlights shortcomings of the Trans-Alaska Pipeline Liability Fund, which gets its money from oil companies using the pipeline and compensates those harmed by oil spills.
On July 2, 1987, the tanker S.S. Glacier Bay struck a rock and spilled almost 150,000 gallons of oil into the Cook Inlet.
Commercial fishermen and fish processors filed suit in federal court in a claim that has ballooned to more than $104.8 million.
Defendants include British Petroleum America; Trinidad Corp., the shipper; and the pipeline liability fund.
The fund was created by the Trans-Alaska Pipeline Act, which provides that the owner or operator of a vessel involved in an oil spill must pay the first $14 million in damages.
The fund is required to pay claims up to an additional $86 million.
The fund's purpose is to provide quick and adequate relief.
But the Glacier Bay case, the fund's first test, shows how easily the fund can be undermined.
Trinidad Corp. is contesting liability.
It claims the Coast Guard failed to chart the rock and refuses to pay damages.
That means the fund isn't obligated to pay anything, at least so far.
The Oil Pollution Act, scheduled to come up for a vote in Congress this fall, would provide that if claimants aren't paid within 90 days of a spill, the liability fund would compensate them and seek reimbursement from the owner or operator of the vessel, says a spokesman for Rep. George Miller (D., Calif.), a sponsor of the bill.
The spokesman says the "glitch" in the statute is "the worst kind of Catch-22."
Many Law School Grads Find Classes Never End
RECENT LAW school graduates are starting jobs with law firms this fall -- and heading back to class.
Bar associations and consultants are offering more programs to teach associates all they need to know about law but didn't learn in law school.
"Law school teaches wonderful theory, but it doesn't teach the nuts and bolts of practical lawyering," says Aaron Weitz, head of a New York County Lawyers' Association committee that sponsors such a course.
In the past, associates learned the basics from senior lawyers who acted as mentors.
But these days, large firms hire as many as 30 new associates a year, and it's impossible to personally train everyone, says Joel Henning of Hildebrandt Inc., a consulting firm that runs training classes.
The Hildebrandt course enables students to brush up on negotiation skills by role playing in simulated deals.
Students also are taught to return clients' phone calls immediately and to treat the support staff with respect.
Many law firms sponsor their own programs.
At the Baltimore firm of Weinberg & Green, new corporate and banking associates are required to enroll in a 20-class course.
Partners lecture on how to form corporations, draft agreements and defend clients against unwanted tender offers.
Now, clients know that new associates have had some practical training before working on their cases, says James J. Hanks, a partner at the firm.
Los Angeles Creates A Courthouse for Kids
THE CHILDREN of Los Angeles will soon have their own $52 million courthouse.
The building, which will handle child abuse, custody and foster care cases, will be "less formal, less threatening and just basically less grim than most courthouses," says Edmund Edelman, chairman of the Los Angeles County Board of Supervisors.
Designs call for an L-shaped structure with a playground in the center.
There will be recreation and movie rooms.
Teens will be able to listen to music with headsets.
Study halls, complete with reference materials, will be available.
And there will be a nurse's station and rooms for children to meet with social workers.
The building's 25 courtrooms will be smaller, says Charlene Saunders, a court administrator.
The bench will be lower so the judge seems less intimidating, and walls will be painted in bright colors and covered with murals.
Cases in Los Angeles County involving dependent children are usually heard in the Criminal Courts Building.
"We need to get the kids away from the criminals into a less traumatic environment," says Mr. Edelman.
About 45,000 children in Los Angeles County are under court supervision, Mr. Edelman says, and an average of 1,500 new children are added each month.
The courthouse, to be built in Monterey Park, is expected to open in the spring of 1992.
Law Firm Management Can Be Quite Rewarding
IT PAYS to follow a management career path -- even at law firms.
That's the conclusion of a recent study of large law firms conducted by Altman & Weil Inc., an Ardmore, Pa., law firm consultant.
Its survey of 96 firms, each with 100 to 1,000 lawyers, shows that managing partners earned an average of $395,974 in compensation and cash benefits in the firms' 1988 fiscal years.
Managing partners who responded to the survey typically spend over half their time supervising their firms' day-to-day operations and just a little more than a third of their time practicing law.
Partners in the survey who devote most of their time to practicing law earned an average of about $217,000.
Chairman Jamie Whitten (D., Miss.) of the House Appropriations Committee proposed a $2.85 billion emergency funding package to assist California's recovery from last week's earthquake and extend further aid to East Coast victims of Hurricane Hugo.
The sweeping measure incorporates $500 million in small-business loans, $1 billion in highway-construction funds and $1.25 billion divided between general emergency assistance and a reserve to be available to President Bush to meet unanticipated costs from the two disasters.
The funds would be attached to a stop-gap spending bill required to keep most of the government operating past Wednesday.
The measure is scheduled to be taken up by the Appropriations Committee today.
The panel is expected to add provisions waiving restrictions on the use of federal highway funds and may also shift money within the package to bolster the share for the Small Business Administration.
"We will support it, we will thank him, and we will augment it where appropriate," said Rep. Vic Fazio (D., Calif.).
Dubbed the "Dire Emergency Supplemental to Meet the Needs of Natural Disasters of National Significance," the measure is vintage Whitten in asserting federal responsibility and in disdaining budget impediments.
"Such other amounts will be made available subsequently as required," the legislation reads, and the new obligations "shall not be a charge against the Budget Act, Gramm-Rudman-Hollings, or other ceilings.
Moody's Investors Service Inc. said it lowered the ratings of some $145 million of Pinnacle debt because of "accelerating deficiency in liquidity," which it said was evidenced by Pinnacle's elimination of dividend payments.
Henry Sargent Jr., Pinnacle executive vice president, said the action "won't really have any effect on us.
We aren't selling bonds right now, and I don't think it will affect the value of our existing bonds."
The rating agency said it lowered the ratings on $75 million of the holding company's convertible subordinated Eurodebentures to B-3 from B-1.
Moody's said it also lowered the ratings of $70 million of Pinnacle's MeraBank thrift unit long-term deposits to B-3 from B-2, and on its subordinated debt to Ca from Caa.
MeraBank's rating for short-term deposits remains Not Prime.
Securities of MeraBank were placed under review last May, and will remain under review for downgrade, the agency said.
First, the somewhat affected idealism of the 1960s.
Then, the all-too-sincere opportunism of the 1970s and 1980s.
What now?
To judge from novels that mirror the contemporary scene, we're back in the age of anxiety.
Where '60s dropouts professed to scorn middle-class life and ambitious yuppies hoped to leave it far behind as they scaled the upper reaches of success, it now seems that so many people feel they're slipping between the cracks, that middle-class life is viewed with nostalgia or outright longing.
Lisa Zeidner's third novel, "Limited Partnerships" (North Point Press, 256 pages, $18.95) is a stylish, funny and thoughtful look at the way love relationships are affected by the pressures of money, or, more specifically, the lack of it.
Nora Worth and Malcolm DeWitt, 33 and 39 respectively, live together in a townhouse in a transitional Philadelphia neighborhood.
Malcolm, a former film-maker turned architect, has just seen his first big chance at a lucrative commission turn to dust with the arrest of his shady, obnoxious client, a fly-by-night real estate developer.
Nora, who still has artistic aspirations, knows she is lucky to be working as a food stylist, prepping pies, burgers, frosty cold drinks and other comestibles to look as appetizing as possible in front of the camera.
After all, she reasons, "there were housewives with Nikons and degrees from cooking schools in France who would kill for her job."
But Nora and Malcolm feel trapped.
They seem to be having the "worst of both worlds: artistic work with none of art's integrity and no control over the finished product; self-employment without fun or profit."
It's a downbeat, "thirtysomething" world, in which bright, still youngish people are engaged in a glossy version of day labor, doing free-lance, semi-professional work that brings little satisfaction or security but that they know they should be grateful to do.
Uncertainty dogs every aspect of their lives.
Malcolm faces bankruptcy and an IRS audit, but Nora finds an extra $30,000 in her bank account, suddenly increasing her available funds some fifteenfold.
While she is wondering whether to live it up, and do something even more dramatic, say get married, her life is further complicated by the reappearance of an old flame, David, a film critic and actor who always seems to be just on the brink of stardom.
In novels of an earlier vintage, David would have represented excitement and danger; Malcolm, placid, middle-class security.
The irony in this novel is that neither man represents a "safe" middle-class haven: Nora's decision is between emotional excitement and emotional security, with no firm economic base anywhere.
The characters confront a world in which it seems increasingly difficult to find a "middle way" between the extremes of success and failure, wealth and poverty.
In making Malcolm and Nora such wonderfully representative specimens of their class and generation, Ms. Zeidner has somewhat neglected the task of making them distinctively individual characters.
The humor of the story owes much to the fact that no hearts (even the characters' own) are likely to bleed for the plight of health-food eaters.
But readers may well feel the pangs of recognition.
In any case, the foundering middle classes aren't the only ones in trouble -- or whose troubles provide material for fiction.
"Rascal Money" (Contemporary Books, 412 pages, $17.95), a novel by consultant and business analyst Joseph R. Garber, tells the story of an innovative, well-run, widely respected computer manufacturing company called PegaSys as it faces a hostile takeover attempt by AIW, a much smaller corporation that is so incompetently managed as to constitute a standing joke in the business world.
Patrician, dynamic Scott Thatcher, founder and head of PegaSys, initially finds the takeover threat risible.
But, as he and his skilled team soon discover, they're up against two factors they hadn't counted on: first, a business climate in which a failing company with few assets and many debts can borrow against the assets of the successful company it hopes to acquire in order to finance the takeover; second, that standing behind AIW is a sinister consortium of much bigger, shadier and shrewder foreign interests secretly providing the money and muscle for the deal.
Mr. Garber manages to invest this tale of financial wars with the colorful characters and fast-paced action of a suspense novel.
And like a spy or mystery story, this novel has strong elements of allegory, as the good and evil forces battle it out.
Mr. Garber depicts these moral qualities with the broad brush strokes of a satire that occasionally descends to the realm of cliched caricatures.
Standard-issue portraits of flaky Californians, snobbish homosexuals and Neanderthal union leaders undermine the force of the author's perceptions.
Yet the heavy-handedness of the satire also can be effective in a book like this: If the head of AIW were not portrayed as an utterly contemptible, malicious dolt, we would not much care whether his schemes were defeated, and would not be so diverted in the process.
Ms. Rubin is a free-lance writer based in Los Angeles.
High-definition television promises to be the TV of tomorrow, so it is a natural multibillion-dollar market.
Although major U.S. manufacturers have all but ceded the main segment of that future business to Japan, not everyone here is ready to give up.
A handful of small U.S. companies are struggling to develop the technology to build the screens for the thin, high-quality televisions that are expected to hang on living room walls by the end of the 1990s.
With only small help from the government, these start-up concerns are trying to compete with the Goliaths of the Japanese consumer electronics industry, which enjoy considerable backing from the Japanese government.
Photonics Technology Inc. of Northwood, Ohio, aims to use a new form of plasma technology to put movie-quality images on a TV display that is 40 inches in diameter but only a few inches thick.
Planar Systems Inc. of Beaverton, Ore., the largest of these firms, with $20 million in annual revenue, has similar plans.
It already has had success in electroluminescence, another promising technology adaptable for high-definition television.
Two other firms, Ovonic Imaging Systems Inc. of Troy, Mich., and Magnascreen Corp. of Pittsburgh are developing a variation of the flat-panel screens called active-matrix liquid crystal displays.
The new technologies are intended to retire the cathode-ray tube, which accounts for most of the bulk of the conventional TV set.
Replacing the cathode-ray tube with a large, thin screen is the key to the creation of a high-definition television, or HDTV, which is expected to become a $30 billion business world-wide within a decade.
Large U.S. companies are interested in other segments of the HDTV business, such as signal-processing and broadcast equipment.
But except for Zenith Electronics Corp. and International Business Machines Corp., which is collaborating with Toshiba on computer displays, they are poorly positioned to exploit advances in large panels.
General Electric Co. recently sold off its interests in liquid-crystal displays to Thompson-CSF of France.
"We found the market not developing as we thought it would," a GE spokesman says.
The small U.S. firms are persisting because of their strong positions in patents, and because the prize is still there to be seized.
"No one yet has shown the ability to manufacture these panels" at commercial costs, says Zvi Yaniv, the president of Ovonic Imaging.
He says he thinks his company is just a few years from doing that.
The Bush administration, hearing conflicting advice about what its role in HDTV should be, isn't doing much for now.
The only material support it is extending to the struggling U.S. industry is $30 million in awards from the Pentagon's Defense Advanced Research Projects Agency.
The DARPA funds are a pittance compared with what Japan and other prospective competitors are spending.
The Commerce Department estimates that Japanese government and industry spending on HDTV research is already over $1 billion.
"Unless it gets more help, the U.S. industry won't have a chance," says Peter Friedman, Photonics's executive vice president.
Thus far, almost all of the basic technology relating to high-definition television has come from U.S. laboratories.
But Peter Brody, Magnascreen's president, says Japanese companies are poised to snatch the technology and put it to commercial use, just as they did with earlier U.S. innovations in color television and video recording.
In the 1970s, Mr. Brody helped develop the first display panels based on active-matrix liquid crystals at Westinghouse Electric Corp.'s research labs in Pittsburgh.
The panels are like oversized semiconductors surfaced with a million or more picture elements, each contributing to the color and tone of a TV image.
In 1979, however, Westinghouse abandoned the project along with its stake in advanced television.
Mr. Brody left the company to find other backers.
He has a claim to the right to commercialize the Westinghouse patents, but he contends that those patents are being infringed by a number of Japanese producers.
"Most American investors have just given up," Mr. Brody says.
"They aren't prepared to compete in an area where the Japanese want to enter."
Many critics question the industry's need for federal support; the Pentagon justifies its help on national-security grounds.
"We don't see a domestic source for some of our {HDTV} requirements, and that's a source of concern," says Michael Kelly, director of DARPA's defense manufacturing office.
So DARPA is trying to keep the industry interested in developing large display panels by doling out research funds.
HDTV already has some military applications, such as creating realistic flight simulations and transmitting information to combat commanders.
The Navy is ordering displays for its Aegis cruisers and the Army wants smaller versions for its Abrams battle tanks.
The Commerce Department also is trying to encourage HDTV because of the benefits that could spin off to the semiconductor and computer industries.
"It isn't just yuppie television," argues Jack Clifford, director of the department's office of microelectronics and instrumentation.
"The industry will create industrial products such as displays for work stations and medical diagnostic equipment before it acquires a mass consumer market."
Although some HDTV advocates are calling for other forms of aid, such as antitrust relief for research consortia, the small firms simply would prefer more DARPA funds.
Each claims to possess the right technology and wants just a bit more money to make it commercial.
They also want U.S. trade policy to reflect the Pentagon and Commerce department's concern over their future.
They all are strongly opposed to a petition from several Japanese TV manufacturers, including Matsushita, Hitachi, and Toshiba, to exempt portable color TVs with liquid-crystal displays from anti-dumping duties that the U.S. imposes on the larger Japanese color TVs.
And they want the U.S. to help them sell overseas.
Planar President James Hurd says he has to pay tariffs as high as 15% to sell his display panels in Japan and South Korea, while panels from those countries enter the U.S. duty-free.
"This isn't a technology issue, but an attitude issue," he says.
"We just haven't learned what it takes to compete.
Burmah Oil PLC, a British independent oil and specialty-chemicals marketing concern, said SHV Holdings N.V. has built up a 7.5% stake in the company.
The holding of 13.6 million shares is up from a 6.7% stake that Burmah announced SHV held as of last Monday.
SHV, of the Netherlands, which last year merged its North Sea oil and gas operations with those of Calor Group PLC and which owns 40% of Calor, was identified as a possible suitor for Burmah.
Burmah said it hadn't held any discussions with SHV and that "no deal of any nature is in contemplation.
The top state environmental official in Massachusetts said Clean Harbors Inc.'s environmental-impact statement for a proposed incinerator in Braintree was inadequate.
The official, John DeVillars, asked Clean Harbors for more information before ruling on a permit for the site.
Critics of the plan, including the town of Braintree, say the incinerator is a health hazard.
Clean Harbors, based in Quincy, said it "will proceed expeditiously" to submit the data requested.
Alan McKim, chief executive officer of Clean Harbors said he was "very much encouraged" by the official's praise of Clean Harbors for the quality of some of the data in the report.
Citizens & Southern Corp. said it signed a definitive agreement to acquire Security Pacific Corp.'s New York-based factoring unit.
Terms of the bank holding companies' agreement weren't disclosed.
Factoring involves the purchase and collection of another company's receivables.
Citizens, based in Atlanta, said it has about $4.6 billion in factored sales annually; the Security Pacific unit has about $1.8 billion annually.
Security Pacific's factoring business works with companies in the apparel, textile and food industries, among others.
The Office of Thrift Supervision banned B.J. Garman, a former director of the failed Vision Banc Savings Association of Kingsville, Texas, from working in any financial institution insured by the government.
The office, a Treasury Department unit that is the successor to the Federal Home Loan Bank Board, said this was the first announcement of an enforcement action since this year's thrift-bailout legislation ordered that all such actions by federal banking regulators be made public.
Generally, regulators haven't announced enforcement actions in the past.
Indeed, the OTS said that before the law took effect Aug. 9, it banned another "key Vision Banc insider" from insured financial institutions.
That individual wasn't identified.
Vision Banc was placed in government conservatorship in March, and it operates under the control of the Resolution Trust Corp., the agency created to sell or liquidate insolvent thrifts.
The OTS didn't say specifically why the action was taken against Ms. Garman.
However, it said examiners found a variety of insider dealings at the thrift, including "extraordinary loan commissions" paid to a firm associated with Vision Banc officials, and loans diverted through borrowers back to the thrift officials.
Ms. Garman couldn't be reached for comment.
Arizona Instrument Corp. said it expects to post a third-quarter net loss of about $600,000, or 25 cents to 27 cents a share, compared with net income of $214,000, or 10 cents a share, a year earlier.
The Tempe, Ariz., maker of underground fuel-storage systems said the most recent period was affected by customers' problems complying with recent Environmental Protection Agency regulations.
For the nine months, the company expects to post a net loss of about $879,000, or 35 cents to 40 cents a share, on revenue of $6.5 million.
A year earlier, it had a loss of $199,203 or nine cents a share, on revenue of $7.6 million.
Growth is good.
At least, that's a theme emerging among many money managers who are anxious both to preserve the handsome stock-market gains they have already achieved this year and to catch the next wave of above-average performers.
They are starting to buy growth stocks.
Remember them?
The upper echelon of this group were shares of the "nifty 50" companies whose profits of the 1960s and early 1970s grew steadily, if not spectacularly, through thick and thin.
That sort of workhorse performance sounds made to order for a time when corporate profits overall have been weakening from the brisk increases of recent years.
The current flood of third-quarter reports are producing many more negative surprises than positive ones.
Those are unwelcome trends in a year that the Dow Jones Industrial Average has risen 23% so far, even with the 190.58-point plunge on Oct. 13; broader market measures are in the same neighborhood.
The question for investors is, how to protect these returns and yet reach a little for additional gains.
That's the path of reasoning leading to growth stocks.
"I think it is a good theme for what looks to be an uncertain market," says Steven Einhorn, partner at Goldman Sachs.
Growth stocks may be as big as Philip Morris or medium-sized such as Circuit City Stores, but their common characteristic is a history of increasing profits on the order of at least 15% to 20% a year, money managers say.
"The period when growth stocks should be performing well is when their earnings are growing at a superior rate to the general level of corporate profits," says Stephen Boesel, president of T. Rowe Price's Growth and Income Fund.
Growth stocks also are attractive in periods of market volatility, which many investors and analysts expect in the weeks ahead as everybody tries to discern where the economy is heading.
This kind of jumpy uncertainty reminds John Calverley, senior economist for American Express Bank, of the 1969-72 period, when the industrial average rolled through huge ranges and investors flocked to the shares of companies with proven earnings records, which became known as the "nifty 50."
And they will again, say money-manager proponents of the growth-stock theme.
Cabanne Smith, president of a money management company bearing his name, predicts that investment companies using computers to identify companies with earnings "momentum" will climb on the growth-stock bandwagon as the overall corporate earnings outlook deteriorates further.
He also thinks foreign investors, who are showing signs of more discriminate investing, will join the pursuit and pump up prices.
"We're just seeing the beginning of a shift," Mr. Smith says.
Mr. Smith recommends Cypress Semiconductor that is currently showing a robust 63% earnings growth rate.
Ronald Sloan, executive vice president of Siebel Capital Management, likes Wellman Inc., a company that recycles plastic into synthetic fibers for carpeting.
Mr. Sloan praises the company as recession resistant and notes that it has an annual earnings growth rate of 32% a year over the past five years.
Wellman stock closed Friday at 39 3/8, up 1/8; Mr. Sloan thinks that in a year it could hit 60.
Others preach the gospel of buying only blue-chip growth stocks.
Carmine Grigoli, chief market strategist for First Boston, who still says, "We expect the Dow average {to be at} 3000 by mid-1990," nonetheless foresees a sluggish economy in the meantime.
He recommends such blue-chip growth stalwarts as Philip Morris, PepsiCo, CPC International, Reebok International, and Limited Inc.
All have a fiveyear earnings growth rate of more than 20% a year.
Some money managers are pursuing growth stocks at the expense of those that rise and fall along with the economic cycle.
"One of the stories of the fourth quarter is that we will get an unusual number of earnings disappointments from companies sensitive to the economy," says Mr. Boesel of T. Rowe Price.
James Wright, chief investment officer for Banc One Asset Management, says, "We've been selling a disproportionate share of cyclical companies and buying a disproportionate share of high earnings stocks."
He recently trimmed his portfolio of International Paper, Dow Chemical, Quantum Chemical, International Business Machines and Digital Equipment.
He is putting money in Dress Barn, Circuit City Stores, Bruno's, and Rubbermaid.
Big cyclical companies are using "all the tricks they can to stabilize earnings," says Mr. Sloan.
He cites IBM, which reported a 30% earnings decline in the third quarter, and which last week announced a $1 billion buy-back of its shares.
"What they are telling you is that they don't have the ability to generate higher returns internally," says Mr. Sloan.
"When they are buying back stock at 10 times earnings, they are suggesting that the rate of return on competing internal projects is below" returns on the stock.
IBM says it considers its shares a good investment.
But not all strategists or money managers are ready to throw in the towel completely on cyclicals.
Growth stocks may underperform cyclical stocks next year if the Federal Reserve begins to let interest rates drift sufficiently lower to boost the economy.
Goldman Sachs's Mr. Einhorn, for one, subscribes to that scenario.
He suggests investors think about buying cyclical shares in the weeks ahead, as well as growth issues.
Friday's Market Activity
Stock prices finished about unchanged Friday in quiet expiration trading.
Traders anticipated a volatile session due to the October expiration of stock-index futures and options, and options on individual stocks.
But there were fewer price swings than expected.
Buy order imbalances on several big stocks were posted by the New York Stock Exchange.
But block trading desks and money managers made a concerted effort to meet the imbalances with stock to sell, one trader said.
As a result, the Dow Jones Industrial Average drifted in narrow ranges in the final hour of trading, and closed 5.94 higher to 2689.14.
New York Stock Exchange volume was 164,830,000.
Advancers on the Big Board lagged decliners 662 to 829.
For the week, the industrial average gained 119.88 points, or 4.7%, the biggest weekly point advance ever and a better than 50% rebound from the 190.58 point loss the industrial average logged Oct. 13.
Broader market averages were little changed in the latest session.
Standard & Poor's 500-Stock Index gained 0.03 to 347.16, the Dow Jones Equity Market Index fell 0.02 to 325.50, and the New York Stock Exchange Composite Index fell 0.05 to 192.12.
Most of last week's surge in the industrial average came on Monday, when the average rose 88.12 points as market players snapped up blue-chip issues and shunned the broad market.
That contrast was reflected in the smaller weekly percentage gains recorded by the broader averages.
The S&P 500 rose 4%, the Dow Jones Equity Market index gained 3.7% and the New York Stock Exchange composite index added 3.5%.
The Dow Jones Transportation Average fell 32.71 to 1230.80 amid renewed weakness in the airline sector.
UAL skidded 21 5/8 to 168 1/2 on 2.2 million shares.
On the week, UAL was down nearly 40%.
The latest drop followed a decision by British Airways, which had supported the $300-a-share buy-out offer for UAL from a labor-management group, not to participate in any revised bid.
British Airways fell 1 to 31 7/8.
While most other airline issues took their cue from UAL, USAir Group rose 1 3/4 to 43 1/4 on 1.5 million shares amid speculation about a possible takeover proposal from investor Marvin Davis.
USA Today reported that Mr. Davis, who had pursued UAL before dropping his bid Wednesday, has acquired a stake of about 3% in USAir.
Unocal fell 1 1/2 to 52 1/4 and Burlington Resources declined 7/8 to 45 5/8.
At a meeting with analysts, British Petroleum officials dispelled speculation that the company may take over a U.S. oil company, according to Dow Jones Professional Investor Report.
Both Unocal and Burlington had been seen as potential targets for a British Petroleum bid.
Paper and forest-products stocks declined after Smith Barney, Harris Upham & Co. lowered investment ratings on a number of issues in the two sectors, based on a forecast that pulp prices will fall sharply.
International Paper dropped 5/8 to 51, Georgia-Pacific fell 1 3/4 to 56 1/4, Stone Container tumbled 1 1/2 to 26 5/8, Great Northern Nekoosa went down 5/8 to 38 3/8 and Weyerhaeuser lost 7/8 to 28 1/8.
Dun & Bradstreet dropped 3/4 to 51 1/8 on 1.9 million shares on uncertainty about the company's earnings prospects.
Merrill Lynch cut its rating and 1990 earnings estimate Thursday, citing weakness in its credit-rating business.
Lamson & Sessions, which posted sharply lower third-quarter earnings and forecast that results for the fourth quarter might be "near break-even," fell 1/2 to 9 1/4.
Winnebago Industries slid 5/8 to 5 1/4.
The company, which reported that its loss for the fiscal quarter ended Aug. 26 widened from a year earlier, cut its semiannual dividend in half in response to the earnings weakness.
MassMutual Corporate Investors fell 3 to 29 after declaring a quarterly dividend of 70 cents a share, down from 95 cents a share.
Stoneridge Resources Inc. said it will begin an offering of rights equivalent to 2.6 million common shares and valued at $22,750,000.
The Bloomfield Hills, Mich.-based real-estate holding company said it will offer the rights at $8.75 a share to shareholders of record on Oct. 26.
The offering is scheduled to expire on Nov. 30.
The company said it will use the proceeds of the offering for debt reduction and general corporate purposes, including acquisitions.
Stockholders may buy one share at the subscription price for every four shares of stock they own.
Stockholders who exercise all their rights may buy additional shares, the company said.
The company said it has an option to increase the offering by up to 350,000 shares.
The following U.S. Treasury, corporate and municipal offerings are tentatively scheduled for sale this week, according to Dow Jones Capital Markets Report: $15.6 billion three-month and six-month bills.
$10 billion of two-year notes.
Resolution Funding Corp. to sell $4.5 billion 30-year bonds.
Aim Prime Rate Plus Fund Inc. -- 10 million common shares, via PaineWebber Inc.
Allied Capital Corp. II -- 6,500,000 common shares, via Shearson Lehman Hutton Inc.
American Cyanamid Co. -- 1,250,000 common shares, via Merrill Lynch Capital Markets.
Associated Natural Gas Corp. -- 1,400,000 common shares, via Dillon Read & Co.
B & H Crude Carriers Ltd. -- Four million common shares, via Salomon Brothers Inc.
Baldwin Technology Co. -- 2,600,000 Class A shares, via Smith Barney, Harris Upham & Co.
Blockbuster Entertainment Corp. -- $250 million (face amount) Liquid Yield Option Notes, via Merrill Lynch.
Chemex Pharmaceuticals Inc. -- 1,200,000 units, via PaineWebber.
Immune Response Corp. -- Three million common shares, via Merrill Lynch.
Marsam Pharmaceuticals Inc. -- 1,300,000 common shares, via Smith Barney, Harris Upham.
RMI Titanium Co. -- 15 million common shares, via Salomon Brothers Inc.
Tidewater Inc. -- 4,631,400 common shares, via Salomon Brothers Inc.
Massachusetts -- Approximately $230 million of general bonds, consolidated loan of 1989, Series D, via competitive bid.
Montgomery County, Maryland -- $75 million of general consolidated public improvement bonds of 1989, Series B, via competitive bid.
Trinity River Authority, Texas -- $134,750,000 of regional wastewater system improvement revenue bonds, Series 1989, via competitive bid.
City and County of Honolulu, Hawaii -- $75 million of obligation bonds, 1989 Series B, due 1993-2009, via competitive bid.
Beverly Hills -- $110 million of civic center project certificates of participation, Series 1989, via a Goldman, Sachs & Co. group.
Broward County School District, Florida -- $185 million of school district general bonds, via a First Boston Corp. group.
Connecticut Housing Finance Authority -- $132,620,000 of housing mortgage revenue (AMT and non-AMT) bonds, via a PaineWebber group.
Maryland Stadium Authority -- $137,550,000 of sports facilities lease revenue Alternative Minimum Tax (AMT) bonds, Series 1989 D, via a Morgan Stanley & Co. group.
Michigan -- $80 million of Michigan First general bonds, including $70 million of environmental protection project bonds and $10 million of recreation project bonds, via a Shearson Lehman Hutton group.
West Virginia Parkways Economic Development and Tourism Authority -- $143 million of parkway revenue bonds, Series 1989, via a PaineWebber group.
San Antonio, Texas -- $640 million of gas and electric revenue refunding bonds, via a First Boston group.
MCI COMMUNICATIONS Corp. said it filed a shelf registration with the Securities and Exchange Commission for issuance of as much as $750 million of debt securities.
The debt will include medium-term notes sold through Merrill Lynch Capital Markets; Drexel Burnham Lambert Inc.; Goldman, Sachs & Co. and Salomon Brothers Inc.
The funds will be used for refinancing existing debt of the Washington, D.C., concern at lower interest rates and for other general purposes.
The effective date of the registration is to be determined by the SEC.
A group including ESL Partners Ltd., a Fort Worth, Texas, investment partnership, and Richard E. Rainwater, a former adviser to the Fort Worth Bass family, said it reduced its stake in Anacomp Inc. to 3.6% of the common shares outstanding.
In a filing with the Securities and Exchange Commission, the group said it sold 1,325,900 Anacomp common shares from Aug. 31 to last Wednesday for $4.48 to $5.84 a share, resulting in a drop in its holdings to 1,351,662 shares.
No reason was given in the filing for the sales.
An Anacomp official said the Indianapolis computer-services concern had no comment on the group's share sales.
In March, the group disclosed it held a 7.2% stake in Anacomp for investment purposes.
It said then it had had and would continue to have discussions with Anacomp's management concerning its investment.
Home Beneficial Corp., Richmond, Va., said it contracted to sell its 50% interest in a Richmond-area shopping mall to a buyer that wasn't identified.
The life-insurance holding company said the sale would result in an after-tax gain of about $32 million, or $3.09 a share, in the first quarter of
The company also said it will adopt new accounting standards in the first quarter.
The change will result in a charge of about $8.5 million, or 82 cents a share, because of an increase in deferred income-tax liability.
In the first quarter of 1988, the company earned $10 million, or 94 cents a share.
Following is a weekly listing of unadited net asset values of publicly traded investment fund shares, reported by the companies as of Friday's close.
Also shown is the closing listed market price or a dealer-to-dealer asked price of each fund's shares, with the percentage of difference.
Closed End Bond Funds
Flexible Portfolio Funds
Specialized Equity and Convertible Funds
a-Ex-dividend.
b-As of Thursday's close.
c-Translated at Commercial Rand exchange rate.
e-In Canadian dollars.
f-As of Wednesday's close.
A shareholder filed suit, seeking to block Unitel Video Inc.'s proposed plan to be acquired by a new affiliate of closely held Kenmare Capital Corp. for $15 a share, or $33.6 million.
The suit, which seeks class-action status, was filed in Delaware Chancery Court.
The complaint alleges that the price is "unfair and grossly inadequate" and that the defendants are seeking to ensure a "lockup" of the purchase of Unitel, thereby discouraging other bids.
It seeks unspecified money damages.
The New York company called the lawsuit without merit.
Shareholders are scheduled to vote on the transaction Nov.
This Toronto closed-end fund cut the annual dividend on its Class A common shares to one Canadian cent from 10 Canadian cents.
The fund invests mainly in gold and silver bullion.
It said the reduced dividend reflects the low price for precious metals.
Greg Davies, Central Fund's vice president, finance, said losses for the fiscal year ending Oct. 31 could be as high as one million Canadian dollars (US$852,000).
The fund last had a profit in 1985.
The new dividend rate is payable Nov. 15 to holders of record Oct. 31.
In American Stock Exchange composite trading Friday, Central Fund was unchanged at $4.6875 a share.
Comair Holdings Inc. said in Cincinnati that it bought Airline Aviation Academy, a pilot training school based at Sanford Regional Airport near Orlando, Fla.
Comair said it paid cash but declined to disclose the price.
Comair Holdings is the parent of Comair Inc., a regional air carrier.
Airline Aviation, which has annual revenue of $5 million to $6 million, has great growth potential because of the large number of U.S. pilots nearing retirement age, Comair said.
The unit will be renamed Comair Aviation Academy and will continue to be headed by Scott Williams, a son of its founder, Comair said.
The collapse of a $6.79 billion buy-out of United Airlines parent UAL Corp. has handed Wall Street's takeover stock speculators their worst loss ever on a single deal.
Their $700 million-plus in estimated paper losses easily tops the $400 million in paper losses the takeover traders, known as arbitragers, suffered in 1982 when Gulf Oil Co. dropped a $4.8 billion offer for Cities Service Co.
In the six trading days since the UAL labor-management buy-out group failed to get bank financing, culminating Friday with the withdrawal of its partner British Airways PLC, UAL stock has plummeted by 41% to 168 1/2 from 285 1/4.
The arbs may recoup some of their paper losses if the UAL deal gets patched up again, as they did in 1982 when Occidental Petroleum Co. rescued them with a $4 billion takeover of Cities Service.
In the meantime, the question faced by investors is: What is UAL stock worth?
The short answer, on a fundamental basis, is that airline analysts say the stock is worth somewhere between $135 and $150 a share.
That's based on a multiple of anywhere between 8.5 to 10 times UAL earnings, which are estimated to come in somewhere around $16 a share this year.
Airline stocks typically sell at a discount of about one-third to the stock market's price-earnings ratio -- which is currently about 13 times earnings.
That's because airline earnings, like those of auto makers, have been subject to the cyclical ups-and-downs of the economy.
That analysis matches up with stock traders' reports that, despite the huge drop in the stock, UAL hasn't returned to the level at which it could attract buying by institutions solely on the basis of earnings.
So anyone buying the stock now is betting on some special transaction such as a recapitalization or takeover, and must do so using some guesswork about the likelihood of such an event.
One analyst, who asked not to be identified, said he believes that the UAL pilots and management can put together a bid "in the $225 area," but that it could take three to four months to close.
At that level, and given the uncertainty, he believes UAL stock should trade closer to
Other observers note that UAL's board, having accepted a bid of $300 a share, might hold out for a new bid much closer to the original level -- even if it means that the management goes back to running the company for a while and lets things return to normal.
By that logic, the closing of a deal could be much further away than three to four months, even though the eventual price might be higher.
Investment bankers following UAL agree that the strongest impetus for an eventual deal is that the pilots have been attempting a buy-out for more than two years, and aren't likely to stop, having come so close to success.
The pilots have a strong financing tool in their willingness to cut their annual compensation by $200 million, and to commit $200 million from their retirement funds.
On Friday, they also persuaded the UAL flight attendants to join them.
However, investment bankers say that banks aren't likely to lend the almost $5 billion that would be necessary for a takeover even at a lower price without someone putting up a hefty wad of cash -- probably even greater than the 17% in cash put up by investors in the leveraged takeover of Northwest Airlines parent NWA Corp. in July.
Banks want to see someone putting up real cash at risk, that is, subordinate to the bank debt in any deal.
That way, they figure, someone else has an even stronger motivation to make sure the deal is going to work, because they would be losing their money before the banks lost theirs.
Banks also want to be able to call someone on the telephone to fix a problem with a deal that goes bad -- preferably someone other than a union leader.
That leaves the pilots still in need of cash totaling around $1 billion -- far more than either they or the flight attendants can lay their hands on from retirement funds alone.
One obstacle to the pilots' finding such a huge amount of cash is their insistence on majority ownership.
Investors such as Marvin Davis of Los Angeles who have sought airline ownership this year have insisted they, not the pilots, must have control.
One way out of that dilemma could be a partial recapitalization in which the pilots would wind up sharing the value of their concessions with public shareholders.
The pilots could borrow against the value of their concessions, using the proceeds to buy back stock from the public and give themselves the majority control they have been seeking.
But it isn't clear that banks would lend sufficient money to deliver a big enough price to shareholders.
The lack of any new cash probably would still leave the banks dissatisfied.
In advising the UAL board on the various bids for the airline, starting with one for $240 a share from Mr. Davis, the investment bank of First Boston came up with a wide range of potential values for the company, depending on appraisal methods and assumptions.
Using the the NWA takeover as a benchmark, First Boston on Sept. 14 estimated that UAL was worth $250 to $344 a share based on UAL's results for the 12 months ending last June 30, but only $235 to $266 based on a management estimate of results for 1989.
First Boston's estimates had been higher before management supplied a 1989 projection.
Using estimates of the company's future earnings under a variety of scenarios, First Boston estimated UAL's value at $248 to $287 a share if its future labor costs conform to Wall Street projections; $237 to $275 if the company reaches a settlement with pilots similar to one at NWA; $98 to $121 under an adverse labor settlement, and $229 to $270 under a pilot contract imposed by the company following a strike.
And using liquidation value assuming the sale of all UAL assets, First Boston estimated the airline is worth $253 to $303 a share.
Unfortunately, all those estimates came before airline industry fundamentals deteriorated during the past month.
American Airlines parent AMR and USAir Group, both subject to takeover efforts themselves, have each warned of declining results.
Some analysts don't expect a quick revival of any takeover by the pilots.
The deal has, as one takeover expert puts it, "so many moving parts.
I don't see anybody who's sophisticated getting his name associated with this mess until the moving parts stop moving."
In addition to the need for another cash equity investor, the other moving parts include: the pilots themselves, who can scuttle rival deals by threatening to strike; the machinists union, the pilots' longtime rivals who helped scuttle the pilots' deal; and regulators in Washington, whose opposition to foreign airline investment helped throw the deal into doubt.
In the meantime, the arbs are bleeding.
Wall Street traders and analysts estimate that takeover stock traders own UAL stock and options equal to as many as 6.5 million shares, or about 30% of the total outstanding.
Frank Gallagher, an analyst with Phoenix Capital Corp. in New York, estimates that the arbs paid an average of about $280 a share for their UAL positions.
That would indicate that the arbs have paper losses on UAL alone totalling $725 million.
UAL Corp. (NYSE; Symbol: UAL)
Business: Airline
Year ended Dec. 31, 1988:
Sales: $8.98 billion
Net income*: $599.9 million; or $20.20 a share
Second quarter, June 30, 1989: Per-share earnings: $6.52 vs. $5.77
Average daily trading volume: 881,969 shares
Common shares outstanding: 21.6 million
Eastern Enterprises, bolstered by improved tonnages in its marine-shipping unit, had a narrower third-quarter net loss of $1.1 million, or five cents a share.
Last year, Eastern had a quarter loss of $1.7 million, or eight cents a share.
Quarter revenue rose 44% to $160.1 million from $111.2 million a year ago.
The Weston, Mass., utilities and marine-transport concern said results for the third quarter, usually a money-losing one because of the seasonality of the gas business, were also aided by higher gas sales and the May 1989 acquisition of Water Products Company.
For the nine months, Eastern had net income of $41.8 million, or $1.80 a share, up 23% from $33.9 million or $1.46 a share a year ago.
Revenue grew 24% to $614.5 million from $497.1 million.
Convex Computer Corp., continuing its rapid growth while other computer companies falter, reported an 87% increase in third-quarter net income from a year earlier and a 50% increase in revenue.
Net was $3.1 million, or 16 cents a share, up from $1.6 million, or nine cents a share.
Revenue was $41.2 million, up from $27.5 million.
For the nine months, net was $7.7 million, or 41 cents a share, up 97% from $3.9 million, or 22 cents a share, a year earlier.
Revenue was $111.9 million, up 50% from $74.8 million.
Convex makes supercomputers that sell for up to $2 million and has an installed base of more than 550 systems and 340 customers world-wide.
During the third quarter, it said, it won several significant contracts, including a five-year contract with the National Institutes of Health valued at an estimated $8 million.
Earlier this month, Convex made a bid to outflank other supercomputer competitors like Digital Equipment Corp. and International Business Machines Corp. by adopting an open set of standards and introducing new hardware and software to link different systems.
The new products allow customers to add Convex machines to established systems made by other manufacturers, which "opens up a phenomenal market for us," said Robert J. Paluck, Convex's chairman, president and chief executive.
Convex also recently agreed to use Posix, a standard for the computer language called UNIX.
Posix is one of three or four versions of UNIX, but it is increasingly required by the federal government as it tries to standardize its computer systems.
Most other supercomputer manufacturers have yet to adopt the Posix standard, Mr. Paluck said, adding that they prefer to maintain proprietary systems that lock in customers.
"They want a lobster trap -- once you get in, you can't get out," he said.
"But the customer doesn't want that."
Convex closed in over-the-counter trading on Friday at $15.375 a share, down 12.5 cents.
Troubled Saatchi & Saatchi Co. has attracted offers for some of its advertising units, with potential suitors including Interpublic Group, but has rejected them, people familiar with the company said.
Industry executives said Interpublic approached Saatchi in August about buying its Campbell-Mithun-Esty unit, but was turned down by Chairman Maurice Saatchi.
More recently, Interpublic inquired about one of Saatchi's smaller communications companies -- identified as the Rowland public relations firm by several industry executives -- but again was rebuffed, they said.
Interpublic's chairman and chief executive officer, Philip Geier Jr., made the pitches in visits to Mr. Saatchi in London, the executives said.
A Saatchi spokesman declined to comment about Interpublic.
But the spokesman confirmed that Saatchi has received several inquiries from companies interested in acquiring its Campbell-Mithun and Rowland units.
He added, "We have no intention of selling either business."
Interpublic declined comment.
The offers come as Saatchi is struggling through the most troubled period in its 19-year history.
Takeover speculation has been rife, its consulting business is on the block, and its largest shareholder, Southeastern Asset Management, has said it's been approached by third parties regarding a possible restructuring.
Analysts have continually lowered their earnings estimates for the company, and their outlook, at least for the short term, is bleak.
In the midst of the current turmoil, Saatchi is attempting to shore up its ad businesses.
It named a new chief executive officer, former IMS International head Robert Louis-Dreyfus.
It rebuffed an offer by Carl Spielvogel, head of Saatchi's Backer Spielvogel Bates unit, to lead a management buy-out of all or part of Saatchi.
And last week, people close to Saatchi said Maurice Saatchi and his brother, Charles, would lead a buy-out if a hostile bid emerged.
But Saatchi's troubles have only whipped up interest among outsiders interested in picking off pieces of its ad businesses.
While Saatchi's major agency networks -- Backer Spielvogel and Saatchi & Saatchi Advertising -- would be difficult for any ad firm to buy because of potential client conflicts, its smaller businesses are quite attractive.
Campbell-Mithun-Esty, for example, has had big problems at its New York office, but offers strong offices in other areas of the country, including Minneapolis and Chicago.
That would would make it appealing to a network such as Interpublic that already has a healthy New York presence.
(While there would be some client conflicts, they wouldn't be nearly as onerous as with Saatchi's other agencies.)
Campbell-Mithun also would be a sizable addition to an agency network: It has billings of about $850 million and blue-chip clients including General Mills, Jeep/Eagle and Dow Brands.
Rowland, meanwhile, has expanded aggressively, and now ranks as the fifth-largest U.S. public relations firm, according to O'Dwyer's Directory of Public Relations Firms.
It would be attractive to an agency such as Interpublic, one of the few big agency groups without an affiliated public relations firm of its own.
Other Saatchi units include ad agency McCaffrey & McCall, which has the Mercedes account and which has been attempting to buy itself back; and Howard Marlboro, a sports and event marketing firm.
Despite Saatchi's firm stand against selling its ad units, U.S. analysts believe the company may ultimately sell some of the smaller units.
Mr. Louis-Dreyfus, in a recent interview, said he might sell "a marginal agency or office."
Analysts believe he may ultimately dispose of some of the non-advertising businesses.
Prudential's Final Four
Prudential Insurance Co. of America said it selected four agencies to pitch its $60 million to $70 million account.
In addition to Backer Spielvogel Bates, a Saatchi unit that has handled the account since 1970, the other agencies include Lowe Marschalk, a unit of the Lowe Group; Grey Advertising; and WPP Group's Scali, McCabe, Sloves agency.
All agencies are New York-based.
A spokesman for the insurance and financial services firm, based in Newark, N.J., said it hopes to make a decision within three to four months.
Jamaica Fires Back
The Jamaica Tourist Board, in the wake of Young & Rubicam's indictment on charges that it bribed Jamaican officials to win the account in 1981, released a scathing memo blaming the agency for the embarrassing incident.
The memo attempts to remove the tourist board as far as possible from the agency, which pleaded innocent to the charges.
Among other things, the memo contends that Young & Rubicam gave false assurances that the investigation wouldn't uncover any information that would "embarrass the government of Jamaica or the Jamaica Tourist Board."
It also contends that Young & Rubicam never told the tourist board about its relationship with Ad Ventures, a Jamaican firm hired by the agency.
The U.S. indictment charges Ad Ventures was a front used to funnel kickbacks to the then-minister of tourism.
The memo also chastises the agency for the timing of its announcement Thursday that it would no longer handle the $5 million to $6 million account.
The agency declined comment, but said it will continue work until a new agency is chosen.
Ad Notes. . . .
NEW ACCOUNT
: American Suzuki Motor Corp., Brea, Calif., awarded its estimated $10 million to $30 million account to Asher/Gould, Los Angeles.
Also participating in the finals was Los Angeles agency Hakuhodo Advertising America.
American Suzuki's previous agency, Keye/Donna/Pearlstein, didn't participate.
AYER TALKS:
N W Ayer's president and chief executive officer, Jerry J. Siano, said the agency is holding "conversations" about acquiring Zwiren Collins Karo & Trusk, a midsized Chicago agency, but a deal isn't yet close to being completed.
WHO'S NEWS:
John Wells, 47, former president and chief executive of N W Ayer's Chicago office, was named management director and director of account services at WPP Group's J. Walter Thompson agency in Chicago. . . .
Shelly Lazarus, 42, was named president and chief operating officer of Ogilvy & Mather Direct, the direct mail division of WPP Group's Ogilvy & Mather agency.
Grand Metropolitan PLC, the United Kingdom food and beverage group that owns Pillsbury Inc. of the U.S., announced a reshuffling of board-level executive duties intended to fit the company's recent expansion.
David Nash, formerly group finance director at Cadbury Schweppes PLC, will become Grand Met's first group finance director in January.
In a statement, Grand Met said its recent "growth and wider geographic spread" made it necessary to create the new position.
The company also reassigned several executive responsibilities.
David Tagg, formerly in charge of gambling operations, was appointed chief executive for retailing and property.
Peter Cawdron, group strategy development director, and Bill Shardlow, group personnel director, will become part of the board's management committee.
David Baltimore, who has just been named president of Rockefeller University, already knows what it's like to go through life with "Nobel laureate" appended to one's name.
He is currently experiencing what it's like to have the phrase, "under investigation for scientific fraud," also attached to his name.
The Nobel committee made the first addition; John Dingell's congressional committee created the second.
Both of Dr. Baltimore's public faces have been on view the past few weeks while he was under consideration to succeed Joshua Lederberg as head of the prestigious Rockefeller research institution.
It came to light that a substantial number of Rockefeller's faculty were upset over or even opposed to Dr. Baltimore's impending appointment.
They were disturbed at what they regarded as Dr. Baltimore's confrontational attitude toward the Dingell committee, which held hearings on a dispute over the lab notebooks of a researcher who had co-authored a scientific paper with Dr. Baltimore.
Readers of these columns ("The Science Police," May 15) will recall that Dr. Baltimore was merely the most well-known part of the Dingell committee's larger investigation, which touched MIT, Tufts, Duke, the National Institutes of Health and elsewhere.
Rep. Dingell even managed to enlist the services of the Secret Service in his investigation of the Baltimore paper.
Insofar as Mr. Dingell has a special interest in NIH and the institutions that receive its funding, the Rockefeller scientists were no doubt discomfited by Dr. Baltimore's unflattering public opinion of this congressional patron, whose behavior reminded Dr. Baltimore of the McCarthy era.
This well may be the first time that the venerable Rockefeller University has brushed up publicly against the intimidations now common in American science.
John Dingell demagogues a David Baltimore, animal-rights activists do $3.5 million of damage to labs at the U.Cal-Davis, Meryl Streep decries the horrors of chemistry on talk shows, Jeremy Rifkin files lawsuits in federal court to thwart biotech experiments, and Dutch-elm-disease researcher Gary Strobel's own colleagues at Montana State denounce him for "violating" EPA rules.
Scientists are mistaken who still think that the anti-science movement in this country isn't their concern or that a David Baltimore could have somehow placated a John Dingell.
(Mr. Dingell, by the way, has decreed another NIH investigation of the Baltimore paper, adding to several previous investigations.
Something other than what most scientists would recognize as the truth is being sought here.)
Fortunately, there are signs that increasing numbers of scientists understand the necessity of speaking out.
David Hubel, a Nobel laureate at Harvard, has taken the lead in defending research with animals, as has Dr. Michael DeBakey.
NASA defended itself vigorously and successfully against a Rifkin suit to block the Galileo launch.
Scientists need to understand that while they tend to believe their work is primarly about establishing new knowledge or doing good, today it is also about power.
In a media-linked world, scientists may earn wide praise and even Nobels for their work, but they also attract the attention of people who wish to gain control over the content, funding and goals of that work.
When a David Baltimore -- or the next target -- decides it is better to stand up to these forces, his fellow scientists would do well to recognize what is fundamentally at stake, and offer their public support.
Wisconsin Toy Co. said it definitively agreed to acquire closely held Everything's a Dollar Inc. of Virginia Beach, Va., for stock currently valued at about $4.7 million.
The Milwaukee toy retailer said the agreement calls for Everything's a Dollar holders to receive for their holdings a total of 354,600 newly issued Wisconsin Toy shares.
Wisconsin Toy currently has about 4.7 million shares outstanding.
A company official said Arthur Borie, until January chief operating officer of Pic 'N Save Inc., will buy a 20% stake in the new Wisconsin Toy subsidiary, and will act as head of Everything's a Dollar.
Wisconsin Toy has 71 retail stores, primarily in discount settings.
Everything's a Dollar operates 60 specialty-retail stores.
While welcoming Nicholas McInnes's Sept. 18 letter offering corrections to your "World-Wide Tax Revolution" table (editorial page, Aug. 29), I am surprised that he neglected other errors that, for some of us, strike close to home.
As a Channel Islander, I was amazed to see my birthplace listed as one of "86 countries with an income tax."
Despite a history of heated local debate on the topic, my passport clearly reads "British citizen."
Whether Mr. McInnes's oversight is merely a sign of a mainlander's benign neglect is a question my fellow Channel Islanders (and friends on the Isle of Man) will continue to ponder.
Patrick Basham
Roland J. Hawkins, chairman of Jet Vacations Inc., was elected to the board of this cruise line.
The board expands to seven members.
Ducks.
If the White House spots one, it intends to fire a veto at it.
Ducks are this season's word for new taxes, under OMB Director Richard Darman's formulation that "if it looks like a duck, walks like a duck and quacks like a duck, it's a duck."
George Bush is quite clear: No new ducks.
But what about all those non-duck ducks flapping over Washington?
We see a whole flock of programs that will impose significant costs on the American economy in the form of burdensome regulation and higher liabilities.
Federal child care (quack).
The Clean Air bill (quack).
The disabled-workers bill (quack, quack).
The Bush White House is breeding non-duck ducks the same way the Nixon White House did: It hops on an issue that is unopposable -- cleaner air, better treatment of the disabled, better child care.
It comes up with a toned-down version of a Democratic proposal.
The bill gets signed into law and then the administration watches helplessly, wondering where all the "unexpected" costs came from.
Consider, for instance, the very fat fowl known as federalized child care.
The President came up with a good bill, but now may end up signing the awful bureaucratic creature hatched on Capitol Hill.
It would create 38,000 local day-care commissions, answerable to the Department of Health and Human Services.
They'd determine where parents could store their kids during the day, and they'd regulate the storage facilities.
The initial costs are said to be in the $2 billion a year range, but that's only the beginning.
New entitlements tend to grow, creating a rationale for new taxes.
Quack.
The administration claims that its Clean Air bill will cost businesses between $14 billion and $19 billion annually, but economist Michael Evans estimates that the costs for firms will actually be in the $60 billion a year range.
The House bill also distorts economic efficiency in all sorts of perverse ways.
For example, the administration proposal imposes extremely tough emissions standards on new power plants.
So instead of building more efficient modern plants, utilities stick scrubbers on the old plants.
The money spent on scrubbers is diverted from planned research on new, cleaner technology.
The bill also imposes the California auto-emissions standards on all cars nationwide, as if a car registered in Big Sky, Montana, needed to be as clean as one driven in Los Angeles.
Proponents of the nationwide standards say the cost for car buyers would be about $500 per car.
Other analysts say that estimate is low.
Quack.
Nobody knows how many billions of dollars the Americans With Disabilities Act will cost, because nobody knows what the bill entails.
It is an intentionally vague document that will create a wave of litigation.
Judges will write the real bill as suits roll through the courts.
Lawyers will benefit.
Private companies, and ultimately their customers, will end up footing the huge bill.
The effect of Nixon era non-duck ducks was an economy clogged up with regulations and distortions.
All this was recognized and documented in the succeeding years by economists, some of whom worked in the Reagan administration to lift this burden from the American people, states and local governments.
Running for President in 1980 and 1988, George Bush also persuasively diagnosed the economic stagnation of the 1970s.
In fact, during last year's campaign, the entire nation constantly heard Mr. Bush tout his accomplishments as head of the Task Force on Regulatory Relief.
"Government continues to inhibit the productivity of our citizenry and the international competitiveness of American business," the vice president declared when he was head of the task force.
But with the impending passage of these new programs, Mr. Bush will surely be sending many people hurtling back into the regulatory thicket that he had helped cut back.
By 1986, the number of federal regulators was down to about 103,000.
Then it turned up, and by one estimate the number will be up to about 109,000 regulators by next year.
Holding the dam on taxes is the most important task of the Bush presidency.
We would have thought by now, though, that there was a significant core of people involved in government life who understood that direct taxation isn't the only way to slow down an economy.
It is merely the most obvious.
What is even more ironic is that all over the world nations are learning that well-intentioned public programs often backfire.
But while they are unloading these burdens, the United States is close to creating three more big ones.
The Bush administration ought to be setting aside some of its buckshot for the non-duck ducks.
Confidence in the pound is widely expected to take another sharp dive if trade figures for September, due for release tomorrow, fail to show a substantial improvement from July and August's near-record deficits.
Chancellor of the Exchequer Nigel Lawson's restated commitment to a firm monetary policy has helped to prevent a freefall in sterling over the past week.
But analysts reckon underlying support for sterling has been eroded by the chancellor's failure to announce any new policy measures in his Mansion House speech last Thursday.
This has increased the risk of the government being forced to increase base rates to 16% from their current 15% level to defend the pound, economists and foreign exchange market analysts say.
"The risks for sterling of a bad trade figure are very heavily on the down side," said Chris Dillow, senior U.K. economist at Nomura Research Institute.
"If there is another bad trade number, there could be an awful lot of pressure," noted Simon Briscoe, U.K. economist for Midland Montagu, a unit of Midland Bank PLC.
Forecasts for the trade figures range widely, but few economists expect the data to show a very marked improvement from the #2 billion ($3.2 billion) deficit in the current account reported for August.
The August deficit and the #2.2 billion gap registered in July are topped only by the #2.3 billion deficit of October 1988.
Sanjay Joshi, European economist at Baring Brothers & Co., said there is no sign that Britain's manufacturing industry is transforming itself to boost exports.
At the same time, he remains fairly pessimistic about the outlook for imports, given continued high consumer and capital goods inflows.
He reckons the current account deficit will narrow to only #1.8 billion in September.
However, Mr. Dillow said he believes that a reduction in raw material stockbuilding by industry could lead to a sharp drop in imports.
Combined with at least some rebound in exports after August's unexpected decline, the deficit could narrow to as little as #1.3 billion.
Mr. Briscoe, who also forecasts a #1.3 billion current account gap, warns that even if the trade figures are bullish for sterling, the currency won't advance much because investors will want to see further evidence of the turnaround before adjusting positions.
Nevertheless, he noted, "No one will want to go into the trade figures without a flat position" in the pound.
Meanwhile, overall evidence on the economy remains fairly clouded.
In his Mansion House speech, Mr. Lawson warned that a further slowdown can be expected as the impact of the last rise in interest rates earlier this month takes effect.
U.K. base rates are at their highest level in eight years.
But consumer expenditure data released Friday don't suggest that the U.K. economy is slowing that quickly.
The figures show that spending rose 0.1% in the third quarter from the second quarter and was up 3.8% from a year ago.
This compares with a 1.6% rise in the second from the first quarter and a 5.4% increase from the second quarter of 1988.
Mr. Dillow said the data show the economy "is still quite strong," but suggestions that much of the spending went on services rather than consumer goods should reduce fears of more import rises.
Certainly, the chancellor has made it clear that he is prepared to increase interest rates again if necessary to both ensure that a substantial slowdown does take place and that sterling doesn't decline further.
Thursday, he reminded his audience that the government "cannot allow the necessary rigor of monetary policy to be undermined by exchange rate weakness."
Analysts agree there is little holding sterling firm at the moment other than Mr. Lawson's promise that rates will be pushed higher if necessary.
And, they warn, any further drop in the government's popularity could swiftly make this promise sound hollow.
Sterling was already showing some signs of a lack of confidence in Mr. Lawson's promise Friday.
In European trading it declined to $1.5890 and 2.9495 marks from $1.5940 and 2.9429 marks late Thursday.
Economists suggested that if the pound falls much below 2.90 marks, the government will be forced to increase rates to 16%, both to halt any further decline and ensure that the balance of monetary policy remains unchanged.
Friday's Market Activity
The dollar posted gains in quiet trading as concerns about equities abated.
Foreign exchange dealers said that the currency market has begun to distance itself from the volatile stock exchange, which has preoccupied the market since Oct. 13, when the Dow Jones Industrial Average plunged more than 190 points.
Currency analysts predict that in the coming week the foreign exchange market will shift its focus back to economic fundamentals, keeping a close eye out for any signs of monetary easing by U.S. Federal Reserve.
Late in the New York trading day, the dollar was quoted at 1.8578 marks, up from 1.8470 marks late Thursday in New York.
The U.S. currency was also changing hands at 142.43 yen, up from 141.70 yen in New York late Thursday.
In Tokyo on Monday, the U.S. currency opened for trading at 141.95 yen, up from Friday's Tokyo close of 141.35 yen.
On the Commodity Exchange in New York, gold for current delivery settled at $367.30 an ounce, up 20 cents.
Estimated volume was a light 2.4 million ounces.
In early trading in Hong Kong Monday, gold was quoted at $366.50 an ounce.
East Rock Partners Limited Partnership said it proposed to acquire A.P. Green Industries Inc. for $40 a share.
In an Oct. 19 letter to A.P. Green's board, East Rock said the offer is subject to the signing of a merger agreement by no later than Oct. 31.
The letter, attached to a filing with the Securities and Exchange Commission, said the approval is also contingent upon obtaining satisfactory financing.
An A.P. Green official declined to comment on the filing.
The $40-a-share proposal values the company at about $106.6 million.
A.P. Green currently has 2,664,098 shares outstanding.
Its stock closed at $38, up $1.875, in national over-the-counter trading.
The company is a Mexico, Mo., maker of refractory products.
East Rock also said in the filing that it boosted its stake in A.P. Green to 8.7%.
It now holds 233,000 A.P. Green common shares, including 30,000 shares bought last Thursday for $35.50 to $36.50 a share.
New York-based John Kuhns and Robert MacDonald control East Rock Partners Inc., the sole general partner of East Rock Partners L.P.
The sole limited partner of the partnership is Westwood Brick Lime Inc., an indirect subsidiary of Westwood Group Inc.
Both Westwood Brick and Westwood Group are based in Boston.
Freight rates, declining for most of the decade because of competition spurred by deregulation, are bottoming out, turning upward and threatening to fuel inflation.
Trucking, shipping and air-freight companies have announced rate increases, scheduled for this fall or early next year, reflecting higher costs and tightened demand for freight transport.
Major shippers say they expect freight rates to rise at least as fast as inflation and maybe faster in the next few years.
That's a big change from recent years when freight haulage was a bright spot for U.S. productivity, helping to restrain inflation and make U.S. industry more competitive abroad.
"Demand has caught up with the supply of certain types of freight transportation, and rates are starting to move up" at a rate "close to or slightly more than the inflation rate," said Clifford Sayre, director of logistics at Du Pont Co.
Shippers surveyed recently by Ohio State University said they expect their freight-transport, storage and distribution costs to rise about 4% this year.
Only 10% of the 250 shippers polled expected their freight-transport costs to decrease, compared with 30% who had looked to freight transport to reduce costs in past years.
"This is the first year since transportation deregulation in 1980 that we have had such a dramatic and broad-based upturn in perceived transportation rates," said Bernard LaLonde, a transportation logistics professor at Ohio State in Columbus.
The deregulation of railroads and trucking companies that began in 1980 enabled shippers to bargain for transportation.
Carriers could use their equipment more efficiently, leading to overcapacity they were eager to fill.
Shippers cut about $35 billion from their annual, inter-city truck and rail costs, to about $150 billion, or about 6.4% of gross national product, down from 8% of GNP in 1981.
But with much of the inefficiency squeezed out of the freight-transport system, rising costs are likely to be reflected directly in higher freight rates.
"Shippers are saying `the party's over,'" said Mr. LaLonde.
"Shippers won't be able to look for transportation-cost savings as they have for the last eight or nine years.
Transport rates won't be an opportunity for offsetting cost increases in other segments of the economy."
Robert Delaney, a consultant at Arthur D. Little Inc., Cambridge, Mass., said "We've gotten all the benefits of deregulation in freight-cost reductions.
Now we are starting to see real freight-rate increases as carriers replace equipment, pay higher fuel costs and pay more for labor.
You'll see carriers try to recoup some of the price cutting that occurred previously."
Not everyone believes that the good times are over for shippers.
"There's still a lot of pressure on rates in both rail and truck," said Gerard McCullough, lecturer in transportation at Massachusetts Institute of Technology.
Less-than-truckload companies, which carry the freight of several shippers in each truck trailer, discounted away a 4.7% rate increase implemented last April.
The carriers were competing fiercely for market share.
Railroad-rate increases are likely to be restrained by weakening rail-traffic levels and keen competition for freight from trucks.
An official at Consolidated Freightways Inc., a Menlo Park, Calif., less-than-truckload carrier, said rate discounting in that industry has begun to "stabilize."
Consolidated Freightways plans to raise its rates 5.3% late this year or early next year, and at least two competitors have announced similar increases.
Truckers are "trying to send signals that they need to stop the bloodletting, forget about market share and go for higher rates," said Michael Lloyd, an analyst at Salomon Bros.
And "shippers are getting the feeling that they have played one trucker off against another as much as they can," he said.
Air-freight carriers raised their rates for U.S. products going across the Pacific to Asia by about 20% earlier this month.
And Japan Air Lines said it plans to boost its rates a further 25% over the next two years.
Such rate increases "will increase the total cost of U.S. products and slow down the rate of increase of U.S. exports," said Richard Connors, a senior vice president of Yusen Air & Sea Service U.S.A. Inc., the U.S. air-freight-forwarding subsidiary of Nippon Yusen Kaisha of Japan.
Ship companies carrying bulk commodities, such as oil, grain, coal and iron ore, have been able to increase their rates in the last couple of years.
Some bulk shipping rates have increased "3% to 4% in the past few months," said Salomon's Mr. Lloyd.
And ship lines carrying containers are also trying to raise their rates.
Carriers boosted rates more than 10% in the North Atlantic between the U.S. and Europe last September, hoping to partly restore rates to earlier levels.
Ship lines operating in the Pacific plan to raise rates on containers carrying U.S. exports to Asia about 10%, effective next April.
MGM Grand Inc. said it filed a registration statement with the Securities and Exchange Commission for a public offering of six million common shares.
The Beverly Hills, Calif.-based company said it would have 26.9 million common shares outstanding after the offering.
The hotel and gaming company said Merrill Lynch Capital Markets will lead the underwriters.
Proceeds from the sale will be used for remodeling and refurbishing projects, as well as for the planned MGM Grand hotel/casino and theme park.
Bob Stone stewed over a letter from his manager putting him on probation for insubordination.
Mr. Stone thought the discipline was unfair; he believed that his manager wanted to get rid of him for personal reasons.
Unable to persuade the manager to change his decision, he went to a "company court" for a hearing.
At the scheduled time, Mr. Stone entered a conference room in a building near where he worked.
After the three members of the court introduced themselves, the chairman of the panel said: "Go ahead and tell us what happened.
We may ask questions as you go along, or we may wait until the end."
No lawyers or tape recorders were present.
The only extra people were a couple of personnel specialists, one of whom knew Mr. Stone's case intimately and would help fill in any facts needed to give the court the full picture.
Over a cup of coffee, Mr. Stone told his story.
He talked about 20 minutes.
When he was through, the court members asked many questions, then the chairman said they would like to hear his manager's side and talk to witnesses.
The chairman promised Mr. Stone a decision within two weeks.
Bob Stone is a fictional name, but the incident described is real.
It happened at Northrop Corp. in Los Angeles.
The court is called the Management Appeals Committee, or just "MAC," and it is likely to hear a couple of dozen cases a year.
Alter some details of this example and it could be taking place today at Federal Express in Memphis, the Defense and Underseas Systems divisions of Honeywell in Minneapolis, a General Electric plant in Columbia, Md., or a number of other companies.
These firms are pioneers in a significant new trend in the corporate world: the rise of what I call corporate due process.
Although corporate due process is practiced today in few companies -- perhaps 40 to 60 -- it is one of the fastest developing trends in industry.
In the coming decade a majority of people-oriented companies are likely to adopt it.
Corporate due process appeals to management for a variety of reasons.
It reduces lawsuits from disgruntled employees and ex-employees, with all that means for reduced legal costs and better public relations.
It helps to keep out unions.
It increases employee commitment to the company, with all that means for efficiency and quality control.
What must your management team do to establish corporate due process?
Here are four key steps:
1. Make sure you have a strong personnel department.
It must be able to handle most of the complaints that cannot be solved in the trenches by managers and their subordinates, else the company court or adjudicators will be inundated with cases.
At Polaroid, the Personnel Policy Planning Committee may hear only about 20 cases a year; the rest of the many hundreds of complaints are resolved at earlier stages.
At TWA, the System Board of Adjustment hears 50 to 75 cases a year, only a fraction of the complaints brought to personnel specialists.
At Citicorp, the Problem Review Board may hear only 12 or so cases because of personnel's skill in complaint-resolution.
In a typical year, up to 20% of the work force goes to personnel specialists with complaints of unfair treatment.
In a large company that means many hundreds of complaints for personnel to handle.
2. Formally or informally, train all your managers and supervisors in the company's due-process approach.
See that they know company personnel policy backwards and forwards, for it is the "law" governing company courts and adjudicators.
Coach them in handling complaints so that they can resolve problems immediately.
In case managers and personnel specialists are unsuccessful and subordinates take their complaints to a company court or adjudicator, teach managers to accept reversals as a fact of business life, for in a good due-process system they are bound to happen.
In the 15 companies I studied, reversal rates range on the average from 20% to 40%.
3. Decide whether you want a panel system or a single adjudicator.
A panel system like that in the Bob Stone example enjoys such advantages as high credibility and, for the panelists, mutual support.
An adjudicator system -- that is, an investigator who acts first as a fact-finder and then switches hats and arbitrates the facts -- has such advantages as speed, flexibility and maximum privacy.
International Business Machines and Bank of America are among the companies using the single-adjudicator approach.
4. Make your due-process system visible.
It won't do any good for anybody unless employees know about it.
Most managements hesitate to go all out in advertising their due-process systems for fear of encouraging cranks and chronic soreheads to file complaints.
On the other hand, they make sure at a minimum that their systems are described in their employee handbooks and talked up by personnel specialists.
Smith-Kline Beecham goes further and sometimes features its grievance procedure in closed-circuit TV programs.
Naturally, one of the best ways to guarantee visibility for your due-process system is for top management to support it.
At IBM, the company's Open Door system is sometimes the subject of memorandums from the chief executive.
Federal Express goes further in this respect than any company I know of with both Frederick Smith and James Barksdale, chief executive and chief operating officer, respectively, sitting in on the Appeals Board almost every Tuesday to decide cases.
Mr. Ewing is a consultant based in Winchester, Mass., and author of "Justice on the Job: Resolving Grievances in the Nonunion Workplace" (Harvard Business School Press, 1989).
Tokyo stocks closed higher in active trading Friday, marking the fourth consecutive daily gain since Monday's sharp fall.
London shares closed moderately lower in thin trading.
At Tokyo, the Nikkei index of 225 selected issues was up 112.16 points to 35486.38.
The index advanced 266.66 points Thursday.
In early trading in Tokyo Monday, the Nikkei index rose 101.98 points to 35588.36.
Friday's volume on the First Section was estimated at one billion shares, up from 862 million Thursday.
Winners outpaced losers, 572 to 368, while 181 issues remained unchanged.
With investors relieved at the overnight gain in New York stocks, small-lot buying orders streamed into the market from early morning, making traders believe the market was back to normal.
The Nikkei, which reached as high as 35611.38 right after the opening, surrendered part of its early advance toward the end of the day because of profit-taking.
"Investors, especially dealers, don't want to hold a position over the weekend," a trader at Dai-ichi Securities said, adding, though, that the trading mood remained positive through the afternoon session.
The Tokyo Stock Price Index (Topix) of all issues listed in the First Section, which gained 22.78 points Thursday, was up 14.06 points, or 0.53%, at 2679.72.
The Second Section index, which rose 15.72 points Thursday, was up 11.88 points, or 0.32%, to close at 3717.46.
Volume in the second section was estimated at 30 million shares, up from 28 million Thursday.
In turmoil caused by the previous Friday's plunge in New York stocks, the Nikkei marked a sharp 647.33-point fall Monday.
But the Nikkei fell an overall 1.8% in value that day compared with Wall Street's far sharper 6.9% drop on Oct. 13.
The Tokyo market's resiliency helped participants to regain confidence gradually as they spent more time on analyzing factors that caused the Friday plunge and realized these problems were unique to New York stocks and not directly related to Tokyo.
The Nikkei continued to gain for the rest of the week, adding 1017.69 points in four days -- more than erasing Monday's losses.
But further major advances on the Nikkei aren't foreseen this week by market observers.
Investors are still waiting to see how the U.S. government will decide on interest rates and how the dollar will be stabilized.
Some high-priced issues made a comeback Friday.
Pioneer surged 450 yen ($3.16) to 6,050 yen ($42.60).
Kyocera advanced 80 yen to 5,440.
Fanuc gained 100 to 7,580.
Breweries attracted investors because of their land property holdings that could figure in development or other plans, traders said.
Sapporo gained 80 to 1,920 and Kirin added 60 to 2,070.
Housings, constructions and pharmaceuticals continued to be bought following Thursday's gains because of strong earnings outlooks.
Daiwa House gained 50 to 2,660.
Misawa Homes was up 20 at 2,960.
Kajima advanced 40 to 2,120 and Ohbayashi added 50 to 1,730.
Fujisawa added 80 to 2,010 and Mochida advanced 230 to 4,400.
London share prices were influenced largely by declines on Wall Street and weakness in the British pound.
The key Financial Times-Stock Exchange 100-share index ended 10.2 points lower at 2179.1, above its intraday low of 2176.9, but off the day's high of 2189.
The index finished 2.4% under its close of 2233.9 the previous Friday, although it recouped some of the sharp losses staged early last week on the back of Wall Street's fall.
London was weak throughout Friday's trading, however, on what dealers attributed to generally thin interest ahead of the weekend and this week's potentially important U.K. trade figures for September.
The FT-SE 100 largely remained within an 11-point range establshed within the first hour of trading before it eased to an intraday low late in the session when a flurry of program selling pushed Wall Street lower.
The FT 30-share index closed 11.0 points lower at 1761.0.
Volume was extremely thin at 351.3 million shares, the lightest volume of the week and modestly under Thursday's 387.4 million shares.
Dealers said the day's action was featureless outside some response to sterling's early weakness against the mark, and fears that Wall Street might open lower after its strong leap forward Thursday.
They added that market-makers were largely sidelined after aggressively supporting the market Thursday in their quest to cover internal shortages of FT-SE 100 shares.
Interest may remain limited into tomorrow's U.K. trade figures, which the market will be watching closely to see if there is any improvement after disappointing numbers in the previous two months.
The key corporate news of the day was that British Airways decided to withdraw from a management-led bid for UAL Corp., the parent of United Airlines.
British Airways rose initially after announcing its withdrawal from the UAL deal.
Dealers said they viewed the initial #390-million ($622 million) outlay for a 15% stake in the airline as a bit much.
Its shares slid in late dealings to close a penny per share lower at 197 pence.
The airline was the most active FT-SE 100 at 8.2 million shares traded.
The next most active top-tier stock was B.A.T Industries, the target of Sir James Goldsmith's #13.4 billion bid.
The company gained shareholder approval Thursday to restructure in a bid to fend off the hostile takeover.
Sir James said Thursday night that his plans for the takeover hadn't changed.
B.A.T ended the day at 778, down 5, on turnover of 7.5 million shares.
Dealers said it was hit by some profit-taking after gains since mid-week.
In other active shares, Trusthouse Forte shed 10 to 294 on volume of 6.4 million shares after a Barclays De Zoete Wedd downgrading, while Hillsdown Holdings, a food products concern, was boosted 2 to 271 after it disclosed it would seek shareholder approval to begin share repurchases.
Elsewhere in Europe, share prices closed higher in Stockholm, Brussels and Milan.
Prices were lower in Frankfurt, Zurich, Paris and Amsterdam.
South African gold stocks closed moderately lower.
Share prices closed higher in Sydney, Taipei, Wellington, Manila, Hong Kong and Singapore and were lower in Seoul.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
The U.S. is required to notify foreign dictators if it knows of coup plans likely to endanger their lives, government officials said.
The notification policy was part of a set of guidelines on handling coups outlined in a secret 1988 exchange of letters between the Reagan administration and the Senate Intelligence Committee.
The existence of the guidelines has become known since President Bush disclosed them privately to seven Republican senators at a White House meeting last Monday.
Officials familiar with the meeting said Mr. Bush cited the policy as an example of the sort of congressional requirements the administration contends contribute to the failure of such covert actions as this month's futile effort to oust Panamanian dictator Manuel Noriega.
According to the officials, Mr. Bush even read to the senators selections from a highly classified letter from the committee to the White House discussing the guidelines.
They said the president conceded the notification requirement didn't affect his decision to lend only minor support to this month's Panama coup effort.
No notification was ever considered, officials said, apparently because the U.S. didn't think the coup plotters intended to kill Mr. Noriega, but merely sought to imprison him.
What's more, both administration and congressional officials hint that the notification requirement is likely to be dropped from the guidelines on coup attempts that are being rewritten by the panel and the White House.
The rewriting was launched at a meeting between Mr. Bush and intelligence committee leaders Oct. 12, a few days before the meeting at which the president complained about the rules.
However, the disclosure of the guidelines, first reported last night by NBC News, is already being interpreted on Capitol Hill as an unfair effort to pressure Congress.
It has reopened the bitter wrangling between the White House and Congress over who is responsible for the failure to oust Mr. Noriega and, more broadly, for difficulties in carrying out covert activities abroad.
A statement issued by the office of the committee chairman, Sen. David Boren (D., Okla.), charged that the disclosure is part of a continuing effort to shift the criticism for the failure of the recent coup attempt in Panama.
The statement added, "Someone has regrettably chosen to selectively summarize portions of highly classified correspondence between the two branches of government.
Not only does this come close to a violation of law, it violates the trust we have all worked to develop."
Sen. Boren said, "It's time to stop bickering and work together to develop a clear and appropriate policy to help the country in the future.
I've invited the president to send his suggestions to the committee."
Republican Sen. William Cohen of Maine, the panel's vice chairman, said of the disclosure that "a text torn out of context is a pretext, and it is unfair for those in the White House who are leaking to present the evidence in a selective fashion."
Sen. Boren said the committee couldn't defend itself by making the documents public because that would violate classification rules.
But the chairman and other committee members stressed that the notification guideline wasn't imposed on the White House by a meddling Congress.
Instead, both congressional and administration officials agreed, it grew out of talks about coup-planning in Panama that were initiated by the administration in July 1988 and stretched into last October.
The guideline wasn't a law, but a joint interpretation of how the U.S. might operate during foreign coups in light of the longstanding presidential order banning a U.S. role in assassinations.
In fact, yesterday the administration and Congress were still differing on what had been agreed to.
One administration official said notification was required even if the U.S. "gets wind" of somebody else's coup plans that seem likely to endanger a dictator's life.
But a congressional source close to the panel said the rule only covered coup plans directly involving the U.S.
Although the notification guideline wasn't carried out in this month's coup attempt, some administration officials argue that it may have led to hesitation and uncertainty on the part of U.S. intelligence and military operatives in Panama.
One senior administration official called the guideline "outrageous" and said it could make U.S. operatives reluctant to even listen to coup plans for fear they may get into legal trouble.
The issue came to a head last year, officials recalled, partly because the Reagan administration had sought unsuccessfully to win committee approval of funding for new Panama coup efforts.
In addition, both administration and congressional officials said the need for guidelines on coups and assassinations was partly spurred by a White House desire to avoid nasty overseas surprises during the election campaign.
Though the assassination ban is a White House order that Congress never voted on, the intelligence committees can exercise influence over its interpretation.
Last week, Central Intelligence Agency Director William Webster publicly called on Congress to provide new interpretations of the assassination order that would permit the U.S. more freedom to act in coups.
The administration has reacted to criticism that it mishandled the latest coup attempt by seeking to blame Congress for restrictions the White House said have hampered its freedom of action.
However, last week Mr. Webster's two top CIA deputies said congressional curbs hadn't hampered the spy agency's role in the coup attempt in Panama.
Nevertheless, the administration's criticisms appeared to have made some headway with Sens. Boren and Cohen after their Oct. 12 meeting with the president.
The three men agreed to rewrite the guidelines, without changing the basic assassination ban, to clear up any ambiguities that may have hampered U.S. encouragement of coups against anti-American leaders.
The new argument over the notification guideline, however, could sour any atmosphere of cooperation that existed.
Gerald F. Seib contributed to this article.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
MUTUAL FUNDS ARRIVED IN THE U.S. during the Roaring Twenties (they had been in Britain for a century), but they didn't boom until the money market fund was created in the 1970s.
By 1980, there were more than 100 such funds.
Besides creating a vehicle for investors, money market funds also helped rewrite banking regulations.
The idea was to let small investors, the backbone of the fund business, deal in the money market's high short-term interest rates.
This had been the exclusive province of those rich enough to use six-figure sums to get income that was figured beyond the third or fourth decimal place.
The now-standard price of $1 a share came about by accident.
An early fund had filed a registration with the Securities and Exchange Commission that included a fixed $1 price.
It arrived just as the regulator handling such operations was retiring.
His successor approved the $1 price in the process of clearing the backed-up papers on his desk.
When Dreyfus started the first advertising-backed retail fund in February 1974, it was priced at $10 a share (and reached $1 billion in assets in one year.)
Dreyfus moved to the $1 price after the SEC set standards -- an average 120-day maturity of high-grade paper -- that are still the rule.
Keeping the listed price at a dollar is primarily a convenience.
Actually, the funds do fluctuate, but beyond the third decimal place.
Rounding-off keeps them at $1.
Eventually, the money funds' success forced relaxation of curbs on bank interest rates to allow banks to offer competing yields.
The new instrument also introduced many to the industry -- 30% of fund owners (there are more than 54 million accounts) started with a money fund.
Today more than 470 money market funds have total assets exceeding $350 billion.
(The companion tax-exempt funds add $71 billion.)
Dreyfus alone has seen its money market funds grow from $1 billion in 1975 to closes to $15 billion today.
Procter & Gamble Co. and Noxell Corp. said they received early termination of the waiting period under the Hart-Scott-Rodino Act regarding the proposed $1.4 billion merger of Noxell into P&G.
Shareholders of Noxell, of Hunt Valley, Md., will vote on the merger at a special meeting on Nov. 30, the companies said.
P&G, Cincinnati, agreed to exchange 0.272 share of its common stock for each share of Noxell common and Class B stock, a total of about 11 million P&G shares.
The transaction would mark the entry of P&G into cosmetics.
The company already markets a wide range of detergents, food, household and health-care products.
Shareholders of Messerschmitt-Boelkow-Blohm G.m.b.H. postponed their formal endorsement of a merger with Daimler-Benz AG until another meeting on Nov. 17.
The owners of the defense and aerospace concern, which include three regional states, several industrial companies and banks, met Friday to discuss the final terms of the transaction, in which Daimler-Benz will acquire 50.01% of
But agreement aparently couldn't be reached because of opposition from the states of Hamburg and Bremen, which are demanding more influence over the German Airbus operations and a better guarantee against job losses in the troubled Northern German region.
The two states and the state of Bavaria still hold a majority in MBB, but their stake will fall to around 30% after Daimler-Benz acquires its stake in the concern.
Jeffrey E. Levin was named vice president and chief economist of this commodity futures and options exchange.
He had been associate professor in the department of finance at Seton Hall University.
SIERRA TUCSON Cos. said it completed its initial public offering of 2.5 million common shares, which raised $30 million.
The Tucson, Ariz., operator of addiction-treatment centers said proceeds will be used for expansion, to pay debt and for general corporate purposes.
Oppenheimer & Co. was the lead underwriter.
The government issues its first reading on third-quarter real gross national product this week in a report that is expected to disclose much tamer inflation.
The consensus view on real GNP, the total value of the nation's output of goods and services adjusted for inflation, calls for a 2.3% gain, down from the second quarter's 2.5%, according to MMS International, a unit of McGraw-Hill Inc., New York.
But inflation, as measured by the GNP deflator in Thursday's report, is expected to rise only 3.5%, down from 4.6% in the second quarter.
"Inflation could be a real surprise," said Samuel D. Kahan, chief financial economist at Kleinwort Benson Government Securities Inc., in Chicago.
"If that gets people excited, it could serve as an impetus to the fixed-income markets to lower their rates," he added.
The week's other notable indicators include mid-October auto sales, September durable goods orders as well as September personal income, personal consumption and the saving rate.
Most are expected to fall below previous-month levels.
Many economists see even slower GNP growth for the remainder of the year, with some leaning more strongly toward a possible recession.
In addition to softer production data, weaker housing starts and lower corporate profits currently in evidence, some analysts believe the two recent natural disasters -- Hurricane Hugo and the San Francisco earthquake -- will carry economic ramifications in the fourth quarter.
The recent one-day, 190-point drop in the Dow Jones Industrial Average seems to be significant to economists mainly for its tacit comment on the poor quality of third-quarter profits now being reported.
"The stock market is sick because profits are crumbling," says Michael K. Evans, president of Evans Economics Inc., Washington.
The economy, he noted, moves the market, not vice versa.
On the other hand, Mr. Evans expects the hurricane and the earthquake "to take a hunk out of fourth-quarter GNP."
His estimate of 3.3% for third-quarter GNP is higher than the consensus largely because he believes current inventories aren't as low as official figures indicate.
Demand, he believes, is being met from overhang rather than new production.
By and large, economists believe the two natural catastrophes will limit economic damage to their regions.
Edward J. Campbell, economist at Brown Brothers Harriman & Co., New York, noted that large increases in construction activity along with government and private relief efforts could offset loss of production in those areas.
Gary Ciminero, economist at Fleet/Norstar Financial Group, Providence, R.I., expects the deflator to rise 3.7%, well below the second quarter's 4.6%, partly because of what he believes will be temporarily better price behavior.
He expects real GNP growth of only 2.1% for the quarter, noting a wider trade deficit, slower capital and government spending and the lower inventory figures.
Sung Won Sohn, chief economist at Norwest Corp., Minneapolis, holds that the recent stock-market volatility "increases the possibility of economic recession and reinforces the bad news" from recent trade deficit, employment and housing reports.
The consensus calls for a 0.5% increase in September personal income and a 0.3% gain in consumption.
In August, personal income rose 0.4% and personal consumption increased 0.9%.
Charles Lieberman, managing director of financial markets reasearch at Manufacturers Hanover Securities Corp., New York, said Hurrican Hugo shaved 0.1% to 0.2% from personal-income growth, because of greatly diminished rental income from tourism.
Durable goods orders for September, due out tomorrow, are expected to show a slip of 1%, compared with August's 3.9% increase.
As usual, estimates on the fickle report are wide, running from a drop of 3.5% to a gain of 1.6%.
HASTINGS MANUFACTURING Co. declared a regular quarterly dividend of 10 cents a share and an extra dividend of five cents a share on its common stock, payable Dec. 15 to shares of record Nov. 17.
This is the 11th consecutive quarter in which the company has paid shareholders an extra dividend of five cents.
The Hastings, Mich., concern makes piston rings, filters and fuel pumps.
Vickers PLC, a United Kingdom defense and engineering company, said an investment unit controlled by New Zealand financier Ron Brierley raised its stake in the company Friday to 15.02% from about 14.6% Thursday and from 13.7% the previous week.
I.E.P. Securities Ltd., a unit of Mr. Brierley's Hong Kong-based Industrial Equity (Pacific) Ltd., boosted its holdings in Vickers to 38.8 million shares.
The latest purchase follows small increases in his holdings made over the past five months.
In May, Mr. Brierley's stake shrank to 8.7% after ranging between 9% and 11% for much of the previous year.
"Ron Brierley clearly views our company as a good investment," a Vickers spokesman said.
The spokesman refused to comment on speculation that Industrial Equity might use its interest as a platform to launch a hostile bid for the company.
Vickers makes tanks for the U.K. army, Rolls Royce cars, and has marine and medical businesses.
When Rune Andersson set out to revive flagging Swedish conglomerate Trelleborg AB in the early 1980s, he spurned the advice of trendy management consultants.
"All these consultants kept coming around telling us we should concentrate on high technology, electronics or biotechnology, and get out of mature basic industries," Mr. Andersson recalls.
Yet under its 45-year-old president, Trelleborg moved aggressively into those unfashionable base industries -- first strengthening its existing rubber and plastics division, later adding mining as well as building and construction materials.
It was a gutsy move for a little-known executive, fired after only two months as president of his previous company.
But going against the grain has never bothered Mr. Andersson.
Stroking his trademark white goatee during a recent interview, the diminutive Swede quips: "It turned out to be lucky for us.
If the whole market thinks what you're doing is crazy you don't have much competition."
Mr. Andersson is anxious to strengthen Trelleborg's balance sheet.
Characteristically, he didn't waste much time getting started.
On Tuesday, Trelleborg's directors announced plans to spin off two big divisions -- minerals processing, and building and distribution -- as separately quoted companies on Stockholm's Stock Exchange.
At current market prices, the twin public offerings to be completed next year would add an estimated 2.5 billion Swedish kronor ($386 million) to Trelleborg's coffers, analysts say.
The board had also been expected to approve a SKr1.5 billion international offering of new Trelleborg shares.
But that share issue -- intended to make Trelleborg better known among international investors -- was postponed until market conditions stabilize, people familiar with the situation say.
Trelleborg's internationally traded "Bfree" series stock plunged SKr29 ($4.48) to SKr205 ($31.65) in volatile trading Monday in Stockholm.
Tuesday, the shares regained SKr20, closing at SKr225.
Mr. Andersson says he is confident that taking parts of the company public will help erase the "conglomerate stigma" that has held down Trelleborg's share price.
Trelleborg plans to remain the dominant shareholder with stakes of slightly less than 50% of both units.
The spinoff should solve a problem for the parent.
A family foundation set up by late founder Henry Dunker controls 59% of Trelleborg's voting shares outstanding.
But the foundation bylaws require the entire Trelleborg stake to be sold in the open market if control drops below 50%.
That possibility had crept closer as repeated new share offerings to finance Trelleborg's rapid growth steadily diluted the foundation's holding.
That growth is the result of Mr. Andersson's shopping spree, during which he has bought and sold more than 100 companies during the past five years.
Most of the new additions were barely profitable, if not outright loss makers.
Applying prowess gained during earlier stints at appliance maker AB Electrolux, Mr. Andersson and a handful of loyal lieutenants aggressively stripped away dead wood -- and got quick results.
The treatment turned Trelleborg into one of Scandinavia's biggest and fastest-growing industrial concerns.
Between 1985 and 1988, sales multipled more than 10 times and pretax profit surged almost twelvefold.
Many analysts expect Mr. Andersson, who owns 1.7% of the company, to be named Trelleborg's new chairman when Ernst Herslow steps down next year.
But the promotion isn't likely to alter a management style Mr. Andersson describes as "being the driving force leading the troops, not managing by sitting back with a cigar waiting for people to bring me ideas."
Last month, in his boldest move yet, Mr. Andersson and Trelleborg joined forces with Canada's Noranda Inc. in a joint $2 billion hostile takeover of another big Canadian mining concern, Falconbridge Ltd.
Industry analysts suggest that the conquest of Falconbridge could vault Trelleborg from a regional Scandinavian success story to a world-class mining concern.
"Trelleborg isn't in the same league yet as mining giants such as RTZ Corp. or Anglo-American Corp.," says Mike Kurtanjek, a mining analyst at James Capel & Co., London.
"But we certainly like what we've seen so far."
But Trelleborg still must clear some tough hurdles.
Mr. Andersson acknowledges that the company's mining division "will be busy for a while digesting its recent expansion."
Booming metals prices have fueled Trelleborg's recent profit surge, raising mining's share of pretax profit to 68% this year from a big loss two years earlier.
But analysts caution an expected fall in metal prices next year could slow profit growth.
Mining is likely to remain Trelleborg's main business.
Analysts say its chances of success will likely hinge on how well Trelleborg manages to cooperate with Noranda in the Falconbridge venture.
Noranda and Trelleborg each came close to winning Falconbridge alone before the successful joint bid.
Some analysts say Noranda would prefer to break up Falconbridge, and that the Swedes -- relatively inexperienced in international mining operations -- could have problems holding their own with a much bigger partner like Noranda operating on its home turf.
Mr. Andersson insists that Trelleborg and Noranda haven't discussed a Falconbridge break-up.
Falconbridge, he says, will continue operating in its current form.
"We'd be reluctant to accept 50-50 ownership in a manufacturing company.
But such partnerships are common in mining, where there aren't problems or conflict of interest or risk of cheating by a partner," Trelleborg's president says.
Perhaps more important, both companies share Mr. Andersson's belief in the coming renaissance of base industries.
"If the 1980s were a decade of consumption, the '90s will be the investment decade," Mr. Andersson says.
"The whole of Europe and the industrialized world is suffering from a breakdown in infrastructure investment," he says.
"That's beginning to change.
And investment is the key word for base metals, and most other businesses Trelleborg is in.
Apple Computer Inc. posted improved fiscal fourth-quarter profit due largely to a $48 million gain on the sale of its stock in Adobe Systems Inc.
Excluding the gain, the company registered a modest 4.6% increase for the quarter ended Sept. 29 to $113 million, or 87 cents a share, from the year-earlier $107.9 million, or 84 cents a share.
Proceeds of the Adobe sale brought net income in the quarter to $161.1 million, or $1.24 a share.
Apple shares fell 75 cents in over-the-counter trading to close at $48 a share.
Fiscal fourth-quarter sales grew about 18% to $1.38 billion from $1.17 billion a year earlier.
Without the Adobe gain, Apple's full-year operating profit edged up 1.5% to $406 million, or $3.16 a share, from $400.3 million, or $3.08 a share.
Including the Adobe gain, full-year net was $454 million, or $3.53 a share.
Sales for the year rose nearly 30% to $5.28 billion from $4.07 billion a year earlier.
John Sculley, chairman and chief executive officer, credited the Macintosh SE/30 and IIcx computers, introduced in the winter, for the brightened sales performance.
Mr. Sculley also indicated that sagging margins, which dogged the company through most of 1989, began to turn up in the fourth quarter as chip prices eased.
"Adverse pressure on gross margins . . . has subsided," Mr. Sculley said.
Margins in the fiscal fourth quarter perked up, rising to 51% from 49.2% a year earlier.
For all of fiscal 1989, however, the average gross margin was 49%, below the average 1988 gross margin of 51%.
Lower component costs -- especially for DRAMs, or dynamic random access memory chips -- were cited for the easing of margin pressure on the company, a spokeswoman said.
Looking ahead to 1990, Mr. Sculley predicted "another year of significant revenue growth," along with improved profitability, as the recovery in gross margins continues into 1990.
Gary J. Schantz, 44 years old, was named president and chief operating officer.
Polymerix makes lumber-like materials that it describes as "plastic wood."
The operating chief's post is new.
Martin Schrager, 51, who had been president, was named vice chairman.
He remains chief executive officer.
Mr. Schantz was vice president and chief operating officer of the Acrylic division of Polycast Technology Corp.
Separately, the board expanded to six members with the election of David L. Holewinski, a consultant.
The company also said it privately placed stock and warrants in exchange for $750,000.
Terry L. Haines, formerly general manager of Canadian operations, was elected to the new position of vice president, North American sales, of this plastics concern.
Also, Larry A. Kushkin, executive vice president, North American operations, was named head of the company's international automotive operations, another new position.
He remains an executive vice president, the company said, and his new position reflects "the growing importance of the world automotive market as a market for A. Schulman's high performance plastic materials."
Gordon Trimmer will succeed Mr. Haines as manager of Canadian operations, and Mr. Kushkin's former position isn't being filled at this time, the company said.
General Electric Co. said it signed a contract with the developers of the Ocean State Power project for the second phase of an independent $400 million power plant, which is being built in Burrillville, R.I.
GE, along with a division of Ebasco, a subsidiary of Enserch Corp., have been building the first 250-megawatt phase of the project, which they expect to complete in late 1990.
The second portion will be completed the following year.
GE's Power Generation subsidiary will operate and maintain the plant upon its completion.
The Environmental Protection Agency is getting a lot out of the Superfund program.
Of the $4.4 billion spent so far on the program, 60% is going for administrative costs, management and research, the Office of Technology Assessment just reported.
Only 36 of 1,200 priority cleanup sites have been "decontaminated."
Over the next 50 years, $500 billion is earmarked for the program.
At current allocations, that means EPA will be spending $300 billion on itself.
It may not be toxic, but we know where one waste dump is.
Chambers Development Co. said its Security Bureau Inc. unit purchased two security concerns in Florida that will add $2.1 million of annual revenue.
Purchase of the businesses serving Miami, Fort Lauderdale and West Palm Beach, Fla., is part of a plan by Chambers to expand in the growing security industry.
Terms weren't disclosed.
Basf AG said it moved its headquarters for Latin America to Mexico and the headquarters for the Asia/Australia regional division to Singapore, effective Oct.
The central offices for both regions were previously located in Ludwigshafen, Basf headquarters.
The West German chemical concern called the moves a further step in the internationalization of its business activities.
Both regions are the fastest-growing areas for Basf, the company said.
David H. Eisenberg, 53 years old, was named president and chief operating officer of Imasco's 500-store Peoples Drug Stores Inc. unit, based in Alexandria, Va.
Mr. Eisenberg was senior executive vice president and chief operating officer.
Imasco is a tobacco, retailing, restaurant and financial services concern.
Lotus Development Corp. is in talks to sell its Signal stock-quote service to Infotechnology Inc., the New York parent of Financial News Network, people familiar with the negotiations said.
They said the price would be around $10 million.
Signal, which has an estimated 10,000 subscribers and is profitable, provides stock quotes over an FM radio band that can be received by specially equipped personal computers.
The computers will display stock prices selected by users.
Lotus, Cambridge, Mass., has been rumored to have the sale of the four-year-old unit under consideration for a year.
The business isn't related to Lotus's main businesses of making computer software and publishing information on compact disks.
"Please submit your offers," says Felipe Bince Jr.
He surveys the prospective investors gathered in the board room of the Philippine government's Asset Privatization Trust for the sale of a 36% interest in the country's largest paper mill.
The agency expects the bids to be equivalent of more than $80 million.
Not a peso is offered.
Mr. Bince, the trust's associate executive trustee, declares the bidding a failure.
"It's getting harder to sell," he mutters as he leaves the room.
Indeed. Recently, the trust failed to auction off the paper mill, a bank, an office building and a small cotton-ginning plant.
Of the four, only the bank and the plant drew bids -- one apiece.
In October 1987, President Corazon Aquino vowed that her government would "get out of business" by selling all or part of the state's holdings in the many companies taken over by the government during the 20-year rule of Ferdinand Marcos.
Two years later, Mrs. Aquino's promise remains largely unfulfilled.
October is a critical month for the privatization program.
Manila is offering several major assets for the first time and is trying to conclude sales already arranged.
In addition, the government is scheduled to unveil plans for privatizing Philippine Airlines, the national carrier, an effort that lawyer and business columnist Rodolfo Romero calls "the bellwether of privatization."
All told, there are assets on the line valued at up to $1.03 billion.
The privatization program is designed to rid the government of hundreds of assets and to raise critically needed funds.
Much of the money from the sales is earmarked for a multibillion-dollar agrarian-reform program.
But efforts have been thwarted by official indifference, bureaucratic resistance, a legal system that operates at a snail's pace, political opposition and government misjudgments.
Most recently, a lack of buyers has been added to the list.
Rather than gathering momentum, the program is in danger of slowing even more as the government tackles several big assets.
The axiom appears to be that the more valuable the asset, the harder the privatization process.
"You just don't see a whole lot happening," says an international economist.
To be sure, the program hasn't completely stalled.
The Asset Privatization Trust, the agency chiefly responsible for selling government-held properties, has recorded sales of more than $500 million since it began functioning in December 1986.
But its success has been largely in the sale of small, nonperforming companies, which are valued for their assets.
Dealing with the sales this month could be particularly challenging because almost every problem that has hobbled the program in the past is popping up again.
Ramon Garcia, the Asset Trust's executive trustee, admits to what he calls "temporary setbacks."
In light of the poor results recently, he says, the agency is adopting an "attitude of flexibility."
October's troubles began when the trust failed to sell a state-owned commercial bank, Associated Bank, for the minimum price of 671 million pesos ($31 million).
At the end of the month, the agency again will offer the bank.
But instead of a minimum price, only a target price will be established.
Bankers say, however, that the government may have difficulty selling the institution even without a floor price.
The bank has a negative net worth, they say.
In addition, special bidding rules give the bank's former owner, Leonardo Ty, the right to match the highest bid.
Mr. Ty lost control to the government in 1980 when a government bank made emergency loans to the cash-strapped institution.
In 1983, the loans were converted into equity, giving Manila 98% of the bank, but with the understanding that Mr. Ty had repurchase rights.
His ability to match any bid has scared off many potential buyers.
Separately, the government will try again within a month to sell the 36% stake in Paper Industries Corp. of the Philippines, or Picop, as the paper mill is known.
The price will depend on how much Picop shares fetch on the local stock market.
But according to bankers and stock analysts who have studied the paper mill, price isn't the only consideration.
As it stands now, the government would continue to hold 45% of Picop after the 36% stake is sold.
(About 7.5% of Picop is publicly traded and other shareholders own the rest of the equity.)
Potential buyers, mostly foreign companies, are reluctant to take a non-controlling stake in a company that, by the government's own reckoning, needs some $100 million in new capital for rehabilitation.
The prospect of buying into a cash-hungry company without getting management control persuaded at least three foreign buyers, including a member of the Elders group of Australia, to pull out of the bidding, the bankers and analysts say.
Mr. Garcia acknowledges the problem and says the Asset Trust will study why the bidding failed and what changes the agency may be able to offer.
Under government regulations, however, foreign ownership of Picop's equity is limited to 40%.
Even though the government would retain the 45% stake in Picop, critics have accused the trust of selling out to foreigners.
A series of newspaper articles accused the trust of short-changing the government over the Picop sale.
Mr. Garcia says he has been notified of congressional hearings on the Picop bidding and possible legislation covering the paper mill's sale, both prompted by the criticism of the agency.
The question of control could further hinder long-delayed plans for the government to divest itself of Philippine Airlines, in which it has a 99% stake.
The carrier has valuable trans-Pacific and Asian routes but it remains debt-laden and poorly managed.
This maker of electronic measuring devices named two new directors, increasing board membership to nine.
The new directors are Gordon M. Sprenger, president and chief executive officer of LifeSpan Inc., and Peter S. Willmott, chairman and chief executive officer of Willmott Services Inc.
Gerard E. Wood, 51 years old, was elected president, chief executive officer and a director of this minerals and materials company.
He succeeds Harry A. Durney, 65, who is retiring from active duty but remains a director and consultant.
Mr. Wood has been president and chief executive of Steep Rock Resources Inc.
Eagle Financial Corp. and Webster Financial Corp., two Connecticut savings bank-holding companies, agreed to merge in a tax-free stock transaction.
The new holding company, Webster/Eagle Bancorp Inc., will have about $1.2 billion of assets and 19 banking offices in Connecticut.
Tangible capital will be about $115 million.
The merger is subject to regulatory clearance and a definitive agreement.
In the merger, each share of Webster, based in Waterbury, will be converted into one share of the new company.
Each share of Eagle, based in Bristol, will become 0.95 share of Webster/Eagle.
In American Stock Exchange composite trading Friday, Eagle shares rose 12.5 cents to $11.
In national over-the-counter trading, Webster shares fell 25 cents to $12.375.
Webster has 3.5 million shares outstanding and Eagle 2.6 million.
Their indicated market values thus are about $43.3 million and $28.6 million, respectively.
Frank J. Pascale, chairman of Eagle, will be chairman of the new firm and James C. Smith, president and chief executive officer of Webster, will take those posts at Webster/Eagle.
Harold W. Smith Sr., chairman of Webster, will become chairman emeritus and a director of the new company.
Ralph T. Linsley, vice chairman of Eagle, will become vice chairman of Webster/Eagle.
The board will be made up of seven directors of each holding company.
In an interview, James Smith said the banks' "markets are contiguous and their business philosophies are similar and conservative."
Nonperforming loans will make up only about 0.5% of the combined banks' total loans outstanding, he said.
At June 30, Webster, which owns First Federal Savings & Loan Association of Waterbury, had assets of $699 million.
Eagle, which controls Bristol Federal Savings Bank and First Federal Savings & Loan Association of Torrington, had assets of $469.6 million on that date.
Guillermo Ortiz's Sept. 15 Americas column, "Mexico's Been Bitten by the Privatization Bug," is a refreshingly clear statement of his government's commitment to privatization, and must be welcomed as such by all Americans who wish his country well.
The Mexico-United States Institute is glad to see such a high official as Mexico's undersecretary of finance view his country's reforms "in the context of a larger, world-wide process" of profound change toward free-market economics, especially in the statist countries.
Having said that, we must caution against an apparent tendency to overstate the case.
It is not quite true, for example, that the Mexican government has "privatized" Mexicana de Aviacion, as Mr. Ortiz claims.
In the same sentence he contradicts himself when he reports that the government still retains 40% of the total equity of the airline.
How can a company be considered "privatized" if the state is so heavily represented in it?
(True, the Mexican government has granted "control" over the airline to a new private consortium, but its propensity to take back what it gives is too well known to permit one to be sanguine.)
Regrettably, too, Mr. Ortiz resorts to the familiar "numbers game" when he boasts that "fewer than 392 {state enterprises} currently remain in the public sector," down from the "1,155 public entities that existed in 1982.
" But the enterprises still in state hands include the biggest and most economically powerful ones in Mexico; indeed, they virtually constitute the economic infrastructure.
I refer essentially to petroleum, electric power, banking and newsprint.
Those enterprises, however, are not going to be privatized.
They are officially considered "strategic," and their privatization is prohibited by the Mexican Constitution.
In language that sidesteps the issue, Mr. Ortiz writes, "The divestiture of nonpriority and nonstrategic public enterprises is an essential element of President Carlos Salinas's plan to modernize Mexico's economy. . . ."
Yet clearly, modernization must embrace its key industries before it can be said to have caught the "privatization bug."
The bottom line, however, is not economic but political reform.
A long succession of Mexican presidents arbitrarily nationalized whatever industry they took a fancy to, without having to answer to the public.
To guarantee that Mexicana de Aviacion and other companies will really be privatized, Mexico needs a pluri-party political system that will ensure democracy and hence accountability.
Daniel James President Mexico-United States Institute
The board of this Ponce, Puerto Rico concern voted to suspend payment of its quarterly of 11 cents a share for the third quarter.
The third-largest thrift institution in Puerto Rico also said it expects a return to profitability in the third quarter when it reports operating results this week.
Ponce Federal said the dividend was suspended in anticipation of more stringent capital requirements under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
A labor-management group is preparing a revised buy-out bid for United Airlines parent UAL Corp. that would transfer majority ownership to employees while leaving some stock in public hands, according to people familiar with the group.
The group has been discussing a proposal valued in a range of $225 to $240 a share, or $5.09 billion to $5.42 billion.
But to avoid the risk of rejection, the group doesn't plan to submit the plan formally at a UAL board meeting today.
Instead, the group is raising the proposal informally to try to test the board's reaction.
People familiar with the company say the board isn't likely to give quick approval to any offer substantially below the $300-a-share, $6.79 billion buy-out bid that collapsed last week after banks wouldn't raise needed loans and after a key partner, British Airways PLC, dropped out.
In composite trading Friday on the New York Stock Exchange, UAL closed at $168.50 a share, down $21.625.
But the pilots union, which has been pushing for a takeover since 1987, appears to be pressing ahead with the revised bid to avoid further loss of momentum even though it hasn't found a partner to replace British Air.
Although the bidding group hasn't had time to develop its latest idea fully or to discuss it with banks, it believes bank financing could be obtained.
After the collapse of the last effort, the group doesn't plan to make any formal proposal without binding commitments from banks covering the entire amount to be borrowed.
Under the type of transaction being discussed, the pilot-management group would borrow several billion dollars from banks that could then be used to finance a cash payment to current holders.
Those current holders would also receive minority interests in the new company.
For example, the group could offer $200 a share in cash plus stock valued at $30 a share.
UAL currently has 22.6 million shares, fully diluted.
The new structure would be similar to a recapitalization in which holders get a special dividend yet retain a controlling ownership interest.
The difference is that current holders wouldn't retain majority ownership or control.
The failed takeover would have given UAL employees 75% voting control of the nation's second-largest airline, with management getting 10% control and British Air 15%.
It wasn't clear how the ownership would stack up under the new plan, but employees would keep more than 50%.
Management's total could be reduced, and the public could get more than the 15% control that had been earmarked for British Air.
One option the board is likely to consider today is some sort of cooling-off period.
Although the pilots are expected to continue to pursue the bid, UAL Chairman Stephen Wolf may be asked to withdraw from the buy-out effort, at least temporarily, and to return to running the company full time.
The board could eventually come under some pressure to sell the company because its members can be ousted by a majority shareholder vote, particularly since one-third of UAL stock is held by takeover stock speculators who favor a sale.
The labor-management buy-out group plans to keep its offer on the table in an apparent attempt to maintain its bargaining position with the board.
However, the only outsider who has emerged to lead such a shareholder vote, Los Angeles investor Marvin Davis, who triggered the buy-out with a $5.4 billion bid in early August, is hanging back -- apparently to avoid being blamed for contributing to the deal's collapse.
Three top advisers to Mr. Davis visited New York late last week, at least in part to confer with executives at Citicorp.
Mr. Davis had paid $6 million for Citicorp's backing of his last bid.
But Citicorp has lost some credibility because it also led the unsuccessful effort to gain bank loans for the labor-management group.
On Friday, British Air issued a statement saying it "does not intend to participate in any new deal for the acquisition of UAL in the foreseeable future."
However, several people said that British Air might yet rejoin the bidding group and that the carrier made the statement to answer questions from British regulators about how it plans to use proceeds of a securities offering previously earmarked for the UAL buy-out.
Also late last week, UAL flight attendants agreed to participate with the pilots in crafting a revised offer.
But the machinists union, whose opposition helped scuttle the first buy-out bid, is likely to favor a recapitalization with a friendly third-party investor.
One advantage the buy-out group intends to press with the board is that pilots have agreed to make $200 million in annual cost concessions to help finance a bid.
Speculation has also arisen that the UAL executive most closely identified with the failure to gain bank financing, chief financial officer John Pope, may come under pressure to resign.
However, people familiar with the buy-out group said Mr. Pope's departure would weaken the airline's management at a critical time.
Despite the buy-out group's failure to obtain financing, UAL remains obligated to pay $26.7 million in investment banking and legal fees to the group's advisers, Lazard Freres & Co., Salomon Brothers Inc., and Paul Weiss Rifkind Wharton & Garrison.
Whittle Communications Limited Partnership, Knoxville, Tenn., will launch its first media property targeting Hispanic women.
"La Familia de Hoy," or "Today's Family," will debut this spring and will combine a national bimonthly magazine and TV programming.
The television element of "La Familia" includes a series of two-minute informational features to air seven days a week on the Spanish-language Univision network, a unit of Univision Holdings Inc., which is 80%-owned by Hallmark Cards Inc.
The features will focus on "parenting, family health and nutrition, and financial management," and will carry 30 seconds of advertising.
The magazines, also ad-supported, will be distributed in more than 10,000 doctors' offices, clinics, and health centers in Hispanic and largely Hispanic communities.
WEIRTON STEEL Corp. said it completed a $300 million sale of 10-year notes, the final step in the 1984 buy-out of the company from National Steel Corp.
The 10 7/8% notes were priced at 99.5% to yield 10.958% in an offering managed by Bear, Stearns & Co., Shearson Lehman Hutton Inc. and Lazard Freres & Co., the company said.
Weirton, of Weirton, W. Va., said $60.3 million of the proceeds were used to prepay the remaining amounts on the note outstanding to National Intergroup Inc., the parent of National Steel.
Remaining proceeds were used to pay other debt and to finance the company's capital spending program.
Lep Group PLC of Britain, which holds a 62.42% stake in Profit Systems Inc., said it is considering courses of action that could result in its having "active control" of the company.
In a filing with the Securities and Exchange Commission, Lep Group said a possible course of action may include acquiring some or all of the Profit Systems shares it doesn't already own.
It noted, however, that it hasn't determined any specific terms of a possible transaction.
Lep Group and affiliates currently control 3,513,072 Profit Systems common shares, or 62.42%, the filing said.
Profit Systems, Valley Stream, N.Y., is an air freight forwarding concern.
U.S. official reserve assets rose $6.05 billion in September, to $68.42 billion, the Treasury Department said.
The gain compared with a $1.10 billion decline in reserve assets in August to $62.36 billion, the department said.
U.S. reserve assets consist of foreign currencies, gold, special drawing rights at the International Monetary Fund and the U.S. reserve position -- its ability to draw foreign currencies -- at the IMF.
The nation's holdings of foreign currencies increased $5.67 billion in September to $39.08 billion, while its gold reserves were virtually unchanged at $11.07 billion.
U.S. holdings of IMF special drawing rights last month rose $247 million, to $9.49 billion, and its reserve position at the IMF increased $142 million, to $8.79 billion.
Alusuisse of America Inc. plans to sell its Consolidated Aluminum Corp. subsidiary as part of its strategy to focus more on aluminum packaging in the U.S.
Alusuisse, of New York, declined to say how much it expects to get for the unit; the company has hired First Boston Corp. to help identify bidders.
Alusuisse is a subsidiary of Swiss Aluminium Ltd., a Zurich, Switzerland, producer of aluminum, chemicals and packaging products.
Consolidated, which had 1988 revenue of $400 million, makes aluminum sheet and foil products at its Hannibal, Ohio, and Jackson, Tenn., rolling mills and recycles aluminum at a plant in Bens Run, W.Va.
Manhattan National Corp. said Michael A. Conway, president and chief executive officer, was elected chief executive of the holding company's two principal insurance subsidiaries.
He succeeds Paul P. Aniskovich Jr., who resigned to pursue other business interests, the company said.
Mr. Conway, 42 years old, was elected chairman, president and chief executive of Manhattan Life Insurance Co. and president and chief executive of Manhattan National Life Insurance Co.
Harry Rossi, 69, chairman of the holding company, also remains chairman of Manhattan National Life Insurance Co.
Mr. Conway was executive vice president and chief investment officer of Union Central Life Insurance Co., of Cincinnati, in 1987, when Union Central bought a 54% interest in Manhattan National Corp.
He resigned as an officer of Central Life to accept the Manhattan National presidency.
Daniel J. Terra, a director of First Illinois Corp., said that in August he reduced his stake in First Illinois to 26.48% of the common shares outstanding.
In a filing with the Securities and Exchange Commission, Mr. Terra said he sold 263,684 First Illinois common shares from Aug. 9 to Aug. 28 for $9.9375 to $10.5625 a share.
As a result of the sales he holds 6,727,042 shares.
Mr. Terra said in the filing that he sold the stock to decrease his position in the Evanston, Ill., banking concern.
He may sell more shares in the open market or in private transactions, but wouldn't rule out changing his intentions and buying shares, the filing said.
SciMed Life Systems Inc., Minneapolis, said a federal appeals court vacated an earlier summary judgment in its favor.
A lower court in St. Paul had ruled in September 1988 that a heart catheter SciMed manufactures doesn't infringe on a patent owned by Advanced Cardiovascular Systems, a unit of Eli Lilly & Co.
SciMed said the appeals court remanded the case back to the district court for further proceedings.
In national over-the-counter trading Friday, SciMed shares tumbled $2.75 to $43.
SciMed said it "remains committed" both to the "vigorous defense" of its position that the catheter doesn't infringe the Lilly unit's patent, and to the pursuit of its own counterclaims, which allege Lilly engaged in antitrust violations and other wrongful acts.
A REVISED BID FOR UAL is being prepared by a labor-management group, sources said.
The new proposal, which would transfer majority ownership of United Air's parent to employees and leave some stock in public hands, would be valued at $225 to $240 a share, or as much as $5.42 billion.
But UAL's board isn't expected to give quick approval to any offer substantially below the $300-a-share bid that collapsed recently.
Takeover stock speculators have incurred paper losses of over $700 million from the failed UAL offer, their worst loss ever on a single deal.
Ford and Saab ended talks about a possible alliance after Ford concluded that the cost to modernize Saab's car operations would outweigh the likely return.
The collapse Friday prompted speculation that Ford would intensify its pursuit of Jaguar, which is negotiating a defensive alliance with GM.
Stock prices edged up in quiet trading Friday.
The Dow Jones industrials rose 5.94, to 2689.14, making the gain for the week a record 119.88 points, or 4.7%.
Most bond prices fell, but junk bonds and the dollar rose.
New York City bonds were sold off by many investors last week amid political and economic uncertainty.
More banks are being hurt by Arizona's worsening real-estate slump.
First Interstate Bancorp of Los Angeles said Friday it expects a $16 million quarterly loss, citing property-loan losses at its Arizona unit.
OPEC's ability to produce more oil than it can sell is starting to cast a shadow over world oil markets.
OPEC officials worry that prices could collapse a few months from now if the group doesn't adopt new quotas.
Saatchi & Saatchi has attracted offers for some of its advertising units but has rejected them, sources said.
The proposals, from suitors including Interpublic Group, come as the London-based ad giant struggles through its most difficult period ever.
Qintex Australia suffered another setback Friday when its Los Angeles-based affiliate filed for Chapter 11 protection.
Qintex's $1.5 billion pact to buy MGM/UA collapsed recently.
Kodak entered the high-definition television market by unveiling a device that can convert conventional film into high-definition video.
A handful of small U.S. firms are refusing to cede the HDTV-screen market to Japanese manufacturers.
Freight rates are bottoming out and starting to rebound.
Trucking, shipping and air-freight firms are all planning rate increases, reflecting higher costs and tightened demand.
Texaco has purchased an oil-producing company in Texas for $476.5 million.
It is Texaco's first major acquisition since the legal battle with Pennzoil began over four years ago.
Winnebago posted a widened quarterly loss and slashed its dividend in half, reflecting the deepening slowdown in recreational vehicle sales.
Markets --
Stocks:
Volume 164,830,000 shares.
Dow Jones industrials 2689.14, up 5.94; transportation 1230.80, off 32.71; utilities 215.48, up 0.06.
Bonds:
Shearson Lehman Hutton Treasury index 3392.49, off
Commodities:
Dow Jones futures index 129.62, off 0.51; spot index 131.34, up 0.88.
Dollar:
142.43 yen, up 0.73; 1.8578 marks, up 0.0108.
Inmac Corp., a money-losing direct marketer of computer supplies and accessories, said directors suspended payment of its semiannual dividend as too great a drain on funds.
The company paid five cents a share in April.
The directors' action, taken Oct. 10 but announced Friday, had little or no effect on the company's stock, which stagnated at $4.75 in light over-the-counter trading.
Inmac recently disclosed a $12.3 million write-off related to a corporate restructuring that resulted in the company's posting a $6.4 million net loss for the year ended July 29, compared with year-earlier profit of $9.7 million, or $1.02 a share.
Sales rose 12% to $249.5 million from $222.8 million.
"The board felt that the continued payment of our semiannual dividend was inconsistent with recent operating results," said Kenneth A. Eldred, president and chief executive officer.
"All our efforts are now focused on improving earnings to the point where we can fund additional new-country development, continue to invest in the business and reinstate the dividend," he added.
The company offers more than 3,500 parts and supplies directly to microcomputer and minicomputer users through catalog sales.
The Food and Drug Administration said American Home Products Corp. agreed to recall certain generic drugs that were produced by its Quantum Pharmics unit in Amityville, N.Y.
Quantum stopped shipping the drugs last month, following a federal investigation regarding information the company supplied to obtain three drug approvals.
The FDA requested the recall of Quantum's mioxidil tablets, chlorazepate dipotassium tablets and meclofenamate sodium capsules because, it said, the size of the production runs submitted for testing to gain FDA approval was in each case misrepresented as much larger than it actually was.
American Home Products, based in New York, agreed to recall four other products, trazadone, doxepin, diazepam and lorazapam, because of concerns about data submitted in their original approval applications before the FDA.
No safety problems with the products are known, the FDA said.
An FDA spokesperson said the drugs are still available under other brand names.
Last month, American Home Products said it was suspending production and distribution of all 21 of Quantum's generic drug products pending the completion of an exhaustive internal audit.
It also temporarily closed Quantum, because of the internal investigation, as well as the FDA's ongoing inquiry.
In New York Stock Exchange composite trading, American Home Products rose 75 cents to $105 on Friday.
Lyondell Petrochemical Co. said third-quarter net income fell 54%, to $73 million, or 91 cents a share, from $160 million a year earlier.
Year-earlier per-share results aren't applicable because the company went public in January.
Revenue rose 7.7% to $1.28 billion from $1.18 billion.
The petrochemical maker said the biggest reason earnings declined was a loss of production time and the increased costs associated with a temporary maintenance closing and expansion of an olefins plant.
Like other refiners, Lyondell's margins for chemicals and gasoline were narrower.
While the company said chemical margins continued to worsen this quarter, costs will be lower because the maintenance and expansions are complete.
In New York Stock Exchange composite trading Friday, Lyondell was unchanged at $18.50 a share.
Four former Cordis Corp. officials were acquitted of federal charges related to the Miami-based company's sale of pacemakers, including conspiracy to hide pacemaker defects.
Jurors in U.S. District Court in Miami cleared Harold Hershhenson, a former executive vice president; John Pagones, a former vice president; and Stephen Vadas and Dean Ciporkin, who had been engineers with Cordis.
Earlier this year, Cordis, a maker of medical devices, agreed to plead guilty to felony and misdemeanor charges related to the pacemakers and to pay the government about $5.7 million in fines and other costs.
Cordis sold its pacemaker operations two years ago to Telectronics Holding Ltd. of Australia.
PAPERS:
Management and unions representing 2,400 employees at Torstar Corp.'s Toronto Star reached a tentative contract agreement Friday, averting a strike by most employees of Canada's largest daily newspaper.
Members of the largest union, representing 1,700 workers, voted in favor of the pact yesterday.
Four other unions have yet to vote, but their leadership also recommended approval.
The pact proposes a 2 1/2-year contract with a raise of 8% in the first year, 7% in the second and 4% for the final six months.
Amgen Inc. said its second-quarter earnings increased more than tenfold to $3.9 million, or 22 cents a share, due to increased sales of the company's new antianemia drug for kidney patients.
The Thousand Oaks, Calif.-based biotechnology company reported a 97% increase in revenue to $42.5 million for the quarter ended Sept. 30.
In the year-ago period, Amgen reported net income of $320,000, or two cents a share, on revenue of $21.5 million.
For the six months, the company reported a more than sixfold increase in earnings to $4.7 million, or 26 cents a share, from $625,000, or four cents a share a year ago.
Revenue rose 77% to $72.6 million, from last year's $41 million.
LEBANESE LAWMAKERS APPROVED a peace plan but Aoun rejected it.
Lebanon's Parliament passed the power-sharing accord to end the country's 14-year-old conflict, but the Christian military leader wad the plan was "full of ambiguities."
The Arab League-sponsored pact, drafted during three weeks of talks at the Saudi Arabian resort of Taif, includes Syrian proposals for at least a partial troop pullout from Lebanon, and guarantees an equal number of seats for Moslems and Christians in the Parliament.
The rejection by Aoun, who has demanded a total and immediate pull-out of Damascus's 33,000 troops, puts the future of the agreement in doubt.
NORTHERN CALIFORNIA BRACED for earthquake-related traffic jams.
As rescuers pressed their efforts after finding a survivor in a collapsed freeway, the San Francisco Bay area girded for hundreds of thousands of commuters seeking to avoid routes ravaged by last Tuesday's tremor.
In Oakland, officials said the 57-year-old longshoreman who spent four days entombed in rubble was in critical condition with slight improvement.
Estimates of damage in the area, visited Friday by Bush, topped $5 billion.
The baseball commissioner announced that the third game of the World Series between the Giants and the Athletics wouldn't resume until Friday.
THE U.S. IS REQUIRED to notify foreign dictators of certain coup plans.
Under guidelines included in an exchange of letters between the Reagan administration and the Senate Intelligence panel last year, the U.S. must inform foreign dictators of plans likely to endanger their lives.
The existence of the policy became known after Bush disclosed it to seven GOP senators last week, citing the plan as an example of congressional requirements the administration contends contribute to the failure of covert actions, officials said.
Bush conceded that the requirement didn't affect a decision to lend only minor support to this month's failed effort to oust Panama's Noriega, aides said.
The shuttle Atlantis's crew prepared to return to Earth today several hours earlier than planned to avoid high winds forecast at the landing site at Edwards Air Force Base, Calif.
The five astronauts, who stowed gear and tested the spacecraft's steering, said they were unconcerned about the touchy weather expected in the Mojave Desert.
Commonwealth leaders issued a declaration giving South Africa six months to deliver on pledges to ease apartheid or face new reprisals.
The 49-nation organization, meeting in Malaysia, called for tighter financial pressure immediately.
Britain's Prime Minister Thatcher alone dissented.
East Germany's leadership vowed swift action to ease travel to the West.
Despite the pledge by the Communist rulers, tens of thousands of people across the country staged marches over the weekend to demand democratic freedoms.
In Leipzig, more than 500 people met with local party officials to discuss internal changes.
The Senate convicted federal Judge Alcee Hastings of Miami of eight impeachment articles, removing him from the bench.
The chamber voted 69-26 Friday to convict the judge of perjury and bribery conspiracy.
It marked the first time a U.S. official was impeached on charges of which a jury had acquitted him.
Rep. Garcia and his wife were found guilty by a federal jury in New York of extorting $76,000 from Wedtech Corp. in return for official acts by the New York Democrat.
The jury also convicted them of extortion in obtaining a $20,000 interest-free loan from an officer of the defunct defense contractor.
Authorities in Honduras launched an investigation into the cause of Saturday's crash of a Honduran jetliner that killed 132 of the 146 people aboard.
The Boeing 727, en route to Honduras from Costa Rica via Nicaragua, smashed into the hills outside Tegucigalpa as it approached the capital's airport in high winds and low clouds.
The U.S. and Israel have been holding what an aide to Prime Minister Shamir called intense telephone negotiations in an effort to bridge differences over Mideast peace moves.
The Labor Party, meanwhile, threatened to support a parliamentary motion to topple the coalition unless Shamir showed flexibility on Arab-Israeli talks.
Nicaragua's Defense Ministry said a group of Contra rebels ambushed two trucks carrying troops in northern Nicaragua, killing 18 of the soldiers.
The incident occurred Saturday night.
The Sandinista government and the U.S.-backed insurgents agreed in March to suspend offensive operations, but there has been sporadic fighting.
Scientists have isolated a molecule that may hold potential as a treatment for disruptions of the immune system, ranging from organ-transplant rejection, to allergies and asthma, Immunex Corp. said.
The molecule is the mouse version of a protein called the interleukin-4 receptor, which directs the growth and function of white blood cells.
Died: Alfred Hayes, 79, former president of the Federal Reserve Bank of New York, Saturday, in New Canaan, Conn.
Contel Corp. said third-quarter net income increased 16% to $72 million, or 45 cents a share, from $62 million, or 39 cents a share, as a result of strong growth in telephone-access lines and long-distance minutes of use.
The telecommunications company's results included a one-time gain of $4 million, or two cents a share, from the sale of Contel Credit, a leasing and financial-services subsidiary.
Revenue rose 8.3% to $780 million from $720 million.
Telephone-operations quarterly profit increased 9% to $84 million from $77 million, while federal-systems earnings declined 33% to $4 million from $6 million.
Information systems posted a loss of $8 million, compared with a loss of $9 million a year earlier.
Customer-access lines increased at an annualized rate of about 4% and minutes of long-distance use rose about 12%.
A 10% gain in operating profit in the quarter was offset by a 21% boost in interest expense, reflecting higher consolidated borrowings and interest rates.
In New York Stock Exchange composite trading, Contel closed at $33.75 a share, down .50 cents.
In East Germany, where humor has long been the only way to express political criticism, they're not laughing about their new leader Egon Krenz.
Mr. Krenz is such a contradictory figure that nobody has even come up with any good jokes about him.
"You have to have clear feelings about someone before you can make jokes," says an East German mother of two who loves swapping political barbs with her friends.
"With Krenz, we just don't know what to expect."
Mr. Krenz doesn't seem to be the knee-jerk hardliner many initially thought he was when the 52-year-old Politburo member was selected last week to succeed Erich Honecker.
But he doesn't appear to be ready to make broad changes either.
According to East Germany's ADN news agency, Mr. Krenz spoke to Soviet leader Mikhail Gorbachev by telephone over the weekend and acknowledged East Germany could learn from Moscow's glasnost policies.
Already last week, Mr. Krenz started overhauling East Germany's heavily censored and notoriously boring news media.
On Thursday, a day after he took office, East German television broke into regular programming to launch a talk show in which viewers call in questions for a panel of officials to answer.
The regular nightly news program and daily newspapers are also getting a visible injection of Soviet-style glasnost.
"It was quite a shock," says a 43-year-old East German shopkeeper.
"For the first time in my life, I wasn't sure whether I was listening to our news or West German television."
Other changes, including easing restrictions on travel for East Germans, are expected.
But whether such moves can win back the confidence of East Germans, who have taken to the streets by the thousands in recent weeks to demand democratic changes, depends largely on whether they feel they can trust Mr. Krenz.
And that's a problem.
Mr. Krenz is not only closely identified with his mentor, Mr. Honecker, but also blamed for ordering violent police action against protesters this month and for praising China for sending tanks against student demonstrators.
"I hope he grows with the job," says Rainer Eppelmann, a Protestant pastor in East Berlin.
"The most important thing is that he have a chance."
Although Mr. Krenz is dedicated to East Germany's conservative vein of communism, there is much about his style that sets him apart from his party comrades.
Unlike Mr. Honecker, who tended to lecture people about socialist values, Mr. Krenz enjoys asking questions.
Indeed, one of his first actions as leader was to visit a gritty machine factory on the outskirts of Berlin and wander among the workers -- a la Gorbachev.
He was later shown on television, fielding questions.
At one point, he asked a worker whether he thought East Germans were fleeing the country because of restrictive travel policies.
The worker's tart reply: "It's more than just travel.
People have a sense the government is ignoring the real problems in our society."
The exchange was all the more remarkable in that authorities released television footage to Western news agencies.
This same tendency toward openness impressed a group of visiting U.S. congressmen this spring.
Rather than trying to "lecture us," says one congressional aide who attended the two-hour meeting, Mr. Krenz "wanted to listen."
Rep. Ronnie Flippo (D., Ala.), one of the members of the delegation, says he was particularly impressed by Mr. Krenz's ready admission that East Germany needed to change.
"He's a very tough man, but one who's also open to arguments," adds an aide to West German Chancellor Helmut Kohl.
But there's another side to Mr. Krenz.
Born in a Baltic town in an area which is now part of Poland, he has dedicated his life to the party apparatus.
He moved quickly through the ranks with the help of his patron, Mr. Honecker, and emerged as the heir apparent.
Barbara Donovan, an expert on East Germany at Radio Free Europe in Munich, says Mr. Krenz may project a smooth image, but she doubts he's a true reformer.
Even if he is, she adds, he appears to have only limited room for maneuver within the Communist Party's ruling Politburo.
Against this background, the new East German leader must move quickly to shore up his government's standing.
The sudden growth of the opposition movement, together with the steady outflow of citizens escaping through Poland and Hungary, has plunged the country into its deepest political crisis since an anti-Soviet workers' uprising in 1953.
"He doesn't have any honeymoon period," says a Western diplomat based in East Berlin.
"But if he's sharp and quick, he has a chance."
The diplomat adds that Mr. Krenz has several things going for him.
The East German economy is strong compared with other East bloc nations.
And his relative youth could help him project a more vibrant image, contrasting with the perception of Mr. Honecker as an out-of-touch old man.
For average East Germans, Mr. Krenz remains a puzzle.
"Either he wasn't being real in the past, or he isn't being real right now," says a 30-year-old East German doctor.
"Either way, I have a problem with how quickly he's changed."
The doctor was among dozens of people milling through East Berlin's Gethsemane Church Saturday morning.
The walls of the church are covered with leaflets, news clippings, and handwritten notes associated with the country's political opposition.
"I have to come here to read the walls," says the doctor, "because it's information I still can't get through the newspapers."
Meanwhile, East Germany's growing openness may even allow the state-controlled news media to display a muted sense of humor.
Television last week carried a new report on East Berlin's main wallpaper factory and the need to boost production.
East Germans remember a comment a few years ago by Kurt Hager, the government's top ideologist, that just because a neighbor hangs new wallpaper, there's no reason to change your own.
His point was there is no reason for East Germany to copy Soviet-style changes.
"It's hard to know whether it was intended to be funny," says the East Berlin shopkeeper, "But everyone I know laughed about it.
The list of laboratories claiming to be producing inexplicable amounts of heat from "cold fusion" experiments is slowly growing.
But the experiments continue to be plagued by lack of firm evidence that the extra heat is coming from the fusing of hydrogen atoms.
New experiments at some of the big national laboratories are still unable to find hints of nuclear fusion reactions, leaving only the finding of tritium in a Texas experiment to support University of Utah chemists' claim of achieving hydrogen fusion at room temperatures.
The latest developments in cold fusion research were presented in 24 reports delivered at the fall meeting here of the Electrochemical Society, the first scientific meeting in five months to hear formal reports on cold fusion experiments.
The meeting offered stark evidence of a dramatic fall in scientific interest in cold fusion research.
Of the 1,300 chemists registered for the society's weeklong meeting, fewer than 200 sat through the day and a half of cold fusion presentations at week's end.
This was in contrast with the society's meeting last May, at the height of the controversy, when more than 1,500 scientists, along with scores of reporters and TV crews, crowded into a Los Angeles hotel ballroom for a tumultuous special night session on the subject.
Neither of the two chemists whose Utah experiments triggered the cold fusion uproar, Martin Fleischmann and B. Stanley Pons, were at the meeting.
But some members of an ad hoc expert committee set up by the Department of Energy to evaluate the cold fusion research were in the audience.
The committee is to recommend at the end of the month whether DOE should support cold fusion research.
Most of the two dozen scientists taking the podium reported results with new, more sophisticated variations of the seemingly simple electrolysis-of-water experiments described last March by Messrs. Fleischmann and Pons.
The experiments involve encircling a thin rod of palladium metal with a wire of platinum and plunging the two electrodes into "heavy" water in which the hydrogen atoms are a doubly heavy form known as deuterium.
When an electric current is applied to the palladium and platinum electrodes, the heavy water did begin to break up, or dissociate.
Ordinarily the electrolysis, or breakup, of the water would consume almost all of the electrical energy.
But Messrs. Fleischmann and Pons said their experiments also produced large amounts of heat.
The heat energy plus the energy consumed by the breakup of the water molecules added to far more energy coming out of the apparatus than electrical energy going in, they reported.
Because they also detected tritium and indications of nuclear radiation, they asserted that the "excess" heat energy must be coming from energy released by the nuclear fusion of deuterium atoms inside the palladium rod.
As of last weekend, a dozen labs also have reported measuring "excess" heat from similar electrolytic experiments, although amounts of such heat vary widely.
One of the seven reports presented here of excess heat production was given by Richard A. Oriani, professor of chemical engineering at the University of Minnesota.
Mr. Oriani said his skepticism of the Utah claims was initially confirmed when his first experiments last spring failed to produce results.
But he then borrowed a palladium rod from chemists at Texas A&M who said they were getting excess heat.
"The results were fascinating," he said.
On the fourth "run" with the borrowed rod, the experiment began producing excess heat.
The experiment was stopped briefly to change an instrument.
When it was restarted, heat output "really took off" and produced excess heat for several hours before dying down, he said.
Typical of other experiments, Mr. Oriani said his experiment was "very erratic."
It would go along doing nothing but dissociating the heavy water and then at totally unpredictable times, it would begin producing excess heat for as long as 10 or 11 hours before quieting down.
The excess heat was 15% to 20% more than the energy involved in the electrolysis of water.
Mr. Oriani said the heat bursts were too large and too long to be explained by the sudden release of energy that might have slowly accumulated during the experiments' quiescent times, as some scientists have suggested.
"There is a reality to the excess energy," he said.
Other scientists said they also were getting sporadic bursts of excess heat lasting several hours at a time.
The bursts often occur, they said, after they "perturbed" the experiments by raising or lowering the amount of electric current being applied, or switching the current off and on.
One chemist privately suggested this hinted that some "anomalous" chemical reactions might be producing the heat.
One reason questions surround the heat experiments is that they involve unusually meticulous measurements.
Typically, the input energy ranges from a third of a watt to one watt and the excess energy is measured in tenths of a watt.
One exception is a continuing experiment at Stanford University where as much as 10 watts of energy are being put into the electrolytic cells.
A cell filled with heavy water is producing 1.0 to 1.5 watts more heat than an identical electrolytic cell filled with ordinary water next to it, reported Turgut M. Gur, an associate of materials scientist Robert A. Huggins, head of the Stanford experimental team.
One of the few hints the excess heat might be produced by fusion came from brief remarks by chemist John Bockris of Texas A&M University.
Mr. Bockris previously reported getting bursts of excess heat and of detecting increasing amounts of tritium forming in the heavy water.
He said that within the past few days, he's gotten evidence that there is a "weak correlation" between the time the heat bursts occur and the production of tritium.
There isn't any way to continuously measure the amount of tritium in the heavy water, so it's been difficult to tell whether the tritium formation is related to the heat bursts or some other phenomenon.
Increasingly careful attempts to measure neutrons, which would be strong evidence of fusion reactions, continue to be negative.
Messrs. Fleischmann and Pons initially reported indirect evidence of neutrons being produced in their experiment but later conceded the measurements were questionable.
Researchers at Sandia National Laboratories in Albuquerque, N.M., reported they went so far as to take a "cold fusion" experiment and three neutron detectors into a tunnel under 300 feet of granite to shield the detectors from cosmic rays.
A number of times they detected neutrons in one, sometimes two, of the three detectors, but only once during 411 hours of the experiment did they detect a neutron burst in all three detectors -- and they think that was a spurious event.
Shimson Gottesfeld of Los Alamos National Laboratory said researchers there detected a burst of neutrons from an early cold fusion experiment last April but decided not to announce it until they could confirm it.
In subsequent experiments, one of two neutron detectors occasionally indicated a burst of neutrons but neutron bursts were never recorded in both detectors at the same time.
They concluded the indications of neutrons stemmed from faults in the detectors rather than from the cold fusion experiment.
At the Lawrence Berkeley Laboratory in California, new experiments indicated that the lithium added to the heavy water so it will conduct a current can produce previously unsuspected electrical effects on the surface of the palladium rod -- which Messrs. Fleischmann and Pons might have misinterpreted, reported Philip Ross from the California laboratory.
Dow Jones & Co. announced Wall Street Journal advertising rates for 1990.
The rates, which take effect Jan. 2, include a 4% increase for national edition advertising.
The Journal also will offer expanded volume and frequency discounts.
The increase for national edition advertising is less than the inflation rate and compares with a 6.5% increase in 1989.
"Newsprint and postage prices this year have not gone up," said Peter R. Kann, president of Dow Jones.
"We have invested in improved editorial quality and expanded our quality audience without substantially increasing our costs.
Fundamental fairness and a sense of responsibility lead us to share operating efficiencies with our customers."
Advertising rates for the Eastern, Midwest, Western and Southwest editions will increase an average 5.5%, and rates for localized advertising editions will increase 7.5%.
Rates for the Wall Street Journal Reports will remain unchanged.
A one-time noncontract full-page advertisement in The Wall Street Journal national edition will cost $99,385.
Advertising rates for The Wall Street Journal/Europe, published in Brussels and printed in the Netherlands and Switzerland, will increase 9%.
Rates for The Asian Wall Street Journal, published and printed in Hong Kong and also printed in Singapore and Tokyo, will rise 8%.
Rates for The Asian Wall Street Journal Weekly, published in New York for North American readers, will rise 6%.
Dow Jones also publishes Barron's magazine, other periodicals and community newspapers and operates electronic business information services.
It owns 67% of Telerate Inc., a leading supplier of computerized financial information on global markets.
Reflecting the impact of lower semiconductor prices and cuts in defense spending, Texas Instruments Inc. said third-quarter net income fell 31% and sales dropped slightly from a year earlier.
Net fell to $65 million, or 67 cents a common share, from $93.7 million or $1.03 a share, a year ago.
Sales fell 2.5% to $1.54 billion from $1.58 billion.
For the nine months, the electronics and defense concern had net of $255.8 million, or $2.70 a share, down 5.6% from $271 million, or $3.01 a share, in the year-ago period.
Sales were $4.66 billion, up 1.3% from $4.6 billion.
Jerry Junkins, chairman, president and chief executive officer, said sluggish consumer-electronics sales reduced demand for semiconductors.
That, coupled with lower semiconductor prices and higher semiconductor-depreciation expense, contributed to the decline in sales and profit.
In addition, cost increases related to fixed-price defense contracts and a $10 million charge to reduce the work force of Texas Instruments' defense-electronics division also reduced net.
However, the quarter results included $28 million in royalty income from patent licenses, up from $21 million in the year-earlier period.
The nine months include $125 million of royalty income, up from $98 million last year.
Mr. Junkins wasn't optimistic about the short-term outlook, hinting that further workforce reductions may be needed.
"We expect near-term sluggishness in the electronics market," he said, "and we will take ongoing cost-reduction actions as necessary to keep operations aligned with demand."
Further, he said, an internal reorganization to combine several divisions into the Information Technology Group is expected to affect fourth-quarter results by an undisclosed amount.
Lynch Corp. said its Lynch Telephone Corp. subsidiary completed the acquisition of Western New Mexico Telephone Co. for $20 million plus assumption of $24 million of debt.
Western New Mexico Telephone, Silver City, had net income of $1.9 million on revenue of about $10 million last year.
It is an independent phone company with a service area of 15,000 square miles in southwest New Mexico.
It is also a partner in the wireline cellular franchise covering most of western New Mexico.
The transaction represents Lynch's entry into the telephone business.
The company, which has interests in television, trucking services, and glass-making and food-processing equipment, said it plans to make other acquisitions in the telephone industry.
Nelson Bunker Hunt's attempted corner on silver a decade ago is still haunting the market in this metal.
Silver, now trading around $5 an ounce, surged to an all-time peak of $50 an ounce in January 1980 from around $9 in mid-1979.
"Mr. Hunt's attempt to squeeze the silver market 10 years ago is still indirectly to blame for today's market depression," says Lesley Edgar, managing director of Sharps Pixley Ltd., London bullion brokers.
While some 100 million ounces of silver once held by Mr. Hunt and Middle Eastern associates aren't hanging over the market anymore, the price surge of 1979-80 precipitated an expansion of mine production and scrap recovery and encouraged silver consumers to economize on silver use, Mr. Edgar says.
Photographic developers, for example, bought equipment to recover silver from spent photographs, negatives and processing solutions.
Meanwhile, the photographic industry, which accounts for 44% of silver consumption, continues to look for substitutes.
Japanese and U.S. photographic firms are beginning to produce electronic cameras and X-rays that don't require silver, dealers say.
Silver's history of volatility is also discouraging investors, dealers say.
Even in the present uncertain investment climate, investors are preferring "quality assets" such as Treasury bills and bonds to gold, silver and platinum, dealers say.
Although prices rallied briefly following the tumble on world stock markets earlier this month and the related decline of the dollar, precious metals are out of favor for the moment because of high interest rates and a determination by industrial nations to curb inflation, dealers say.
Silver, however is in a deeper slump than are gold and platinum.
Some analysts contend that silver is cheap now that prices are languishing at levels last seen in the mid-1970s.
"Bargain hunters believe that silver offers the best value amongst precious metals," says Frederick R. Demler, analyst at Drexel Burnham Lambert Inc.
A further decline in prices will lead to mine production cuts in the U.S., he says.
Scrap merchants are converting smaller quantities of metal into silver, while low prices are discouraging exports from India and the Soviet Union.
Silver prices could also be boosted by strikes in leading producing nations Peru and Mexico, Mr. Demler says.
Meanwhile, total fabrication demand for silver has risen six years in a row, he says.
Japanese demand grew by 70% in the first half of this year and the nation plans an issue of a silver commemorative coin that will require 4.5 million ounces.
Compared with huge annual surpluses of more than 100 million ounces in the first half of the 1980s, world silver supplies and consumption are now nearly in balance, Mr. Demler says.
Despite intermittent rallies in the past few years, improvements in the supply-demand balance haven't managed to push silver prices into a higher range.
"There's just too much silver around," says Tom Butler, an analyst at Samuel Montagu & Co., a London bullion house.
A huge silver stockpile at exchanges, refiners, consuming industries and government warehouses of at least 617 million ounces is the market depressant, says Shearson Lehman Hutton Inc. in a report.
This year alone, inventories at the Commodity Exchange of New York jumped "by a staggering 46 million to 221 million ounces" because of producer deliveries, de-stocking by fabricators and sales by disenchanted investors, says Rhona O'Connell, London-based precious metals analyst at Shearson Lehman Hutton.
"Silver production is also in an inexorable upward trend," Ms. O'Connell says.
Moreover, while Asian and Middle Eastern investors hoard gold and help underpin its price, silver doesn't have the same mystique, dealers say.
Investors have gotten burned on silver so often that they are far more partial to gold, says Urs Seiler, senior vice president at Union Bank of Switzerland.
Yet if gold prices improve, silver prices could rally sharply, he says.
However, dealers caution that any increase would be $1 to $2 at most.
Looking ahead to other commodity markets this week:
Livestock and Meats
Analysts expect the prices of live cattle futures contracts to rise in trading today in the wake of a government quarterly census that found fewer-than-expected cattle on feedlots.
After the close of trading Friday, the Agriculture Department reported that feedlots in the 13 biggest ranch states held 8.06 million cattle on Oct. 1, down 6% from that date a year earlier.
Most analysts had expected the government to report a 4% decline.
Feedlots fatten young cattle for slaughter, so a decline signals a tightening supply of beef.
The government reported that the number of young cattle placed on feedlots during the quarter dropped 5% compared with the year-earlier quarter.
Many industry analysts had been projecting a 3% decline in placements for the quarter.
In the 1988 quarter, many farmers were forced to sell their cattle to feedlot operators because the drought dried out the pasture on their ranches.
The number of cattle moving onto feedlots in the recent quarter was also lower because fattening cattle is less profitable.
A shortage of young cattle has made them more expensive for feedlot operators to buy.
The Agriculture Department also said that the number of fattened cattle slaughtered in the quarter dropped by 5% from the 1988 quarter, which was in line with projections by analysts.
Energy
Friday's 44-cent-a-barrel price drop to $19.98 in the expiring November contract for West Texas Intermediate crude may well set the tone for trading this week in petroleum futures on the New York Mercantile Exchange.
Most traders and analysts attributed the decline to technical factors associated with the contract's going off the board.
Others said that the drop continued the downward correction that's been due in the petroleum pits and that such a trend could well continue in the next several trading sessions.
Barring any petroleum-related news events, trading in the days ahead should further test recent projections by oil economists and other market watchers that strong fourth-quarter demand will keep prices firm.
Copper
Copper prices fell sharply Friday afternoon.
For example, copper for December delivery settled 4.5 cents lower at $1.2345 a pound.
Pressure came from several developments including the settlement of two long-term strikes.
On Friday, one analyst said, rank-and-file workers ratified a new labor agreement ending a three-month strike at the Highland Valley mine in British Columbia.
In Mexico, the analyst added, employees at the Cananea mine, who have been out of work since late August when the mine was declared bankrupt by the government, accepted a 35% cut in the 3,800-man work force.
The mine is expected to return to production in about a week.
On Friday, selling dominated the afternoon "curb" session in London, which takes place at noon EDT.
The premium of cash copper to the three-month forward offerings narrowed, indicating weaker demand for cash copper.
Long-term support for the December contract was believed to be at $1.25 a pound.
A technical analyst said there were a number of stop-loss orders under that level that were touched off when the contract's price fell below it.
That brought in considerable fund selling, which continued until the close of trading.
"In general, it was a bearish close," said Ben Hanauer, a copper trader at Rudolph Wolff & Co., a major commodities trading and brokerage firm.
But whether this price break has implications for this week, he said, "we will know more when the London Metal Exchange copper stock levels are released Monday morning."
Another analyst said he expected LME inventories to be down by about 15,000 tons when the weekly report is issued.
Bernard Savaiko, senior commodities analyst at PaineWebber Inc., said that when traders saw the market wasn't reacting positively to the forecasts of lower LME stocks, they perceived a bearish sign.
He also noted that the Japanese, who had been buying at prices just above the $1.25 level, apparently pulled back from the market on Friday.
Mr. Savaiko said he sees a possibility of the December contract dropping to $1.05 a pound.
Hewlett-Packard Co. will announce today a software program that allows computers in a network to speed up computing tasks by sending the tasks to each other.
Called Task Broker, the program acts something like an auctioneer among a group of computers wired together.
If a machine has a big computing task, Task Broker asks other computers in the network for "bids" on the job.
It then determines which machine is free to do the task most quickly and sends the task to that machine.
Hewlett-Packard claims that the software allows a network to run three times as many tasks as conventional networks and will run each task twice as fast.
The new Hewlett-Packard program, said analyst John McCarthy at Forrester Research Inc., a computer-market research company, "is a key building block as people move to this new model of distributed processing."
In today's computer networks, some machines often sit idle while others are overtaxed.
With the Hewlett-Packard program, he said, "You get more bang for the buck you've spent on computers."
The program, which will be shipped in January 1990, runs on the Unix operating system.
Hewlett-Packard will charge $5,000 for a license covering 10 users.
The program now works on all Hewlett-Packard and Apollo workstations and on computers made by Multiflow Computer Inc. of Branford, Conn.
Hewlett-Packard said it will sell versions later next year that run on Sun Microsystems Inc. and Digital Equipment Corp. machines.
The Task Broker differs from other programs that spread computing tasks around a network.
A previously available program called Network Computing System, developed by Hewlett-Packard's Apollo division, for instance, takes a task and splits it up into parts, divvying up those parts to several computers in a network for simultaneous processing.
But programs in individual computers must be revised in order to work with that system.
Applications won't have to be rewritten to work with Task Broker, Hewlett-Packard said, and the user of a computer won't be able to tell that another machine is doing the work.
The Task Broker "turns that network into -- as far as the user is concerned -- one giant computer," said Bill Kay, general manager of Hewlett-Packard's workstation group.
Price wars between the fast-food giants are starting to clobber the fast-food little guys: the franchisees.
"When elephants start fighting, ants get killed," says Murray Riese, co-owner of National Restaurants, a New York franchisee for Pizza Hut, Roy Rogers and other chains.
As hamburger and pizza outlets saturate one area after another, franchisers are struggling desperately for market share, slashing prices and stepping up costly promotions.
The fight is putting a tight squeeze on profits of many, threatening to drive the smallest ones out of business and straining relations between the national fast-food chains and their franchisees.
The chains "used to offer discounts during winter when business was slow, but in the last year or so, discounting has become a 12-month thing," says Donald Harty, president of Charisma Group Inc., a New York franchisee of Grand Metropolitan PLC's Burger King chain.
Though Charisma's sales are up slightly this year, Mr. Harty says profits will be flat or lower.
And Bill Konopnicki, a Safford, Ariz., licensee of McDonald's Corp. who is chairman of the company's National Operators Advisory Board, says some fast-food outlets "could be in serious trouble, based on the amount of discounting that seems to be going on."
Until recently, the huge fast-food industry, with sales of about $60.1 billion last year, kept price-skirmishing to a minimum.
But early this year, PepsiCo Inc.'s Taco Bell unit and Wendy's International Inc. slashed prices and stepped up promotions, says John Rohs, an analyst for Wertheim Schroder & Co.
That brought a chain reaction in the industry.
The situation was further aggravated early this month, when McDonald's set plans to heat up the discounting by offering coupons.
It also decided to go national with pizza, which it has been test-marketing.
Now, two-for-one deals on pizza are common; so are 99-cent specials on sandwiches normally priced twice as high.
The discounting, say fast-food operators, occurs on a scale and with a frequency they haven't seen before.
The result is that some franchisees are running hard just to stay even, laying off middle managers and working harder to make less.
Joe Mack, a district manager for Cormack Enterprises Inc., a Burger King operator in Omaha, Neb., says discounting is so prevalent that "we have to serve 15% to 20% more customers" to keep sales level.
"It's almost as if you're doing extra work to give away the food," he says.
Alan D'Agosto, president of Panda's Inc., an operator of Arby's restaurants in Omaha, says: "All we're doing is keeping the customers coming, but we aren't increasing sales."
With fast-food outlets on every corner, he, like many, doesn't think he has a choice in the price war: "Our customers say that they won't go into a fast-food store unless they get a coupon."
If the battle continues much longer, many fast-food businesses will close or merge, predicts Vincent Morrissey, who owns a string of Kentucky Fried Chicken stores in the Midwest.
"The industry is overbuilt," he says.
"Fast-food franchisers have managed to squeeze in stores into every corner available."
The National Restaurant Association says quick-service restaurant units in the U.S. rose 14% to 131,146 between 1983 and 1987, the last year for which figures are available.
With the market so crowded, says a spokesman for Wendy's in Columbus, Ohio, "If you're doing well, you're doing well at someone else's expense."
Simply put, there isn't enough business for every store to grow.
According to Mr. Rohs, inflation-adjusted, same-store sales at company-owned Wendy's units in the U.S. have trailed year-earlier levels throughout 1989, except for August.
"McDonald's has also been running negative all year," the analyst says.
Spokesmen for Wendy's and McDonald's criticized Mr. Rohs's calculations.
Jack Greenberg, executive vice president and chief financial officer of McDonald's, says the company doesn't compute, much less disclose, inflation-adjusted, same-store sales.
He adds that short-term comparisons "can be very misleading because of differences in timing of marketing programs from year to year."
Profit margins at company-owned McDonald's outlets in the U.S. "are holding up quite nicely," says Mr. Greenberg.
Profits of franchisees haven't been higher since the mid-1970s, he adds.
But Mr. Greenberg's sanguine outlook isn't matched by many fast-food industry observers.
Smaller chains and single-store operators will be the first to fail, many in the industry predict.
Big franchise groups "can ride out the storm a lot longer," says Mr. Harty, the Burger King operator in New York.
The prolonged price pressures are driving a wedge between some franchisers and their franchisees.
Mr. Morrissey, the Kentucky Fried Chicken franchisee, notes that most franchise owners must absorb increases in expenses without any cut in the royalties, or portion of sales, that they must pay franchisers.
Franchisees can't be forced to go along with a franchiser's discounting.
But once a franchisee agrees to a promotional program, the franchiser can demand full participation to the very end, says Lew Rudnick, a principal of Rudnick & Wolfe, a Chicago law firm with franchise industry clients.
He says courts have held that antitrust considerations are outweighed in such cases by the need to protect consumers from deceptive marketing.
In any case, many franchisees, in order to stay on good terms with franchisers, routinely go along with promotions.
Says Mr. Riese of National Restaurants: "If you resisted on prices, maybe you would never get that telephone call about a new franchise.
Companies listed below reported quarterly profit substantially different from the average of analysts' estimates.
The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share.
Estimated and actual results involving losses are omitted.
The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days.
Otherwise, actual profit is compared with the 300-day estimate.
Companies listed below reported quarterly profit substantially different from the average of analysts' estimates.
The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share.
Estimated and actual results involving losses are omitted.
The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days.
Otherwise, actual profit is compared with the 300-day estimate.
CalMat Co. said it completed a $32.8 million sale of assets from its Los Angeles area real estate portfolio for net income of $12 million.
CalMat said the sale is part of its previously announced plan to sell much of its real estate holdings to focus on its core business of mining and producing asphalt, concrete, rock and sand.
And you thought the only reason to save your canceled checks was to prepare for an IRS audit.
Reggie Jackson, the retired baseball star, has found another use for them.
Mr. Jackson, who won the nickname "Mr. October" for his World Series exploits, is selling some of his canceled checks to autograph collectors through a dealer for as much as $500 each.
Dealers say the budding trade in Mr. Jackson's canceled checks is unusual.
"I don't know of any living ballplayer that's ever done it," says Jack Smalling, a dealer in Ames, Iowa, and a recognized expert in the field of baseball autographs.
An initial batch of Mr. Jackson's checks was on sale at a baseball-card show held in San Francisco over Labor Day weekend.
Mr. Jackson showed up at the affair to sign autographs for a fee as well.
"For someone who has everything else -- Reggie's jersey, cap and cards -- his checks might be a nice addition," says William Vizas, owner of Bill's Sports Collectibles in Denver, who examined the checks at the San Francisco card show.
For years, the canceled checks of a small number of well-known baseball players have been bought and sold.
But these players were dead.
"Maybe three years ago, there were a lot of {Ty} Cobbs in the hobby, and awhile back there were Babe Ruth checks," says Mr. Smalling.
However, the thought of a living player selling his checks rubs some people the wrong way.
"Maybe I'm a little stuffy, but I wouldn't sell them," sniffs Bob Machon, owner of Papa's Sports Cards in Menlo Park, Calif.
"Who knows how much they'll be worth 100 years from now?"
And Mr. Smalling doesn't believe they're worth all that much now.
"I don't think the checks are worth $15 apiece," he says.
Why Mr. Jackson, who couldn't be reached for comment, has made some of his checks available for sale isn't clear.
He probably hasn't done it for the cash.
"I would say he's definitely not in need of money," says Matt Merola, an agent of Mr. Jackson's based in New York.
"He has good investments."
And Mr. Jackson probably has opened new checking accounts, too.
Or at least he should.
"I assume those accounts are closed," says Mr. Smalling, referring to the accounts of the canceled checks.
"I don't think he'd want to give out his current account numbers.
USX Corp. and its Japanese partner, Kobe Steel Ltd., agreed to form a joint venture to build a new plant to produce hot-dipped galvanized sheet products, mainly for the automotive market.
Terms weren't disclosed for the plant, which will have annual capacity of 600,000 tons.
The move by the nation's largest steelmaker follows a string of earlier announcements by other major steel companies.
Bethlehem Steel Corp., LTV Corp. and Armco Inc. all have plans to build additional lines for such coated corrosion-resistant steel.
The surge in production, analysts say, raises questions about capacity outpacing demand.
They note that most of the new plants will come on line in 1992, when the current import trade restraint program ends, which could result in more imports.
"There's too much capacity," contended Charles Bradford, an analyst with Merrill Lynch Capital Markets.
"I don't think there's anyone not building one."
He does add, however, that transplanted Japanese car makers are boosting the levels of U.S.-made steel in their autos, instead of relying heavily on imported steel.
That trend could increase demand for hot-dipped galvanized sheet.
The hot-dipped galvanized segment is one of the fastest-growing and most profitable segments of the steel market, coveted by all major integrated steelmakers wanting to maintain an edge over smaller minimills and reconstructed mills -- those spun off to employees.
Indeed, USX said it expects the market for coated sheet steel to reach 12 million tons annually by 1992, compared with 10.2 million tons shipped in 1988.
For the first eight months of 1989, analysts say shipments of hot-dipped galvanized steel increased about 8% from a year earlier, while overall steel shipments were up only 2.4%.
USX and Kobe Steel hope to reach a definitive agreement establishing the 50-50 partnership by the end of the year, with construction tentatively slated for the spring of 1990 and production by 1992.
USX already has six lines in existing plants producing hot-dipped galvanized steel, but this marks the first so-called greenfield plant for such production.
Moreover, it will boost by 50% USX's current hot-dipped capacity of 1,275,000 tons.
The company said it doesn't expect the new line's capacity to adversely affect the company's existing hot-dipped galvanizing lines.
Steelmakers have also been adding capacity of so-called electrogalvanized steel, which is another way to make coated corrosion-resistant steel.
One of the advantages of the hot-dipped process is that it allows the steel to be covered with a thicker coat of zinc more quickly.
ONCE YOU MAKE UP your mind about an investment, the rest is easy, right?
You just call your broker and say "buy" or "sell."
Dream on.
There are all sorts of ways to give buy and sell instructions to a broker -- and just as many ways to get burned if you don't know what you're doing.
So here's a rundown of the most common types of market orders permitted by the stock and commodity exchanges.
Two things to keep in mind: Not all exchanges accept every type of order.
And even when a specific order is acceptable to an exchange, a brokerage firm can refuse to enter it for a customer.
Market Order: This is probably the most widely used order -- and the one most open to abuse by unscrupulous floor brokers, since it imposes no price restrictions.
With a market order, an investor tells a broker to buy or sell "at the market."
It's like saying, "get me in now" or "get me out now."
For example, if wheat is being offered at $4.065 and bid at $4.060, a market order to buy would be filled at the higher price and a market order to sell at the lower price.
A recent indictment alleges that some floor brokers at the two largest Chicago commodity exchanges used market orders to fill customers' orders at unfavorable prices by arranging trades with fellow brokers.
Profits realized from these trades would then be shared by the conspiring brokers.
Limit Order: Limit orders are used when investors want to restrict the amount they will receive or pay for an investment.
Investors do this by specifying a minimum price at which the investment may be sold or the maximum price that may be paid for it.
Suppose an investor wants to sell a stock, but not for less than $55.
A limit order to sell could be entered at that price.
One risk: Investors may regret the restriction if the stock reaches 54 and then falls.
Unless the market goes at least one tick (the smallest price increment permitted) beyond the limit price, investors aren't assured of having their orders filled because there may not be sufficient trading volume to permit filling it at the specified price.
Stop Order: Stop orders tell a floor broker to buy or sell an investment once the price reaches a certain level.
Once the price reaches that level, a stop order turns into a market order, and the order is filled at whatever price the broker can get.
Stop orders are sometimes called "stop-loss" orders because they are frequently used to protect profits or limit losses.
While stop orders sound similar to limit orders, there is a difference: Sell stops must be entered at a price below the current market price and buy stops above.
In contrast, sell limit orders must be placed above the market price and buy limit orders are placed below.
The crash in October 1987 and last Friday's sell-off painfully taught some investors exactly what stop orders will and won't do.
An investor who may have placed a stop-loss order at $90 under a stock that was trading at $100 a share on the Friday before the crash was stunned to discover that the order was filled at $75 when the stock opened at that price on Monday.
Stop-Limit Order: Stop-limit orders turn into limit orders when an investment trades at the price specified in the order.
Unlike stop orders -- which are filled at the market price when the stop price is hit -- stop-limit orders demand that the trades be made only at the specified price.
If it can't be made at that price, it doesn't get filled.
Investors who wish to be out of a position, without the risk of receiving a worse-than-expected price from a market order, may use this type of order to specify the price at which the order must be filled.
But if the market moves quickly enough, it may be impossible for the broker to carry out the order because the investment has passed the specified price.
Market-If-Touched Order: Market-if-touched orders are like stop orders in that they become market orders if a specified price is reached.
However, unlike a buy-stop order, a buy market-if-touched order is entered at a price below the current price, while a sell market-if-touched order is entered at a price above it.
As soon as the market trades at the specified price the floor broker will fill it at the best possible price.
Fill-Or-Kill Order: The fill-or-kill order is one of several associated with the timing of trades.
It instructs a broker to buy or sell an investment at the specified price or better.
But if the investment can't be bought or sold immediately, the order is automatically canceled.
Gregory Bessemer, who came in second in the stock division of the recently completed U.S. Trading Championship, says he uses fill-or-kill orders almost exclusively when trading options.
"I like to use them to feel out the market," he says.
"If they don't fill it immediately, then I can start over at a new price or try again with the same price."
Not-Held Order: This is another timing order.
It is a market order that allows floor brokers to take more time to buy or sell an investment, if they think they can get a better price by waiting.
Not-held orders, which are also known as "disregard the tape" orders, are always done at the customer's risk.
One-Cancels-The-Other Order: This is really two orders in one, generally for the same security or commodity, instructing floor brokers to fill whichever order they can first and then cancel the other order.
In a fast-moving market, it prevents an investor from getting stuck with having made two trades on the same security.
Specific-Time Order: This type of order couples many of the orders described above with instructions that the order must be carried out at or by a certain time.
"On the close" can be added to many types of orders.
For example, "market-on-close orders" must be filled during the last few minutes of trading for the day at a price that is within the official closing range of prices as determined by the exchange.
"Stop-close-only orders" are stop orders that only become active during the closing minutes of trading.
"Day orders" expire at the end of the day on which they are entered, "good-till-canceled orders" have no expiration date.
Most brokers assume that all orders are day orders unless specified otherwise.
On Oct. 19, 1987, some investors learned the consequences of entering "good-til-canceled limit orders" and then forgetting about them.
They found they had bought stock from limit orders that they might have entered weeks or months earlier and had forgotten to cancel.
It is always the responsibility of investors to keep track of the orders they have placed.
Investors who change their mind about buying or selling after an order has been filled are, usually, stuck with the consequences.
Mr. Angrist writes on the options and commodities markets for The Wall Street Journal.
IN SIZING UP the risks of stock-market investments, there's probably no starting place better than "beta."
But investors better not ignore its limitations, either.
Beta is a handy gauge that measures the volatility of a stock or stock mutual fund.
For any given move in the overall market, it suggests how steeply that particular issue might rise or fall.
Beta figures are widely available and easy to interpret.
The beta of the broad market, typically defined as the Standard & Poor's 500-stock index, is always 1.0.
So a stock with a beta of 0.5 is half as volatile, one at 1.5 is 50% more volatile, and so on.
Cautious investors should generally go with stocks that have low betas.
Go with high-beta stocks to get the biggest payoff from a bet on a bull market.
Remember, though, that beta also has important limitations.
"Beta is only part of the risk in a stock," says William F. Sharpe, the Stanford University emeritus professor who developed the measure.
"There is risk that is not associated with market moves, and the beta doesn't tell you the magnitude of that."
In particular, beta doesn't measure the company- and industry-specific risk associated with an individual stock.
That "business" risk is very significant for an investor with only a few stocks, but it virtually disappears in a large and well-diversified portfolio.
Beta is also a poor indicator of the risk in stock groups that march to their own drummer.
In particular, the prices of gold and other precious-metals stocks shoot up and down, but the stocks tend to have low betas because their moves are not market-inspired.
Concern that investors could misinterpret such readings led the American Association of Individual Investors to eliminate beta figures for precious-metals funds in the 1989 edition of its mutual-fund guide.
"Our fear was people would look just at the beta {of a gold fund} and say here is an investment with very low risk," says John Markese, director of research for the Chicago-based group.
"In reality it's very volatile, but the movements are not because of market movements.
READY TO REVIEW the riskiness of your investment portfolio?
First, a pop quiz.
When you think of the words "risk" and "investment," what's the specific peril that comes to mind?
Pencils down.
If you're like most people, you said it's a holding that goes completely sour -- maybe a bond that defaults or a stock whose value disappears in a bankruptcy proceeding.
"People tend to see risk primarily on that one dimension," says Timothy Kochis, national director of personal financial planning for accountants Deloitte, Haskins & Sells.
But therein lies another aspect of investment risk: the hazard of shaping your portfolio to avoid one or more types of risk and being blind-sided by others.
This is clearly not good news to all you people who sleep like babies every night, lulled by visions of your money sitting risk-free in six-month CDs.
Risk wears many disguises, and investments that are low in one type of obvious risk can be distressingly high in other, less obvious kinds.
U.S. Treasury bonds, for example, are supersafe when it comes to returning money at maturity.
But their value as investments can be decimated by inflation, which erodes the purchasing power of bonds' fixed-dollar interest payments.
Risk is also a function of time.
When financial professionals measure risk mathematically, they usually focus on the volatility of short-term returns.
Stocks are much riskier than Treasury bills, for example, because the range in performance from the best years to the worst is much wider.
That is usually measured by the standard deviation, or divergence, of annual results from the average return over time.
But investors who are preoccupied with short-term fluctuations may be paying too little attention to another big risk -- not generating enough money to meet long-term financial and life-style goals.
For instance, some investors have sworn off stocks since the 1987 market crash; last Friday's debacle only reinforced those feelings.
But the stock market, despite some stomach-churning declines, has far outperformed other securities over extended periods.
By retreating to the apparent security of, say, money-market funds, investors may not be earning enough investment return to pay for a comfortable retirement.
"That's the biggest risk of all -- the risk of not meeting your objectives," says Steven B. Enright, a New York financial planner with Seidman Financial Services.
As a result, financial advisers say they take several steps when evaluating the riskiness of clients' portfolios.
They estimate the return a person's current portfolio is likely to generate over time, along with a standard deviation that suggests how much the return will vary year by year.
They try to figure out the long-term results the person needs to meet major goals.
And they eyeball types of risk that are not easily quantified.
The portfolios of two hypothetical families, one a couple at retirement age and another a two-income couple at age 45, illustrate several types of risk that investors need to consider.
For instance, the insured municipal bonds that dominate the older couple's portfolio were probably selected in large part for their low repayment risk.
But they expose the holders to a lot of inflation risk and interest-rate risk.
The younger couple's stockholdings involve more risk than a diversified stock portfolio because the bulk of the money is in a single issue.
Note that the younger couple's portfolio has a higher expected annual return, 10.1% vs. 8.8%, as calculated by Seidman Financial Services, which is the financial-planning affiliate of BDO Seidman.
That largely reflects the heavy stockholdings.
But one price paid for the higher expected return is greater short-term volatility, as reflected in the higher standard deviation that Seidman estimates for the younger couple's portfolio.
(Here's how to interpret a standard deviation figure: Take the expected return and add one standard deviation to it.
Then take the expected return and subtract one standard deviation.
In two of three years, the actual result should fall within that range if all the assumptions were accurate.
Then add and subtract two standard deviations to get a wider range.
There's a 95% probability any year's result will fall in the range.)
Of course, the greater volatility of the younger couple's portfolio doesn't necessarily mean those investments are riskier in terms of meeting the holders' long-term goals.
Indeed, the older couple's portfolio could actually be riskier in that sense if the expected return won't generate enough dollars to meet their spending plans.
"They may feel emotionally secure now because they are not heavily in the stock market," says John H. Cammack, a financial planner with Alexandra Armstrong Advisors Inc. in Washington.
"But they may pay a price 10 or 20 years in the future."
Ms. Slater reports on personal finance from The Wall Street Journal's New York bureau.
When it comes to investing, trying to weigh risk and reward can seem like throwing darts blindfolded: Investors don't know the actual returns that securities will deliver, or the ups and downs that will occur along the way.
Looking to the past can provide some clues.
Over several decades, for instance, investors who put up with the stock market's gyrations earned returns far in excess of those on bonds and "cash" investments like Treasury bills.
But while history can suggest what is reasonable to expect there's no guarantee that the past will repeat itself.
For instance, some analysts believe bond returns and volatility have moved permanently closer to those of the stock market.
And returns on cash investments may continue to exceed inflation by a wider margin than they did over the long-term past.
Portfolio A: Retired couple, age 65; $400,000 portfolio.
Portfolio B: Two-income couple, age 45; $150,000 portfolio.
A letter from Senator John Kerry chides us today for implying that he had "flip-flopped" on Manuel Noriega.
He correctly says he has been down on Noriega for some time, hence his criticism of administration mishandling of the attempted coup.
Our October 12 editorial should have been more precise.
It meant to convey our hope that the Senator and other members of the congressional left are broadening their dislike of Noriega to include other notorious Central American drug runners.
The Sandinistas of Nicaragua, for example, also are part of the Castro-Medellin cartel nexus.
In his letter and on the basis of his losing vote Tuesday against U.S. aid for the Nicaraguan opposition, Senator Kerry makes clear he has not made that intellectual leap.
We were wrong.
THROUGHOUT THE 1980s, investors have been looking for creative alternatives to traditional modes of financial planning.
Capital has been democratized, and people want in.
Too often, however, small investors are left with the same stale solutions that appealed to previous generations of fiduciary strategists.
Now a startling new approach is available to building your financial portfolio without undue risk, without extensive planning and without hurting your life style one bit!
This is particularly good news for those who hate risk, who are incapable of doing extensive amounts of planning and who refuse to see their life styles hurt in any way.
You know who you are.
My revolutionary system is also useful for those who have tried customary forms of growing their currency cushion.
Like all Americans seeking chronic prosperity, I do find it necessary to plunge certain funds into conservative monetary tools, if only to assuage my father-in-law, who believes in such things.
So throughout the decade I have maintained my share of individual retirement accounts and CDs, and tinkered with stocks, bonds and mutual funds, as well as preserving my necessary position in the residential real-estate market.
Return on this fine portfolio has been modest when it has not been negative.
Figure 1 demonstrates the performance of those businesses I've invested in during this prosperous decade (see accompanying illustration -- WSJ Oct. 20, 1989).
Oil-related properties suffered a huge decline until I divested myself of all such stocks in 1985, at which point the industry, while not lighting up any Christmas trees, began a slow recovery.
Likewise, mutual funds remained relatively flat until I made what was, for me, a serious investment.
By 1987, these properties were in a tailspin, causing my broker at Pru-Bache to remark that she'd "never seen anything like it."
Concerned for her state of mind, I dropped them -- and the market instantly began its steady climb back to health.
Perhaps most dramatic was the performance of the metropolitan New York real-estate market, which was booming until I entered it in late 1988, at which time it posted the first negative compound annual growth rate in years.
Disgusted, I cast around for a different way to plan my asset distribution, and with hardly any heavy breathing the answer struck me: I was doing it already!
We've all got money to spend, some of it clearly disposable since we keep disposing of it.
Bank it?
Not really!
Sock it away in long-term instruments?
Nonsense!
Daily living is the best possible investment!
Your priorities may be different, but here in Figure 2 is where I've chosen to build for the future: personal space; automotive pursuits; children's toys; gardening equipment, bulbs and shrubs; and finally, entertainment, perhaps the best investment of all.
All have paid off for me in double-digit annual growth and continue to provide significant potential.
At least, according to my calculations.
Personal space (Figure 3) has grown 35% annually over the course of the decade, a performance that would compare positively with an investment in, say, synthetic-leather products for the interiors of cold-weather vehicles, which my cousin got into and sort of regrets to this day.
The assortment of expensive children's toys that I have purchased wisely at a host of discount-toy brokerage firms (Figure 4) has increased handsomely in total asset value far beyond any personal investment except, perhaps, for my record collection, whose worth, I think it's safe to say, is incalculable.
Continued investment in my 1984 subcompact has been part of my strategy (Figure 5), with present annual contributions now equaling more than 60% of the car's original value.
According to my calculations, these outlays should have brought the value of my sedan to more than $22,000 on the open market (Figure 6), where I plan to offer it shortly.
Expansion of my living space has produced an obvious need for maintenance and construction of suitable lawns, shrubs and bushes fitting to its suburban locale.
I have thus committed sufficient personal outlay to ensure that my grounds and lodgings will never be short of greens and flowers.
My initial stake in this blooming enterprise has grown tenfold, according to my conservative calculations.
At the same time, my share in a wide variety of entertainment pursuits has given perhaps the most dramatic demonstration of the benefits of creative personal financial planning.
Over the course of the decade, for instance, my return on investment in the area of poker alone (Figures 7A and 7B) has been most impressive, showing bodacious annual expansion with -- given the way my associates play -- no sign of abatement into the 1990s and beyond.
With this personal strategy firmly in place, I look forward to years of fine life-style investments and increasing widespread leverage.
My kids' college education looms as perhaps the greatest future opportunity for spending, although I'll probably have to cash in their toy portfolio to take advantage of it.
But with every step I take, I'm building wealth.
You can, too, if you, like me, refuse to bite the bullet.
So go out there and eat that debt.
You're right there in the mainstream of American business, building value on the back of insupportable expenditures.
Henry Kravis, watch out!
Mr. Schwartz is a business executive and writer in New York.
WHEN JAMES SCHWARTZ was just a lad his father gave him a piece of career advice.
"He told me to choose an area where just by being mediocre I could be great," recalls Mr. Schwartz, now 40.
He tried management consulting, traded in turquoise for a while, and even managed professional wrestlers.
Now he has settled into a career that fits the bill -- financial planning.
It should be noted that Mr. Schwartz, who operates out of Englewood, Colo., is a puckish sort who likes to give his colleagues the needle.
But in this case the needle has a very sharp point.
Though it's probably safe to assume that the majority of financial planners are honest and even reasonably competent, the fact remains that, as one wag puts it, "anybody who can fog a mirror" can call himself a financial planner.
Planners now influence the investment of several hundred billion dollars, but in effect they operate in the dark.
There is no effective regulation of planners, no accepted standard for admission into their ranks -- a dog got into one trade group -- no way to assess their performance, no way even to know how many of them there are (estimates range from 60,000 to 450,000).
All anyone need do is hang up a shingle and start planning.
So it should come as no shock that the profession, if that's what it is, has attracted a lot of people whose principal talents seem to be frittering away or flat-out stealing their clients' money.
Alarmed, state and federal authorities are trying to devise ways to certify and regulate planners.
Industry groups and reputable planners who are members of them want comprehensive standards, too; they're tired of seeing practitioners depicted collectively in the business press as dumber than chimpanzees and greedier than a herd of swine.
But reform hasn't taken hold yet.
"The industry is still pretty much in its Wild West days," says Scott Stapf, director of investor education for the North American Securities Administrators Association.
An admittedly limited survey by NASAA, whose members are state securities-law regulators, found that between 1986 and 1988 "fraud and abuse" by financial planners cost 22,000 investors $400 million.
The rogues' gallery of planners involved includes some convicted felons, a compulsive gambler or two, various businessmen who had planned their own previous ventures right into bankruptcy, and one man who scammed his wife's grandmother.
What's more, the losses they and the others caused "are just what we are stumbling over," says Mr. Stapf, adding that the majority of misdeeds probably go undetected.
So do just about all the losses that could be attributed to the sheer incompetence of unqualified planners.
Nobody can estimate the toll, but John Gargan, a Tampa, Fla., planner and head of one trade group, the International Association of Registered Financial Planners, thinks the danger to investors from incompetence is "humongous," far greater than that from crookery.
His group, like others, wants minimum standards applied to all who call themselves financial planners.
Surveying all this, some people now think the best planner might be no planner at all.
For most investors "the benefits just aren't worth the risks," says Barbara Roper, who follows financial-planning issues for the Consumer Federation of America, a consumer-advocacy organization based in Washington.
She concedes that such a position is "unfair" to the thousands of conscientious and qualified people plying the trade, but as a consumer advocate she feels impelled to take it.
She says her group used to give tips on selecting planners -- check educational and experience credentials, consult regulators and Better Business Bureaus -- but found that even some people who took these steps "were still getting ripped off."
The bad news, however, hasn't been bad enough to kill the growing demand for financial planning.
The Tax Reform Act of 1986, which eliminated many tax shelters peddled by planners, and the stock market crash the next year did cause a sharp slump in such demand, and many planners had to make an unplanned exit from the business.
But membership in the International Association of Financial Planners (IAFP), the industry's biggest trade group, is still nearly triple what it was in 1980, and it's believed that the ranks of planners who don't belong to any group have soared as well.
An estimated 10 million Americans are now using financial planners, and the pool of capital they influence is enormous.
A survey of 54,000 of them conducted by the IAFP in April showed that these practitioners alone had controlled or guided the investment of $154 billion of their clients' money in the previous 12 months.
The sheer number of planners makes the business extremely difficult, if not impossible, to regulate.
Even the minority of them who must register with the Securities and Exchange Commission as "investment advisers" -- people who are in the business of counseling others on the buying and selling of securities specifically -- have been enough to swamp the agency's capacity.
The SEC has only about 200 staffers assigned to keep tabs on investment advisers -- about the same as in 1980 -- even though the number of advisers has tripled to about 15,000 over the past decade.
Currently, a registered investment adviser can expect an SEC audit only once every 12 years.
A lot of bad things can happen in 12 years.
"It doesn't take a rocket scientist to figure out our problem," says Kathryn McGrath, director of the SEC's division of investment management.
So the SEC has proposed to Congress that much of the job of oversight be turned over to an industry-funded, self-regulatory organization patterned on the National Association of Securities Dealers, which operates in the brokerage business.
Such an organization could, among other things, set minimum standards for competence, ethics and finances and punish those investment advisers who broke the rules.
The proposal has set off a lively debate within an industry that was far from united to begin with.
Mr. Schwartz, the puckish planner from Englewood, Colo., says that allowing the business to police itself would be "like putting Dracula in charge of the blood bank."
Mr. Gargan, the Tampa planner who heads one trade group, favors simply assessing the industry and giving the money to the SEC to hire more staff.
(Mr. Gargan's views are not greeted with wild enthusiasm over at the IAFP, the major industry organization.
When the IAFP recently assembled other industry groups to discuss common standards that might be applied to planners, Mr. Gargan's group was excluded.
That may be because Mr. Gargan, smarting at what he considered slurs on his membership standards made by the rival group, enrolled his dog, Beauregard, as a member of the IAFP.
Then he sent the pooch's picture with the certificate of membership -- it was made out to "Boris `Bo' Regaard" -- to every newspaper he could think of.)
The states have their own ideas about regulation and certification.
NASAA, the organization of state securities regulators, is pushing for a model regulatory statute already adopted in eight states.
It requires financial planners to register with states, pass competency tests and reveal to customers any conflicts of interest.
The most common conflict involves compensation.
NASAA estimates that nearly 90% of planners receive some or all of their income from sales commissions on securities, insurance and other financial products they recommend.
The issue: Is the planner putting his clients into the best investments, or the ones that garner the biggest commissions?
In 1986 the New York attorney general's office got an order from a state court in Albany shutting down First Meridian Corp., an Albany financial-planning firm that had invested $55 million on behalf of nearly 1,000 investors.
In its notice of action, the attorney general said the company had promised to put clients into "balanced" investment portfolios; instead, the attorney general alleged, the company consistently shoved unwary customers into high-risk investments in paintings, coins and Florida condos.
Those investments paid big commissions to First Meridian, payments investors were never told about, the attorney general alleged.
Investors were further assured that only those with a minimun net worth would be accepted.
In practice, the attorney general alleged in an affidavit, if an investor had access to cash "the chances of being turned down by First Meridian were about as probable as being rejected by the Book-of-the-Month Club."
And, the attorney general added, First Meridian's president, Roger V. Sala, portrayed himself as a "financial expert" when his qualifications largely consisted of a high-school diploma, work as a real-estate and insurance salesman, and a stint as supervisor at a highway toll booth.
First Meridian and its officials are currently under investigation for possible criminal wrongdoing, according to a spokeswoman for the attorney general.
Harry Manion, Mr. Sala's attorney, says his client denies any wrongdoing and adds that the attorney general's contentions about First Meridian's business practices are incorrect.
As for Mr. Sala's qualifications, "the snooty attorneys for the state of New York decided Mr. Sala wasn't qualified because he didn't have a Harvard degree," says Mr. Manion.
Civil suits against planners by clients seeking recovery of funds are increasingly common.
Two such actions, both filed earlier this year in Georgia state court in Atlanta, could be particularly embarrassing to the industry: both name J. Chandler Peterson, an Atlanta financial planner who is a founder and past chairman of the IAFP, as defendant.
One suit, filed by more than three dozen investors, charges that Mr. Peterson misused much of the $9.7 million put into a limited partnership that he operated and promoted, spending some of it to pay his own legal bills and to invest in other companies in which he had an interest.
Those companies, in turn, paid Mr. Peterson commissions and fees, the suit alleges.
The other suit was filed by two men in a dispute over $100,000 investments each says he made with Mr. Peterson as part of an effort to purchase the Bank of Scottsdale in Scottsdale, Ariz.
One plaintiff, a doctor, testified in an affidavit that he also gave Mr. Peterson $50,000 to join a sort of investment club which essentially gave the physician "the privilege of making additional investments" with Mr. Peterson.
In affidavits, each plaintiff claims Mr. Peterson promised the bank purchase would be completed by the end of 1988 or the money returned.
Mr. Peterson took the plaintiffs' and other investors' money to a meeting of the bank's directors.
Wearing a business suit and western-style hat and boots, he opened up his briefcase and dumped $1 million in cash on a table in front of the directors, says Myron Diebel, the bank's president.
"He said he wanted to show the color of his money," recalls Mr. Diebel.
Bank officials, however, showed him the door, and the sale never came off.
According to the suit, Mr. Peterson has yet to return the plaintiffs' investment.
They want it back.
Mr. Peterson declines to comment on specific allegations in the two suits, saying he prefers to save such responses for court.
But he does say that all of his activities have been "entirely proper."
On the suit by the limited partners, he says he is considering a defamation suit against the plaintiffs.
The suit, he adds, "is almost in the nature of a vendetta by a handful of disgruntled people."
Rearding the suit over the bank bid, Mr. Peterson says it is filled with "inflammatory language and half truths."
He declines to go into specifics.
Mr. Peterson says the suits against him are less a measure of his work than they are a "sign of the times" in which people generally are more prone to sue.
"I don't know anybody in the industry who hasn't experienced litigation," he says.
Mr. Peterson also says he doesn't consider himself a financial planner anymore.
He now calls himself an "investment banker."
In many scams or alleged scams involving planners, it's plain that only a modicum of common sense on the part of the investors would have kept them out of harm's way.
Using it, wouldn't a proessional hesitate to pay tens of thousands of dollars just for a chance to invest witha planner?
Other cases go to show that an old saw still applies: If it sounds too good to be true, it probably is.
Certificates of deposit don't pay 23% a year, for example, but that didn't give pause to clients of one Alabama planner.
Now they're losers and he's in jail in Mobile County.
CDs yielding 40% are even more implausible -- especially when the issuing "bank" in the Marshall Islands is merely a mail drop watched over by a local gas-station operator -- but investors fell for that one too.
And the Colorado planner who promised to make some of his clients millionaires on investments of as litle as $100?
Never mind.
You already know the answer.
Mr. Emshwiller is a staff reporter in The Wall Street Journal's Los Angeles bureau.
At the ritzy Fashion Island Shopping Center, the tanned and elegant ladies of this wealthy Southern California beach community disembark from their Mercedes-Benzes and BMWs for another day of exercising their credit cards.
They root among the designer offerings at Neiman-Marcus and Bullocks Wilshire.
They stroll through the marble-encased corridors of the Atrium Court.
They graze at the Farmers Market, a combination gourmet food court and grocery store, while a pianist accompanies the noon fashion show with a selection of dreamy melodies.
"The beautiful look of wool," croons the show's narrator, "slightly Victorian in its influence...."
Meanwhile, in the squat office buildings that ring Fashion Island, the odds are good that someone is getting fleeced.
Law-enforcement authorities say that at any given time, a host of fraudulent telemarketing operations mingle with the many legitimate businesses here.
"They seem to like these industrial parks," says Kacy McClelland, a postal inspector who specializes in mail fraud.
"We call them fraud farms."
Welcome to that welter of contradictions known as Newport Beach.
This city of more than 70,000 is known for sunshine, yachts and rich residents.
It is also known as the fraud capital of the U.S., dubbed by investigators and the media as the "Cote de Fraud".
How does a community famous for its high living end up as a haven for low-lifes?
Clearly, the existence of the former lures the latter.
The places renowned for breeding bunco, like the Miami neighborhood known as the "Maggot Mile" and Las Vegas's flashy strip of casinos, invariably offer fast cars, high rollers, glamorous women and lots of sunshine.
You don't hear much about unusual concentrations of fraud in Green Bay or Buffalo.
Con men hate snow.
Newport Beach fits the scam artists' specifications perfectly.
What more could a con man in search of the easy life ask for?
Nothing seems hard here.
The breezes are soft, the waves lap gently and the palm trees sway lazily.
Nightlife is plentiful.
Moreover, ostentation is appreciated.
The median price of homes is $547,000; more than 9,000 vessels fill what the chamber of commerce calls the nation's largest pleasure-boat harbor.
"Blondes, cocaine and Corvettes," mutters Mr. McClelland.
"That's what they're after."
The rich image of Newport Beach also helps lend the con artists' operation an air of respectability.
"One reason they use Newport Beach is that it sounds swankier than most addresses," says David Katz, a U.S. attorney who, until recently, headed a multi-agency Southern California fraud task force.
"Newport Beach is known in Rhode Island for having a lot of rich people."
No wonder all kinds of big-time scams have flourished here, from phony tax-sheltered Bible sales to crooked car dealers to bogus penny-stock traders.
But above all, this is the national headquarters for boiler-room operators, those slick-talking snake-oil salesmen who use the telephone to extract money from the gullible and the greedy and then vanish.
Because only a fraction of them are ever prosecuted, nobody really knows how much money bogus telemarketing operators really harvest.
"I've heard that there is $40 billion taken in nationwide by boiler rooms every year," Mr. McClelland says.
"If that's true, Orange County has to be at least 10% of that."
And most of the truly big scams in Orange County seem to originate in Newport Beach or one of the other well-heeled communities that surround this sliver-like city that hooks around a point of land on the California coast south of Los Angeles.
In fact, sophisticated big-bucks boiler-room scams are known generically among law-enforcement types as "Newport Beach" operations.
That contrasts with the penny-ante sales of things such as pen-and-pencil sets and office supplies that are known as "Hollywood" scams.
Newport Beach telemarketers concentrate on precious metals and oil-leasing deals that typically cost thousands of dollars a shot.
The investors range from elderly widows to affluent professionals.
In one ingenious recent example of a Newport Beach boiler room, prospective investors in Capital Trust Inc. were allegedly told that their investment in precious metals was insured against losses "caused by employees due to dishonesty, destruction or disappearance," according to an indictment handed up by a federal grand jury in Los Angeles last month.
Thus falsely reassured, investors sent $11.4 million to the Newport Beach company, most of which was diverted to unauthorized uses, the indictment charges.
Douglas Jones, an attorney representing Richard O. Kelly Sr., the chairman and president of Capital Trust, says his client denies that there was any attempt to defraud investors.
"There were some business deals that went bad," Mr. Jones says, "but no intent to defraud."
Newport Beach operations differ from the Hollywood boiler rooms in style as well as in dollars.
Traditionally, boiler rooms operate on the cheap, since few, if any, customers ever visit their offices.
Indeed, the name derives from the tendency among telemarketing scammers to rent cheap basement space, near the boiler room.
But, says Mr. Katz, the U.S. attorney, "the interesting thing about Newport Beach operations is that they give themselves the indulgence of beautiful offices, with plush furnishings.
When we go there, it's quite different from these Hollywood places where the sandwiches are spread out on the table and the people are picking their noses."
The Newport Beach operators also tend to indulge themselves privately.
Investigators cite the case of Matthew Valentine, who is currently serving a six-year sentence at Lompoc Federal Prison for his role in Intech Investment Corp., which promised investors returns of as much as 625% on precious metals.
Mr. Valentine, who pleaded guilty to five counts of fraud in federal court in Los Angeles, drove a leased Mercedes and lived in an expensive home on Lido Isle, an island in Newport's harbor, according to investigators.
With the $3 million received from investors, he took frequent junkets with friends to exotic locales and leased an expensive BMW for his girlfriend, whom he met at the shop where he got his custom-tailored suits.
"It's amazing the amount of money that goes up their nose, out to the dog track or to the tables in Las Vegas," Mr. Katz says.
All this talk of boiler rooms and fraud is unnerving to the city's legitimate business element.
Vincent M Ciavarella, regional manager of Property Management Systems, insists he doesn't know of any bogus telemarketers operating in the 1.6 million square feet of office space around Fashion Island that his company leases for Irvine Co., the owner and developer of the project.
Mr. Ciavarella has rejected a few prospective tenants who provided "incomplete" financial information and acknowledges that illegitimate operators "are not easily detectable.
" (Investigators stress that building owners are victims, too, since boiler rooms often leave without paying rent.)
Richard Luehrs, president of the Newport Harbor Area Chamber of Commerce, calls boiler rooms a "negative we wish we could get rid of."
Actually, "we don't get much negative publicity about this," he insists, "except for the press who write about it."
Mr. Lancaster is deputy chief of The Wall Street Journal's Dallas bureau.
YOU WENT to college and thought you got an education.
Now you discover that you never learned the most important lesson: How to send your kids to college.
True, when you went to college, there wasn't that much to learn.
Stick some money in an interest-bearing account and watch it grow.
Now, investment salesmen say it's time to take some risks if you want the kind of returns that will buy your toddler a ticket to Prestige U. in 18 years.
In short, throw away the passbook and go for the glory.
The reason is cost.
Nothing in the annals of tuition readied parents for the 1980s.
Tuitions at private colleges rose 154% in the 10 years ended in June of this year; that's twice the 77% increase in consumer prices for the same period.
A year at Harvard now goes for $19,395.
By 2007, when this year's newborns hit campus, a four-year Ivy League sheepskin will cost $300,000, give or take a few pizzas-with-everything at exam time.
Stanford, MIT and other utmosts will cost no less.
So what's a parent to do?
Some investment advisers are suggesting, in effect, a bet on a start-up investment pool -- maybe even on margin.
Others prefer deep-discount zero-coupon bonds.
Still others say, Why not take a chance on a high-octane growth fund?
"You're not going to make it in a 5% bank account," says James Riepe, director of mutual funds at T. Rowe Price.
To get the necessary growth, adds Murray Ruffel, a marketing official at the Financial Programs mutual-fund group, "you need to go to the stock market."
In other words, a little volatility never hurt.
It never hurt anyone, that is, unless the growth funds don't grow when you need them to.
Or the zero-coupon bonds turn out not to have been discounted deeply enough to pay your kid's tuition.
That's the dilemma for today's parent.
Although many experts are advising risk, no one has a good answer for you if the risk doesn't pay off.
Help may be on the way.
The antitrust division of the Justice Department is investigating the oddly similar tuition charges and increases among the top schools.
Fear of the price police could help cool things off in the 1990s.
And then there's always State U.
But parents' craving for a top-rated education for their children is growing like their taste for fancy wheels and vintage wine.
Belatedly aware of public concern, lawmakers and financial middlemen are working overtime to create and sell college savings and investment schemes.
Their message, explicit or implicit, is that a good college will cost so much by whenever you want it that the tried and true won't do anymore.
Forget about Treasury bills or a money-market fund.
The latest wave of marketing is instructive.
Several outfits -- including the Financial Programs, Franklin, and T. Rowe Price mutual-fund groups and the Edward D. Jones brokerage house -- are advertising "college planner" tables and charts that tell you how much you need to put aside regularly.
The calculations generally rely on an after-tax rate of return of 8% annually -- a rate historically obtainable by the individual in only one place, the stock market.
Most of the mailers are free, but Denver-based Financial Programs sells, for $15, a version customized to the age of the child and the college of choice.
The figures are shocking.
To build a nest egg that would pay for Stanford when a current first-grader reaches college age, parents would need to set aside $773.94 a month -- for 12 years.
They can cut this to $691.09 a month if the investing keeps up through college.
And they can further reduce the monthly amount if they start saving earlier -- when mother and child come home from the hospital.
Plugging a cheaper college into the formulas still doesn't generate an installment most people can live with.
Using a recent average private-school cost of about $12,500 a year, T. Rowe Price's planner prescribes $450 monthly if the plan begins when the child is six.
Since the formula assumes an 8% before-tax return in a mutual fund, there would also be $16,500 in taxes to pay over the 12 years.
Not everyone is so pessimistic.
"People are basically peddling a lot of fear," says Arthur Hauptman, a consultant to the American Council on Education in Washington.
He takes issue with projections that don't factor in students' own contribution, which reduces most parents' burden substantially.
Still, he says, "it's no bad thing" if all the marketing prods people into putting aside a little more.
"The situation you want to avoid is having somebody not save anything and hope they'll be able to do it out of current income," he says.
"That's crazy."
His advice: Don't panic.
Parents, he says, should aim at whatever regular investment sum they can afford.
Half the amount that the investment tables suggest might be a good goal, he adds.
That way, parents will reduce borrowings and outlays from current income when the time comes to pay tuition.
Mr. Hauptman reckons that the best investment choice is mutual funds because they are managed and over time have nearly kept up with the broad stock averages.
He favors either an all-stock fund or a balanced fund that mixes both stocks and bonds.
In their anxiety, however, parents and other student benefactors are flocking to new schemes.
They have laid out about $1 billion for so-called baccalaureate zero-coupon municipal bonds -- so far offered by Connecticut, Illinois, Virginia and eight other states.
And they have bought about $500 million in prepaid-tuition plans, offered in Michigan, Florida and Wyoming.
The prepaid plans take payment today -- usually at current tuitions or at a slight discount -- for a promise that tuition will be covered tomorrow.
The baccalaureate bonds -- tax-free, offered in small denominations and usually containing a provision that they won't be called before maturity -- seem to be tailor-made for college savers.
Like other zeros, they pay all their interest at maturity, meaning that buyers can time things so that their bonds pay off just when Junior graduates from high school.
Their compounding effect is also alluring.
In June, Virginia sold bonds for $268.98 that will pay $1,000 in 2009.
But Richard Anderson, head of the Forum for College Financing Alternatives, at Columbia University, a research group partly financed by the federal government, says zeros are particularly ill-suited.
Their price falls further than that of other bonds when inflation and interest rates kick up.
That won't matter if they are held to maturity, but if, for any reason, the parents need to sell them before then, there could be a severe loss of principal.
Had zeros been available in 1972 and had parents bought a face amount equal to four years' tuition at the time, aiming for their children's 1988 enrollment, they would have been left with only enough to pay for two years, Mr. Anderson figures.
Most other bonds, however, would probably not have fared much better.
The prepaid plans may be a good bet, provided the guarantee of future tuition is secure.
Issuing states generally limit the guarantees to in-state institutions, however, and buyers get refunds without much interest if the children don't attend the specified schools.
Two private groups are seeking Securities and Exchange Commission approval for plans that could be more broadly transferable.
Mr. Anderson wants the prestige colleges to sponsor such a plan.
The issue here may be the soundness of the guarantee.
Prepayments, much like mutual-fund purchases, are pooled for investment.
Sponsors are naturally counting on their ability to keep ahead of tuition inflation with investment returns.
But buyers are essentially betting on a start-up investment fund with no track record -- and some have been encouraged to borrow to do so.
One problem is that the Internal Revenue Service has decided that the investment earnings and gains of the sponsors' funds are taxable.
The colleges, as educational institutions, had hoped that wouldn't be the case.
Based on historical rates of return, Mr. Anderson reckons a 100% stock portfolio, indexed to the market, would have kept up with tuition and taxes in the 20th century.
But sponsors might not pick the stocks that will match the market.
And they're leaning more toward fixed income, whose returns after tax have trailed tuition increases.
"I'm not sure they're going to make it work," says Mr. Anderson.
What happens if the sponsors don't have the cash to pay the tuitions?
Florida and Wyoming have backed up their guarantees with the full faith and credit of the state governments, meaning that taxpayers will pick up any slack.
Not so Michigan.
Its plan is set up as an independent agency.
The state says there's no worry -- investment returns, combined with fees and the gains from unused plans, will provide all the cash it needs.
Mr. Putka covers education from The Wall Street Journal's Boston bureau.
If you start saving for your child's eduction on Jan. 1, 1990, here's the monthly sum you will need to invest to pay for four years at Yale, Notre Dame and University of Minnesota.
Figures assume a 7% annual rise in tuition, fees, room and board and an 8% annual investment return.
Note: These figures are only for mandatory charges and don't include books, transportation etc.
*For in-state students
Source: PaineWebber Inc.
AMONG THE CATFISH farmers in the watery delta land of Humphreys County, Miss., Allen D. Tharp of Isola was one of the best known and most enterprising.
He sold quarter-inch fingerlings to stock other farmers' ponds, and he bought back one-pound-or-so food-fish that he "live-hauled" to market along with his own whiskery crop.
And he nearly always bought and sold for cash.
Along the way, Mr. Tharp omitted a total of $1.5 million from his receipts reported on federal tax returns for three years.
The returns landed in the hands of an Internal Revenue Service criminal investigator, Samuel James Baker.
Mr. Baker interviewed or wrote to hundreds of catfish farmers, live-haulers and processors throughout the South before coming up with detailed estimates of purchases and sales, in pounds and dollars, by Mr. Tharp and others.
Unknown to Mr. Tharp, he had fouled his net on a special IRS project to catch catfish farmers and haulers inclined to cheat on their taxes.
Confronted with the evidence, Mr. Tharp pleaded guilty to one charge of filing a false return and was fined $5,000 and sentenced to 18 months in prison.
He also owes a lot of back taxes, interest and civil fraud penalties.
A lot of taxpayers out there aren't as paranoid as one might think.
Federal and state tax enforcers develop many group targets for investigation, on the basis of occupation, high income, type of income, or some other characteristic that may signal an opportunity or tendency to hide income or exaggerate deductions.
Many professions long have seemed to be targets because of the exotic or ludicrous efforts of some members to offset high income with fake losses from phony tax shelters: dentists who invested in dubiously dubbed foreign films or airline pilots who raised racehorses on their days off.
Mail-order ministers have been squelched.
Now, television and radio evangelists are under scrutiny.
The IRS recently won part of its long-running battle with the Church of Scientology over exemptions when the U.S. Supreme Court held that members' payments to the church weren't deductible because the members received services in return.
IRS statistics show that the more persistent hiders of income among sole proprietors of businesses include used-car dealers, entertainment producers, masons, roofers, and taxi owners.
Small businesses in general account for almost 40% of unreported personal income, the IRS has said.
Once such abuses become so pervasive, the IRS builds another factor into its secret computer formula for selecting returns for audit and doesn't need special projects for them.
San Franciscans have a much higher incidence of audits than average because more of them score high under that formula, not because IRS agents envy their life styles.
Many openings for mass cheating, such as questionable tax shelters and home offices, have gaped so broadly that Congress has passed stringent laws to close them.
Deductions of charitable gifts of highly valued art now must be accompanied by appraisals.
And laws requiring the reporting of more varieties of transactions have enabled the IRS to rely on computers to ferret out discrepancies with returns and to generate form-letter inquiries to taxpayers.
Unreported alimony income can be spotted by computer because a payer of alimony (who gets a deduction) must report the former spouse's Social Security number.
Passport applicants now must give Social Security numbers, enabling the IRS to see whether Americans living abroad are filing required U.S. returns.
But while IRS computers focus routinely on target groups like these, the agency has assigned many agents to special projects that need more personal attention.
In most cases, the IRS says, these projects are local or regional, rather than national, and arise because auditors in an area detect some pattern of abuse among, say, factory workers claiming that having a multitude of dependents frees them from tax withholding or yacht owners deducting losses from sideline charter businesses.
The national office currently has 21 noncriminal audit projects, according to Marshall V. Washburn, deputy assistant commissioner for examination.
Auditors involved in noncriminal projects can't send anyone to jail, but they can make life miserable in other ways -- for one, by imposing some of the 150 different civil penalties for negligence, failure to file a return, and the like.
The targeted audit groups include direct sellers -- people who sell cosmetics, housewares and other items door to door or at home parties -- and employers who label workers as independent contractors instead of employees, to avoid the employer share of payroll taxes.
Other projects look for offenders among waiters who get cash tips, people who engage in large cash transactions, and people whose returns show they sold a home for a profit without reinvesting the capital gain in another home by the end of the same year; the gain must be rolled over within two years to defer tax.
And now that returns must show dependents' Social Security numbers, the IRS wants to see which dependents show up on more than one return -- and which dependents turn out to be deceased.
Impetus for the direct-seller project came from a congressional hearing some years back.
It prompted an IRS study that found many sellers were concealing income and treating large amounts of nondeductible travel and other personal expenses as business costs, Mr. Washburn says.
The study provided criteria for singling out returns of "potentially noncompliant" taxpayers who report low income and large expenses from a part-time business.
The Tax Court recently denied business deductions by Mr. and Mrs. Peter S. Rubin of Cherry Hill, N.J., who both were part-time distributors of Amway products in addition to their regular jobs as sales people in other fields.
For 1984, they reported gross income of $1,647 from Amway sales, offset by expenses totaling $16,746 -- including car costs of $6,805 and travel and entertainment costs of $5,088.
The Tax Court didn't believe that the Rubins, who earned $65,619 in their regular jobs, treated the sideline as a real business and derived "merely incidental elements of recreation and other personal pleasure and benefits" from it.
The Direct Selling Association, a trade group, points out that its members, which include Amway Corp., cooperate with the IRS to distribute tax-compliance material to sales people and are helping to prepare a public-service television program on the subject.
The independent-contractor project, which began in 1988, involves about 350 IRS agents.
In the fiscal nine months ended June 30, reports Raymond P. Keenan, assistant commissioner for collection, they examined about 13,000 employers, assessed more than $67 million in delinquent employment taxes, and reclassified about 56,000 workers as employees instead of self-employed contractors.
The number of misclassified workers may be in the millions, mostly paid by small firms.
Many workers, especially professionals, want to remain independent to avoid tax withholding and to continue to deduct many expenses that employees can't.
But many others, who want to qualify for employee benefits and unemployment compensation, become tipsters for the IRS, says Jerry Lackey, who manages the IRS project's force of nine agents in north and central Florida from Orlando.
Firms that are paying employment taxes also provide leads to competitors that aren't, he says.
In his area, Mr. Lackey continues, the miscreant employers most commonly are in construction -- doing framing, drywall, masonry and similar work.
But a medical clinic with about 20 employees wrongly listed all of them -- including physicians and receptionists -- as independent contractors.
The IRS assessed the clinic $350,000 in back payroll taxes.
It assessed nearly $500,000 against a cruise-ship company that carried about 100 deckhands, cooks, bartenders, entertainers and other employees as self-employed independents.
Revenue-short states also are becoming more aggressive pursuers of tax delinquents, and perhaps none tracks them down with more relish than does New York since it acquired an $80 million computer system in 1985.
The state's tax enforcers have amassed data bases from other New York agencies that license or register professionals and businesses; from exchange agreements with the IRS, 24 other states, and two Canadian provinces, and even from phonebook Yellow Pages.
Thus armed for massive matching of documents by computer, they single out high-income groups, looking primarily for people who haven't filed New York income-tax returns.
The state has combed through records relating to architects, stockbrokers, lawyers in the New York City area, construction workers from out of the state, and homeowners who claim to be residents of other states -- especially Florida, which has no personal income tax.
Soon to feel the glare of attention are lawyers elsewhere in the state, doctors, dentists, and accountants, says Frederick G. Hicks, director of the tax-department division that develops the computer-matching programs.
The department has collected over $6.5 million from brokers so far and recommended more than 30 of them for criminal prosecution.
In the early stage of checking people with incomes exceeding $500,000 who were filing nonresident returns, it squeezed $7.5 million out of a man who was posing as a Florida resident.
"We think we can reclaim hundreds of millions of dollars just through the nonresident project," Mr. Hicks declares.
Mr. Schmedel is editor of The Wall Street Journal's Tax Report column.
In finding "good news" in Berkeley's new freshman admissions plan ("The Privileged Class," editorial, Sept. 20), you're reading the headline but not the story.
The plan indeed raises from 40% to 50% the number of freshmen applicants admitted strictly by academic criteria.
But that doesn't mean "half of the students attending Berkeley" will be admitted this way.
The plan is talking about applicants admitted, not students who enroll.
Since the "yield" from this top slice of applicants is relatively low, boosting admits from 40% to 50% will boost registrants from about 31% to 38% of the class.
In addition, perhaps 5% of registrants will come from a new category consisting of applicants whose academic credentials "narrowly missed" gaining them admission in the first category.
But against that combined increase of 12% in students chosen by academic criteria, the plan eliminates a large category in which admissions now are based on grades, test scores and "supplemental points" for factors such as high-school curriculum, English-language proficiency and an essay.
This category now accounts for about 19% of admits and 22% of registrants.
The plan thus will decrease by 22%, for a net loss of 10%, the number of students admitted primarily by academic criteria.
Who will take over these places?
The plan creates a new category of students from "socioeconomically disadvantaged backgrounds," a concept not yet defined, and gives them about 10% of the class.
One of the plan's authors has defended the "socioeconomic disadvantage" category as perhaps making more sense than the current affirmative-action preferences based on race.
Perhaps it does.
But the new category does not replace or reduce Berkeley's broad racial preferences.
Nor will students from racial-minority groups who are admitted through the new category be counted against the affirmative-action "target" for their group.
The plan thus places a large new affirmative-action program, based on "socioeconomic disadvantage," on top of the existing program based on race.
The role of academic criteria in choosing Berkeley's freshmen can only decline as a result.
Stephen R. Barnett Professor of Law University of California Berkeley, Calif.
FOR THOSE WHO DELIGHT in the misfortune of others, read on.
This is a story about suckers.
Most of us know a sucker.
Many of us are suckers.
But what we may not know is just what makes somebody a sucker.
What makes people blurt out their credit-card numbers to a caller they've never heard of?
Do they really believe that the number is just for verification and is simply a formality on the road to being a grand-prize winner?
What makes a person buy an oil well from some stranger knocking on the screen door?
Or an interest in a retirement community in Nevada that will knock your socks off, once it is built?
Because in the end, these people always wind up asking themselves the same question: "How could I be so stupid?"
There are, unfortunately, plenty of answers to that question -- and scam artists know all of them.
"These people are very skilled at finding out what makes a person tick," says Kent Neal, chief of the economic-crime unit of the Broward County State Attorney's Office in Fort Lauderdale, Fla., a major haven for boiler rooms.
"Once they size them up, then they know what buttons to push."
John Blodgett agrees -- and he ought to know.
He used to be a boiler-room salesman, peddling investments in oil and gas wells and rare coins.
"There's a definite psychology of the sale and different personalities you pitch different ways," he says.
The most obvious pitch, of course, is the lure of big returns.
"We're all a little greedy.
Everyone is vulnerable," says Charles Harper, associate regional administrator for the Securities and Exchange Commission in Miami.
"These guys prey on human frailties."
While the promises of big profits ought to set off warning bells, they often don't, in part because get-rich-quick tales have become embedded in American folklore.
"The overnight success story is part of our culture, and our society puts an emphasis on it with lotteries and Ed McMahon making millionaires out of people," says Michael Cunningham, an associate professor of psychology at the University of Kentucky in Louisville.
"Other people are making it overnight, and the rest who toil daily don't want to miss that opportunity when it seems to come along."
Adds Spencer Barasch, branch chief for enforcement at the SEC in Fort Worth, Texas: "Why do people play the lottery when the odds are great against them?
People are shooting for a dream."
Clearly, though, scam artists have to be a bit more subtle than simply promising millions; the psychology of suckers isn't simply the psychology of the greedy.
There's also, for instance, the need to be part of the in-crowd.
So one popular ploy is to make a prospective investor feel like an insider, joining an exclusive group that is about to make a killing.
Between 1978 and 1987, for instance, SH Oil in Winter Haven, Fla., sold interests in oil wells to a very select group of local residents, while turning away numerous other eager investors.
The owner of the company, Stephen Smith, who has since pleaded guilty to state and federal fraud charges, confided to investors that he had a secret agreement with Amoco Oil Co. and said the location of his wells was confidential, according to a civil suit filed in a Florida state court by the Florida comptroller's office.
Neither the Amoco agreement nor the wells existed, the suit alleged.
Such schemes, says Tony Adamski, chief of the financial-crimes unit of the Federal Bureau of Investigation in Washington, D.C., appeal to investors' "desire to believe this is really true and that they are part of a chosen group being given this opportunity."
At times, salesmen may embellish the inside information with "the notion that this is some slightly shady, slightly illegal investment the person is being included in," says Mr. Cunningham.
In appealing to those with a bit of larceny in their hearts, the fraud artist can insist that a person keep an investment secret -- insulating himself from being discovered and keeping his victim from consulting with others.
It also adds to the mystery of the venture.
Mr. Blodgett, the boiler-room veteran, believes that for many investors, the get-rich-quick scams carry a longed-for element of excitement.
"Once people got into it, I was allowing them to live a dream," he says.
He phoned them with updates on the investment, such as "funny things that happened at the well that week," he says.
"You gave them some excitement that they didn't have in their lives."
(Mr. Blodgett, who was convicted in Florida state court of selling unregistered securities and in California state court of unlawful use of the telephone to defraud and deceive, is now on probation.
He says he has quit the business and is back in school, majoring in psychology with aspirations to go into industrial psychology.)
For some investors, it's the appearances that leave them deceived.
"The trappings of success go a long way -- wearing the right clothes, doing the right things," says Paul Andreassen, an associate professor of psychology at Harvard.
Conservative appearances make people think it's a conservative investment.
"People honestly lose money on risky investments that they didn't realize were a crapshoot," he says.
Paul Wenz, a Phoenix, Ariz., attorney, says a promise of unrealistic returns would have made him leery.
But Mr. Wenz, who says he lost $43,000 in one precious-metals deal and $39,000 in another, says a salesman "used a business-venture approach" with him, sending investment literature, a contract limiting the firm's liability, and an insurance policy.
When he visited the company's office, he says, it had "all the trappings of legitimacy."
Still others are stung by a desire to do both well and good, says Douglas Watson, commanding officer of the Los Angeles Police Department's bunko-forgery division.
Born-again Christians are the most visible targets of unscrupulous do-gooder investment pitches.
But hardly the only ones: The scams promise -- among other things -- to help save the environment, feed starving families and prevent the disappearance of children.
Psychologists say isolated people who don't discuss their investments with others are particularly at risk for fraud.
Scam artists seek out such people -- or try to make sure that their victims isolate themselves.
For instance, salesmen may counter a man's objection that he wants to discuss an investment with his wife by asking, "Who wears the pants in your family?"
Or an investor who wants his accountant's advice may be told, "You seem like a guy who can make up his own mind."
Often con artists will try to disarm their victims by emphasizing similarities between them.
William Lynes, a retired engineer from Lockheed Corp., says he and his wife, Lily, warmed to the investment pitches of a penny-stock peddler from Stuart-James Co. in Atlanta after the broker told them he, too, had once worked with Lockheed.
The Lyneses, of Powder Springs, Ga., have filed suit in Georgia state court against Stuart James, alleging fraud.
They are awaiting an arbitration proceeding.
They say the broker took them out for lunch frequently.
He urged them to refer their friends, who also lost money.
(Donald Trinen, an attorney for the penny-brokerage firm, denies the fraud allegations and says the Lyneses were fully apprised that they were pursuing a high-risk investment.)
"It's not uncommon for these guys to send pictures of themselves or their families to ingratiate themselves to their clients," says Terree Bowers, chief of the major-frauds section of the U.S. attorney's office in Los Angeles.
"We've seen cases where salesmen will affect the accent of the region of the country they are calling.
Anything to make a sale."
Experts say that whatever a person's particular weak point, timing is crucial.
People may be particularly vulnerable to flim-flam pitches when they are in the midst of a major upheaval in their lives.
"Sometimes when people are making big changes, retiring from their jobs, moving to a new area, they lose their bearings," says Maury Elvekrog, a licensed psychologist who is now an investment adviser and principal in Seger-Elvekrog Inc., a Birmingham, Mich., investment-counseling firm.
"They may be susceptible to some song and dance if it hits them at the right time."
They are obviously also more susceptible when they need money-retirees, for instance, trying to bolster their fixed income or parents fretting over how to pay for a child's college expenses.
"These people aren't necessarily stupid or naive.
Almost all of us in comparable circumstances might be victimized in some way," says Jerald Jellison, a psychology professor at the University of Southern California in Los Angeles.
Nick Cortese thinks that's what happened to him.
Mr. Cortese, a 33-year-old Delta Air Lines engineer, invested some $2,000 in penny stocks through a broker who promised quick returns.
"We were saving up to buy a house, and my wife was pregnant," says Mr. Cortese.
"It was just before the Christmas holidays, and I figured we could use some extra cash."
The investment is worth about $130 today.
"Maybe it was just a vulnerable time," says Mr. Cortese.
"Maybe the next day or even an hour later, I wouldn't have done it."
Ms. Brannigan is a staff reporter in The Wall Street Journal's Atlanta bureau.
Prices for seats on the New York Stock Exchange are recovering a bit after hitting a four-year low earlier this month.
Two seats on the Big Board were sold yesterday for $455,000, and then $500,000.
The previous sale was $436,000 on Oct. 17; the last time prices were that low was November 1985, when a seat sold for $425,000.
Prices peaked at $1,150,000 in September 1987.
Seats are currently quoted at $430,000 bid and $525,000 asked.
FOX HUNTING HAS been defined as the unspeakable in pursuit of the inedible, but at least it's exercise.
At least it has a little dash.
Most of us have to spend our time on pursuits that afford neither, drab duties rather than pleasures.
Like trying to buy life insurance, for instance, an endeavor notably lacking in dash.
Call it the uninformed trudging after the incomprehensible.
But sooner or later, most of us have to think about life insurance, just as we often have to think about having root-canal work.
And my time has come.
I'm 33, married, no children, and employed in writing stories like this one.
In times past, life-insurance salesmen targeted heads of household, meaning men, but ours is a two-income family and accustomed to it.
So if anything happened to me, I'd want to leave behind enough so that my 33-year-old husband would be able to pay off the mortgage and some other debts (though not, I admit, enough to put any potential second wife in the lap of luxury).
Figuring that maybe $100,000 to $150,000 would do but having no idea of what kind of policy I wanted, I looked at the myriad products of a dozen companies -- and plunged into a jungle of gibberish.
Over the past decade or two, while I was thinking about fox hunting, the insurance industry has spawned an incredible number of products, variations on products, and variations on the variations.
Besides term life and whole life (the old standbys), we now have universal life, universal variable life, flexible adjustable universal life, policies with persistency bonuses, policies festooned with exotic riders, living benefit policies, and on and on.
What to do?
First, generalize.
Shorn of all their riders, special provisions, and other bells and whistles, insurance policies can still be grouped under two broad categories: so-called pure insurance, which amasses no cash value in the policy and pays off only upon death, and permanent insurance, which provides not only a death benefit but also a cash value in the policy that can be used in various ways while the insured is still alive.
If all you want is death-benefit coverage, pure insurance -- a term policy -- gives you maximum bang for your buck, within limits.
It's much cheaper than permanent insurance bought at the same age.
But "term" means just that; the policy is written for a specific time period only and must be renewed when it expires.
It may also stipulate that the insured must pass another medical exam before renewal; if you flunk -- which means you need insurance more than ever -- you may not be able to buy it.
Even if you're healthy and can renew, your premium will go up sharply because you're that much older.
So term insurance may not be as cheap as it looks.
There are all sorts of variations on term insurance: policies structured to pay off your mortgage debt, term riders tacked on to permanent insurance, and many others.
One variation that appealed to me at first was the "Money Smart Term Life" policy offered by Amex Life Insurance Co., the American Express unit, to the parent company's credit-card holders.
Upon examination, however, I wondered whether the plan made a lot of sense.
Amex said it would charge me $576 a year for $100,000 of coverage -- and would pay me back all the premiums I put in if I canceled the policy after 10 years.
Sounds great -- or does it?
First, if I canceled, I'd have no more insurance, a not insignificant consideration.
Second, the $5,760 I'd get back would be much diminished in purchasing power by 10 years of inflation; Amex, not I, would get the benefit of the investment income on my money, income that would have exceeded the inflation rate and thus given the company a real profit.
Third and most important, Amex would charge me a far higher premium than other reputable companies would on a straight term policy for the same amount; I'd be paying so heavily just to have the option of getting my premiums back that I'd almost have to cancel to make the whole thing worthwhile.
That would be all right with Amex, which could then lock in its investment profit, but it doesn't add up to a "smart money" move for me.
Which goes to show that the First Law applies in insurance as in anything else: There is no free lunch, there is only marketing.
And the Second Law, unique to insurance?
If I die early, I win -- a hollow victory, since I can't enjoy it -- and if I live long, the insurer wins.
Always.
This is worth remembering when insurers and their salesmen try to sell you permanent insurance, the kind that amasses cash value.
The word "death" cannot be escaped entirely by the industry, but salesmen dodge it wherever possible or cloak it in euphemisms, preferring to talk about "savings" and "investment" instead.
The implication is that your permanent-insurance policy is really some kind of CD or mutual-fund account with an added feature.
That is gilding the lily.
The fact is that as a savings or investment vehicle, insurance generally runs a poor second to any direct investment you might make in the same things the insurance company is putting your money into.
That's because you have to pay for the insurance portion of the policy and the effort required to sell and service the whole package.
Again, no free lunch.
This is reflected in a built-in mortality cost -- in effect, your share of the company's estimated liability in paying off beneficiaries of people who had the effrontery to die while under its protection.
And in most cases, a huge hunk of your premium in the initial year or two of the the policy is, in effect, paying the salesman's commission as well; investment returns on most policies are actually negative for several years, largely because of this.
So view permanent insurance for what it is -- a compromise between pure insurance and direct investment.
The simplest, most traditional form of permanent insurance is the straight whole life policy.
You pay a set premium for a set amount of coverage, the company invests that premium in a portfolio of its choosing, and your cash value and dividends grow over the years.
One newer wrinkle, so called single-premium life (you pay for the whole policy at once), has been immensely popular in recent years for tax reasons; the insured could extract cash value in the form of policy "loans," and none of the proceeds were taxable even though they included gains on investment.
Congress closed this loophole last year, or thought it did.
However, Monarch Capital Corp. of Springfield, Mass., has developed a "combination plan" of annuity and insurance coverage that it says does not violate the new regulations and that allows policy loans without tax consequences.
But the percentage of your cash reserve that you can borrow tax-free is very small.
I'm not prepared in any case to put that much money into a policy immediately, so I look into the broad category called universal life.
Hugely popular, it is far more flexible than straight whole life.
I can adjust the amount of insurance I want against the amount going into investment; I can pay more or less than the so-called target premium in a given year; and I can even skip payments if my cash reserves are enough to cover the insurance portion of the policy.
In looking at these and other policies, I learn to ask pointed questions about some of the assumptions built into "policy illustrations" -- the rows of numbers that show me the buildup of my cash values over the years.
They commonly give two scenarios: One is based on interest rates that the company guarantees (usually 4% to 4.5%) and the other on the rate it is currently getting on investment, often 8.5% or more.
Projecting the latter over several decades, I find my cash buildup is impressive -- but can any high interest rate prevail for that long?
Not likely, I think.
Also, some policy illustrations assume that mortality costs will decline or that I will get some sort of dividend bonus after the 10th year.
These are not certain, either.
Companies "aren't comfortable playing these games, but they realize they're under pressure to make their policies look good," says Timothy Pfiefer, an actuarial consultant at Tillinghast, a unit of Towers Perrin Co., the big New York consulting firm.
Another factor to consider: Some of the companies currently earning very high yields are doing so through substantial investment in junk bonds, and you know how nervous the market has been about those lately.
There are seemingly endless twists to universal life, and it pays to ask questions about all of them.
At a back-yard barbecue, for example, a friend boasts that she'll only have to pay premiums on her John Hancock policy for seven years and that her death benefits will then be "guaranteed."
I call her agent, David Dominici.
Yes, he says, premiums on such variable-rate coverage can be structured to "vanish" after a certain period -- but usually only if interest rates stay high enough to generate sufficient cash to cover the annual cost of insurance protection.
If interest rates plunge, the insurer may be knocking on my door, asking for steeper premium payments to maintain the same amount of protection.
I don't like the sound of that.
Some insurers have also started offering "persistency bonuses," such as extra dividends or a marginally higher interest yield, if the policy is maintained for 10 years.
But Glenn Daily, a New York-based financial consultant, warns that many of these bonuses are "just fantasies," because most aren't guaranteed by the companies.
And the feature is so new, he adds, that no insurer has yet established a track record for actually making such payments.
So-called living-benefits provisions also merit a close inspection.
Offered by insurers that include Security-Connecticut Life Insurance Co., Jackson National Life Insurance Co., and National Travelers Life Insurance Co., these policy riders let me tap a portion of my death benefits while I'm still alive.
Some provisions would let me collect a percentage of the policy's face value to pay for long-term care such as nursing-home stays; others would allow payments for catastrophic illnesses and conditions such as cancer, heart attarcks, renal failure and kidney transplants.
But the catastrophic events for which the policyholder can collect are narrowly defined, vary from policy to policy, and generally permit use of only a small fraction of the face amount of insurance.
Also, financial planners advising on insurance say that to their knowledge there has not yet been a tax ruling exempting these advance payments from taxes.
And considering the extra cost of such provisions, some figure that people interested in, say, paying for extended nursing-home care would be better off just buying a separate policy that provides it.
I'm more favorably impressed by "no-load life," even though it turns out to be low-load life.
Insureres selling these policies market them directly to the public or otherwise don't use commissioned salesmen; there is still a load -- annual administrative fees and initial "setup" charges -- but I figure that the lack of commission and of "surrender fees" for dropping the policy early still saves me a lot.
I compared one universal policy for $130,000 face amount from such an insurer, American Life Insurance Corp. of Lincoln, Neb., with a similar offering from Equitable Life Assurance Society of the U.S., which operates through 11,000 commissioned salesmen.
After one year I could walk away from the Ameritas policy with $792, but Id get only $14 from the Equitable.
The difference is magnified by time, too.
At age 65, when I'd stop paying premiums, the Ameritas offering would have a projected cash value $14,000 higher than the other, even though the Equitable's policy illustration assumed a fractionally higher interest rate.
Did I buy it?
Well, not yet.
I'm thinking about using the $871 annual premium to finance a trip to Paris first.
A person can do some heavy thinking about insurance there -- and shop for something more exciting while she's doing it.
Rorer Group Inc. will report that third-quarter profit rose more than 15% from a year earlier, though the gain is wholly due to asset sales, Robert Cawthorn, chairman, president and chief executive officer, said.
His projection indicates profit in the latest quarter of more than $17.4 million, or 55 cents a share, compared with $15.2 million, or 48 cents a share, a year ago.
Mr. Cawthorn said in an interview that sales will show an increase from a year ago of "somewhat less than 10%."
Through the first six months of 1989, sales had grown about 12% from the year-earlier period.
Growth of 10% would make sales for the latest quarter $269 million, compared with $244.6 million a year ago.
Mr. Cawthorn said the profit growth in the latest quarter was due to the sale of two Rorer drugs.
Asilone, an antacid, was sold to Boots PLC, London.
Thrombinar, a drug used to stanch bleeding, was sold to Jones Medical Industries Inc., St. Louis.
He said Rorer sold the drugs for "nice prices" and will record a combined, pretax gain on the sales of $20 million.
As the gain from the sales indicates, operating profit was "significantly" below the year-earlier level, Mr. Cawthorn said.
Rorer in July had projected lower third-quarter operating profit but higher profit for all of 1989.
He said the company is still looking for "a strong fourth quarter in all areas -- sales, operating income and net income."
Mr. Cawthorn attributed the decline in third-quarter operating profit to the stronger dollar, which reduces the value of overseas profit when it is translated into dollars; to accelerated buying of Rorer products in the second quarter because of a then-pending July 1 price increase, and to higher marketing expenses for Rorer's Maalox antacid, whose sales and market share in the U.S. had slipped in the first half of 1989.
He said Rorer opted to sell Asilone and Thrombinar to raise revenue that would "kick start" its increased marketing efforts behind Maalox, still its top-selling product with about $215 million in world-wide sales in 1988.
"We had underfunded Maalox for a year," he said, because the company was concentrating on research and development and promoting other drugs.
He said Rorer will spend $15 million to $20 million more on Maalox advertising and promotion in the second half of 1989 than in the year-earlier period.
A "big chunk" of that additional spending came in the third quarter, he said.
Hoechst AG said it will stop producing fertilizer in 1990 because of continued losses and a bleak outlook.
The West German chemical concern said it will close the last remaining fertilizer plant in Oberhausen in the fall of next year.
Hoechst said the fertilizer market faces overcapacity in Western Europe, rising imports from East bloc countries and overseas, and declining demand.
HomeFed Corp. said its main subsidiary, Home Federal Savings & Loan, converted from a federal savings and loan to a federal savings bank and changed its name to HomeFed Bank.
The federal Office of Thrift Supervision approved the conversion last Friday, HomeFed said.
The change in charter doesn't alter the federal insurance of deposits, federal regulatory powers or company operations, a spokesman said.
It was the second anniversary of the 1987 crash, but this time it was different.
Stocks rallied on good earnings reports and on data that showed less inflation than expected.
Blue chips led the march up in heavy trading.
The Dow Jones Industrial Average rose 39.55 points to 2683.20.
The 30 industrials led the market higher from the opening bell as foreign buyers stepped in.
By afternoon, the broader market joined the advance in full strength.
Standard & Poor's 500-stock Index rose 5.37 to 347.13 and the Nasdaq composite index jumped 7.52 to 470.80.
New York Stock Exchange volume swelled to 198,120,000 shares.
The industrials were up about 60 points in the afternoon, but cautious investors took profits before the close.
Traders said a variety of factors triggered the rally.
The consumer price index rose 0.2% in September, while many economists were looking for a 0.4% increase.
Stock-index arbitrage buy programs -- in which traders buy stock against offsetting positions in futures to lock in price differences -- helped the rally's momentum.
The euphoria was such that investors responded to good earnings reports of companies such as American Express, while ignoring the disappointing profits of companies such as Caterpillar, analysts said.
Stock-index arbitrage trading was a minor influence in yesterday's rally, traders said.
Institutional buyers were the main force pushing blue chips higher.
To the amazement of some traders, takeover stocks were climbing again.
Hilton rose 2 7/8 to 100, for example.
Last Friday, takeover traders spilled out of Hilton, knocking the stock down 21 1/2 to 85.
Among other stocks involved in restructurings or rumored to be so: Holiday Corp. gained 1 7/8 to 73 and Honeywell rose 2 7/8 to 81 1/2.
One floor trader noted in astonishment that nobody seemed to mind the news that British Airways isn't making a special effort to revive the UAL buy-out.
The announcement of the buy-out's troubles triggered the market's nose dive a week ago.
Takeover enthusiasm may have been renewed when an investor group disclosed yesterday that it had obtained all the financing required to complete its $1.6 billion leveraged buy-out of American Medical International.
"That's put some oomph back into this market," said Peter VandenBerg, a vice president of equity trading at Shearson Lehman Hutton.
But some traders thought there was less to the rally than met the eye.
"There is no strength behind this rally," asserted Chung Lew, head trader at Kleinwort Benson North America.
"It's traders squaring positions.
It's not good; the market is setting up for another fall."
Indeed, many traders said that uncertainty about today's monthly expiration of stocks-index futures and options, and options on individual stocks, prompted a lot of buying by speculative traders who were unwinding positions that were bets on declining stock prices.
The number of outstanding contracts in the October Major Market Index jumped from 5,273 on Friday to 9,023 on Monday.
The MMI is a 20-stock index that mimics the Dow Jones Industrial Average.
Outstanding contracts are those that remain to be liquidated.
By Wednesday, the outstanding October contracts amounted to 8,524, representing about $1.13 billion in stock, noted Donald Selkin, head of stock-index futures research at Prudential-Bache Securities, who expects a volatile expiration today.
"There has been a tremendous increase" in MMI positions, Mr. Selkin said.
Consumer stocks once again set the pace for blue-chip issues.
Philip Morris added 1 1/8 to 44 1/2 in Big Board composite trading of 3.7 million shares, Coca-Cola Co. gained 2 3/8 to 70 3/8, Merck gained 1 3/8 to 77 3/8 and American Telephone & Telegraph advanced 7/8 to 43 3/8 on 2.5 million shares.
American Medical jumped 1 7/8 to 23 5/8.
IMA Acquisition, an investor group that includes First Boston and the Pritzker family of Chicago, said Chemical Bank had made arrangements for 23 other banks to provide $509 million in bank financing for the buy-out offer.
Chemical and six other banks, along with First Boston, are providing the rest of the $1.6 billion.
Elsewhere on the takeover front, Time Warner advanced 2 5/8 to 136 5/8 and Warner Communications tacked on 7/8 to 63 7/8.
The Delaware Supreme Court affirmed a ruling that barred Chris-Craft Industries from voting its Warner preferred stock as a separate class in deciding on the companies' proposed merger.
Paramount Communications climbed 1 1/4 to 58 1/2 and MCA rose 1 1/2 to 64; both media companies have long been mentioned as potential acquisition candidates.
Among other actual and rumored targets, Woolworth rose 1 1/4 to 60 1/2, Upjohn went up 1 1/8 to 39 3/4, Armstrong World Industries gained 1 to 40 1/8 and Kollmorgen rose 3/4 to 13 7/8.
In addition: -- Soo Line jumped 2 3/4 to 20 1/4, above the $19.50 a share that Canadian Pacific offered for the company in a takeover proposal.
-- Xtra gained 1 1/8 to 27 1/8.
Investor Robert M. Gintel, who owns a 4.7% stake in the company, said he plans a proxy fight for control of its board.
-- Golden Nugget rose 2 to 28 1/4.
Its board approved the repurchase of as many as three million common shares, or about 17% of its shares outstanding.
Buying interest also resurfaced in the technology sector, including International Business Machines, whose board approved a $1 billion increase in its stock buy-back program.
IBM rose 2 3/8 to 104 1/8 as 2.2 million shares changed hands.
Compaq Computer soared 4 5/8 to 111 1/8 on 1.8 million shares in response to the company's announcement of plans to introduce several products next month.
Digital Equipment gained 1 3/8 to 89 3/4 despite reporting earnings for the September quarter that were on the low end of expectations.
Among other technology issues, Cray Research rose 1 5/8 to 37, Hewlett-Packard added 1 1/4 to 50 1/4, Tandem Computers rallied 1 1/8 to 25 3/4, Data General rose 3/4 to 14 1/2 and Motorola gained 2 3/8 to 59 1/4.
On the other hand, Symbol Technologies dropped 1 1/4 to 18 1/2 after Shearson Lehman Hutton lowered its short-term investment rating on the stock and its 1989 earnings estimate, and Commodore International fell 7/8 to 8 after the company said it expects to post a loss for the September quarter.
Insurance stocks continued to climb on expectations that premium rates will rise in the aftermath of the earthquake in the San Francisco area.
American International Group climbed 4 to 106 5/8, General Re rose 3 1/8 to 89 5/8, Kemper added 2 1/2 to 48, AON went up 1 3/8 to 36 and Chubb rose 1 1/4 to 82 1/4.
Stocks of major toy makers rallied in the wake of strong third-quarter earnings reports.
Mattel added 1 1/4 to 19 5/8, Tonka firmed 1 to 18 1/2 and Lewis Galoob Toys rose 7/8 to 13 5/8 on the Big Board, while Hasbro gained 1 to 21 7/8 on the American Stock Exchange.
Capital Cities-ABC surged 42 5/8 to 560.
Kidder Peabody raised its investment rating on the stock and its earnings estimates for 1989 and 1990, based on optimism that the company's ABC television network will continue to fare well in the ratings.
Dun & Bradstreet lost 1 7/8 to 51 7/8 on 1.8 million shares.
Merrill Lynch lowered its short-term rating on the stock and its estimate of 1990 earnings, citing a sales slowdown in the company's credit-rating business.
Pinnacle West Capital, which suspended its common-stock dividend indefinitely and reported a 91% decline in third-quarter earnings, fell 5/8 to 11 3/8.
The Amex Market Value Index recorded its sharpest gain of the year by climbing 4.74 to 382.81.
Volume totaled 14,580,000 shares.
B.A.T Industries, the most active Amex issue, rose 3/8 to 12 3/8.
The company received shareholder approval for its restructuring plan, designed to fend off a hostile takeover bid from a group headed by financier Sir James Goldsmith.
Chambers Development Class A jumped 3 1/8 to 37 1/8 and Class B rose 2 5/8 to 37 1/4.
The company said six officers are buying a total of $1.5 million of its stock.
TRC Cos., the target of an investigation by the U.S. inspector general, dropped 2 to 10 3/4.
The probe involves testing procedures used on certain government contracts by the company's Metatrace unit.
Avondale Industries Inc., New Orleans, received a $23 million contract from the Navy to enlarge by 50% the capacity of an auxiliary oiler.
The award results from the Navy's exercising of an option in an earlier contract it awarded Avondale.
Richard J. Pinola was elected to the board of this personnel consulting concern, increasing its size to nine members.
Mr. Pinola is president and chief operating officer of Penn Mutual Life Insurance Co.
The Senate rejected a constitutional amendment that President Bush sought to protect the U.S. flag from desecration.
The 51-48 roll call fell well short of the two-thirds majority needed to approve changes to the Constitution.
The vote, in which 11 GOP lawmakers voted against Mr. Bush's position, was a victory for Democratic leaders, who opposed the amendment as an intrusion on the Bill of Rights.
"We can support the American flag without changing the American Constitution," said Senate Majority Leader George Mitchell of Maine.
In order to defuse pressure for an amendment, Mr. Mitchell and House Speaker Thomas Foley (D., Wash.) had arranged for lawmakers to pass a statute barring flag desecration before voting on the constitutional change.
Mr. Bush said he would allow the bill to become law without his signature, because he said only a constitutional amendment can protect the flag adequately.
In June, the Supreme Court threw out the conviction of a Texas man who set a flag afire during a 1984 demonstration, saying he was "engaging in political expression" that is protected by the First Amendment.
If you think you have stress-related problems on the job, there's good news and bad news.
You're probably right, and you aren't alone.
A new Gallup Poll study commissioned by the New York Business Group on Health, found that a full 25% of the work force at companies may suffer from anxiety disorders or a stress-related illness, with about 13% suffering from depression.
The study surveyed a national group of medical directors, personnel managers and employee assistance program directors about their perceptions of these problems in their companies.
It is one of a series of studies on health commissioned by the New York Business Group, a non-profit organization with about 300 members.
The stress study was undertaken because problems related to stress "are much more prevalent than they seem," said Leon J. Warshaw, executive director of the business group.
In presenting the study late last week, Dr. Warshaw estimated the cost of these types of disorders to business is substantial.
Occupational disability related to anxiety, depression and stress costs about $8,000 a case in terms of worker's compensation.
In terms of days lost on the job, the study estimated that each affected employee loses about 16 work days a year because of stress, anxiety or depression.
He added that the cost for stress-related compensation claims is about twice the average for all injury claims.
"We hope to sensitize employers" to recognize the problems so they can do something about them, Dr. Warshaw said.
Early intervention into these types of problems can apparently save businesses long-term expense associated with hospitalization, which sometimes results when these problems go untreated for too long.
Even the courts are beginning to recognize the link between jobs and stress-related disorders in compensation cases, according to a survey by the National Council on Compensation Insurance.
But although 56% of the respondents in the study indicated that mental-health problems were fairly pervasive in the workplace, there is still a social stigma associated with people seeking help.
The disorders, which 20 years ago struck middle-age and older people, "now strike people at the height of productivity," says Robert M.A. Hirschfeld, of the National Institute of Mental Health, who spoke at the presentation of the study's findings.
The poll showed that company size had a bearing on a manager's view of the problem, with 65% of those in companies of more than 15,000 employees saying stress-related problems were "fairly pervasive" and 55% of those in companies with fewer than 4,000 employees agreeing.
The poll also noted fear of a takeover as a stress-producing event in larger companies.
More than eight in 10 respondents reported such a stress-provoking situation in their company.
Mid-sized companies were most affected by talk of layoffs or plant closings.
The study, which received funding from Upjohn Co., which makes several drugs to treat stress-related illnesses, also found 47% of the managers said stress, anxiety and depression contribute to decreased production.
Alcohol and substance abuse as a result of stress-related problems was cited by 30% of those polled.
Although Dr. Warshaw points out that stress and anxiety have their positive uses, "stress perceived to be threatening implies a component of fear and anxiety that may contribute to burnout."
He also noted that various work environments, such as night work, have their own "stressors."
"We all like stress, but there's a limit," says Paul D'Arcy, of Rohrer, Hibler & Replogle, a corporate psychology and management consulting firm.
The problem, says Mr. D'Arcy, a psychologist, is that "it's very hard to get any hard measures on how stress affects job performance.
For Cheap Air Fares, Spend Christmas Aloft
IT ISN'T TRUE that a 90-year old clergyman on a mission of mercy to a disaster area on Christmas Day can fly free.
But his circumstances are among the few that can qualify for the handful of really cheap airline tickets remaining in America.
In recent years, carriers have become much more picky about who can fly on the cheap.
But there still are a few ways today's traveler can qualify under the airline's many restrictions.
One of the best deals, though, may mean skipping Christmas dinner with the relatives.
This week, many carriers are announcing cut-rate fares designed to get people to fly on some of the most hallowed -- and slowest -- days of the year, including Christmas.
In recent years, the airlines had waited until the last moment to court Christmas season vacationers with bargain fares.
That approach flopped: Last Christmas Day, a USAir Group Inc. DC-9 jetliner flew about seven passengers from Chicago to Pittsburgh.
So this year, the airlines are getting a jump on holiday discounts.
They are cutting ticket prices by as much as 70% from normal levels for travel to most U.S. locations on Dec. 24, 25, 29, 30 and 31, and Jan. 4, 5 and 6.
The promotions -- dubbed everything from 'Tis the Season to be Jolly to Kringle fares -- put round-trip fares at $98, $148 and $198.
"They're trying to keep planes flying on days they'd normally park them," says Roger Bard, president of Mr. Mitchell Travel Service in Burnsville, N.C.
Expect, of course, sky-high prices on other dates near the holidays when the airlines know vacationers are eager to travel.
Consider Adopting Your Spouse's Name
IF CONTINENTAL Airlines has its way, couples like Marlo Thomas and Phil Donahue may find it a hassle to qualify for some new discounts.
Continental, a Texas Air Corp. unit, recently unveiled a marketing program offering free companion tickets to business-class and first-class passengers on international flights.
The Continental catch: Only immediate family members are allowed, and they must have the same last name as the buyer of the ticket or legal proof they're related.
That irritates many women who haven't taken their husbands' last name.
"What a bunch of nonsense," says Jessica Crosby, president of the New York chapter of the National Association of Women Business Owners.
"This sets things way back."
Continental's logic: It doesn't want business companions abusing the promotion by falsely claiming to be related.
"We accommodate their choice of names by allowing them to demonstrate" family affiliation with legal documents, says Jim O'Donnell, a senior vice president.
But gay rights advocates are angry, too.
The Lambda Legal Defense and Education Fund of New York City has received complaints from homosexual couples whom the airline doesn't recognize as family.
"It's certainly discrimination," says attorney Evan Wolfson, whose group forced Trans World Airlines this year to change a rule that allowed travelers to transfer frequent flier awards only to family members.
Take Your Vacation In a Hurricane Area
WHEN HURRICANE Hugo careened through the Caribbean and the Atlantic coast states, it downed electric and telephone lines, shot coconuts through cottage rooftops, shattered windows and uprooted thousands of lives.
It also lowered some air fares.
Since the hurricane, Midway Airlines Inc. and American Airlines, a unit of AMR Corp., trimmed their one-way fares to the Virgin Islands to $109 from prices that were at times double that before the storm.
The fares are code-named Hugo, Compassion and Virgin Islands Aid.
(Airlines aren't lowering fares to Northern California following this week's earthquake, but reservation agents can waive advance-purchase restrictions on discount fares for emergency trips.)
Some hotels in the hurricane-stricken Caribbean promise money-back guarantees.
In Myrtle Beach, S.C., the damaged Yachtsman Resort offers daily rates as low as $35, or as much as 22% below regular prices.
Says Michele Hoffman, a clerk in the resort's front office: "We don't have the outdoor pool, the pool table, ping pong table, snack bar or VCR, but we still have the indoor pool and Jacuzzi."
Just Wait Until You're a Bit Older
SENIOR CITIZENS have long received cheap air fares.
This year, the older someone is the bigger the discount.
A senior citizen between 62 and 70 saves 70% off regular coach fare.
Travelers up to age 99 get a percentage discount matching their age.
And centenarians fly free in first class.
Next month, Northwest Airlines says, a 108-year-old Lansing, Mich., woman is taking it up on the offer to fly with her 72-year-old son to Tampa, Fla.
Last year when Northwest first offered the promotion, only six centenarians flew free.
If All Else Fails. . . .
THE NATION'S carriers also provide discounts to Red Cross workers, retired military personnel and medical students.
There's even a special fare for clergy that doesn't require the usual stay over Saturday night.
That way, they can be home in time for work Sunday.
The British Petroleum Co. PLC said its BP Exploration unit has produced the first oil from its Don oilfield in the North Sea.
In an official release, BP said initial production from the field was 11,000 barrels a day, and that it expects peak output from the field of 15,000 barrels a day to be reached in 1990.
As the sponsor of the "Older Americans Freedom to Work Act," which would repeal the Social Security earnings limit for people aged 65 and older, I applaud your strong endorsement to repeal this Depression-era fossil.
For every dollar earned over $8,880, Social Security recipients lose 50 cents of their Social Security benefits; it's like a 50% marginal tax.
But the compounded effects of "seniors only" taxes result in truly catastrophic marginal tax rates.
Imagine a widow who wants to maintain her standard of living at the same level she had before she had to pay the catastrophic surtax.
Although this widow earns only twice the minimum wage, largely due to the earnings limit, she would have to earn an additional $4,930 to offset her catastrophic surtax of $496.
Eliminating the earnings limit would greatly help seniors and reduce the deficit.
Repeal would generate more in new taxes than the government would lose in increased Social Security benefit payments.
We now need support from the Democrats on the Rules Committee in order to include earnings-limit reform in the Reconciliation Bill.
Since all four Republicans on the committee are co-sponsors of my bill, it is the Democrats who will be held fully accountable if an earnings test amendment is not allowed from the floor.
The time is now to lift the burdensome Social Security earnings limit from the backs of our nation's seniors.
Rep. J. Dennis Hastert (R., Ill.)
When his Seventh Avenue fur business here was flying high 20 years ago, Jack Purnick had 25 workers and a large factory.
Now his half-dozen employees work in an eighth-floor shop that he says is smaller than his old storage room.
He also says he is losing money now.
He blames imports.
But just down Seventh Avenue, where about 75% of U.S. fur garments are made, Larry Rosen has acquired two retail outlets, broadened his fur-making line and expanded into leather.
He credits imports.
The difference lies in how the two entrepreneurial furriers reacted to the foreign competition and transformation of their industry over the past 10 years.
One stuck to old-line business traditions, while the other embraced the change.
"The small, good fur salon is not what it used to be," says Mr. Purnick, 75 years old.
"We make the finest product in the world, and the Americans are being kicked around."
Mr. Rosen, though, believes imports have reinvigorated the industry in which he has worked for most of his 57 years.
"You've got some minds here that won't think progressively," he says.
Import competition for U.S. furs has risen sharply since furriers started aggressively marketing "working-girl mink" and similar lower-priced imported furs in recent years.
Merchants discovered a consumer largely ignored by higher-priced furriers: the younger woman -- even in her late 20s -- who never thought she could buy a mink.
The new market helped boost U.S. fur sales to about $1.8 billion a year now, triple the level in the late 1970s.
It also opened the door to furs made in South Korea, China, Hong Kong and other countries.
Jindo Furs, a large South Korean maker, says it operates 35 retail outlets in the U.S. and plans to open 15 more by the end of next year.
Mr. Purnick and other old-line furriers call many of the the imports unstylish and poorly made.
High-end U.S. furriers say these imports haven't squeezed them.
But low-priced and middle-priced furriers like Mr. Purnick, who once saturated the five-block Seventh Avenue fur district, say imports have cut their sales.
A woman who once would have saved for two or three seasons to buy a U.S.-made mink can now get an imported mink right away for less than $2,000.
Yet Mr. Rosen has turned the import phenomenon to his advantage.
Early in the decade he saw that fur workers in many foreign countries were willing to work longer hours at lower wages than their American counterparts and were more open to innovation.
In 1982, he started a factory in Greece.
Two years later, he opened one in West Germany.
He also noticed that foreign makers were introducing many variations on the traditional fur, and he decided to follow suit.
By combining his strengths in innovation and quality control with the lower costs of production abroad, he says he has been able to produce high-quality goods at low cost.
To maintain control over production and avoid overdependence on foreign sources, he says he still makes most of his furs in the U.S.
But six years ago he also began importing from the Far East.
Inspired by imports, Mr. Rosen now makes fur muffs, hats and flings.
This year he produced a men's line and offers dyed furs in red, cherry red, violet, royal blue and forest green.
He has leather jackets from Turkey that are lined with eel skin and topped off with raccoon-skin collars.
From Asia, he has mink jackets with floral patterns made by using different colored furs.
Next he will be testing pictured embroidery (called kalega) made in the Far East.
He plans to attach the embroidery to the backs of mink coats and jackets.
Besides adding to sales, leathers also attract retailers who may buy furs later, he adds.
Other furriers have also benefited from leathers.
Seymour Schreibman, the 65-year-old owner of Schreibman Raphael Furs Inc., treats the reverse side of a Persian lambskin to produce a reversible fur-and-leather garment.
He says it accounts for 25% of total sales.
Mr. Rosen is also pushing retail sales.
This year he bought two stores, one in Brooklyn and one in Queens.
Other furriers have also placed more weight on retailing.
Golden Feldman Furs Inc. began retailing aggressively eight years ago, and now retail sales account for about 20% of gross income.
In other moves, Mr. Rosen says he bought a truck three years ago to reach more retailers.
Since then he has expanded his fleet and can now bring his furs to the front door of retailers as far away as the Midwest.
Small retailers who can't afford to travel to his New York showroom have become fair game.
Such moves have helped Mr. Rosen weather the industry slump of recent years.
The industry enjoyed six prosperous years beginning in 1980, but since 1986 sales have languished at their $1.8 billion peak.
Large furriers such as Antonovich Inc., Fur Vault Inc. and Evans Inc. all reported losses in their latest fiscal years.
Aftereffects of the 1987 stock market crash head the list of reasons.
In addition, competition has glutted the market with both skins and coats, driving prices down.
The animal-rights movement hasn't helped sales.
Warm winters over the past two years have trimmed demand, too, furriers complain.
And those who didn't move some production overseas suffer labor shortages.
"The intensive labor needed to manufacture furs {in the U.S.} is not as available as it was," says Mr. Schreibman, who is starting overseas production.
But even those who have found a way to cope with the imports and the slump, fear that furs are losing part of their allure.
"People are promoting furs in various ways and taking the glamour out of the fur business," says Stephen Sanders, divisional merchandise manager for Marshall Field's department store in Chicago.
"You can't make a commodity out of a luxury," insists Mr. Purnick, the New York furrier.
He contends that chasing consumers with low-priced imports will harm the industry in the long run by reducing the prestige of furs.
But Mr. Rosen responds: "Whatever people want to buy, I'll sell.
The name of the game is to move goods.
Four workers at GTE Corp.'s headquarters have been diagnosed as having hepatitis, and city health officials are investigating whether a cafeteria worker may have exposed hundreds of other GTE employees to the viral infection, company and city officials said.
The four cases were all reported to GTE's medical director and state and local health authorities.
GTE shut down its cafeteria Tuesday afternoon after testing determined that at least one cafeteria worker employed by GTE's private food vending contractor, ARA Services Inc., was suffering from a strain of the virus, officials said.
More than 700 people work in the GTE building.
The cafeteria remains closed.
Dr. Andrew McBride, city health director, said his staff suspects the hepatitis, which can be highly contagious, was spread by the cafeteria worker with the virus.
The exact strain of hepatitis that the cafeteria worker contracted hasn't been determined but should be known by the end of the week, Dr. McBride said.
Hepatitis A, considered the least dangerous strain of the virus, has been confirmed in at least one GTE employee, company and city officials said.
"From a public health point of view we're relieved because hepatitis A is rarely life-threatening," said Dr. Frank Provato, GTE's medical director.
"It's a double-edged sword though, because it is also the most contagious kind of hepatitis."
GTE officials began posting warning notices about the potential threat to exposure Wednesday morning at various places at the company, said GTE spokesman Thomas Mattausch.
The company has begun offering shots of gamma globulin, which will diminish the flu-like symptoms of hepatitis A, in anyone who has contracted the disease, Mr. Mattausch said.
"We're strongly recommending that anyone who has eaten in the cafeteria this month have the shot," Mr. Mattausch added, "and that means virtually everyone who works here.
I was appalled to read the misstatements of facts in your Oct. 13 editorial "Colombia's Brave Publisher."
It is the right-wing guerrillas who are aligned with the drug traffickers, not the left wing.
This information was gleaned from your own news stories on the region.
Past Colombian government tolerance of the "narcotraficantes" was due to the drug lords' history of wiping out leftists in the hinterlands.
Mary Poulin Palo Alto, Calif.
I suggest that The Wall Street Journal (as well as other U.S. news publications of like mind) should put its money where its mouth is: Lend computer equipment to replace that damaged at El Espectador, buy ad space, publish stories under the bylines of El Espectador journalists.
Perhaps an arrangement could be worked out to "sponsor" El Espectador journalists and staff by paying for added security in exchange for exclusive stories.
Reward El Espectador's courage with real support.
Douglas B. Evans
COCA-COLA Co. (Atlanta) --
Anton Amon and George Gourlay were elected vice presidents of this soft-drink company.
Mr. Amon, 46 years old, is the company's director of quality assurance; most recently, he served as vice president, operations, for Coca-Cola Enterprises.
Mr. Gourlay, 48, is manager for corporate manufacturing operations; he was assistant vice president at the company.
In the wake of a slide in sterling, a tailspin in the stock market, and a string of problematic economic indicators, British Chancellor of the Exchequer Nigel Lawson promised gradual improvement in the U.K. economy.
In a speech prepared for delivery to London's financial community, Mr. Lawson summed up current economic policy as a battle to wring inflation out of the British economy, using high interest rates as "the essential instrument" to carry out the campaign.
Two weeks after boosting base rates to 15%, he pledged that "rates will have to remain high for some time to come."
Mr. Lawson also made it clear that he would be watching exchange rates carefully.
A sinking pound makes imports more expensive and increases businesses' expectations of future inflation, he argued.
In an apparent warning to currency traders who have lately been selling the British currency, he stated that the exchange rates will have a "major role in the assessment of monetary conditions."
In reaffirming the current monetary policy of using high interest rates to fight inflation and shore up the pound, Mr. Lawson dismissed other approaches to managing the economy.
He said he monitors the money-supply figures, but doesn't give them paramount importance, as some private and government economists have suggested.
Mr. Lawson also dismissed the possibility of imposing direct credit controls on Britain's financial system.
Mr. Lawson's speech, delivered at the Lord Mayor of London's annual dinner at Mansion House, came on the heels of a grueling period for the U.K. economy.
Two weeks ago, in a campaign to blunt inflation at home and arrest a world-wide plunge in the pound, he raised base rates a full percentage point to 15%.
Despite the increase, the British currency slid below a perceived threshold of three marks early last week.
It was quoted at 2.9428 marks in late New York trading Wednesday.
Leading up to the speech was a drumroll of economic statistics suggesting that the British war on inflation will be more bruising than previously assumed.
Unemployment in September dropped to 1,695,000, the lowest level since 1980.
While lower joblessness is generally good news, the hefty drop last month indicates that the economy isn't slowing down as much as hoped -- despite a doubling of interest rates over the last 16 months.
Meanwhile, average earnings in Britain were up 8.75% in August over the previous year.
Another inflationary sign came in a surge in building-society lending to a record #10.2 billion ($16.22 billion) last month, a much higher level than economists had predicted.
In a separate speech prepared for delivery at the dinner, Robin Leigh-Pemberton, Bank of England governor, conceded that "demand pressures were even more buoyant than had been appreciated" when the British economy was heating up last year.
He added that "there's no quick-fix solution" to the economic woes, and said "tight monetary policy is the right approach."
Discussing the recent slide in stock prices, the central bank governor stated that "the markets now appear to have steadied" after the "nasty jolt" of the 190.58-point plunge in the Dow Jones Industrial Average a week ago.
Although the New York market plunge prompted a 70.5-point drop in the London Financial Times-Stock Exchange 100 Share Index, Mr. Leigh-Pemberton declared "that the experience owed nothing to the particular problems of the British economy."
Specifically, he pointed out that compared with the U.S. market, the U.K. has far fewer highly leveraged junk-bond financings.
Discussing future monetary arrangements, Mr. Lawson repeated the Thatcher government's commitment to join the exchange rate mechanism of the European Monetary System, but he didn't indicate when.
Ing.
C. Olivetti & Co., claiming it has won the race in Europe to introduce computers based on a powerful new microprocessor chip, unveiled its CP486 computer yesterday.
The product is the first from a European company based on Intel Corp.'s new 32-bit 486tm microprocessor, which works several times faster than previously available chips.
Hewlett-Packard Co. became the first company world-wide to announce a product based on the chip earlier this month, but it won't start shipping the computers until early next year.
An Olivetti spokesman said the company's factories are already beginning to produce the machine, and that it should be available in Europe by December.
"What this means is that Europeans will have these machines in their offices before Americans do," the spokesman said.
The new chip "is a very big step in computing, and it is important that Olivetti be one of the first out on the market with this product," said Patricia Meagher Davis, an analyst at James Capel & Co. in London.
Executives at Olivetti, whose earnings have been steadily sliding over the past couple of years, have acknowledged that in the past they have lagged at getting new technology to market.
Ms. Davis said the new machines could steal some sales away from Olivetti's own minicomputers, but would bring new sales among professionals such as engineers, stockbrokers and medical doctors.
Although Olivetti's profits tumbled 40% in the first half of this year, she believes Olivetti's restructuring last fall and its introduction of new products will begin to bear fruit with an earnings rebound next year, especially if it can fulfill its promise to deliver the new machines by December.
"We think the worst is over" in the European information-technology market, she said.
Depending on the type of software and peripherals used, the machines can serve either as the main computer in a network of many terminals (a role usually filled by a minicomputer), as a technical workstation or as a very fast personal computer.
"It's the missing link" in Olivetti's product line between small personal computers and higher-priced minicomputers, the Olivetti spokesman said.
He added that Olivetti will continue making its LSX minicomputer line.
The machines will cost around $16,250 on average in Europe.
The Intel 486 chip can process 15 million instructions per second, or MIPS, while Intel's previous 386 chip could handle only 3 to 6 MIPS.
Olivetti also plans to sell the CP486 computer in the U.S. starting next year through Olivetti USA and through its ISC/Bunker Ramo unit, which specializes in automating bank-branch networks.
Viatech Inc. said it received approval from the French government for its proposed $44.7 million acquisition of Ferembal S.A.
The approval satisfies the remaining conditions of the purchase, which is expected to close within two weeks.
erembal, the second-largest maker of food cans in France, had 1988 sales of $150 million.
Ferembal has 930 workers at four canning manufacturing plants and one plastic container facility.
Viatech makes flexible packaging films and machinery, and materials for the food and pharmaceutical industries.
Social Security benefits will rise 4.7% next year to keep pace with inflation, boosting the average monthly benefit to $566 from $541, the Department of Health and Human Services announced.
The higher payments will start with Social Security checks received on Jan. 3, 1990.
Supplemental Security Income payments to the disabled also will rise 4.7%, starting with checks received on Dec. 29, 1988, increasing the maximum SSI payment to $386 from $368 a month.
The inflation adjustment also means that the maximum annual level of earnings subject to the wage tax that generates revenue for the Social Security trust fund will rise to $50,400 in 1990 from $48,000 this year.
As mandated by law, the tax rate will rise to 7.65% in 1990 from 7.51% and won't rise any further in the future.
This means that the maximum yearly Social Security tax paid by workers and employers each will rise $250.80 next year to $3,855.60.
Beneficiaries aged 65 through 69 will be able to earn $9,360 without losing any Social Security benefits in 1990, up from $8,880 this year.
The exempt amount for beneficiaries under 65 will rise to $6,840 from $6,480.
The adjustments reflect the increase in the consumer price index for urban wage earners and clerical workers from the third quarter of last year to the third quarter of this year.
Health-care companies should get healthier in the third quarter.
Medical-supply houses are expected to report earnings increases of about 15% on average for the third quarter, despite sales increases of less than 10%, analysts say.
To offset sluggish sales growth, companies have been cutting staff, mostly through attrition, and slowing the growth in research and development spending.
Sales growth in the quarter was slowed by mounting pressure from groups of buyers, such as hospitals, to hold down prices.
Suppliers were also hurt by the stronger U.S. dollar, which makes sales abroad more difficult.
In some cases, competition has squeezed margins.
Becton, Dickinson & Co., for example, faces stiff competition from a Japanese supplier in the important syringe market.
The Franklin Lakes, N.J., company is expected to report sales growth of only 5% to 6%, but should still maintain earnings growth of 10%, says Jerry E. Fuller, an analyst with Duff & Phelps Inc.
Among the first of the group to post results, Abbott Laboratories said third-quarter net income jumped 14% to $196 million, or 88 cents a share, from $172 million, or 76 cents a share, a year earlier.
Sales for the company, based in Abbott Park, Ill., rose 8.3% to $1.31 billion from $1.21 billion.
Baxter International Inc. yesterday reported net climbed 20% in the third period to $102 million, or 34 cents a share, from $85 million, or 28 cents a share, a year earlier.
Sales for the Deerfield, Ill., company rose 5.8% to $1.81 billion from $1.71 billion.
But not every company expects to report increased earnings.
C.R. Bard Inc. yesterday said third-quarter net plunged 51% to $9.9 million, or 18 cents a share, from $20 million, or 35 cents a share, a year earlier.
Sales fell 1.2% to $190.1 million from $192.5 million.
The Murray Hill, N.J., company said full-year earnings may be off 33 cents a share because the company removed a catheter from the market.
In 1988, the company earned $1.38 a share.
The Food and Drug Administration had raised questions about the device's design.
Some analysts add that third-party pressures to reduce health costs will continue to bedevil companies' bottom lines.
Takeover speculation, which has been buoying stocks of supply houses, may also ease, says Peter Sidoti, an analyst with Drexel Burnham Lambert Inc.
"As that wanes, you're going to see the stocks probably wane as well," he says.
Hospitals companies, meanwhile, are reporting improved earnings.
Bolstered by strong performances by its psychiatric hospitals, National Medical Enterprises Inc., Los Angeles, reported net income of $50 million, or 65 cents a share, for the first quarter ended Aug. 31, up from $41 million, or 56 cents a share, a year earlier.
Humana Inc., Louisville, Ky., also reported favorable results, with net income of $66.7 million, or 66 cents, in the fourth quarter ended Aug. 31, up from $58.2 million, or 59 cents, a year earlier.
Analysts say the handful of hospital companies that are still publicly traded are benefiting from several trends.
Most important, hospital admission rates are stabilizing after several years of decline.
Moreover, companies have sold off many of their smaller, less-profitable hospitals and have completed painful restructurings.
Humana's revenues, for example, are being boosted by large increases in enrollments in the company's health maintenance organizations.
Says Todd Richter, an analyst with Dean Witter Reynolds: "The shakeout in the publicly traded companies is over.
Initial claims for regular state unemployment benefits rose to a seasonally adjusted 396,000 during the week ended Oct. 7 from 334,000 the previous week, the Labor Department said.
The number of people receiving regular state benefits in the week ended Sept. 30 decreased to a seasonally adjusted 2,202,000, or 2.2% of those covered by unemployment insurance, from 2,205,000 the previous week, when the insured unemployment rate also was 2.2%.
Counting all state and federal benefit programs, the number of people receiving unemployment benefits in the week ended Sept. 30 fell to 1,809,300 from 1,838,200 a week earlier.
These figures aren't seasonally adjusted.
A Labor Department spokesman said the unusually high number of initial claims for state unemployment benefits reflects the impact of Hurricane Hugo on southern states, particularly North Carolina and South Carolina.
The figure also may reflect initial claims filed by striking Nynex Corp. workers who have become eligible for unemployment benefits, the official said.
Digital Equipment Corp. reported a 32% decline in net income on a modest revenue gain in its fiscal first quarter, causing some analysts to predict weaker results ahead than they had expected.
Although the second-largest computer maker had prepared Wall Street for a poor quarter, analysts said they were troubled by signs of flat U.S. orders and a slowdown in the rate of gain in foreign orders.
The Maynard, Mass., company is in a transition in which it is trying to reduce its reliance on mid-range machines and establish a presence in workstations and mainframes.
Net for the quarter ended Sept. 30 fell to $150.8 million, or $1.20 a share, from $223 million, or $1.71 a share, a year ago.
Revenue rose 6.4% to $3.13 billion from $2.94 billion.
Digital said a shift in its product mix toward low-end products and strong growth in workstation sales yielded lower gross margins.
A spokesman also said margins for the company's service business narrowed somewhat because of heavy investments made in that sector.
The lack of a strong product at the high end of Digital's line was a significant drag on sales.
Digital hopes to address that with the debut of its first mainframe-class computers next Tuesday.
The new line is aimed directly at International Business Machines Corp.
"Until the new mainframe products kick in, there won't be a lot of revenue contribution at the high end, and that's hurt us," said Mark Steinkrauss, Digital's director of investor relations.
He said unfavorable currency translations were also a factor in the quarter.
DEC shares rose $1.375 to $89.75 apiece in consolidated New York Stock Exchange trading yesterday.
But analysts said that against the backdrop of a nearly 40-point rise in the Dow Jones Industrial Average, that shouldn't necessarily be taken as a sign of great strength.
Some cut their earnings estimates for the stock this year and predicted more efforts to control costs ahead.
"I think the next few quarters will be difficult," said Steven Milunovich of First Boston.
"Margins will remain under pressure, and when the new mainframe does ship, I'm not sure it will be a big winner.
" Mr. Milunovich said he was revising his estimate for DEC's current year from $8.20 a share to "well below $8," although he hasn't settled on a final number.
One troubling aspect of DEC's results, analysts said, was its performance in Europe.
DEC said its overseas business, which now accounts for more than half of sales, improved in the quarter.
It even took the unusually frank step of telling analysts in a morning conference call that orders in Europe were up in "double digits" in foreign-currency terms.
That gain probably translated into about 5% to 7% in dollar terms, well below recent quarters' gains of above 20%, reckons Jay Stevens of Dean Witter Reynolds.
"That was a disappointment" and a sign of overall computer-market softness in Europe, Mr. Stevens said.
Marc Schulman, with UBS Securities in New York, dropped his estimate of DEC's full-year net to $6.80 a share from $8.
Although overall revenues were stronger, Mr. Schulman said, DEC "drew down its European backlog" and had flat world-wide orders overall.
"The bottom line is that it's more hand to mouth than it has been before," he said.
Mr. Schulman said he believes that the roll-out of DEC's new mainframe will "occur somewhat more leisurely" than many of his investment colleagues expect.
He said current expectations are for an entry level machine to be shipped in December, with all of the more sophisticated versions out by June.
For reasons he wouldn't elaborate on, he said he's sure that schedule won't be met, meaning less profit impact from the product for DEC in the next few quarters.
John R. Wilke contributed to this article.
Colgate Palmolive Co. reported third-quarter net income rose 27%, bolstered by strong sales in its Latin American business and surprisingly healthy profits from U.S. operations.
Colgate said net income for the quarter rose to $76.7 million, or $1.06 a share, on sales that increased 6% to $1.3 billion.
In the year-earlier period, Colgate posted net income of $60.2 million, or 88 cents a share.
Last year's results included earnings from discontinued operations of $13.1 million, or 19 cents a share.
Reuben Mark, chairman and chief executive officer of Colgate, said earnings growth was fueled by strong sales in Latin America, the Far East and Europe.
Results were also bolstered by "a very meaningful increase in operating profit at Colgate's U.S. business," he said.
Operating profit at Colgate's U.S. household products and personal care businesses, which include such well-known brands as Colgate toothpaste and Fab laundry detergent, jumped more than 40%, the company said.
Mr. Mark attributed the improvement to cost savings achieved by consolidating manufacturing operations, blending together two sales organizations and more carefully focusing the company's promotional activities.
"We've done a lot to improve (U.S.) results and a lot more will be done," Mr. Mark said.
"Improving profitability of U.S. operations is an extremely high priority in the company."
Colgate's results were at the high end of the range of analysts' forecasts.
The scope of the improvement in the U.S. business caught some analysts by surprise.
The company's domestic business, especially its household products division, has performed poorly for years.
Analysts say the earnings improvement came from cutting costs rather than increasing sales.
For the nine months, net increased 14% to $217.5 million, or $3.09 a share.
Sales rose 7% to $3.8 billion.
The company earned $191.1 million, or $2.79 a share, in the year-earlier period.
Colgate's 1988 net income included $40.1 million, or 59 cents a share, from discontinued operations.
Colgate sold its hospital supply and home health care business last year.
Separately, Colgate Wednesday finalized an agreement with MacroChem Corp., a tiny dental products and pharmaceutical concern based in Billerica, Mass., to market in the U.S. four of MacroChem's FDA-approved dental products.
The products -- sealants and bonding materials used by dentists -- all contain fluoride that is released over time.
The move is part of a drive to increase Colgate's business with dentists, a company spokeswoman said.
Terms of the agreement weren't given.
USACafes Limited Partnership said it completed the sale of its Bonanza restaurant franchise system to a subsidiary of Metromedia Co. for $71 million in cash.
USACafes, which is nearly half-owned by Sam and Charles Wyly of Dallas, said it will distribute proceeds from the sale to unit holders as a liquidating dividend as soon as possible.
The Bonanza franchise system, which generates about $600 million in sales annually, represented substantially all of the partnership's assets.
The sale of the system has been challenged in a class-action suit on behalf of unit holders filed last week in a Delaware court, USACafes said.
The company said it believes the suit is without merit.
American Telephone & Telegraph Co. unveiled a sweetened pension and early-retirement program for management that it hopes will enable it to save $450 million in the next year.
AT&T also said net income rose 19% in the third quarter.
AT&T said its amended pension program will nearly double to 34,000 the number of managers eligible to retire with immediate pension payments.
AT&T said that based on studies of other companies that have offered retirement plans, it expects about one-third of its eligible managers to retire under the new program.
AT&T said third-quarter net income grew, despite stiff competition in all of the company's markets.
Net income rose to $699 million, or 65 cents a share, from the year-earlier $587 million, or 55 cents a share.
Revenue edged up to $8.9 billion from $8.81 billion.
The latest period's net was reduced $102 million, or nine cents a share, for a change in depreciation method and concurrent changes in estimates of depreciable lives and net salvage for certain telecommunications equipment.
The results roughly matched estimates of securities analysts, who were encouraged by AT&T increasing its operating margin to 13% from 11% a year ago, because of continued cost-cutting efforts.
Sales of long-distance services, an extremely competitive market, rose 6.4%.
But the growth was partly offset by lower equipment sales and rentals and price cuts on some products.
Under the amended pension program, AT&T managers who have at least five years of service will have five years added to their age and length of service for pension purposes.
Managers who retire Dec. 30 will have an additional 15% added to their monthly pension for as long as five years or age 65, whichever comes earlier.
An AT&T spokeswoman said the company would likely replace about one-third of its managers who choose to retire with new employees.
Analysts hailed the sweetened pension package, which they said had been the subject of rumors for several months.
"This tells you AT&T is serious about continuing to manage their cost structure and is committed to 20%-a-year earnings growth," said Jack Grubman, an analyst with PaineWebber Inc.
But other analysts expressed disappointment that the cost-cutting move won't result in even greater earnings growth.
"This is a good move, but it only gets you to where people's expectations already are," in terms of earnings growth, said Joel D. Gross, an analyst with Donaldson, Lufkin & Jenrette.
Mr. Gross said he had hoped that a cost savings of $450 million would result in even greater growth than the 20% annual earnings increase AT&T has told analysts it expects in the future.
AT&T said the special retirement option will increase fourth-quarter expenses.
But the company said the amount can't be determined until it knows how many managers opt to retire.
AT&T said the expense increase will be largely offset by a gain from its previously announced plan to swap its holdings in Ing. C. Olivetti & Co. for shares in Cie. Industriali Riunite, an Italian holding company.
For the nine months, AT&T said net income was $1.99 billion, or $1.85 a share, up 19% from $1.67 billion, or $1.56 a share.
Revenue gained 3.1% to $26.81 billion from $26 billion.
In composite trading yesterday on the New York Stock Exchange, AT&T shares closed at $43.375, up 87.5 cents.
When it comes to buying and selling shares, Westridge Capital Management Inc. takes a back seat to no one.
Every dollar's worth of stock in the Los Angeles money manager's portfolio is traded seven or eight times a year, the firm estimates.
That makes it the most active trader among all the nation's investment advisers, according to Securities and Exchange Commission filings.
But wait a second.
Westridge Capital is an index fund -- the type of stolid long-term investor whose goal is to be nothing more than average.
Westridge Capital's frenetic trading reflects the changes sweeping through the previously sleepy world of indexing.
Indexing for the most part has involved simply buying and then holding stocks in the correct mix to mirror a stock market barometer, such as Standard & Poor's 500-stock index, and match its performance.
Institutional investors have poured $210 billion into stock and bond indexing as a cheap and easy form of investment management that promises to post average market returns.
These big investors have flocked to indexing because relatively few "active" stock pickers have been able to consistently match the returns of the S&P 500 or other bellwethers, much less beat it.
And the fees investors pay for indexing run a few pennies for each $100 of assets -- a fraction of the cost of active managers.
That's because computers do most of the work, and low trading activity keeps a lid on commission costs.
But today, indexing is moving from a passive investment strategy to an increasingly active one.
Because index-fund managers are no longer satisfied with merely being average, they have developed "enhanced" indexing strategies that are intended to outperform the market as much as three percentage points.
"Indexing has been the most single successful investment concept in the last decade, but the index money has been just sort of sitting there," says Seth M. Lynn, president of Axe Core Investors Inc., an indexer based in Tarrytown, N.Y.
"Now the interest is in what else can I do with that money."
Among the souped-up indexing strategies: Indexed portfolios can be built around thousands of stocks, or just a few dozen, rather than being restricted to the S&P 500 companies.
They can ignore the S&P 500 stocks altogether and focus on particular types of stocks, such as smaller companies, those paying high dividends or companies in a particular industry, state or country.
With today's computer-driven program trading techniques, index funds can trade back and forth between stock-index futures and the actual stocks making up indexes such as the S&P 500.
Futures and options also make it possible to build "synthetic" index funds that don't actually own a single share of stock, but can produce returns that match or exceed the broad stock market.
One reason for these hybrids is that indexing's rapid growth is slowing, particularly for those "plain vanilla" funds that mirror the S&P 500.
"There isn't a boatload {of big investors} out there still waiting to get into indexing," says P. James Kartalia, vice president of ANB Investment Management Co., Chicago, which offers both indexing and active management services.
(After tripling in size in the past five years, index funds now hold about 20% of the stock owned by pension funds.)
A further problem is razor-thin profits.
Plain-vanilla funds have become so commonplace that fees they can charge have plunged to almost nothing, and in some cases are just that.
To land customers for their well-paying stock custodial business, big banks sometimes will throw in basic indexing services for free.
"It's like getting a free toaster when you open an account," says Axe Core's Mr. Lynn.
As a result, indexers have been looking for ways to give investors something more than the average for their money.
And many have been successful, as in the case of the index fund operated by hyper-trader Westridge Capital.
Westridge Capital has used enhanced indexing techniques to beat the S&P 500's returns by 2.5 to 3 percentage points over the past four years, with the same risk level as holding the S&P 500 stocks, according to James Carder, the firm's president.
Strategies vary for Westridge Capital, which has $300 million under management.
The firm sometimes buys S&P 500 futures when they are selling at a discount to the actual stocks, and will switch back and forth between stocks and stock-index futures to take advantages of any momentary price discrepencies.
Mr. Carder also goes through periods when he buys stocks in conjunction with options to boost returns and protect against declines.
And in some months, he buys stock-index futures and not stocks at all.
"By their nature, our trades are very short-term and are going to create high turnover," Mr. Carder adds.
"The more turnover, the better for our clients."
Big indexer Bankers Trust Co. also uses futures in a strategy that on average has added one percentage point to its enhanced fund's returns.
J. Thomas Allen, president of Pittsburgh-based Advanced Investment Management Inc., agrees it's a good idea to jump between the S&P 500 stocks and futures.
"You're buying the S&P, and you always want to hold the cheapest form of it," he says.
But some indexers make little or no use of futures, saying that these instruments present added risks for investors.
"If the futures markets have a problem, then those products could have a problem," says John Zumbrunn, managing director of Prudential Insurance Co. of America's Investment Index Technologies Inc. unit.
Prudential currently is seeking approval to offer a new fund offering a return equal to the S&P 500 index plus 5/100 of a percentage point.
An added feature is that the slighty improved return would be guaranteed by Prudential.
There are many other strategies to bolster the returns of index funds.
They include:
LIMITED RISK FUNDS:
These guarantee protection against stock market declines while still passing along most gains.
Here a fund may promise to pay back, say, $95 of every $100 invested for a year, even if the market goes much lower.
The fund could invest $87 for one year in Treasury bills yielding 8% to return the guaranteed $95.
That leaves $13, which could be used to buy S&P 500 options that will nearly match any gain in the S&P index.
MANAGER REPLICATION FUNDS:
Say a big investor is interested in growth stocks.
Instead of hiring one of the many active managers specializing in growth stocks, indexers can design a portfolio around the same stocks; the portfolio will be maintained by computer, reducing both fees and, in theory, risk (because of the large number of stocks).
"We see a lot of interest in those kind of things," says Frank Salerno, a vice president of Bankers Trust.
"People comfortable with the passive approach are using them for other strategies."
TILT FUNDS:
This is an index fund with a bet.
Instead of replicating the S&P 500 or some other index exactly, some stocks are overweighted or underweighted in the portfolio.
One simple approach is to exclude S&P 500 companies considered bankruptcy candidates; this can avoid weak sisters, but also can hurt when a company like Chrysler Corp. rebounds.
Another approach: An investor with $100 million might use $75 million to buy the S&P 500 index and spend the other $25 million on a favorite group of stocks.
SPECIALIZED FUNDS:
Indexes can be constructed to serve social goals, such as eliminating the stocks of companies doing business in South Africa.
Other funds have been designed to concentrate on stocks in a geographic area in order to encourage local investment.
Pennsylvania State Employees Retirement System, for example, has about $130 million invested in a fund of 244 companies that are either Pennsylvania-based or have 25% of their work forces in the state.
Short interest on the New York Stock Exchange declined for the second consecutive month, this time 4.2%, while the American Stock Exchange reported its third consecutive record month of short interest.
The Big Board reported that short interest dropped to 523,920,214 shares as of Oct. 13 from 547,347,585 shares in mid-September.
Amex short interest climbed 3% to 53,496,665 shares from 51,911,566 shares.
For the year-earlier month, the Big Board reported 461,539,056 shares, indicating a 13.5% year-to-year rise, while the Amex reported 36,015,194 shares, a 48% leap.
Amex short interest has been heading upward since mid-December, with increases in each month since then except at mid-July.
Traders who sell short borrow stock and sell it, betting that the stock's price will decline and that they can buy the shares back later at a lower price for return to the lender.
Short interest is the number of shares that haven't yet been purchased for return to lenders.
Although a substantial short position reflects heavy speculation that a stock's price will decline, some investors consider an increase in short interest bullish because the borrowed shares eventually must be bought back.
Fluctuation in short interest of certain stocks also may be caused partly by arbitraging.
The figures occasionally include incomplete transactions in restricted stock.
The level of negative sentiment measured by the Big Board short interest ratio slipped to 3.36 from last month's 3.38.
The ratio is the number of trading days, at the exchange's average trading volume, that would be required to convert the total short interest position.
Some analysts suggest, however, that the ratio has weakened in value as an indicator because options and other products can be used to hedge short positions.
Varity Corp. led the Big Board list of largest short volumes with 12,822,563 shares.
Varity has proposed to acquire K-H Corp., consisting of the auto parts division and some debt of Fruehauf Corp., for $577.3 million of cash and securities.
Chemical Waste Management posted the biggest increase in short volume on the New York exchange, up 3,383,477 shares to 5,267,238.
Bristol-Myers Squibb Co., the entity formed from the recent acquisition of Squibb Corp. by Bristol-Myers Co., logged the largest volume decline, 7,592,988 shares, to 12,017,724.
Short interest in International Business Machines Corp. plunged to 1,425,035 shares from 2,387,226 shares a month earlier.
Also closely watched is Exxon Corp., where short interest slid to 4,469,167 shares from 5,088,774.
On a percentage basis, Germany Fund Inc. led the gainers, leaping to 67,972 shares from three shares.
TransCanada PipeLines Ltd. led the percentage decliners, dropping to 59 shares from 183,467.
The Amex short interest volume leader again was Texas Air Corp., rising to 3,820,634 shares from 3,363,949.
Bolar Pharmaceutical Co. posted the largest volume increase, 552,302 shares, to 2,157,656.
The company is under an investigation concerning procedures to gain Food and Drug Administration approval of generic drugs.
Bolar has denied any wrongdoing.
The largest volume drop -- down 445,645 shares to 141,903 -- came in shares represented by B.A.T Industries PLC's American depositary receipts.
The company is facing a takeover proposal from the financier Sir James Goldsmith.
First Iberian Fund led the percentage increases, rising to 73,100 shares from 184.
Nelson Holdings International Ltd. dropped the most on a percentage basis, to 1,000 shares from 255,923.
The adjacent tables show the Big Board and Amex issues in which a short interest position of at least 100,000 shares existed as of mid-October or in which there was a short position change of at least 50,000 shares since mid-September.
Your Oct. 12 editorial "Pitiful, Helpless Presidency?" correctly states that I was critical of the Bush administration's failure to have any plan in place to respond in a timely fashion to the opportunities to oust Manuel Noriega presented by the attempted military coup on Oct. 3.
You are absolutely wrong, however, in opining that this position is some kind of "flip-flop," something newly arrived at as a result of reading the opinion polls.
My position is one founded on both the facts and the law.
Although you may have forgotten, public opinion about Gen. Noriega is where it is in large measure because of my investigation of his years of involvement in narcotics smuggling (and simultaneous work as a U.S. operative).
The public made up its mind about Gen. Noriega largely as a result of the hearings I chaired in the Subcommittee on Terrorism and Narcotics of the Foreign Relations Committee on Feb. 8, 9, 10 and 11, 1988, and again on April 4, 1988.
It was during those hearings that the nation first learned the breadth and depth of Gen. Noriega's criminality, and of his enduring relationships with a variety of U.S. government agencies.
Those hearings also highlighted how Gen. Noriega was able to use his relationships with these agencies to delay U.S. action against him, and to exploit the administration's obsession with overthrowing the Sandinistas to protect his own drug-dealing.
As former Ambassador to Costa Rica Francis J. McNeil testified before the subcommittee, the Reagan administration knew that Gen. Noriega was involved with narcotics, but made a decision in the summer of 1986 "to put Gen. Noriega on the shelf until Nicaragua was settled."
As the report issued by the subcommittee concluded, "Our government did nothing regarding Gen. Noriega's drug business and substantial criminal involvement because the first priority was the Contra war.
This decision resulted in at least some drugs entering the United States as a hidden cost of the war."
Unfortunately, this problem continued even after Gen. Noriega's indictment.
Throughout 1988 and this year, I and others in Congress have pressed the U.S. to develop a plan for pushing this "narcokleptocrat" out of Panama.
Regrettably, two administrations in a row have been unwilling and unable to develop any plan, military or economic, for supporting the Panamanian people in their attempts to restore democracy.
Sen. John Kerry (D., Mass.)
For Vietnamese, these are tricky, often treacherous, times.
After years of hesitation, economic and political reform was embraced at the end of 1986, but ringing declarations have yet to be translated into much action.
Vietnam is finding that turning a stagnant socialist order into a dynamic free market doesn't come easy.
Here is how three Vietnamese are coping with change:
The Tire King
Nguyen Van Chan is living proof that old ways die hard.
Mr. Chan used to be an oddity in Hanoi: a private entrepreneur.
His business success made him an official target in pre-reform days.
Mr. Chan, now 64 years old, invented a fountain pen he and his family produced from plastic waste.
Later, he marketed glue.
Both products were immensely popular.
For his troubles, Mr. Chan was jailed three times between 1960 and 1974.
Though his operation was registered and used only scrap, he was accused of conducting illegal business and possessing illegal materials.
Once he was held for three months without being charged.
Things were supposed to change when Vietnam's economic reforms gathered pace, and for awhile they did.
After years of experimenting, Mr. Chan produced a heavy-duty bicycle tire that outlasted its state-produced rival.
By 1982, he was selling thousands of tires.
Newspapers published articles about him, and he was hailed as "the tire king."
His efforts earned a gold medal at a national exhibition -- and attracted renewed attention from local authorities.
District police in 1983 descended on his suburban home, which he and his large family used as both residence and factory, and demanded proof the house and equipment were his.
He produced it.
"That was the first time they lost and I won," he says.
He was further questioned to determine if he was "a real working man or an exploiter."
Says Mr. Chan: "When I showed it was from my own brain, they lost for the second time."
But a few days later the police accused him of stealing electricity, acquiring rubber without permission and buying stolen property.
Warned he was to be jailed again, he fled to the countryside.
His family was given three hours to leave before the house and contents were confiscated.
With only the clothes they were wearing, family members moved to a home owned by one of Mr. Chan's sons.
After six months on the run, Mr. Chan learned the order for his arrest had been canceled.
He rejoined his family in January 1984 and began the long struggle for justice, pressing everyone from Hanoi municipal officials to National Assembly deputies for restoration of his rights.
He and his family kept afloat by repairing bicycles, selling fruit and doing odd jobs.
Mr. Chan achieved a breakthrough in 1987 -- and became a minor celebrity again -- when his story was published in a weekly newspaper.
In 1988, 18 months after the sixth congress formally endorsed family-run private enterprise, district authorities allowed Mr. Chan to resume work.
By late last year he was invited back as "the tire king" to display his products at a national exhibition.
National leaders stopped by his stand to commend his achievements.
Mr. Chan now produces 1,000 bicycle and motorbike tires a month and 1,000 tins of tire-patching glue in the son's small house.
Eighteen people pack the house's two rooms -- the Chans, four of their 10 children with spouses, and eight of 22 grandchildren.
Most sleep on the floor.
Come daybreak, eight family members and two other workers unroll a sheet of raw rubber that covers the floor of the house and spills out onto the street.
The primitive operations also burst out the back door into a small courtyard, where an ancient press squeezes rubber solution into a flat strip and newly made tires are cooled in a bathtub filled with water.
Mr. Chan talks optimistically of expanding, maybe even moving into the import-export field.
First, however, he has unfinished business.
When district authorities allowed him to resume manufacturing, they released only one of his machines.
They didn't return the rubber stocks that represent his capital.
Nor did they return his house and contents, which he values at about $44,000.
He wants to recover more than just his property, though.
"I want my dignity back," he says.
The Editor
Nguyen Ngoc seemed an obvious choice when the Vietnamese Writers Association was looking for a new editor to reform its weekly newspaper, Van Nghe.
After the sixth congress, journalists seized the opportunity provided by the liberalization to probe previously taboo subjects.
Mr. Ngoc, 57 years old, had solid reformist credentials: He had lost his official position in the association in he early 1980s because he questioned the intrusion of politics into literature.
Appointed editor in chief in July 1987, Mr. Ngoc rapidly turned the staid Van Nghe into Vietnam's hottest paper.
Circulation soared as the weekly went way beyond standard literary themes to cover Vietnamese society and its ills.
Readers were electrified by the paper's audacity and appalled by the dark side of life it uncovered.
One article recounted a decade-long struggle by a wounded soldier to prove, officially, he was alive.
Another described how tax-collection officials in Thanh Hoa province one night stormed through homes and confiscated rice from starving villagers.
The newspaper also ran a series of controversial short stories by Nguyen Huy Thiep, a former history teacher, who stirred debate over his interpretation of Vietnamese culture and took a thinly veiled swipe at writers who had blocked his entry into their official association.
Van Nghe quickly made influential enemies.
"Those who manage ideology and a large number of writers reacted badly" to the restyled paper, says Lai Nguyen An, a literary critic.
After months of internal rumblings, Mr. Ngoc was fired last December.
His dismissal triggered a furor among intellectuals that continues today.
"Under Mr. Ngoc, Van Nghe protected the people instead of the government," says Nguyen Duy, a poet who is the paper's bureau chief for southern Vietnam.
"The paper reflected the truth.
For the leadership, that was too painful to bear."
The `Billionaire'
Nguyen Thi Thi is Vietnam's entrepreneur of the 1980s.
Her challenge is to keep her fledgling empire on top in the 1990s.
Mrs. Thi didn't wait for the reforms to get her start.
She charged ahead of the government and the law to establish Hochiminh City Food Co. as the biggest rice dealer in the country.
Her success, which included alleviating an urban food shortage in the early 1980s, helped persuade Hanoi to take the reform path.
Her story is becoming part of local folklore.
A lifelong revolutionary with little education who fought both the French and the U.S.-backed Saigon regime, she switched effortlessly to commerce after the war.
Her instincts were capitalistic, despite her background.
As she rode over regulations, only her friendship with party leaders, including Nguyen Van Linh, then Ho Chi Minh City party secretary, kept her out of jail.
Following Mr. Linh's appointment as secretary-general of the party at the sixth congress, Mrs. Thi has become the darling of "doi moi", the Vietnamese version of perestroika.
The authorities have steered foreign reporters to her office to see an example of "the new way of thinking."
Foreign publications have responded with articles declaring her Vietnam's richest woman.
"Some people call me the communist billionaire," she has told visitors.
Actually, 67-year-old Mrs. Thi is about as poor as almost everyone else in this impoverished land.
She has indeed turned Hochiminh City Food into a budding conglomerate, but the company itself remains state-owned.
She manages it with the title of general-director.
The heart of the business is the purchase of rice and other commodities, such as corn and coffee, from farmers in the south, paying with fertilizer, farm tools and other items.
Last year, Hochiminh City Food says it bought two million metric tons of unhusked rice, more than 10% of the country's output.
The company operates a fleet of trucks and boats to transport the commodities to its warehouses.
A subsidiary company processes commodities into foods such as instant noodles that are sold with the rice through a vast retail network.
In recent years, Mrs. Thi has started to diversify the company, taking a 20% stake in newly established, partly private Industrial and Commercial Bank, and setting up Saigon Petro, which owns and operates Vietnam's first oil refinery.
Mrs. Thi says Hochiminh City Food last year increased pretax profit 60% to the equivalent of about $2.7 million on sales of $150 million.
She expects both revenue and profit to gain this year.
She is almost cavalier about the possibility Vietnam's reforms will create rivals on her home turf.
"I don't mind the competition inside the country," she says.
"I am only afraid that with Vietnam's poor-quality products we can't compete with neighboring countries.
The earthquake that hit the San Francisco Bay area isn't likely to result in wholesale downgrading of bond ratings, officials at the two major rating agencies said.
Standard & Poor's Corp. is reviewing debt issued by 12 California counties, and "there are potential isolated problems," said Hyman Grossman, a managing director.
The agency is preparing a report, to be issued today, on the earthquake's impact on the property- and casualty-insurance industry.
The only securities so far to be singled out are those issued by Bay View Federal Savings & Loan.
Moody's Investors Service Inc. said it is reviewing, with an eye toward a possible downgrade, the ratings on Bay View Federal bonds, long-term deposits and the preferred-stock rating of its parent company, Bay View Capital Corp.
As for property and casualty insurers, Moody's said "preliminary estimates suggest that losses should not have a significant impact on most insurers' financial condition," but it "raises concerns about potentially substantial risks" longer-term.
"Losses from the earthquake are expected to be of similar magnitude to those of Hurricane Hugo," according to Moody's.
Your Oct. 5 editorial "A Democratic Tax Cut" contained an error.
In the third paragraph it referred to the senators seeking loophole suggestions from lobbyists for various sectors of the economy.
Among them, "banana farmers."
The only significant commercial banana farmers in the U.S. are in Hawaii.
The Hawaii Banana Industry Association, to which nearly all of them belong, has no lobbyist.
Thomas V. Reese Sr. Maui Banana Co.
Western Digital Corp. reported a net loss of $2.7 million, or nine cents a share, for its first quarter ended Sept. 30, citing factors as varied as hurricane damage, an advance in graphics technology and the strengthening dollar.
In the year-ago period, the company earned $12.9 million, or 45 cents a share, on sales of $247 million.
Sales for the just-ended period fell to about $225 million, the maker of computer parts said.
Nonetheless, Chairman Roger W. Johnson said he expects the company to be profitable in the current quarter.
"We are positioned to come through," he said, noting that the company's backlog was up from the previous quarter.
In its second quarter last year, Western Digital earned $12.7 million, or 44 cents a share, on sales of $258.4 million.
Mr. Johnson said Western Digital's plant in Puerto Rico was affected by Hurricane Hugo, losing three days' production because of the storm, which wrecked much of the Caribbean island's infrastructure.
Although the plant itself wasn't damaged, Mr. Johnson said millions of dollars in first-quarter revenue were lost.
The revenue will be regained in the current period, he added.
There are no plans to initiate a common stock dividend, Mr. Johnson said, explaining that the board continues to believe shareholders are best served by reinvesting excess cash.
Mr. Johnson said the first-quarter loss also heavily reflected a rapid change in graphics technology that left reseller channels with too many of the old computer graphics boards and too few new monitors compatible with the new graphics boards.
Western Digital doesn't make the monitors.
An accelerating move by personal computer manufacturers' to include advanced graphics capabilities as standard equipment further dampened reseller purchases of Western Digital's equipment.
"The other areas of the business -- storage and microcomputers -- were very good," Mr. Johnson said.
He said Western Digital has reacted swiftly to the movement to video graphics array, VGA, graphics technology from the old enhanced graphics adapter, EGA, which has a lower resolution standard, technology and now is one of the leading producers of these newer units.
Other makers of video controller equipment also were caught in the EGA-VGA shift, he said, "but we were able to respond much more quickly."
Still, Mr. Johnson said, "our stock is grossly undervalued."
He said the company has cut operating expenses by about 10% over the last few quarters, while maintaining research and development at about 8% to 9% of sales.
As part of its reorganization this week, Western Digital has divided its business into two segments -- storage products, including controllers and disk drives; and microcomputer products, which include graphics, communications and peripheral control chips.
Graphics, communications and peripheral control chips were combined because, increasingly, multiple functions are being governed by a single chip.
Storage, which includes computer controllers and 3.5-inch disk drives, represents nearly two-thirds of the company's business.
Disk drives, which allow a computer to access its memory, generated 38% more revenue in the most recent period compared with the fiscal first quarter a year earlier.
Computer parts are getting ever smaller, Mr. Johnson said, a shrinking that has propelled laptops into position as the fastest-growing segment of the computer business.
As smaller and more powerful computers continue to be the focus of the industry, he said, Western Digital is strengthening development of laptop parts.
Next year Western Digital plans to consolidate its operations from 11 buildings in Irvine into two buildings in the same citya new headquarters and, a block away, a modern $100 million silicon wafer fabrication plant.
The plan will help the company in its existing joint manufacturing agreement with AT&T.
About half of Western Digital's business is overseas, and Mr. Johnson expects that proportion to continue.
Plans to dissolve many of the trade barriers within Europe in 1992 creates significant opportunities for the company, he said, particularly since Western Digital already manufactures there.
Capitalizing on that presence, Western Digital is launching a major effort to develop the embryonic reseller market in Europe.
Directors of state-owned Banca Nazionale del Lavoro approved a two-step capital-boosting transaction and a change in the bank's rules that will help it operate more like a private-sector institution.
Until now, BNL's top managers and its directors have been appointed by a Treasury decree.
But under the bank's proposed statutes, an assembly of shareholders must approve board members.
The bank's chairman and director general, who also sit on the board, still would be appointed by the Treasury.
BNL, which is controlled by the Italian Treasury, was rocked by the disclosure last month that its Atlanta branch extended more than $3 billion in unauthorized credits to Iraq.
The ensuing scandal, in which the bank's management resigned, has helped renew calls for privatization, or at least an overhaul, of Italy's banking system, which is about 80% state-controlled.
In a related move, the bank also proposed that board representation be linked more closely to the bank's new shareholding structure.
BNL called a shareholders' assembly meeting in December to vote on the proposals.
BNL has about 75,000 nonvoting shares that are listed on the Milan Stock Exchange.
The shares were suspended from trading following disclosure of the Atlanta scandal; Consob, the stock exchange regulatory body, reportedly will decide soon whether to end the trading suspension.
Switzerland's wholesale price index increased 0.3% in September from August, and was up 3.9% from a year ago, marking the first time this year that the index has fallen below 4% on a year-to-year basis, the government reported.
The government attributed the 0.3% month-to-month rise in the index largely to higher energy prices.
In August, the index was up 0.2% from the previous month, and was up 4.5% on a year-to-year basis.
The wholesale price index, based on 1963 as 100, was 180.9 in September.
American Express Co. posted a 21% increase in third quarter net income despite a sharp rise in reserves for Third World loans at its banking unit.
Aided by a sharp gain in its travel business, American Express said net rose to $331.8 million, or 77 cents a share, from $273.9 million, or 64 cents a share.
The year-earlier figures included $9.9 million, or three cents a share, in income from discontinued operations.
Income from continuing operations was up 26%.
Revenue rose 24% to $6.5 billion from $5.23 billion.
The travel, investment services, insurance and banking concern added $110 million to reserves for credit losses at its American Express Bank unit, boosting the reserve to $507 million as of Sept. 30.
The bank's Third World debt portfolio totals $560 million, down from $2.2 billion at the end of 1986.
The bank charged off $53 million in loans during the quarter.
At the American Express Travel Related Services Co. unit, net rose 17% to a record $240.8 million on a 19% revenue increase.
The figures exclude businesses now organized as American Express Information Services Co.
American Express card charge volume rose 12%.
Travel sales rose 11%, led by gains in the U.S.
At IDS Financial Services, the financial planning and mutual fund unit, net rose 19% to a record $47.6 million on a 33% revenue gain.
Assets owned or managed rose 20% to $45 billion, and mutual fund sales rose 45% in the quarter to $923 million.
American Express Bank earnings fell 50% to $21.3 million from $42.5 million despite a 29% revenue gain.
The results include $106 million of tax benefits associated with previous years' Third World loan activity, compared with $15 million a year earlier.
Profit rose 38% at American Express Information Services to $21.6 million.
Shearson Lehman Hutton Holdings Inc., as previously reported, had net of $65.9 million, reversing a $3.5 million loss a year earlier; its latest results include a $37 million gain from the sale of an institutional money management business.
American Express's share of Shearson's earnings was $41 million, after preferred stock dividends; it owns about 68% of Shearson's common.
For the nine months, American Express said net rose 11% to $899.8 million, or $2.09 a share, from $807.5 million, or $1.89 a share.
Revenue rose 24% to $18.73 billion from $15.09 billion.
Textron Inc., hampered by a slowdown in its defense sales, reported an 8% decline in per-share earnings on nearly flat revenue for its third quarter.
The aerospace and financial services concern said net income fell 5% to $59.5 million from $62.8 million.
Revenue of $1.73 billion was almost unchanged from last year's $1.72 billion.
Per-share net of 66 cents, down from 72 cents, fell by more than overall net because of more shares outstanding.
The company said that improved results in its financial-services sector were negated by increased costs in its government contract business, lower operating earnings in its commercial-products sector and soft automotive markets.
Net was aided by a lower income tax rate.
Profit before taxes fell 17% to $84.4 million from $101.4 million.
For the nine months, Textron reported net of $182.1 million, or $2.06 a share, on revenue of $5.41 billion.
A year ago, net was $170.4 million, or $1.93 a share, on revenue of $5.3 billion.
The nine-month results included a $9.5 million special charge in 1989 for an arbitration settlement related to past export sales, and $29.7 million in extraordinary charges in 1988 related to a former line of business and early redemption of debt.
Textron said that nine-months' results don't include earnings of Avdel PLC, a British maker of industrial fasteners, but do include interest costs of $16.4 million on borrowings related to the proposed purchase of Avdel.
A federal judge has issued a preliminary injunction against the purchase because of Federal Trade Commission concerns that the transaction would reduce competition in the production of two kinds of rivets.
For the quarter, Textron said aerospace revenue, including Bell helicopter and jet-engine manufacture, declined 9.8% to $755.9 million from $838.3 million, an indication of slowing government defense work.
As the Hunt brothers' personal bankruptcy cases sputter into their second year, Minpeco S.A. has proposed a deal to settle its huge claim against the troubled Texas oil men.
But the plan only threatens to heighten the tension and confusion already surrounding the cases that were filed in September 1988.
The Peruvian mineral concern's $251 million claim stems from 1988 jury award in a case stemming from the brothers' alleged attempts to corner the 1979-80 silver market.
Minpeco now says it is willing to settle for up to $65.7 million from each brother, although the actual amount would probably be much less.
Although the proposal must be approved by federal Judge Harold C. Abramson, W. Herbert Hunt has agreed to the Peruvian mineral concern's proposal.
Nelson Bunker Hunt is considering it, although his attorney says he won't do it if the proposal jeopardizes a tentative settlement he has reached with the Internal Revenue Service, which claims the brothers owe $1 billion in back taxes and is by far the biggest creditor in both cases.
The tentative agreement between the IRS and Nelson Bunker Hunt is awaiting U.S. Justice Department approval.
Under it, the former billionaire's assets would be liquidated with the IRS getting 80% of the proceeds and the rest being divided among other creditors, including Minpeco and Manufacturers Hanover Trust Co., which is seeking repayment of a $36 million loan.
A similiar proposal has been made in the W. Herbert Hunt case although he and the IRS are at odds over the size of the non-dischargable debt he would have to pay to the government from future earnings.
In both cases, Minpeco and Manufacturers Hanover have been fighting ferociously over their shares of the pie.
With support from the IRS, Manufacturers Hanover has filed suit asking Judge Abramson to subordinate Minpeco's claim to those of Manufacturer Hanover and the IRS.
Minpeco has threatened a "volcano" of litigation if the Manufacturers Hanover Corp. unit attempts to force such a plan through the court.
Minpeco said it wouldn't pursue such litigation if its settlement plan in the W. Herbert Hunt case is approved by Judge Abramson, who will consider the proposal at a hearing next week.
Minpeco attorney Thomas Gorman decribed the plan as one step toward an overall settlement of the W. Herbert Hunt case but Hugh Ray, attorney for Manufacturers Hanover, called it "silly" and said he would fight it in court.
"The thing is so fluid right now that there's really no way to say what will happen," says Justice Department attorney Grover Hartt III, who represents the IRS in the case.
"Developments like this are hard to predict.
Banc One Corp. said it agreed in principle to buy five branch offices from Trustcorp Inc., Toledo, Ohio, following the planned merger of Trustcorp into Society Corp., Cleveland.
The five offices in Erie and Ottawa counties in northern Ohio have total assets of about $88 million, Banc One said.
The purchase price will be established after Banc One has an opportunity to study the quality of the assets, Banc One said.
Society Corp. already has branches in the area, and selling the Trustcorp offices could avoid a problem with regulators over excessive concentration of banking in the two counties after the merger of Trustcorp into Society, according to industry sources.
The merger is scheduled to take place in the 1990 first quarter.
Stock-market fears and relatively more attractive interest rates pushed money-market mutual fund assets up $6.07 billion in the latest week, the sharpest increase in almost two years.
The 473 funds tracked by the Investment Company Institute, a Washington-based trade group, rose to $356.1 billion, a record.
The $6.07 billion increase was the strongest weekly inflow since January 1988.
The increase was spread fairly evenly among all three types of funds.
Individual investors, represented in the general-purpose and broker-dealer fund categories, pulled money from the stock market after its big drop last Friday and put the money into funds, said Jacob Dreyer, vice president and chief economist of the Institute.
"Insitutional investors, on the other hand, reacted to the steep decline in yields on direct money-market instruments following the stock-market decline last Friday," Mr. Dreyer said.
Yields on money funds dropped in the week ended Tuesday, according to Donoghue's Money Fund Report, a Holliston, Mass., newsletter.
The average seven-day compounded yield fell to 8.55% from 8.60% the week earlier, Donoghue's said.
At the auction of six-month U.S. Treasury bills on Monday, the average yield fell to 7.61% from 7.82%.
Likewise, certificates of deposit on average posted lower yields in the week ended Tuesday.
The 142 institutional-type money funds rose $2.23 billion to $85.49 billion.
The 235 general-purpose funds increased $2.53 billion to $116.56 billion, while 96 broker-dealer funds increased $1.3 billion to $154.05 billion.
Domestic lending for real estate and property development was the source of Bank Bumiputra Malaysia Bhd.'s most recent spate of financial troubles, the institution's executive chairman, Mohamed Basir Ismail, said.
Speaking to reporters this week after Bank Bumiputra's shareholders approved a rescue plan, Tan Sri Basir said heavy lending to the property sector rocked the bank when property prices in Malaysia plummeted in 1984-85.
He said the bank couldn't wait any longer for prices to recover and for borrowers to service their loans.
So the bank's board decided to make 1.23 billion Malaysian dollars (US$457 million) in provisions for interest payments from loans previously recorded as revenue but never actually received by the bank, and to submit a bailout package to replenish the bank's paid-up capital.
The predicament, he added, was similar to the Hong Kong 1982-83 property-price collapse, which exposed the involvement of Bank Bumiputra's former subsidiary in the colony in the largest banking scandal in Malaysia's history.
The subsidiary, Bumiputra Malaysia Finance Ltd., was left with M$2.26 billion in bad loans made to Hong Kong property speculators.
Both episodes wiped out Bank Bumiputra's shareholders' funds.
Each time, the bank's 90% shareholder -- Petroliam Nasional Bhd., or Petronas, the national oil company -- has been called upon to rescue the institution.
In five years, Petronas, which became the dominant shareholder in a 1984 rescue exercise, has spent about M$3.5 billion to prop up the troubled bank.
Tan Sri Basir said the capital restructuring plan has been approved by Malaysia's Capital Issues Committee and central bank.
Malaysia's High Court is expected to approve the plan.
Once the plan is approved, Tan Sri Basir said, most of Bank Bumiputra's nonperforming loans will have been fully provided for and the bank will be on track to report a pretax profit of between M$160 million and M$170 million for the fiscal year ending March 31.
For the previous financial year, the bank would have reported a pretax profit of M$168 million if it hadn't made provisions for the nonperforming loans, he said.
Malaysia's Banking Secrecy Act prohibited the bank from identifying delinquent borrowers, said Tan Sri Basir.
But public documents indicate 10% or more of the bank's provisions were made for foregone interest on a M$200 million loan to Malaysia's dominant political party, the United Malays National Organization, to build its convention and headquarters complex in Kuala Lumpur.
The loan to UMNO was made in September 1983.
"We lent a lot of money all over the place," said Tan Sri Basir, who refused to discuss the bank's outstanding loans to
As well as the M$1.23 billion in provisions announced on Oct. 6, the restructuring package covers an additional M$450 million in provisions made in earlier years but never reflected in a reduction of the bank's paid-up capital.
At the end of the exercise, the cash injection from Petronas will increase the bank's paid-up capital to M$1.15 billion after virtually being wiped out by the new provisions.
Heidi Ehman might have stepped from a recruiting poster for young Republicans.
White, 24 years old, a singer in her church choir, she symbolizes a generation that gave its heart and its vote to Ronald Reagan.
"I felt kind of safe," she says.
No longer.
When the Supreme Court opened the door this year to new restrictions on abortion, Ms. Ehman opened her mind to Democratic politics.
Then a political novice, she stepped into a whirl of "pro-choice" marches, house parties and fund-raisers.
Now she leads a grassroots abortion-rights campaign in Passaic County for pro-choice Democratic gubernatorial candidate James Florio.
"This is one where I cross party lines," she says, rejecting the anti-abortion stance of Rep. Florio's opponent, Reagan-Republican Rep. James Courter.
"People my age thought it wasn't going to be an issue.
Now it has -- especially for people my age."
Polls bear out this warning, but after a decade of increased Republican influence here, the new politics of abortion have contributed to a world turned upside down for Mr. Courter.
Unless he closes the gap, Republicans risk losing not only the governorship but also the assembly next month.
Going into the 1990s, the GOP is paying a price for the same conservative social agenda that it used to torment Democrats in the past.
This change comes less from a shift in public opinion, which hasn't changed much on abortion over the past decade, than in the boundaries of the debate.
New Jersey's own highest court remains a liberal bulwark against major restrictions on abortion, but the U.S. Supreme Court ruling, Webster vs. Missouri, has engaged voters across the nation who had been insulated from the issue.
Before July, pro-choice voters could safely make political decisions without focusing narrowly on abortion.
Now, the threat of further restrictions adds a new dimension, bringing an upsurge in political activity by abortion-rights forces.
A recent pro-choice rally in Trenton drew thousands, and in a major reversal, Congress is defying a presidential veto and demanding that Medicaid abortions be permitted in cases of rape and incest.
"If Webster hadn't happened, you wouldn't be here," Linda Bowker tells a reporter in the Trenton office of the National Organization for Women.
"We could have shouted from the rooftops about Courter . . . and no one would have heard us."
New Jersey is a proving ground for this aggressive women's-rights movement this year.
The infusion of activists can bring a clash of cultures.
In Cherry Hill, the National Abortion Rights Action League, whose goal is to sign up 50,000 pro-choice voters, targets a union breakfast to build labor support for its cause.
The league organizers seem more a fit with a convention next door of young aerobics instructors in leotards than the beefy union leaders; "I wish I could go work out," says a slim activist.
A labor chief speaks sardonically of having to "man and woman" Election Day phones.
No age group is more sensitive than younger voters, like Ms. Ehman.
A year ago this fall, New Jersey voters under 30 favored George Bush by 56% to 39% over Michael Dukakis, according to a survey then by Rutgers University's Eagleton Institute.
A matching Eagleton-Newark Star Ledger poll last month showed a complete reversal.
Voters in the same age group backed Democrat Florio 55% to 29% over Republican Courter.
Abortion alone can't explain this shift, but New Jersey is a model of how so personal an issue can become a baseline of sorts in judging a candidate.
By a 2-to-1 ratio, voters appear more at ease with Mr. Florio's stance on abortion, and polls indicate his lead widens when the candidates are specifically linked to the issue.
"The times are my times," says Mr. Florio.
The Camden County congressman still carries himself with a trademark "I'm-coming-down-your-throat" intensity, but at a pause in Newark's Columbus Day parade recently, he was dancing with his wife in the middle of the avenue in the city's old Italian-American ward.
After losing by fewer than 1,800 votes in the 1981 governor's race, he has prepared himself methodically for this moment, including deciding in recent years he could no longer support curbs on federal funding for Medicaid abortions.
"If you're going to be consistent and say it is a constitutionally protected right," he asks, "how are you going to say an upscale woman who can drive to the hospital or clinic in a nice car has a constitutional right and someone who is not in great shape financially does not?"
Mr. Courter, by comparison, seems a shadow of the confident hawk who defended Oliver North before national cameras at Iran-Contra hearings two years ago.
Looking back, he says he erred by stating his "personal" opposition to abortion instead of assuring voters that he wouldn't impose his views on "policy" as governor.
It is a distinction that satisfies neither side in the debate.
"He doesn't know himself," Kathy Stanwick of the Abortion Rights League says of Mr. Courter's position.
Even abortion opponents, however angry with Mr. Florio, can't hide their frustration with the Republican's ambivalence.
"He doesn't want to lead the people," says Richard Traynor, president of New Jersey Right to Life.
Moreover, by stepping outside the state's pro-choice tradition, Mr. Courter aggravates fears that he is too conservative as well on more pressing concerns such as auto insurance rates and the environment.
He hurt himself further this summer by bringing homosexual issues into the debate; and by wavering on this issue and abortion, he has weakened his credibility in what is already a mean-spirited campaign on both sides.
Elected to Congress in 1978, the 48-year-old Mr. Courter is part of a generation of young conservatives who were once very much in the lead of the rightward shift under Mr. Reagan.
Like many of his colleagues, he didn't serve in Vietnam in the 1960s yet embraced a hawkish defense and foreign policy -- even voting against a 1984 resolution critical of the U.S. mining of Nicaraguan harbors.
Jack Kemp and the writers Irving Kristol and George Gilder were influences, and Mr. Courter's own conservative credentials proved useful to the current New Jersey GOP governor, Thomas Kean, in the 1981 Republican primary here.
The same partnership is now crucial to Mr. Courter's fortunes, but the abortion issue is only a reminder of the gap between his record and that of the more moderate, pro-choice Gov. Kean.
While the Warren County congressman pursued an anti-government, anti-tax agenda in Washington, Gov. Kean was approving increased income and sales taxes at home and overseeing a near doubling in the size of New Jersey's budget in his eight years in office.
Kean forces play down any differences with Mr. Courter, but this history makes it harder for the conservative to run against government.
Mr. Courter's free-market plan to bring down auto insurance rates met criticism from Gov. Kean's own insurance commissioner.
Mr. Courter is further hobbled by a record of votes opposed to government regulation on behalf of consumers.
Fluent in Spanish from his days in the Peace Corps, Mr. Courter actively courts minority voters but seems oddly over his head.
He is warm and polished before a Puerto Rican Congress in Asbury Park.
Yet minutes after promising to appoint Hispanics to high posts in state government, he is unable to say whether he has ever employed any in his congressional office.
"I don't think we do now," he says.
"I think we did."
Asked the same question after his appearance, Democrat Florio identifies a staff member by name and explains her whereabouts today.
When he is presented with a poster celebrating the organization's 20th anniversary, he recognizes a photograph of one of the founders and recalls time spent together in Camden.
Details and Camden are essential Florio.
Elected to Congress as a "Watergate baby" in 1974, he ran for governor three years later.
In the opinion of many, he hasn't stopped running since, even though he declined a rematch with Gov. Kean in 1985.
His base in South Jersey and on the House Energy and Commerce Committee helped him sustain a network of political-action committees to preserve his edge.
With limited budgets for television in a high-priced market, Mr. Florio's higher recognition than his rival is a major advantage.
More than ever, his pro-consumer and pro-environment record is in sync with the state.
Auto insurance rates are soaring.
A toxic-waste-dump fire destroyed part of an interstate highway this summer.
In Monmouth, an important swing area, Republican freeholders now run on a slogan promising to keep the county "clean and green."
Mr. Florio savors this vindication, but at age 52, the congressman is also a product of his times and losses.
He speaks for the death penalty as if reading from Exodus 21; to increase state revenue he focuses not on "taxes" but on "audits" to cut waste.
Hard-hitting consultants match ads with Mr. Courter's team, and Mr. Florio retools himself as the lean, mean Democratic fighting machine of the 1990s.
Appealing to a young audience, he scraps an old reference to Ozzie and Harriet and instead quotes the Grateful Dead.
The lyric chosen -- "long strange night" -- may be an apt footnote to television spots by both candidates intended to portray each other as a liar.
The Democratic lawmaker fits a pattern of younger reformers arising out of old machines, but his ties to Camden remain a sore point because of the county's past corruption.
His campaign hierarchy is chosen from elsewhere in the state, and faced with criticism of a sweetheart bank investment, he has so far blunted the issue by donating the bulk of his profits to his alma mater, Trenton State College.
Mr. Florio's forcefulness on the abortion issue after the Webster ruling divides some of his old constituency.
Pasquale Pignatelli, an unlikely but enthusiastic pipe major in an Essex County Irish bagpipe band, speaks sadly of Mr. Florio.
"I am a devout Catholic," says Mr. Pignatelli, a 40-year-old health officer.
"I can't support him because of abortion."
Bill Wames Sr., 72, is Catholic too, but unfazed by Mr. Florio's stand on abortion.
A security guard at a cargo terminal, he wears a Sons of Italy jacket and cap celebrating "The US 1 Band."
"I still think the woman has the right to do with her body as she pleases," he says.
"If you want more opinions ask my wife.
She has lots of opinions.
Consumer prices rose a surprisingly moderate 0.2% in September, pushed up mostly by a jump in clothing costs, the Labor Department reported.
Energy costs, which drove wholesale prices up sharply during the month, continued to decline at the retail level, pulling down transportation and helping to ease housing costs.
The report was the brightest news the financial markets had seen since before the stock market plunged more than 190 points last Friday.
The Dow Jones Industrial Average rallied on the news, closing 39.55 points higher at 2683.20.
Bond prices also jumped as traders appeared to read the data as a sign that interest rates may fall.
But many economists were not nearly as jubilant.
The climb in wholesale energy prices is certain to push up retail energy prices in the next few months, they warned.
They also said the dollar is leveling off after a rise this summer that helped to reduce the prices of imported goods.
"I think inflation is going to pick up through the fall," said Joel Popkin, a specialist on inflation who runs an economic consulting firm here.
"It has been in what I would describe as a lull for the past several months."
"We've had whopping declines in consumer energy prices in each of the past three months, and at the wholesale level those are fully behind us now," said Jay Woodworth, chief domestic economist at Bankers Trust Co. in New York.
Because wholesale energy prices shot up by a steep 6.5% last month, many analysts expected energy prices to rise at the consumer level too.
As a result, many economists were expecting the consumer price index to increase significantly more than it did.
But retail energy prices declined 0.9% in September.
Though analysts say competition will probably hold down increases in retail energy prices, many expect some of the wholesale rise to be passed along to the consumer before the end of the year.
Still, some analysts insisted that the worst of the inflation is behind.
"It increasingly appears that 1987-88 was a temporary inflation blip and not the beginning of a cyclical inflation problem," argued Edward Yardeni, chief economist at Prudential-Bache Securities Inc. in New York.
In both 1987 and 1988, consumer prices rose 4.4%.
A run-up in world oil prices last winter sent consumer prices soaring at a 6.7% annual rate in the first five months of this year, but the subsequent decline in energy prices has pulled the annual rate back down to 4.4%.
Mr. Yardeni predicted that world business competition will continue to restrain prices.
"The bottom line is, it seems to me that the economic environment has become very, very competitve for a lot of businesses," he said.
"Back in 1987-88, business was operating at fairly tight capacity, so businesses felt they could raise prices."
Now, he said, a slowdown in economic activity has slackened demand.
The mild inflation figures renewed investors' hopes that the Federal Reserve will ease its interest-rate stance.
The steep climb in producer prices reported last Friday fostered pessimism about lower interest rates and contributed to the stock market's 6.9% plunge that day.
In the past several days, however, the U.S.'s central bank has allowed a key interest rate to fall slightly to try to stabilize the markets.
Analysts say Fed policy makers have been wary of relaxing credit too much because they were still uncertain about the level of inflation in the economy.
Excluding the volatile categories of energy and food -- leaving what some economists call the core inflation rate -- consumer prices still rose only 0.2% in September.
Transportation costs actually fell 0.5%, and housing costs gained only 0.1%.
Apparel prices rocketed up 1.7%, but that was after three months of declines.
Medical costs continued their steep ascent, rising 0.8% after four consecutive months of 0.7% increases.
Car prices, another area that contributed to the steep rise in the wholesale index last month, still showed declines at the consumer level.
They dropped 0.4% as dealers continued to offer rebates to attract customers.
Food prices rose 0.2% for the second month in a row, far slower than the monthly rises earlier in the year.
Separately, the Labor Department reported that average weekly earnings rose 0.3% in September, after adjusting for inflation, following a 0.7% decline in August.
All the numbers are adjusted for seasonal fluctuations.
Here are the seasonally adjusted changes in the components of the Labor Department's consumer price index for September.
After watching interest in the sport plummet for years, the ski industry is trying to give itself a lift.
Across the country, resorts are using everything from fireworks to classical-music concerts to attract new customers.
Some have built health spas, business centers and shopping villages so visitors have more to do than ski.
And this week, the industry's efforts will go national for the first time when it unveils a $7 million advertising campaign.
Such efforts -- unheard of only a few years ago -- are the latest attempts to revive the sagging $1.76 billion U.S. ski industry.
Since the start of the decade, lift-ticket sales have grown only 3% a year on average, compared with 16% annual growth rates in the '60s and '70s.
Last season, lift-ticket sales fell for the first time in seven years.
By some estimates, nearly a fourth of all U.S. ski areas have been forced to shut down since the early '80s.
Competition and mounting insurance and equipment costs have been the undoing of many resorts.
But another big problem has been the aging of baby boomers.
Skiing, after all, has mainly been for the young and daring and many baby boomers have outgrown skiing or have too many family responsibilities to stick with the sport.
In its new ad campaign, created by D'Arcy Masius Benton & Bowles Inc., Chicago, the ski industry is trying to change its image as a sport primarily for young white people.
One 60-second TV spot features a diverse group of skiers gracefully gliding down sun-drenched slopes: senior citizens, minorities, families with children -- even a blind skier.
"Ski school is great," cries out a tot, bundled in a snowsuit as he plows down a bunny slope.
"You'll never know 'til you try," says a black skier.
"We used to show some hot-dog skier in his twenties or thirties going over the edge of a cliff," says Kathe Dillmann, a spokeswoman for the United Ski Industries Association, the trade group sponsoring the campaign.
Ski promotions have traditionally avoided the touchy issue of safety.
But the new commercials deal with it indirectly by showing a woman smiling as she tries to get up from a fall.
"We wanted to show it's okay if you fall," says Ms. Dillmann.
"Most people think if you slip, you'll wind up in a body cast."
The ad campaign represents an unusual spirit of cooperation among resorts and ski equipment makers; normally, they only run ads hyping their own products and facilities.
But in these crunch times for the ski industry, some resorts, such as the Angel Fire, Red River and Taos ski areas in New Mexico, have even started shuttle-busing skiers to each other's slopes and next year plan to sell tickets good for all local lifts.
Many resorts also are focusing more on the service side of their business.
Since 40% of skiers are parents, many slopes are building nurseries, expanding ski schools and adding entertainment for kids.
Vail, Colo., now has a playland that looks like an old mining town; kids can ski through and pan for fool's gold.
For $15, they can enjoy their own nightly entertainment, with dinner, without mom and dad.
A few years ago, parents usually had to hire a sitter or take turns skiing while one spouse stayed with the children.
"Most parents who had to go through that never came back," says Michael Shannon, president of Vail Associates Inc., which owns and operates the Vail and nearby Beaver Creek resorts.
To make skiing more convenient for time-strapped visitors, several resorts are buying or starting their own travel agencies.
In one phone call, ski buffs can make hotel and restaurant reservations, buy lift tickets, rent ski equipment and sign up for lessons.
And resorts are adding other amenities, such as pricey restaurants, health spas and vacation packages with a twist.
During Winter Carnival week, for example, visitors at Sunday River in Maine can take a hot-air balloon ride.
"People these days want something else to do besides ski and sit in the bar," says Don Borgeson, executive director of Angel Fire, N.M.'s Chamber of Commerce.
The ski industry hopes to increase the number of skiers by 3.5 million to about 21.7 million in the next five years with its latest ads and promotions.
But some think that's being overly optimistic.
For one thing, it may be tough to attract people because skiing is still expensive: a lift ticket can cost up to $35 a day and equipment prices are rising.
And most vacationers still prefer a warm climate for their winter excursions.
An American Express Co. survey of its travel agents revealed that only 34% believe their clients will pick a trip this winter based on the availability of winter sports, as opposed to 69% who think that warm-weather sports will be the deciding factor.
"Even if they could bring in that many new skiers, I don't know if {the industry} could handle that kind of an increase," says I. William Berry, editor and publisher of the Ski Industry Letter in Katonah, N.Y.
"Most people will come on the weekend, the slopes will be overcrowded and then these {new skiers} won't come back.
They didn't play the third game of the World Series on Tuesday night as scheduled, and they didn't play it on Wednesday or Thursday either.
But you knew that, didn't you?
They are supposed to play the game next Tuesday, in Candlestick Park here.
The theory is that the stadium, damaged by Tuesday's earthquake, will be repaired by then, and that people will be able to get there.
Like just about everything else, that remains to be seen.
Aftershocks could intervene.
But, at least, the law of averages should have swung to the favorable side.
It may seem trivial to worry about the World Series amid the destruction to the Bay Area wrought by Tuesday's quake, but the name of this column is "On Sports," so I feel obliged to do so.
You might be interested to know that baseball, not survival, appeared to be the first thought of most of the crowd of 60,000-odd that had gathered at Candlestick at 5:04 p.m. Tuesday, a half-hour before game time, when the quake struck.
As soon as the tremor passed, many people spontaneously arose and cheered, as though it had been a novel kind of pre-game show.
One fan, seated several rows in front of the open, upper-deck auxiliary press section where I was stationed, faced the assembled newsies and laughingly shouted, "We arranged that just for you guys!"
I thought and, I'm sure, others did: "You shouldn't have bothered."
I'd slept through my only previous brush with natural disaster, a tornado 15 or so summers ago near Traverse City, Mich., so I was unprepared for one reaction to such things: the urge to talk about them.
Perhaps primed by the daily diet of radio and TV reporters thrusting microphones into people's faces and asking how they "feel" about one calamity or another, fellow reporters and civilians who spied my press credential were eager to chat.
"It felt like I was on a station platform and a train went by," said one man, describing my own reaction.
A women said she saw the park's light standards sway.
A man said he saw the upper rim undulate.
I saw neither.
Dictates of good sense to the contrary not withstanding, the general inclination was to believe that the disturbance would be brief and that ball would be played.
"I was near the top of the stadium, and saw a steel girder bow six feet from where I sat, but I stayed put for 10 or 15 minutes," confessed a friend.
"I guess I thought, `This is the World Series and I'm not gonna wimp out!'"
Here in the Global Village, though, folks do not stay uninformed for long.
Electrical power was out in still-daylighted Candlestick Park, but battery-operated radios and television sets were plentiful.
Within a few minutes, the true extent of the catastrophe was becoming clear.
Its Richter Scale measurement was reported as 6.5, then 6.9, then 7.0.
A section of the Bay Bridge had collapsed, as had a part of Interstate Highway 880 in Oakland.
People had died.
At 5:40 p.m., scheduled game time having passed, some fans chanted "Let's Play Ball."
No longer innocent, they qualified as fools.
The stadium was ordered evacuated soon afterward; the announcement, made over police bullhorns, cited the power outage, but it later was revealed that there also had been damage of the sort reported by my friend.
Outside, I spotted two young men lugging blocks of concrete.
"Pieces of Candlestick," they said.
The crowd remained good natured, even bemused.
TV reporters interviewed fans in the parking lots while, a few feet away, others watched the interviews on their portable TVs.
The only frenzy I saw was commercial: Booths selling World Series commemorative stamps and dated postmarks were besieged by fledgling speculators who saw future profit in the items.
The traffic jam out of the park was monumental.
It took me a half-hour to move 10 feet from my parking spot in an outer lot to an aisle, and an additional hour to reach an inner roadway a half-block away.
The six-mile trip to my airport hotel that had taken 20 minutes earlier in the day took more than three hours.
At my hotel, the Westin, power was out, some interior plaster had broken loose and there had been water damage, but little else.
With Garpian randomness, a hotel across the street, the Amfac, had been hit harder: A large sheet of its concrete facade and several window balconies were torn away.
The Westin staff had, kindly, set out lighted candles in the ballroom, prepared a cold-cuts buffet and passed around pillows and blankets.
I fell asleep on the lobby floor, next to a man wearing a Chicago Cubs jacket.
I expected him to say, "I told you so," but he already was snoring.
The journalistic consensus was that the earthquake made the World Series seem unimportant.
My response was that sports rarely are important, only diverting, and the quake merely highlighted that fact.
Should the rest of the Series be played at all?
Sure.
The quake and baseball weren't related, unlike the massacre of athletes that attended the 1972 Olympics.
That heavily politicized event learned nothing from the horrifying experience, and seems doomed to repeat it.
Two ironies intrude.
This has been widely dubbed the BART Series, after the local subway line, and the Bay Bridge Series.
Flags fly at half-staff for the death of Bart Giamatti, the late baseball commissioner, and now the Bay Bridge lies in ruins.
A Series that was shaping up as the dullest since the one-sided Detroit-over-San Diego go of 1984 has become memorable in the least fortunate way.
Still, its edge is lost.
It now will be played mostly for the record, and should be wrapped up as quickly as possible, without "off" days.
And I will never again complain about a rainout.
The disarray in the junk-bond market that began last month with a credit crunch at Campeau Corp. has offered commercial banks a golden opportunity to play a greater role in financing billion-dollar takeovers.
But two big New York banks seem to have kicked those chances away, for the moment, with the embarrassing failure of Citicorp and Chase Manhattan Corp. to deliver $7.2 billion in bank financing for a leveraged buy-out of United Airlines parent UAL Corp.
For more than a decade, banks have been pressing Congress and banking regulators for expanded powers to act like securities firms in playing Wall Street's lucrative takeover game, from giving mergers advice all the way to selling and trading high-yield junk bonds.
Those expanded powers reached their zenith in July when Bankers Trust New York Corp. provided mergers advice, an equity investment and bank loans for the $3.65 billion leveraged buy-out of Northwest Airlines parent NWA Inc.
One of the major selling points used by Los Angeles financier Alfred Checchi in getting the takeover approved was that the deal didn't include any junk bonds.
That was seen as an advantage in lobbying airline employees and Washington regulators for approval of the contested takeover.
All $3.35 billion in debt for the deal was supplied by banks.
Charles Nathan, co-head of mergers and acquisitions at Salomon Brothers Inc., says it is natural for banks to try to expand beyond their bread-and-butter business of providing senior debt for buy-outs.
But the UAL collapse, he says, "may tell you it's not going to work that easily."
David Batchelder, a mergers adviser in La Jolla, Calif., who aided Los Angeles investor Marvin Davis on the bids which put both UAL and NWA in play as takeover candidates this year, says that banks have been "preparing to play a larger and larger role in acquisition financing."
Mr. Batchelder says that in the past, banks would normally have loaned 65% of a total buy-out price, with the loans secured by the target company's assets.
Another 20% of the borrowed funds would come from the sale to investors of junk bonds, which offer less security and typically carry higher yields than bank loans.
Mr. Checchi's purchase of NWA, Mr. Batchelder notes, "was probably the most aggressive to date," with bank debt at 85% of the purchase price.
But Mr. Batchelder says that Citicorp's "failure to deliver" on its promise to raise the UAL bank debt for a labor-management buy-out group "is very distressing to potential users of a `highly-confident' letter from commercial banks."
His client, Mr. Davis, used just such a letter from Citicorp in pursuing UAL; Citicorp later agreed to work with a competing UAL buy-out group.
Executives of Citicorp and Chase Manhattan declined to comment on either the UAL situation, or on the changing nature of banks' role in financing takeovers.
In the wake of Campeau's problems, prices of junk bonds tumbled, throwing into doubt the ability of corporate acquirers to finance large takeovers with the help of junk bond sales.
Mark Solow, senior managing director at Manufacturers Hanover Trust Co., says the falloff in junk bonds may yet open new business opportunities to banks in structuring takeovers.
But he warns that banks will have "to have enough discipline" not to make loans that are too risky.
In fact, Manufacturers Hanover said in its third-quarter earnings report that fees from syndicating loans to other banks dropped 48%, to $21 million.
"We didn't take part in a lot of deals because their credit quality was poor," says a bank spokesman.
James B. Lee, head of syndications and private placements at Chemical Banking Corp., said he believes banks can still make a credible offer of one-stop shopping for takeover finance.
As evidence, he cites yesterday's arrangement for the final financing of a $3 billion bid for American Medical International Inc. in which Chemical served as both the lead bank and an equity investor.
Beyond the current weakness in the junk bond market, banks have another advantage over investment banks in financing contested takeovers.
Arthur Fleischer Jr., a takeover lawyer at Fried Frank Harris Shriver & Jacobson, notes that "a political and emotional bias" has developed against junk bonds.
One hostile bidder who deliberately avoided using junk bonds was Paramount Communications Inc. in its initial offer to acquire Time Inc. for $10.7 billion, or $175 a share.
A Paramount spokesman says that decision was based on the financial, not political, drawbacks of junk bonds.
But some observers believe Paramount Chairman Martin Davis wanted to avoid the possible taint of being perceived as a corporate raider in his controversial bid for Time.
In the end, Mr. Davis used junk bonds so that he could raise Paramount's bid to $200 a share.
Some Monday-morning quarterbacks said the initial lower bid, without junk bonds, was a factor in his losing the company.
Time eluded Paramount by acquiring Warner Communications Inc.
The success of the NWA financing, and the failure of the UAL deal, also seem to highlight the important new role in takeover financing being played by Japanese banks.
Japanese banks accounted for 50% of the NWA bank debt, according to a report by Transportation Secretary Samuel Skinner.
But it was broad-scale rejection by Japanese banks that helped seal the fate of the attempt to buy UAL.
Citicorp and Chase are attempting to put together a new, lower bid.
Takanori Mizuno, chief economist of the Institute for Financial Affairs Inc., a Tokyo research center on finance and economics, says, "The junk bond market became very jittery, and there's a fear of a coming recession and the possible bankruptcy of LBO companies.
Harley-Davidson Inc. filed suit in federal court here, alleging that a group that holds 6.2% of its stock made "false, deceptive and misleading" statements in recent regulatory filings and public announcements.
Harley-Davidson's complaint claims that the group, led by investor Malcolm I. Glazer, violated securities laws by failing to disclose plans to purchase 15% of the company's shares outstanding and that when the required Hart-Scott-Rodino filing eventually was made, it didn't disclose the group's alleged earlier violation of the so-called prior-notice requirements of the law.
Mr. Glazer couldn't immediately be reached to comment.
But when Harley last week publicly questioned the legality of the group's filing procedures, the Rochester, N.Y., investor said "we complied with every law," and he denied any wrongdoing.
The Glazer group said in a Securities and Exchange Commission filing in early October that it may seek a controlling interest in Harley-Davidson, or seek representation on the company's board.
Harley has said it doesn't intend to be acquired by the Glazer group or any other party.
Inland Steel Industries Inc., battered by lower volume and higher costs, posted a 75% drop in third-quarter earnings.
The nation's fourth-largest steelmaker earned $18.3 million, or 43 cents a share, compared with $61 million, or $1.70 a share, a year earlier, when the industry was enjoying peak demand and strong pricing.
Sales fell to $981.2 million from $1.02 billion.
The earnings also mark a significant drop from the second quarter's $45.3 million or $1.25 a share.
Moreover, the earnings were well below analysts' expectations of about $1.16 a share.
In composite trading on the New York Stock Exchange, Inland closed yesterday at $35.875 a share, down $1.
The company attributed the earnings drop to lower volume related to seasonal demand and the soft consumer durable market, especially in the automotive sector.
However, the company also lost orders because of prolonged labor talks in the second quarter.
Third-quarter shipments slipped 7% from the year-ago period, and 17% from this year's second quarter.
Profit of steel shipped for the company's steel segment slid to $26 a ton, from $66 a ton a year earlier and $57 a ton a quarter earlier.
Analysts noted that the disappointing results don't reflect lower prices for steel products.
Charles Bradford, an analyst with Merrill Lynch Capital Markets, said higher prices for galvanized and cold-rolled products offset lower prices for bar, hot-rolled and structural steel.
Structural steel, which primarily serves the construction market, was especially hurt by a 15% price drop, Mr. Bradford said.
The company said its integrated steel sector was also hurt by higher raw material, repair and maintenance, and labor costs.
The increased labor costs became effective Aug. 1 under terms of the four-year labor agreement with the United Steelworkers union.
Meanwhile, the company's service center segment, which saw operating profit drop to $11.5 million from $30.7 million a year ago, experienced much of the same demand and cost problems, as well as start-up costs associated with a coil processing facility in Chicago and an upgraded computer information system.
Inland Chairman Frank W. Luerssen said the company's short-term outlook is "clouded by uncertainties in the economy and financial markets."
However, he noted that steel mill bookings are up from early summer levels, and that he expects the company to improve its cost performance in the fourth quarter.
In the first nine months, profit was $113 million, or $3.04 a share, on sales of $3.19 billion, compared with $204.5 million, or $5.76 a share, on sales of $3.03 billion, a year earlier.
The "seismic" activity of a financial market bears a resemblance to the seismic activity of the earth.
When things are quiet (low volatility), the structures on which markets stand can be relatively inefficient and still perform their functions adequately.
However, when powerful forces start shaking the market's structure, the more "earthquake-resistant" it is, the better its chance for survival.
America's financial markets do not yet have all the required modern features required to make them fully "aftershock-resistant."
Investors lack equal access to the markets' trading arena and its information.
That structural lack is crucial because investors are the only source of market liquidity.
And liquidity is what markets need to damp quakes and aftershocks.
In today's markets, specialists (on the New York Stock Exchange) and "upstairs" market makers (in the over-the-counter market) are the only market participants allowed to play a direct role in the price-determination process.
When they halt trading, all market liquidity is gone.
And when any component of the market -- cash, futures or options -- loses liquidity, the price discovery system (the way prices are determined) becomes flawed or is lost entirely for a time.
Last Friday the 13th (as well as two years ago this week) the markets became unlinked.
When that happened, "seismic" tremors of fear -- much like the shock waves created by an earthquake -- coursed through the market and increased the market's volatility.
Lack of important, needed information can cause fear.
Fear is the father of panic.
Panic frequently results in irrational behavior.
And in financial markets, irrational behavior is sometimes translated into catastrophe.
When market tremors start, it is crucial that as much information about transaction prices and the supply-demand curve (buy and sell orders at various prices) be made available to all, not just to market makers.
Because of a lack of information and access, many investors -- including the very ones whose buying power could restore stability and damp volatility -- are forced to stand on the sidelines when they are most needed, because of their ignorance of important market information.
To add aftershock-damping power to America's markets, a modern, electronic trading system should be implemented that permits equal access to the trading arena (and the information that would automatically accompany such access) by investors -- particularly institutional investors.
Contrary to some opinions, the trading activities of specialists and other market makers do not provide liquidity to the market as a whole.
What market makers provide is immediacy, a very valuable service.
Liquidity is not a service.
It is a market attribute -- the ability to absorb selling orders without causing significant price changes in the absence of news.
Market makers buy what investors wish to sell; their business is reselling these unwanted positions as quickly as possible to other investors, and at a profit.
As a result, while any one customer may purchase immediacy by selling to a market maker (which is micro-liquidity for the investor), the market as a whole remains in the same circumstances it was before the transaction: The unwanted position is still an unwanted position; only the identity of the seller has changed.
In fact it can be argued that increasing capital commitments by market makers (a result of some post-1987 crash studies) also increases market volatility, since the more securities are held by market makers at any given time, the more selling pressure is overhanging the market.
In an open electronic system, any investor wishing to pay for real-time access to the trading arena through a registered broker-dealer would be able to see the entire supply-demand curve (buy and sell orders at each price) entered by dealers and investors alike, and to enter and execute orders.
Current quotations would reflect the combined financial judgment of all market participants -- not just those of intermediaries who become extremely risk-averse during times of crisis.
Investors and professionals alike would compete on the level playing field Congress sought and called a "national market system" (not yet achieved) almost 15 years ago when it passed the Securities Reform Act of 1975.
Last Friday's market gyrations did not result in severe "aftershocks."
Were we smart or just lucky?
I'm not certain.
But I am sure we need to maximize our "earthquake" protection by making certain that our market structures let investors add their mighty shock-damping power to our nation's markets.
Mr. Peake is chairman of his own consulting company in Englewood, N.J.
NOW YOU SEE IT, now you don't.
The recession, that is.
The economy's stutter steps leave investors wondering whether things are slowing down or speeding up.
So often are government statistics revised that they seem to resemble a spinning weather vane.
For the past seven years, investors have had the wind at their backs, in the form of a generally growing economy.
Some may have forgotten -- and some younger ones may never have experienced -- what it's like to invest during a recession.
Different tactics are called for, as losing money becomes easier and making money becomes tougher.
For those investors who believe -- or fear -- that 1990 will be a recession year, many economists and money managers agree on steps that can be taken to lower the risks in a portfolio.
In a nutshell, pros advise investors who expect a slowdown to hold fewer stocks than usual and to favor shares of big companies in "defensive" industries.
A heavy dose of cash is prescribed, along with a heavier-than-usual allotment to bonds -- preferably government bonds.
It's tempting to think these defensive steps can be delayed until a recession is clearly at hand.
But that may not be possible, because recessions often take investors by surprise.
"They always seem to come a bit later than you expect.
When they do hit, they hit fast," says David A. Wyss, chief financial economist at the Data Resources division of McGraw-Hill Inc.
Though he himself doesn't expect a recession soon, Mr. Wyss advises people who do that "the best thing to be in is long that is, 20-year to 30-year Treasury bonds."
The reason is simple, Mr. Wyss says: "Interest rates almost always decline during recession."
As surely as a seesaw tilts, falling interest rates force up the price of previously issued bonds.
They are worth more because they pay higher interest than newly issued bonds do.
That effect holds true for both short-term and long-term bonds.
But short-term bonds can't rise too much, because everyone knows they will be redeemed at a preset price fairly soon.
Long-term bonds, with many years left before maturity, swing more widely in price.
But not just any bonds will do.
Corporate bonds "are usually not a good bet in a recession," Mr. Wyss says.
As times get tougher, investors fret about whether companies will have enough money to pay their debts.
This hurts the price of corporate bonds.
Also, he notes, "most corporate bonds are callable."
That means that a corporation, after a specified amount of time has passed, can buy back its bonds by paying investors the face value (plus, in some cases, a sweetener).
When interest rates have dropped, it makes sense for corporations to do just that; they then save on interest costs.
But the investors are left stranded with money to reinvest at a time when interest rates are puny.
If corporate bonds are bad in recessions, junk bonds are likely to be the worst of all.
It's an "absolute necessity" to get out of junk bonds when a recession is in the offing, says Avner Arbel, professor of finance at Cornell University.
"Such bonds are very sensitive to the downside, and this could be a disaster."
Municipal bonds are generally a bit safer than corporate bonds in a recession, but not as safe as bonds issued by the federal government.
During an economic slump, local tax revenues often go down, raising the risks associated with at least some municipals.
And, like corporates, many municipal bonds are callable.
But a few experts, going against the consensus, don't think bonds would help investors even if a recession is in the offing.
One of these is Jeffrey L. Beach, director of research for Underwood Neuhaus & Co., a brokerage house in Houston, who thinks that "we're either in a recession or about to go into one."
What's more, he thinks this could be a nastier recession than usual: "Once the downturn comes, it's going to be very hard to reverse."
Investors, he advises, "should be cautious," holding fewer stocks than usual and also shunning bonds.
Because he sees a "5% to 6% base rate of inflation in the economy," he doubts that interest rates will fall much any time soon.
Instead, Mr. Beach says, investors "probably should be carrying a very high level of cash," by which he means such so-called cash equivalents as money-market funds and Treasury bills.
Greg Confair, president of Sigma Financial Inc. in Allentown, Pa., also recommends that investors go heavily for cash.
He isn't sure a recession is coming, but says the other likely alternative -- reignited inflation -- is just as bad.
"This late in an expansion," the economy tends to veer off either into damaging inflation or into a recession, Mr. Confair says.
The Federal Reserve Board's plan for a "soft landing," he says, requires the Fed to navigate "an ever-narrowing corridor."
A soft landing isn't something that can be achieved once and for all, Mr. Confair adds.
It has to be engineered over and over again, month after month.
He believes that the task facing Fed Chairman Alan Greenspan is so difficult that it resembles "juggling a double-bladed ax and a buzz saw."
And, in a sense, that's the kind of task individuals face in deciding what to do about stocks -- the mainstay of most serious investors' portfolios.
It comes down to a question of whether to try to "time" the market.
For people who can ride out market waves through good times and bad, stocks have been rewarding long-term investments.
Most studies show that buy-and-hold investors historically have earned an annual return from stocks of 9% to 10%, including both dividends and price appreciation.
That's well above what bonds or bank certificates have paid.
Moreover, because no one knows for sure just when a recession is coming, some analysts think investors shouldn't even worry too much about timing.
"Trying to time the economy is a mistake," says David Katz, chief investment officer of Value Matrix Management Inc. in New York.
Mr. Katz notes that some economists have been predicting a recession for at least two years.
Investors who listened, and lightened up on stocks, "have just hurt themselves," he says.
Mr. Katz adds that people who jump in and out of the stock market need to be right about 70% of the time to beat a buy-and-hold strategy.
Frequent trading runs up high commission costs.
And the in-and-outer might miss the sudden spurts that account for much of the stock market's gains over time.
Still, few investors are able to sit tight when they are convinced a recession is coming.
After all, in all five recessions since 1960, stocks declined.
According to Ned Davis, president of Ned Davis Research Inc. in Nokomis, Fla., the average drop in the Dow Jones Industrial Average was about 21%, and the decrease began an average of six months before a recession officially started.
By the time a recession is "official" (two consecutive quarters of declining gross national product), much of the damage to stocks has already been done-and, in the typical case, the recession is already half over.
About six months before a recession ends, stocks typically begin to rise again, as investors anticipate a recovery.
The average recession lasts about a year.
Unfortunately, though, recessions vary enough in length so that the average can't reliably be used to guide investors in timing stock sales or purchases.
But whatever their advice about timing, none of these experts recommend jettisoning stocks entirely during a recession.
For the portion of an investor's portfolio that stays in stocks, professionals have a number of suggestions.
Mr. Katz advocates issues with low price-earnings ratios -- that is, low prices in relation to the company's earnings per share.
"Low P-E" stocks, he says, vastly outperform others "during a recession or bear market."
In good times, he says, they lag a bit, but overall they provide superior performance.
Prof. Arbel urges investors to discard stocks in small companies.
Small-company shares typically fall more than big-company stocks in a recession, he says.
And in any case, he argues, stocks of small companies are "almost as overpriced as they were Sept. 30, 1987, just before the crash."
For example, Mr. Arbel says, stocks of small companies are selling for about 19 times cash flow.
(Cash flow, basically earnings plus depreciation, is one common gauge of a company's financial health.)
That ratio is dangerously close to the ratio of 19.7 that prevailed before the 1987 stock-market crash, Mr. Arbel says.
And it's way above the ratio (7.5 times cash flow) that bigger companies are selling for.
Another major trick in making a portfolio recession-resistant is choosing stocks in "defensive" industries.
Food, tobacco, drugs and utilities are the classic examples.
Recession or not, people still eat, smoke, and take medicine when they're sick.
George Putnam III, editor of Turnaround Letter in Boston, offers one final tip for recession-wary investors.
"Keep some money available for opportunities," he says.
"If the recession does hit, there will be some great investment opportunities just when things seem the blackest."
Mr. Dorfman covers investing issues from The Wall Street Journal's New York bureau.
Some industry groups consistently weather the storm better than others.
The following shows the number of times these industries outperformed the Standard & Poor's 500-Stock Index during the first six months of the past seven recessions.
Bond prices posted strong gains as investors went on a bargain hunt.
But while the overall market improved, the new-issue junk-bond market continued to count casualties, even as junk-bond prices rose.
Yesterday, Prudential-Bache Securities Inc. said it postponed a $220 million senior subordinated debenture offering by York International Corp.
And Donaldson, Lufkin & Jenrette Securities Corp. scrambled to restructure and improve the potential returns on a $475 million debenture offering by Chicago & North Western Acquisition Corp. that was still being negotiated late last night.
The issue by Chicago & North Western is one of the so-called good junk-bond offerings on the new-issue calendar.
Some analysts said the restructuring of the railroad concern's issue shows how tough it is for underwriters to sell even the junk bonds of a company considered to be a relatively good credit risk.
Since last week's junk-bond market debacle, many new issues of high-yield, high-risk corporate bonds have either been scaled back, delayed or dropped.
On Wednesday, Drexel Burnham Lambert Inc. had to slash the size of Continental Airlines' junk-bond offering to $71 million from $150 million.
Salomon Brothers Inc. has delayed Grand Union Co.'s $1.16 billion junk-bond offering while it restructures the transaction.
Last week, the Grand Union offering was sweetened to include warrants that allow bondholders to acquire common stock.
Prudential-Bache said the York issue was delayed because of market conditions.
"Everything is going through firehoops right now, and {Chicago & North Western} is no exception," said Mariel Clemensen, vice president, high-yield research, at Citicorp.
Portfolio managers say sweeteners like equity kickers and stricter protective covenants may increasingly be required to sell junk-bond deals.
Dan Baldwin, managing director of high-yield investments at Chancellor Capital Management, said the Chicago & North Western offering was restructured in part because "several large insurance buyers right now are demanding equity as part of the package.
If you're going to take the risk in this market, you want something extra."
Mr. Baldwin likes the offering.
But several mutual-fund managers, nervous about the deteriorating quality of their junk-bond portfolios and shy about buying new issues, said they're staying away from any junk security that isn't considered first rate for its class.
While they consider the Chicago & North Western issue to be good, they don't view it as the best.
To lure buyers to the Chicago & North Western bonds, portfolio managers said Donaldson Lufkin sweetened the transaction by offering the bonds with a resettable interest rate and a 10% equity kicker.
The bonds are expected to have a 14 1/2% coupon rate.
The equity arrangement apparently would allow bondholders to buy a total of 10% of the stock of CNW Corp., Chicago & North Western's parent company.
Donaldson Lufkin declined to comment on the restructuring.
According to some analysts familiar with the negotiations, the 10% of equity would come directly from Donaldson Lufkin and a fund affiliated with the investment bank Blackstone Group, which would reduce their CNW equity holdings by 5% each.
That would leave the Blackstone fund with a 60% stake and Donaldson Lufkin with 15%.
Despite the problems with new issues, high-yield bonds showed gains in the secondary, or resell, market.
Junk bonds ended about one-half point higher with so-called high-quality issues from RJR Capital Holdings Corp. and Petrolane Gas Service Limited Partnership rising one point.
In the Treasury market, the benchmark 30-year bond rose seven-eighths point, or $8.75 for each $1,000 face amount.
The gain reflects fresh economic evidence that inflation is moderating while the economy slows.
That raised hopes that interest rates will continue to move lower.
The Labor Department reported that consumer prices rose just 0.2% last month, slightly lower than some economists had expected.
But there were also rumors yesterday that several Japanese institutional investors were shifting their portfolios and buying long-term bonds while selling shorter-term Treasurys.
Short-term Treasury securities ended narrowly mixed, with two-year notes posting slight declines while three-year notes were slightly higher.
Yesterday, the Fed executed four-day matched sales, a technical trading operation designed to drain reserves from the banking system.
The move was interpreted by some economists as a sign that the Fed doesn't want the federal funds rate to move any lower than the 8 3/4% at which it has been hovering around during the past week.
The closely watched funds rate is what banks charge each other on overnight loans.
It is considered an early signal of Fed credit policy changes.
"The fact that they did four-day matched sales means they are not in a mood to ease aggressively.
They are telling us that {8 3/4%} is as low as they want to see the fed funds rate," said Robert Chandross at Lloyds Bank PLC.
Treasury Securities
The benchmark 30-year bond was quoted late at a price of 101 25/32 to yield 7.955%, compared with 100 29/32 to yield 8.032% Wednesday.
The latest 10-year notes were quoted late at 100 9/32 to yield 7.937%, compared with 99 26/32 to yield 8.007%.
Short-term rates rose yesterday.
The discount rate on three-month Treasury bills rose to 7.56% from 7.51% Wednesday, while the rate on six-month bills rose to 7.57% from 7.53%.
Meanwhile, the Treasury sold $9.75 billion of 52-week bills yesterday.
The average yield on the bills was 7.35%, down from 7.61% at the previous 52-week bill auction Sept. 21.
Yesterday's yield was the lowest since 7.22% on July 27.
Here are details of the auction:
Rates are determined by the difference between the purchase price and face value.
Thus, higher bidding narrows the investor's return while lower bidding widens it.
The percentage rates are calculated on a 360-day year, while the coupon-equivalent yield is based on a 365-day year.
Corporate Issues
Junk bond price climbed yesterday despite skittishness in the new-issue market for high-yield securities.
Dealers said junk bond issues on average were up by 1/4 to 1/2 point with so-called quality issues from RJR Capital Holdings Corp. and Petrolane Gas Service Limited Partnership posting one-point gains.
Petrolane Gas Service's 13 1/4% debentures traded at 102, after trading around par earlier this week, and RJR's 13 1/2% subordinated debentures of 2001 were at 101 5/8 after trading at below par earlier this week.
Investment-grade bonds were unchanged.
Municipals
Activity was brisk in the high-grade general obligation market, as a series of sell lists hit the Street and capped upward price movement in the sector.
Traders estimated that more than $140 million of high-grade bonds was put up for sale via bid-wanted lists circulated by a handful of major brokers.
There was speculation that the supply was coming from a commercial bank's portfolios.
According to market participants, the bonds were met with decent bids, but the volume of paper left high grades in the 10-year and under maturity range unchanged to 0.05 percentage point higher in yield.
Away from the general obligation sector, activity was modest.
Long dollar bonds were flat to up 3/8 point.
New Jersey Turnpike Authority's 7.20% issue of 2018 was up 3/8 at 98 3/8 bid to yield about 7.32%, down 0.03 percentage point.
The debt of some California issuers pulled off lows reached after Tuesday's massive earthquake, although traders said market participants remained cautious.
California expects to rely on federal emergency funds and its $1.06 billion in general fund reserves to meet the estimated $500 million to $1 billion in damages resulting from the quake, according to a state official.
It's also unclear precisely how the state will rebuild its reserve, said Cindy Katz, assistant director of California's department of finance, although she noted that a bond offering for that purpose isn't anticipated.
Meanwhile, new issuance was slow.
The largest sale in the competitive arena was a $55.7 million issue of school financing bonds from the Virginia Public School Authority.
A balance of $25.8 million remained in late order-taking, according to the lead manager.
Mortgage-Backed Securities
Mortgage securities generally ended 6/32 to 9/32 point higher, but lagged gains in the Treasury market because of a shift in the shape of the Treasury yield curve and rumored mortgage sales by thrifts.
Premium Government National Mortgage Association securities with coupon rates of 13% and higher actually declined amid concerns about increased prepayments because of a plan being considered by Congress to speed the refinancing of government-subsidized mortgages.
Ginnie Mae 13% securities were down about 1/4 at 109 30/32.
If the refinancing plan clears Congress, there could be fairly heavy prepayments on the premium securities, hurting any investor paying much above par for them.
In the current-coupon sector, a shift in the Treasury yield curve resulting from the better performance of long-dated issues over short-dated securities hurt major coupons because it will become more difficult to structure new derivative securities offerings.
Ginnie Mae 9% securities ended at 98 6/32, up 9/32, and Federal Home Loan Mortgage Corp. 9% securities were at 97 10/32, up 6/32.
The Ginnie Mae 9% issue was yielding 9.42% to a 12-year average life assumption, as the spread above the Treasury 10-year note widened 0.03 percentage point to 1.48.
While Remic issuance may slow in the coming days because of the shift in the Treasury yield curve, underwriters continued to crank out new real estate mortgage investment conduits structured when the yield curve was more favorable.
Two new Remics totaling $900 million were announced by Freddie Mac yesterday.
Foreign Bonds
British government bonds ended little changed as investors awaited an economic policy address last night by Chancellor of the Exchequer Nigel Lawson.
The Treasury 11 3/4% bond due 2003/2007 was down 2/32 at 111 29/32 to yield 10.09%, while the 11 3/4% notes due 1991 were unchanged at 98 19/32 to yield 12.94%.
In Japan, the bellwether No. 111 4.6% bond of 1998 ended off 0.03 at 95.72, to yield 5.32%, and in West Germany, the 7% benchmark issue due October 1999 ended 0.05 point lower at 99.85 to yield 7.02%.
THE PANHANDLER approaches, makes his pitch.
It may be straightforward -- he wants money for food -- or incredibly convoluted; his sister is at this very moment near death in Hoboken, he has lost his wallet and has only $1.22 in change to put toward a bus ticket costing $3.83, and won't you give him the difference?
No?
Well, how about a loan, he'll take your name and address . . .
Figuring that their money would more likely go toward a bottle of Night Train Express, most people have little trouble saying no to propositions like this.
But healthy skepticism vanishes when they are solicited by an organized charity to help fight cancer, famine, child abuse, or what have you.
Most see little reason to doubt that their cash will go toward these noble goals.
But will it?
In a distressing number of cases, no.
In fact, the donors sometimes might be better off giving the money to the panhandler: at least he has no overhead, and he might even be telling the truth.
Last year, more than $100 billion was donated to the nation's 400,000 charities.
While the vast bulk of it was indeed spent by reputable organizations on the good works it was raised for, it's equally true that a sizable hunk was consumed in "expenses" claimed by other operators, including fraudulent expenses.
In many cases the costs claimed were so high that only a dribble of cash was left for the purported beneficiaries.
It's impossible to say exactly how much of the total charity intake is devoured by stratospheric fund-raising costs, high-living operators, and downright fraud.
But the problem clearly is widespread and persistent.
State law enforcers can barely keep up with charity scams, and reports from watchdog groups such as the Council of Better Business Bureaus are not encouraging.
The Philanthropic Advisory Service of the BBB reviews hundreds of new charities every year, measuring them against minimum standards for accountability; for accuracy and honesty in solicitation; and for percentage of funds actually going to work for which the charity was supposedly established.
The Service figures at least half of the money taken in should be spent on program.
Roughly a third of the charities reviewed flunk the test.
Which, it should be added, doesn't prevent the charities from raking in a lot of money anyway.
Without a microscope and a subpoena, it's often hard to sort out worthwhile causes from ripoffs if all you've got to go on is the solicitation itself.
On this basis, "there's no way the average person can know a good charity from a bad one," says David Ormstedt, an assistant attorney general in Connecticut.
"A lot of donors just get taken."
Including those, he contends, who put about $1 million into the kitty for the Connecticut Association of Concerned Veterans and the Vietnam Veterans Service Center.
The state has sued these charities in state court, complaining that much of the money was grossly misspent; 82%, says Mr. Ormstedt, went to fund raisers and most of the rest to the people who ran the charities and to their relatives -- for fur coats, trips to Florida, Lucullan restaurant tabs.
The telephone number for the charity in Shelton, Conn., has been disconnected, and the former officials couldn't be located.
Running a charity does cost money, but reputable organizations manage to get the lion's share of donations out to where they are really needed.
The Arthritis Foundation, the American Cancer Society and the United Way of America all say that they spend roughly 90% of their income on programs, not overhead.
With some other charities, however, its the other way around.
The fledgling National Children's Cancer Society, for example, took in $2.5 million last year to finance bone-marrow transplants for children.
By the time it paid its expenses it only had $120,000 left -- not enough to treat even one child.
The state of Illinois is suing the charity for fraud in Chicago, along with Telesystems Marketing Inc., its Houston-based fund raiser.
Both deny wrongdoing.
The charity admits spending a lot on fund raising, but says that was necessary to establish a donor base it can tap at much lower cost in years to come.
Michael Burns, president of Telesystems, says his concern has only benefited from the publicity surrounding the case, noting that three other charities have signed on as clients because they were impressed with the amount he raised for National Children's.
Meanwhile, a state court judge has allowed the charity to go on soliciting funds.
Enforcers can't put charities out of business simply because they spend the lion's share of their income on fund raising.
State laws previously used as a yardstick minimum percentages of income -- usually half -- that had to be spent on the program rather than overhead, but these have been overturned by the U.S. Supreme Court.
It has ruled that such laws might work to stifle fund raising, which would amount to limiting the charities' first-amendment right to freedom of expression.
This puts upon enforcers the burden of proving outright fraud or misrepresentation, and such actions have been brought against hundreds of charities recently.
The attorney general's office in Connecticut alone has put seven of them out of business over the past couple of years, and the enforcement drive is continuing there and elsewhere.
In making cases, the authorities frequently zero in on alleged misrepresentations made by the charities' fund raisers.
Illinois, for instance, currently has under investigation 10 of the 30 companies drumming up funds for charities soliciting there.
Enforcers pay special attention to operators using sweepstakes prizes as an additional inducement to give.
Attorneys general in several states, including Illinois, are already suing Watson & Hughey Co., an Alexandria, Va.-based outfit that they say has used deceptive sweepstakes ads to solicit donations for the American Heart Disease Foundation and the Cancer Fund of America.
According to the Illinois attorney general's suit, Watson & Hughey sent mailings indicating that recipients were guaranteed cash prizes, and could win up to an additional $1,000 on top of them, if they contributed as little as $7.
But the total value of the prizes was only $5,000 and most "winners" will receive just 10 cents, according to the attorney general's office.
The suit is still pending in Illinois state court.
Watson & Hughey has denied the allegations in court; officials decline to comment further.
While they can target some of the most obvious miscreants, enforcers concede that they are only scratching the surface.
There are so many cunning ploys used by so many dubious operators, they say, that it is probably impossible to stop them all.
One maneuver: the "public education" gambit.
The solicitation material indicates that donations will go toward a campaign alerting and informing the public about some health or other issue.
What it doesn't say is that the entire "campaign" may be the fund-raising letter itself.
"All too often this will merely be a statement on the solicitation such as, `Don't smoke!' or `Wear suntan lotion,' " says William Webster, attorney general of Missouri.
"By putting these pithy statements on the solicitations, hundreds of thousands of dollars are claimed to have been spent on education to consumers when in fact this represents the costs of sending the newsletters."
Mr. Webster cites a four-page mailing from the United Cancer Council that offers a chance to win $5,000 in gold bullion to those giving as little as $5 to cancer education.
"A few boilerplate warnings about cancer appear but that's only two inches in all four pages.
I think some people may believe they're helping fund a massive TV and print campaign, but we couldn't find that the charity does anything except write these letters," he says.
Officials at the Washington D.C.-based charity didn't return repeated phone calls.
Many fly-by-night charities ride the coattails of the biggest, best-known and most reputable ones by adopting names similar to theirs.
The established charities are bothered by this but say they can do little about it.
"We can't police the many organizations that have sprung up in the last few years using part of our name.
Most of them don't last for long, but in the meantime all we can do is tell people they aren't connected with us," says a spokeswoman for the American Heart Association.
And sometimes a reputable charity with a household name gets used and doesn't even know it.
A couple in Rockford, Ill., raised $12,591 earlier this year using the name and logo of Mothers Against Drunk Driving, without permission from the group.
MADD didn't learn of the fund raising until the couple sent it a check for $613, along with a letter saying that was the charity's "share."
The Illinois Attorney General won a court order to prevent the couple from raising further funds without MADD's permission.
The couple couldn't be reached for comment and apparently have left Rockford, law enforcement officials report.
Denise McDonald, a spokeswoman for MADD, says, "It's scary, because anybody could do this."
Mr. Johnson is a staff reporter in The Wall Street Journal's Chicago bureau.
Overhead costs at some of the largest charities, in millions of dollars
British Airways PLC, a crucial participant in the proposed buy-out of UAL Corp., washed its hands of the current efforts to revive a bid for the parent of United Airlines.
Specifically, the British carrier said it currently has no plans to participate in any new offer for UAL.
In addition, British Air officially withdrew its support for the previous $300-a-share bid in a terse statement that said "the original deal is closed."
Company officials said later that British Airways believes its involvement in the UAL buy-out ended last Friday when the buy-out group, which also includes UAL's management and pilot union, failed to obtain financing for the $6.79 billion transaction.
The carrier stopped short of saying it wouldn't at some point reconsider participating in any new bid for UAL.
However, company officials said they plan to take "no initiatives" to resurrect the transaction, and "aren't aware" of any restructured bid in the making.
Collectively, the statements raised questions about whether a new bid for UAL will ever get off the ground.
The transaction has had a series of setbacks since the financing problems became known last Friday, with no signs or statements from the buy-out group to indicate that any progress has taken place.
However, in response to the British Air decision, United's pilot union vowed to continue efforts to revive the buy-out.
Pilot union Chairman Frederick C. Dubinsky said advisers to UAL management and the union will begin meeting in New York today and will work through the weekend to devise a new proposal to present to UAL's board "at the earliest time possible."
Pilot union advisers appeared confident that a new bid could go forward even without British Air's participation.
UAL declined to comment on British Air's statement.
UAL Chairman Stephen M. Wolf, who is leading the management end of the buy-out, hasn't provided investors with any assurances about the prospect of a new deal.
In another setback yesterday, United's machinist union asked the Treasury Department to investigate whether certain aspects of the original buy-out proposal violated tax laws.
In an effort to derail the buy-out, the union has already called for investigations by the Securities and Exchange Commission, Transportation Department and Labor Department.
But there was one bright spot yesterday.
The United flight-attendants union agreed to negotiations that could lead to the flight attendants contributing concessions to a revived bid in exchange for an ownership stake.
The pilot union, the only one to support the buy-out thus far, said the flight attendants' decision "enforces our belief that an all-employee owned airline is practical and achievable."
Still, without the assurance of British Airways' financial backing, it will be tougher for the buy-out group to convince already-reluctant banks to make loan commitments for a revised bid, especially since British Air's original investment represented 78% of the cash equity contribution for the bid.
Under the previous plan, British Air would have received a 15% stake in UAL in exchange for a $750 million equity investment, with a 75% stake going to UAL employees and 10% to UAL management.
British Air officials said the airline's chairman, Lord King, was concerned about news reports indicating that British Air might be willing to participate in a bid that included a lower purchase price and better investment terms for the British carrier.
The previous reports were based on remarks by British Air's chief financial officer, Derek Stevens, who said any revised bid would have to include a lower purchase price to reflect the sharp drop in UAL's stock in the past week.
UAL stock dropped $1.625 yesterday to $190.125 on volume of 923,500 shares in composite trading on the New York Stock Exchange.
UAL declined to comment on British Air's statement.
In an interview Wednesday with Dow Jones Professional Investor Report, Mr. Stevens said, "We're in no way committed to a deal going through at all.
We're not rushing into anything.
We don't want to be party to a second rejection."
Indeed, British Air seemed to be distancing itself from the troubled transaction early in an effort to avoid any further embarrassment.
The original transaction fell through on the same day British Air shareholders approved the plan at a special meeting after the British succeeded in arranging the financing for its equity contribution.
The carrier also seemed eager to place blame on its American counterparts.
"The {buy-out} consortium ceased to exist because our American partners were not capable of organizing the financing," a British Air spokesman said.
British Airways may have begun to have second thoughts about the transaction after the Transportation Department forced Northwest's Airlines' new owners to restructure the equity contribution of KLM Royal Dutch Airlines in that carrier.
Most of the department's statements since the Northwest transaction indicated it planned to curtail foreign ownership stakes in U.S. carriers.
Even before British Air's announcement, pilot union leaders had been meeting in Chicago yesterday to consider their options.
The leaders expressed support for trying to revive the bid following a briefing Wednesday by the union's advisers, Lazard Freres & Co. and Paul, Weiss, Rifkind Wharton & Garrison.
They also unanimously re-elected Mr. Dubinsky, the union chairman who has led the pilots' 2 1/2-year fight to take control of the airline.
UAL's advisers have indicated previously that it may take a while to come forward with a revised plan since they want to have firm bank commitments before launching a new bid.
They have maintained that banks remain interested in financing the transaction.
The buy-out fell through after Citicorp and Chase Manhattan Corp., the lead banks in the transaction, failed to obtain $7.2 billion in financing needed for the plan.
Italy's industrial wholesale sales index rose 13.2% in June from a year earlier, the state statistical institute Istat said.
The June increase compared with a rise of 10.5% in May from a year earlier.
Domestic wholesale sales rose 11.9% from a year earlier, while foreign sales jumped 17.3%, Istat said.
For the first six months, wholesale sales rose 12.3% from the year before, reflecting to a 11.5% jump in domestic sales and a 14.6% boost in foreign sales.
Sales of capital goods to foreign and domestic destinations increased 16.6% in the January-June period from a year earlier.
Sales of consumer goods rose 6.9% in the same period, while sales of intermediate goods were up 13.8% from a year ago.
Senate Democrats favoring a cut in the capital-gains tax have decided, under pressure from their leaders, not to offer their own proposal, placing another obstacle in the path of President Bush's legislative priority.
A core group of six or so Democratic senators has been working behind the scenes to develop a proposal to reduce the tax on the gain from the sale of assets.
The plan was complete except for finishing touches, and there was talk that it would be unveiled as early as yesterday.
But Senate Majority Leader George Mitchell (D., Maine), a vigorous opponent of the capital-gains tax cut, called the group to meet with him Wednesday night and again yesterday.
Sen. Mitchell urged them to desist.
Afterward, leaders of the dissident Democrats relented, and said they wouldn't offer their own proposal as they had planned.
The decision is a setback for President Bush, who needs the support of Democrats to pass the tax cut through the Democratic-controlled Senate.
Having a proposal sponsored by Democrats would have given the president an advantage.
Having only a Republican measure makes the task harder.
Still, Sen. Bob Packwood (R., Ore.), the lead sponsor of the Republican capital-gains amendment, predicted that the tax cut would be enacted this year.
He said a clear majority of senators back the tax reduction and that ultimately there would be enough senators to overcome any procedural hurdle the Democratic leadership might erect.
But Sen. Mitchell, buoyed by his victory among fellow Democrats, strongly disagreed.
Mr. Mitchell has been predicting that the president's initiative would fail this year.
Yesterday, in an interview, he added that the Democrats' decision "increases the likelihood that a capital-gains tax cut will not pass this year."
Mr. Mitchell's first victory came last week, when the Senate passed a deficit-reduction bill that didn't contain a capital-gains provision.
That vote made it unlikely that a capital-gains tax cut would be included in the final bill, now being drafted by House and Senate negotiators.
The House version of the bill does include the tax cut.
Now Republican leaders are concentrating on attaching a capital-gains amendment to some other bill, perhaps a measure raising the federal borrowing limit or a second tax bill that would follow on the heels of the deficit-reduction legislation.
To help lay the groundwork for that fight, President Bush plans early next week to meet at the White House with some 20 Democratic senators who favor cutting the capital-gains tax or are undecided on the issue.
The president apparently will have only one bill to push, Sen. Packwood's, and at least some of the dissident Democrats plan to support it.
"I may want to offer additional amendments to improve it when the bill comes to the floor," said Sen. David Boren (D., Okla.), a leader of those Democrats.
The Packwood plan, as expected, would allow individuals to exclude from income 5% of the gain from the sale of a capital asset held for more than one year.
The exclusion would rise five percentage points for each year the asset was held, until it reached a maximum of 35% after seven years.
The exclusion would apply to assets sold after Oct. 1.
As an alternative, taxpayers could chose to reduce their gains by an inflation index.
For corporations, the top tax rate on the sale of assets held for more than three years would be cut to 33% from the current top rate of 34%.
That rate would gradually decline to as little as 29% for corporate assets held for 15 years.
The Packwood plan also would include a proposal, designed by Sen. William Roth (R., Del.), that would create new tax benefits for individual retirement accounts.
The Roth plan would create a new, non-deductible IRA from which money could be withdrawn tax-free not only for retirement, but also for the purchase of a first home, education expenses and medical expenses.
Current IRAs could be rolled over into the new IRAs, but would be subject to tax though no penalty.
Westmoreland Coal Co., realizing benefits of a sustained effort to cut costs and boost productivity, reported sharply improved third-quarter results.
The producer and marketer of low-sulfur coal said net income for the quarter was $5.9 million, or 71 cents a share, on revenue of $145.4 million.
For the year-earlier period, the company reported a loss of $520,000 or six cents a share.
In the latest nine months, the company earned $8.5 million, or $1.03 a share.
Last year's net loss of $3,524,000 included a benefit of $1,640,000 from an accounting change.
Revenue for the nine months rose to $449 million from $441.1 million.
In an interview, Pemberton Hutchinson, president and chief executive, cited several reasons for the improvement: higher employee productivity and "good natural conditions" in the mines, as well as lower costs for materials, administrative overhead and debt interest.
In the latest nine months, Mr. Hutchinson said, total coal sales rose to about 14.6 million tons from about 14.3 million tons a year earlier.
In addition, long-term debt has been trimmed to about $72 million from $96 million since Jan. 1.
He predicted the debt ratio will improve further in coming quarters.
Westmoreland's strategy is to retain and expand its core business of mining and selling low-sulphur coal in the Appalachia region.
The operating territory includes coal terminals on the Ohio River and in Newport News, Va.
Westmoreland exports about a fourth of its coal tonnage, including a significant amount of metallurgical coal produced by others that is used by steelmakers overseas.
For the past couple of years, Westmoreland has undertaken an aggressive streamlining of all aspects of its business.
Marginal operations and assets have been sold.
The size of the company's board has been reduced to eight directors from 13.
About 140 salaried management jobs and hundreds of hourly wage positions have been eliminated.
Even perks have been reduced.
For example, the chief executive himself now pays 20% of the cost of his health benefits; the company used to pay 100%.
"I think the ship is now righted, the bilges are pumped and we are on course," Mr. Hutchinson said of the restructuring program.
"Much of what we set out to do is completed."
But he cautioned that Westmoreland's third quarter is typically better than the fourth, so investors "shouldn't just multiply the third quarter by four" and assume the same rate of improvement can be sustained.
One difference, he said, is that the fourth quarter has significantly fewer workdays because of holidays and the hunting season.
"I don't want to give the impression that everybody can relax now," he said.
"We have to keep working at improving our core business to stay efficient.
It's a process that never really ends."
Nevertheless, Mr. Hutchinson predicted that 1989 would be "solidly profitable" for Westmoreland and that 1990 would bring "more of the same."
For all of 1988, the company reported an after-tax operating loss of $134,000 on revenue of $593.5 million.
An accounting adjustment made net income $1.5 million, or 18 cents a share.
In a move that complements the company's basic strategy, its Westmoreland Energy Inc. unit is developing four coal-fired cogeneration plants with a partner in Virginia.
Some of the coal the plants buy will come from Westmoreland mines.
Mr. Hutchinson predicted that the unit's contribution to company results in the 1990s "will be exciting."
He said Westmoreland is looking at investment stakes in other cogeneration plants east of the Mississippi River.
Westmoreland expects energy demand to grow annually in the 2.5% range in the early 1990s.
"We see coal's piece of the action growing," Mr. Hutchinson said.
"Coal prices, while not skyrocketing, will grow modestly in real terms, we think.
Chase Manhattan Corp., after trying unsuccessfully to sell its interest in its lower Manhattan operations building, has exercised its option to purchase the 50-story office tower.
Chase had purchased an option to buy the building at One New York Plaza for an undisclosed sum from the late Sol Atlas as part of its original lease in 1970.
The current transaction cost the bank approximately $140 million.
Of that amount, $20 million was payment for the land underneath the building and the rest was for the building itself.
The building houses about 4,500 Chase workers, most of whom will be moved to downtown Brooklyn after the bank's new back office center is completed in 1993.
The move is part of Chase's strategy to consolidate its back offices under one roof.
The headquarters is located a few blocks away at 1 Chase Manhattan Plaza.
As part of its decision to leave the building, Chase tried to sell its interest, along with the Atlas estate's interest, shortly after the October 1987 stock market crash.
Chase Senior Vice President George Scandalios said the bank decided to exercise its option after bids fell short of expectations.
He said Chase and the Atlas estate were looking to sell the entire building for $400 million to $475 million, but didn't get an offer for more than $375 million.
As the building's new owner, Chase will have its work cut out for it.
Chase is vacating 1.1 million square feet of space, and Salomon Brothers Inc., whose headquarters is in the building, also plans to move shortly.
In addition, another major building tenant, Thomson McKinnon Inc.'s Thomson McKinnon Securities, likely will vacate the premises as part of its liquidation.
New York real estate brokerage Edward S. Gordon Co. will have the difficult task of finding new tenants.
Even with its striking views of the New York harbor, the building is considered antiquated by modern office standards.
And Chase will have to spend approximately $50 million to remove asbestos from the premises.
WALL STREET, SHAKE hands with George Orwell.
The author of the futuristic novel "1984" invented a language called Newspeak that made it impossible to fully develop a heretical thought -- that is, anything negative about the policies and practices of the state.
Wall Street hasn't gotten that far yet, but it has made a promising start.
Its language -- call it Streetspeak -- is increasingly mellifluous, reassuring, and designed to make financial products and maneuvers appear better, safer or cheaper than they really are.
When something undeniably nasty happens, a few euphemisms are deployed to simply make it disappear, much as a fresh grave may be covered by a blanket of flowers.
For example, we'll bet you thought that the stock market crashed two years ago.
Wrong.
According to some of the grand panjandrums of the market, it never happened.
In their lexicon the 508-point collapse in the Dow Jones Industrial Average on Oct. 19, 1987, was just a big blip.
Trotting out a much-beloved Streetspeak term, New York Stock Exchange Chairman John Phelan recently declared that history would record the event as only "a major technical correction."
(Another much-beloved saying, however, this one in plain English, holds that if something walks like a duck and quacks like a duck, it is a duck.
On Oct. 29, 1929 -- a date historians stubbornly insist on associating with the dreaded C-word -- the DJ industrials fell 12.8%.
In the "technical correction" of two years ago, they lost a whopping 22.6%.)
Customers hear a lot of this stuff from people who try to sell them stock.
These people used to be called brokers, but apparently this word either is not grandiose enough or carries too many negative connotations from the aforementioned technical correction, when terrified customers couldn't raise brokers on the phone.
Either way, the word "broker" is clearly out of favor.
Of the major New York-based securities firms, only Morgan Stanley & Co. still calls its salespeople brokers.
At Merrill Lynch & Co. and Shearson Lehman Hutton Inc., they are "financial consultants."
At Drexel Burnham Lambert Inc., Prudential Bache Securities, and Dean Witter Reynolds Inc., they are "account executives."
At PaineWebber Inc., they are "investment executives."
Such titles are designed to convey a sense of dignified, broad-scale competence and expertise in selling today's myriad financial products.
It is a competence and expertise that some brokers themselves, overwhelmed by all the new things being dreamed up for them to peddle, don't feel.
"Its almost product de jour," grouses one account executive at Dean Witter.
The transmogrified brokers never let the C-word cross their lips, instead stressing such terms as "safe," "insured" and "guaranteed" -- even though these terms may be severely limited in their application to a particular new financial product.
The names of some of these products don't suggest the risk involved in buying them, either.
A case in point: "government-plus" bond funds.
What could imply more safety than investing in government bonds?
What could be better than getting a tad more income from them (the plus) than other people?
Indeed, conservative investors, many of them elderly, have poured more than $50 billion into such funds, which promise fatter yields than ordinary Treasury bonds -- only to learn later that these funds use part of their money to dabble in high-risk bond options, a gambler's game.
When a certain class of investment performs so poorly that its reputation is tarnished, look for Wall Street to give it a new moniker.
This seems to be happening now to limited partnerships, many of which either have gone into the tank in recent years or have otherwise been grievous disappointments.
They are still being sold, but more and more often as "direct investments" -- with all the same risks they had under the old label.
In such cases, the game hasn't changed, only the name.
In others a familiar old name still prevails, but the underlying game has changed.
For example, "no load" mutual funds remain a favorite with investors because they don't carry a frontend sales commission.
Getting out of them, however, may be a different story now.
Traditional no-loads made their money by charging an annual management fee, usually a modest one; they imposed no other fees, and many still don't.
In recent years, though, a passel of others flying the no-load flag have been imposing hefty charges -- all the way up to 6% -- when an investor sells his shares.
Shouldn't they properly be called exit-load funds?
The mutual-fund industry is debating the question, but don't expect a new name while the old one is working so well.
And don't expect anyone to change the term "blue chip," either, even though some of the companies that still enjoy the title may be riskier investments than they were.
American Telephone & Telegraph Co., for one, is still a favorite of widows, orphans and trust departments -- but shorn of its regional telephone units and exposed to competition on every side, it is a far different investment prospect than it was before divestiture.
Also, blue chips in general have suffered much more short-term price volatility in recent years.
Larry Biehl, a money manager in San Mateo, Calif., blames that on the advent of program trading, in which computers used by big institutional investors are programmed to buy and sell big blocks when certain market conditions prevail.
Blue chips, he says, "are now being referred to as poker chips."
Finally, even the time-honored strategy called "value investing" no longer means what it once did.
Before the takeover mania of the '80s, it referred to rooting out through analysis undervalued stocks, especially those with shrewd management, sound fundamentals and decent prospects.
Now, says Mr. Biehl, value investing often means "looking for downtrodden companies with terrible management that are in real trouble."
To institutional investors or brokers, he adds, a company with value is a company at risk of being swallowed up.
Ms. Bettner covers personal finance from The Wall Street Journal's Los Angeles bureau.
I was amused to read your recent news stories on the banking industry's reserve additions and concomitant threats to cease making new loans to less-developed countries.
If the whole story were told, it would read something like this:
-- During the 1970s the commercial banks lured the country loan business away from the bond markets where the discipline of a prospectus and "Use of Proceeds" confirmation allowed lenders to audit expenditures of old loans before new loans were made.
-- The reward for that reckless lending was high reported earnings (and management bonuses); the price, a sea of bad loans.
-- For the past several years, the banks, lacking a private navy to enforce their interests, have been pressuring the U.S. Treasury to underwrite their bad LDC credits.
-- The Treasury wisely has refused, but has concluded that indirect credit support through various multinational agencies should be made available for a price: either debt reduction or debt-service reduction or new loans (the Brady Plan).
-- The banks will threaten not to make further loans, but in truth, lacking the capital to write off their mistakes or to build a navy, they have no alternative but to go along.
George A. Wiegers
Gillette Co. elected Warren E. Buffett, chairman of Berkshire Hathaway Inc., to its board, increasing the number of directors to 12 from 11.
Berkshire Hathaway earlier this year bought $600 million of preferred stock in Gillette that is convertible into an 11% stake, and Gillette said at the time that Mr. Buffett would be added to the board.
Separately, Gillette said its third-quarter earnings rose 2% to $65.2 million, or 57 cents a share, from $63.9 million, or 57 cents a share, in the year-earlier period; per-share earnings remained flat despite an increase in net income in part because the company paid a $10.4 million dividend on the new preferred stock in the period.
Sales rose 9% to $921.6 million from $845.7 million, with sales of the company's international/diversified operations "well above" the year earlier-period.
For the nine months, Gillette's net income declined 1% to $205.3 million, or $2.02 a share, from $207 million, or $1.82 a share, in the 1988 period.
Sales rose 6% to $2.77 billion from $2.61 billion.
In composite trading on the New York Stock Exchange, the company closed yesterday at $45.50 a share, up 25 cents.
When Walter Yetnikoff, the president of Sony Corp.'s CBS Records, last month told producer Peter Guber that Sony was about to make a $3.4 billion bid for Columbia Pictures and needed someone to run the studio, Mr. Guber jumped at the chance.
Within two days, he was on his way to New York and Tokyo to meet with top brass at Sony.
And before the week was out, Sony had offered Mr. Guber and his partner, Jon Peters, the most lucrative employment contracts in the history of the movie business.
Not only that, Sony also agreed to give them a stake in Columbia's future profits and buy their company, Guber Peters Entertainment Co., for $200 million, almost 40% more than the market value of the company.
There was just one sticking point: The two had a prior commitment.
Just seven months earlier, they had signed a five-year exclusive contract to make movies for Warner Bros. for which they had just produced the smash hit "Batman."
But Mr. Guber figured that Warner Communications Inc. chairman Steven Ross, would empathize and let the producers go, knowing the Sony offer was "the culmination of a life's work."
He figured wrong.
Last week, following fruitless settlement talks, Warner, now merging with Time Inc., filed a $1 billion breach of contract suit in Los Angeles Superior Court against both Sony and Guber Peters.
Sony promptly countersued, charging Warner with trying to sabotage its acquisitions and hurt its efforts to enter the U.S. movie business.
The accusations of lying and duplicity are flying thick and fast on both sides: As one Sony executive puts it, "It's World War III."
That two successful producers who aren't all that well known outside Hollywood could occasion such a clash of corporate titans suggests how desperate the quest for proven talent is in the movie business.
And they are a very odd team in any case.
Mr. Guber was raised in Boston and educated in New York.
He is a lawyer with a string of academic degrees.
Mr. Peters is a high-school dropout who came to fame as Barbra Streisand's hairdresser.
Yet, they are far and away the most prolific producers in Hollywood.
And despite their share of duds, they make movies that make money.
That is a skill Sony badly needs -- and Warner is loath to lose.
Although Columbia had a good summer with "Ghostbusters II" and "When Harry Met Sally," rivals such as Warner, Paramount Pictures, Walt Disney Co. and Universal Studios have been thrashing Columbia at the box office.
After five years of management turmoil, with four different studio heads, Columbia sorely needs a stable, savvy team to restore its credibility and get it back in the business of making hits.
Mr. Guber and Mr. Peters aren't universally loved in Hollywood but they are well connected.
Their stock in trade as "executive producers" is sniffing out hot properties, locking them up and then getting big studios to bankroll and distribute them.
Sometimes Mr. Guber and Mr. Peters do little more than grab the first draft of a screenplay for a "Flashdance," or buy rights to a best seller such as "The Color Purple."
It falls to others to do the writing, directing and producing.
With MGM/UA's "Rainman," for instance, Messrs. Guber and Peters had virtually nothing to do with day-to-day production, but their names still appear in big letters on the credits, and they are inevitably associated with its success.
Sometimes, as with "Batman," the pair really do make the film.
In that case, Guber Peters acquired the rights in 1979, nursed the movie through a dozen scripts, and were on the set in London for 11 months hovering over the most minute changes in casting and production.
"They're the best production talent around," says Brian De Palma, beholden to Guber Peters for hiring him to direct the Warner movie of Tom Wolfe's novel "Bonfire of the Vanities."
On that film, which is to start shooting in a few months, "they've been very much involved, hiring talent and discussing the development of the script.
And when you're making a movie this big, you need all the help you can get," Mr. De Palma adds.
"I wish they were around 24 hours a day."
And some movies seem to have been hurt by their inattention.
Warner executives blame Mr. Guber's and Mr. Peters's lack of involvement in "Caddyshack II" for casting and production problems and the film's ultimate dismal failure.
"We've had a few bombs," admits Mr. Peters.
"But by and large this company has only been profitable."
He says his company's prowess at packaging and marketing "is why we'll be good at Columbia.
We practically ran our own studio."
Longtime Hollywood associates describe Mr. Guber as the intellectual powerhouse of the two, a man with a flair for deal-making and marketing.
"Peter is a major piece of Hollywood manpower who has really earned his success," says Robert Bookman, an agent at Creative Artists Agency.
Mark Johnson, the producer of "Rainman," chimes in: "He has a great ability to hire terrific people and delegate authority. . . .
It's no accident that they've been able to develop such successful material."
Mr. Peters, on the other hand, has fewer fans in Hollywood, and his detractors like to characterize him as something of a hot-tempered bully.
He gets better reviews as a creative whiz, an enthusiast, an idea man.
He also had to fight harder for credibility than his partner did.
Barbra Streisand made him famous.
He cut her hair.
He lived with her.
He came to produce her records and her movies -- "A Star Is Born" and "The Main Event."
Thrice married but now single, Mr. Peters got plenty of ink last summer for an on-set romance with actress Kim Basinger during the making of "Batman."
Mr. Guber, by contrast, has been married to one woman for more than 20 years.
But for all their intellectual and stylistic differences, they make the perfect "good cop, bad cop" team, Hollywood associates say.
"Peter is the bright, sympathetic guy when you're doing a deal," says one agent.
"If there's a problem, Peter disappears, and all of a sudden Jon shows up."
Mr. Guber and Mr. Peters rub many people in Hollywood the wrong way.
Producers Don Simpson and Jerry Bruckheimer, who shepherded "Flashdance" through several scripts and ultimately produced the movie, bristle when Messrs. Guber and Peters take credit for the film.
Says Mr. Simpson: "The script was unreadable.
We reinvented it.
We are the producers of that movie.
They got a small piece of the net profits and a screen credit" as executive producers.
When Roger Birnbaum, an executive who worked for Guber Peters in the early 1980s, left to take a job as head of production at the United Artists studio, they made him forfeit all credits and financial interest in the films he had helped develop, including "Rainman" and "Batman."
Mr. Peters acknowledges that and says it's not unlike the situation he and Mr. Guber are in with Warner.
"I was upset with Roger, I fumpered and schmumpered," says Mr. Peters.
"But he wanted to pursue his own dream, and he went."
Still, Mr. Birnbaum says his relationship with Guber Peters was "one of the most successful I've had in Hollywood."
The two "have a wonderful chemistry -- Jon is very impulsive, and Peter is very compulsive," adds Mr. Birnbaum, who is now head of production at News Corp.'s 20th Century Fox Film Co.
"Jon Peters will come barreling into a room, say he's got a great idea, and be gone.
Peter will take the kernel of that idea and make it grow into something specific. . . ."
Mr. Birnbaum recalls that Mr. Guber and Mr. Peters shifted into high gear a few years back upon learning that they had competition for the story of the murdered naturalist Dian Fossey, which became "Gorillas in the Mist."
He says, "Within a few weeks, we made deals with the government of Rwanda and everyone who had ever met or talked to Dian Fossey.
I think Peter even made some deals with the gorillas."
Universal Studios was working on a competing film, but the studio and its producers ultimately agreed to co-produce the film with Guber Peters and Warner.
More recently, Guber Peters beat out a dozen other producers, reportedly including Robert Redford and Ted Turner, for rights to the life story of Chico Mendes, the murdered Brazilian union leader who fought developers in the Amazon rain forest.
Messrs. Guber and Peters assiduously courted the man's widow for months, showing her a tape of "Gorillas in the Mist" to impress her with the quality of their work.
Money helped, too.
Ultimately, they paid more than $1 million for the rights.
(The sale caused a rift between the widow and some of her husband's followers.
Some of the money will go to the Chico Mendes Foundation, but it isn't earmarked for groups trying to save the rain forest.)
It's hardly astonishing (given the men's track record) that Sony wants Mr. Guber and Mr. Peters.
But it is puzzling to some Hollywood executives that Sony rushed to hire them without clearing up the Warner situation first.
Some note that Sony might have saved itself some trouble by just hiring Mr. Guber and letting Mr. Peters stay on to fulfill the Warner contract.
But though "people in town may ask why Guber needs Peters, it's good to have a partner, and obviously the chemistry works," says Steven Tisch, a producer who once worked for Mr. Guber.
"This business isn't about personalities at the end of the day -- its about whether the ink is red or black.
In the case of Peter and Jon, the ink has been very, very black."
Mr. Guber got his start in the movie business at Columbia two decades ago.
Recruited from New York University's MBA program, he rose within two years to head of production, overseeing such films as "The Way We Were," "Taxi Driver," "Tommy" and "Shampoo."
In 1976, he teamed up with record producer Neil Bogart in Casablanca Records and Filmworks -- later called Polygram Pictures -- where they produced such hits as as "The Deep," and "Midnight Express."
In 1980, Mr. Guber got together with Mr. Peters, by then a successful producer in his own right, after the death of Mr. Bogart.
While Guber Peters produced a number of hits for Warner and others, their record wasn't always so impressive.
Among their clinkers were "The Legend of Billie Jean," "VisionQuest," "Clue" and "Clan of the Cave Bear."
And the failures make it possible for Warner in its current lawsuit to paint the producers as ingrates.
The studio says it stuck with them "even in the early years when the creative partnership was not particularly profitable for Warner."
Mr. Guber replies that "this is a Goliath, this Time Warner, trying to chew up two fellows who have done only well for them for a long period of time."
Mr. Guber and Mr. Peters maintain that executives at Warner have always known of their ambitions to run a major entertainment powerhouse, but that Warner never felt threatened until they linked up with Sony.
"From the beginning, {they} knew we had a goal and a dream," says Mr. Guber.
On a number of occasions, he adds, he tried to get Warner to buy Guber Peters outright.
"They always listened, but they never acted," Mr. Guber says.
In 1987, Mr. Guber and Mr. Peters contributed their company's assets in exchange for a 28% stake in Barris Entertainment, a small-fry TV production company controlled by Giant Industries Inc. Chairman Burt Sugarman.
In July a year later, Warner agreed to release the producers from their old contract when Messrs. Guber, Peters and Sugarman made a $100 million offer to buy 25% of MGM/UA.
Mr. Guber and Mr. Peters planned to run the nearly dormant MGM studio, and the two even tried to interest Warner Bros.' President Terry Semel in becoming a partner after he advised them on the deal.
But the MGM plan collapsed just two weeks later.
Mr. Guber and Mr. Peters say they got a look at the books and balked at the price.
Their relationship with Mr. Sugarman soured shortly thereafter.
Last May, he sold his 24% stake in Barris to a passive Australian investor and Barris was renamed Guber Peters Entertainment Co.
Meanwhile, Mr. Guber and Mr. Peters had agreed to extend their Warner agreement with the new five-year exclusive contract.
The new deal was considered the most generous of its kind, both financially and in terms of creative freedom.
But it paled by comparison to what Sony was to offer last month: the chance, at last, to run a major studio, about $50 million in deferred compensation, up to 10% of Columbia's future cash flow, 8% of the future appreciation of Columbia's market value, and annual salaries of $2.7 million for each.
The producers' 28% share of publicly held Guber Peters would net them an additional $50 million.
Sony also agreed to indemnify the producers against any liability to Warner.
Sony is paying a hefty price for a company that had revenue of only $42 million last year.
And earnings have been erratic.
In the the latest quarter, thanks in part to "Batman," Guber Peters earned $5.8 million, or 50 cents a share, compared to a loss of $6.8 million, or 62 cents a share, in last year's quarter.
Guber Peters stock, which traded as low as $6 a share last year, closed yesterday at $16.625.
The two sides now are accusing each other of lying.
Mr. Guber and Mr. Peters claim they have an oral agreement with Warner executives that allows them to terminate their contract should the opportunity to run a major studio arise.
But in affidavits filed yesterday in the Los Angeles court, Mr. Ross, Warner Bros. Chairman Robert Daly and President Semel deny that such an oral agreement was ever made.
Warner, in its court filings, calls it "a piece of fiction created for this litigation."
Mr. Daly in his affidavit acknowledges that Warner agreed to release the producers last year to take over MGM but says that situation was altogether different.
For one thing, according to Mr. Daly, the producers requested a release in advance.
Moreover, the old contract was about to expire, and the lineup of Guber Peters pictures for Warner wasn't as strong as it is now.
Warner itself was in negotiations with MGM over certain movie and other rights, and it was "in Warner's interest to accommodate MGM/UA, Guber and Peters by permitting them to become MGM executives," Mr. Daly said in his affidavit.
Warner obviously doesn't think that it is in its own interests to let Mr. Guber and Mr. Peters go off to Columbia.
At the very least, Mr. Ross clearly sees an opportunity to use the two men to get a pound of flesh from Sony.
During settlement talks, for example, Warner demanded such things as cable TV rights to Columbia movies and Columbia's interest in the studio it jointly owns with Warner, according to executives involved in the talks.
In any settlement, Warner is almost certain to demand rights to most of the 50 or so projects Mr. Guber and Mr. Peters have locked up for the next few years, notably sequels to "Batman."
Mr. Guber and Mr. Peters refuse to concede that they may have made a tactical error in accepting the Sony offer before taking it up with Warner.
And they say there are plenty of precedents in Hollywood for letting people out of contracts.
The last time Columbia Pictures was looking for a studio chief, they note, Warner released producer David Puttnam from his contract, then took him back after he was subsequently fired by his bosses at Columbia.
In his affidavit filed yesterday, Warner's Mr. Ross indicated he isn't buying any such argument: "If Sony succeeds here, no written contract in Hollywood will be worth the paper it's written on.
THE SALES PITCH couldn't sound better.
First, there's the name: "asset-backed securities."
Better than all those offers you get to buy securities backed by nothing.
And there's more.
The assets backing the securities come from some of the country's biggest -- and most secure -- institutions.
Most earn high ratings from credit agencies.
Their yields are higher than those of U.S. Treasury issues.
And the booming market has already attracted many of the nation's biggest institutional investors.
Ready to jump?
Well, think twice.
The concept may be simple: Take a bunch of loans, tie them up in one neat package, and sell pieces of the package to investors.
But the simplicity may be misleading.
Skeptics say the slightly higher returns aren't enough to compensate for the extra risk.
They warn that asset-backed securities are only as good as the assets and credit backing that support them -- and those are hard to evaluate.
Moreover, the securities were introduced only about 4 1/2 years ago; the biggest unknown is how they will fare in a recession.
"A lot of this stuff really is in untested waters," says Owen Carney, director of the investment securities division of the U.S. comptroller of the currency.
"We don't know how this whole market will work in a serious economic downturn."
Such concerns, however, haven't stopped asset-backed securities from becoming one of Wall Street's hottest new products.
Since the spring of 1985, financial alchemists have transformed a wide variety of debt into these new securities.
They have sold issues backed by car loans, boat loans and recreational-vehicle loans.
They have offered bundles of homeequity loans, as well as packages of loans used to buy vacation time-shares.
Last year, there was an issue of "death-backed bonds" -- securities backed by loans to life-insurance policyholders.
Some predict there will be "Third World bonds," backed by loans to Brazil, Argentina and other debt-ridden nations.
And the biggest volume this year has been on securities backed by credit-card receivables, sometimes known as "plastic bonds."
"This is the heyday of debt," says James Grant, editor of Grant's Interest Rate Observer, a newsletter.
"Before the sun sets on the '80s, it seems nothing will be left unhocked."
The result is a $45 billion market, according to Securities Data Co.
That includes more than $9.5 billion issued through August of this year, up sharply from $6.5 billion in the comparable 1988 period -- and more than in all of 1987.
Most issues have been sold to professional money managers, pension funds, bank trust departments and other institutions.
But wealthy individuals also have been jumping in, and lately brokers have been pushing smaller investors into the asset-backed market.
The entry fee is affordable: Issues typically are sold in minimum denominations of $1,000.
"We expect additional offerings" of asset-backed securities targeted toward individual investors, says Bill Addiss, a senior vice president at Shearson Lehman Hutton Inc.
The process typically begins when an institution, such as Citibank or Sears, Roebuck & Co., takes a pool of credit-card or other receivables and sells them to a specially created trust.
The trust then issues securities -- generally due in five years or less -- that are underwritten by Wall Street brokerage firms and offered to investors.
Issues typically come with "credit enhancements," such as a bank letter of credit, and thus have received high credit ratings.
Enthusiasts say the booming market has opened up a valuable new source of funds to issuers, while providing a valuable new investment for individuals and institutions.
Asset-backed securities "are an attractive investment compared to bank certificates of deposit or other corporate bonds," says Craig J. Goldberg, managing director and head of the asset-backed securities group at Merrill Lynch Capital Markets.
But skeptics question whether asset-backed bonds offer sufficient rewards to compensate for the extra risks.
Consider a $500 million offering of 9% securities issued last spring and backed by Citibank credit-card receivables.
The triple-A-rated issue offered a yield of only about 0.5 percentage point above four-year Treasury issues.
On a $10,000 investment, that's a difference of only $50 a year.
That kind of spread can be critical for money managers who buy bonds in large quantities and whose livelihood depends on outperforming the money manager across the street.
But for individuals who buy much smaller amounts and care less about relative performance than in preserving what they have, that margin is meaningless.
"If you're in the bond business playing the relative-performance derby, then even an extra 25 basis points (0.25 percentage point) becomes an important consideration on a career basis," says Mr. Grant.
"But if you're an individual investing money and trying to get it back again, then that isn't of overwhelming importance."
Moreover, the interest on asset-backed securities is fully taxable, while interest on Treasury issues is tax-free at the state and local level.
That's why some investment managers, such as Alex Powers, a vice president of Chase Manhattan Bank's private banking division, don't recommend most asset-backed issues for individuals in high-tax states, such as New York or California.
But Mr. Powers has purchased asset-backed issues for individuals with tax-deferred accounts, such as retirement plans.
He points out that institutions buying asset-backed issues in large quantities can earn higher spreads over Treasurys than individuals buying smaller amounts.
Another concern is liquidity, or how easily a security can be converted into cash.
The secondary, or resale, market for asset-backed securities is relatively new and much less active than for Treasury issues.
That could make it tricky for investors who need to sell their holdings quickly before the securities mature.
That's particularly true, analysts say, for certain of the securities, such as those backed by time-share loans.
"You could see massive gyrations here because it's such a thinly traded market," says Jonathan S. Paris, a vice president of European Investors Inc., a New York investment-management firm.
In addition, an investor who wants to know the daily value of Treasury bonds, or corporate bonds traded on the New York Stock Exchange, can simply check newspaper listings.
There aren't any such listings for asset-backed securities.
Evaluating asset-backed securities poses another problem.
Investors, for instance, may mistakenly assume that the bank or company that originally held the assets is guaranteeing the securities.
It isn't.
The front cover of the prospectus for the Citibank credit-card receivables offering points out in bold capital letters that the certificates represent an interest only in the specially created trust and "do not represent interests in or obligations of the banks, Citibank N.A., Citicorp or any affiliate thereof."
In other words, if there's a problem, don't expect Citibank to come to the rescue.
The prospectus also notes that the securities are not guaranteed by any government agency.
That means investors have to focus on the quality of the debt that lies beneath the securities, as well as on the credit enhancement for the issue and the credit ratings the issue has received.
That also isn't easy.
Take the "credit enhancements," which typically include a bank letter of credit or insurance from a bond-insurance company.
The letter of credit typically is not offered by the bank selling the assets to back the securities.
Nor does it cover the entire portfolio.
Details of credit enhancements vary widely from issue to issue.
Still, they play a crucial role in winning top ratings for most asset-backed issues -- which in turn is why the yield above Treasurys is so slim.
But skeptics ask why you should bother buying this stuff when you can get only slightly lower yields on government-guaranteed paper.
When you buy an asset-backed issue, you take the risk that a bank or an insurer could run into unexpected difficulties.
If a bank's credit rating was lowered because of, say, its loans to Third World nations, that could also affect the ratings, liquidity and prices of the asset-backed issues that the bank supports.
Underwriters insist these issues are constructed to withstand extremely tough economic conditions.
But despite the credit enhancements, despite the high ratings, some money managers still worry that a recession could wreak havoc on the underlying assets.
At a time when Americans are leveraged to their eyeballs, asset-backed investors may be taking a heady gamble that consumers will be able to repay loans in hard times.
At the very least, a recession would prompt investors to buy the highest-quality bonds they can find -- that is, Treasurys.
That could widen the yield spread between Treasurys and asset-backed securities, as well as make it tougher to unload the latter.
But it could be much worse.
Some analysts are especially wary of credit-card issues.
For one thing, credit-card loans are unsecured.
In addition, they fear that banks have been overeager to issue cards to the public -- giving cards to too many big spenders who will default during a recession.
"A day of reckoning is coming where we think the market will place a high premium on the highest-quality debt issues, and therefore we think the best debt investment is U.S. government bonds," says Craig Corcoran of Davis/Zweig Futures Inc., an investment advisory firm.
What about triple-A-rated asset-backed issues?
"Nope, we still say to stick with Treasurys," Mr. Corcoran replies.
Ratings, he notes, "are subject to change."
All this makes asset-backed securities seem too risky for many people.
And it reminds Raymond F. DeVoe Jr., a market strategist at Legg Mason Wood Walker Inc., of what he calls "DeVoe's Unprovable but Highly Probable Theory No. 1:
"More money has been lost reaching for yield than in all the stock speculations, scams and frauds of all time."
Mr. Herman is a staff reporter in The Wall Street Journal's New York bureau.
Volume of asset-backed securities issued annually
*Principal amount
**As of August 30
*Principal amount
Source: Securities Data Co.
IF YOU FORCE financial planners to sum up their most important advice in a single sentence, it would probably be a one-word sentence: Diversify.
Judging by a poll of Wall Street Journal readers conducted this summer by Erdos & Morgan Inc., serious investors have taken that advice to heart.
Nearly 1,000 investors responded to the Journal's poll, providing an in-depth look at their portfolios.
Those portfolios are remarkably diversified.
By spreading their wealth among several investment alternatives, the respondents have protected themselves against squalls in any one area, be it stocks, bonds or real estate.
For example, about 88% of Journal readers owned stock (down slightly from 91% in a similar poll last year).
But only 17.5% said they had more than half their money in the stock market.
Similarly, 57% of respondents own shares in a money-market mutual fund, and 33% own municipal bonds.
But only 6% to 7% of the investors were committing more than half their funds to either of those alternatives.
The poll, conducted Aug. 7-28, also provides a glimpse into the thinking of serious investors on a variety of other topics.
It found them in a cautious, but not downbeat, mood.
Of 1,500 people sent a questionnaire, 951 replied.
The response rate, more than 63%, allows the results to be interpreted with a high degree of confidence.
The results can't be extrapolated to all investors, though.
Journal readers are relatively affluent, with a median household income of between $75,000 and $99,000.
Nearly half of the respondents (47%) said their investment portfolio was worth $250,000 or more, and 17% said it was worth $1 million or more.
The respondents were mildly optimistic about the economy and investment markets, but their collective judgments were a notch more sober than they were a year ago.
For example, 12% of this year's respondents said they expect a recession within 12 months.
Last year, only 8% were expecting a recession.
An additional 56% of this year's respondents expect the economy to slow down during the next 12 months.
Only 42% of last year's respondents anticipated slowing growth.
Apparently, the respondents don't think that an economic slowdown would harm the major investment markets very much.
A slim majority (51%) think stock prices will be higher in August 1990 than they were in August 1989.
Their verdict on real estate is almost the same.
Some 50% expect real estate in their local area to increase in value over the next 12 months.
By contrast, only 32% expect an increase in the price of gold.
Since gold tends to soar when inflation is high, that finding suggests that people believe inflation remains under control.
Even though only 12% actually predicted a recession, many respondents were taking a better-safe-than sorry investment stance.
Nearly a third said they have made some portfolio changes to anticipate a possible recession.
For the most part, the changes were "slight."
The two-thirds who haven't tried to make their portfolios more recession-resistant were split about evenly between investors who "don't believe in trying to predict the markets" (about 31%) and investors who "don't expect a recession" (about 15%) or are "unsure if and when a recession might come" (about 22%).
A buy-and-hold approach to stocks continues to be the rule among respondents.
Most own two to 10 stocks, and buy or sell no more than three times a year.
Some 71% had bought some stock in the past year; only 57% had sold any.
But the lurking shadow of 1987's stock-market crash still seems dark.
About 33% considered another crash "likely," while about 63% said one is "unlikely."
Those percentages hardly changed from the previous year's poll.
And the respondents' commitment to the stock market remains somewhat lighter than usual.
About 60% of them said they would "ordinarily" have at least 25% of their money in stocks.
But as of August, only 50% actually had stock-market investments of that size.
Most stock-market indexes were hitting all-time highs at around the time of the poll.
But it appears that many Journal readers were taking that news as a sign to be cautious, rather than a signal to jump on the bandwagon.
Mr. Dorfman covers investing issues from The Wall Street Journal's New York bureau.
Canadian steel ingot production totaled 276,334 metric tons in the week ended Oct. 14, down 5.3% from the preceding week's total of 291,890 tons, Statistics Canada, a federal agency, said.
The week's total was down 7.1% from 297,446 tons a year earlier.
A metric ton is equal to 2,204.62 pounds.
The cumulative total in 1989 was 12,283,217 tons, up 7.5% from 11,429,243 tons a year earlier.
Health Care Property Investors Inc. said it acquired three long-term care facilities and one assisted-living facility in a purchase-and-lease transaction valued at $15 million.
The real estate investment trust said that it leased the three Florida facilities to National Health Care Affiliates Inc. of Buffalo, N.Y.
Health Care Property holds an interest in 139 facilities in 30 states.
Moody's Investors Service said it lowered its rating on about $75 million of this Chatsworth, Calif., concern's convertible subordinated debentures, due 2012, to Caa from B2.
It said the reduction reflects impaired business prospects and reduced financial flexibility caused by continuing losses at the maker of Winchester disk drives.
VALLEY National Corp. --
Moody's Investors Service Inc. said it lowered its rating on about $400 million of this bank holding company's senior debt to B2 from Ba3.
Moody's said it expects Valley National, of Phoenix, Ariz., to make substantial further provisions against its real-estate portfolio, and that it continues to suffer from the high cost of carrying nonperforming assets, and from high loan-loss provisions.
Electronic theft by foreign and industrial spies and disgruntled employees is costing U.S. companies billions and eroding their international competitive advantage.
That was the message delivered by government and private security experts at an all-day conference on corporate electronic espionage.
"Hostile and even friendly nations routinely steal information from U.S. companies and share it with their own companies," said Noel D. Matchett, a former staffer at the federal National Security Agency and now president of Information Security Inc., Silver Spring, Md.
It "may well be" that theft of business data is "as serious a strategic threat to national security" as it is a threat to the survival of victimized U.S. firms, said Michelle Van Cleave, the White House's assistant director for National Security Affairs.
The conference was jointly sponsored by the New York Institute of Technology School of Management and the Armed Forces Communications and Electronics Association, a joint industry-government trade group.
Any secret can be pirated, the experts said, if it is transmitted over the air.
Even rank amateurs can do it if they spend a few thousand dollars for a commercially available microwave receiver with amplifier and a VCR recorder.
They need only position themselves near a company's satellite dish and wait.
"You can have a dozen competitors stealing your secrets at the same time," Mr. Matchett said, adding: "It's a pretty good bet they won't get caught."
The only way to catch an electronic thief, he said, is to set him up with erroneous information.
Even though electronic espionage may cost U.S. firms billions of dollars a year, most aren't yet taking precautions, the experts said.
By contrast, European firms will spend $150 million this year on electronic security, and are expected to spend $1 billion by 1992.
Already many foreign firms, especially banks, have their own cryptographers, conference speakers reported.
Still, encrypting corporate communications is only a partial remedy.
One expert, whose job is so politically sensitive that he spoke on condition that he wouldn't be named or quoted, said the expected influx of East European refugees over the next few years will greatly increase the chances of computer-maintenance workers, for example, doubling as foreign spies.
Moreover, he said, technology now exists for stealing corporate secrets after they've been "erased" from a computer's memory.
He said that Oliver North of Iran-Contra notoriety thought he had erased his computer but that the information was later retrieved for congressional committees to read.
No personal computer, not even the one on a chief executive's desk, is safe, this speaker noted.
W. Mark Goode, president of Micronyx Inc., a Richardson, Texas, firm that makes computer-security products, provided a new definition for Mikhail Gorbachev's campaign for greater openness, known commonly as glasnost.
Under Mr. Gorbachev, Mr. Goode said, the Soviets are openly stealing Western corporate communications.
He cited the case of a Swiss oil trader who recently put out bids via telex for an oil tanker to pick up a cargo of crude in the Middle East.
Among the responses the Swiss trader got was one from the Soviet national shipping company, which hadn't been invited to submit a bid.
The Soviets' eavesdropping paid off, however, because they got the contract.
The University of Toronto stepped deeper into the contest for Connaught BioSciences Inc. by reaching an unusual agreement with Ciba-Geigy Ltd. and Chiron Corp.
The University said the two companies agreed to spend 25 million Canadian dollars ($21.3 million) over 10 years on research at Canadian universities if they are successful in acquiring the vaccine maker.
It said $10 million would go to the University of Toronto.
Ciba-Geigy and Chiron have made a joint bid of C$866 million for Connaught, and Institut Merieux S.A. of France has made a rival bid of C$942 million.
The University is seeking an injunction against the Merieux bid, arguing that Connaught's predecessor company agreed in 1972 that Connaught's ownership wouldn't be transferred to foreigners.
The university implied that it would drop its opposition to foreign ownership if Ciba-Geigy and Chiron are successful with their lower bid.
It said the new agreement would "replace" the old one that forms the basis of its suit against the Merieux takeover.
"Notwithstanding foreign ownership of Connaught, this accord would enhance research and development in Canada," said James Keffer, the university's vice president of research.
Ciba-Geigy is a Swiss pharmaceutical company and Chiron is based in Emeryville, Calif.
In a statement, Jacques-Francois Martin, director general of Merieux, said the French company is still determined to acquire Connaught.
While he didn't comment directly on the pact between Ciba-Geigy and the university, he said Merieux can transfer new products and technologies to Connaught more rapidly than other companies "not currently producing and marketing vaccines {who} can only promise this for some . . . years in the future."
In national over-the-counter trading yesterday, Connaught closed at $28.625, up $1.25.
Microsoft and other software stocks surged, leading the Nasdaq composite index of over-the-counter stocks to its biggest advance of the year on breathtaking volume.
Leading the pack, Microsoft soared 3 3/4, or 4%, to a record price of 84 1/4 on 1.2 million shares.
On the other hand, Valley National tumbled 24% after reporting a sizable third-quarter loss.
The Nasdaq composite leaped 7.52 points, or 1.6%, to 470.80.
Its largest previous rise this year came Aug. 7, when it gained 4.31.
The OTC market's largest stocks soared as well, as the Nasdaq 100 Index jumped 10.01, or 2%, to 463.06.
The Nasdaq Financial Index rose 5.04, or 1.1%, to 460.33.
By comparison, the Dow Jones Industrials and the New York Stock Exchange Composite each rose 1.5%.
Volume totaled 173.5 million shares, 30% above this year's average daily turnover on Nasdaq.
Among broader Nasdaq industry groups, the utility index gained 18.11 to 761.38.
The transportation and insurance sectors each posted gains of 8.59, with the transports finishing at 486.74 and the insurers at 537.91.
The Nasdaq industrial index climbed 8.17 to 458.52, and the "other finance" index, made up of commercial banks and real estate and brokerage firms, rose 3.97 to 545.96.
The index of smaller banks improved 1.97.
Of the 4,346 issues that changed hands, 1,435 rose and 629 fell.
Jeremiah Mullins, head of OTC trading at Dean Witter Reynolds, said both institutional and retail investors were buying.
But there was a dearth of sellers, traders said, so buyers had to bid prices up to entice them.
"There's no pressure on OTC stocks at this point," said Mr. Mullins, who said some buyers are beginning to shop among smaller OTC issues.
Microsoft's surge followed a report this week of substantially improved earnings for its first quarter, ended Sept. 30.
The stock was trading at 69 just two weeks ago.
Rick Sherlund, a Goldman Sachs analyst, has raised his earnings estimates for the company twice in the past two weeks, citing improved margins.
After the earnings were announced, he raised his fiscal 1990 estimate to between $3.80 and $4 a share.
Microsoft earned $3.03 a share in fiscal 1989.
Among other software issues, Autodesk jumped 1 1/4 to 42, Lotus Development was unchanged at 32 1/2, Novell jumped 7/8 to 30 3/4, Ashton-Tate gained 1/4 to 10 5/8, and Oracle Systems rose 3/4 to 25 3/4.
Caere, a new software issue, surged from its offering price of 12 to close at 16 1/8.
The company also makes optical character recognition equipment.
Caere was underwritten by Alex. Brown & Sons.
Another recently offered Alex. Brown issue, Rally's, surged 3 1/8 to 23.
The operator of fast-food restaurants, whose shares began trading last Friday, climbed 3 1/8 to 23 on 944,000 shares.
Its 1.7 million-share offering was priced at 15.
Valley National's slide of 5 3/4 points to 18 1/2 on 4.2 million shares followed its report late Wednesday of a $72.2 million third-quarter loss.
In the 1988 quarter, the Phoenix, Ariz., commercial banking concern earned $18.7 million.
Valley National said its $110 million provision for credit losses and $11 million provision for other real estate owned is related to weakness in the Arizona real estate market.
Additionally, Moody's Investors Service said it downgraded Valley National's senior debt and confirmed the company's commercial paper rating of "not prime."
A new issue, Exabyte, surged 2 1/8 from its initial offering price to close at 12 1/8.
The offering was for about 2.8 million shares of the data storage equipment maker; more than 2.2 million shares changed hands after trading began.
Dell Computer dropped 7/8 to 6.
The company said earnings for the year ending Jan. 28, 1990, are expected to be 25 to 35 cents a share, compared with a previous estimate of 50 to 60 cents a share.
Nutmeg Industries lost 1 3/4 to 14.
Raymond James & Associates in St. Petersburg, Fla., lowered its third-quarter earnings estimate for the company, according to Dow Jones Professional Investor Report.
A.P. Green Industries advanced 1 5/8 to 36 1/8.
East Rock Partners, which has indicated it might make a bid for the company, said A.P. Green, a refractory products maker, told the partnership it isn't for sale.
Row 21 of Section 9 of the Upper Reserved at Candlestick Park is a lofty perch, only a few steps from the very top of the stands.
From my orange seat, I looked over the first-base line and the new-mown ball field in the warm sun of the last few minutes before what was to have been the third game of the World Series.
It was five in the afternoon, but that was Pacific time.
Back in New York the work day was already over, so I didn't have to feel guilty.
Even still, I did feel self-indulgent, and I couldn't help remembering my father's contempt for a rich medical colleague who would go to watch the Tigers on summer afternoons.
This ballpark, the Stick, was not a classic baseball stadium -- too symmetrical, too much bald concrete.
And it didn't have the crowded wild intimacy of Yankee Stadium.
But I liked the easy friendliness of the people around me, liked it that they'd brought their children, found it charming that, true citizens of the state of the future, they had brought so many TVs and radios to stay in touch with electroreality at a live event.
Maybe it was their peculiar sense of history.
The broadcasters were, after all, documenting the game, ratifying its occurrence for millions outside the Stick.
Why not watch or hear your experience historicized while you were living it?
The day was saturated with the weight of its own impending history.
Long lines of people waited to buy special souvenir World Series postcards with official postmarks.
Thousands of us had paid $5 for the official souvenir book with its historical essays on Series trivia, its historical photographs of great moments in Series past, and its instructions, in English and Spanish, for filling in the scorecard.
Pitcher=lanzador.
Homerun=jonron.
Players ran out on the field way below, and the stands began to reverberate.
It must be a local custom, I thought, stamping feet to welcome the team.
But then the noise turned into a roar.
And no one was shouting.
No one around me was saying anything.
Because we all were busy riding a wave.
Sixty thousand surfers atop a concrete wall, waiting for the wipeout.
Only at the moment of maximum roll did I grasp what was going on.
Then I remembered the quake of '71, which I experienced in Santa Barbara in a second-story motel room.
When the swaying of the building woke me up, I reasoned that a) I was in Southern California; b) the bed was moving; c) it must be a Magic Fingers bed that had short-circuited.
Then I noticed the overhead light was swaying on its cord and realized what had happened.
What should I do?
Get out of the possibly collapsing building to the parking lot.
But the lot might split into crevasses, so I had better stand on my car, which probably was wider than the average crevasse.
Fortunately, the quake was over before I managed to run out and stand naked on the hood.
At the Stick, while the world shook, I thought of that morning and then it struck me that this time was different.
If I survived, I would have achieved every journalist's highest wish.
I was an eyewitness of the most newsworthy event on the planet at that moment.
What was my angle?
How would I file?
All these thoughts raced through my head in the 15 seconds of the earthquake's actual duration.
The rest is, of course, history.
The Stick didn't fall.
The real tragedies occurred elsewhere, as we soon found out.
But for a few minutes there, relief abounded.
A young mother found her boy, who had been out buying a hotdog.
The wall behind me was slightly deformed, but the center had held.
And most of us waited for a while for the game to start.
Then we began to file out, to wait safely on terra firma for the opening pitch.
It was during the quiet exodus down the pristine concrete ramps of the Stick that I really understood the point of all those Walkmen and Watchmen.
The crowd moved in clumps, clumps magnetized around an electronic nucleus.
In this way, while the Stick itself was blacked out, we kept up to date on events.
Within 15 minutes of the quake itself, I was able to see pictures of the collapsed section of the Bay Bridge.
Increasingly accurate estimates of the severity of the quake became available before I got to my car.
And by then, expensive automobile sound systems were keeping the gridlocked parking lot by the bay informed about the fire causing the big black plume of smoke we saw on the northern horizon.
Darkness fell.
But the broadcasts continued through the blacked-out night, with pictures of the sandwiched highway ganglion in Oakland and firefighting in the Marina district.
By then, our little sand village of cars had been linked with a global village of listeners and viewers.
Everyone at the Stick that day had started out as a spectator and ended up as a participant.
In fact, the entire population of the Bay Area had ended up with this dual role of actor and audience.
The reporters were victims and some of the victims turned into unofficial reporters.
The outstanding example of this was the motorist on the Bay Bridge who had the presence of mind to take out a video camera at the absolutely crucial moment and record the car in front as it fell into the gap in the roadway.
The tape was on tv before the night was out.
Marshall McLuhan, you should have been there at that hour.
Investors who received Shearson Lehman Hutton Inc.'s latest stock commentary may be left with blank expressions.
The first 10 pages of the 76-page Weekly Portfolio Perspective are completely blank, except for the page numbers.
Rather than printing devils, Shearson puts all the blame on the unpredictable stock market.
The plunge made Shearson's market commentary instantly out of date.
In fact, last Friday's 190.58-point tumble in the stock market caught many people and businesses by surprise, not the least of them brokerage firms such as Shearson that print their weekly market commentaries on Fridays for dissemination the following week.
Shearson, a 62%-owned unit of American Express Co., didn't have enough time to update its market commentary so, "We decided to kill our strategy pieces," says Jack Rivkin, the head of Shearson's research department.
The first thought some investors had was that a red-faced Shearson must have been wildly bullish on stocks in its original commentary, and that's why it purged its pages.
Investors recalled that Shearson last week had been advising that "the market is still exhibiting all the signs of a further advance."
Many other brokerage firms had similarly bullish views.
But Mr. Rivkin insists that the 10 pages weren't pulled because they were too bullish.
Instead, he says, "they were cautious, and that wasn't the message we wanted to deliver" on Monday.
As Mr. Rivkin explains it, "We were raising some caution flags about rate rises in Europe and concerns about the LBO market.
And by late Friday afternoon, actually after the close, we decided that was the wrong tone to take.
With the market down, we wanted to tell people to put their orders in on the opening."
Both before and after the Friday plunge, Shearson has maintained a recommended portfolio weighting of 65% stocks, 20% bonds and 15% cash.
Sheldon B. Lubar, chairman of Lubar & Co., and John L. Murray, chairman of Universal Foods Corp., were elected to the board of this engine maker.
They succeed Robert W. Kasten and John R. Parker, who reached the mandatory retirement age.
China's slide toward recession is beginning to look like a free fall.
In a report on China's foundering economy, the official State Statistical Bureau disclosed that industrial output last month rose 0.9% from a year earlier-the lowest growth rate in a decade for September.
Retail sales are plummeting, while consumer prices still are rising.
Chinese and foreign economists now predict prolonged stagflation: low growth and high inflation.
"The economy is crashing hard," says an Asian economist in Beijing.
"The slowdown is taking hold a lot more quickly and devastatingly than anyone had expected."
A lengthy recession, if it materializes, would drain state coffers and create severe hardships for urban workers.
Experts predict the coming year will be characterized by flat or negative industrial growth, rising unemployment and a widening budget deficit.
Unless the government suddenly reverses course, wages for most workers won't keep pace with inflation, creating a potential source of urban unrest.
The economy's slowdown is due only partly to the austerity program launched in September 1988 to cool an overheated economy and tame inflation.
(Industrial output surged 21% in 1988, while inflation peaked last February at nearly 30%.)
The slowdown also results from chronic energy and raw-materials shortages that force many factories to restrict operations to two or three days a week.
In Western, market-driven countries, recessions often have a bright side: prodding the economy to greater efficiency.
In China, however, there isn't likely to be any silver lining because the economy remains guided primarily by the state.
Instead, China is likely to shell out ever-greater subsidies to its coddled state-run enterprises, which ate up $18 billion in bailouts last year.
Nor are any of these inefficient monoliths likely to be allowed to go bankrupt.
Rather, the brunt of the slowdown will be felt in the fast-growing private and semi-private "township" enterprises, which have fallen into disfavor as China's leaders re-emphasize an orthodox Marxist preference for public ownership.
"When the going gets rough, China penalizes the efficient and rewards the incompetent," says a Western economist.
Reports of an economy near recession come as officials prepare a major Communist Party plenum for sometime in the next few weeks.
The meeting is expected to call for heightened austerity for two years.
But with industrial growth stagnant and inflation showing signs of easing, some voices may call for measures to pump new life into the economy.
Some analysts believe China soon will begin relaxing economic controls, particularly by loosening credit.
That would benefit Chinese enterprises as well as Sino-foreign joint ventures, both of which have been plagued by shortages of working capital.
A dangerous buildup this year of billions of dollars in inter-company debts threatens, if unchecked, to bring the economy to a collapse.
One sign of a possible easing of credit policy was the decision this week of People's Bank of China, the central bank, to allocate $5.4 billion in short-term loans to pay farmers for the autumn harvest, the official China Daily reported.
But while pumping more money into the economy would bring relief to many industries, it also runs the risk of triggering another period of runaway growth and steep inflation.
The cycle has been repeated several times since China began reforming its planned economy in 1979.
And, because China's leaders have abandoned plans to drastically reform the economy, it is likely to continue, analysts say.
The statistical bureau's report, cited in China Daily, notes that industrial output in September totaled $29.4 billion, a rise of just 0.9% from a year earlier.
Output declined in several provinces, including Jiangsu and Zhejiang, two key coastal areas, and Sichuan, the nation's agricultural breadbasket.
Production in Shanghai, China's industrial powerhouse and the largest source of tax revenue for the central government, fell 1.8% for the month.
Nationwide, output of light industrial products declined 1.8% -- "the first decline in 10 years," a bureau spokesman told China Daily.
In an unusually direct statement, the bureau spokesman recommended that state banks extend more credit to shopkeepers so that they can purchase manufacturers' goods.
"This will prevent a slide in industrial production, which will otherwise cause new panic buyings," the spokesman said.
The 1986 tax overhaul, the biggest achievement of President Reagan's second term, is beginning to fall apart, and interest groups are lining up for tax goodies all over Capitol Hill.
Real-estate executives are lobbying to ease anti-tax-shelter rules.
Charitable groups are trying to reinstate the write-off for contributions made by individuals who don't itemize their deductions.
Big auction houses want to make collectibles eligible for lower capital-gains taxes.
And heavy-industry lobbyists are quietly discussing the possibility of reinstating the investment tax credit.
"Everything is up for grabs," says Theodore Groom, a lobbyist for mutual life-insurance companies.
Adds Robert Juliano, the head lobbyist for a variety of interests that want to protect the tax deduction for travel and entertainment expenses: "It appears as though the whole thing is wide open again."
The catalyst has been the congressional move to restore preferential tax treatment for capital gains, an effort that is likely to succeed in this Congress.
Other fundamental "reforms" of the 1986 act have been threatened as well.
The House seriously considered raising the top tax rate paid by individuals with the highest incomes.
The Senate Finance Committee voted to expand the deduction for individual retirement accounts, and also to bring back income averaging for farmers, a tax preference that allows income to be spread out over several years.
As part of the same bill, the finance panel also voted in favor of billions of dollars in narrow tax breaks for individuals and corporations, in what committee member Sen. David Pryor (D., Ark.) calls a "feeding frenzy" of special-interest legislating.
The beneficiaries would range from pineapple growers to rich grandparents to tuxedo-rental shops.
To be sure, the full Senate, facing a fast-approaching budget deadline, last Friday stripped away all of the tax breaks that were contained in the Finance Committee bill.
But lawmakers of both parties agree that the streamlining was temporary.
Other bills will be moving soon that are expected to carry many of the tax cuts, including both the capital-gains and IRA provisions.
"There isn't any doubt that the thread of the '86 code has been given a mighty tug," says Rep. Thomas Downey (D., N.Y.).
"You'll see the annual unraveling of it."
"It's back to tax-give-away time for the select few," says Rep. William Gray of Pennsylvania, the third-ranking Democrat in the House.
Referring to the chairmen of the Senate and House tax-writing committees, he adds, "Next year, every special-interest group is going to be there knocking on Lloyd Bentsen's door, on Danny Rostenkowski's door."
Many groups aren't waiting that long.
Just last week, a House Ways and Means subcommittee held a lengthy meeting to hear the pleas of individual cities, companies and interest groups who want to open their own special loopholes.
"It's a Swiss-cheese factory and the cheese smells pretty good," commented one veteran lobbyist who was watching the proceedings.
Even lobbyists for heavy industry, one of the interests hit hardest in the 1986 bill, are encouraged.
The return of pro-investment tax breaks such as those for capital gains and IRAs "creates more of a mood or a mindset that is helpful for getting better depreciation (write-offs) or investment credits," says Paul Huard, a vice president for the National Association of Manufacturers.
Corporate lobbyist Charls Walker is planning a spring conference to discuss what tax changes to make to improve "competitiveness."
In reaction to proposed capital-gains legislation, groups are lobbying to make sure they aren't left off the gravy train.
Real-estate interests, for example, are protesting an omission in President Bush's capital-gains proposal: It doesn't include real-estate gains.
"If there is going to be a tax scheme that contemplates lower treatment of capital gains, they certainly want to be part of it," says real-estate lobbyist Wayne Thevenot of Concord Associates.
In the House-passed tax bill, Mr. Thevenot got his wish; real-estate assets are included in the capital-gains provision.
But Sotheby's, Christie's and the National Association of Antique Dealers are still trying to get theirs.
They have sent a letter to congressional tax-writers asking that gains from the sale of collectibles also be given preferential treatment.
"Collectibles should continue to be recognized as capital assets," the letter states.
All of this talk is antithetical to the Tax Reform Act of 1986.
In exchange for dramatically lower tax rates, the framers of that legislation sought to eliminate most of the exemptions, deductions and credits that gave some taxpayers an advantage over others.
The goal was to tax people with roughly equivalent incomes equally, and to eliminate the many shelters that allowed the wealthy to escape taxes.
Two of the major ways that tax-writers managed to attain these ends were to scrap the preferential treatment of capital gains and to curtail the use of paper losses, also known as passive losses, that made many tax shelters possible.
Many other tax benefits also were swept away.
This year Congress, with prodding from President Bush, has been busy trying to put many of these same tax preferences back into the code.
It appears likely that, this year or next, some form of capital-gains preference and passive-loss restoration will be enacted.
Other tax benefits probably will be restored and created.
The main obstacle is finding a way to pay for them.
"The '86 act was a fluke.
They wanted reform and they got a revolution," says overhaul advocate Rep. Willis Gradison (R., Ohio).
So, is the tax code now open game again?
Mr. Juliano thinks so.
One recent Saturday morning he stayed inside the Capitol monitoring tax-and-budget talks instead of flying to San Francisco for a fund-raiser and then to his hometown of Chicago for the 30th reunion of St. Ignatius High School.
"I'm too old to waste a weekend, but that's what I did," the 48-year-old Mr. Juliano moans.
"These days, anything can happen.
Lufthansa AG said passenger volume climbed 5.2% for the first nine months of 1989 to 15.3 million passengers from 14.5 million passengers in the year-earlier period.
The West German national air carrier said cargo volume jumped 12% to 638,000 metric tons from 569,000 tons a year ago.
Load factor, or percentage of seats filled, climbed to 67.1% from 66.6%, even though the number of flights rose 6.9% to 215,845 in the first-three quarters.
From January through September, the distance flown by Lufthansa airplanes rose 5.6% to 266.2 million kilometers from a year earlier, the company added.
Raymond Chandler, in a 1950 letter defending a weak Hemingway book, likened a champion writer to a baseball pitcher.
When the champ has lost his stuff, the great mystery novelist wrote, "when he can no longer throw the high hard one, he throws his heart instead.
He throws something.
He doesn't just walk off the mound and weep."
Chandler might have been predicting the course of his own career.
His last published novel featuring private detective Philip Marlowe, the inferior "Playback" (1958), at times read almost like a parody of his previous work.
When he died in 1959, Chandler left behind four chapters of yet another Marlowe book, "The Poodle Springs Story," which seemed to go beyond parody into something like burlesque.
"Champ" Chandler's last pitch, apparently, was a screwball.
Now Robert Parker, author of several best sellers featuring Spenser, a contemporary private eye in the Marlowe mold, has with the blessings of the Chandler estate been hired to complete "The Poodle Springs Story."
The result, "Poodle Springs" (Putnam's, 288 pages, $18.95) is an entertaining, easy to read and fairly graceful extension of the Marlowe chronicle, full of hard-boiled wisecracks and California color.
If it does not quite have Chandler's special magic -- well, at the end, neither did Chandler.
As the book begins, a newly wed Marlowe roars into the desert resort of Poodle (a.k.a. Palm) Springs at the wheel of a Cadillac Fleetwood.
His bride is the rich and beautiful Linda Loring, a character who also appeared in Chandler's "The Long Goodbye" and "Playback."
Philip and Linda move into her mansion and can't keep their hands off each other, even in front of the Hawaiian/Japanese houseman.
But the lovebirds have a conflict.
He wants to continue being a low-paid private eye, and she wants him to live off the million dollars she's settled on him.
That's Chandler's setup.
Mr. Parker spins it into a pretty satisfying tale involving Poodle Springs high life, Hollywood low life and various folk who hang their hats in both worlds.
The supporting lineup is solid, the patter is amusing and there's even a cameo by Bernie Ohls, the "good cop" of previous Chandler books who still doesn't hesitate to have Marlowe jailed when it suits his purposes.
The style throughout bears a strong resemblance to Chandler's prose at its most pared down.
All told, Mr. Parker does a better job of making a novel out of this abandoned fragment than anyone might have had a right to expect.
But there are grounds for complaint.
At one point, the reader is two steps ahead of Marlowe in catching on to a double identity scam -- and Marlowe is supposed to be the pro.
More bothersome, there are several apparent anachronisms.
Contact lenses, tank tops, prostitutes openly working the streets of Hollywood and the Tequila Sunrise cocktail all seem out of place in the 1950s.
A little more care in re-creating Marlowe's universe would have made the book that much more enjoyable.
Mr. Nolan is a contributing editor at Los Angeles Magazine.
Ko Shioya spent eight years as the editor in chief of the Japanese edition of Reader's Digest.
"Japan has been a major importer of foreign information and news," says Mr. Shioya.
"But one gets fed up with importing information and news."
Mr. Shioya has turned the tables.
Today, he is publisher of Business Tokyo magazine, the first English-language business magazine devoted to coverage of Japanese business.
After a slick redesign, the two-year-old magazine has been relaunched this month by its parent company, Keizaikai Corp., the Tokyo-based company with interests that include financial services, book publishing and a tourist agency.
Printed in the U.S. and carrying the line "The Insider's Japan," Business Tokyo's October cover story was "The World's No. 1 Customer" -- Japanese women.
Keizaikai is one of a small but growing band of Japanese companies taking their first steps into American publishing, after making major investments in entertainment, real estate and banking companies here.
Japanese concerns have retained a number of publishing consultants and media brokers to study the U.S. market, including the New York-based investment banker Veronis, Suhler & Associates.
And they are quietly linking up with U.S. publishing trade groups.
"Japanese publishers want to be introduced to the publishing and information industries," said John Veronis, chairman of Veronis Suhler.
While there aren't any major deals in the works currently on the scale of Sony Corp.'s recent $3.4 billion agreement to buy Columbia Pictures Entertainment Inc., observers don't rule out a transaction of that size.
"The Japanese take the long view." said Mr. Veronis.
"It may not be weeks or months, but they are also opportunistic and if they feel comfortable, they will move on a deal," he said.
In recent months, three big Tokyo-based publishing concerns -- including Nikkei Business Publications, Nikkei Home (no relation), and Magazine House -- applied for membership in Magazine Publishers of America, which represents almost all U.S. consumer magazines.
Japanese involvement in American publishing has been so small to date that magazines such as Business Tokyo are considered groundbreakers.
When Keizaikai launched Business Tokyo in 1987, it appealed to a more multinational audience.
The magazine was overhauled with the aid of American magazine design gurus Milton Glaser and Walter Bernard, and targets top-level U.S. executives with Japanese and American advertisers.
American publishers appear more than ready to do some selling.
Susumu Ohara, president of Nihon Keizai Shinbun America Inc., publisher of the Japan Economic Journal, said he receives telephone calls weekly from media bankers on whether his parent company is interested in buying a U.S. consumer or business magazine.
"The Japanese are in the early stage right now," said Thomas Kenney, a onetime media adviser for First Boston Corp. who was recently appointed president of Reader's Digest Association's new Magazine Publishing Group.
"Before, they were interested in hard assets and they saw magazines as soft.
Now they realize magazines are as much a franchise as Nabisco is a franchise.
Bell Atlantic Corp. and Southern New England Telecommunications posted strong profit gains for the third quarter, while Nynex Corp., Pacific Telesis Group and U S West Inc. reported earnings declines for the period.
Rate settlements in Minnesota and Colorado depressed U S West's third-quarter profit.
Denver-based U S West said net income dropped 8.9%, noting that the year-ago quarter included the sale of a building by its BetaWest Properties unit.
Revenue dropped 4.3% to $2.3 billion from $2.4 billion, reflecting declines in its consumer-telephone sector, long-distance carrier business and diversified division.
Revenue from business-telephone operations grew 3.3% to $618.9 million from $599.4 million a year ago.
New telephone lines posted healthy growth.
Overall they increased 2.8% to 12.1 million, putting U S West over the 12 million mark for the first time.
Business lines increased 3.7% to 3.3 million.
"On a truly comparable basis, we've seen modest earnings growth this year from the operations of our company," said Jack MacAllister, chairman and chief executive officer.
"The major negative factor was the cumulative impact of regulatory activity over the past two years."
He said the company expects to be "on target" with analysts' projections by year end but conceded that the fourth quarter represents "a significant challenge."
Expenses in the quarter dropped 11.2% to $664.3 million from $747.7 million a year ago.
Yesterday, U S West shares rose 75 cents to close at $71.25 in New York Stock Exchange composite trading.
Philadelphia-based Bell Atlantic said net rose 6.5%, aided by strong growth in the network-services business and an increase in the number of new telephone lines.
Revenue jumped 5.6% to $2.9 billion from $2.8 billion in the year-ago quarter.
Revenue from financial and real-estate services jumped 23% to $177.4 million from $144.1 million a year ago.
Network-access revenue from long-distance telephone companies increased 6.4% to $618.6 million.
Bell Atlantic added 148,000 new telephone lines in the quarter for a total of 16.9 million.
The company said per-share earnings were slightly reduced by the sale of 4.1 million shares of treasury stock to the company's newly formed Employee Stock Ownership Plans.
In composite trading on the Big Board, Bell Atlantic closed at $100.625, up $1.50 a share.
At Nynex, net slumped 14.8%, primarily because of a continuing strike by 60,000 employees, lower-than-expected profit at its New York Telephone unit and significantly higher taxes and costs.
State and local taxes increased to $131.3 million from $99.1 million a year ago.
Nynex said expenses rose 4.5% to $2.73 billion from $2.61 billion, a $119 million increase.
Most of the higher costs were associated with acquisitions and growth in nonregulated business units, it added.
"Our net income isn't where we would want it to be at this point," said William C. Ferguson, chairman and chief executive officer.
"This deviation from our past growth patterns is caused largely by lower earnings at New York Telephone."
Mr. Ferguson said a continued softness in New York City area's economy and increased competition, particularly in the private-line market, took a heavy toll on earnings.
The three-month-old strike at Nynex seriously hurt the installation of new telephone lines in the quarter.
Nynex said access lines in service at the end of the quarter were off 18,000 from the previous quarter, which reported an increase of 160,000 new access lines.
Revenue rose to $3.31 billion from $3.18 billion, mostly from acquisition of AGS Computers and robust non-regulated businesses.
In Big Board composite trading yesterday, Nynex common closed at $81.125, up $1.625.
Southern New England Telecommunications, which bolstered its marketing efforts for telephone and non-telephone subsidiaries, reported that net increased 8.1%.
Walter H. Monteith Jr., SNET chairman and chief executive officer, said: "Innovative marketing of our products and services contributed to increase revenue."
Revenue and sales increased 7.5% to $423.9 million from $394.4 million a year earlier.
Yellow pages advertising sales rose 11.8% to $41.2 million.
Cost and expenses for the quarter, excluding interest, increased 6.1% to $333.3 million from $314 million the year before.
SNET common rose $1.25 to $85.50 a share yesterday in composite trading on the Big Board.
San Francisco-based Pacific Telesis said net declined 12.6%, primarily because of regulatory action.
Revenue was about flat at $2.4 billion.
Revenue was reduced $33 million by three extraordinary items: a California Public Utilities Commission refund for an American Telephone & Telegraph Co. billing adjustment; a provision for productivity sharing to be paid to customers in 1990 and a one-time accrual for a toll settlement with long-distance telephone companies.
Excluding the one-time charges, the company would have posted earnings of $298 million, or 73 cents a share.
The company also was hurt by a $289 million rate reduction that went into effect in 1989.
"This is a good quarter for us in terms of our business fundamentals," said Sam Ginn, chairman and chief executive officer.
Pacific Telesis said new telephone lines increased 4.5% for a total of about $13.5 million for the quarter; toll calls increased 9.6% to 807 million and minutes of telephone usage increased to 9.9 billion.
In Big Board composite trading yesterday, Pacific Telesis common closed at $45.50, up 87.5 cents.
a-Includes a one-time gain of $88.7 million from a commonstock sale by U S West's U S West New Vector Group.
b-Includes a $41.3 million gain on the sale of FiberCom.
Amoco Corp. said third-quarter net income plunged 39% to $336 million, or 65 cents a share, as gasoline refining and marketing profits lagged substantially behind last year's record level.
A charge of $80 million related to projected environmental costs in its refining and marketing operations further depressed results.
A spokesman said Amoco completed an environmental analysis last quarter but that no single clean-up project was responsible.
In the 1988 third quarter, the Chicago-based oil company earned $552 million, or $1.07 a share.
Revenue in the latest quarter rose 12% to $6.6 billion from $5.91 billion.
Aside from the special charge, Amoco's results were in line with Wall Street estimates.
The company's stock ended at $48.375, up 25 cents in New York Stock Exchange composite trading.
Amoco is the first major oil company to report third-quarter results.
Analysts expect others to show a similar pattern.
Generally in the quarter, overproduction of gasoline and higher crude oil prices pressured profitability.
The industry's chemical profits also declined because excess capacity has depressed prices.
Gasoline margins may rebound this quarter, some industry officials say, but they believe chemical margins could worsen.
American Petrofina Inc., a Dallas-based integrated oil company, yesterday said its third-quarter earnings declined by more than half.
Fina blamed lower chemical prices, reduced gasoline margins and refinery maintenance shutdowns.
It said net income dropped to $15.1 million, or 98 cents a share, from $35.2 million, or $2.66 a share.
Sales rose 2.2% to $711.9 million from $696.1 million.
Amoco's refining and marketing profit in the quarter fell to $134 million from $319 million.
Chemical earnings declined by one-third to $120 million last year's robust levels.
Amoco's domestic oil and natural gas operations recorded a profit of $104 million in the quarter compared with a loss of $5 million, "primarily on the strength of higher crude oil prices," said Chairman Richard M. Morrow.
Amoco also sharply boosted natural-gas output, part of it from properties acquired from Tenneco Inc. last year.
But foreign exploration and production earnings fell sharply, to $12 million from $95 million.
Higher oil prices weren't enough to offset a roughly $20 million charge related to a 10% reduction in Amoco's Canadian work force as well as increased exploration expenses.
For the nine months, Amoco said that net income fell to $1.29 billion from $1.69 billion but if unusual items are excluded, operations produced essentially flat results.
Revenue rose 12% to $19.93 billion from $17.73 billion.
James F. Gero, former chairman and chief executive officer of Varo Inc., and Richard J. Hatchett III, a Dallas investment banker, were elected directors of this medical-products concern, boosting the board to seven members.
For retailers, Christmas, not Halloween, promises to be this year's spookiest season.
Many retailers fear a price war will erupt if cash-strapped companies such as Campeau Corp. slash tags to spur sales.
Concerns about the stock market, doubts about the economy in general and rising competition from catalog companies also haunt store operators.
"Profits at Christmas could be under attack for every retailer," asserts Norman Abramson, president and chief operating officer of Clothestime Inc., an off-price chain.
Even if there isn't any widespread discounting, the outlook for industry profits isn't good.
Management Horizons forecasts a 1.4% profit decline for non-auto retailers this year, after annual drops that averaged 4.5% in 1988 and 1987.
"For the last two and a half years, retailing has been in a mild recession," says Carl Steidtmann, chief economist at the Columbus, Ohio, consulting firm.
This year, many stores are entering the Christmas season in turmoil: Bonwit Teller and B. Altman parent L.J. Hooker Corp. is operating under Chapter 11 of the federal Bankruptcy Code; B.A.T Industries PLC's healthy Saks Fifth Avenue and Marshall Field's chains are on the auction block; Campeau's Bloomingdale's is also on the block.
Industry observers expect a wide divergence in performance.
Stores in a state of confusion are likely to fare poorly, and to lose customers to stable chains such as Limited Inc., May Department Stores Co. and Dillard Department Stores Inc., which should do well.
"There are going to be very clear winners and very clear losers," says Cynthia Turk, a Touche Ross & Co. retail consultant.
Says Mr. Steidtmann: "I'm looking for a bi-polar Christmas."
Economists expect general merchandise sales in the fourth quarter to rise 4.5% to 6% from year-ago figures.
But Mr. Steidtmann predicts that healthy stores hawking mostly apparel could ring up gains of as much as 25% to 30%.
Troubled chains could see their sales drop as much as 8%, he believes, as managers distracted by fears about the future allow their stores to get sloppy.
Thin merchandise selections at the most troubled chains are also expected to hurt sales.
Catalog companies are likely to pose a bigger threat to all stores this year, particularly in December.
More than 200 catalog outfits are promoting a low-cost Federal Express service that guarantees pre-Christmas delivery of orders made by a certain date.
"Traditionally, consumers were concerned about ordering after the first of December because they didn't believe they would get it by Christmas," says Adam Strum, chairman of the Wine Enthusiast Inc., which sells wine cellars and accessories through the mail.
Using Federal Express delivery last year, Mr. Strum says, "December was our biggest month."
Even Sears, Roebuck & Co. is getting into the act, offering for the first time to have Federal Express deliver toys ordered by Dec. 20 from its Wish Book catalog.
K mart Corp. Chairman Joseph E. Antonini summed up his outlook for the Christmas season as "not troublesome."
He's not predicting a blockbuster, but he is "more optimistic than three months ago" because employment remains strong and inflation low.
Other retailers are also preparing for a ho-hum holiday.
Philip M. Hawley, chairman of Carter Hawley Hale Stores Inc., expects sales at department stores open at least a year to rise a modest 3% to 5% over last year's totals, both for his company and the industry in general.
"I'm not looking for a runaway Christmas at all," he says.
"It isn't a real boom holiday season in our eyes," says Woolworth Corp. Chairman Harold E. Sells, "but it isn't going to be a bust either."
Mr. Sells expects fourth-quarter sales at his company -- which besides Woolworth stores includes Kinney and Foot Locker shoe stores and other specialty chains -- to rise "pretty much in line" with its year-to-date increases of between 8% and 9%.
The estimate includes the results of new stores.
A consumer poll conducted in early September by Leo J. Shapiro & Associates, a market researcher based in Chicago, also suggests a modest holiday.
Of the 450 survey respondents, 35% said they expect to spend less buying Christmas gifts this year than last year, while 28% said they expect to spend more and 37% said their gift budget would stay the same.
The results are almost identical to Shapiro's September 1988 numbers.
Retailers could get a boost this year from the calendar.
Christmas falls on a Monday, creating a big last-minute weekend opportunity for stores.
Most will stay open late Saturday night and open their doors again Sunday.
But many consumers probably will use the extra time to put off some purchasing until the last minute.
"What you'll hear as we get into December is that sales are sluggish," predicts Woolworth's Mr. Sells.
"The week ending the 24th is going to save the entire month for everyone.
The Spanish author Camilo Jose Cela won the Nobel Prize for literature yesterday, a surprising choice, but given the Swedish Academy's past perversities, hardly the most undeserved and ridiculous accolade handed out by the awarding committee.
In Spain, anyway, the 73-year-old Mr. Cela enjoys some renown for the novels and travel books he wrote during the parched Franco years, the everyday poverty and stagnant atmosphere of which he described in brutally direct, vivid prose, beginning with "The Family of Pascal Duarte" (1942).
Unlike other writers who either battled the fascists during the Civil War, or left Spain when Franco triumphed, Mr. Cela fought briefly on the general's side, no doubt earning with his war wound some forbearance when he went on to depict a country with a high population of vagabonds, murderers and rural idiots trudging aimlessly through a dried-out land.
Still, it was in Argentine editions that his countrymen first read his story of Pascal Duarte, a field worker who stabbed his mother to death and has no regrets as he awaits his end in a prison cell: "Fate directs some men down the flower-bordered path, and others down the road bordered with thistles and prickly pears.
The lucky ones gaze out at life with serene eyes and smile with a face of innocence at their perfumed happiness.
The others endure the hot sun of the plains and scowl like cornered wild beasts."
Mr. Cela himself was one of the lucky ones, his fortunes steadily increasing over the decades he spent putting out some 70 travelogues, novels, short story collections and poetry.
These days, he is as known for his flamboyant tastes and the youthful muse who shares his life as he is for his books.
The man who wore out his shoes wandering around Guadalajara in 1958, describing in his travel book "Viaje a la Alcarria" how he scrounged for food and stayed in squalid inns, now tours Spain in a Rolls-Royce.
Of his 10 novels, "The Hive" (1951), full of sharp vignettes of Madrid life and centered on a cafe run by Dona Rosa, a foul-mouthed, broad-based woman with blackened little teeth encrusted in filth, used to be available in English, translated by J.M. Cohen and published by Ecco Press, which now no doubt regrets relinquishing its copyright.
Here is an excerpt:
The lonely woman walks on in the direction of the Plaza de Alonso Martinez.
Two men have a conversation behind one of the windows of the cafe on the corner of the boulevard.
Both are young, one twenty odd, the other thirty odd.
The older one looks like a member of the jury for a literary award, the younger one looks like a novelist.
It is evident that their conversation runs more or less on the following lines: "I've submitted the manuscript of my novel under the title `Teresa de Cepeda,' and in it I've treated a few neglected aspects of that eternal problem which . . ."
"Oh, yes.
Will you pour me a drop of water, if you don't mind?"
"With pleasure.
I've revised it several times and I think I may say with pride that there is not a single discordant word in the whole text."
"How interesting."
"I think so.
I don't know the quality of the works my colleagues have sent in, but in any case I feel confident that good sense and honest judgment . . ."
"Rest assured, we proceed with exemplary fairness."
"I don't doubt it for a moment.
It does not matter if one is defeated, provided the work that gets the award has unmistakable qualities.
What's so discouraging is . . ."
In passing the window, Senorita Elvira gives them a smile -- simply out of habit.
Ashland Oil Inc. said it will take after-tax charges of $78 million, or $1.40 a share, in its fiscal fourth quarter, ended Sept. 30.
Because of the charge, Ashland expects to report a loss for the fourth quarter and "significantly lower results" for fiscal 1989.
The oil refiner said it will report fiscal fourth quarter and 1989 results next week.
The company earned $66 million, or $1.19 a share, on revenue of $2.1 billion in the year-ago fourth quarter.
For fiscal 1988, Ashland had net of $224 million, or $4.01 a share, on revenue of $7.8 billion.
Both revenue figures exclude excise taxes.
The charges consist of: a $25 million after-tax charge to cover cost overruns in Ashland's Riley Consolidated subsidiary; a previously announced $38 million after-tax charge resulting from a $325 million settlement with National Iranian Oil Co. and a $15 million after-tax charge from the previously announced sale of its Ashland Technology Corp. subsidiary.
Ashland expects that sale to be complete next year.
The charge for the Riley subsidiary is for expected costs to correct problems with certain bed boilers built for utilities.
The charge will be added to $20 million in reserves established a year ago to cover the cost overruns.
When President Bush arrives here next week for a hemispheric summit organized to commemorate a century of Costa Rican democracy, will he be able to deliver a credible message in the wake of the Panamanian fiasco?
Undoubtedly Mr. Bush will be praised by some Latin leaders prone to pay lip service to nonintervention, while they privately encourage more assertive U.S. action to remove Gen. Manuel Noriega and safeguard their countries from a Sandinista onslaught.
The Panamanian affair is only the tip of a more alarming iceberg.
It originates in a Bush administration decision not to antagonize the U.S. Congress and avoid, at all costs, being accused of meddling in the region.
The result has been a dangerous vacuum of U.S. leadership, which leaves Central America open to Soviet adventurism.
"The {influence of the} U.S. is not being felt in Central America; Washington's decisions do not respond to a policy, and are divorced from reality," says Fernando Volio, a Costa Rican congressman and former foreign minister.
The disarray of the Bush administration's Latin diplomacy was evident in the failure of the Organization of American States to condemn categorically Gen. Noriega.
Faced with this embarrassment, U.S. diplomats expressed confidence that the influential Rio Group of South American nations, which gathered last week in Peru, would take a stronger posture toward the Panamanian dictator.
But other than a few slaps on the wrist, Gen. Noriega went unpunished by that body, too; he was not even singled out in the closing statement.
Now Mr. Bush will come to Costa Rica and encounter Nicaraguan strongman Daniel Ortega, eager for photo opportunities with the U.S. president.
The host, Costa Rican President Oscar Arias, did not invite Chile, Cuba, Panama or Haiti to the summit, which was to be restricted to democracies.
However, Mr. Ortega was included.
Formally upgrading the Sandinistas to a democratic status was an initiative harshly criticized in the Costa Rican press.
Even Carlos Manuel Castillo -- the presidential candidate for Mr. Arias's National Liberation Party -- made public his opposition to the presence of Nicaragua "in a democratic festivity."
Nevertheless, the Bush administration agreed to the dubious arrangement in July, a few weeks before the Central American presidents met in Tela, Honduras, to discuss a timetable for disbanding the anti-Sandinista rebels.
According to officials in Washington, the State Department hoped that by pleasing President Arias, it would gain his support to postpone any decision on the Contras until after Mr. Ortega's promises of democratic elections were tested next February.
However, relying on an ardent critic of the Reagan administration and the Contra movement for help in delaying the disarming of the Contras was risky business.
And even some last-minute phone calls that Mr. Bush made (at the behest of some conservative U.S. senators) to enlist backing for the U.S. position failed to stop the march of Mr. Arias's agenda.
Prior to this episode, Sen. Christopher Dodd (D., Conn.), sensing an open field, undertook a personal diplomatic mission through Central America to promote an early disbanding of the rebels.
Visiting Nicaragua, he praised the Sandinistas for their electoral system and chided the Bush administration for not rewarding the Sandinistas.
In Honduras, where the Contras are a hot political issue, he promised to help unblock some $70 million in assistance withheld due to the failure of local agencies to comply with conditions agreed upon with Washington.
Aid was also the gist of the talks Sen. Dodd had with Salvadoran President Alfredo Cristiani; Mr. Cristiani's government is very much at the mercy of U.S. largess and is forced to listen very carefully to Sen. Dodd's likes and dislikes.
It was therefore not surprising that close allies of the U.S., virtually neglected by the Bush administration, ordered the Nicaraguan insurgents dismantled by December, long before the elections.
Fittingly, the Tela Accords were nicknamed by Hondurans "the Dodd plan."
The individual foreign policy carried out by U.S. legislators adds to a confusing U.S. performance that has emboldened Soviet initiatives in Central America.
On Oct. 3, following conversations with Secretary of State James Baker, Soviet Foreign Minister Eduard Shevardnadze arrived in Managua to acclaim "Nicaragua's great peace efforts."
There, Mr. Shevardnadze felt legitimized to unveil his own peace plan: The U.S.S.R. would prolong a suspension of arms shipments to Nicaragua after the February election if the U.S. did likewise with its allies in Central America.
He also called on Nicaragua's neighbors to accept a "military equilibrium" guaranteed by both superpowers.
The Pentagon claims that in spite of Moscow's words, East bloc weapons continue to flow into Nicaragua through Cuba at near-record levels.
Since Mr. Shevardnadze's proposals followed discussions with Mr. Baker, speculations arose that the Bush administration was seeking an accommodation with the Soviets in Central America.
This scheme would fit the Arias Plan, which declared a false symmetry between Soviet military aid to the Sandinista dictatorship and that provided by Washington to freely elected governments.
Furthermore, it is also likely to encourage those on Capitol Hill asking for cuts in the assistance to El Salvador if President Cristiani does not bend to demands of the Marxist guerrillas.
The sad condition of U.S. policy in Central America is best depicted by the recent end to U.S. sponsorship of Radio Costa Rica.
In 1984, the Costa Rican government requested help to establish a radio station in the northern part of the country, flooded by airwaves of Sandinista propaganda.
Recovering radiophonic sovereignty was the purpose of Radio Costa Rica, funded by the U.S. and affiliated with the Voice of America (VOA).
A few months ago, the Bush administration decided to stop this cooperation, leaving Radio Costa Rica operating on a shoestring.
According to news reports, the abrupt termination was due to fears that VOA transmissions could interfere with the peace process.
In the meantime, Russia gave Nicaragua another powerful radio transmitter, which has been installed in the city of Esteli.
It is capable of reaching the entire Caribbean area and deep into North America.
Perhaps its loud signal may generate some awareness of the Soviet condominium being created in the isthmus thanks to U.S. default.
The Soviet entrenchment in Nicaragua is alarming for Costa Rica, a peaceful democracy without an army.
Questioned in Washington about what would happen if his much-heralded peace plan would fail, President Arias voiced expectations of direct U.S. action.
A poll conducted in July by a Gallup affiliate showed that 64% of Costa Ricans believe that if their country is militarily attacked by either Nicaragua or Panama, the U.S. will come to its defense.
But in the light of events in Panama, where the U.S. has such clear strategic interests, waiting for the Delta Force may prove to be a dangerous gambit.
Mr. Daremblum is a lawyer and a columnist for La Nacion newspaper.
Holiday Corp. said net income jumped 89%, partly on the strength of record operating income in its gaming division.
Separately, the hotel and gambling giant said it was proceeding with plans to make a tender offer and solicit consents with respect to approximately $1.4 billion of its publicly traded debt.
That debt is part of the $2.1 billion of Holiday debt that Bass PLC of Britain said it would retire or assume when it agreed to buy the Holiday Inn business in August.
Holiday said third-quarter earnings rose to $39.8 million, or $1.53 a share, from $21 million, or 84 cents a share, a year earlier.
Results for the quarter included $19.2 million in pretax gains from property transactions, including the sale of one Embassy Suites hotel, and $3.5 million of nonrecurring costs associated with the acquisition of the Holiday Inn business by Bass.
Holiday said operating income related to gaming increased 4.5% to a record $61.4 million from $58.8 million a year earlier.
The jump reflected record results in Las Vegas, Nev., and Atlantic City, N.J., as well as a full quarter's results from Harrah's Del Rio in Laughlin, Nev.
Third-quarter revenue rose 2.7% to $433.5 million from $422.1 million.
For the nine months, earnings fell 2.9% to $99.1 million, or $3.86 a share, from $102.1 million, or $4.10 a share, a year earlier.
Revenue dropped 1.6% to $1.21 billion from $1.23 billion.
The tender offer and consent solicitation will be made to debtholders in December.
In effect, Holiday is asking holders for permission for Bass to buy their debt.
Holiday said Salomon Brothers Inc. has been retained to act as the dealer-manager and financial adviser in connection with the offer and solicitation.
The debt issues involved and the proposed consent fees and cash tender offer prices (expressed per $1,000 of principal amount) are as follows: 10 1/2% senior notes due 1994 at 101%; 11% subordinated debt due 1999 at 102%; 9 3/8% notes due 1993 at 100%; and 8 3/8% notes due 1996 at 95.25%.
Holiday said its 15% notes due 1992 also will be included in the tender offer and consent solicitation at a price to be determined by Holiday prior to the commencement of the offer.
The television units of Paramount Communications Inc. and MCA Inc. are exploring the possibility of offering prime-time programming to independent stations two nights a week, industry executives say.
Although such a venture wouldn't match the "fourth network" created by News Corp.'s Fox Broadcasting Co., MCA and Paramount may have similar ambitions.
Fox, which also owns six TV stations, provides programs three nights a week to those and other affiliates.
Paramount Domestic TV and MCA TV formed a joint venture last month, named Premier Advertiser Sales, to sell advertising in programs syndicated by both companies, such as "Star Trek: the Next Generation," "Charles in Charge" and "Friday the 13th: the Series."
A spokeswoman for Paramount said the company doesn't comment on speculation.
Calls to Shelly Schwab, president of MCA TV, weren't returned.
The two companies, like Fox, already have their own TV stations.
MCA owns WWOR in New York and Paramount last month agreed to purchase a 79% stake in the TVX Broadcast Group from Salomon Inc. in a deal valued at $140 million.
TVX owns five stations, including WTXF, a Fox affiliate, in Philadelphia.
One broadcasting executive familiar with the project said the co-venture would target stations affiliated with Fox because Fox has the desirable independent stations in most of the key cities.
Currently, Fox supplies programs on Saturdays, Sundays and Mondays, although the company plans to expand to other weeknights.
Jamie Kellner, president of Fox Broadcasting, said, "We believe the partnership of Fox, its affiliates and advertisers is succeeding and will continue to grow."
Another Fox official, who declined to be identified, said Fox wasn't pleased by the possible Paramount-MCA venture into prime-time programming.
"To make the venture work, they would need Fox affiliates," he said.
"We spent a lot of time and money in building our group of stations," he said, adding that Fox doesn't "appreciate" another company attempting to usurp its station lineup.
Fox said it plans to offer its stations movies, theatrical and made-for-TV ventures, probably on Wednesdays, sometime next year.
It is also planning another night of original series.
Paramount and MCA, according to the broadcasting executive, plan to offer theatrical movies produced separately by Paramount and MCA for Wednesdays and perhaps a block of original shows Fridays.
The executive said Paramount and MCA have also held discussions with Chris-Craft Industries' broadcasting unit, which owns five independent stations in cities such as Los Angeles, San Francisco and Portland, Ore.
A Chris-Craft station manager said there have been no formal talks.
"I think it's to Fox's advantage to be associated with the Paramount-MCA venture," said Michael Conway, station manager of WTXF, the TVX station that is a Fox affiliate.
Mr. Conway said the Fox shows appearing on nights when Paramount-MCA shows wouldn't be offered could be promoted on the programs produced by Paramount-MCA.
Michael Fisher, general manager of KTXL, a Fox affiliate in Sacramento, Calif., said, "The real question is whether the Paramount-MCA offering is practical.
It isn't. . . .
Why would I consider giving up Fox, a proven commodity," for an unknown venture?
Fox attracts a young audience with shows such as "Married . . . With Children," its most successful series.
Banco Popular de Puerto Rico and BanPonce Corp. -- agreed to merge in a transaction valued at $324 million.
Under the agreement, BanPonce stockholders will be able to exchange each of their shares for either shares in the new entity or cash.
In each case, the exchange is valued at $56.25 a share.
The two companies, both based in San Juan, will form a bank holding company with assets of just over $9 billion.
The holding company will be called BanPonce Corp.
The primary subsidiary will be the combined banking operations of the two companies and will be known as Banco Popular de Puerto Rico.
Rafael Carrion Jr., chairman of Banco Popular, will be the chairman of the holding company.
Alberto M. Paracchini, currently chairman of BanPonce, will serve as president of the bank holding company and chairman of the subsidiary.
Banco Popular originally proposed the merger in July, in a cash and stock transaction valued at $50 a share, or about $293 million.
BanPonce reacted cooly at first, but appeared to be won over, analysts said, by Banco Popular's assurances that it wanted only a friendly transaction.
"Banco Popular just kept waiting," said Edward Thompson, a vice president and analyst at Thomson BankWatch Inc. in New York.
"They got a transaction that's good for both companies."
The two banks appear to be a good fit.
BanPonce caters to a more affluent customer, while Banco Popular has always had a large presence among middle-income and lower-income markets.
The merger should also allow the companies to reduce costs by combining operations in many locations in Puerto Rico.
"They're often right across the street from one another," Mr. Thompson said.
Richard Carrion, who is currently president and chief executive officer of Banco Popular, said the merger will result in a "larger and stronger locally based bank."
Mr. Carrion, who will now serve as president and chief executive officer of the subsidiary bank, added: "We'll be able to better compete with large foreign banks.
It makes sense from a strategic standpoint."
The newly merged company will have 165 branches in Puerto Rico and 27 branches outside of the island.
The banks said they don't expect the merger to face any regulatory hurdles.
Mr. Carrion said the merger should be completed in six to nine months.
Hit by higher costs and lower sales, Caterpillar Inc. said third-quarter earnings tumbled 43% and full-year earnings will trail last year's results.
The construction equipment maker said third-quarter profit fell to $108 million, or $1.07 a share, from $190 million, or $1.87 a share, a year earlier.
Sales dropped 6% to $2.58 billion from $2.74 billion, reflecting eight fewer business days in the latest quarter.
The company, which is in a costly modernization program, said earnings were hurt by higher start-up and new program costs, increased costs of materials, higher wages and an $11 million provision for bad debts in Latin America.
In announcing a 1989 capital spending plan of $950 million early this year, Caterpillar said full-year earnings would be flat compared with last year's $616 million, or $6.07 a share.
But yesterday, the company said this year's profit will be lower.
It didn't say by how much.
Suffering from a downturn in heavy truck production that cut orders for its engines, Caterpillar also said it will indefinitely lay off about 325 workers in the Peoria area and temporarily shut its plant in York, Pa., for two weeks in both November and December.
For the first nine months of the year, Caterpillar said earnings fell 14% to $390 million, or $3.85 a share, from $453 million, or $4.46 a share, a year earlier.
Sales rose to $8.19 billion from $7.65 billion.
Millicom Inc. said it is one of two companies to receive a license to introduce and operate a cellular mobile telephone system in Pakistan.
The market during the start-up is estimated at 25,000 subscribers.
A spokeswoman for Millicom, a telecommunications company, said she didn't know the value of the contract.
Cable & Wireless PLC of Britain won the other license.
Millicom said it would build and operate the system in Pakistan with Comvik International AB, part of the Kinnevik group of Sweden, and Arfeen International, Pakistan.
B.A.T Industries PLC won overwhelming shareholder approval for a defensive restructuring to fend off a #13.35 billion ($21.23 billion) takeover bid from Sir James Goldsmith.
At a shareholders' meeting in London, the tobacco, financial-services and retailing giant said it received 99.9% approval from voting holders for plans to spin off about $6 billion in assets.
B.A.T aims to sell such U.S. retailing units as Marshall Field and Saks Fifth Avenue and float its big paper and British retailing businesses via share issues to existing holders.
Proceeds will help pay for a planned buy-back of 10%, or about 153 million, of its shares and a 50% dividend increase.
B.A.T yesterday started its share buy-back.
The company said it acquired 2.5 million shares for 785 pence ($12.48) each, or a total of #19.6 million ($31.2 million), from its broker, Barclays de Zoete Wedd.
The share buy-back plan is likely to underpin B.A.T's share price.
B.A.T said it may make more equity purchases until the close of business today, depending on market conditions, but will cease further purchases until Nov. 22, when it releases third-quarter results.
B.A.T shares rose 29 pence to 783 pence on London's stock exchange yesterday.
Shareholder approval sets the stage for a lengthy process of restructuring that might not be completed until next year's second half.
Before the recent tumult in global financial markets, B.A.T officials, holders and analysts had expected a substantial part of the restructuring to be complete by the end of the first half.
"We are not in any hurry to sell" Saks, Marshall Field or B.A.T's other U.S. retail properties, said Chairman Patrick Sheehy.
"This isn't a distress sale.
We are determined to get good prices."
Company officials say the flotations of the paper and British retailing businesses are likely only after the disposals of the U.S. retailing assets.
Meanwhile, Sir James still is pursuing efforts to gain U.S. insurance regulators' approval for a change in control of B.A.T's Farmers Group Inc. unit.
The Anglo-French financier has indicated he intends to bid again for B.A.T if he receives approval.
Hasbro Inc., the nation's largest toy maker, reported third-quarter earnings increased 73% from a year earlier on a 9.4% sales gain, reflecting improved margins.
Hasbro said it had net income of $31.3 million, or 53 cents a share, up from $18.1 million, or 31 cents a share, a year earlier, when it took a pretax charge of $10 million after dropping development of an interactive video entertainment system.
Revenue rose to $403 million from $368.4 million.
The company cited sales gains at its Milton Bradley and Playskool units and in its international business for the increase in revenue.
Alan G. Hassenfeld, chairman and chief executive, added that Hasbro's new line of battery-powered racing cars, called Record Breakers, and its acquisition of Cabbage Patch Kids, Scrabble and other lines from Coleco Industries Inc. puts the company "in a good position as we enter the Christmas buying season."
For the first nine months of the year, Hasbro's net income rose 33% to $68.2 million, or $1.15 a share, from $51.3 million, or 88 cents a share, on a 3.1% increase in revenue to $992.7 million from $963 million a year earlier.
Reebok International Ltd. posted a 35% increase in third-quarter net income despite a slight decline in sales.
The athletic footwear maker said net rose to $49.9 million, or 44 cents a share, from $37.1 million, or 32 cents a share, a year earlier.
Sales declined 3% to $524.5 million from $539.4 million.
Paul Fireman, Reebok chairman and chief executive officer, said, "Our gains in earnings provide further evidence that the controls we have put in place and our sales mix are continuing to improve the company's overall profit performance."
The company said it expects sales to improve due to a number of new products, including a "pump" basketball shoe that can be inflated to better fit the foot.
In the first nine months, net was $140 million, or $1.23 a share, on sales of $1.44 billion.
Separately, Reebok completed the acquisition of CML Group Inc.'s Boston Whaler unit, a builder of power boats.
CML, Acton, Mass., had agreed to sell the unit to Reebok for about $42 million.
The agreement also called for Reebok to receive warrants to purchase 400,000 shares of CML common at $31.25 a share, exercisable at any time before July 1,
An outside spokesman for CML said the terms were changed to a minor extent but wouldn't disclose what those changes were.
Pitney Bowes Inc. directors authorized the company to seek buyers for its Wheeler Group Inc. subsidiary, a direct mail marketer of office supplies.
Pitney Bowes said the decision was based on a long-term analysis of the compatibility of Wheeler Group's marketing business with other Pitney Bowes operations.
Pitney Bowes acquired the core of what evolved into Wheeler Group in 1979 by buying Dictaphone Corp.
A spokeswoman wouldn't comment on whether the company had talked with any potential buyers for the New Hartford, Conn., unit, which had 1988 sales of about $75 million.
She said Wheeler Group was profitable but wouldn't give figures.
The spokeswoman said the company doesn't have a timetable for the sale, adding that the board's decision just starts the search for a buyer.
Separately, Pitney Bowes said third-quarter net income gained 15% to $62 million, or 78 cents a share, from $54 million, or 68 cents a share, a year ago.
Revenue grew 13% to $734.8 million from $650.9 million.
The company said the growth was led by its major operations, particularly mailing, shipping, dictating and facsimile businesses.
Steel jackets of a type that may have prevented collapse of the columns of a 1.5-mile stretch of the Nimitz Freeway had been installed on at least a small test section of the double-decker highway last year by California's Department of Transportation, employees familiar with the project say.
The test project -- which reportedly survived Tuesday's earthquake -- was a prelude to a state plan to retrofit that critical section of the freeway with the steel casings.
State engineers have made a preliminary finding that it was failure of the concrete columns, wrenched and separated from the double-decker roadbed, that was responsible for the collapse.
The failure in Oakland of the freeway segment known as the Cypress structure was the deadliest aspect of the quake, although officials were hopeful yesterday that the death toll there might be significantly lower than the 250 initially feared.
Sorting out the wreckage is expected to take several days.
Red tractors gingerly picked at the rubble while jackhammers tried to break up some of the massive slabs of concrete.
Giant yellow cranes were wheeled up alongside the collapsed segment, preparing to lift off chunks of the debris.
In Sacramento, a transportation department spokesman said he couldn't immediately confirm or deny existence of the test work.
However, he asserted that the department hadn't mastered the technology needed to retrofit the entire Cypress structure.
Moreover, other officials noted, snafus in transportation funding that the state has experienced over the years may have restricted the availability of funds for such a retrofitting, even if it were technologically feasible.
Knowledgeable employees said the retrofitting, which hadn't yet been budgeted, was part of a planned, three-stage reinforcement of the Cypress structure begun by the California transportation department several years ago.
The Cypress reinforcement project itself was part of an annual effort to shore up structures believed vulnerable to earthquakes.
The state began such work after a 1971 tremblor in Southern California, when numerous bridges collapsed.
"We had just finished phase two" of the Cypress project that involved installing a series of retaining cables designed to prevent sections of the roadway from separating as a result of seismic shock, a state DOT engineer said.
After completing installation of the jackets on "one frame" of the freeway last year, the state DOT had sent the project over to its Sacramento engineers to draw up a final design.
Knowledgeable employees said the project had been stymied somewhat by "the difficulty of designing" the jackets.
The procedure involves encasing the concrete columns with steel, then connecting them more securely to the double-decker roadbed.
The employees also said the project may have been snagged by budgetary concerns.
One preliminary estimate put the retrofitting cost at as much as $50 million.
The collapse of the span has provoked surprise and anger among state officials.
Gov. George Deukmejian, who said he had been assured by state transportation officials that the structure could withstand an even larger quake, called for an immediate investigation.
"I want to know who made the decision that it was safe for 186,000 people to use every day," said Richard Katz, a state legislator who is chairman of the California Assembly's transportation committee.
He said he would convene hearings within two weeks.
The Cypress structure opened in June 1957, and as such, like many buildings in the San Francisco Bay area, does not meet current building codes requiring considerably more steel support.
The northern piers of the span lie in estuarian deposits that were of a type to have liquefied easily during the 1906 quake.
Transportation department officials, however, said they were as surprised as anyone by the Cypress destruction.
They said previous earthquakes suggested that multiple-column viaducts would stand up well, although they were working on ways to bolster them.
"Unfortunately, there is only one laboratory for developing techniques to withstand earthquakes, and that is an earthquake," said Burch Bachtold, San Francisco district director for the transportation department.
He said: "We know of no technology that exists anywhere in the world that would allow us to" reinforce the columns.
Financial Corp. of Santa Barbara said it rescheduled to Nov. 29 a special shareholder meeting to vote on a $75 million stock-for-debt exchange.
The meeting had been scheduled for Nov. 10 but the company delayed the meeting to allow time for the Securities and Exchange Commission to review the proposal.
As part of a restructuring announced earlier this year, the company proposed in August to exchange 168 newly issued common shares for each $1,000 face value of debt.
However, that figure could be revised, Financial Corp. said.
Currently, the company has about six million common shares outstanding.
If all the debt was converted, about 13 million new shares would be issued.
In composite trading Wednesday on the New York Stock Exchange, Financial Corp. closed at $1.125, unchanged.
The debt consists of $50 million of 13 3/8% subordinated notes due 1998, and $25 million of 9% convertible subordinated debentures due 2012.
Financial Corp. also is proposing to exchange each of its 130,000 outstanding shares of cumulative convertible preferred series A stock for two shares of common.
After years of quarreling over Bonn's "Ostpolitik", West Germany and the U.S. appear to have shifted onto a united course in Eastern Europe.
Bonn and Washington have taken a leading role in aid for the reformist countries, pledging billions of dollars in fresh credit and forgiving old debt while urging other industrial nations to follow suit.
Both hope to encourage pressure for change in East bloc countries still ruled by Stalinist holdouts by arranging liberal financial aid and trade benefits for Poland, Hungary and, to a lesser extent, the Soviet Union.
West German officials also have the special goal of holding out hope for East Germany's fledgling reform movement.
"The change taking place in the Soviet Union, Poland and Hungary has aroused new hope in both German states that reforms will be undertaken in {East Germany}, and that relations between the two German states, too, will get better," said Foreign Minister Hans-Dietrich Genscher.
Addressing a conference of the New York-based Institute for East-West Security Studies in Frankfurt yesterday, Mr. Genscher said, "History will judge us by whether we have taken the opportunities that emerge from these reforms."
The ultimate aim of Western support for East bloc reforms, he said, is to create "an equitable and stable peaceful order in Europe from the Atlantic to the Urals."
Mr. Genscher and U.S. Secretary of Commerce Robert A. Mosbacher, in separate speeches at the conference, appealed for more Western contributions to economic reforms and business development in Hungary and Poland.
Bonn and Washington are leading supporters of Poland's request for a $1 billion stand-by credit from the International Monetary Fund.
"We want the bold programs of market development and political freedom in Hungary and in Poland to succeed.
We are prepared to support those changes," said Mr. Mosbacher.
U.S. curbs on the exports of sensitive technology to East bloc countries will remain in place, however.
Meanwhile, the U.S. House of Representatives yesterday approved an $837.5 million aid package for Poland and Hungary that more than doubles the amount President Bush had requested.
The package was brought to the House just 15 days after it was introduced, indicating Congress's eagerness to reward Poland and Hungary for their moves toward democracy and freemarket economic reforms.
The legislation, approved 345-47 and sent to the Senate, establishes two enterprise funds, to be governed by independent nonprofit boards, which will make loans and investments in new business ventures in Hungary and Poland.
The Polish fund would be seeded with $160 million, the Hungarian fund with $40 million.
In addition, a group of 24 industrialized countries, including the U.S. and Japan and coordinated by the European Community Commission, has promised Poland and Hungary trade advice and a line of credit equivalent to $1.11 billion through the European Investment Bank, while the EC plans $222 million in direct aid.
When Chancellor Helmut Kohl travels to Poland Nov. 9, he is expected to take with him a promise of three billion West German marks ($1.6 billion) in new credit guarantees for industrial projects.
Last week, Bonn agreed to reschedule 2.5 billion marks in Polish debt that came due last year.
In addition, a one billion mark credit dating from 1974 is to be written off.
Poland's plan to switch to a free-market economy by 1991 is hampered by a foreign debt load of $39.2 billion.
West Germany also has increased its credit guarantees to Hungary by 500 million marks to 1.5 billion marks as the emerging democratic state rushes through its own economic reforms, including a broad privatization of state-owned industry and tax incentives for industrial investment.
An additional 500 million marks in credit-backing was promised by the West German state governments of Bavaria and Baden-Wuerttemberg.
Deutsche Bank AG, which last year arranged a three billion mark credit for the Soviet Union, is now moving to become the first West German bank to set up independent business offices in Hungary and Poland as they shift to free-market economies.
A maxim of Frankfurt banking holds that wherever Deutsche Bank goes, other West German banks follow.
Indeed, at least four other West German banks are believed to be making inquiries.
Mattel Inc. said third-quarter net income rose 73%, to $38 million, or 76 cents a share, from $21.9 million, or 45 cents a share, a year ago.
Revenue rose 34% to $410 million from $306.6 million a year earlier.
"Mattel's world-wide volume has grown 25% in a climate of relatively flat industry sales," said John W. Amerman, chairman.
He said the toy company's "prospects for a strong fourth quarter" are also good.
Mattel attributed the jump in quarter net to strong world-wide sales of its Barbie doll, Hot Wheels cars, Disney toys and other well-known toy lines.
The company also cited retail trade and consumer demand for new products introduced this year, such as Cherry Merry Muffin and Turtle Tots.
For the nine months, Mattel net more than doubled to $58.9 million, or $1.19 a share, from $25.4 million, or 53 cents a share, a year ago.
Revenue rose 25%, to $877.6 million, from $702.4 million.
Mattel said the company's sale of rights to land and buildings at its Hawthorne, Calif., headquarters resulted in a $13 million charge to third-quarter operating profit.
The charge didn't affect net for the quarter as it was offset by tax benefits.
Mattel has purchased a new headquarters building in El Segundo, Calif., which it will occupy by the end of next year.
Democracy can be cruel to politicians: Sometimes it forces them to make choices.
Now that the Supreme Court opened the door on the subject of abortion, politicians are squinting under the glare of democratic choice.
Their discomfort is a healthy sign for the rest of us.
Republicans are squinting most painfully, at least at first, which is only fair because they've been shielded the most.
So long as abortion was a question for litigation, not legislation, Republicans could find political security in absolutism.
They could attract one-issue voters by adopting the right-to-life movement's strongest position, even as pro-choice Republicans knew this mattered little on an issue monopolized by the court.
Now it matters.
Much of Washington thought it detected George Bush in a characteristic waffle on abortion the past week.
Only a month ago he'd warned Congress not to pass legislation to pay for abortions in cases of rape or incest.
Last Friday, after Congress passed it anyway, he hinted he was looking for compromise.
Was the man who once was pro-choice, but later pro-life, converting again?
In fact, Mr. Bush's dance was more wiggle than waffle.
Pro-life advocates say the White House never wavered over the veto.
Christopher Smith (R., N.J.), a pro-life leader in the House, suggested a compromise that would have adapted restrictive language from rape and incest exceptions in the states.
The White House, never eager for a fight, was happy to try, which is why George Bush said he was looking for "flexibility" last week.
When Democrats refused to budge, pro-life Republicans met at the White House with Chief of Staff John Sununu on Monday, and Mr. Bush quickly signaled a veto.
Amid charges of "timidity" on Panama and elsewhere, the president wasn't about to offend his most energetic constituency.
The GOP doubters were in Congress.
In last week's House vote, 41 Republicans defected.
After the vote, Connecticut Rep. Nancy Johnson rounded up nearly as many signatures on a letter to Mr. Bush urging him not to veto.
Even such a pro-life stalwart as Sen. Orrin Hatch (R., Utah) had counseled some kind of compromise.
The Senate passed the same bill yesterday, with a veto-proof majority of 67.
The manuevering illustrates an emerging Republican donnybrook, pacified since the early 1980s.
At the 1988 GOP convention, abortion was barely discussed at all, though delegates were evenly divided on the question of an anti-abortion constitutional amendment.
Ms. Johnson made a passionate statement to the platform committee, but she was talking to herself.
Now many Republicans are listening.
They're frightened by what they see in New Jersey, and especially Virginia, where pro-life GOP candidates for governor are being pummeled on abortion.
Eddie Mahe, a Republican consultant, says the two GOP candidates could have avoided trouble if they had framed the issue first.
(In Virginia, Marshall Coleman and his running mate, Eddy Dalton, are both on the defensive for opposing abortions even in cases of rape or incest.)
But Mr. Mahe adds, "The net loser in the next few years is the right-to-life side."
Darla St. Martin, of the National Right to Life Committee, says exit polls from the 1988 election had single-issue, pro-life voters giving Mr. Bush about five more percentage points of support than pro-choice voters gave Michael Dukakis.
But the Supreme Court's opening of debate may have changed even that.
GOP pollster Neil Newhouse, of the Wirthlin Group, says polls this summer showed that the single-issue voters had about evened out.
Polls are no substitute for principle, but they'll do for some politicians.
The Republican danger is that abortion could become for them what it's long been for Democrats, a divisive litmus test.
It's already that in the Bush administration, at least for any job in which abortion is even remotely an issue.
Oklahoma official Robert Fulton lost a chance for a senior job in the Department of Health and Human Services after right-to-life activists opposed him.
Caldwell Butler, a conservative former congressman, was barred from a Legal Services post, after he gave wrong answers on abortion.
Even the president's doctor, Burton Lee, has said on the record that he'd love to be surgeon general but couldn't pass the pro-life test.
In the case of HHS Secretary Louis Sullivan, the litmus test could yet damage issues important to other parts of the Republican coalition.
After Mr. Sullivan waffled on abortion last year, the White House appeased right-to-lifers by surrounding him with pro-life deputies.
Their views on health care and welfare didn't much matter, though HHS spends billions a year on both.
It makes only a handful of abortion-related decisions.
Though Democrats can gloat at all this for now, they may want to contain their glee.
On abortion, their own day will come.
Eventually even Republicans will find a way to frame the issue in ways that expose pro-choice absolutism.
Does the candidate favor parental consent for teen-age abortions?
(The pro-choice lobby doesn't.
) What about banning abortions in the second and third trimesters?
(The lobby says no again.)
Democracy is forcing the abortion debate toward healthy compromise, toward the unpolarizing middle.
Roe v. Wade pre-empted political debate, so the extremes blossomed.
Now the ambivalent middle, a moral majority of sorts, is reasserting itself.
Within a few years, the outcome in most states is likely to be that abortion will be more restricted, but not completely banned.
This is where the voters are, which is where politicians usually end up.
Union Pacific Corp. third-quarter net income fell 17%.
Excluding earnings from discontinued operations a year earlier, net fell only 2%.
The energy, natural resources and railroad concern had net of $137.4 million, or $1.35 a share, down from $165 million, or $1.44 a share, a year earlier.
In the 1988 third quarter, profit from continuing operations totaled $140.1 million.
A year earlier, the company had profit from discontinued operations of $24.9 million from sale of a pipeline, a refinery and an interest in a second refinery.
Revenue rose 2% to $1.58 billion from $1.54 billion.
In composite trading on the New York Stock Exchange, Union Pacific jumped $1.375 to $75 a share.
The company said its Union Pacific Railroad had a 3% profit increase, despite a 14% rise in fuel costs and a 4% drop in car loadings.
Most of the commodity traffic was off, the company said.
Earnings from continuing operations of the Union Pacific Resources unit almost doubled, the company said.
It added that higher revenue, strong crude oil prices and higher natural gas prices offset declines in production of oil, gas and plant liquids.
In addition, the company cited cost-reduction moves and interest income.
Earnings from Union Pacific Realty dropped 50% to $3 million.
Before good will, Overnite Transportation earnings fell 11% to $15 million, Union Pacific said.
In the nine months, net fell 6.3% to $427.7 million, or $3.98 a share, from $456.4 million, or $4 a share, a year earlier.
Profit from continuing operations in the year-earlier period was $402.7 million.
Revenue was $4.75 billion, up 6% from $4.49 billion.
The Federal Trade Commission ruled that five major title-insurance companies illegally fixed prices for title search-and-examination services by participating in joint "rating bureaus" in six states.
The FTC ordered the companies not to use rating bureaus in those six states.
The commission order named the following companies: Ticor Title Insurance Co. of California, a unit of Los Angeles-based Ticor; Chicago Title Insurance Co. and Safeco Title Insurance Co., units of Chicago Title & Trust Co.; Lawyers Title Insurance Corp., a unit of Richmond, Va.-based Universal Corp.; and Stewart Title Guaranty Co., a unit of Houston-based Stewart Information Services Corp.
Chicago Title & Trust acquired Safeco in 1987 and changed the unit's name to Security Union Title Insurance Co.
The FTC ruled that the companies violated federal antitrust law by fixing rates in the following states: New Jersey, Pennsylvania, Connecticut, Wisconsin, Arizona and Montana.
The FTC first issued an administrative complaint in the case in 1985.
John Christie, a lawyer here for the two Chicago Title & Trust units accused the FTC of "second-guessing" state-level regulations, with which, he said, his clients had complied.
"I expect all the companies to appeal," he added.
A lawyer for Lawyers Title said that, because the named companies no longer use the type of cooperative rating bureaus attacked by the FTC, the commission's order won't have much practical impact.
Officials for the other named companies didn't return telephone calls seeking comment.
MARK RESOURCES INC., Calgary, Alberta, said it agreed to sell 75 million Canadian dollars (US$63.9 million) of 8% convertible debentures to a group of securities dealers.
Mark, an oil and gas concern, said the 15-year debentures are convertible before maturity at C$12.50 for each Mark common share, and can be redeemed at the company's option, under certain conditions, after Nov. 30, 1992.
The government will try to sell all the real estate managed by the Federal Asset Disposition Association in one fell swoop, said William Seidman, chairman of the Federal Deposit Insurance Corp.
The FADA real-estate package, with an asking price of $428 million, is comprised of 150 properties in Texas, California, Colorado, Arizona and Florida.
It includes apartments, shopping centers, office buildings and undeveloped land.
Mr. Seidman is chairman of the Resolution Trust Corp., established to sell or merge the nation's hundreds of insolvent savings-and-loan associations.
The RTC, created by this year's S&L bailout legislation, is trying to sell FADA's network of offices separately.
FADA, which holds problem assets of thrifts that were closed before the bailout legislation was enacted, is being liquidated.
The properties held by FADA won't be sold piecemeal, Mr. Seidman said in a speech before Southern Methodist University Business School in Dallas.
"You need to buy the entire lot," Mr. Seidman said, "so get out your checkbooks.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
Sequa Corp. -- $150 million of 9 5/8% notes due Oct. 15, 1999, priced at 99.75 to yield 9.664%.
The noncallable issue was priced at a spread of 170 basis points above the Treasury's 10-year note.
Rated Baa-2 by Moody's Investors Service Inc. and triple-B-minus by Standard & Poor's Corp., the issue will be sold through underwriters led by Merrill Lynch Capital Markets.
Virginia Public School Authority -- $55.7 million of school financing bonds, 1989 Series B (1987 resolution), due 19912000, 2005 and 2010, through a BT Securities Corp. group.
The bonds, rated double-A by Moody's and S&P, were priced to yield from 6% in 1991 to 7.10% in 2010.
Serial bonds were priced to yield to 6.75% in 2000.
Bonds due 1991-1996 carry 6.70% coupons and bonds due 1997-2000 carry 6 3/4% coupons.
Term bonds due 2005 aren't being formally reoffered.
They carry a 7% coupon.
Term bonds due 2010 are 7.10% securities priced at par.
St. Johns River Water Management District, Fla. -- $50,005,000 of land acquisition revenue bonds, Series 1989, due 1990-2000, 2003, 2006 and 2009, tentatively priced by a Smith Barney, Harris Upham & Co. group to yield from 6% in 1990 to about 7.03% in 2003.
There are $9.76 million of 7% term bonds due 2003, priced at 99 3/4 to yield about 7.03%.
The $11,775,000 of term bonds due 2006 and the $13,865,000 of term bonds due 2009 aren't being formally reoffered.
Serial bonds were priced at par to yield to 6.90% in 2000.
The bonds are insured and rated triple-A by Moody's and S&P.
Federal Home Loan Mortgage Corp. -- $500 million of Remic mortgage securities being offered in 12 classes by Salomon Brothers Inc.
The offering, Series 105, is backed by Freddie Mac 9 1/2% securities.
Separately, $400 million of Freddie Mac Remic mortgage securities is being offered in 10 classes by Kidder, Peabody & Co.
The offering, Series 106, is backed by Freddie Mac 9 1/2% securities.
According to available details, yields range from 8.70%, a spread of 80 basis points over three-year Treasury securities, to 10.37%, a spread of 230 basis points over 20-year Treasurys.
The offerings bring Freddie Mac's 1989 Remic issuance to $32.6 billion and its total volume to $46.5 billion since the program began in February 1988.
European Investment Bank (agency) -- 200 billion lire of 12% bonds due Nov. 16, 1995, priced at 101 3/4 to yield 12% less full fees, via lead manager Banco Commercial Italiana.
Fees 1 3/4.
IBM International Finance (U.S. parent) -- 125 million European currency units of 9 1/8% bonds due Nov. 10, 1994, priced at 101 5/8 to yield 9.13% at the recommended reoffered price of par, via Banque Paribas Capital Markets.
Societe Generale Australia Ltd. (French parent) -- 50 million Australian dollars of 17% bonds due Nov. 20, 1991, priced at 101.90 to yield 16.59 less fees, via Westpac Banking Corp.
Guaranteed by Societe Generale.
Fees 1 1/4.
Mitsubishi Trust & Banking Corp. (Japan) -- 200 million Swiss francs of privately placed convertible notes due March 31, 1994, with a fixed 0.75% coupon at par, via Union Bank of Switzerland.
Put option on March 31, 1992, at a fixed 107 3/4 to yield 3.5%.
Callable from March 31, 1992, at 107 3/4, declining two points semi-annually to par.
Each 50,000 Swiss franc note is convertible from Nov, 27, 1989, to March 21, 1994, at a premium over the closing share price Oct. 25, when terms are scheduled to be fixed.
Also, the company issued 300 million marks of convertible bonds with an indicated 2 3/4% coupon due March 31, 1995, at par, via Westdeutsche Landesbank Girozentrale Bank.
Put on March 31, 1992, at an indicated 105 to yield 4.80%.
Call option beginning March 31, 1992, if the price of the stock rises more than 50% within 30 trading days as well as a call option for tax reasons.
Each 1,000 mark and 10,000 mark bond is convertible from Nov. 27, 1989, to March 21, 1995, at a price to be determined when terms are fixed Oct. 25.
Scandinavian Airlines System (Sweden) -- 100 million Swiss francs of 6 1/8% bonds due Nov. 24, 1999, priced at 100 3/4 to yield 6.03%, via Union Bank of Switzerland.
Call from Nov. 24, 1994, at 101 1/2, declining 1/4 point a year.
Federal Home Loan Mortgage Corp. -- $400 million of 10-year debentures with a coupon rate of 8.80%, priced at par.
The debentures, callable at par in five years, were priced at a yield spread of about 86 basis points above the Treasury 10-year note.
The issue is being sold through Freddie Mac's 17-member securities selling group.
The debentures mature Oct. 27, 1999.
The debentures will be available in book-entry form only in a minimum amount of $5,000 and additional increments of $5,000.
Interest will be paid semi-annually.
First they get us to buy computers so we can get more information.
Then the computers give us more information than we can ever read.
Now they plan to sell us products that sift through all the information to give us what we really want to know.
The products range from computer-edited, personal newsletters to systems that sit inside a personal computer and pick stories on selected topics off news wires.
"Filtered news is what people want," says Esther Dyson, editor of Release 1.0, an industry newsletter that spots new developments.
"Most people read 10 times more than necessary in order to find out what they really need."
Geoffrey Goodfellow, who dropped out of high school back in the 1970s to manage a computer network at a California research firm, says: "Old network hands have started to turn off the network because they don't have time to wade through the muck."
Mr. Goodfellow has started a Menlo Park, Calif., company called Anterior Technology that provides human editors for public electronic networks.
"I see it as a sewage treatment plant," he says.
A new product, NewsEdge, carries five business news wires simultaneously into a user's computer and beeps and flashes whenever an article appears that is of interest to the user.
The product, developed by Desktop Data Corp., a new company based in Waltham, Mass., scans the wires looking for articles that contain key words specified by the user.
One early user, David Semmel, a Chicago venture capitalist and investor in Desktop Data, says he uses it to track takeover developments.
He says he told NewsEdge to look for stories containing such words as takeover, acquisition, acquire, LBO, tender, merger, junk and halted.
"I'm pretty confident I'm catching everything," he says.
NewsEdge is pricey: $7,500 a year for a limited version, $40,000 a year if the cost of all the news wires is included.
And it works best in high-powered personal computers.
But some investors and consultants who have tried it are enthusiastic.
Jeffrey Tarter, editor of SoftLetter, a Watertown, Mass., industry newsletter, says: "I've seen a lot of people fooling around on the fringes of filtering information.
This is the first time I've seen something I could imagine a lot of people using."
NewsEdge uses an FM radio band to carry news wires provided by Reuters, McGraw-Hill and Dow Jones & Co., as well as PR Newswire, which carries corporate press releases.
An FM receiver attached to a user's personal computer receives the information.
Some organizations have devised their own systems to sort through news wire items as they come in.
George Goodwin, an account manager at Royal Bank of Canada, adapted a Lotus Development Corp. program called Agenda to sort through international news wires.
It automatically selects stories from particular countries for reading by the international bankers responsible for lending in those areas.
For those who don't need their personalized information moment by moment, some services are offering overnight newsletters.
Individual Inc., a new company in Brookline, Mass., uses filtering technology developed by Cornell University computer scientist Gerard Salton, to automatically produce customized newsletters it sends electronically to subscribers by 8 a.m. the next day.
"We are operating an information refinery that takes a broad stream of raw data and turns it into actionable knowledge," says Yosi Amram, founder and president.
The daily newsletter, which isn't widely available yet, will have a base cost of $2,000 a year and provides full text of relevant articles under license agreements with Reuters, McGraw Hill, United Press International, two press release news wires and Japan's Kyodo news service.
One early user is NEC Corp.'s U.S. printer marketing arm.
"They want the full press releases on printer announcements by their competition," Mr. Amram says.
It also tracks personnel and financial announcements by NEC's distributors and customers.
Individual Inc.'s technology goes beyond word searches by using a computerized thesaurus.
If a customer asks for stories about "IBM," the computer will also supply stories that mention "I.B.M., International Business Machines, or Big Blue," Mr. Amram says.
Moreover, Individual Inc.'s computers can weigh the value of an article based on how closely the story matches the subscriber's interest area.
It compares the position of key words in the story; words in the headline or first paragraph get a higher value.
And it calculates how often the words appear in the story compared with how often they appear in the entire data base.
The higher the ratio of hits to total words, the higher the presumed value to the reader.
Pinpoint Information Corp., Chantilly, Va., a producer of $1,800-a-year personalized newsletters about the computer industry that started full operation last month, relies on 12 human readers to code news releases by topic in order to select items for each subscriber.
"The computers find all the key words they can, but the editors confirm every one.
Computer picking isn't perfect," says Harvey Golomb, president and founder of Pinpoint.
The humans also write abstracts of articles from some 200 computer industry publications.
Once all the articles are coded and put in a data base, Pinpoint's computers pick the most relevant for each subscriber and lay them out in a three-to-five-page newsletter format; each newsletter is sent directly from the computer to the subscriber's fax machine.
Mr. Golomb says each of his computers can produce and send about 75 unique newsletters a night.
Many computer network users who never see news wires would like to sort through their electronic mail automatically.
So-called E-mail is the collection of inter-office memos, gossip, technical data, schedules and directives distributed over local and national computer networks.
"All these interconnected computers make it difficult to sort out what's junk and what's important," says Chuck Digate, a former Lotus Development executive who has started a new company to cope with the problem.
Mr. Digate says his firm, Beyond Inc., has licensed technology known as Information Lens from Massachusetts Institute of Technology and plans to develop it for commercial use.
The MIT project devised ways for E-mail to be automatically categorized as top priority if it comes from certain designated senders or requires action in the next couple of days.
Mr. Digate says that Beyond will refine the product "so the message will be smart enough to know to come back and bother you again next week."
And if a user is busy, "he can set it for crisis mode: `Don't bother me with reports until Monday.'"
A program called Notes, which is under development by Lotus, also is designed to sort E-mail sent within work groups.
One thing that makes E-mail difficult to sift through is that each item looks the same.
Notes, which is designed for advanced computers that display graphics, allows mail senders to put different logos on their mail.
A daily news briefing from the company librarian, for example, would have a distinctive format on the screen, just as a paper version would have.
"With E-mail, you don't have the visual clues of paper," says Mr. Tarter, the editor of SoftLetter.
"With Notes, they're visually distinct.
Dean Witter Reynolds Inc. lost its second recent arbitration case involving a former bond-trading executive.
A New York Stock Exchange arbitration panel ordered Dean Witter to pay $404,294 in back bonuses to William Kelly, the company's former head of high-yield, high-risk junk-bond trading and sales.
It also awarded $196,785 in back bonuses to former trader Michael Newcomb and $69,105 in fees to the two men's attorneys.
The sums awarded to Messrs. Kelly and Newcomb represent bonuses the two men said they deserved from the first half of 1988, but which weren't paid because of a dispute over an incentive contract.
Jeffrey L. Liddle, the two men's attorney at Liddle, O'Connor, Finkelstein & Robinson, said Mr. Kelly began working at Dean Witter in 1987.
Mr. Kelly built the company's high-yield bond group, which has been a minor player in the junk-bond arena.
Dean Witter lost a separate case involving a former bond executive earlier this year; in August it paid $666,666 in back pay and a bonus to a former corporate-bond trading chief, Harold Bachman.
That award ended a dispute between Dean Witter and Mr. Bachman over who was responsible for certain bond-trading losses around the time of the 1987 stock-market crash.
A spokesman for Dean Witter, a unit of Sears, Roebuck & Co., declined to comment.
DILLARD DEPARTMENT STORES Inc. said it offered $50 million of 9 1/2% debentures due 2001 at par.
The Little Rock, Ark., department-store retailer said proceeds will be used to reduce short-term debt.
Goldman, Sachs & Co. was the underwriter.
American Brands Inc. said third-quarter net income rose 13%, reflecting strong gains in its tobacco and distilled spirits businesses.
The company, which also has businesses in life insurance, office products and hardware, and home-improvement products, said net income rose to $166.4 million, or $1.71 a share, from $146.8 million, or $1.53 a share, a year earlier.
Year-earlier results for the quarter and the nine months were restated to reflect a change in accounting standards.
Revenue declined 2%, to $3.06 billion from $3.13 billion, because of the sale of Southland Life in March, and the impact of the stronger U.S. dollar on overseas results.
Operating profit for world-wide tobacco products rose 10% to $247.6 million.
For distilled spirits, operating profit rose 36%, to $24.8 million.
In the first nine months, net rose 1.5%, to $458.8 million, or $4.76 a share, from $452 million, or $4.50 a share, a year earlier.
The year-earlier period included $40.1 million, or 41 cents a share, from discontinued operations.
Revenue rose to $9.03 billion from $8.98 billion.
The average number of shares outstanding rose 2% in the third quarter but was down 4% for the nine months.
In composite trading on the New York Stock Exchange, American Brands shares rose $1.75 to $73.
SANTA FE PACIFIC PIPELINE PARTNERS Limited Partnership, of Los Angeles, increased its quarterly cash dividend to 60 cents a unit from 55 cents, payable Nov. 14 to units of record Oct. 31.
The company is an independent refined-petroleum-products pipeline serving six Western states.
WASHINGTON LIES LOW after the stock market's roller-coaster ride.
Lawmakers, haunted by charges that some of their comments contributed to the 1987 crash, generally shy away from calls for sweeping new legislation.
But a House Energy and Commerce subcommittee will quiz SEC Chairman Breeden Wednesday, and Treasury Secretary Brady will go before the Senate Banking panel Thursday.
The market's wild week may speed along the market-reform legislation that has been pending for months in the aftermath of the 1987 crash.
It may also expedite the SEC's modest pending changes in junk-bond disclosure rules and intensify the Treasury's look at plans for giving new tax breaks on dividends and raising taxes on short-term trades by pension funds.
Brady and Breeden work well together on the plunge, despite the fact that the Treasury secretary opposed Breeden's nomination to the SEC post.
BAKER FALTERS in the Mideast amid Israeli paralysis and Palestinian politics.
Despite seeing his plan for Israeli-Palestinian elections wither, the cautious secretary of state is so far unwilling to cut U.S. economic or military aid to force Israeli cooperation.
Baker nonetheless remains furious both at Shamir, for backing down on the elections, and at Shamir's rival, Peres, for political ineptitude in forcing a premature cabinet vote on Baker's plan.
Meanwhile, some U.S. officials fear PLO chief Arafat is getting cold feet and may back off from his recent moderation and renunciation of terrorism.
He is under intense fire from other Palestinian groups; Syria is pushing Ahmad Jibril, whose terrorist band is blamed for the Pan Am 103 bombing, as an alternative to Arafat.
DARMAN'S MANEUVERS on the budget and capital gains hurt him in Congress.
Republicans as well as Democrats were angered by the budget director's rejection of Speaker Foley's effort to expedite a deficitcutting measure by stripping it of the capital-gains tax cut as well as pet Democratic projects.
Darman now blames the clash on miscommunication, but House GOP leader Michel, who carried the offer to him, observes, "I was speaking English at the time, and quite loud so I could be understood."
Senate GOP leader Dole ridicules the budget chief on the Senate floor.
Democratic counterpart Mitchell, asked to interpret Darman's threat to make permanent the across-the-board Gramm-Rudman cuts that took effect this week, says, "I don't even bother to interpret them."
But Darman suggests such tensions will dissipate quickly.
"If I can show signs of maturity, almost anybody can," he jokes.
HHS OFFICIALS expect Secretary Sullivan to continue a ban on research using fetal tissue.
Before he was confirmed, Sullivan said he had "reservations about any blanket prohibitions on medical research."
But now, an official says, he is "surrounded by right-to-lifers," who contend that any breakthroughs in fetal-tissue research could increase the demand for abortions.
COOPERATION WANES on weapons development between the U.S. and Europe.
Britain, France and Italy pull out of a proposal to build new NATO frigates; the U.S. and West Germany have each withdrawn from missile projects.
Defense experts say joint projects are increasingly squeezed by budget pressures and the desire to save domestic jobs; some also fear rising protectionism as European unity nears.
BOTH SIDES NOW:
Virginia GOP lieutenant governor candidate Eddy Dalton tries to have it both ways on the abortion issue.
Though she opposes abortion in almost all cases, she airs a TV commercial using pro-choice buzzwords.
"A woman ought to have a choice in cases where her life or health are in danger and in cases of rape or incest," she proclaims.
HOT TOPIC:
Interest in the abortion issue is so great that the Hotline, a daily, computer-distributed political newsletter, comes up with a spinoff product called the Abortion Report dealing solely with its political implications.
CONSERVATIVES EXPECT Bush to solidify their majority on a key court.
Bush has three vacancies to fill on the prestigious D.C. Circuit Court, which handles many important regulatory issues and is often considered a warm-up for future Supreme Court nominees.
Conservatives now hold only a 5-4 edge.
One slot is expected to go to EEOC Chairman Clarence Thomas, a black conservative; after mulling a fight, liberals now probably won't put up a major struggle against him.
Other conservatives thought to be on the administration's short list include Washington lawyer Michael Uhlmann, who was passed over for the No. 2 job at the Justice Department, and Marshall Breger, chairman of a U.S. agency on administration.
The Bush administration would also like to nominate a woman; one possibility is former Justice Department official Victoria Toensing.
MINOR MEMOS:
In the wake of the failed Panama coup, a bumper sticker appears: "Ollie Would Have Got Him." . . .
Rep. Garcia, on trial for bribery and extortion, puts statements in the Congressional Record attributing missed votes to "scheduling conflicts." . . .
A GOP Senate fund-raising letter from Sen. Burns of Montana is made to appear personally written, and its opening line is, "Please excuse my handwriting."
But Burns confesses in an interview: "That's not my handwriting.
MC SHIPPING Inc., New York, declared an initial quarterly of 60 cents a share payable Nov. 15 to shares of record Oct. 30.
The announcement boosted the charter-shipping company's shares, which closed at $15.125, up $1.25 a share, in composite trading on the American Stock Exchange.
The company, which went public in May, intends to pay dividends from available cash flow; the amount may vary from quarter to quarter.
Ever since the hotly contested America's Cup race last year, the famous yachting match has run into more rough sailing out of the water than in it.
Now that a key member of the San Diego Yacht Club team is splitting off to form his own team, even more competition lies ahead.
Peter Isler, the winning navigator in the past two America's Cup challenges, has split from the team led by Dennis Conner, skipper of the victorious Stars & Stripes, to form his own team for the next contest in 1992.
And, in addition to a crack team of sailors, Mr. Isler has lined up some real brass to help him finance the syndicate.
Isler Sailing International's advisory board includes Ted Turner, Turner Broadcasting chairman and a former Cup victor; Peter G. Diamandis, head of Diamandis Communications, and Joseph B. Vittoria, chairman and chief executive of Avis Inc.
His steering committee includes other notable businessmen, including the California investor and old salt Roy E. Disney.
"We have the structure, people and plan," Mr. Isler said in a statement.
Now, the first order of business is raising enough money to keep his team afloat -- a new yacht will cost about $3 million alone, and sailing syndicate budgets can easily run to $25 million for a Cup challenge.
The split comes in the midst of a court battle over whether the San Diego Yacht Club should be allowed to keep the international trophy for sailing a catamaran against the New Zealand challengers' 90-foot monohull.
In September, a New York appellate court overturned a state judge's ruling that awarded the Cup to the New Zealand team.
Pending an appeal by the New Zealand team, led by Michael Fay, the finals for the next Cup challenge are scheduled to be held in mid-1992 in San Diego.
But because of the uncertainty of the outcome of the suit, Mr. Conner's team has done little to begin gearing up to defend its title.
"If you don't know what the rules of the game are, it's hard to start your fund-raising or design," said Dana Smith, an official with Team Dennis Conner.
The Conner team won't be able to negotiate with corporate sponsors until the suit is resolved and the race site is determined, Mr. Smith said, and the syndicate's budget could easily reach $30 million.
But spokesmen for both Mr. Isler and Mr. Conner say the formation of the new syndicate has to do with Mr. Isler's desire to skipper his own team and begin planning now, rather than any falling out between the two sportsmen.
Mr. Smith and a spokesman for the America's Cup Organizing Committee insist that the added competition for the defender's spot will only improve the race.
Missouri farmer Blake Hurst writing in the fall issue of the Heritage Foundation's Policy Review about the proposed location of a hazardous-waste incinerator in his county:
Of course I'd rather have a computer software firm in my backyard than a hazardous waste incinerator.
But I'd also rather live next door to an incinerator than to some of the hog farms I've seen (and smelt) in these parts.
An incinerator is also probably better than having nobody next door -- on our farm there are four unoccupied houses.
On my four-mile drive to farm headquarters each morning, I drive by another four empty houses.
A community of abandoned farmsteads, failing businesses, and crumbling roads and bridges is hardly a desirable one. . . .
The loss of 40 jobs by a depressed county in rural Missouri is hardly of national importance except for this: If the most environmentally safe way of dealing with a national problem cannot be built in Atchinson County, what hope have we for dealing with the wastes our economy produces?
After all, farmers here work with "hazardous" chemicals every day, many of them the same chemicals that would have been destroyed in the incinerator.
We know they are dangerous, but if handled with care, their benefits far outweigh any risk to the environment.
Just because Stamford, Conn., High School did nothing when its valuable 1930s mural was thrown in the trash doesn't mean the city no longer owns the work of art, a federal judge ruled.
The mural, now valued at $1.3 million according to appraisers, was tossed in a trash heap in 1971 by workers who were renovating the building.
The 100-foot-long mural, painted by James Daugherty in 1934, was commissioned by the federal Works Project Administration.
After the discarded mural was found outside the school by a concerned Stamford graduate, it eventually was turned over to Hiram Hoelzer, a professional art restorer.
Throughout the 1970s, Stamford school and city officials made no effort to locate the mural.
Apparently the officials didn't even know the mural was missing until 1980, when a researcher found that the painting was in Mr. Hoelzer's studio and questioned school officials about it.
In 1986, Stamford officials thanked Mr. Hoelzer for taking care of the mural -- and demanded he return it as soon as possible.
Mr. Hoelzer, however, sued Stamford, claiming that the city had abandoned the artwork and that it had waited too long to reclaim it.
But Judge Louis L. Stanton of federal court in Manhattan ruled that the city couldn't be faulted for waiting too long because it didn't realize until 1986 that its ownership of the painting was in dispute.
The judge also ruled that the painting wasn't abandoned because officials didn't intend for it to be thrown away and were unaware that the workmen had discarded it.
Mr. Hoelzer didn't return phone calls seeking comment on the judge's decision.
The judge ordered that a hearing be held Nov. 17 to determine how much the city should pay Mr. Hoelzer for his services.
Mary E. Sommer, corporate counsel for Stamford, said the city has discussed several possible plans for displaying the mural, which portrays various scenes from the Great Depression.
She said the mural "preserves an era in Stamford and in our country when this type of work was being done.
The prices of corn futures contracts jumped amid rumors that the Soviet Union is keeping up its dizzying October buying binge of U.S. corn.
Those rumors were confirmed after the end of trading yesterday when the U.S. Agriculture Department announced that the Soviets had bought 1.2 million metric tons of U.S. corn, bringing their U.S. corn purchases confirmed so far this month to about five million metric tons.
In trading at the Chicago Board of Trade, the corn contract for December delivery jumped 5.75 cents a bushel to settle at $2.44 a bushel.
The Soviet purchases are close to exceeding what some analysts had expected the Soviet Union to buy this fall, the season in which it usually buys much of the corn it imports from the U.S.
That pace is causing some analysts to speculate that the Soviet Union might soon purchase as much as another two million metric tons.
One sign that more Soviet purchases are possible is that U.S. grain companies yesterday bought an unusually large amount of corn futures contracts.
That sometimes signals that they are laying plans to export corn.
By some estimates, several grain companies combined bought contracts for the possession of roughly one million metric tons of corn.
By buying futures contracts, these companies attempt to protect themselves from swings in the price of the corn that they are obligated to deliver.
Rumors of Soviet interest also pushed up the prices of soybean futures contracts.
Among other things, the Agriculture Department is widely thought to be mulling whether to subsidize the sale of soybean oil to the Soviet Union.
On top of all this, corn and soybean prices rose on reports that the Midwest harvest was disrupted by a freakishly early snow storm that dumped several inches in parts of Indiana and Ohio.
The harvest delays, however, are expected to be temporary.
Balmy temperatures are forecast for next week, said Robert Lekberg, an analyst at Farmers Grain & Livestock Corp., Chicago.
Many farmers used the jump in prices to sell their recently harvested crop to grain elevator companies.
The heavy selling by farmers helped to damp the price rally.
Wheat futures prices rose slightly.
In other commodity markets yesterday:
PRECIOUS METALS:
Futures prices declined.
A number of developments were negatively interpreted by traders.
December delivery gold fell $1.80 an ounce to $370.60.
December silver eased 2.7 cents an ounce to $5.133.
January platinum was down $3.60 an ounce at $491.10.
One price-depressing development was the lower-than-expected increase of only 0.2% in the consumer price index for September, an analyst said.
He noted that the "core inflation rate," which excludes food and energy, was also low at 0.2%.
Other news that weighed on the market: Initial unemployment claims rose by 62,000 last week; American Telephone & Telegraph Co. will reduce its managerial staff by 15,000 through attrition; the oil market turned weaker; there wasn't any investor demand for bullion; and the dollar strengthened during the day, putting pressure on gold.
Also, the analyst said, economic circumstances are such that both South Africa and the Soviet Union, the principal gold and platinum producers, are being forced to continue selling the metals.
Both are in great need of foreign exchange, and South Africa is also under pressure to meet foreign loan commitments, he said.
"Putting it all together, we have a negative scenario that doesn't look like it will improve overnight," he said.
COPPER:
Futures prices recovered in quiet trading.
The December contract rose 1.50 cents a pound to $1.2795.
That contract fell a total of 5.75 cents during the first three days of this week, mostly in reaction to last Friday's stock market plunge, which prompted concern that it might signal a similar sharp slowing of the U.S. economy and thus reduced demand for copper, a leading industrial metal.
In recent days, however, there has been increased purchasing of copper in London, an analyst said.
Some of this buying was by Japan, which has had its supplies sharply reduced by long production stoppages at the Bougainville mine in Papua New Guinea, Highland Valley mine in British Columbia, and the Cananea mine in Mexico, which are major shippers to Japan.
The increasing likelihood that Cananea and Highland Valley will soon return to production may have cut some of that purchasing, but even if any of these mines begin operating soon, their output won't be significant until at least the end of the year, analysts note.
So, one analyst said, even though the long-term production problems may be easing, there will still be a significant need for copper over the next three months, when inventories will remain relatively low.
ENERGY:
Crude oil prices ended mixed.
West Texas Intermediate for November delivery fell 14 cents a barrel to $20.42.
But so-called outer month contracts finished higher.
For instance, December contracts for WTI rose 17 cents to $20.42.
Most energy futures opened lower, following Wednesday's market downturn.
But a flurry of late trading yesterday beefed up prices.
Heating oil and gasoline futures ended higher as well.
Melvin Belli's San Francisco law offices may have been the epicenter of legal activity after Tuesday's earthquake.
In the first 25 minutes after his office's telephone service was restored yesterday morning, 17 potential clients had called seeking the services of the self-proclaimed King of Torts.
Mr. Belli, like many other personal-injury lawyers, suspects that the earthquake, which measured 6.9 on the Richter scale, will generate enough lawsuits to keep this city's personal-injury and construction lawyers busy for quite some time.
Suits are likely to be filed against engineering firms, contractors and developers, as well as against local-government agencies.
But lawyers looking to cash in on the quake may have a tough time once their cases reach a judge.
Experts on California tort law say protections afforded government agencies in such cases are pretty ironclad.
Even claims against individuals and companies face significant roadblocks.
The major legal barrier is the principle that no one can be held liable for an "act of God."
For now, says Laurence Drivon, president-elect of the 6,000-member California Trial Lawyers Association, "the last thing we really need to worry about is whether anybody is going to get sued, or whether they have liability or not.
We still have people wandering around in a daze in San Francisco worrying about whether it's going to rain tonight."
But that won't stop plaintiffs' lawyers from seeking a little room for maneuvering.
In San Francisco, they argue, an earthquake was a near certainty.
Therefore, engineering firms, construction contractors and developers can be sued for not keeping structures up to standard, and government agencies can be held accountable for failing to properly protect citizens from such a foreseeable disaster, if negligence can be proven.
"My prediction is there will be mass litigation over errors and omissions in engineering and contracting," says Stanley Chesley, a well-known Cincinnati plaintiffs lawyer.
From what he saw on television, Mr. Chesley points out that Interstate 880, which collapsed and killed more than 200 commuters, suffered serious damage while surrounding buildings appeared to sustain no damage whatsoever.
He adds that "they were aware of the propensity for earthquakes and the San Andreas Fault."
The flamboyant and publicity-conscious Mr. Belli says he already has investigators looking into who could be held liable for the damage on the Bay Bridge and the interstate approaching it.
"We won't know until the smoke clears -- but yes, we're looking into it," he says.
Mr. Belli says he wants to know whether state or federal engineers or private companies could have prevented the damage.
Mr. Belli, who was at Candlestick Park for the World Series Tuesday night, says he has hired civil engineers to check out his own mildly damaged building and to investigate the bridge collapse.
Defense lawyers, perhaps understandably, say that plaintiffs' lawyers taking such an approach will have little success in pursuing their claims, though they add that the facts of each case must be looked at individually.
"A lot of this is going to be code-related," says Ignazio J. Ruvolo, a construction law specialist at Bronson, Bronson & McKinnon, a San Francisco law firm.
Plaintiffs, he says, will argue that damaged structures weren't built to proper design standards.
But if defendants can prove that they met San Francisco's stringent building codes, "that's probably going to protect them," Mr. Ruvolo says.
Government entities, continues Mr. Ruvolo, could be protected by the California Government Tort Liability Act.
Under the statute, agencies are provided "defenses that normally aren't available in the private sector," Mr. Ruvolo says.
"The legislature does not want to inhibit the unique government activities by exposing public entities to liability."
Built into the statute are so-called design immunities, which are likely to protect government agencies, according to Mr. Ruvolo and Richard Covert, a lawyer with the California Department of Transportation, which oversees the damaged Bay Bridge.
The state is protected when plans and designs for public structures were approved ahead of time or when structures met previously approved standards, says Mr. Covert.
He believes those defenses might well apply to the Bay Bridge collapse.
Nevertheless, he adds, "I wouldn't get totally shocked if we get lawsuits out of the Bay Bridge."
If there's going to be a race to the courthouse, it hasn't started yet.
Mr. Covert had to search through law books scattered on the floor of his office yesterday, and Mr. Belli's courtyard was strewn with bricks.
Wednesday, Mr. Belli's staff wasn't permitted into his office by city officials worried about their safety.
He said he set up shop on the sidewalk in front of his town-house office and helped victims apply for federal aid -- free of charge.
In a news release issued by Mr. Drivon, the trial lawyers association also promised free assistance to victims.
The association said it would monitor the conduct of lawyers and warned that solicitation of business is unethical.
What's in a name?
Apparently a lot, according to the British firm of Deloitte, Haskins & Sells.
The British firm has begun court proceedings in London to prevent the use of the name "Deloitte" by Deloitte, Haskins & Sells and Touche Ross & Co. in England and the rest of the world.
The British Deloitte firm recently withdrew from the merger of Deloitte and Touche world-wide and joined Coopers & Lybrand.
John Bullock, senior partner of Deloitte in the U.K., said "the decision to start these proceedings hasn't been taken lightly."
Mr. Bullock said the British firm has used the name "Deloitte" since 1845.
In the U.S., Deloitte, Haskins & Sells was known as Haskins & Sells until 1978, when it added the "Deloitte" name of its British affiliate.
John C. Burton, an accounting professor at Columbia University's Graduate School of Business, said "there's a lot of emotion involved in the name of an accounting firm with a long history and with roots in England, where accounting predates the U.S."
Although accountants aren't noted as "being deeply emotional, they really hold it all in," said Mr. Burton, former chief accountant of the Securities and Exchange Commission.
J. Michael Cook, chairman of Deloitte, Haskins & Sells International, said he believes the legal action by the British firm "to be without merit."
Mr. Cook said that last June, the international executive committes of Deloitte and Touche agreed to a world-wide merger.
"The merger is proceeding according to plan, except as to the withdrawal of the Deloitte U.K. firm," he said.
Partners at other accounting firms say that the Deloitte firm in the U.K. is filing the suit to get even with the merged Deloitte-Touche firm for keeping major auditing work in England.
General Motors Corp., a Deloitte audit client, for example, has agreed to keep its annual $18 million world-wide audit and associated tax work with the merged Deloitte-Touche firm, to be known as Deloitte & Touche in the U.S.
In England, this would mean that the British Deloitte would lose revenue for its audit of GM's Vauxhill unit.
The defection of Deloitte's affiliates in Britain and the Netherlands to Coopers & Lybrand will make Coopers one of the biggest accounting firms in Europe, rivaling KPMG Peat Marwick there.
Although Coopers hasn't been courted by other major accounting firms for a merger, it is benefiting greatly from fallout from the Deloitte-Touche merger.
In New York, Harris Amhowitz, general counsel of Coopers, said Coopers "was aware of the litigation," but he declined further comment.
He also declined to comment on the name that Coopers would use in England if Deloitte UK won its litigation to keep its name.
Coopers uses the Coopers & Lybrand name world-wide.
William Bennett, the White House drug-policy director, accused local officials in the Washington area of blocking construction of prison facilities to house convicted drug dealers.
"Politics has essentially put up a roadblock" to finding sites for new federal prisons, Mr. Bennett said at a news conference called to report on his "emergency assistance program" for the capital.
Without more space to incarcerate convicted criminals, he added, "we will not win the war on drugs."
Mr. Bennett declared in April that he would make Washington a "test case" for how the Bush administration would aid cities afflicted by heavy drug trafficking and violence.
The drug czar claimed that enforcement efforts are working here, "albeit at a slower and more halting pace than we would like."
He acknowledged, however, that Washington's "drug-related murder rate is intolerably high.
The prisons are too crowded.
Drugs continue to be sold openly around schools, parks and housing projects."
Mr. Bennett declined to name the area officials who he believes have impeded plans for building more federal prisons to ease Washington's problem.
But other Bush administration officials have criticized Maryland Gov. William Schaefer for blocking the use of possible sites in that state.
Administration officials also have said that Washington Mayor Marion Barry has delayed consideration of sites in the city.
In a letter to Mr. Bennett's office, released yesterday, Washington's city administrator, Carol Thompson, complained that the drug czar had exaggerated the amount of federal drug-related assistance provided to the capital.
Referring to Mr. Bennett's claim that the federal government would provide $97 million in emergency federal support, Ms. Thompson wrote, "Our analysis was unable to even come close to documenting that figure."
Of his successes in Washington, Mr. Bennett stressed that existing federal prisons have taken custody of 375 local inmates.
He also noted that the federal Drug Enforcement Administration has established a federal-local task force responsible since April for 106 arrests and more than $2 million in seizures of drug dealers' assets.
The Defense Department has lent the Washington U.S. attorney 10 prosecutors, and the Federal Bureau of Investigation has provided crime laboratory facilities and training, he added.
What if it happened to us?
In the wake of the earthquake in California and the devastation of Hurricane Hugo, many companies in disaster-prone areas are pondering the question of preparedness.
Some, particularly in West Coast earthquake zones, are dusting off their evacuation plans, checking food stocks and reminding employees of what to do if emergency strikes.
Others say they feel confident that steps they've already taken would see them through a disaster.
Preparedness involves more than flashlights and fire alarms these days.
Some big companies have teams of in-house experts focusing on safety and business resumption.
Many companies in the path of potential disaster have set up contingency offices in safe regions, hoping they can transport employees there and resume operations quickly.
That means making sure that copies of vital computer software and company records are out of harm's way.
Some businesses -- like Disneyland -- claim that even if they became isolated in a crisis, they would be able to feed and care for their people for as long as five days.
"Self-sufficiency has to be the cornerstone of your plan," says Stephanie Masaki-Schatz, manager of corporate emergency planning at Atlantic Richfield Co. in Los Angeles.
"If you don't save your critical people, you won't be able to bring up your vital business functions."
Although ARCO's head office, more than 300 miles from the epicenter, wasn't affected by this week's tremors, Ms. Masaki-Schatz used the occasion to distribute a three-page memo of "Earthquake Tips" to 1,200 ARCO employees.
"You need to capitalize on these moments when you have everyone's attention," she says.
"It was a good reminder that we all need to prepare prior to an event."
The ARCO memo urges employees to keep certain supplies at work, such as solid shoes and "heavy gloves to clear debris."
It also recommends that employees be aware of everyday office items that could be used for emergency care or shelter.
Among the suggestions: Pantyhose and men's ties could be used for slings, while removable wooden shelves might aid in "breaking through office walls."
ARCO maintains an office in Dallas that would take over if payroll operations in Pasadena were disrupted.
Two months ago the company set up a toll-free number, based outside California, to handle queries from employees about when they should report back to work after an earthquake or other disaster.
The ARCO plan takes into account such details as which aspects of business are busier at certain times of the year.
This way, depending on when a quake might strike, priorities can be assigned to departments that should be brought back on line first.
At Hewlett-Packard Co., the earthquake came just as the company was reviewing its own emergency procedures.
"We were talking about scheduling a practice drill for November," says Joan Tharp, a spokeswoman.
"Then we had a real one in the afternoon."
The Palo Alto, Calif., computer maker scrambled to set up a special phone line to tell manufacturing and support staff to stay home Wednesday.
Sales and service employees were asked to report to work to help Bay area clients who called with computer problems.
Hewlett-Packard also called in its systems experts to restore its own computer operations.
"That means we can accept orders" and begin getting back to normal, says Ms. Tharp.
Prompted by an earlier California earthquake, as well as a fire in a Los Angeles office tower, Great Western Bank in the past year hired three emergency planners and spent $75,000 equipping a trailer with communications gear to serve as an emergency headquarters.
Although officials of the savings and loan, a unit of Great Western Financial Corp., used some of their new plans and equipment during this week's quake, they still lost touch for more than 24 hours with 15 branches in the affected areas, not knowing if employees were injured or vaults were broken open.
"Some people flat out didn't know what to do," says Robert G. Lee, vice president for emergency planning and corporate security at Great Western.
As it turned out, bank employees weren't hurt and the vaults withstood the jolts.
Still, says Mr. Lee: "We need to educate people that they need to get to a phone somehow, some way, to let someone know what their status is."
Some companies are confident that they're prepared.
Occidental Petroleum Corp. holds regular evacuation drills and stocks food, oxygen and non-prescription drugs at checkpoints in its 16-story headquarters.
The company also maintains rechargeable flashlights in offices and changes its standby supply of drinking water every three months.
"We feel we are doing everything we can," an Occidental spokesman says.
Walt Disney Co.'s Disneyland in Anaheim, Calif., stocks rescue equipment, medical supplies, and enough food and water to feed at least 10,000 visitors for as long as five days in the event that a calamity isolates the theme park.
The park also has emergency centers where specially trained employees would go to coordinate evacuation and rescue plans using walkie-talkies, cellular phones, and a public-address system.
The centers are complete with maps detailing utility lines beneath rides and "safe havens" where people can be assembled away from major structures.
Vista Chemical Co., with three chemical plants in and near Lake Charles, La., "prepares for every hurricane that enters the Gulf of Mexico," says Keith L. Fogg, a company safety director.
Hurricane Hugo, an Atlantic storm, didn't affect Vista.
But two other major storms have threatened operations so far this year, most recently Hurricane Jerry this week.
Because hurricanes can change course rapidly, the company sends employees home and shuts down operations in stages -- the closer a storm gets, the more complete the shutdown.
The company doesn't wait until the final hours to get ready for hurricanes.
"There are just tons of things that have to be considered," Mr. Fogg says.
"Empty tank cars will float away on you if you get a big tidal surge."
Still, Vista officials realize they're relatively fortunate.
"With a hurricane you know it's coming.
You have time to put precautionary mechanisms in place," notes a Vista spokeswoman.
"A situation like San Francisco is so frightening because there's no warning.
Former Democratic fund-raiser Thomas M. Gaubert, whose savings and loan was wrested from his control by federal thrift regulators, has been granted court permission to sue the regulators.
In a ruling by the Fifth U.S. Circuit Court of Appeals in New Orleans, Mr. Gaubert received the go-ahead to pursue a claim against the Federal Home Loan Bank Board and the Federal Home Loan Bank of Dallas for losses he suffered when the Bank Board closed the Independent American Savings Association of Irving, Texas.
Mr. Gaubert, who was chairman and the majority stockholder of Independent American, had relinquished his control in exchange for federal regulators' agreement to drop their inquiry into his activities at another savings and loan.
As part of the agreement, Mr. Gaubert contributed real estate valued at $25 million to the assets of Independent American.
While under the control of federal regulators, Independent American's net worth dropped from $75 million to a negative $400 million, wiping out the value of Mr. Gaubert's real estate contribution and his stock in the institution.
Mr. Gaubert's suit to recover his damages was dismissed last year by U.S. District Judge Robert Maloney of Dallas under the Federal Tort Claims Act, which offers broad protection for actions by federal agencies and employees.
Earlier this week, a Fifth Circuit appellate panel upheld Judge Maloney's dismissal of Mr. Gaubert's claim as a shareholder but said the judge should reconsider Mr. Gaubert's claim for the loss of his property.
"It may depend on whether there was an express or implied promise . . . that the federal officials would not negligently cause the deterioration" of Independent American, the court wrote.
Mr. Gaubert's lawyer, Abbe David Lowell of Washington, D.C., says the impact of the ruling on other cases involving thrift takeovers will depend on the degree of similarity in the facts.
"I don't know if this will affect one institution or a hundred," Mr. Lowell says.
"It does establish a very clear precedent for suing the FHLBB where there was none before."
MAITRE'D CLAIMS in suit that restaurant fired her because she was pregnant.
In a suit filed in state court in Manhattan, the American Civil Liberties Union is representing the former maitre'd of the chic Odeon restaurant.
The suit, which seeks compensatory and punitive damages of $1 million, alleges that the firing of Marcia Trees Levine violated New York state's human-rights law.
Among other things, the law prohibits discrimination on the basis of sex and pregnancy.
The suit alleges that Ms. Levine was fired after she refused to accept a lower paying, less visible job upon reaching her sixth month of pregnancy.
Ms. Levine told her employer that she was pregnant in February; a month later, the suit says, the restaurant manager told Ms. Levine that she would be demoted to his assistant because he felt customers would be uncomfortable with a pregnant maitre'd.
Kary Moss, an attorney with the ACLU's Women's Rights Project, said, "They wanted a svelte-looking woman, and a pregnant woman is not svelte.
They told her, 'We don't hire fat people and we don't hire cripples.
And pregnant women are fat.'"
Ms. Moss said Ms. Levine secretly taped many conversations with her bosses at the Odeon in which they told her she was being fired as maitre'd because she was pregnant.
Paul H. Aloe, an attorney for Odeon owner Keith McNally, denied the allegations.
He said Ms. Levine had never been fired, although she had stopped working at the restaurant.
"The Odeon made a written offer to Marcia Levine on July 10 to return to work as the maitre'd, at the same pay, same hours and with back pay accrued," he said.
Mr. Aloe said the Odeon "has no policy against hiring pregnant people."
LAWYERS IN Texas's biggest bank-fraud case want out in face of retrial.
Lawyers representing five of the seven defendants in the case say their clients can no longer afford their services.
The trial of the case lasted seven months and ended in September with a hung jury.
The defendants were indicted two years ago on charges that they conspired to defraud five thrifts of more than $130 million through a complicated scheme to inflate the price of land and condominium construction along Interstate 30, east of Dallas.
The defense lawyers, three of whom are solo practitioners, say they can't afford to put their law practices on hold for another seven-month trial.
Some of the lawyers say they would continue to represent their clients if the government pays their tab as court-appointed lawyers.
Assistant U.S. Attorney Terry Hart of Dallas says the government will oppose any efforts to bring in a new defense team because it would delay a retrial.
FEDERAL JUDGE ALCEE HASTINGS of Florida, facing impeachment, received an unanticipated boost yesterday.
Sen. Arlen Specter (R., Pa.) urged acquittal of the judge in a brief circulated to his Senate colleagues during closed-door deliberations.
Among other things, the brief cited insufficient evidence.
Sen. Specter was vice chairman of the impeachment trial committee that heard evidence in the Hastings case last summer.
A former prosecutor and member of the Senate Judiciary Committee, Sen. Specter is expected to exercise influence when the Senate votes on the impeachment today.
RICHMOND RESIGNATIONS:
Six partners in the Richmond, Va., firm of Browder, Russell, Morris & Butcher announced they are resigning.
Five of the partners -- James W. Morris, Philip B. Morris, Robert M. White, Ann Adams Webster and Jacqueline G. Epps -- are opening a boutique in Richmond to concentrate on corporate defense litigation, particularly in product liability cases.
The sixth partner, John H. OBrion, Jr., is joining Cowan & Owen, a smaller firm outside Richmond.
LAW FIRM NOTES:
Nixon, Hargrave, Devans & Doyle, based in Rochester, N.Y., has opened an office in Buffalo, N.Y. . . .
Mayer, Brown & Platt, Chicago, added two partners to its Houston office, Eddy J. Roger Jr., and Jeff C. Dodd. . . .
Copyright specialist Neil Boorstyn, who writes the monthly Copyright Law Journal newsletter, is joining McCutchen, Doyle, Brown & Enersen.
New York Times Co.'s third-quarter earnings report is reinforcing analysts' belief that newspaper publishers will be facing continued poor earnings comparisons through 1990.
The publisher was able to register soaring quarter net income because of a onetime gain on the sale of its cable-TV system.
However, operating profit fell 35% to $16.4 million.
The decline reflected the expense of buying three magazines, lower earnings from the forest-products group, and what is proving to be a nagging major problem, continued declines in advertising linage at the New York Times, the company's flagship daily newspaper.
In composite trading on the American Stock Exchange, New York Times closed at $28.125 a share, down 37.5 cents.
Analysts said the company's troubles mirror those of the industry.
Retail advertising, which often represents half of the advertising volume at most daily newspapers, largely isn't rebounding in the second half from extended doldrums as expected.
At the same time, newspapers are bedeviled by lagging national advertising, especially in its financial component.
Dow Jones & Co. recently reported net fell 9.9%, a reflection, in part, of continued softness in financial advertising at The Wall Street Journal and Barron's magazine.
"We expect next year to be a fairly soft year in newspaper-industry advertising," said John Morton, an analyst for Lynch, Jones & Ryan.
"Next year, earnings will hold steady, but we just don't see a big turnaround in the trend in advertising."
John S. Reidy, an analyst for Drexel Burnham Lambert Inc., said, "The Times faces the same problem of other publishers: linage is down.
It will be hard to do handstands until real linage starts heading back up."
In the quarterly report, Arthur Ochs Sulzberger, New York Times Co. chairman and chief executive officer, said negative factors affecting third-quarter earnings will continue.
Analysts agreed with company expectations that operating profit will be down this year and in 1990.
Mr. Sulzberger said the scheduled opening of a new color-printing plant in Edison, N.J., in 1990 would involve heavy startup and depreciation costs.
"With the Edison plant coming on line next summer, the Times is facing some tough earnings comparison in the future," said Peter Appert, an analyst with C.J. Lawrence, Morgan Grenfell.
"But many newspapers are facing similar comparisons."
The sale of the company's cable franchise brought an after-tax gain of $193.3 million, part of which will be used to reduce debt.
The company also has a stock-repurchase plan.
Analysts said they were impressed by the performance of the company's newspaper group, which consists of the Times, 35 regional newspapers and a one-third interest in the International Herald Tribune; group operating profit for the quarter increased slightly to $34.9 million from $34.5 million on flat revenue.
Drexel Burnham's Mr. Reidy pointed out that "profits held up in a tough revenue environment.
That's a good sign when profits are stable during a time revenue is in the trough.
Investors celebrated the second anniversary of Black Monday with a buying spree in both stocks and bonds.
But the dollar was mixed.
Stock and bond investors were cheered by last month's encouragingly low inflation rate.
This news raised hopes for further interest-rate cuts.
Treasury-bond prices immediately rallied, setting the stock market rolling from the opening bell.
The Dow Jones Industrial Average, up about 60 points in mid-afternoon, finished with a gain of 39.55 points, to 2683.20.
That brought the average's cumulative gain this week to about 114 points.
Since the 1987 crash, the industrials have soared more than 54%, and the widely watched market barometer is about 4% below its record high set earlier this month.
The stock-market rally was led by blue-chip issues, but, unlike Monday's rebound, was broadly based.
Indeed, over-the-counter stocks, led by technology issues, outleaped the industrial average.
The Nasdaq Composite Index soared 7.52, or 1.6%, to 470.80, its highest one-day jump in points this year.
Many takeover-related stocks rose after news that a group obtained financing commitments for the proposed buy-out of American Medical International Inc.
Among the biggest winners were brokerage-house stocks, responding to heavy trading volume.
The government said consumer prices rose only 0.2% last month.
Economists expected twice as large an increase.
That news, plus recent signs of economic sluggishness, greatly increases pressure on the Federal Reserve to ease credit further, which in turn would be good news for stocks, investment managers say.
"I see a lot of evidence indicating a slower economy, and that means my interest-rate outlook has a downward tilt," said Garnett L. Keith Jr., vice chairman of Prudential Insurance Co. of America, one of the nation's largest institutional investors.
Fed officials probably won't drive down rates immediately, Mr. Keith said.
Despite the inflation news, several Fed officials still fear consumer-price pressures will intensify because they insist the economy is stronger than generally believed.
But Wall Street analysts expect further signs of economic weakness in government reports during the next few weeks.
If so, that will cinch the case for another shot of credit-easing within a month or so.
That, in turn, is expected to persuade banks to cut their prime lending rate, a benchmark rate on many corporate and consumer loans, by half a percentage point, to 10%.
"We're not out of the woods yet by any means," said George R. Mateyo, president and chief executive of Carnegie Capital Management Co., Cleveland.
But the economy "is slowing enough to give the Federal Reserve leeway to reduce interest rates."
But many individual investors are leery about stocks because of fresh signs of fragility in the huge junk-bond market.
Investors also are anxious about today's "witching hour," the monthly expiration of stock-index futures and options, and options on individual stocks.
This phenomenon often makes stock prices swing wildly at the end of the trading session.
In major market activity: Stock prices surged in heavy trading.
Volume on the New York Stock Exchange rose to 198.1 million shares from 166.9 million Wednesday.
Gaining Big Board issues outnumbered decliners by 1,235 to 355.
The dollar was mixed.
In New York late yesterday, it was at 141.70 yen, up from 141.45 yen late Wednesday.
But it fell to 1.8470 marks from 1.8485.
Tuesday's rout of a GOP congressional hopeful in a Mississippi district that hasn't backed a Democratic presidential candidate since Adlai Stevenson is another reminder that, at least at the federal level, political "ticket splitting" has been on the rise over the past half century.
In only one presidential election year prior to 1948 did more than 20% of the nation's congressional districts choose a different party's candidate for the White House than for the House of Representatives.
Now that percentage routinely equals a third and twice has been above 40%.
As we know, voters tend to favor Republicans more in races for president than in those for Congress.
In every presidential election over the past half century, except for the Goldwater presidential candidacy, the GOP has captured a greater percentage of the major-party popular vote for president than it has of congressional seats or the popular vote for Congress.
Prior to 1932, the pattern was nearly the opposite.
What accounts for the results of recent decades?
A simple economic theory may provide at least a partial explanation for the split personality displayed by Americans in the voting booth.
The theory relies on three assumptions:
1) Voters can "buy" one of two brands when they select their political agents -- a Republican brand that believes in the minimalist state and in the virtues of private markets over the vices of public action, and a Democratic brand that believes in big government and in public intervention to remedy the excesses attendant to the pursuit of private interest.
2) Congressional representatives have two basic responsibilities while voting in office -- dealing with national issues (programmatic actions such as casting roll call votes on legislation that imposes costs and/or confers benefits on the population at large) and attending to local issues (constituency service and pork barrel).
3) Republican congressional representatives, because of their belief in a minimalist state, are less willing to engage in local benefit-seeking than are Democratic members of Congress.
If these assumptions hold, voters in races for Congress face what in economic theory is called a prisoner's dilemma and have an incentive, at the margin, to lean Democratic.
If they put a Republican into office, not only will they acquire less in terms of local benefits but their selected legislator will be relatively powerless to prevent other legislators from "bringing home the bacon" to their respective constituencies.
Each legislator, after all, is only one out of 535 when it comes to national policy making.
In races for the White House, a voter's incentive, at the margin, is to lean Republican.
Although a GOP president may limit local benefits to the voter's particular district/state, such a president is also likely to be more effective at preventing other districts/states and their legislators from bringing home the local benefits.
The individual voter's standing consequently will be enhanced through lower taxes.
While this theory is exceedingly simple, it appears to explain several things.
First, why ticket splitting has increased and taken the peculiar pattern that it has over the past half century: Prior to the election of Franklin Roosevelt as president and the advent of the New Deal, government occupied a much smaller role in society and the prisoner's dilemma problem confronting voters in races for Congress was considerably less severe.
Second, it explains why voters hold Congress in disdain but generally love their own congressional representatives: Any individual legislator's constituents appreciate the specific benefits that the legislator wins for them but not the overall cost associated with every other legislator doing likewise for his own constituency.
Third, the theory suggests why legislators who pay too much attention to national policy making relative to local benefit-seeking have lower security in office.
For example, first-term members of the House, once the most vulnerable of incumbents, have become virtually immune to defeat.
The one exception to this recent trend was the defeat of 13 of the 52 freshman Republicans brought into office in 1980 by the Reagan revolution and running for re-election in 1982.
Because these freshmen placed far more emphasis on their partisan role -- spreading the Reagan revolution -- in national policy making, they were more vulnerable to defeat.
Fourth, the theory indicates why the Republican Party may have a difficult time attracting viable candidates for congressional office.
Potential candidates may be discouraged from running less by the congressional salary than by the prospect of defeat at the hands of a Democratic opponent.
To the extent that potential Republican candidates and their financial backers realize that the congressional prisoner's dilemma game works to their disadvantage, the Republican Party will be hindered in its attempts to field a competitive slate of congressional candidates.
Fifth, the theory may provide at least a partial reason for why ticket splitting has been particularly pronounced in the South.
To the extent that Democratic legislators from the South have held a disproportionate share of power in Congress since 1932 and have been able to translate such clout into relatively more local benefits for their respective constituencies, voters in the South have had an especially strong incentive to keep such Democrats in office.
Finally, the theory suggests why Republicans generally have fared better in Senate races than in campaigns for the House.
Since local benefit-seeking matters more and national policy making matters less in the lower chamber of Congress, this is precisely the pattern one would expect if Republicans are less willing to engage in local benefit-seeking than their Democratic counterparts.
Is there any empirical support for this theory?
Three pieces of evidence corroborate the key assumption that Democratic legislators are more willing to engage in local benefit-seeking than their Republican colleagues.
First, economists James Bennett and Thomas DiLorenzo find that GOP senators turn back roughly 10% more of their allocated personal staff budgets than Democrats do.
To the extent that the primary duty of personal staff involves local benefit-seeking, this indicates that political philosophy leads congressional Republicans to pay less attention to narrow constituent concerns.
Second, if the key assumption is valid, Democrats should have lower attendance rates on roll-call votes than Republicans do to the extent that such votes reflect national policy making and that participating in such votes takes away from the time a legislator could otherwise devote to local benefit-seeking.
This is indeed what the data indicate, particularly in the case of the House.
The Democratic House attendance rate has not exceeded the Republican House attendance rate since 1959.
Finally, as shown in the table, Democrats allocate a higher proportion of their personal staffs to district offices -- where local benefit-seeking duties matter more and national policy making activities matter less relative to Washington offices.
An examination of changes in personal staffing decisions in the Senate between 1986 and 1987 (when control of that body changed party hands), moreover, reveals that the personal staffing differences noted in the table cannot be attributed to the disproportionate control Democrats exercise, due to their majority-party status, over other resources such as committee staff.
An additional piece of evidence from the Senate: Holding other factors constant, such as incumbency advantages and regional factors, the difference between popular votes for Republican presidential and senatorial candidates in states conducting a Senate election turns out to be a positive function of how onerous the federal government's tax burden is per state (a progressive tax rate hits higher-income states harder).
Put more simply, GOP candidates for president are looked on more kindly by voters than Republican candidates for the Senate when the prisoner's dilemma is more severe.
Moreover, ticket splitting appears to take the same peculiar pattern at the state government level as it does at the federal level.
State government is more typically split along Republican-governor/Democratic-legislature lines than the reverse.
A cross-state econometric investigation, furthermore, reveals that, holding other factors constant, the difference between a state's major-party vote going to the Republican gubernatorial candidate and the Republican share of the lower state house is a positive function of the state tax rate.
In sum, at both the federal and state government levels at least part of the seemingly irrational behavior voters display in the voting booth may have an exceedingly rational explanation.
Mr. Zupan teaches at the University of Southern California's business school.
A House-Senate conference approved a nearly $17 billion State, Justice and Commerce Department bill that makes federal reparations for Japanese-Americans held in World War II internment camps a legal entitlement after next Oct. 1.
The measure provides no money for the promised payments until then, but beginning in fiscal 1991, the government would be committed to meeting annual payments of as much as $500 million until the total liability of approximately $1.25 billion is paid.
The action abandons earlier efforts to find offsetting cuts to fund the payments, but is widely seen as a more realistic means of expediting reparations first authorized in 1988.
The action came as Congress sent to President Bush a fiscal 1990 bill providing an estimated $156.7 billion for the Departments of Labor, Education, Health and Human Services.
Final approval was on a 67-31 roll call in the Senate, which sets the stage for a veto confrontation with Mr. Bush over the issue of publicly financed abortions for poor women.
Reversing an eight-year federal policy, the measure supports Medicaid abortions in cases of rape and incest, but Mr. Bush has so far refused to support any specific exemption beyond instances in which the mother's life is in danger.
Mr. Bush's veto power puts him a commanding position in the narrowly divided House, but a vote to override his position could well pick up new support because of the wealth of health and education programs financed in the underlying bill.
The measure before the conference yesterday funds the Departments of State, Justice and Commerce through fiscal 1990.
An estimated $1.32 billion is provided for next year's census, and negotiators stripped a Senate-passed rider seeking to block the counting of illegal aliens.
Elsewhere in the Commerce Department, nearly $191.2 million is preserved for assistance programs under the Economic Development Administration.
And in a footnote to the fall of House Speaker James Wright this year, the conference voted to rescind $11.8 million in unspent EDA funds for a Fort Worth, Texas, stockyards project that figured in ethics charges against the former Democratic leader.
Fiscal pressures also forced the adoption of new fees charged by federal agencies, and an 18% increase in the Securities and Exchange Commission's budget would be financed entirely by an added $26 million in filing fees.
In an unprecedented step, the measure anticipates another $30 million in receipts by having the Federal Bureau of Investigation charge for fingerprint services in civil cases -- a change that is almost certain to increase Pentagon costs in processing personnel and security clearances.
The bill doesn't include an estimated $1.9 billion in supplemental anti-drug funds for Justice Department and law-enforcement accounts that are still in conference with the House.
But yesterday's agreement would make it easier for state governments to handle the promised aid by deferring for one year a scheduled 50% increase in the required state matching funds for law-enforcement grants.
Similarly, the measure adjusts the current funding formula to promise smaller states such as New Hampshire and Delaware a minimum allocation of $1.6 million each in drug grants, or three times the current minimum.
The odd mix of departments in the bill makes it one of the more eclectic of the annual appropriations measures, and the assorted provisions attached by lawmakers run from $1.5 million for a fish farm in Arkansas to a music festival in Moscow under the United States Information Agency.
Lawmakers scrapped all of a $7.4 million State Department request for the 1992 Expo in Seville, Spain, but agreed elsewhere to $15,000 for an oil portrait of former Chief Justice Warren Burger.
Senate Commerce Committee Chairman Ernest Hollings (D., S.C.), who also chairs the Senate appropriations subcommittee for the department, attached $10 million for an advanced technology initiative, including work on high-definition television.
His Republican counterpart, Sen. Warren Rudman (R., N.H.), has used his position to wage a legislative war with the conservative board of the Legal Services Corp.
An estimated $321 million is provided to maintain the program, but Mr. Rudman also succeeded in attaching language seeking to curb the authority of the current board until new members are confirmed.
The effective date of any new regulations by the current board would be delayed until Oct. 1 next year, and the bill seeks to reverse efforts by the corporation to cut off funds to service organizations such as the Food Research and Action Center.
The bill also provides $620.5 million to meet U.S. contributions to international organizations and $80 million for peace-keeping activities.
Both accounts reflect significant increases from fiscal 1989, although the amount for peace-keeping shows a 27% cut from the administration's request.
Mercury Savings & Loan Association said it retained Merrill Lynch Capital Markets as its lead investment banker to advise it regarding a possible sale or other combination of the Huntington Beach, Calif., thrift.
Mercury, which has assets of more than $2 billion and 24 branches in California, said the action to improve its regulatory capital position is related directly to new capital requirements mandated by recently adopted federal legislation.
Mercury also said it extended its two-year advisory relationship with Montgomery Securities of San Francisco.
Mercury's stock closed yesterday at $4.875, unchanged in composite trading on the New York Stock Exchange.
Watching Congress sweat and grimace through its annual budget labors, fighting the urge to spend more, we're reminded of those late-night movies in which the anguished serial killer turns himself in to police and says, "Stop me before I kill again."
The Members know they're doing wrong, but they need help to restrain their darker compulsions.
Arkansas Democrat David Pryor spilled his guts on the Senate floor the other day after he'd joined the Finance Committee's early-morning pork-barrel revels: "I must tell you . . .
I come to the floor tonight as one who ended up with a busload of extraneous matter.
It was nothing more or nothing less than a feeding frenzy."
He was turning himself in.
"Frankly, as I was walking back to get in my car, I heard many, many people . . . opening champagne bottles and celebrating individual victories that some of us had accomplished in getting our little deal in the tax bill and winking at this person for slipping this in," he said.
"As I was driving home, I did not feel very good about myself."
We can applaud Mr. Pryor's moment of epiphany, even as we understand that he and his confreres need restraint lest they kill again.
A good place to start the rehabilitation is a "legislative line-item veto" bill now being offered by Indiana Senator Dan Coats.
The Coats bill, which already has 32 Senate co-sponsors, isn't a pure line-item veto because it would apply only to spending bills.
Instead it's a form of "enhanced rescission," giving a President a chance to rescind, or strike, specific spending items that just go too far.
Under the proposal, a President would have a chance twice each year to return a package of "rescissions" to the Hill -- once when he proposes his budget and again after Congress disposes.
Congress would have 20 days to reject the package with a 50% majority, but then a President could veto that rejection.
Congress would then need the usual two-thirds majority to override any veto.
The proposal would restore some discipline erased from the budget process by the 1974 Budget "Reform" Act.
Before 1974, a President could "impound," or refuse to spend, funds appropriated by Congress.
Presidents Kennedy and Johnson were both big users of the impoundment power, but Congress saw its chance against a weakened President Nixon and stripped it away.
Today a President can still send up spending rescissions, but they're meaningless unless Congress has a guilty conscience and changes its mind.
This is like asking foxes to feel remorse about chickens, and naturally rescissions are almost never approved.
In 1987, President Reagan sent 73 rescissions back to the Hill, but only 3% of the spending total was approved by Congress.
Senator Coats's proposal would let the proposed spending cuts take place automatically unless Congress acts.
The Members could still try to serve their constituents with special-interest goodies, but the police (in the form of a President) would be there with a straitjacket if they really get crazy, as they do now.
Mr. Coats plans to offer his proposal as an amendment to a bill to raise the federal debt limit before the end of the month.
President Bush has endorsed the idea, and at least 50 sitting Senators have voted to support enhanced rescission authority in the past.
We're told Senator Pryor isn't yet a co-sponsor, but if he and his colleagues are serious about kicking their compulsions, they'll sign up.
Business and civic operations lurched back toward normalcy here as congressional officials estimated that the price tag for emergency assistance to earthquake-ravaged California would total at least $2.5 billion.
"That is a minimum figure, and I underscore minimum," said House Speaker Thomas Foley (D., Wash.) after conferring with California lawmakers.
"It's impossible to put an exact figure on it at this time."
The Office of Management and Budget has begun looking into legislation to provide more funds for earthquake repairs.
And California's 45-member delegation in the House is expected to propose that emergency funds be added to a stop-gap spending bill that the House Appropriations Committee is to consider Monday.
For the most part, major corporations' headquarters and plants were unaffected or only slightly damaged by Tuesday's earthquake, which registered 6.9 on the Richter scale.
One of the last big employers in the Silicon Valley to report in, Seagate Technology, said it expects to be back at full strength Monday.
The day before the quake, Seagate completed three days of emergency training and drills.
Echoing the response of almost all big corporations in the Bay Area, Don Waite, Seagate's chief financial officer, said, "I wouldn't expect this to have any significant financial impact."
The city's recovery from the earthquake was uneven.
Banks indicated they were operating at greater than 90% of their usual capacity, but a Nob Hill hotel said tourists had fled, leaving the previously full hotel with an 80% vacancy rate.
City crews tallied the wreckage to buildings, but lacked a clear sense of how gravely transportation arteries were disabled.
Among the city's banks, Bank of America said all but eight of its 850 branches were open.
The closed branches, in San Francisco, Hayward, Santa Clara and Santa Cruz, sustained structural damage.
Power failures kept just seven of its 1,500 automated-teller machines off-line.
Securities-trading operations were moved to Bank of America's Concord office, and foreign-exchange trading operations were shifted to Los Angeles, the bank said.
Wells Fargo & Co. said its Emergency Operations Committee -- which met all night Tuesday -- moved its global-funds transfer system to El Monte, Calif., 500 miles to the south.
Only five of 496 branches statewide remain closed, while 23 of 600 automated-teller machines remained out of order.
The most extensive damage was in small towns near the quake's epicenter, 80 miles south of San Francisco.
Santa Cruz County estimates total damage at nearly $600 million.
Santa Clara County has a running total so far of $504 million, excluding the hard-hit city of Los Gatos.
Oakland officials were still uncertain about the magnitude of structural damage late yesterday; a section of I-880, a twotiered highway, collapsed in Oakland, causing a majority of the deaths resulting from the quake.
San Francisco Mayor Art Agnos estimated that damages to the city total $2 billion.
That includes dwellings in the ravaged Marina district that must be demolished, peeled business facades south of Market Street, and houses in the city's outer Richmond district that were heaved off their foundations.
Many streets and sidewalks buckled, and subterranean water mains and service connections ruptured.
The federal funds would go to a range of programs, including the Federal Emergency Management Agency, highway construction accounts and the Small Business Administration, according to Rep. Vic Fazio (D., Calif.).
FEMA, which coordinates federal disaster relief, is already strapped by the costs of cleaning up after Hurricane Hugo, which hit the Carolinas last month.
It is likely to get as much as $800 million initially in additional funds, and eventually could get more than $1 billion, according to Mr. Fazio, a member of the House Appropriations Committee.
White House spokesman Marlin Fitzwater said there is enough money on hand to deal with immediate requirements.
The Bush administration has at its disposal $273 million in funds remaining from the $1.1 billion Congress released for the cleanup after Hurricane Hugo.
"We feel we have the money necessary to handle the immediate, short-term requirements," Mr. Fitzwater said.
He added that the Office of Management and Budget, the Transportation Department and other agencies are "developing longer-term legislation" that should be ready soon.
Much of the cost of cleaning up after the earthquake will involve repairing highways and bridges.
California lawmakers are seeking changes in rules governing the federal highway relief program so more money can be made available for the state.
Some things can't be repaired.
The Asian Art Museum in Golden Gate Park reports $10 million to $15 million in damage, including shattered porcelains and stone figures.
Its neighbor, the De Young Museum, totaled $3 million to $5 million in structural damage and shattered sculpture.
The city's main library is closed because of fissures that opened in its walls, and marble facings and ornamental plaster at the Beaux Arts City Hall broke off in the temblor.
The ground along the Embarcaderothe street that skirts the city's eastern boundary and piers -- dropped six inches after the quake, wreaking major damage to at least one of the piers.
At San Francisco International Airport, shock waves wrecked the control tower, knocking down computers and shattering glass.
Offices of the city's Rent Board were destroyed.
Mayor Agnos's $2 billion estimate doesn't include damage to freeway arteries leading into the city, some of which remained closed.
A major chunk of the $2 billion is expected to be eaten up by overtime for city workers deployed in the emergency, said a spokesman for Mr. Agnos.
"All of the city's $5.9 million emergency reserve was spent in the first 24 hours" on overtime salaries, he said.
Insurers struggled to to get a firm grasp on the volume of claims pouring into their offices.
At Fireman's Fund Corp., a spokesman said 142 claims were received in the first 24 hours after the quake, and the company is braced for as many as 5,000 claims from its 35,000 residential and 35,000 business policyholders in the affected area.
"Claims range from a scratched fender -- and there were an awful lot of cars damaged in this -- to a major processing plant," a spokesman said.
"We're delivering a check for $750,000 to an automotive business in Berkeley that burned on Tuesday."
Fireman's is part of a $38 million syndicate that supplies business interruption insurance to the city on the Bay Bridge, which must pay employees during the three weeks or more it is expected to be out of service and deprived of toll income.
California lawmakers want to eliminate temporarily a $100 million cap on the amount of federal highway relief for each state for each disaster, as well as a prohibition on using the emergency highway aid to repair toll roads.
In addition, under the highway-relief program, the federal government provides 100% of emergency highway aid for only the first 90 days of a repair effort.
After that, the federal share diminishes.
For interstate highways, the federal share normally would drop to 90% of the cost of repairs, and the state would have to pick up the remainder of the cost.
But lawmakers want to extend the period for 100% federal funding for several months.
Those changes also would apply to two areas hit hard by Hurricane Hugo -- South Carolina and the U.S. Virgin Islands, according to an aide to Rep. Fazio.
Meanwhile, the FEMA announced a toll-free telephone number (800-462-9029) to expedite service to victims of the earthquake.
Lines will be available 24 hours a day to take applications for such disaster relief as temporary housing and emergency home repairs by phone.
Transportation officials are expecting utter traffic pandemonium beginning Monday and growing worse over the next several weeks.
Some 250,000 cars normally cross the closed Bay Bridge between Oakland and San Francisco daily.
Officials say it is clear that alternate routes can't handle the overflow.
The state is calling in a flotilla of navy landing vessels and other boats to expand ferry service across the bay and hopes to add numerous new bus routes and train departures to help alleviate the traffic problem.
Moreover, state officials are urging freight haulers to bypass many of the area's main highways and to travel late at night or during predawn hours.
Even so, "We're looking for chaos," said George Gray, a deputy district director at the California Department of Transportation.
"If there's any way you can do it, you ought to go to Idaho and go fishing for a while."
Most of San Francisco's tourists and business travelers already have left -- despite hotel's offers of rate cuts.
"Everyone left," said Peter Lang, reservations manager of the Mark Hopkins Hotel.
The Westin St. Francis hotel, which survived the 1906 earthquake and fire, currently is less than 50% occupied.
"We still have our die-hard baseball fans," a spokesman said.
"One lady from New York said she's not going home until the {World Series} is over."
Gerald F. Seib and Joe Davidson in Washington contributed to this article.
Is an American Secretary of State seriously suggesting that the Khmer Rouge should help govern Cambodia?
Apparently so.
There are no easy choices in Cambodia, but we can't imagine that it benefits the U.S. to become the catalyst for an all-too-familiar process that could end in another round of horror in Cambodia.
Now that Vietnam appears to have pulled out its occupation army, the State Department is talking again about accepting an "interim" coalition government in the Cambodian capital of Phnom Penh.
The coalition would include the current Vietnamese-backed Hun Sen regime, the two non-communist resistance groups led by Son Sann and Prince Sihanouk, and the Khmer Rouge.
The aim would be to end the guerrilla war for control of Cambodia by allowing the Khmer Rouge a small share of power.
The State Department says that any Khmer Rouge participation would have to be "minimal."
The usual problem with including communists in "interim" coalition governments is that their ideology and methods require they squeeze out everyone else.
Recall that Nicaragua's Sandinistas came into Managua as partners in a coalition government with anti-Somoza moderates.
Within two years, the moderates were exiled or in prison, Nicaragua had gone communist, and the Sandinistas were building one of the biggest armies in Latin America and threatening their neighbors.
In Laos, when the Western powers bowed to pressure for such a coalition it turned out they were opening the door to communist domination.
Even Mao Tse-tung's China began in 1949 with a partnership between the communists and a number of smaller, non-communist parties.
What complicates the scene in Cambodia is that the current regime is already communist, as are its Vietnamese overseers back in Hanoi, as are the Khmer Rouge -- who are the strongest of the three guerrilla groups.
It's not clear which crew of communists might prevail in a coalition government, but the one good bet is that the non-communists would disappear.
That would leave Hun Sen and the Khmer Rouge.
The Hun Sen regime has sent thousands of conscript laborers to die of malaria and malnourishment while building Cambodia's equivalent of the Berlin Wall near the Thai border.
The Khmer Rouge, however, carry an unsurpassed record for Cambodian tyranny.
These utopians caused the deaths -- by starvation, disease or execution -- of well over one million Cambodians.
The Cambodian horror was so bad that the Vietnamese occupation in 1978 was a perverse form of relief.
The world might want to believe that the Khmer Rouge can't still be such bad guys, just as in the late 1970s it was reluctant to credit the reports of genocide then taking place.
But there is no solid evidence that the Khmer Rouge have changed.
Some of our sources in Thailand say the notorious old Khmer Rouge leader, Pol Pot, has been holed up this summer in Khmer Rouge camps near the Thai-Cambodian border.
So it's difficult to swallow the notion that Mr. Baker is willing to accept conditions that would help the Khmer Rouge set up shop again in Phnom Penh.
True, Prince Sihanouk backs the idea of such a coalition, at least for this week.
But Prince Sihanouk has backed all sorts of ideas over the years, and done rather better by himself than by Cambodia.
Nor should the U.S. worry much about offending China, which still aids the Khmer Rouge.
It's time the State Department recognized that China does not play by gentlemen's rules.
For the U.S. to lend even the slightest support to the most infamous killers on Indochina's bleak scene could only disturb America's allies elsewhere.
It would be entirely rational for communist insurgents in countries such as the Philippines or Peru to conclude the following: Fight viciously enough and the U.S., under the banner of pragmatism, might eventually help negotiate your way to victory.
U.S. diplomacy has done it before, and it will likely do it again.
The administration and Congress have lately tangoed around the idea of sending military aid to Cambodia's non-communists.
But now the possibility of "diplomatic movement" (Vietnam's withdrawal, the Baker initiative) has put that plan on hold, with the proviso that if the going got rough, the U.S. would then rearm the opposition.
Why the timidity?
At the very least, the odds are heavily weighted against the prospects of preventing the Khmer Rouge and Cambodia's communists from ultimately moving against their opponents.
When that day comes, it would be particularly awful to know that the United States sat on military aid and deprived these people of the means to settle their fate with at least a little honor.
Michael F. Harris, 53, was named executive vice president, North America, for the Financial Times, the business newspaper published by this company that also has interests in book publishing, fine china, oil services and investment banking.
Mr. Harris had been vice president for the newspaper's advertising in New York.
He takes additional responsibility for newspaper sales and distribution of the Financial Times in North America.
Laurance V. Allen, 44, who had been director for North America, resigned to pursue other business interests and do some consulting.
Cipher Data Products Inc. posted a net loss of $14.2 million, or 97 cents a share, for its fiscal first quarter, compared with net income of $3.8 million, or 27 cents a share, a year ago.
Revenue for the quarter ended Sept. 30 fell 20%, to $41.3 million from $51.9 million in the year-earlier period.
Cipher Data, a San Diego maker of magnetic tape peripherals and optical disc drives, said the loss included reserves of $3.8 million related to a corporate restructuring.
The restructuring calls for a 24% reduction in its work force over the next two months, affecting about 525 jobs, Cipher Data said.
It is eliminating the positions of president and chief operating officer, formerly held by Edward L. Marinaro.
Cipher Data said Mr. Marinaro consequently has resigned from those posts and from the company's board.
Mr. Marinaro couldn't immediately be reached for comment.
FileNet Corp., Costa Mesa, Calif., said it expects to report a third-quarter loss of about $1.8 million, or 17 cents a share, because of a $2.5 million reserve to be taken against potential losses on a contract with the state of California.
Revenue is estimated at $18.6 million.
The maker of document image processing equipment said the state procurement division had declared FileNet in default on its contract with the secretary of state uniform commercial code division.
FileNet said it doesn't believe the state has a valid basis of default and is reviewing its legal rights under the contract, but said it can't predict the outcome of the dispute.
The disagreement centers on testing deadlines and other issues involving a FileNet system installed earlier this year.
State officials couldn't be reached for comment late yesterday.
FileNet noted that it had cash and marketable securities totaling $22.5 million on Sept. 30, and stockholders' equity is $60.1 million.
The company made the announcement after the close of the markets, where its stock finished at $10.75, up 25 cents, in over-the-counter trading.
Clinton Gas Systems Inc. said it received a contract from Timken Co., Canton, Ohio, to manage the natural gas purchasing, scheduling and transportation activities for Timken's seven Ohio and two Pennsylvania plants.
Clinton and Timken agreed not to disclose the value of the contract.
Timken, a producer of bearings and specialty steel, already buys gas from Clinton.
Clinton said in Columbus, Ohio, that its Clinton Gas Marketing unit wants to line up a number of such gas management contracts.
Manufacturers frequently don't have anyone who is a specialist in natural gas, Clinton said, and a specialist such as Clinton can save them substantial amounts of money.
The scene opens with pinstripe-suited executives -- Easterners, obviously -- glued to cellular phones and hightailing it out of town in chauffeur-driven limousines.
"The carpetbaggers," snorts the narrator with a Texas twang, "have packed their bags and went."
But, he continues, "They're forgetting we're all Texans.
The Lone Star is on the rise again."
As the music swells, viewers discover they're watching a commercial for Lone Star Beer, the pride of Texas, a product of G. Heileman Brewing Co., a La Crosse, Wis., unit of Bond Corp.
As the ad's tone implies, the Texas spirit is pretty xenophobic these days, and Lone Star isn't alone in trying to take advantage of that.
From Chevy trucks to Lipton iced tea to a host of battling banks, the state has been inundated with broadcast commercials and print advertising campaigns celebrating Texans and castigating outsiders.
While advertisers have long appealed to Texans' state pride and prejudices, the latest trend has been sparked, in part, by the state's recent hard economic times.
That has taken some of the swagger out of natives who like to brag that Texas is the only state that was once a nation, but it has increased their legendary resentment of outsiders.
In the past, writes Houston Chronicle columnist Jim Barlow, outlanders were accepted only after passing a series of tests to prove they had the "right" Texas attitudes and "of course they had to be dipped for parasites."
There is no small irony in the fact that some of the most-jingoistic advertising comes courtesy of -- you guessed it -- outsiders.
Lone Star's Bond Corp. parent, for instance, hails from Perth, Australia.
North Carolinians, New Yorkers, Californians, Chicagoans and Ohioans own Texas banks.
All kinds of landmark Texas real estate has been snapped up by out-of-staters.
Even the beloved Dallas Cowboys were bought by an Arkansas oil man.
"Texas has lost its distinctiveness, leaving Texans with a hunger to feel proud about themselves," says Stephen Klineberg, a sociology professor at Rice University, Houston.
"This plays right into the hands of the advertising agencies."
For example, the iced-tea radio campaign for Thomas J. Lipton Co., an Englewood Cliffs, N.J., unit of Anglo-Dutch Unilever Group, emphatically proclaims: "Real Texans do not wear dock-siders -- ever.
Real Texans don't play paddleball, at least I hope not.
This is football country.
And another thing -- real Texans drink Lipton iced tea."
In developing that theme at Interpublic Group of Cos.' Lintas: New York unit, account supervisor Lisa Buksbaum says she made a "couple of phone calls" to Dallas ad friends and reported her "findings" to a team of writers.
Her findings?
"You know," she says, "stereotypical stuff like armadillos, cowboys and football."
Not exactly sophisticated market research, but who cares as long as the campaigns work.
And ad agencies insist that they do.
Stan Richards of Richards Group Inc., Dallas, tells of the Texan who saw the agency's tear-jerking commercial for First Gibraltar Bank F.S.B. -- complete with the state's anthem -- and promptly invested $100,000 in the thrift's CDs.
Never mind that First Gibraltar is one of the failed Texas thrifts taken over by outsiders -- in this case, an investor group headed by New York financier Ronald Perelman.
The North Texas Chevy Dealers recently had a record sales month after the debut of ad campaign that thumbs its nose at elite Easterners.
And deposits at NCNB Texas National Bank, a unit of NCNB Corp., Charlotte, N.C., have increased $2 billion since last year after heavy advertising stressing commitment to Texas.
"Obviously, pride sells in Texas," says a spokeswoman for Bozell Inc., Omaha, Neb., which represents
The ad campaigns usually follow one of three tracks -- stressing the company's `Texasness,' pointing out the competition's lack thereof, or trying to be more Texan than Texans.
Ford trucks may outsell Chevy trucks in places like "Connecticut and Long Island," sniffs a commercial for Chevrolet, a division of General Motors Corp.
The commercial, created by Bateman, Bryan & Galles Inc., of Dallas, adds derisively: "I bet it takes a real tough truck to haul your Ivy League buddies to the yacht club."
Because they want a truck that is "Texas tough," the commercial concludes, "Texans drive Chevy."
J.C. Penney Co., which relocated from New York to suburban Dallas two years ago, gently wraps itself in Texas pride through a full-page magazine ad: "Taking the long-range view to conserve what is of value to future generations is part of the Lone Star lifestyle," the ad reads.
"It's part of our style, too."
According to several ad-agency sources, newcomers to the Texas banking market are spending a combined $50 million this year to woo Texans.
Meanwhile, surviving Texas banking institutions are busily pitching themselves as the only lenders who truly care about the state.
The most-strident anti-outsider sentiment among bankers comes from the Independent Bankers Association of Texas, although it's hard to tell from previews of the $5 million "The I's of Texas" TV campaign.
Commercials will highlight heart-rending scenes of Texas and chest-swelling, ain't-it-great-to-be-a-Texan music.
Supporting banks will sign a "Texas Declaration of Independents."
But in introductory material for the campaign, the trade group urges members to "arm" for a "revolution" against big, out-of-state bank-holding companies.
A video sent to association members, featuring shots of the Alamo, cowboys, fajitas and a statue of Sam Houston, doesn't mince words.
"Texans can sniff a phony a mile away," the narrator warns outsiders.
"So, don't come and try to con us with a howdy y'all or a cowboy hat."
Young & Rubicam's Pact
Young & Rubicam, fighting charges that it bribed Jamaican officials to win the Jamaica Tourist Board ad account in 1981, said it will no longer create the tourist board's advertising.
In a statement, Alex Kroll, Young & Rubicam's chairman, said "under the present circumstances {we} have agreed that it is prudent to discontinue that contract."
Young & Rubicam has pleaded innocent to the charges.
The board wouldn't comment on its impending search for a new ad agency to handle its estimated $5 million to $6 million account.
Ad Notes. . . .
NEW ACCOUNT:
Sunshine Biscuits Inc., Woodbridge, N.J., awarded its estimated $5 million account to Waring & LaRosa, New York.
The account had been at Della Femina McNamee WCRS, New York.
MEDIA POLICY:
MacNamara Clapp & Klein, a small New York shop, is asking magazine ad representatives to tell it when major advertising inserts will run in their publications.
It says it may pull its clients' ads from those magazines.
COKE ADS:
Coca-Cola Co. said it produced a new version of its 1971 "I'd like to teach the world to sing" commercial.
The ad is part of Classic Coke's 1990 ad campaign, with the tag line, "Can't beat the Real Thing."
Basketball star Michael Jordan and singer Randy Travis have also agreed to appear in ads.
Dell Computer Corp., squeezed by price pressure from its larger competitors and delays in its new product line, said its per-share earnings for fiscal 1990 will be half its previous forecasts.
Although the personal computer maker said it expects revenue to meet or exceed previous projections of $385 million for the year ending Jan. 28, 1990, earnings are expected to be 25 cents to 35 cents a share, down from previous estimates of 50 cents to 60 cents.
Earnings for fiscal 1989 were $14.4 million, or 80 cents a share, on sales of $257.8 million.
Results for the third quarter ending Oct. 31, are expected to be released the third week of November, according to Michael Dell, chairman and chief executive officer.
Mr. Dell said he doesn't expect a loss in either the third or fourth quarter, but said third-quarter earnings could be as low as four cents a share.
In the third quarter last year, Dell had net income of $5 million, or 26 cents a share, on sales of $75.2 million.
Mr. Dell attributed the earnings slide to new product delays, such as a laptop scheduled for September that won't be introduced until early November.
Some delays have been caused by a shortage of micoprocessors -- notably Intel Corp.'s newest chip, the 486 -- but others apparently have been caused by Dell's explosive growth and thinly stretched resources.
"They've got a lot of different balls in the air at the same time," observes Jim Poyner, a computer securities analyst with Dallas-based William K. Woodruff & Co.
Mr. Dell, meanwhile, concedes the company was "definitely too optimistic" in its expectations.
Product delays, however, have left Dell buffeted by harsher competition in its bread-and-butter line of desktop computers, as powerhouse competitors Compaq Computer Corp. and International Business Machines Corp. price their PCs more aggressively.
The result has been thinner margins, which have been further eroded by an ambitious research and development effort and rapid overseas expansion.
Analyst James Weil of the Soundview Financial Group believes Dell's response has been to place increased emphasis on product quality, "in an effort to rise above some of that price pressure."
But that has been the key to Compaq's success, he adds, whereas Dell carved out its market niche as a direct seller of low-cost but reliable computers -- and it might be too late in the game for a shift in strategy.
In national over-the-counter trading, Dell closed yesterday at $6 a share, down 87.5 cents.
TransAtlantic Holdings PLC, a British-based, South African-controlled financial services investment group, and France's Societe Centrale Union des Assurances de Paris reached an accord effectively reducing chances of an unfriendly takeover for Sun Life Assurance Society PLC.
In a joint statement, the two companies, whose combined holdings equal 52.7% of Sun Life's ordinary shares, said their agreement is aimed at reducing "the uncertainty and instability for Sun Life that has resulted from two major shareholders owning" a controlling interest in the company.
TransAtlantic, whose Transol Investments Ltd. unit owns the largest minority stake in Sun Life, has agreed not to make a takeover bid for the British life insurer without the prior consent of the French company, known as UAP.
In return, the agreement would force UAP to buy TransAtlantic's 29.8% holding in Sun Life or sell its 22.9% stake to TransAtlantic at a price set by Transatlantic.
Pride Petroleum Services Inc. said it agreed to buy well-servicing assets of two companies and expects to report higher third-quarter revenue and earnings.
In the year-earlier quarter, the well-servicing contractor had net income of $319,000, or 3 cents a share, on revenue of about $15 million.
Results for the earlier quarter included a $100,000 restructuring charge.
Separately, the Houston concern said it signed letters of intent for the cash and stock purchases of a total of 29 well-servicing rigs from two concerns located in New Mexico and California.
It didn't disclose specifics but said it expects to complete the purchases by Nov. 1.
Schlumberger Ltd., New York, reported third-quarter net income edged up as growth in its oil-field services sector offset a decline in interest income.
The lower interest income occurred because Schlumberger spent $1.2 billion buying back its stock last year.
Net for the oil-field services and electronic measurements and systems concern rose to $114.2 million, or 48 cents a share, from $112.2 million, or 42 cents a share, a year earlier.
Per-share earnings advanced 14% because of the buy-back.
Revenue declined 6.3% to $1.11 billion from $1.18 billion.
But excluding businesses acquired or sold, revenue was flat at about $1.24 billion.
Nine-month net fell 9.5% to $323.4 million, or $1.36 a share, from $357.2 million, or $1.32 a share, a year earlier.
Revenue dropped 5.4% to $3.48 billion from $3.68 billion.
This year's nine-month results include gains of $13 million, or five cents a share, from the sale of Schlumberger's defense systems business, and $22 million, or nine cents a share, from an award by the IranU.S. Claims Tribunal.
The year-earlier nine months include a gain of $35 million, or 13 cents a share, from sale of the company's Electricity Control & Transformers division.
NEW ENGLAND CRITICAL CARE Inc. offered $35 million in convertible subordinated debentures through Morgan Stanley & Co. and Prudential-Bache Capital Funding.
The debentures, due in 2014, have a coupon of 7 3/4%, payable semiannually.
The debentures may be converted into common stock of the Westborough, Mass., home health care concern at $52.50 a share.
Proceeds will be used for working capital and general corporate purposes, including expansion of the company's operations.
The French building group Dumez S.A. said profit jumped 70% in the first half of 1989, partly on the strength of nonrecurring gains from a share issue by its Canadian unit.
Dumez said group profit after payments to minority interests rose to 252 million francs ($40.1 million) from 148 million a year earlier.
Revenue rose 40% to 13.32 billion francs from 9.53 billion.
The group noted that 75 million francs of the advance reflected a one-time gain from the June offering by its United Westburne unit in Canada.
It didn't say if its year-earlier results were influenced significantly by nonrecurring elements.
For all of 1988, Dumez had group profit of 452 million francs after payment to minority interests.
Revenue was 21.98 billion francs.
The group hasn't forecast full-year earnings for 1989, although it said that its first-half results aren't a good indication because of one-time elements and the seasonal nature of its operations.
Tuesday's earthquake will depress local real-estate values in the short term and force companies to reconsider expanding in or relocating to the Bay Area and California, real-estate and relocation specialists said.
Few specialists said they expect the quake to have much of an effect on most California property values.
But real-estate experts and brokers said the quake undoubtedly will drag down prices in neighborhoods built on less stable ground, especially in the Bay Area.
"California prices were already coming down.
This isn't going to help," said Kenneth T. Rosen, chairman of the Center for Real Estate and Urban Economics at the University of California at Berkeley.
State housing prices, at a median $201,028, have declined in recent months because of potential buyers' inability to afford homes.
Mr. Rosen, among others, suggested that the quake, the strongest since the 1906 temblor that struck San Francisco, will in the short term create a two-tier price system for quake-prone communities, with dwellings built on sturdy ground likely to demand higher prices.
One San Francisco neighborhood likely to test Mr. Rosen's theory soon is the city's fashionable Marina district, which boasts some of the highest home prices in the state.
The district, built on landfill, suffered heavy quake damage, including collapsed buildings.
Yesterday, the city demolished two dwellings in the district because of severe structural damage and said as many as 19 of the district's 350 dwellings might have to be razed.
Brokers agreed with the two-tier price theory.
"My gut feeling is that the Marina properties will be affected," said Grace Perkins, senior vice president at Grubb & Ellis Residential Brokerage Inc.
Neither she nor other real-estate executives and brokers could project how much less Marina properties might bring, but she said the two-tier price structure would affect prices "for a while."
Mr. Rosen said the quake will revive consumer interest in a little-publicized 1972 state law that requires brokers to disclose to potential buyers how close a property sits to a fault line.
Because of the size of the California market, few relocation specialists expect a widespread corporate flight in the quake's aftermath.
But they said the quake will force some companies to relocate or expand part or all of their operations outside the state.
"What you're going to get is 'We don't want to put all of our eggs in one basket' theory," said James H. Renzas, president of Location Management Services Inc., a Palo Alto, Calif., relocation concern.
Mr. Renzas, among others, said the quake will prod companies in certain industries, like semiconductors, computers and aerospace, to consider moving operations that involve particularly sensitive machinery to locations outside California.
Because of the quake threat, "some firms have evaluated what the cost is to shore up their buildings and compared it with the cost of building it elswehere," he said.
One Southern California aerospace firm, for example, two months ago asked Location Management to compare the costs of reinforcing its current building against earthquakes with the cost of building a new structure elsewhere.
A new dwelling would cost $21 million, Location Management found, compared with $22 million to make the present building earthquake-proof.
The company, Mr. Renzas said, hasn't yet determined what to do.
NATIONWIDE HEALTH PROPERTIES, Pasadena, Calif., said it wouldn't pay its fourth-quarter dividend, despite a 44% increase in third-quarter earnings, to $3.5 million, or 42 cents a share.
Net income included a gain of $708,000 on asset sales, the real estate investment trust said.
A year earlier, Nationwide Health earned $2.4 million, or 29 cents a share.
Revenue rose 3% to $9 million from $8.8 million.
Nationwide Health said that although it has the cash to cover the 25-cent-a-share dividend, its banks have denied the company's request to pay it because the trust hasn't met certain terms.
Nationwide Health said it has "numerous financing activities" under way to remedy the problem and will make up the dividend payment later if possible.
Aussedat Rey S.A., a French paper producer, said it concluded an agreement with Japan's Fuji Photo Film Co. that will allow Aussedat Rey to manufacture and sell thermal paper using Fuji technology.
Aussedat Rey is a leading French maker of copying and electronic printing paper.
Thermal paper is used in facsimile machines.
Terms of the agreement weren't disclosed.
Aussedat Rey's move follows similar technology-licensing agreements between Japanese producers of thermal paper and European paper groups.
W.R. Grace & Co., New York, said its earnings for the third quarter nearly doubled as a result of a $114.4 million pre-tax gain from restructuring its energy operations and other adjustments.
Net income rose to $97.9 million, or $1.15 a share, from $50.5 million, or 60 cents a share, a year earlier.
Sales increased 7% to $1.49 billion from $1.39 billion.
The gain resulted from the sale of Grace Equipment Co., the initial public offering of a one-sixth interest in Grace Energy Corp. and an adjustment in the carrying value of certain natural resource assets not part of Grace Energy.
The international specialty chemical company's earnings were hurt by an accrual for stock-appreciation rights that reflected a 19% increase in the stock price, and higher interest expenses.
Anglo American Corp. of South Africa Ltd. said the third-quarter combined profit of its six gold mines dropped 8.5% from the previous quarter.
Total net income fell to 471.6 million rand ($178.0 million) from 515.4 million rand in the June quarter.
Total gold production by all six mines rose 4% to 63,971 kilograms from 61,493 kilograms in the previous quarter.
Doman Industries Ltd. said it increased its stake in Western Forest Products Ltd. to 56% from 22%, through a two-step transaction valued at 137 million Canadian dollars ($US116.7 million).
Doman is based in Duncan, British Columbia.
The company, founded and controlled by Harbanse Doman, its chairman and president, said the purchase would make it Canada's 10th largest forest products company.
Under terms of the transaction, which was proposed in June, Doman said it acquired International Forest Products Ltd.'s 22% stake in Western Forest, and Western Forest, in a related transaction, bought back a 22% interest in the company from Fletcher Challenge Canada Ltd.
The Fletcher Challenge Canada stake was then canceled, Doman said, raising Doman's interest in Western Forest to 56%.
Doman said it was also granted an option to acquire the remaining 44% interest in Western Forest, which is currently held by two Canadian banks.
International Forest, Western Forest, and Fletcher Challenge Canada are Vancouver-based forest products concerns.
The Canadian government introduced in the House of Commons legislation to extend federal regulatory authority over provincial government-owned telephone utilities in Alberta, Saskatchewan and Manitoba.
The legislation would open the way for more telephone services and more competition in the telephone business in the three provinces, federal officials said.
The federal government initiative follows a recent Canadian Supreme Court decision that held that the major telephone companies in Alberta, Saskatchewan and Manitoba and in the Atlantic coast provinces were interprovincial undertakings and subject to federal legislative authority.
Prior to the ruling the federal government had regulated only the telephone companies in Quebec, Ontario, British Columbia and the Northwest Territories.
The governments of Alberta, Saskatchewan and Manitoba have strongly opposed federal regulation of their telephone companies.
The extension of federal regulatory authority over telephone utilities in the Atlantic provinces hasn't required special legislation because they are investor-owned.
Amdura Corp. said its bank group, led by Chicago-based Continental Bank, agreed to extend its $40 million bridge loan until March 31, 1990, and gave it a new $30 million credit line.
Under terms of the loan agreement, Amdura said it will omit the next quarterly dividends on its Series A, B, C and D preferred shares, which are due Nov. 15.
Since the preferred stock is cumulative, Amdura said it will pay all omitted dividends, which range from $1.19 to $4.88 a share, when debt-reduction requirements have been met.
Amdura's bridge loan, part of the financing for Amdura's acquisition of CoastAmerica in December 1988, was to come due next Friday.
The company's new management, which took control of Amdura's board after a consent solicitation last month, wanted to extend the loan while it tries to sell two units.
Proceeds from those sales will be used to reduce debt.
Amdura, a Denver hardware and automotive distributor, said the new credit agreement will provide the working capital needed to meet ongoing requirements.
Three savings-and-loan institutions in Kansas and Texas were added to the Resolution Trust Corp.'s conservatorship program after federal regulators declared the thrifts insolvent and named the RTC their receiver.
The deposits, assets and certain liabilities of the three thrifts were transferred to newly chartered federal mutual institutions.
The three institutions are: Mid Kansas Federal Savings & Loan Association, Wichita, which had $830.5 million in assets; Valley Federal Savings & Loan Association of McAllen, McAllen, Texas, with $582.6 million in assets; and Surety Savings Association, El Paso, with $309.3 million in assets.
The three insolvent thrifts will maintain normal business hours and operations under RTC-appointed managing agents, while the RTC tries to negotiate permanent resolutions.
Separately, Century Bank, Phoenix, Ariz., was closed by Arizona banking officials.
The Federal Deposit Insurance Corp. approved the assumption of Century's deposits and fully secured liabilities by a newly chartered subsidiary of Valley Capital Corp., Las Vegas.
The new institution is also called Century Bank, and the failed bank's five offices will reopen today.
The failed bank had assets of about $129.6 million.
The newly chartered bank will assume about $125.7 million in 10,300 deposit accounts and pay the FDIC a purchase premium of $2.9 million.
It also will buy about $91.7 million of assets, and the FDIC will advance $31.8 million to the assuming bank.
Lonrho PLC of Britain is to come to the rescue of the French distribution group Societe Commerciale de l'Ouest Africaine in an operation that has been engineered with the Paribas financial group, Societe Commerciale's main shareholder.
The announcement came as Societe Commerciale, a trading company with activities in more than 40 countries, reported a loss of 320.5 million francs ($51 million) for the first six months of this year, partly because of provisions on future losses.
The rescue operation will consist of a capital boost for Societe Commerciale of one billion francs through issues of new shares and convertible bonds.
Cie. Financiere de Paribas said it intends to transfer its 30% shareholding in Societe Commerciale to a new company which will be jointly owned with Lonrho.
This will give Paribas and Lonrho joint control of Societe Commerciale.
Paribas said Lonrho will participate in the forthcoming capital boost for Societe Commerciale.
International Business Machines Corp. and MCA Inc. said they agreed to sell their Discovision Associates joint venture to U.S. units of Pioneer Electronic Corp. for $200 million.
The joint venture licenses a portfolio of about 1,400 patents and patent applications relating to optical-disk recording technology.
IBM and MCA formed Discovision in 1979 to make laser-read optical products.
But the partners didn't believe the market for the systems was developing as rapidly as they had hoped.
After reportedly investing $100 million in the business, Discovision ceased manufacturing operations in 1982 and sold many of its assets to Tokyo-based Pioneer, among others.
Discovision now has world-wide license agreements with major manufacturers covering CD audio disks, audio disk players, videodisks and videodisk players.
It also licenses optically based data storage and retrieval devices.
James N. Fiedler, president of Discovision and a vice president of MCA, said that IBM and MCA hadn't planned to sell the joint venture, which is now profitable, but that Pioneer approached Discovision earlier this year.
He said it isn't certain whether Discovision's current management will remain when Pioneer buys the company.
The agreement is contingent on certain government approvals and should be completed later this year.
Tokyo stocks closed higher in moderately active but directionless trading as the recent anxiety in world stock markets continued to fade.
London shares also closed firmer in thin trading driven largely by technical factors and support from a new Wall Street rally.
Prices also rose on almost every other major exchange in Europe, Asia and the Pacific.
Tokyo's Nikkei index of 225 issues, which gained 111.48 points Wednesday, climbed 266.66, or 0.76%, to 35374.22.
Volume on the first section was estimated at 800 million shares, compared with 841 million Wednesday.
Winners outnumbered losers 645-293, with 186 issues unchanged.
In early trading in Tokyo Friday, the Nikkei index rose 170.65 points, to 35544.87.
On Thursday, the Tokyo Stock Price Index of all issues listed in the first section, which gained 0.24 point Wednesday, was up 22.78, or 0.86%, at 2665.66.
The morning session was dominated by individuals and dealers, but some institutions participated in the afternoon, encouraged by the market's firmness, traders said.
Sentiment was helped by the small gain made by New York stocks Wednesday despite anxiety over possible effects of the major earthquake that struck northern California Tuesday.
Having survived both last Friday's 6.9% Wall Street plunge and the immediate aftermath of the San Francisco Bay area earthquake, Tokyo market participants expressed relief that trading had returned to normal.
Hiroyuki Murai, general manager of the stock trading division at Nikko Securities, said that after looking at the reasons for Friday's Wall Street plunge, participants realized that the Tokyo and New York markets have different economic fundamentals.
This conclusion, he said, restored the credibility of Tokyo stocks.
Yoshiaki Mitsuoka, head of the investment information department at Daiwa Investment Trust & Management, said that if New York stocks just fluctuate in or near their current range, the Tokyo market will remain firm with a moderately upward trend for the rest of the year.
But traders said the market lacks a base on which to set long-term buying strategy, as the future direction of U.S. interest rates remains unclear.
"Investor interest switches back and forth ceaselessly as they are unable to shift their weight to one side for sure," Mr. Mitsuoka of Daiwa Investment Trust said.
Many of Wednesday's winners were losers yesterday as investors quickly took profits and rotated their buying to other issues, traders said.
Pharmaceuticals made across-the-board advances.
Fujisawa Pharmaceutical gained 130 to 1,930 yen ($13.64) a share, Mochida Pharmaceutical was up 150 at 4,170, and Eisai advanced 60 to 2,360.
Housing issues were boosted by a report that Daiwa House expects to post 43% higher earnings for its latest fiscal year, traders said.
Daiwa House advanced 100 to 2,610, Misawa Homes was up 60 at 2,940, and Sekisui House gained 100 to 2,490.
Leading construction companies also attracted interest for their strong earnings outlooks, traders said.
They and many other major Japanese corporations will issue results soon for the fiscal first half ended Sept. 30.
Ohbayashi was up 60 to close at 1,680, Shimizu gained 50 to 2,120, and Kumagai-Gumi advanced 40 to 1,490.
Other winners included real estate issues Mitsubishi Estate, which closed at 2,500, up 130, and Mitsui Real Estate Development, which gained 100 to 2,890.
Steel shares fell back after advancing for three days.
Kawasaki Steel was down 11 at 788, Kobe Steel lost 5 to 723, and Nippon Steel slipped 6 to 729.
Mitsubishi Rayon, a leading advancer Wednesday, fell 44 to 861 as investors grabbed profits.
London's Financial Times-Stock Exchange 100-share index finished 19.2 points higher at 2189.3.
The Financial Times 30-share index ended 13.6 higher at 1772.1.
Volume continued to ease from the active dealings at the start of the week.
Turnover was 382.9 million shares, compared with 449.3 million Wednesday.
Dealers said the market was underpinned by a squeeze in FT-SE 100 stocks, particularly among market-makers seeking shares that had been hit hard in recent weeks, such as retailers and building-related concerns.
But despite the flurry of interest in those shares, dealers said, the market remains nervous about Wall Street's volatility and high U.K. interest rates.
U.K. money supply figures for September, released yesterday, showed continued growth in corporate and personal lending, which will keep pressure on the government to maintain tight credit.
Among the stocks featured in the market-makers' squeeze was Sears, which closed at 107 pence ($1.70) a share, up 3.
General Universal Stores, another top-tier stock hit recently by concerns over retail demand in the face of high interest rates, gained 20 to #10.44.
Storehouse gained 2 to
Another active FT-SE 100 stock was clothing and furniture retailer Burton, which gained 6 to 196.
Insurers recovered ground again on market-maker demand and speculative buying linked to talk of mergers in the industry before the European Community's planned market unification in
Royal Insurance was the sector's hottest issue, ending 15 higher at 465.
Sun Alliance fell 1 to close at 289, and General Accident jumped 10 to #10.13.
B.A.T Industries surged in afternoon dealings after its shareholders approved a plan to dispose of its U.S. and U.K. retailing operations to fend off Hoylake Investment's #13.4 billion ($21.33 billion) hostile bid.
With the company also exercising a plan to buy back as many as 10% of its shares outstanding, B.A.T closed at 783, up 27.
Turnover was 6.8 million shares, including about four million shares traded in the afternoon after the shareholders' meeting.
B.A.T said it purchased 2.5 million shares at 785.
In other European markets, shares closed sharply higher in Stockholm, Frankfurt, Zurich and Paris and higher in Milan, Amsterdam and Brussels.
South African gold stocks closed firmer.
Prices also closed higher in Singapore, Sydney, Taipei, Wellington, Hong Kong and Manila but were lower in Seoul.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
The federal response to California's earthquake crisis was marred by coast-to-coast name-calling between the White House and San Francisco's Mayor Art Agnos.
Mr. Agnos complained that he was "ticked off" that Vice President Dan Quayle, who toured the earthquake site Wednesday, didn't schedule a private meeting with him.
The mayor said the Quayle visit was "a publicity stunt."
The White House said Mr. Quayle's staff had invited the mayor to two meetings of the vice president and groups of local officials and had offered to dispatch a helicopter to pick him up.
Mr. Agnos declined the invitations, the White House said.
Marlin Fitzwater, White House press secretary, also asserted that Mr. Agnos had failed to return telephone calls from John Sununu, White House chief of staff.
"We regret very much that the mayor of San Francisco has decided not to cooperate with us on this matter in making sure that there is adequate federal support for the disaster in his city," Mr. Fitzwater said.
By late yesterday, both sides appeared prepared to bury the hatchet.
The White House announced that Mr. Agnos, along with the mayors of Oakland and Alameda, are to accompany President Bush on a tour of the earthquake area today.
And one White House official reported that Mr. Agnos had been "very helpful" in making arrangements for Mr. Bush's hastily scheduled trip to California.
Gold and silver broker Preston Semel asked a federal court to halt the Commodity Exchange from imposing a record $550,000 fine on his firm.
The suit, filed in federal court in Manhattan, also asks that the Comex's nine-month suspension of Mr. Semel be lifted, pending the broker's appeal of the disciplinary measures.
The fine and suspension, announced in August, are the stiffest sanctions the Comex has ever ordered against one of its members.
The Comex accused the 39-year-old Mr. Semel of "fraudulent conduct" and improper trading.
The disciplinary proceedings stem from trading in April 1987.
Mr. Semel and his firm, Semel & Co., have appealed the Comex decision and the sanctions to the Commodity Futures Trading Commission.
The commission denied Mr. Semel's request that the fine and suspension be delayed pending the appeal.
The lawsuit states that unless the sanctions are halted pending an appeal, the broker and his firm "will be irreparably injured and their business will be totally and permanently destroyed."
Already the firm has paid $211,666 of the fine, the suit said, and it will have to liquidate additional assets in order to pay the rest.
A spokesman for the Comex couldn't be reached to comment.
The Federal National Mortgage Association said 39 lenders across the U.S. have agreed to offer home loans under Fannie Mae's pilot program for elderly people.
Fannie Mae, a federally chartered and shareholder-owned company, said the lenders include Prudential Home Mortgage Co., a unit of Prudential Insurance Co. of America that operates in every state.
Prudential Insurance is based in Newark, N.J.
Fannie Mae has agreed to buy as much as $100 million of loans under its Seniors' Housing Opportunities pilot program, which offers four types of loans to people 62 years of age or older to help them maintain their home or obtain housing.
The loans can be for accessory apartments, for cottages built in a relative's yard, for home-sharing or for sale-lease-back transactions.
Fannie Mae makes a secondary market in home loans.
It buys loans from lenders, packages some into securities for sale to investors and holds the remainder in a portfolio.
Robert M. Gintel, senior partner of a Greenwich, Conn., investment firm, said he plans to launch a proxy fight against the board of Boston-based Xtra Corp.
Mr. Gintel, head of Gintel & Co., said he plans to conduct a proxy contest to elect a majority of Xtra's board at the next annual stockholders meeting.
Xtra, a transportation leasing company, said in a statement it would have no comment on Mr. Gintel's plans until "further information has been disclosed by him."
The company also said its 1990 annual meeting has not been scheduled.
Mr. Gintel owns 300,000 of the company's 6.3 million common shares outstanding.
Xtra said it recently bought back approximately 55,000 of its shares pursuant to its existing authorization to acquire as many as 650,000 shares.
Mr. Gintel has filed suit in Delaware Chancery Court, seeking to block Xtra's anti-takeover tactic.
In a filing with the Securities and Exchange Commission, Mr. Gintel said Xtra "has pursued business strategies that aren't in the best interest of stockholders.
STOCKS AND BONDS SURGED on the second anniversary of Black Monday as a favorable inflation report prompted speculation of lower interest rates.
The Dow Jones industrials closed up 39.55, at 2683.20, after rising over 60 points in mid-afternoon.
The rally brought the gain so far this week to about 114 points.
The dollar finished mixed, while gold declined.
Consumer prices climbed a moderate 0.2% in September, mostly due to higher clothing costs.
Energy prices continued to fall at the retail level, but economists worried about a big rise in wholesale energy costs.
British Airways dropped out of the current bidding for United Air's parent, leaving a UAL management-pilots group without a key partner.
British Air's move raised new questions about the buy-out group's efforts to revive a stalled bid for UAL.
A capital-gains tax-cut plan was dropped by Senate Democrats under pressure from their leadership.
The move is a setback for Bush, who needs Democratic support to pass a capital-gains cut in the Senate.
Other tax breaks also are likely to be restored or created in the coming months as special interest groups try to undo the 1986 tax overhaul.
Many retailers are worried that a price war could erupt this Christmas if cash-strapped firms such as Campeau slash prices to spur sales.
AT&T unveiled a sweetened early retirement plan for management that the company hopes will save it $450 million in the next year.
Also, profit rose 19% in the third quarter.
Chrysler will idle a Toledo assembly plant temporarily due to slowing sales of its profitable Jeep Cherokee and Wagoneer sport utility vehicles.
Digital Equipment's profit fell 32% in the latest quarter, prompting forecasts of weaker results ahead.
Analysts were troubled by signs of flat U.S. orders at the computer maker.
IBM plans to unveil over 50 software products on Tuesday to try to end some of the problems in computerizing manufacturing operations.
The TV units of Paramount and MCA are exploring offering prime-time programming to independent stations two nights a week.
BankAmerica's profit jumped 34% in the third quarter.
The rapid recovery continued to be fueled by growth in consumer loans, higher interest margins and only minor loan losses.
Big Board short interest fell 4.2% for the month ended Oct. 13, the second decline in a row.
Borrowed shares on the Amex rose to another record.
Bell Atlantic posted a strong earnings gain for the third quarter, as did Southern New England Telecommunications.
But Nynex, Pacific Telesis and U S West had lower profits.
B.A.T Industries won shareholder approval for a defensive restructuring to fend off Sir James Goldsmith.
American Express's profit climbed 21% in the quarter, aided by a surge in its travel business and despite a big rise in Third World loan reserves.
Markets --
Stocks: Volume 198,120,000 shares.
Dow Jones industrials 2683.20, up 39.55; transportation 1263.51, up 15.64; utilities 215.42, up 1.45.
Bonds: Shearson Lehman Hutton Treasury index 3398.65, up
Commodities: Dow Jones futures index 130.13, up 0.23; spot index 130.46, up 0.10.
Dollar: 141.70 yen, up 0.25; 1.8470 marks, off 0.0015.
Computer Sciences Corp., El Segundo, Calif., said the National Aeronautics and Space Administration will negotiate details of a contract valued at about $170 million to provide software for the Ames Research Center.
Included in the three-year contract are options for two one-year renewals.
NASA awarded the contract to CSC in November but an appeal by Sterling Software Inc. of Dallas sent the contract to the General Services Administration Board of Contract Appeals and the board required NASA to re-evaluate bidders' proposals.
Sterling had completed a five-year contract for NASA but lost its bid for renewal.
As directed by the board, NASA completed the evaluation and again chose CSC.
For its fiscal year ended March 31, CSC had revenue of $1.3 billion.
AFTERSHOCKS RATTLED Northern California amid an earthquake cleanup.
As power and commuters returned to much of downtown San Francisco for the first time since Tuesday's temblor in the Bay area, three strong aftershocks, one measuring 5.0 on the Richter scale, jolted the region.
Serious injuries or damages weren't reported.
Californians, meanwhile, tried to cope with still-limited services, blocked roadways and water shortages in the aftermath of the tremor that left scores dead and injured.
Thousands remained homeless.
Bush is to visit the area today, and officials in Washington estimated that emergency assistance would total at least $2.5 billion.
A series of earthquakes struck northern China, killing at least 29 people, injuring hundreds and razing about 8,000 homes, the Xinhua News Agency said.
The Senate rejected a constitutional amendment sought by Bush to prohibit desecration of the U.S. flag.
While the proposal won a slight majority, the 51-48 vote was well short of the two-thirds needed to approve changes in the Constitution.
It was considered a victory for Democratic leaders, who favor a law barring flag burning.
The House approved an $837 million aid package for Poland and Hungary, nearly double what Bush had requested.
The vote of 345-47 sent the measure to the Senate.
Britain's chief justice quashed the murder convictions of four people for Irish Republican Army bombings that killed seven people in 1974.
The reversal came after the government conceded that investigators may have faked evidence.
The "Guildford Four," three Irishmen and an Englishwoman, have been imprisoned since 1975.
The Nobel Prize in literature was won by Camilo Jose Cela, a Spanish writer.
His 1942 novel "The Family of Pascual Duarte" is considered the most popular work of fiction in Spanish since Cervantes's "Don Quixote" was published 400 years ago.
The Swedish Academy in Stockholm cited the 73-year-old Cela for "rich and intensive prose."
The editor of Pravda was dismissed and succeeded by a confidant of Soviet leader Gorbachev.
The action at the Communist Party daily, viewed as the Soviet Union's most authoritative newspaper, was considered the most significant development in a week of Kremlin wrangling over the press, including sharp criticism from Gorbachev.
East Germany's new leader met with Lutheran Church officials to discuss a growing opposition movement demanding democratic freedoms.
As they conferred near East Berlin, a pro-democracy protest erupted in the Baltic city of Greifswald, and activists threatened further rallies against leader Krenz's expected hard-line policies.
Police in Prague raided an international meeting on human rights, detaining Czechoslovakia's former foreign minister, Jiri Hajak, and 14 other activists.
A leading U.S. human-rights monitor also was briefly held.
Dissident playwright Vaclav Havel reportedly escaped the crackdown, the fourth against activists in recent days.
Bush met in Washington with Spain's Prime Minister Gonzalez and discussed what the president called "the unique role" that Madrid can play in furthering democracy in Eastern Europe and Latin America.
Gonzalez, who pledged to help monitor voting in Nicaragua, was said to be carrying proposals for free elections in Panama.
The Galileo spacecraft sped unerringly toward the planet Jupiter, while five astronauts aboard the space shuttle Atlantis measured the Earth's ozone layer.
The robot probe was dispatched Wednesday by the shuttle crew, which is to conduct a series of medical and other experiments before their scheduled landing Monday in California.
Argentina and Britain agreed to resume diplomatic and economic relations, seven years after the two nations battled over the Falkland Islands.
The announcement, in which they said hostilities had ceased, followed a two-day meeting in Madrid.
Rebel artillerists bombarded the capital of Afghanistan, killing at least 12 people, as the Soviet Union was reported to be airlifting arms and food to Kabul's forces.
Fighting also was reported around the strategic town of Khost, near the Pakistani border.
Saudi Arabia's foreign minister met in Damascus with President Assad to develop a plan for the withdrawal of Syria's 40,000 troops from Lebanon as part of a settlement of that nation's 14-year-old civil war.
The talks came as Lebanese negotiations on political changes appeared deadlocked.
GOP Sen. Specter of Pennsylvania said he would vote to acquit federal Judge Alcee Hastings in his impeachment trial on charges of perjury and bribery conspiracy.
Specter, the vice chairman of the Senate's evidence panel, said there was "insufficient evidence to convict" the Miami jurist.
After slipping on news of a smaller-than-expected U.S. inflation figure, the dollar rebounded later in the trading day.
The U.S. unit dipped to a session low against the mark just after the release of the U.S. consumer price index.
The report showed that September consumer prices rose just 0.2%, a smaller increase than expected.
The market had anticipated a 0.4% rise in the price index.
The September index fueled speculation, damaging to the dollar, that the Federal Reserve soon will ease monetary policy further.
But foreign-exchange dealers said the dollar staged a quick comeback, prompted by a round of short covering and some fresh buying interest later in the trading day.
Traders said that a nearly 40-point gain in the Dow Jones Industrial Average, fueled in part by news of a lower-than-expected price index, had little influence on the dollar's moves.
"The market is beginning to disassociate itself from Wall Street," said one New York trader.
In late New York trading yesterday, the dollar was quoted at 1.8470 marks, down from 1.8485 marks late Wednesday, and at 141.70 yen, up from 141.45 yen late Wednesday.
Sterling was quoted at $1.5990, up from $1.5920 late Wednesday.
In Tokyo Friday, the U.S. currency opened for trading at 141.93 yen, up from Thursday's Tokyo close of 141.55 yen.
Some analysts said the consumer price index reflects a more significant slowdown in the U.S. economy than earlier indicated.
They point out that September's producer-price index showed a 0.9% increase.
They noted that because the consumer price index, known as the CPI, is a more comprehensive measure of inflation and is rising less rapidly than the producer-price index, or PPI, it could signal further easing by Fed.
Others suggested, however, that the Fed will hold any changes in monetary policy in check, leaving fed funds at around 8 3/4%, down from the 9% level that prevailed from July through September.
Kevin Logan, chief economist with the Swiss Bank Corp., said that both PPI and CPI climbed around 4 1/2% year-to-year in September.
He argued that both CPI and PPI have in fact decelerated since spring.
"The Fed won't be stampeded into easing," Mr. Logan said, predicting that for now, interest rates will stay where they are.
A four-day matched sale-purchase agreement, a move to drain liquidity from the system, was viewed as a technical move, rather than an indication of tightening credit.
Market participants note that the mark continues to post heftier gains against its U.S. counterpart than any other major currency, particularly the yen.
"There's a bottomless pit of dollar demand" by Japanese investors, said Graham Beale, managing director of foreign exchange at Hongkong & Shanghai Banking Corp. in New York, adding that purely speculative demand wouldn't hold the dollar at its recent levels against the Japanese currency.
Mr. Beale commented that the mark remains well bid against other currencies as well.
Robert White, manager of corporate trading at First Interstate of California, called the market "psychologically pro-mark," noting that the U.S. remains a "veritable grab bag" for Japanese investors which accounts for the unabated demand for U.S. dollars.
On the Commodity Exchange in New York, gold dropped $1.60 to $367.10 an ounce in moderate trading.
Estimated volume was three million ounces.
In early trading in Hong Kong Friday, gold was at about $366.85 an ounce.
Hotel Investors Trust and its affiliate, Hotel Investors Corp., said the companies plan to sell all of the hotels the companies own and operate, except for two hotel-casinos in Las Vegas, Nev.
The hotels and management interests will be sold at an auction, said John Rothman, president and chief executive officer of the trust and a director of the corporation.
Value of the properties and management interests wasn't disclosed.
In all, the Los Angeles-based trust plans to sell its interests in 36 hotels, while the corporation will sell its management interests in 32 of those properties.
Excluded from the sale are the interests of the trust and the corporation in two Las Vegas hotel-casinos.
After completing the sale and paying debts, the trust and corporation will consider a number of options including a stock repurchase, payment of special dividend or investment in more gaming properties.
The companies will retain their current regular quarterly dividend of 25 cents during the sale process, Mr. Rothman said.
For the first six months, the trust and corporation had a net loss of $244,000.
Baxter International Inc., citing cost-cutting moves and increased sales of its home-care products and dialysis treatments, posted a 20% rise in third-quarter net income on a 5.9% sales boost.
The Deerfield, Ill., medical products and services company posted net of $102 million, or 34 cents a share, compared with $85 million, or 28 cents a share, a year ago.
Sales totaled $1.81 billion up from $1.71 billion the previous year.
For the nine-month period, Baxter said net rose 15% to $307 million, or $1.02 a share, from $267 million, or 89 cents a share, during the year-ago period.
Sales for the nine months were up 8% to $5.44 billion from $5.04 billion in the same period in 1988.
In New York Stock Exchange composite trading, Baxter closed at $22.25 a share, down 12.5 cents.
A group bidding for American Medical International Inc., New York, said it formally received the final financing needed for a $3 billion bid for about 86% of the hospital operator's stock.
The offer from IMA Acquisition Corp., for as many as 63 million shares, is set to expire Wednesday.
Earlier this month, IMA said it had received about $1 billion of senior debt financing from Chemical Bank and six other banks; Chemical Bank said it was "highly confident" it could arrange the balance of about $509 million.
In addition, the $3 billion bid includes $1 billion of debt that will be assumed by IMA, $600 million of high-yield junk bonds that will be sold by First Boston Corp. and $285 million of equity.
In New York Stock Exchange composite trading yesterday, American Medical closed at $23.625, up $1.875.
American Medical has agreed to the offer, but earlier this month said it had received new "expressions of interest" from two previous bidders.
American Medical said it would pursue the inquiries from the companies, but wouldn't identify them unless they make firm offers.
H&R Block is one of the great success stories of U.S. business.
Oddly enough, this presents a problem for the stock.
Some money managers are disenchanted with H&R Block because they suspect the company's glory days are past, or at least passing.
Block's tax-preparation business is mature, they say, and some of its diversifications are facing tough competition.
It's no secret that Block dominates the mass-market tax-preparation business.
The Street knows all about the predictability of its earnings, which are headed for a ninth consecutive yearly increase.
The company has consistently earned more than a 20% annual return on its net worth while many companies would be happy with 15%.
But the tax-preparation business simply has no more room to grow, says Mark Cremonie, director of research for Capital Supervisors Inc., a Chicago firm that manages $6.5 billion.
"You go to any medium-sized town in the U.S. and you're going to see H&R Block tax services."
Mr. Cremonie's firm once held about 4.8% of H&R Block.
That was before the 1986 tax "reform" made taxes more complex than ever.
"One thing you can bet on," he says, "is that Congress will do stupid things with the Tax Code."
But Capital Supervisors sold the last of its H&R Block holdings earlier this year.
"They're thrashing around for diversification," he says.
"I think a lot of their businesses are just so-so."
Last week the stock hit an all-time high of 37 1/4 before getting roughed up in the Friday-the-13th minicrash.
It closed yesterday at 34 3/4.
To be sure, the stock still has a lot of fans.
"If you invested $10,000 in the initial public offering in 1962, it would be worth well over $5 million today," says Fredric E. Russell, a Tulsa, Okla., money manager.
"I don't know what the risk is {of holding the stock}.
Taxes are not going out of business."
Many of his peers feel the same way.
The number of big institutions that own H&R Block shares is 207 and growing, according to a midyear tally by CDA Investment Technologies.
Brokerage houses are sweet on H&R Block, too.
Zacks Investment Research counts five brokerage houses that consider the stock a buy, and four that call it a hold.
None dare say to sell it.
But some money managers are doing just that.
Eugene Sit, president of Sit Investment Associates in Minneapolis, says, "When we bought it, we thought the growth rate was going to accelerate" because of computerized tax filing and instant refunds (the customer gets a refund immediately but pays extra to the tax preparer, which waits for Uncle Sam's check).
But neither of those developments did much to juice up growth, Mr. Sit says.
He figures Block earnings are now growing at about a 10% annual rate (down from about 14% the past five years) and will grow at an 8%-10% rate in the future.
That's "not bad," Mr. Sit says, but it sure doesn't justify Block shares being priced at 15 to 16 times estimated earnings for fiscal 1990.
He wants stocks whose price/earnings ratio is less than their growth rate; as he figures it, H&R Block doesn't even come close.
Two other money managers, in explaining why they have sold large amounts of H&R Block stock this year, spoke on the condition they not be named.
"The stock was going no place and the earnings were so-so," said one.
(In the past two years, the stock almost stalled out.
It was above 33, adjusted for a subsequent split, in 1987, and hasn't gotten much higher since.)
"There's no more growth in the tax business {except} for increasing prices," the money manager added.
The CompuServe subsidiary (which provides information to home-computer users) is "where the growth is," he said, but its format is "still too complicated."
CompuServe provides about 20% of both sales and earnings.
The tax business still provides about 70% of earnings, on about 50% of sales.
Personnel Pool (temporary workers, mostly in the health-care area) chips in close to 25% of sales but only about 9% of earnings.
The shortage of nurses is crimping profit at Personnel Pool, said the second money manager.
He concedes H&R Block is "well-entrenched" and "a great company," but says "it doesn't grow fast enough for us.
We're looking for something that grows faster and sells at a comparable {price-earnings} multiple."
Thomas M. Bloch, president and chief operating officer, says "I would disagree" that the tax business is mature.
For example, he says, the company is planning to go nationwide with a new service, tested in parts of the country, aimed at taxpayers who want refunds in a hurry.
Mr. Bloch concedes that a recent diversification attempt fell through.
"We're still interested {in diversifying}," he says, "but we'd rather be prudent than make a mistake."
He also says CompuServe's earnings continue to grow "20% to 30% a year" in spite of tough competition from giants like Sears and IBM.
And he says Block's other businesses are growing, although less consistently.
H&R Block (NYSE; Symbol:HRB)
Business: Tax Preparation
Year ended April 30, 1989:
Revenue: $899.6 million
Net loss: $100.2 million; $1.90 a share
First quarter, July 31, 1989:
Per-share earnings: Loss of 8 cents vs. loss of 9 cents
Average daily trading volume: 145,954 shares
Philips Industries Inc. said its board authorized the redemption Dec. 6 of the company's $1 cumulative convertible special preferred stock at $37.50 a share, not including a 25 cent dividend for the current quarter, and the $3 cumulative convertible preferred stock at $75, plus a 75 cent dividend for the current quarter.
The Dayton, Ohio, maker of parts for the building and transportation industries said holders of the two issues can convert their stock into common shares through the close of business Dec. 1.
Each $1 cumulative share can be converted into 4.92 common shares; the ratio on the $3 cumulative is eight common shares for each $3 cumulative preferred.
Philips didn't indicate how many shares outstanding it has of either issue.
Company officials couldn't be reached.
Earlier this month the company said its board approved a proposed management-led leveraged buy-out at $25.50 a share, or $750 million.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
PUTS AND CALLS, STOCK MARKET PATOIS for options to sell or buy a company's shares, were long an arcane Wall Street art best left to the experts, who used them either as a hedge or for pure speculation.
Options lost some of their mystery in 1973 when the Chicago Board of Trade set up a special exchange to deal in them.
Until then, options had been traded only in the over-the-counter market, mostly in New York, and in an almost invisible secondary market operating chiefly by telephone.
The Chicago Board of Trade, the No. 1 U. S. grain market, had long chafed under the attention won by its innovative archrival, the livestock-dealing Mercantile Exchange.
So the men who ran the grain pits listened when Joseph Sullivan, a 35-year-old former Wall Street Journal newsman, offered them the idea of all-options trading.
After four year of tinkering and $2.4 million in seed money, the board set up the new marketplace, titled it the Chicago Board Options Exchange, and named Sullivan its first president.
The beginnings were modest.
The CBOE opened for business on April 26, 1973, in what had been a Board of Trade lunchroom.
It listed just 16 options to buy a "pilot list" of stocks on the New York Stock Exchange.
(Puts, or sell options, would not be added until 1977.)
The 282 members had paid $10,000 apiece for seats.
(The 1989 price: $250,000.)
The first day's business was 911 contracts (each for 100 shares of one of the listed stocks).
By the end of 1973, the number of "underlying" Big Board stocks had been increased to 50 and the options exchange had run up volume of 1.1 million contracts.
A year later, it was 5.7 million.
Last year, more than 1,800 traders on the CBOE bought and sold 112 million contracts on 178 listed stocks, 60% of all U.S. listed options trading.
The new exchange drew instant recognition from an unwelcome quarter.
The government, campaigning against fixed brokerage commissions, promptly sued the CBOE over its minimum-fee system.
The Nuclear Regulatory Commission ruled unanimously that the financial troubles facing the Seabrook, N.H., nuclear-power plant have no impact on whether the plant receives a full-power license.
Massachusetts Attorney General James Shannon, opposing the license, said he will appeal the ruling in federal court.
Seabrook officials said the plant could receive a full-power license by the end of the year.
The NRC rejected Mr. Shannon's argument that Public Service Co. of New Hampshire, which owns the largest share of Seabrook, and 11 other owners are financially unable to guarantee the plant's safe operation.
Mr. Shannon was seeking a waiver of NRC policy that ignores financial considerations in making licensing decisions.
In its ruling, the NRC said that because Seabrook will be allowed to charge rates sufficient to run the plant and make payments on past construction costs, consideration of the owners' financial condition is pointless.
"The commissioners found the circumstances of the case didn't undercut the assurance from government rate setters of available funds adequate for safe operation," said a commission spokesman.
In January 1988, the utility filed for protection under Chapter 11 of the federal Bankruptcy Code, allowing it to continue to operate while protected from creditors' lawsuits.
Bristol-Myers Squibb Co., New York, the newly merged drug and health-care-product company, reported record third-quarter earnings for both companies in the merger.
Bristol-Myers Co. and Squibb Corp., Princeton, N.J., merged Oct. 4, but the new company reported third-period earnings for both companies.
For the fourth quarter, Bristol-Myers Squibb will report one set of earnings.
Bristol-Myers said net income rose 15% to $266.2 million, or 93 cents a share, from $232.3 million, or 81 cents a share, a year earlier.
Sales gained 5% to $1.59 billion from $1.52 billion.
Squibb Corp. said net rose 17% to $144.5 million, or $1.47 a share, from $123 million, or $1.25 a share.
Sales were $730.1 million, up 7% from $679.5 million.
In New York Stock Exchange composite trading, Bristol-Myers Squibb rose $1.75 to $52.75.
PPG Industries Inc., hurt by softness in the U.S. automotive and construction industries, said third-quarter net income fell 5.5% to $106.7 million, or 97 cents a share, from $112.9 million, or $1.03 a share, a year ago.
Sales were nearly identical to the year-earlier $1.36 billion.
The drop in earnings didn't surprise analysts who said the Pittsburgh glass, coatings and chemical concern had been predicting a slow quarter because of the sluggish construction industry, a major market for the company's flat glass.
Glass sales to Canadian and European auto makers and sales of replacement auto glass in all markets increased.
The coating segment also posted higher sales particularly in North America and Europe.
But sale increases were offset by slumping sales in flat glass and fiberglass reinforcements, the company said.
Also, chemicals sales were slightly down because of lower prices for vinyl chloride monomer and other chlorine derivatives.
In New York Stock Exchange composite trading, PPG closed at $41 a share, down 37.5 cents.
Jefferies Group Inc. said third-quarter net income fell 4%, to $2.2 million, or 35 cents a share, from $2.3 million, or 31 cents a share on more shares, a year earlier.
Revenue rose 15%, to $36 million from $31.2 million.
Jefferies, a Los Angeles holding company primarily engaged in securities trading, also said stock market declines since the quarter ended Sept. 30 created an unrealized pretax loss of about $6 million in its risk arbitrage account.
For the nine months, Jefferies said net fell 39%, to $6.8 million, or $1.07 a share, from $11.1 million, or $1.50 a share.
Revenue fell 3%, to $105.2 million from $108.4 million.
Sony Corp., New York, said its bids for Columbia Pictures Entertainment Inc. and Guber-Peters Entertainment Co. have been cleared by federal antitrust regulators.
The Japanese company said the waiting period under the Hart-Scott-Rodino antitrust act for the $3.4 billion bid for Columbia and the $200 million offer for Guber-Peters expired Monday.
Sony has agreed to buy both companies, but is in a legal battle with Warner Communications Inc. over the services of producers Peter Guber and Jon Peters.
In a filing with the Securities and Exchange Commission, Sony also said two more suits have been filed opposing the company's agreement to buy Columbia.
Sony added that a hearing has been set for Thursday in the Delaware Chancery Court in one of the suits.
Thursday, October 19, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 8 3/4% high, 8 5/8% low, 8 11/16% near closing bid, 8 11/16% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.45% 30 to 44 days; 8.25% 45 to 73 days; 8.325% 74 to 99 days; 7.75% 100 to 179 days; 7.50% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.525% 30 days; 8.425% 60 days; 8.375% 90 days.
CERTIFICATES OF DEPOSIT: 8.05% one month; 8.02% two months; 8% three months; 7.98% six months; 7.95% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market: 8.60% one month; 8.60% three months; 8.45% six months.
BANKERS ACCEPTANCES: 8.45% 30 days; 8.32% 60 days; 8.32% 90 days; 8.17% 120 days; 8.08% 150 days; 7.98% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 11/16% to 8 9/16% two months; 8 11/16% to 8 9/16% three months; 8 5/8% to 8 1/2% four months; 8 9/16% to 8 7/16% five months; 8 9/16% to 8 7/16% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 3/4% one month; 8 11/16% three months; 8 9/16% six months; 8 9/16% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 8.50%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS: Results of the Monday, October 16, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.37% 13 weeks; 7.42% 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days.
9.87%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.81%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.50%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
China said the question of Taiwan's membership in the General Agreement on Tariffs and Trade should be considered only after China's own membership in the 97-nation organization is restored.
Both China and Taiwan are seeking seats in GATT, which sponsors trade-liberalizing agreements and sets world-commerce rules.
"As one of China's provinces, Taiwan has no right to join GATT on its own," Foreign Ministry spokesman Li Zhaoxing said.
China, under the Nationalist government of Chiang Kai-shek, was a founding member of GATT in 1947.
The Nationalists withdrew in 1950, after their flight to Taiwan, and the Communist government in Beijing applied for restoration of China's membership in July 1986.
The U.S. has voiced opposition to China's bid for GATT membership, saying China has yet to undertake needed economic reforms.
Japan's biggest women's underwear maker, Wacoal Corp., said that it developed a sports car that it plans to market in two years.
The "Jiotto Caspita" can run at over 188 miles an hour, a company spokesman said.
The base price of the car is estimated at 30 million yen (about $213,000).
Wacoal said it intends to produce the cars through a car manufacturer.
Along with the car, Wacoal plans to launch a series of Caspita-brand men's underwear.
"Our image is a company that makes women's products," said a Wacoal spokesman.
"Now, we're going to sell to men."
The British satirical magazine Private Eye won an appeal against the size of a $960,000 libel award to Sonia Sutcliffe, the estranged wife of the "Yorkshire Ripper" mass murderer.
An appeals-court panel slashed all but $40,000 from the award, the largest ever set by a British jury, pending a reassessment of the damages.
But the panel dismissed the magazine's contention that it hadn't libeled Mrs. Sutcliffe when it accused her of trying to sell her story to capitalize on the notoriety of her husband.
Private Eye had been threatened with closure because it couldn't afford the libel payment.
Senshukai Co., a travel agent based in Osaka, Japan, announced that it and Nissho Iwai Corp., a major Japanese trading house, will jointly build a 130-unit condominium in Queensland, Australia.
Senshukai said the partners plan to rent to tourists but will also sell to interested parties.
Senshukai has a 60% stake in the venture and Nissho Iwai has the rest.
Construction of the 34-floor building will begin next May and should be completed in April 1992.
Units will cost from 500,000 to 3.5 million Australian dollars (about US$386,000 to US$2.7 million).
The Soviet Union has halted construction of two Chernobyl-type nuclear reactors and is reassessing the future of 12 other existing reactors.
Viktor Sidorenko, vice chairman of the State Committee on Nuclear Safety, said the two reactors were at Kursk and Smolensk.
News of the halt comes amid growing anger in the Ukraine and Byelorussia over continuing high levels of radiation from Chernobyl.
A former vice president of the Singapore branch of Drexel Burnham Lambert Group Inc. was charged in court yesterday on 19 counts of cheating.
Francis Dang, 41, is alleged to have been involved in cheating Drexel Burnham Lambert of up to 2.1 million Singapore dollars (US$1.1 million) by carrying out unauthorized transactions on the London Commodities Exchange and the International Petroleum Exchange.
Mr. Dang is alleged to have used the account of Singapore hotel and property magnate Ong Beng Seng to effect the transactions.
Japan says its economic growth will fall sharply if it cuts back on the use of oil, coal and gas to cap emissions of carbon dioxide.
A Ministry of International Trade and Industry official said that a study found that Japan's annual economic growth rate would eventually be only 0.8% if carbon-dioxide emissions remained at this year's level of 300 million tons.
The study will support arguments against capping carbon-dioxide emissions that Japan will make at a U.N.-backed conference on atmospheric pollution next month.
The study said Japan's carbon-dioxide emissions would slightly more than double by 2010 unless the nation reduced its dependence on fossil fuels.
It said that expanding nuclear-power capability is the quickest way to lessen that dependence.
But increased reliance on nuclear power would meet stiff opposition from environmentalists, a second ministry official said.
Just in time for Halloween, Britain's Oxford University Press is publishing a "Dictionary of Superstitions."
The books 1,500 entries include stepping on cracks and knocking on wood. . . .
In New Zealand's tiny township of Kaitaia, which has had direct dialing for less than a year, about 30 angry phone-company customers questioned the size of their bills.
It turned out their children had been dialing a "sex fantasy" service in the U.S.
Slowing sales of its profitable Jeep Cherokee and Wagoneer sport utility vehicles are forcing Chrysler Corp. to temporarily idle its Toledo, Ohio, assembly plant for the first time since April 1986.
About 5,500 hourly workers will be laid off for a week beginning Oct. 23, and overtime has been eliminated at the plant for the fourth quarter, a Chrysler spokesman said.
That's a significant change from earlier this year when the plant worked substantial overtime only to have sales fall short of the company's bullish expectations.
Sales of Cherokee, the best-selling Jeep, and the lower-volume Wagoneer were actually up about 10% through the end of last month.
But that's less than Chrysler officials had hoped when they set ambitious production schedules for the Toledo plant earlier this year.
Even when it became clear this spring that demand wasn't coming up to expectations, Chrysler officials "resisted" cutting output because Cherokee and Wagoneer are "very profitable vehicles," the spokesman said.
Instead, Chrysler officials in late May slapped $1,000 cash rebates on the vehicles, including the first such incentives on the popular four-door Cherokee since Chrysler bought Jeep in 1987.
The incentives boosted sales for a while, but the pace had cooled by last month.
The result: Chrysler dealers had a bloated 82-day supply of the Cherokee as of the end of last month and a 161-day supply of the Comanche pickup, which Toledo also builds.
A 60-day to 65-day supply is considered normal.
At Jasper Jeep-Eagle, one of the largest Jeep dealerships in the country, inventories have continued to swell.
Steve Lowe, general manager of Jasper, Ga., dealership, said new rebates of $500 to $1,000 on the models have stimulated sales, but not enough to significantly cut dealer stocks.
"If people aren't buying, you have to close plants," he said.
Separately, Chrysler said it will idle for four weeks the St. Louis assembly plant that builds the Chrysler LeBaron and Dodge Daytona models.
Chrysler officials said the plant is scheduled to resume production on Nov. 20., and 3,300 hourly workers will be affected.
General Motors Corp., meanwhile, said it will idle for yet another week its Linden, N.J., assembly plant, bringing to three weeks the total time that plant will be idled during October.
GM said the assembly plant, which builds the Chevrolet Corsica and Beretta compact cars, originally was scheduled to reopen Monday but now will not resume production until Oct. 30.
The shutdown affects 3,000 workers and will cut output by about 4,320 cars.
Sluggish sales of the Beretta and Corsica spurred GM to offer $800 rebates on those cars.
The Corsica and Beretta make up the highest-volume car line at Chevrolet, but sales of the cars are off 9.6% for the year, and fell a steep 34.2% early this month.
GM has scheduled overtime at its Lordstown, Ohio, and Janesville, Wis., assembly plants, which build the Chevrolet Cavalier.
Ford Motor Co. said it will shut down for one week its Kentucky Truck Plant because of a "shortage of dealer orders."
The shutdown will idle 2,000 hourly employees and eliminate production of about 1,300 medium and heavy duty trucks.
The assembly plant is scheduled to resume production on Oct. 30.
Meanwhile, the nine major U.S. auto makers plan to build 143,178 cars this week, down 11.7% from 162,190 a year ago and flat with last week's 142,117 car output.
f-Includes Chevrolet Prizm and Toyota Corolla.
r-Revised.
x-Year-to-date 1988 figure includes Volkswagen domestic-production through July.
LOTUS DEVELOPMENT Corp.'s net income rose 61% in the third quarter from the year-earlier period.
Yesterday's edition misstated the percentage increase.
First Fidelity Bancorp., Lawrenceville, N.J., reported a 24% drop in third-quarter profit, because of a decline in earning assets, lower loan volume and tighter interest margins.
The bank holding company posted net income of $54.4 million, or 87 cents a share, including $1.7 million, or three cents a share, in one-time tax benefits.
A year earlier, net was $71.6 million, or $1.22 a share.
First Fidelity said non-performing assets increased to $482.3 million Sept. 30 from $393.1 million June 30.
The rise resulted from the transfer to non-accrual status of $96 million "owed by two national borrowers and one local commercial real-estate customer," First Fidelity said.
It said it doesn't anticipate any loss of principal on two of the loans, comprising $85 million of these credits.
First Fidelity said it boosted its loan-loss provision to $50.9 million from $20.4 million a year ago, primarily because of a weaker real-estate sector in the region.
VIACOM Inc.'s loss narrowed to $21.7 million in the third quarter from $56.9 million a year ago.
Thursday's edition misstated the narrowing.
Coastal Corp. said it signed a definitive agreement with Aruba to restart a 150,000-barrel-a-day oil refinery.
Coastal wouldn't disclose the terms.
Coastal, a Houston oil and gas company, said it expects to begin operations in October 1990.
The company said it may install additional processing units at the refinery to produce higher octane gasolines and other products.
The company said it was leasing the site of the refinery from Aruba.
Exxon Corp. built the plant but closed it in 1985 and sold off much of the equipment to dismantling contractors, from whom Coastal bought back much of the equipment.
A Coastal spokesman said the biggest expense will be to refurbish the refinery but wouldn't say how much that would be.
The prime minister of Aruba has said it could cost around $100 million.
Coastal said the refinery's expected daily production will include 34,000 barrels of jet fuel, 32,000 barrels of low-sulfur diesel fuel, 30,000 barrels of naphtha, 17,000 barrels of residual fuel oil, 8,000 barrels of asphalt and 25,000 barrels of low-sulfur catalytic cracker feedstock.
Loral Corp. said fiscal second-quarter net income was $19.8 million, or 79 cents a share, compared with year-earlier earnings from continuing operations of $15.6 million, or 62 cents a share.
Year-earlier net of $21 million, or 84 cents a share, included the results of Loral's former Aircraft Braking Systems and Engineered Fabrics divisions, which were sold April 27 to the company's chairman, Bernard L. Schwartz.
The defense electronics concern attributed the operating improvement to higher profit margins and lower net interest expense.
Loral also reported that its bookings more than doubled to $654 million in the quarter, ended Sept. 30, from $257 million, in the year-before period.
The increase was due mainly to a $325 million order from Turkey to equip its fleet of F-16 fighters with Loral's ALQ-178 Rapport III electronic countermeasures system.
The order is the biggest in the company's history.
Sales in the latest period edged up to $295.7 million from $293.9 million.
Mr. Schwartz said the recent increase in orders "puts us well on the way to our goal of $1.6 billion in bookings for the year."
He added: "I expect to see the earnings momentum we experienced this quarter continue for the rest of the year."
Loral said it expects sales to accelerate in both the third and fourth quarters of this fiscal year.
Loral's profit from continuing operations for the first six months of fiscal 1990 was $36.4 million, or $1.44 a share, up 31% from $27.8 million, or $1.11 a share, a year earlier.
Net income fell 8.6% to $37.1 million, or $1.43 a share, from $40.6 million, or $1.56 a share.
Fiscal first-half sales slipped 3.9% to $528.4 million from $549.9 million.
Bookings for the first half totaled $813 million, compared with the $432 million recorded last year.
In New York Stock Exchange composite trading, Loral closed at $33.25, down 37.5 cents.
HealthVest said two of its lenders have given it notices of default on bank loans and said they may take actions to recover their loans.
HealthVest, an Austin, Texas, real estate investment trust, said that Chemical Bank, the lead bank under its domestic bank agreement, told it that if $3.3 million owed to the bank group isn't paid by today, the group will call the $120 million that HealthVest has outstanding under the credit line.
The bank group also said that it won't make additional advances under the $150 million credit line.
HealthVest missed a payment to the group that was due in late September.
In addition, HealthVest said Bank of Tokyo Trust Co. also has notified it of a default and said it might take action to cure the default.
HealthVest missed an interest payment to Bank of Tokyo on Oct. 1.
However, HealthVest said the Tokyo bank indicated that it won't accelerate HealthVest's $50 million loan.
HealthVest is in a severe liquidity bind because its affiliate, Healthcare International Inc., has failed to make about $10.6 million in principal and interest payments owed since August.
Healthcare operates many of the health-care properties that HealthVest owns.
EMPIRE PENCIL, later called Empire-Berol, developed the plastic pencil in 1973.
Yesterday's Centennial Journal misstated the company's name.
Storage Technology Corp. had net income of $8.3 million, or 32 cents a share, for its fiscal-third quarter ended Sept. 29, almost 15 times the $557,000, or two cents a share, it posted for the year-ago period.
Storage, Louisville, Colo., which makes data-storage devices for mainframe computers, said the huge increase in net reflects "strong sales" of its tape products, particularly the 4400 Automated Cartridge System, which holds a library of tape cartridges.
The company said it recently sold its 750th cartridge system, which cost $400,000 to $500,000 each.
Quarter revenue was $232.6 million, up 12% from $206 million last year.
The stock market reacted strongly to the news.
Storage rose $1.125 a share, to close at $14, in New York Stock Exchange composite trading.
For the nine months, Storage had net of $25.5 million, or 98 cents a share, including an $11.3 million extraordinary gain for the anticipated proceeds from liquidating an Irish unit.
Net was up 69% from $15.1 million, or 57 cents a share, last year.
Revenue for the latest period was up 11% to $682.7 million, from $614.6 million.
A Canadian government agency conditionally approved proposed exports to the U.S. of natural gas from big, untapped fields in the Mackenzie River delta area of the western Canadian Arctic.
Three companies, Esso Resources Canada Ltd., Shell Canada Ltd. and Gulf Canada Resources Ltd., applied to the Canadian National Energy Board to export 9.2 trillion cubic feet of Mackenzie delta natural gas over 20 years starting in 1996.
To be economically feasible, the 11 billion Canadian dollar (US$9.37 billion) project requires almost a doubling of natural gas export prices.
It also faces numerous other hurdles including an agreement on a pipeline route for the gas.
The board said the export licenses would be issued on the condition that Canadian interests would also be allowed to bid for the Mackenzie delta gas on terms similar to those offered to U.S. customers.
U.S. buyers have already been lined up.
They include Enron Corp., Texas Eastern Corp., Pacific Interstate Transmission Co. and Tennessee Gas Pipeline Co.
The project could result in the U.S. taking more than 10% of its natural gas supplies from Canada, up from about 5% currently.
It would bring 13 gas fields into production at a combined rate of about 1.2 billion cubic feet a day.
The board estimated that the cost of building a pipeline from the Mackenzie delta to Alberta would be about C$5.9 million.
It also said projections of surging U.S. demand for natural gas and price forecasts of C$5.25 per thousand cubic feet by 2005 would make the project economically viable.
Esso, a unit of Imperial Oil Ltd. which is 71%-owned by Exxon Corp., will be allowed to export 5.1 trillion cubic feet to the U.S. in the 20-year period.
Shell, a subsidiary of Royal Dutch/Shell Group, will be allowed to export 0.9 trillion cubic feet, and Gulf, a unit of Olympia & York Developments Ltd. will be allowed to export 3.2 trillion cubic feet.
Combustion Engineering Inc., Stamford, Conn., said it sold and agreed to sell several investments and nonstrategic businesses for about $100 million, which will be used for reducing debt and general purposes.
The transactions are unrelated.
The company agreed to sell its minority investments in makers of steam-generating and related equipment, Stein Industrie and Energie & Verfahrenstechnik, to the major shareholder in the companies, Dutch-based GEC Alsthom N.V.
Combustion Engineering, which provides engineered products, systems and services for power generation, also sold Illinois Minerals Co., based in Cairo, Ill.
That unit of its Georgia Kaolin Co. subsidiary was sold to a unit of Unimin Corp.
Assets of Construction Equipment International, Houston, were sold to Essex Crane Inc., and the assets of Elgin Electronics, Erie, Pa., were sold to closely held Charter Technologies Inc.
Where do Americans put their money?
It depends on when you look.
In 1900, for instance, less than 8% of assets went into bank deposits.
That rose to nearly 18% during the Depression, and hasn't changed much since.
Pension reserves, on the other hand, made up a relatively small part of household assets until the last decade, when they skyrocketed.
And there has been a drastic decline in the importance of unincorporated business assets -- thanks to industry consolidation and a decline in family farms.
That's some of what emerges from the following charts, which show how Americans have changed their investment patterns over the past 90 years.
Some results are self-explanatory.
But other figures are surprising.
Housing, for instance, has remained a fairly steady component of household assets over the past decade -- although common wisdom would have expected an increase.
"There is a lot of attention paid to housing as a form of household wealth," says Edward N. Wolff, professor of economics at New York University.
"But it hasn't increased much relative to other assets.
It suggests that households accumulate wealth across a broad spectrum of assets.
And housing though it appears in the popular mind as being the major {growing} household asset, isn't."
In addition, investors' desire to hold stocks -- directly and through mutual funds -- has held surprisingly steady; stocks' importance among assets largely reflects the ups and downs of the stock market, and not a shift in stock-holding preferences.
"Stocks have not spread to the general public, despite the fact that the environment is much different," concludes Robert Avery, an economist at Cornell University.
"To me it says that despite all the views that we spend too much of our wealth on paper assets, we have ways of holding wealth similar to 100 years ago."
-- The charts show how househld assets have been distributed over time.
The main components of the various asseet categories: Housing: Primary home, but not the land it's on.
Land and Other Real Estate: Land on which primary home is built, investment property.
Consumer Durables: Automobiles, appliances, furniture.
Bank Deposits: Currency, checking-account deposits, small savings and time deposits, certificates of deposits, money-market fund shares.
Bonds: Excludes bond funds.
Stocks/Mutual Funds: Stocks and mutual funds other than money-market funds.
Unincorporated Business: Partnerships and sole proprietorships, professional corporations.
Pension Reserves: Holdings by pension funds.
McCaw Cellular Communications Inc. said it sent a letter to LIN Broadcasting Corp. clarifying its revised tender offer for LIN and asking LIN to conduct "a fair auction."
The letter apparently came in response to a request for clarification by LIN earlier this week.
LIN, which has agreed with BellSouth Corp. to merge their cellular-telephone businesses, said then that it wouldn't take a position on McCaw's revised tender offer.
Earlier this month, McCaw revised its offer to $125 a share for 22 million LIN shares.
McCaw is seeking 50.3% of the cellular and broadcasting concern; the revised offer includes a feature requiring McCaw to begin an auction process in July 1994 that would buy out remaining holders at a per-share price roughly equivalent to what a third party might then have to pay for all of LIN.
The letter outlines broad powers for an independent group of directors provided for in the revised offer.
In a statement, Craig O. McCaw, chairman and chief executive officer of McCaw, said: "We trust LIN will take no further actions that favor BellSouth."
McCaw said the three independent directors provided for in the offer would be designated by the current board.
The successors would be nominated by the independent directors.
LIN would have a priority right to pursue all opportunities to acquire U.S. cellular interests in markets other than those in which McCaw holds an interest, or which are contiguous to those markets, unless LIN has an interest there or contiguous to it.
Independent directors would have veto rights to any acquisition if they unanimously decide it isn't in LIN's best interest.
Independent directors would be able to block transactions they unanimously deem would be likely to depress the private market value of LIN at the time it is to be sold in five years.
If LIN is put up for sale rather than purchased by McCaw in five years, McCaw won't submit a bid unless the independent directors request it, and the independent directors will run the bidding.
The directors would be able to sell particular assets to enable such buyers as the regional Bell operating companies to purchase the company's interests.
MCA Inc. said third-quarter net fell 6.3% to $50.8 million, or 69 cents a share, from $54.3 million, or 74 cents a share, a year earlier.
MCA said revenue rose 14% to $918.4 million from $806.7 million.
The entertainment concern said the success of several movies released during the quarter, including "Parenthood" and "Uncle Buck," contributed to record revenue for its film unit.
Both MCA's music-entertainment and book-publishing units also posted record revenue and operating profit.
The parent company's net included a loss -- which it didn't specify -- that was related to the company's 50% stake in Cineplex Odeon Corp.
Cineplex, a Toronto theater chain, had a second-quarter net loss of $38.7 million.
MCA said net also included certain reserves related to the restructuring of its LJN Toys' international operations.
These items were partly offset, MCA said, by an unspecified gain on the sale of its Miller International unit, a maker and distributor of budget-priced audio cassettes.
In New York Stock Exchange composite trading, MCA rose $1.50 to $64.
In the nine months, net rose 35% to $120.1 million, or $1.64 a share, from $89.2 million, or $1.22 a share, a year earlier.
Revenue increased 22% to $2.5 billion from $2.1 billion.
Past Due Impasse
I never pay my bills Till the very last day; I lose far less interest By proceeding that way.
But it all evens out, It's so easy to see: Not till the last moment Am I paid what's due me.
-- Arnold J. Zarett.
Rex Tremendae
The effete Tyrannosaurus Rex Had strict Cretaceous views on sex, And that is why you only see him Reproduced in the museum.
-- Laurence W. Thomas.
Helmsley Enterprises Inc. plans to close its company-owned insurance business and is seeking other brokers to take over its policies, according to individuals familiar with the New York firm.
Helmsley Enterprises is the umbrella organization for companies controlled by Harry B. Helmsley.
These include office and residential real estate giant, HelmsleySpear Inc., and Helmsley Hotels.
The insurance brokerage agency, just a fragment of Helmsley's vast empire, would be the first piece of the company to be stripped away since last summer when Mr. Helmsley's wife, Leona Helmsley, was found guilty of tax evasion.
Industry sources estimate the agency brokers property and casualty premiums worth about $25 million annually, and has revenue, based on a standard 10% commission rate, of about $2.5 million.
The insurance firm acts as a broker on policies covering buildings managed by HelmsleySpear and others.
Many of the properties are owned through limited partnerships controlled by Mr. Helmsley.
New York State law prohibits insurance brokerages from deriving more than 10% of revenue from insuring affiliated companies.
Helmsley's insurance division had slightly exceeded that percentage, sources say, but the division wasn't considered significant enough to the company to be restructured, particularly at a difficult time for the firm.
Adverse publicity from the scandal surrounding its founder's wife and related management strife have put pressure on the entire Helmsley organization.
However, individuals close to the company insist shuttering the insurance division, a sideline from the company's core property management business, isn't the beginning of a sale of assets.
Helmsley's insurance premiums are expected to be transferred to several different insurance brokerage companies.
Frank B. Hall Inc. of Briarcliff Manor, N.Y. is reportedly working out an agreement with Helmsley.
Officials there declined to comment, as did Helmsley management.
Outside the white-walled headquarters of the socalled Society of Orange Workers, all seems normal in South Africa's abnormal society.
A pickup truck driven by a white farmer rumbles past with a load of black workers bouncing in the back.
Over at Conradies, the general store, a black stock boy scurries to help an elderly white woman with her packages.
Down the street, a car pulls into the Shell station and is surrounded by black attendants.
But inside the white walls of the Orange Workers' office -- just about the largest building in town, save for the Dutch Reformed Church and the school -- South Africa's neat racial order is awry.
A dozen white office workers fold newsletters and stuff them into envelopes.
White women serve tea and coffee, and then wash the cups and saucers afterwards.
White children empty the wastepaper baskets and squeegee the windows.
There isn't a black worker in sight.
Not in the kitchen, or the storeroom or the book shop.
"If we want to have our own nation, then we must be willing to do all the work ourselves," says Hendrik Verwoerd Jr., son of the former prime minister and the leader of the Orange Workers, founded in 1980.
They do indeed want their own nation.
The pillars of apartheid may be trembling in the rest of South Africa, with Johannesburg opening its public facilities to all races, blacks storming the all-white beaches of the Cape and the government releasing seven leaders of the banned African National Congress.
But here in Morgenzon, a sleepy town amid the corn fields of the eastern Transvaal, the Orange Workers are holding the pillars steady.
The Orange Workers -- who take their name from William of Orange of the Netherlands, a hero of the Dutch-descended Afrikaners -- believe that the solution to South Africa's racial problems isn't the abolition of apartheid, it's the perfection of apartheid -- complete and total separation of the races.
Here, then, is where the Orange Workers have come to make apartheid's last stand.
Their idea is to create a city, first, and then an entire nation -- without blacks.
This may seem to be a preposterous and utterly futile effort in Africa.
And the fact that there are only 3,000 card-carrying Orange Workers may put them on the loony fringe.
But their ideal of an Afrikaner homeland, an all-white reserve to be carved out of present-day South Africa, is a mainstream desire of the right-wing, which embraces about one-third of the country's five million whites.
Afrikaner philosophers and theologians have long ruminated on the need for a white homeland.
The Orange Workers are just putting this preaching into practice.
Thus, farmer Johan Fischer, his T-shirt and jeans covered in grease, crawls around under his planter, tightening bolts and fixing dents.
On almost every other farm in South Africa, black workers do the repairs.
But not here.
Mr. Fischer plows his own fields, sows his own corn and sunflowers, and feeds his own sheep.
Over at the fiberglass factory, four white workers assemble water tanks on their own, and in their spare time they build townhouses across the road.
On Main Street, Alida Verwoerd and her daughters look after the clothes and fabric shop, then hurry home to fix lunch for the rest of the family.
Down by the stream, a group of Orange Workers puts the finishing touches on a golf course.
If whites want to play there by themselves, says consulting engineer Willem van Heerden, whites should also build it by themselves.
"If we want to survive as a people," he says, "we have to change our way of life.
The Afrikaner must end his reliance on others."
In their quest to perfect apartheid, the Orange Workers have discovered a truth that most of privileged white South Africa tries mightily to deny: The master can't become dependent on the slave and expect to remain master forever.
"If apartheid means you want cheap black labor and all the comforts that go with it, but you also want to exclude the blacks from social and political integration, then these are two contradictions that can't go on forever," says Mr. Verwoerd.
He is sitting in his living room, beneath a huge portrait of his late father, Hendrik F. Verwoerd, apartheid's architect and South African prime minister from 1958 to 1966.
Somewhere, the son sighs, things went terribly wrong with apartheid; today, whites even rely on blacks to police their separation.
"People took separate development as an opportunity to use black labor without ever getting rid of it.
But my father meant it to mean real separation," says the son.
The Orange Workers speak sincerely.
"We agree with world opinion that the status quo in South Africa is morally wrong," says Pieter Bruwer, the Orange Workers' chief scribe and pamphleteer.
"We must either integrate honestly or segregate honestly."
Morgenzon has long been a special domain of Afrikanerdom.
According to Mr. Verwoerd, the early Afrikaner pioneers were the first people to settle in the eastern Transvaal, even before the blacks.
Then, when Morgenzon was incorporated in 1908, the farmer who owned the land stipulated that only whites could reside in town; blacks could work there, but they had to leave at night.
Today, Morgenzon is a town of 800 whites and two paved roads.
Weeds push up through the cracks in the sidewalks, and many houses and storefronts are empty.
There are few factories and no mines.
It was an ideal place for the Orange Workers to start their new nation, unencumbered by the demographics that have undermined apartheid elsewhere in South Africa.
So far, about 150 Orange Workers have moved here, spending nearly $1 million buying up property over the past three years.
Still, complete and total segregation remains elusive.
Just beyond the city limits is a shantytown of 2,000 blacks who are employed throughout the area.
Despite the Orange Workers' intention to put them all out of work, they are in no hurry to leave.
A young man called July (that's when he was born), who works at the railroad station just up the street from the Orange Workers office, points at the whitewalled building and says matter-of-factly, "We're not allowed in there, that's all I know."
The 650-or-so local whites who aren't Orange Workers are more troubled.
Try as they might, they just can't conceive of life without black workers.
"Impossible, impossible," say the Conradies, an elderly couple who have run the general store for decades.
"We can't do without their help," says Mrs. Conradie.
"Oh no.
We need them and I thank God for them."
Over at the Shell station, owner Rudi van Dyk, who doubles as Morgenzon's mayor, worries that the Orange Workers have made his town the laughingstock of the nation.
"What they want us to do just isn't practical," he says, noting that he employs 16 blacks.
"I couldn't afford to hire 16 whites.
The only Afrikaners who would be willing to work for this salary wouldn't know how to handle money."
Back at the Verwoerd house, Hendrik Sr. peers down over the shoulder of Hendrik Jr.
The son believes that when the Afrikaners finally realize there is no turning back the integration of South African society and politics, Morgenzon will boom.
"We urge our people not to wait until they have to fight for their own nation," says Mr. Verwoerd.
"By populating a place now, we make ourselves a power any new government will have to take into account."
Curiously, he compares the Orange Workers to the ANC, which his father outlawed in 1960.
"The ANC won't be stopped until there is a provision for black aspirations," says Mr. Verwoerd.
"Likewise, no government will stop this idea of the Afrikaners."
He apologizes for sounding pushy.
"Look," he says, "If the rest of South Africa wants to have an integrated melting pot, that's their choice.
We'll leave them alone.
We just want to have our own cup of tea."
And they will even serve it themselves.
Okay, now you can pick up that phone.
But don't do anything rash.
After last Friday's stock-market plunge, investment professionals cautioned people to resist the urge to call their brokers and sell stocks.
Not selling into a panic turned out to be very good advice: Despite the market's volatility, the Dow Jones Industrial Average has surged 114 points in the past four days.
Now, with a semblance of normalcy returning, some advisers say it's time for investors to take a hard, cold look at the stocks they own and consider some careful pruning.
"The market is sending nervous signals," says Peter J. Canelo, chief market strategist for Bear, Stearns & Co., and it's "unwise" to be overcommitted to stocks.
Alan Weston, president of Weston Capital Management, a Los Angeles money-management firm, adds that in periods of uncertainty like today, "it's a good time to cut out the dead branches of your portfolio."
Not everybody agrees that it's time to trim.
"We aren't inclined to prune stock portfolios now," says Steven G. Einhorn, chairman of the investment policy committee of Goldman, Sachs & Co.
"Investors should stay with their stocks.
We expect a choppy and sloppy market for a short period, but we don't think it will be ugly.
The downside is limited."
And even those who say some selective selling may be in order stress that individuals need to be in the stock market to achieve their long-term investment objectives and to help balance their other assets.
Any selling, they say, should be well thought-out, and executed gradually, during market rallies.
They offer these suggestions:
GET RID OF THE DOGS.
"Sell stocks that aren't doing well now, and that don't have good earnings prospects," says Alfred Goldman, technical analyst at St. Louis-based A.G. Edwards & Sons.
"Most people do just the opposite: They sell their winners and keep their losers."
Which types of stocks are most likely to qualify?
Technology stocks, says Mr. Goldman.
WATCH FOR EARNINGS DISAPPOINTMENTS.
A company doesn't have to post a loss to be a candidate for sale, says Charles I. Clough Jr., chief market strategist at Merrill Lynch & Co.
If earnings don't live up to analysts' expectations, he says, that's enough to dump the stock.
John Markese, director of research for the American Association of Individual Investors, raises a cautionary note.
"Substituting a rule of thumb for your own judgment" can be a mistake, he says.
An earnings disappointment may reflect a situation that's short-term.
But Mr. Clough says, "The risk is that earnings disappointments will continue."
The economy is decelerating after six good years, and "right now it's better to shoot first and ask questions later."
Which types of stocks currently have the greatest earnings risks?
Computer companies; commodity cyclical stocks, like autos; and retailing stocks, he says.
BEWARE OF HEAVY DEBT.
The companies apt to run into earnings problems soonest are the ones with heavy debt loads, says Larry Biehl, partner in the San Mateo, Calif., money-management firm of Bailard, Biehl & Kaiser.
Mr. Canelo of Bear Stearns agrees: "If we do have an economic slowdown," he says, "companies with high debt ratios will be dumped en masse."
The best course for individual investors is to sell these stocks now, the two advisers say.
SELL `WHISPER' STOCKS.
UAL Corp.'s difficulty in obtaining bank financing for its leveraged buy-out and its resulting price plunge is a tip-off to what's going to happen to "takeover stocks," says Mr. Canelo.
Takeover activity will slow down as more and more banks tighten their lending requirements, he says.
"There'll be fewer and fewer deals."
Moreover, many financial advisers say individuals should be in the stock market as long-term investors, not as traders trying to catch the next hot stock.
In general, they say, avoid takeover stocks.
COMPARE P/E RATIOS WITH PROSPECTS.
Mr. Canelo suggests that investors compare price/earnings ratios (the price of a share of stock divided by a company's per-share earnings for a 12-month period) with projected growth rates.
"If you think earnings will grow at 20% a year, it's all right to pay 20 times earnings," he says.
"But don't pay 30 times earnings for a company that's expected to grow at 15% a year."
Mr. Canelo thinks the market will probably go higher, but "will be ruthless with stocks if the earnings aren't there."
Mr. Markese cautions that investors shouldn't slavishly follow any specific price/earnings sell trigger.
"If you say sell anytime a company's price/earnings ratio exceeds 15, that knocks out all your growth stocks," he says.
"You eliminate companies with substantial prospects that are moving up in price."
EXAMINE WHAT HAS CHANGED.
Tom Schlesinger, market analyst at A.G. Edwards & Sons Inc., says investors should consider selling if there has been a fundamental change in a company since they bought its stock.
Say you purchased a stock because of a new product that was in the works.
Now, because of various difficulties, the product has been scrapped.
Time to sell, says Mr. Schlesinger.
Similarly, he says, suppose you were attracted to a company because of expectations that sales would hit $200 million by 1990.
If things haven't worked out that well, and sales won't hit $200 million until 1992, it's time to consider selling, he says.
USX Corp. declined a United Steelworkers request for a reopening of its four-year labor contract that is due to expire Jan. 31, 1991.
The union on Oct. 5 requested that the contract be reopened to restore all pay and benefits that the union gave up in the 1982-83 and 1986-87 rounds of bargaining.
A United Steelworkers spokeman said Lynn Williams, the union's president, was out of town.
The union won't respond to the USX statement until Mr. Williams has studied it, the spokesman said.
Robert A. Oswald, chief financial officer and a director of this natural-gas pipeline company, was elected to the additional position of executive vice president.
In addition, Michael W. O'Donnell, executive vice president of a Columbia unit, was named assistant chief financial officer and a senior vice president of the parent company.
The appointments take effect Nov. 1.
Both men are 44 years old.
This magazine and book publisher said three men were elected directors, increasing the board to 10.
They are: James R. Eiszner, 62 years old and chairman and chief executive officer of CPC International Inc.; Robert G. Schwartz, 61, chairman, president and chief executive officer of Metropolitan Life Insurance Co., and Walter V. Shipley, 53, chairman and chief executive officer of Chemical Banking Corp.
BankAmerica Corp. reported a 34% jump in third-quarter earnings, as its rocket-like recovery from nearly ruinous losses several years ago continued to be fueled by growth in consumer loans, higher interest margins and negligible loan losses.
For the quarter, BankAmerica said it earned $254 million, or $1.16 a share, compared with $190 million, or 97 cents a share, a year earlier.
BankAmerica spokesmen said preliminary reports indicate the company wasn't materially affected by the Tuesday earthquake.
All but eight of the 850 branches, which had some structural damage, reopened yesterday for business.
Automated teller machine operations also were up and operating yesterday, a bank spokesman said.
For the first time in nearly two years, BankAmerica results failed to improve in consecutive quarters, but the decline from the second quarter was attributable to special factors.
Third-quarter profit was 16% below the $304 million, or $1.50 a share, earned in the 1989 second quarter.
The company cited higher tax credits in the second quarter, totaling $63 million, compared with $28 million in the third quarter.
Excluding tax credits, profit was 6% below the second quarter.
But that drop was caused entirely by a decline in Brazilian interest paid, to $5 million from $54 million the second quarter.
Moreover, BankAmerica continued to build its reserve against troubled foreign loans by boosting its loan-loss provision to $170 million, about the same as the previous quarter but well above the $100 million in the year-earlier quarter.
The provision rate was far above BankAmerica's actual net credit losses of $24 million in the third quarter, compared with $18 million in the second period and $38 million a year earlier.
As a result, BankAmerica said its reserve against troubled foreign-country loans, once below 25%, now amounts to 45% of the $6.4 billion of non-trade debt it calculates it is owed by those nations.
That level is about the same as some other big banks, but far below the 85% and 100% reserves of Bankers Trust New York Corp. and J.P. Morgan & Co., respectively.
By any measure, third-quarter earnings were still robust, equivalent to a 0.92% return on assets even excluding tax credits.
By that key measure of operating efficiency, BankAmerica turned in a better performance than its well-regarded Los Angeles-based competitor, Security Pacific Corp., which posted a 0.89% return in the third quarter.
But it continued to badly trail its San Francisco neighbor, Wells Fargo & Co., which reported an extraordinary 1.25% return on assets.
Both returns don't include any tax credits.
"They {BankAmerica} continue to show good performance," said Donald K. Crowley, an analyst with Keefe, Bruyette & Woods Inc., San Francisco.
In composite trading yesterday on the New York Stock Exchange, BankAmerica common stock edged up 12.5 cents to close at $32 a share.
Shareholder equity improved to 4.68% from 4.23% in the previous quarter.
The 4.52% net interest margin, or the difference between the yield on a bank's investments and the rate it pays for deposits and other borrowings, was still markedly higher than the 3.91% ratio a year earlier, and is among the best in the industry, analysts said.
The high margin partly stems from continued strong growth in high-yielding consumer loans, which jumped 31% to $17.47 billion from a year earlier, and residential mortgages, which rose 25% to $12 billion.
BankAmerica's total loans rose 8% to $71.36 billion.
For the nine months, BankAmerica profit soared 81% to $833 million, or $4.07 a share, from $461 million, or $2.40 a share.
International Business Machines Corp. will announce on Tuesday a slew of software products aimed at eliminating some of the major problems involved in computerizing manufacturing operations, industry executives said.
Many plant floors currently resemble a Tower of Babel, with computers, robots and machine tools that generally speak their own language and have trouble talking to each other.
As a result, if a problem develops on a production line, it is unlikely some supervisor sitting in front of a personal computer or workstation will know about it or be able to correct it.
So IBM will be announcing more than 50 products that will be aimed at letting even the dumbest machine tool talk to the smartest mainframe, or anything in between.
In an unusual display of openness, IBM also will be helping customers tie together operations that include lots of equipment made by IBM's competitors.
In addition, the executives said IBM will be offering programming tools designed to let anyone working on a factory floor write ad-hoc software, for instance, to do statistical analysis that would pinpoint a problem on a manufacturing line.
In Armonk, N.Y., an IBM spokeswoman confirmed that IBM executives will be announcing some computer-integrated-manufacturing plans next week but declined to elaborate.
The industry executives said that, as usual with such broad announcements from IBM, this one will be part reality and part strategy.
So it will take many quarters for IBM to roll out all the products that customers need, and it will take years for customers to integrate the products into their operations.
Also as usual, the products will appeal mostly to heavy users of IBM equipment, at least initially.
Still, consultants and industry executives said the products could help make manufacturing operations more efficient, and provide a boost to the computer-integrated-manufacturing market -- a market that Yankee Group, a research firm, has said may double to $40 billion by 1993.
"This is a step in the right direction," said Martin Piszczalski, a Yankee Group analyst.
He added, though, that "a lot of this is intentions. . . .
We'll have to wait and see" how the plan develops.
The announcements also should help IBM go on the offensive against Digital Equipment Corp. on the plant floor.
While IBM has traditionally dominated the market for computers on the business side of manufacturing operations and has done well in the market for design tools, Digital has dominated computerized manufacturing.
Hewlett-Packard Co. also has begun to gain share in the whole computer-integrated-manufacturing arena.
IBM will face an uphill climb against Digital, given Digital's reputation for being better than IBM at hooking together different manufacturers' computers.
In addition, Hewlett-Packard, while a much smaller player, has made a big commitment to the sorts of industry standards that facilitate those hookups and could give IBM some problems.
Both can be expected to go after the market aggressively: Gartner Group Inc., a research firm, estimated the Digital gets 30% of its revenue from the manufacturing market, and Hewlett-Packard gets 50%.
IBM, which Gartner Group said generates 22% of its revenue in this market, should be able to take advantage of its loyal following among buyers of equipment.
That is because many companies will standardize on certain types of equipment as the various parts of the manufacturing market merge, and IBM is the biggest player.
But much will depend on how quickly IBM can move.
The whole idea of computer-integrated manufacturing, CIM, seems to be making a comeback after losing a little luster over the past couple of years when it became apparent that it wasn't a panacea that would make U.S. plants more efficient and banish foreign competition.
Erik Keller, a Gartner Group analyst, said organizational changes may still be required to really take advantage of CIM's capabilities -- someone on the shop floor may not like having someone in an office using a personal computer to look over his shoulder, for instance, and may be able to prevent that from happening.
But he said a system such as IBM's should help significantly.
In making polyethylene sheets out of plastic chips, for instance, a chip sometimes doesn't melt, gets caught in the machinery and creates a run in the sheets.
That can be expensive, because the problem may not be noticed for a while, and the sheets are typically thrown away.
But Mr. Keller said that, if computers can be integrated into the process, they could alert an operator as soon as the problem occurred.
They could also check through the orders on file to find a customer that was willing to accept a lower grade of polyethylene.
The computer would let the machine run just until that order was filled, eliminating waste.
This sort of improved link figures to eventually become a significant weapon for some companies.
Companies might be able to tell salespeople daily, for instance, about idle equipment, so they could offer discounts on whatever that equipment produces.
Salespeople also could get a precise reading on when products could be delivered -- in much the same way that Federal Express has marketed its ability to tell exactly where a package is in the delivery system.
Ford Motor Co.'s Merkur, the company's first new car franchise in the U.S. since the Edsel was unveiled in 1957, now will share Edsel's fate.
Ford said yesterday it will halt imports of the Merkur Scorpio, a $28,000 luxury sedan built by Ford of Europe in West Germany.
The cars are sold under a separate franchise with its own sign in front of Lincoln-Mercury dealers -- as opposed to new models such as Taurus or Escort, which are sold under existing Ford divisions.
The move to halt imports -- announced 29 years and 11 months to the day after Henry Ford II declared that the Edsel division and its gawky car would be scrapped -- kills the four-year-old Merkur brand in the U.S. market.
It will continue to be sold in the European market.
Merkur's death isn't nearly as costly to Ford as was the Edsel debacle, because Merkur was a relatively low-budget project with limited sales goals.
Still, Merkur's demise is a setback for Ford at a time when the company's image as the U.S. auto maker with the golden touch is showing signs of strain.
The No. 2 auto maker's new Thunderbird and Mercury Cougar models haven't met sales expectations in the year since they were introduced, and Ford's trucks are losing ground to their GM rivals.
This fall, Ford introduced only one new product: A restyled version of its hulking Lincoln Town Car luxury model.
The demise of Merkur (pronounced mare-COOR) comes after a September in which 670 Merkur dealers managed to sell only 93 Scorpios.
Total Merkur sales for the first nine months dropped 46% from a year ago to just 6,320 cars.
Merkur isn't the only European luxury brand having problems in the U.S.
The Japanese assault on the luxury market is rapidly overshadowing such European makes as Audi and Saab, which at least have clear brand images.
Merkur, as an import on domestic car lots, suffered from the same sort of image confusion that is hobbling sales of imports at General Motors Corp. and Chrysler Corp.
Merkur was originally aimed at enticing into Lincoln-Mercury dealerships the kind of young, affluent buyers who wouldn't be caught dead in a Town Car -- a vehicle so bargelike that Ford is staging a press event next month linking the Town Car's launch to the commissioning of a new aircraft carrier in Norfolk, Va.
But the brand had trouble from the start.
The first Merkur, the XR4Ti, went on sale in early 1985.
The sporty coupe foundered in part because American buyers didn't go for the car's unusual double-wing rear spoiler.
In May 1987, Ford began importing the Scorpio sedan from West Germany to sell next to a redesigned XR4Ti in showrooms.
Ford officials said they expected the two Merkurs would sell about 15,000 cars a year, and in 1988 they reached that goal, as sales hit 15,261 cars.
It was downhill from there, however.
One major factor was the decline of the dollar against the mark, which began less than a year after Merkur's 1985 launch.
As the West German currency rose, so did Merkur prices.
The Merkur cars also suffered from spotty quality, some dealers say.
"It was like a comedy of errors," says Martin J. "Hoot" McInerney, a big dealer whose Star Lincoln-Mercury-Merkur operation in Southfield, Mich., sold more XR4Ti's than any other dealership.
But by the third quarter of 1988, Scorpios had a high satisfaction rating in internal Ford studies, a spokesman said.
Apparently, however, the improvement came too late.
Last fall, Ford announced it would discontinue the XR4Ti in the U.S. at the end of the 1989 model year.
Ford said then it would keep the Scorpio.
This year, Scorpio sales plummeted, and at the current sales pace it would take Ford 242 days to sell off the current Scorpio inventory of about 4,600 cars.
Canadian Pacific Ltd. said it proposed acquiring the 44% of Soo Line Corp. it doesn't already own for $19.50 a share, or about $81.9 million, after failing to find a buyer for its majority stake earlier this year.
Soo Line said its board appointed a special committee of independent directors to study the proposal.
The troubled Minneapolis-based railroad concern said the committee has the authority to hire financial and legal advisers to assist it.
The proposed acquisition will be subject to approval by the Interstate Commerce Commission, Soo Line said.
In New York Stock Exchange composite trading yesterday, Soo Line shares jumped well above the proposed price, closing at $20.25, up $2.75.
Canadian Pacific put its 56% stake in Soo Line up for sale last year but couldn't find any takers.
Canadian Pacific, which has interests in transportation, telecommunications, forest products, energy and real estate, finally took its majority block off the market this spring.
"It turned out we couldn't sell it," a Canadian Pacific official said, adding that acquiring the remainder of Soo Line is now "the best way to rationalize operations."
Canadian Pacific is Soo Line's biggest customer and has owned a majority stake in the U.S. railroad since 1947.
Canadian Pacific and Soo Line tracks connect at two points in the West on the Canada-U.S. border and the two companies operate a very successful Chicago-Montreal rail service.
Separately, for the first nine months, Soo Line reported a loss of $398,000, or four cents a share, compared with net income of $12.5 million, or $1.32 a share, a year earlier.
Revenue fell 5.8% to $407.9 million from $433.2 million.
The company had a loss from operations of $1.7 million.
Golden Nugget Inc. reported a third-quarter net loss of $13.1 million, or 76 cents a share, based on 17.2 million common shares and dilutive equivalents outstanding.
The results compare with a year-earlier net loss of $1.5 million, or seven cents a share, based on 20.3 million common and dilutive equivalents outstanding.
Operating revenue rose 25% to $52.1 million from $41.8 million a year ago.
Results for the latest quarter include nonoperating items of $23.9 million, versus $8.4 million a year earlier.
Most of the expenses stem from the company's huge Mirage resort-casino scheduled to open next month along the Strip, and an April 1989 financing by units operating the downtown Golden Nugget property.
For the nine months, Golden Nugget reported a net loss of $11.4 million, or 69 cents a share, based on 16.6 million common and dilutive equivalents outstanding.
The year earlier, the company had a net loss of $4.3 million, or 20 cents a share, based on 21 million common shares and dilutive equivalents outstanding.
The 1988 results include a $10.7 million charge stemming from a litigation judgment.
Separately, the casino operator said its board approved a plan to buy-back as many as three million common shares from time to time, either in the open market or through private transactions.
An additional 299,000 shares are authorized for repurchase under an earlier stock buy-back program.
John Uphoff, an analyst with Raymond James & Associates, said the results weren't surprising, and attributed the buy-back to management's confidence in the Mirage's ability to generate strong cash flow in 1990.
Yesterday, in New York Stock Exchange composite trading, Golden Nugget common closed at $28.25, up $2.
Capital Holding Corp. said it requested and received the resignation of John A. Franco, its vice chairman, as an officer and a director of the life insurance holding company.
The company said Mr. Franco developed a plan to establish a business that might be competitive with Capital Holding Corp.'s Accumulation and Investment Group, which Mr. Franco headed.
The group temporarily will report to Irving W. Bailey II, chairman, president and chief executive officer of Capital Holding.
Mr. Franco, 47 years old, said in a telephone interview that he has been considering and discussing a number of possible business ventures, but that "nothing is at a mature stage."
He said he "didn't argue with" the company's decision to seek his resignation because contemplating outside business ventures can distract an executive from performing his best "at the job he is paid to do."
Martin H. Ruby, a managing director of Capital Holding's Accumulation and Investment Group, also resigned to pursue other business interests, Capital Holding said.
Mr. Ruby, 39, said that he had "an amicable parting" with Capital Holding and that he has "a number of ventures in the financial-services area" under consideration.
He said that his resignation was a mutual decision with Capital Holding management, but that he wasn't actually asked to resign.
The Accumulation and Investment Group is responsible for the investment operations of all Capital Holding's insurance businesses and markets guaranteed investment contracts to bank trust departments and other institutions.
It also sells single-premium annuities to individuals.
Mr. Bailey said he expects to name a new group president to head that operation following the Nov. 8 board meeting.
@
Money Market Deposits-a 6.23%
a-Average rate paid yesterday by 100 large banks and thrifts in the 10 largest metropolitan areas as compiled by Bank Rate Monitor.
b-Current annual yield.
Guaranteed minimum 6%.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
PLASTIC PENCILS, CODE-NAMED E-71, made their hush-hush debut in children's pencil boxes at five-and-dime stores in 1973.
But few knew it then and most still think all pencils are wooden.
Eagle Pencil of Shelbyville, Tenn., "Pencil City U.S.A.," had made its earliest pilot plastic pencils in 1971.
But it wasn't until after it hired Arthur D. Little, a Cambridge, Mass., research concern, that its new product was refined for commercial sale in 1973.
Three A.D.L. inventors applied April 6, 1973, for the patent, which was assigned and awarded in 1976 to Hasbro Industries, then Eagle's parent.
Pencil pushers chew and put the plastic models behind their ears just like traditional pencils made of glued strips of California incense cedar filled with ceramic lead.
It takes five steps to make standard pencils, just one for the plastic type.
Automated machines coextrude long plastic sheaths with graphite-plastic cores that are printed, cut, painted and eraser-fitted.
"After more than 200 years, something new has happened to pencils," said Arthur D. Little in a 1974 report that publicly described the previously secret item.
Eagle's plastic type sharpens and looks like a wooden pencil.
A major difference is that a snapped wooden pencil will have a slivered break while a plastic model will break cleanly.
The softness of the core constrains the plastic models to No. 1, No. 2 or No. 3-type pencils, which account for the bulk of the market.
Artists and draftsmen need harder "leads."
Eagle, now called Eagle-Berol, remains a leading company among the 10 in the U.S. that produced about 2.3 billion pencils last year, according to the Pencil Makers Association.
It's a trade secret how many were plastic, and most writers still don't know what they're using.
H.F. Ahmanson & Co., the nation's largest thrift holding company, posted a 12% earnings decline for the third quarter while another large California savings and loan, Great Western Financial Corp., reported a slight earnings gain.
H.F. Ahmanson, parent of Home Savings of America, reported third-quarter net of $49.2 million, or 50 cents a share, down from $56.1 million, or 57 cents a share, in the year-earlier period.
Most of the earnings decline reflected an increase in the company's effective tax rate to 44% from 37% in the year-ago third quarter when nonrecurring tax credits were recorded, the company said.
Pretax earnings declined 1.3%.
For the nine months, Los Angeles-based H. F. Ahmanson had profit of $128.1 million, or $1.29 a share, a 4.6% decline from earnings of $134.2 million in the year-ago nine months.
The company said the decline was attributable to a 79% reduction in net gains on loan sales this year.
Third-quarter spreads widened to the highest level in two years as loan portfolio yields rose and money costs declined, the company said.
Great Western Financial said third-quarter profit rose slightly to $68.4 million, or 52 cents a share, from $67.9 million, or 53 cents a share, from a year ago.
Great Western, based in Beverly Hills, Calif., is a financial services firm and parent to Great Western Bank, an S&L.
Great Western said it had a sharp increase in margins in the recent third quarter.
Margins are the difference between the yield on the company's earning assets and its own cost of funds.
But a reduction in one-time gains on the sale of various assets and an increase in the company's provision for loan losses held down the earnings gain, the company said.
Great Western's provision for loan losses was increased to $27.9 million for the recent quarter compared with $21.8 million a year ago primarily as a result of "continued weakness in various commercial and multifamily real estate markets outside California."
For the nine months Great Western posted net of $177.5 million, or $1.37 a share, a 5.9% decline from $188.7 million, or $1.48 a share, in the year-ago period.
Dun & Bradstreet Corp. posted a 15% rise in third-quarter earnings.
But revenue declined more than 2%, reflecting in part a continuing drop in sales of credit services in the wake of controversy over the company's sales practices.
The information company also cited the stronger dollar, the sale last year of its former Official Airline Guides unit and other factors.
Net income rose to a record $155.3 million, or 83 cents a share, from $134.8 million, or 72 cents a share.
Revenue fell to $1.04 billion from $1.07 billion.
In composite trading on the New York Stock Exchange, Dun & Bradstreet closed yesterday at $53.75, down 25 cents a share.
Analysts said the results were as expected, but several added that the earnings masked underlying weaknesses in several businesses.
"The quality of earnings wasn't as high as I expected," said Eric Philo, an analyst for Goldman, Sachs & Co.
For example, he noted, operating profit was weaker than he had anticipated, but nonoperating earnings of $14.6 million and a lower tax rate helped boost net income.
Dun & Bradstreet said operating earnings rose 8%, excluding the sale of Official Airline Guides.
Third-quarter sales of U.S. credit services were "disappointingly below sales" of a year earlier, Dun & Bradstreet said.
As previously reported, those sales have been declining this year in the wake of allegations that the company engaged in unfair sales practices that encouraged customers to overpurchase services.
The company has denied the allegations but has negotiated a proposed $18 million settlement of related lawsuits.
Analysts predict the sales impact will linger.
"There isn't much question there will continue to be a ripple effect," said John Reidy, an analyst with Drexel Burnham Lambert Inc.
Dun & Bradstreet noted that price competition in its Nielsen Marketing Research, Nielsen Clearing House and Donnelley Marketing businesses also restrained revenue growth.
It cited cyclical conditions in its Moody's Investors Service Inc. and D&B Plan Services units.
For the nine months, net income rose 19% to $449 million, or $2.40 a share, from $375.9 million, or $2.01 a share, a year earlier.
Year-earlier earnings reflected costs of $14.3 million related to the acquisition of IMS International.
Revenue rose slightly to $3.16 billion from $3.13 billion.
Control Data Corp. said it licensed its airline yield-management software to the International Air Transport Association.
Terms include a royalty arrangement, but details weren't disclosed.
The computer equipment and financial services company said IATA, a trade group, will sell access to the package to its 180 airline members world-wide.
Control Data will receive revenue linked to the number of passengers served by the software, IATA said.
The package helps carriers solve pricing problems, such as how to react to discounts offered by competitors or what would be the optimum number of seats to offer at a given price.
Wheeling-Pittsburgh Steel Corp. said it decided to proceed with installation of automatic gauge and shape controls at its 60-inch tandem cold rolling mill in Allenport, Pa.
The new equipment, which will produce steel sheet with more uniform thickness and flatness, is likely to cost more than $20 million, the company said.
When the company last considered adding the equipment two years ago, it estimated the cost at $21 million to $22 million, but a task force will have to prepare a detailed plan before the company can predict the current cost.
The time schedule for installing the equipment also will be developed by the task force, the company said.
Sir Richard Butler, 60-year-old chairman of Agricola (U.K.) Ltd., was named chairman of County NatWest Investment Management Ltd., the investment management subsidiary of County NatWest Ltd., the investment banking arm of this British bank.
Sir Richard succeeds John Plastow, who resigned in July.
Sir Richard is also a non-executive director at National Westminister Bank and NatWest Investment Bank Ltd.
In the long, frightening night after Tuesday's devastating earthquake, Bay Area residents searched for comfort and solace wherever they could.
Some found it on the screen of a personal computer.
Hundreds of Californians made their way to their computers after the quake, and checked in with each other on electronic bulletin boards, which link computers CB-radio-style, via phone lines.
Some of the most vivid bulletins came over The Well, a Sausalito, Calif., board that is one of the liveliest outposts of the electronic underground.
About two-thirds of the Well's 3,000 subscribers live in the Bay Area.
The quake knocked The Well out for six hours, but when it came back up, it teemed with emotional first-hand reports.
Following are excerpts from the electronic traffic that night.
The time is Pacific Daylight Time, and the initials or nicknames are those subscribers use to identify themselves.
11:54 p.m.
JCKC:
Wow!
I was in the avenues, on the third floor of an old building, and except for my heart (Beat, BEAT!) I'm OK.
Got back to Bolinas, and everything had fallen: broken poster frames with glass on the floor, file cabinets open or dumped onto the floor.
11:59 p.m.
JKD:
I was in my favorite watering hole, waiting for the game to start.
I felt the temblor begin and glanced at the table next to mine, smiled that guilty smile and we both mouthed the words, "Earth-quake!" together.
That's usually how long it takes for the temblors to pass.
This time, it just got stronger and then the building started shaking violently up and down as though it were a child's toy block that was being tossed.
12:06 a.m.
HRH:
I was in the Berkeley Main library when it hit.
Endless seconds wondering if those huge windows would buckle and shower us with glass.
Only a few books fell in the reading room.
Then the auto paint shop fire sent an evil-looking cloud of black smoke into the air.
12:07 a.m.
ONEZIE:
My younger daughter and I are fine.
This building shook like hell and it kept getting stronger.
Except for the gas tank at Hustead's Towing Service exploding and burning in downtown Berkeley, things here are quite peaceful.
A lot of car alarms went off.
The cats are fine, although nervous.
12:15 a.m.
DHAWK:
Huge fire from broken gas main in the Marina in SF.
Areas that are made of `fill' liquefy.
A woman in a three-story apartment was able to walk out the window of the third floor onto street level after the quake.
The house just settled right down into the ground.
12:38 a.m.
DAYAC:
I was driving my truck, stopped at a red light at the corner of Shattuck and Alcatraz at the Oakland-Berkeley border when it hit.
Worst part was watching power lines waving above my head and no way to drive away.
12:48 a.m.
LMEYER:
Was 300 ft. out on a pier in San Rafael.
It flopped all around, real dramatic!
Many hairline cracks in the concrete slabs afterwards.
Ruined the damn fishing!
1:00 a.m.
HEYNOW:
I rode it out on the second floor of Leo's at 55th and Telegraph in Oakland.
I heard parts of the building above my head cracking.
I actually thought that I might die.
I couldn't decide if I should come home to Marin, because my house is on stilts.
I decided to brave the storm.
There was a horrible smell of gas as I passed the Chevron refinery before crossing the Richmond-San Rafael Bridge.
I could also see the clouds across the bay from the horrible fire in the Marina District of San Francisco.
I have felt many aftershocks.
My back is still in knots and my hands are still shaking.
I think a few of the aftershocks might just be my body shaking.
1:11 a.m.
GR8FLRED:
I could see the flames from San Francisco from my house across the bay.
It's hard to believe this really is happening.
1:11 a.m.
RD:
Building on the corner severely damaged, so an old lady and her very old mother are in the guest room.
Books and software everywhere.
This being typed in a standing position.
1:20 a.m.
DGAULT:
Bolinas -- astride the San Andreas Fault.
Didn't feel a thing, but noticed some strange bird behavior.
Duck swarms.
3:25 a.m.
SAMURAI:
I just felt another aftershock a few seconds ago.
I'm just numb.
3:25 a.m.
MACPOST:
Downtown Bolinas seems to be the part of town that's worst off.
No power, minimal phones, and a mess of mayonnaise, wine, and everything else all over the floors of the big old general store and the People's Co-op.
The quivers move through my house every few minutes at unpredictable intervals, and the mouse that's been living in my kitchen has taken refuge under my desk.
It runs out frantically now and then, and is clearly pretty distressed.
I was in Stinson Beach when the quake rolled through town.
At first, we were unfazed.
Then as things got rougher, we ran for the door and spent the next few minutes outside watching the brick sidewalk under our feet oozing up and down, and the flowers waving in an eerie rhythm.
Amazing what it does to one's heart rate and one's short-term memory.
Everyone looked calm, but there was this surreal low level of confusion as the aftershocks continued.
4:02 a.m.
SHIBUMI:
Power is back on, and UCSF {medical center} seems to have quieted down for the night (they were doing triage out in the parking lot from the sound and lights of it).
A friend of mine was in an underground computer center in downtown SF when the quake hit.
He said that one of the computers took a three-foot trip sliding across the floor.
Today should be interesting as people realize how hard life is going to be here for a while.
4:30 a.m.
KIM:
I got home, let the dogs into the house and noticed some sounds above my head, as if someone were walking on the roof, or upstairs.
Then I noticed the car was bouncing up and down as if someone were jumping on it.
I realized what was happening and screamed into the house for the dogs.
Cupboard doors were flying, the trash can in the kitchen walked a few feet, the dogs came running, and I scooted them into the dog run and stood in the doorway myself, watching the outside trash cans dance across the concrete.
When I realized it was over, I went and stood out in front of the house, waiting and praying for Merrill to come home, shivering as if it were 20 below zero until he got there.
Never in my life have I been so frightened.
When I saw the pictures of 880 and the Bay Bridge, I began to cry.
5:09 a.m.
JROE:
The Sunset {District} was more or less like a pajama party all evening, lots of people & dogs walking around, drinking beer.
6:50 a.m.
CAROLG:
I was just sitting down to meet with some new therapy clients, a couple, and the building started shaking like crazy.
It's a flimsy structure, built up on supports, and it was really rocking around.
The three of us stopped breathing for a moment, and then when it kept on coming we lunged for the doorway.
Needless to say, it was an interesting first session!
7:13 a.m.
CALLIOPE:
Albany escaped embarrassingly unscathed.
Biggest trouble was scared family who couldn't get a phone line through, and spent a really horrible hour not knowing.
8:01 a.m.
HLR:
Judy and I were in our back yard when the lawn started rolling like ocean waves.
We ran into the house to get Mame, but the next tremor threw me in the air and bounced me as I tried to get to my feet.
We are all fine here, although Mame was extremely freaked.
Kitchen full of broken crystal.
Books and tapes all over my room.
Not one thing in the house is where it is supposed to be, but the structure is fine.
While I was standing on the lawn with Mame, waiting for another tremor, I noticed that all the earthworms were emerging from the ground and slithering across the lawn!
9:31 a.m.
GR8FLRED:
It's amazing how one second can so completely change your life.
9:38 a.m.
FIG:
I guess we're all living very tentatively here, waiting for the expected but dreaded aftershock.
It's hard to accept that it's over and only took 15 seconds.
I wonder when we'll be able to relax.
9:53 a.m.
PANDA:
Flesh goes to total alert for flight or fight.
Nausea seems a commonplace symptom.
Berkeley very quiet right now.
I walked along Shattuck between Delaware and Cedar at a few minutes before eight this morning.
Next to Chez Panisse a homeless couple, bundled into a blue sleeping bag, sat up, said, "Good morning" and then the woman smiled, said, "Isn't it great just to be alive?"
I agreed.
It is.
Great.
Georgia-Pacific Corp., exceeding some analysts' expectations, said third-quarter earnings rose 56% to $178 million, or $2.03 a share, from $114 million, or $1.19 a share, in the year-earlier period.
Sales increased 10% to $2.65 billion from $2.41 billion.
Per-share earnings were enhanced by the company's share buy-back program, which reduced the average shares outstanding to 87.5 million in the quarter from 95.8 million in the same quarter of 1988.
With strong prices in the company's two major areas -- building products as well as pulp and paper -- analysts had expected a roaring quarter.
But the performance exceeded some estimates of around $1.90 a share.
Fueling the growth, among other things, were higher-than-expected prices for certain building products.
One reason: efforts to protect the spotted owl led to restrictions on logging in the Pacific Northwest, constricting supply and forcing prices up.
Another reason: strikes, both at Georgia-Pacific and other lumber companies also cut supplies and raised prices, analysts said.
For the nine months, Georgia-Pacific's earnings increased 49% to $504 million, or $5.58 a share, from $338 million, or $3.41 a share.
Sales rose 11% to $7.73 billion from $6.94 billion.
In composite New York Stock Exchange Trading, Georgia-Pacific stock rose $1.25 a share yesterday to close at $58.
The House Public Works and Transportation Committee approved a bill that would give the Transportation Department power to block airline leveraged buy-outs, despite a clear veto threat from the Bush administration.
The 23-5 vote clears the way for consideration on the House floor next week or the week after.
Transportation Secretary Samuel Skinner, in a letter to the committee, warned that he would urge President Bush to veto the legislation if it passed Congress.
The Senate Commerce Committee already has approved similar legislation.
On Monday, a letter from Mr. Skinner's deputy, Elaine Chao, said the administration opposed the legislation "in its present form."
Some of the bill's supporters had taken heart from the fact that the letter wasn't signed by Mr. Skinner and that it didn't contain a veto threat.
The stepped-up administration warnings annoyed some lawmakers, especially senior Republicans who supported the bill because they thought the Transportation Department favored it.
"We backed this bill because we thought it would help Skinner," one Republican said, "and now we're out there dangling in the wind."
A few weeks ago, Mr. Skinner testified before Congress that it would be "cleaner, more efficient" if he had authority to block buy-outs in advance.
But he never took an official position on the bill and has steadfastly maintained that he already has enough authority to deal with buy-outs.
Under the committee bill, the Transportation secretary would have 30 days, and an additional 20 days if needed, to review any proposed purchase of 15% or more of a major U.S. airline's voting stock.
The secretary would be required to block an acquisition if he concluded that it would so weaken an airline financially that it would hurt safety or reduce the carrier's ability to compete, or if it gave control to a foreign interest.
Although the legislation would apply to any acquisition of a major airline, it is aimed at transactions financed by large amounts of debt.
Supporters of the bill are concerned an airline might sacrifice costly safety measures in order to repay debt.
The panel's action occurs in a politically charged atmosphere surrounding recent buy-out proposals, their apparent collapse and the volatile conditions in the stock market.
"It became apparent in hearings that there ought to be regulation of leveraged buy-outs of some sort," Rep. James Oberstar (D., Minn.), chairman of the House Aviation Subcommittee, said during the panel's deliberations.
"I don't believe in the airline business you can be totally laissez-faire because of the high degree of public interest" at stake.
But Mr. Skinner disagreed, calling the legislation "a retreat from the policy of deregulaton of the airline industry."
In his letter to Committee Chairman Glenn Anderson (D., Calif.), the secretary also said the bill "would be at odds with the administration's policies welcoming open foreign investment and market allocation of resources."
Currently, the Transportation Department doesn't have the authority to block a takeover in advance.
However, if the secretary concludes that a transaction has made a carrier unfit to operate, the department may revoke its certificate, grounding the airline.
Such authority is more than adequate, say opponents of the legislation.
But supporters argue that grounding an airline is so drastic that the department would hesitate doing it.
The panel rejected a proposal pushed by AMR Corp., the parent of American Airlines, to allow the Transportation secretary to block corporate raiders from waging proxy fights to oust boards that oppose a leveraged buy-out.
It also voted down proposals to give the secretary much more discretion on whether to block a buy-out and to require the department to consider the impact of a buy-out on workers.
London shares rallied to post strong gains after initial fears evaporated that the California earthquake would depress Wall Street prices.
Tokyo stocks, which rebounded strongly Tuesday, extended their gains yesterday, but most other Asian and Pacific markets closed sharply lower.
In London, the Financial Times-Stock Exchange 100-share index jumped 34.6 points to close at its intraday high of 2170.1.
The index was under pressure for most of the morning over concerns that the effects of Tuesday night's major earthquake in the San Francisco area would undermine the U.S. market.
The mood changed after dealers reappraised the direct impact of the disaster on shares and Wall Street rebounded from early losses.
The Financial Times 30-share index settled 27.8 points higher at 1758.5.
Volume was 449.3 million shares, the slowest of a hectic week, compared with 643.4 million Tuesday.
U.K. composite, or non-life, insurers, which some equity analysts said might be heavily hit by the earthquake disaster, helped support the London market by showing only narrow losses in early trading.
The insurers' relative resilience gave the market time to reappraise the impact of the California disaster on U.K. equities, dealers said.
Dealers said the market still hasn't shaken off its nervousness after its bumpy ride of the past several sessions, caused by interest-rate increases last week and Wall Street's 6.9% plunge Friday.
But technical factors, including modest gains in the value of the pound, helped draw buying back into the market and reverse losses posted a day earlier.
Among composite insurers, General Accident rose 10 pence to #10.03 ($15.80) a share, Guardian Royal climbed 5 to 217 pence, Sun Alliance rose 3 to 290, and Royal Insurance jumped 12 to 450.
Life insurers fared similarly, with Legal & General advancing 3 to 344, although Prudential fell 2 to 184 1/2.
Pearl Group rose 5 to 628, and Sun Life finished unchanged at #10.98.
Most banking issues retreated after a sector downgrade by Warburg Securities, although National Westminister showed strength on positive comments from brokerage firms about its long-term prospects.
NatWest, the most actively traded of the banks, finished at 300, up 1.
B.A.T Industries fell in early dealings but recovered to finish at 754, up 5.
Dealers said the market was nervous ahead of a special B.A.T holders' meeting today.
The session is to consider a defensive plan to spin off assets to fend off Sir James Goldsmith's #13.4 billion bid for B.A.T.
The recent stock market drop has shaken confidence in the plan, but dealers said the shares fell initially on questions about whether Mr. Goldsmith's highly leveraged bid will come to fruition.
Trading was suspended in WCRS Group, a U.K. advertising concern, pending an announcement that it is buying the remaining 50% of France's Carat Holding for 2.02 billion French francs ($318.7 million) and expanding commercial and equity ties with advertising group Eurocom.
Merchant banker Morgan Grenfell climbed 14 to 406 on renewed takeover speculation.
S.G. Warburg, also mentioned in the rumor mill, jumped 14 at to 414.
Jaguar advanced 19 to 673 as traders contemplated a potential battle between General Motors and Ford Motor for control of the U.K. luxury auto maker.
Tokyo's Nikkei index of 225 issues rose 111.48 points, or 0.32%, to 35107.56.
The index gained 527.39 Tuesday.
Volume was estimated at 800 million shares, compared with 678 million Tuesday.
Declining issues outnumbered advancers 505-455, with 172 unchanged.
The Tokyo Stock Price Index of all issues listed in the first section, which gained 41.76 Tuesday, was up 0.24 points, or 0.01%, at 2642.88.
In early trading in Tokyo Thursday, the Nikkei index rose 135.09 points to 35242.65.
On Wednesday, shares were pushed up by index-related buying on the part of investment trusts as well as small orders from individuals and corporations, traders said.
Institutions, meanwhile, stepped back to the sidelines as the direction of U.S. interest rates remained unclear.
The uncertainty was multiplied by the persistent strength of the dollar, traders said, and by the U.S. trade deficit, which widened by 31% in August from the previous month.
Traders and analysts said they didn't see any effect on Tokyo stocks from the California earthquake.
The impact on Japanese insurers and property owners with interests in the San Francisco area is still being assessed, they said.
Buying was scattered across a wide range of issues, making the session fairly characterless, traders said.
With uncertainty still hanging over interest rates and the dollar, the market failed to find a focus that might lead to further investor commitments, they said.
Some traders said the popularity of issues that gained yesterday won't last long, as investors will rotate their buying choices over the short term.
Interest rate-sensitive shares such as steel, construction and electric utility companies, which rose early in the week, saw their advance weaken yesterday.
Traders said these issues need large-volume buying to push up their prices, so substantial gains aren't likely unless institutional investors participate.
An outstanding issue in yesterday's session was Mitsubishi Rayon, which surged 95 to 905 yen ($6.34) a share.
Its popularity was due to speculation about the strong earnings potential of a new type of plastic wrap for household use, a trader at County Natwest Securities Japan said.
Some laggard food issues attracted bargain-hunters, traders said.
Kirin Brewery was up 100 at 2,000, and Ajinomoto gained 70 to 2,840.
Pharmaceuticals were mostly higher, with SS Pharmaceutical gaining 140 to 1,980.
Shares closed lower in other major Asian and Pacific markets, including Sydney, Hong Kong, Singapore, Taipei, Wellington, Seoul and Manila.
Most of those markets had rebounded the day before from Monday's slide.
But unlike the Tokyo exchange, they failed to extend the rise to a second session.
Elsewhere, prices surged for a second day in Frankfurt, closed higher in Zurich, Stockholm and Amsterdam and were broadly lower in Milan, Paris and Brussels.
South African gold stocks ended marginally firmer.
In Brussels, it was the first trading day for most major shares since stocks tumbled on Wall Street Friday.
Trading had been impeded by a major computer failure that took place before the start of Monday's session.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
Housing construction sank in September to its lowest level since the last recession, the Commerce Department reported.
Work began on homes and apartments at an annual rate of 1,263,000 units last month, down 5.2% from August, the department said.
The September decline followed an even steeper drop of 6.2% in August and left housing starts at their weakest since October 1982, when the country was nearing the end of a recession.
Originally the department had reported the August decline as 5%.
The numbers suggest that the housing industry is still suffering the effects of the Federal Reserve's battle against inflation.
The industry had shown signs of recovery this summer, after the central bank began to relax its clamp on credit, allowing interest rates to drop a bit after pushing them up for a year.
Sales of new homes rose and inventories of houses, which had been climbing, dropped.
But last month new construction in all types of homes waned, from single-family houses to large apartment complexes.
"It's pretty much weak across the board," said Martin Regalia, chief economist of the National Council of Savings Institutions.
Mr. Regalia said the industry may be reluctant to step up building at the moment for fear the inventories of unsold homes will increase again.
Another reason for the weakness, he said, may be that mortgage rates have hit a plateau since they began edging down after a peak in March.
In August, rates on 30-year fixed-rate mortgages started creeping up a bit, but they inched down again through September.
"Rates haven't really peeled off that much," Mr. Regalia said.
"We've kind of settled now into an interest-rate environment that's fairly high."
Work was begun on single family homes -- the core of the housing market -- at an annual rate of 971,000 in September, a drop of 2.1% from the previous month.
That followed a 3.3% decline in August.
Construction of apartments and other multi-family dwellings slipped 2.2% to an annual rate of 1,022,000 following a 3.5% decline in August.
The number of building permits issued for future construction dropped 2.4% to a 1,296,000 annual rate after rising 3.7% in August.
All the numbers were adjusted for normal seasonal variations in building activity.
The housing starts numbers, however, are one of the least precise of the government's economic indicators and are often revised significantly as more information is collected.
Shearson Lehman Hutton Holdings Inc. posted a sharp third-quarter turnaround from a year earlier, but net income would have dropped from the second quarter without a $37 million after-tax gain.
The securities firm posted third-quarter net of $66 million, or 64 cents a share, compared with a restated year-earlier loss of $3 million, or 11 cents a share.
Revenue climbed 25% to $3.3 billion from $2.6 billion.
The latest period included the gain, which was $77 million before tax, from the previously announced sale of the institutional money management business of Lehman Management Co.
The 1988 period was restated from net income of $8 million to correct an overstatement in the company's Boston Co. subsidiary.
In the 1989 second quarter, Shearson had net income of $55 million, or 54 cents a share.
An average 102.5 million common shares were outstanding in the latest quarter, up from 87.1 million.
In New York Stock Exchange composite trading yesterday, Shearson shares lost 37.5 cents to $18.125.
The company said the improved performance from a year ago reflects higher commissions and revenue from marketmaking and trading for its own account.
Commission revenue was $522 million, up 49%.
But industrywide trading activity slowed in September as institutional investors turned cautious and individuals continued to shy away from the market.
Investment banking revenue fell 32% to $205 million, in part reflecting the continued slowdown of the underwriting business.
In the nine months, net fell 3% to $106 million, or 98 cents a share, from $110 million, or $1.05 a share.
Revenue advanced 26% to $9.6 billion from $7.6 billion.
Two major drug companies posted strong third-quarter earnings, in line with profits already reported by industry leaders and analysts' expectations.
But Pfizer Inc., based in New York, reported flat earnings.
Schering-Plough Corp., based in Madison, N.J., reported a 21% rise in earnings as American Home Products Corp. of New York posted an 11% increase in net.
American Home Products
American Home Products said sales and earnings for the third quarter and nine months were at record levels.
Sales for the third quarter increased 6.5% to $1.51 billion from $1.42 billion.
Sales of health-care products increased 6% in the third quarter, based in part on strong sales of prescription drugs such as Premarin, an estrogen-replacement drug, and sales of the company's infant formula.
American Home Products said net income benefited from a "lower effective tax rate," reflecting a reduction of foreign tax rates, and additional operations in Puerto Rico.
Net also was aided by a gain on the sale of the company's equity interests in South Africa effective Sept. 1.
In New York Stock Exchange composite trading yesterday, American Home Products closed at $102.25 a share, down 75 cents.
Pfizer
Pfizer said third-quarter sales increased 4% to $1.44 billion from $1.38 billion.
The company said net income was flat because of investment in research and development and costs related to launches of several products.
The company said the dollar's continued strengthening reduced world-wide sales growth by three percentage points.
Pfizer posted its largest gains in healthcare sales, up 3%, and consumer products, up 23%.
Sales by the specialty chemicals and materials science segments were flat, and sales by the agriculture segment declined 5%.
In the health-care segment, pharmaceutical sales increased 4% and sales of hospital products increased 1%.
During the quarter, Pfizer received federal approval of Procardia XL, a calcium channel blocker approved for both angina and hypertension, and Monorail Piccolino, used to open obstructed coronary arteries.
In New York Stock Exchange composite trading yesterday, Pfizer closed at $67.75 a share, up 75 cents.
Schering-Plough
Schering-Plough said sales gained 2.7% to $743.7 million from $724.4 million.
In the period, the company completed the sale of its European cosmetics businesses, sold a majority interest in its Brazilian affiliate, and announced the reorganization of its over-the-counter drug businesses into a new unit, Schering-Plough Health Care Products.
These actions didn't affect results because the gain on the sale of the European cosmetics businesses was offset by provisions relating to the Brazil divestiture and drug restructuring.
U.S. pharmaceutical sales rose 15%, led by allergy, asthma and cold products; dermatological products; anti-infectives and anti-cancer products; and cardiovascular products.
World-wide consumer product sales declined 12%, primarily because of the European cosmetics sale.
Significantly lower sales of `Stay Trim' diet aids also were a factor in the drop.
The Maybelline beauty product line had higher sales following a sluggish first half.
In Big Board composite trading, Schering-Plough shares fell 75 cents to close at $74.125.
Swedish auto and aerospace concern Saab-Scania AB said it received a 250 million krona ($39 million) order from Swiss Crossair, one of Europe's leading regional air companies, for five Saab 340B turboprop commuter aircraft.
It is quite unfortunate that you failed so miserably in reporting the Hurricane Hugo disaster.
Your Sept. 27 page-one article "Charleston Lost Quite a Lot to Hugo, Especially Gentility" leaves the impression that the storm was little more than an inconvenience.
The damage reported focused on a select few who owned irreplaceable historic homes on the Battery.
Not mentioned were the 50,000 people rendered homeless, and the more than 200,000 out of work for an indeterminable period; the $1 billion-plus in losses to homes and personal property on the barrier islands; the near- and long-term impact on the state's largest industry, tourism, not to mention the human suffering.
In centering on the disruption of a few proud local customs such as the historichomes tour and the damage to the antiquities, your reporter served to only perpetuate an outdated and stereotypically provincial view of this otherwise thriving port city.
The damage will undoubtedly prove to be one of the epic human and economic disasters of the decade in this country.
David M. Carroll
Columbia, S.C.
Your story was tasteless and insensitive.
Depicting the people of a traumatized city reeling from a disaster of unprecedented proportions was at the very best ludicrous under the circumstances.
Your narrow focus appears to be a contrived attempt to show the people of that historic city to be doddering fools.
You had to have been blind not to see the scenario there for what it was and is and will continue to be for months and even years -- a part of South Carolina that has sustained a blow that the Red Cross expects will cost that organization alone some $38 million.
William C. Barksdale Jr.
Columbia, S.C.
Charleston is historic and aristocratic, as your reporter said, but not haughty, as he suggested.
Charlestonians are instead indomitable and have contributed mightily to the culture and history of our country for more than 300 years.
I suggest your reporter see Charleston next spring in its full glory.
William C. Stuart III
Silver Spring, Md.
Affiliated Bankshares of Colorado Inc. said it agreed to sell its 10% interest in Rocky Mountain Bankcard Systems for $18.5 million to Colorado National Bank of Denver and Central Bank of Denver.
Colorado National is a unit of Colorado National Bankshares Inc. and Central is a unit of First Bank System of Minneapolis.
Affiliated said it expects to record a pretax gain of about $18.5 million from the sale of the credit-card business, which should more than offset any reduction in the carrying value of real estate and real-estate loans on its books.
The U.S. Export-Import Bank tentatively decided to guarantee commercial bank financing for the purchase of two Boeing Co. 767 airliners by Avianca, Colombia's international airline, at a cost of about $150 million.
The loan guarantee would amount to about $127.5 million, or 85% of the cost of the aircraft.
Because of the size of the proposed loan guarantee, the Ex-Im Bank's preliminary commitment is subject to review by the House and Senate Banking committees.
Ex-Im Bank officials said this review process currently is under way.
Sebastian Guzman Cabrera took over the oil workers union, Mexico's most powerful labor organization, only last January.
But even in that short time Mr. Guzman Cabrera has become as controversial in his own way as his deposed predecessor, Joaquin Hernandez Galicia, known as La Quina.
President Carlos Salinas de Gortari used the army to oust La Quina, who reigned for 28 years over a graft-riddled empire that made state-run Petroleos Mexicanos, or Pemex, one of the world's most inefficient oil companies.
Now, Mr. Guzman Cabrera is facing accusations that he's as much a company man as La Quina was a crook.
In recent contract negotiations with Pemex management, Mr. Guzman Cabrera accepted major concessions that greatly curtail the union's role in subcontracting, long a source of millions of dollars in illicit earnings.
And with the quiet pragmatism of Mr. Guzman Cabrera replacing the prickly populism of La Quina, government technocrats have been given a free hand to open the petrochemical sector to wider private and foreign investment.
Mr. Guzman Cabrera's new order hasn't arrived without resistance.
Brawls between union factions still erupt at Pemex installations.
Leftist leader Cuauhtemoc Cardenas publicly questioned Mr. Guzman Cabrera's "moral quality," suggesting he is part of a conspiracy to turn over the country's oil, a symbol of Mexican nationalism, to foreigners.
The 61-year-old Mr. Guzman Cabrera takes such criticisms in stride.
"This isn't a new kind of union leadership, it's a new Mexico.
We're no longer afraid of associating with private or foreign capital," he says.
Pemex, which produces 40% of government revenue, desperately needs new investment.
Since world oil prices collapsed in 1982, the government has siphoned Pemex's coffers to make payments on Mexico's $97 billion foreign debt.
Little money has been returned to upgrade Pemex's aging facilities.
While the government drains Pemex from above, the union has drained it from below.
A bloated payroll and pervasive graft caused Pemex's operating costs to balloon to 95 cents of each $1 in sales, far above the industry norm.
The declines in investment and efficiency explain in part why Mexico has been importing gasoline this year.
Some projections show Mexico importing crude by the end of the century, barring an overhaul of operations.
"Whatever you tried to change, whether it was cutting costs or attracting new partners, the big obstacle was the old union leadership," says oil consultant George Baker.
Enter Mr. Guzman Cabrera, who has a clear understanding of where union leaders fit in the pro-enterprise regime of President Salinas.
"I'm the secretary-general, if there is one," he says, greeting a visitor to his office.
Beginning as a laborer in a refinery, Mr. Guzman Cabrera put in more than 40 years at Pemex before being pushed into retirement by La Quina after a dispute two years ago.
Though he also long benefited from the system built by La Quina, Mr. Guzman Cabrera says union perks had simply gotten out of hand.
They are "at the base of all of the problems of corruption," he says.
Thus, in recent contract negotiations, Mr. Guzman Cabrera gave up the union's right to assign 40% of all of Pemex's outside contracts -- an enormous source of kickbacks.
The union also ceded the 2% commission it had received on all Pemex maintenance contracts.
(The union will keep a 2% commission on construction projects.)
The new contract also eliminates the $15 monthly coupon, good only at union-owned grocery stores, that was part of the salary of every worker, from roughneck to chief executive.
About 9,800 technical workers, notably chemists and lawyers, were switched to non-union status.
Also, because of its reduced capital budget, Pemex has phased out about 50,000 transitory construction workers, reducing the work force to about 140,000, the union leader says.
Mr. Guzman Cabrera says the union's sacrifices will be offset by a wage and benefit package that amounts to a 22% increase in compensation.
But Pemex managers are the ones most thrilled by the contract.
"We are retaking the instruments of administration," says Raul Robles, a Pemex subdirector.
Pemex officials wouldn't say how much money the new contract would save the company, but one previous government estimate pegged savings at around $500 million a year.
Pemex's customers also are pleased with the company's new spirit.
Grupo Desc, a big conglomerate, has long depended on Pemex petrochemicals to produce plastic packing material.
But when the Pemex plant shut down for an annual overhaul, it would never give notice to its customers.
"The capriciousness would completely disrupt our operations," says Ernesto Vega Velasco, Desc's finance director.
This year, for the first time, Desc and other customers were consulted well in advance of the Pemex plant's shutdown to ensure minimal inconvenience.
Taming the union complements previous moves by the government to attract private investment in petrochemicals, which Mexico has been forced to import in large quantities in recent years.
In May, the government unveiled new foreign investment regulations that create special trusts allowing foreigners, long limited to a 40% stake in secondary petrochemical companies, to own up to 100%.
Later, the government reclassified several basic petrochemicals as secondary products.
But Pemex's courtship with private companies, and especially foreign ones, is controversial in a country where oil has been a symbol of national sovereignty since foreign oil holdings were nationalized in 1938.
"They are preparing the workers for what's coming: foreign control," wrote Heberto Castillo, a leftist leader.
Mr. Guzman Cabrera and government officials insist that foreigners will be limited to investing in secondary petroleum products.
But the new union leader makes no apologies for Pemex's more outward-looking attitude.
"If we do not integrate into this new world of interdependence, sooner or later we're going to become victims of our own isolation," he says.
Couple Counseling Grows to Defuse Stress
MORE EXECUTIVES and their spouses are seeking counseling as work and family pressures mount.
Some employers initiate referrals, especially if work problems threaten a top manager's job.
Many couples "are like ships passing in the night," a communications gulf that sparks problems on the job and at home, says psychologist Harry Levinson.
His Levinson Institute in Belmont, Mass., has seen in recent years a doubling in the number of executives and spouses at its weeklong counseling program.
Employers foot the bill, he says, figuring what's good for the couple is good for the company.
One East Coast manufacturing executive, faced with a job transfer his wife resented, found that counseling helped them both come to grips with the move.
And the vice president of a large Midwestern company realized that an abrasive temperament threatened his career when his wife confided that similar behavior at home harmed their marriage.
More dual-career couples also are getting help, with men increasingly bringing their working wives for joint counseling.
"The level of stress for a woman is often so high, it's the husband who says, 'I'm worried about her,'" says psychologist Marjorie Hansen Shaevitz.
Her Institute for Family and Work Relationships in La Jolla, Calif., has noted a doubling in the number of couples seeking help the past two years.
"No matter how competent and smart you both are, the relationship almost certainly will erode if you don't have time to talk, to have fun and to be sexual," says Ms. Shaevitz.
She urges client couples to begin a "detoxification" period, purging social and other nonproductive activities and setting time apart for themselves.
"Putting those times on the calendar," she says, "is as important as remembering business appointments."
Power of Suggestion Stronger in Japan
HERE'S ONE more explanation for why Japan is a tough industrial competitor: Two of three Japanese employees submit suggestions to save money, increase efficiency and boost morale, while only 8% of American workers do.
And the Japanese make far more suggestions -- 2,472 per 100 eligible employees vs. only 13 per 100 employees in the
Data for 1987 from the National Association of Suggestion Systems and the Japan Human Relations Association also indicate that Japanese employers adopt four of five suggestions, while their U.S. counterparts accept just one in four.
In Japan, small suggestions are encouraged.
Each new employee is expected to submit four daily in the first few months on the job.
U.S. companies tend to favor suggestions "that go for the home runs," says Gary Floss, vice president of corporate quality at Control Data Corp.
That helps explain why American employers grant an average award of $604.72 per suggestion, while Japan's payment is $3.23.
Still, suggestions' net savings per 100 employees is $274,475 in Japan vs. $24,891 in the U.S.
U.S. companies developing management teams are wrestling with how to handle individual suggestion systems.
Control Data, for one, plays down its employee suggestion program because it favors the team-management focus.
Merger Fallout: Beware Employee Dishonesty
CORPORATE security directors increasingly worry that merger mania spawns a rise in employee dishonesty.
A Security magazine survey places the effect of takeovers and buy-outs among the industry's 10 biggest challenges.
"If it causes management to take their eye off the ball, inventory shrinkage is going to be affected," says Lewis Shealy, vice president for loss prevention at Marshall Field's, the department store chain.
A separate study of the extent of employee misconduct linked general job satisfaction to property loss.
Co-author Richard Hollinger cites what happened at one family-owned company absorbed by a foreign giant.
Pilferage climbed dramatically as many angry employees "felt abandoned by the former owners," says the University of Florida sociologist.
But top management should watch for other tell-tale signs of employee misdeeds, like expense-account fudging and phone misuse.
Security consultant Dennis Dalton of Ventura, Calif., thinks mergers often trigger longer lunch hours and increased absenteeism, conduct which can sap the bottom line more than thefts.
New management can take several steps to reduce dishonesty.
Most important, experts say, is to show that a company's ethical tone is set at the top.
Mr. Dalton also recommends that the chief executive establish a rumor control center and move swiftly to bolster morale.
Consultant John Keller of Southlake, Texas, urges that top management adopt a "tough hands-on approach" with very tight controls and monitoring.
And security authority Robert L. Duston favors disciplining all employees who cheat.
Firms Walk Fine Line In Distributing Profits
ARE CORPORATE profits distributed fairly?
A survey by Sirota, Alper & Pfau, a New York consulting firm, underscores the difficulty for top management in satisfying employees and investors on that score.
Nearly seven of 10 investors think companies reinvest "too little" of their profits in the business.
And half the employees surveyed think companies dole out too little to them.
But both see a common enemy: About 66% of employees and 73% of investors think senior managers get too big a slice of the profit pie.
Bank of New York Co. said it agreed in principle to acquire the credit-card business of Houston-based First City Bancorp. of Texas for between $130 million and $134 million.
The move, subject to a definitive agreement, is part of a trend by big-city banks that have been buying up credit-card portfolios to expand their business.
Just last month, a Bank of New York subsidiary agreed to buy the credit-card operation of Dreyfus Corp.'s Dreyfus Consumer Bank for $168 million, a transaction that is expected to be completed by the end of the year.
First City's portfolio includes approximately 640,000 accounts with about $550 million in loans outstanding.
First City, which issues both MasterCard and Visa cards, has agreed to act as an agent bank.
At the end of the third quarter, Bank of New York's credit-card business consisted of 2.4 million accounts with $3.6 billion in loans outstanding.
Bank of New York is currently the seventh-largest issuer of credit cards in the
First City said that because of increased competition in the credit-card business, it had decided it either had to expand its own holdings substantially or sell them.
"We think there's a good prospect that competition is going to get pretty fierce in this market," said James E. Day, a First City vice president.
"We see it becoming a bargain-basement kind of business."
The company estimated that the transaction would enhance its book value, which stood at $28.55 a share on Sept. 30, by more than $100 million, or about $4 a share.
The company also said the transaction would bolster after-tax earnings by $3.25 a share when completed and boost its primary capital ratio to 7% from 6.63%.
First City, which recently purchased three small Texas banking concerns, said it would use the proceeds to pursue additional expansion opportunities in the Southwest and elsewhere.
With that possibility in mind, analysts said the transaction was a positive move for First City.
"I think they'll be able to move faster to make acquisitions in Texas," said Brent Erensel, an analyst with Donaldson, Lufkin & Jenrette.
"That's something they can do very well.
British Airways PLC said it is seeking improved terms and a sharply lower price in any revised bid for United Airlines parent UAL Corp. following the collapse of a $6.79 billion, $300-a-share buy-out bid.
Derek Stevens, British Air's chief financial officer, told Dow Jones Professional Investor Report a price of $230 a share is "certainly not too low," and indicated his company would like to reduce the size of its $750 million cash investment.
He added the airline isn't committed to going forward with any new bid, and hasn't participated in bankers' efforts to revive the transaction that collapsed.
"We're in no way committed to a deal going through at all.
We're not rushing into anything.
We don't want to be party to a second rejection," he said, adding that coming up with a revised offer could easily take several weeks.
Mr. Stevens's remarks, confirming a report in The Wall Street Journal that British Air wants to start from scratch in any new bid for the nation's second-largest airline, helped push UAL stock lower for the fourth straight day.
UAL fell $6.25 a share to $191.75 on volume of 2.3 million shares in composite trading on the New York Stock Exchange as concern deepened among takeover stock traders about the length of time it will take to revive the purchase.
Under the original buy-out approved by the UAL board Sept. 14, UAL's pilots planned to put up $200 million in cash and make $200 million in annual cost concessions for a 75% stake.
UAL management was to pay $15 million for 10%, and British Air was to receive a 15% stake.
The buy-out fell through when Citicorp and Chase Manhattan Corp. unexpectedly failed to obtain bank financing.
Since then, UAL stock has fallen 33% in what may rank as the largest collapse of a takeover stock ever.
The tenor of Mr. Stevens's remarks seemed to indicate that British Air will take a more active, high-profile role in pursuing any new bid.
He said he believes UAL management was badly advised on the funding of its original transaction.
Mr. Stevens said British Air hasn't received any new buy-out proposals from the labor-management group, led by UAL Chairman Stephen Wolf, and hasn't received any indication of when one might be forthcoming.
"As far as we're concerned, we're waiting for the dust to settle," he said.
Although British Air is waiting to see what the buy-out group comes up with, Mr. Stevens said a revised transaction with less debt leverage is likely to be more attractive to banks.
He said the original proposal is dead, and all aspects of a revised version are up for change, in light of the changes in UAL's market price, the amount of debt banks are willing to fund, and the price British Air would be willing to pay.
Mr. Stevens said he expects the new price will be considerably lower, but declined to specify a figure.
Asked whether a $230-a-share figure circulating in the market yesterday is too low, he said, "It's certainly not too low."
He added the original offer was "a pretty full price," and that British Air's contribution "was quite a large chunk for us."
British Air was originally attracted to the chance of obtaining a 15% stake in the company, but wasn't particularly happy with paying $750 million.
"If the {new} deal had us putting up less money but still having 15%, that would be a point in our favor," he said.
In any new proposal, British Air would expect a greater rate of return than the 20%-plus in the original proposal.
In the event that the buy-out group stalls in reviving its bid, the UAL board could remain under some pressure to seek another transaction, even without any legal obligation to do so.
Roughly one-third of its stock is believed held by takeover stock traders, who could vote to oust the board if they become impatient.
Meanwhile, the buy-out group's task of holding its fragile coalition together, in the face of the bid's collapse and internal opposition from two other employee groups, has been further complicated by an apparent rift in the ranks of the pilot union itself.
A pilot representing a group of 220 pilots hired during United's 1985 strike filed suit Friday in Chicago federal court to block the takeover.
The dissident pilots oppose the plan because it would cause them to lose their seniority.
UAL's management agreed to reduce the seniority of those pilots in exchange for the support of the United pilot union for the buy-out proposal.
The 220 pilots involved in the suit aren't members of the union.
The airline had allowed them to move ahead of some union members in seniority following the 1985 strike, a move the union had contested in a previous lawsuit.
Judith Valente contributed to this article.
Corporate efforts to control health-care costs by requiring evaluations prior to planned hospitalization and surgery haven't been sweeping enough to reduce the long-term rate of cost increases, according to a study by the Institute of Medicine.
In the last decade, many corporations have embraced the "utilization management" cost containment strategy as a way to control health-care costs for employees.
These programs vary widely, but often require second opinions on proposed surgery, preadmission reviews of elective hospitalizations and reviews of treatment during illnesses or recovery periods.
Between 50% and 75% of today's workers are covered by such plans, up from 5% five years ago.
"Although it probably has reduced the level of expenditures for some purchasers, utilization management -- like most other cost containment strategies -- doesn't appear to have altered the long-term rate of increase in health-care costs," the Institute of Medicine, an affiliate of the National Academy of Sciences, concluded after a two-year study.
"Employers who saw a short-term moderation in benefit expenditures are seeing a return to previous trends."
While utilization management frequently reduces hospitalization costs, these savings are often offset by increases in outpatient services and higher administrative costs, according to the report by a panel of health-care experts.
The report suggested that current review programs are too narrow.
"The unnecessary and inappropriate use of the hospital, and not the actual need for a particular procedure, has been the main focus," the panel said.
"As a general rule, prior-review programs have not made case-by-case assessments of the comparative costs of alternative treatments or sites of care."
The report said that utilization management should have more of an impact as federal research on the effectiveness of medical treatments helps lead to medical practice guidelines.
Howard Bailit, a panel member and a vice president of Aetna Life & Casualty, said that utilization management will also do a better job of containing costs as it spreads to cover medical services delivered outside of hospitals.
"There's pretty good evidence that utilization management has reduced inappropriate hospitalization," he said.
But at the same time, spending on physician services and ambulatory care have mushroomed.
"It's like squeezing a balloon," Dr. Bailit said.
David Rahill of A. Foster Higgins & Co. said that clients of his consulting firm report that utilization management reduces their hospital care bills by about 5%, but he agreed that for the health-care system as whole, some of these savings are offset by administrative and outpatient care costs.
Jerome Grossman, chairman of the panel, agrees that administrative costs of utilization management programs can be high.
"You have a whole staff standing ready" to evaluate the appropriateness of recommended treatment, he said.
Dr. Grossman, who also is president of New England Medical Center Hospitals in Boston, noted that the hospitals he runs deal with more than 100 utilization management firms and that many of them have different procedures and requirements.
The panel urged greater efforts to reduce the complexity, paperwork and cost of utilization review.
"Utilization management needs to better demonstrate that it reduces the wasteful use of resources, improves the appropriateness of patient care and imposes only reasonable burdens on patients and providers," the panel concluded.
Renault and DAF Trucks NV announced a preliminary agreement to jointly manufacture a line of trucks in Britain and France.
Philippe Gras, a Renault managing director, said the new line will cover trucks of between 2.5 tons and 4.2 tons and will be built at Renault's Bapilly plant in France and at DAF's British plant.
The French state-controlled auto group and the Dutch truck maker plan to incorporate the new trucks into their product lines when they begin production toward the middle of the 1990s.
Mr. Gras said he expects a definitive agreement between the two companies to be completed in the next few months.
The venture is the latest example of the trend toward cooperative projects in Europe ahead of the 1992 deadline for eliminating trade barriers within the European Community.
Renault and DAF are expected to invest a total of about three billion French francs ($157.8 million) in the venture, including FFr1 billion for design and development costs.
In addition, the companies will each spend about FFr1 billion on tooling up their plants.
Mr. Gras said the joint venture represents considerable savings for both Renault and DAF, since both companies would in any case have had to renew their existing ranges of light goods vehicles.
By pooling their resources, the two groups have effectively halved the design and development costs that would otherwise have been entailed, he said.
Renault officials said the potential European market for light trucks in the 2.5-ton to 4.2-ton range is between 700,000 and 800,000 vehicles annually, and Renault and DAF are aiming for a combined market share of about 11%.
Both Renault and DAF will have world-wide marketing rights for the new range of vans and light trucks.
Under a separate arrangement, British Aerospace PLC's Rover Group PLC subsidiary will also be able to offer the vehicles through its dealers in the U.K., and Renault's truck-building subsidiary Renault Vehicles Industriels will have similar rights in France.
DAF is 16%-owned by British Aerospace, with a further 6.5% held by the Dutch state-owned chemical group NV DSM.
The van Doorne family of the Netherlands holds an additional 11% of DAF's capital.
The Federal Reserve System is the standard object of suggestions for organizational and institutional changes, for two reasons.
First, its position in the government is anomalous.
It has an unusual kind of independence from elected officials and still has authority over one of the most powerful of government's instruments -- the control of the money supply.
Thus we have a condition that is easily described as undemocratic.
Second, the responsibilities of the Federal Reserve as guardian of the currency, which means as guardian of the stability of the price level, sometimes lead it to take measures that are unpopular.
As former Fed Chairman William McChesney Martin used to say, they would have to take the punch bowl away just as the party is getting interesting.
So the Federal Reserve is an attractive target for complaint by politicians.
The Fed is easily assigned the blame for unpleasantness, like high interest rates or slow economic growth, while the politicians can escape responsibility by pointing to the Fed's independence.
This leads to proposals for "reform" of the Fed, which have the common feature of making the Fed more responsive to the administration, to the Congress and to public opinion -- without, however, any assumption of additional responsibility by the politicians.
These proposals include changing the term of the chairman, shortening the terms of the members, eliminating the presidents of the Federal Reserve Banks from the decision-making process, putting the Secretary of the Treasury on the Federal Reserve Board, having the Fed audited by an arm of Congress (the General Accounting Office), putting the Fed's expenditures in the budget, and requiring prompt publication of the Fed's minutes.
Some of these ideas are again under consideration in Congress.
But these proposals do not rest on a view of what the Fed's problem is or, if they do, they rest on an incorrect view.
They would not solve the problem; they would make it worse.
The problem is not that the Fed is too unresponsive to the public interest.
On the contrary, it is too responsive to an incorrect view of the public interest.
The price level in the U.S. is now about 4 1/4 times as high as it was 30 years ago.
On average, something that cost $100 30 years ago now costs $425.
Or, a wage that was $100 30 years ago would buy only $23.53 worth of stuff today.
On two occasions the inflation rate rose to more than 10% a year.
In each case the ending of this unsustainable inflation caused a severe recession -- the two worst of the postwar period.
The enormous inflation over the past 30 years was largely due to monetary policy.
At least, it would not have happened without the support of monetary policy that provided for a 10-fold increase in the money supply during the same period.
And that increase in the money supply would not have happened without the consent of the Federal Reserve.
The basic problem of monetary policy, to which reform of the Fed should be addressed, is to prevent a recurrence of this experience.
There were two general reasons for the mistaken monetary policy of the past 30 years:
1. To some extent the Federal Reserve shared the popular but incorrect view that expansionary monetary policy could yield a net improvement in employment and output.
2. Even where the Fed did not share this view it felt the need to accommodate to it.
Despite all the formal provisions for its independence, the Fed seems constantly to feel that if it uses its independence too freely it will lose it.
The common proposals for reforming the Fed would only make the situation worse, if they had any effect at all.
Putting the Secretary of the Treasury on the Board of Governors, one of the leading proposals today, is an example.
The secretary is the world's biggest borrower of money.
He has a built-in, constant longing for lower interest rates.
Moreover, he is a political agent of a political president, who naturally gives extraordinary weight to the way the economy will perform before the next election, and less to its longer-run health.
These days, the secretary suffers the further disqualification that he is a member of a club of seven finance ministers who meet occasionally to decide what exchange rates should be, which is a diversion from the real business of the Federal Reserve to stabilize the price level.
How should a reasonable member of the Federal Reserve Board interpret a congressional decision to put the secretary on the board?
Could he plausibly interpret it as encouragement for the Fed to give primary emphasis to stabilizing the price level?
Or would he interpret it as instruction to give more weight to these other objectives that the secretary represents -- low interest rates, short-run economic expansion, and stabilization of exchange rates at internationally managed levels?
The answer seems perfectly clear.
(True, a succession of Fed chairmen has given color to the notion that the Secretary of the Treasury belongs on the Fed.
By their constant readiness to advise all and sundry about federal budgetary matters the chairmen have encouraged the belief that fiscal policy and monetary policy are ingredients of a common stew, in which case it is natural that the Fed and the Treasury, and probably also the Congress, should be jointly engaged in stirring the pot.
The Fed's case for its own independence would be a little stronger if it were more solicitous of the independence of the rest of the government.)
The Fed's problem is not that it is too independent, or too unpolitical.
The Fed is responsive to, and cannot help being responsive to, the more overtly political part of the government.
The Fed exercises a power given to it by Congress and the president.
But Congress and the president accept no responsibility for the exercise of the power they have given the Fed.
Critics of the present arrangement are correct to say that it is undemocratic.
What is undemocratic is the unwillingness of the more political parts of the government to take the responsibility for deciding the basic question of monetary policy, which is what priority should be given to stabilizing the price level.
To leave this decision to an "independent" agency is not only undemocratic.
It also prevents the conduct of a policy that has a long-term rationale, because it leaves the Fed guessing about what are the expectations of its masters, the politicians, who have never had to consider the long-term consequences of monetary policy.
The greatest contribution Congress could make at this time would be to declare that stabilizing the price level is the primary responsibility of the Federal Reserve System.
Legislation to this effect has been introduced in Congress in this session by Rep. Stephen Neal (D., N.C.).
It is not the kind of thing that is likely to be enacted, however.
Congress would be required to make a hard decision, and Congress would much prefer to leave the hard decision to the Fed and retain its rights of complaint after the fact.
People will say that the nation and the government have other objectives, in addition to stabilizing the price level, which is true.
But that is not the same as saying that the Federal Reserve has other objectives.
The government has other agencies and instruments for pursuing these other objectives.
But it has only the Fed to pursue price-level stability.
And the Fed has at most very limited ability to contribute to the achievement of other objectives by means other than by stabilizing the price level.
The two objectives most commonly thought to be legitimate competitors for the attention of the Fed are high employment and rapid real growth.
But the main lesson of economic policy in the past 30 years is that if the Fed compromises with the price-stability objective in the pursuit of these other goals, the result is not high employment and rapid growth but is inflation.
A former chairman of the president's Council of Economic Advisers, Mr. Stein is an American Enterprise Institute fellow.
Republic New York Corp. joined the list of banks boosting reserves for losses on loans to less-developed countries, setting out a $200 million provision and posting a $155.4 million third-quarter net loss as a result.
The per-share loss was $5.32.
In the year earlier period, the New York parent of Republic National Bank had net income of $38.7 million, or $1.12 a share.
Excluding the provision, Republic earned $44.6 million, up 15% from a year ago.
The bank's medium-term and long-term loans to less-developed countries total $293 million, of which $146 million aren't accruing interest, the bank said.
Republic's total of nonperforming assets was $167 million at Sept. 30, with its reserve for loan losses now standing at $357 million.
Abortion-rights advocates won last week's battles, but the war over the nation's most-contentious social question is about to pick up again on turf that favors those seeking to restrict abortions.
Strict new regulations seem certain to pass the state House in Pennsylvania next week, with easy approval by the Senate and by Democratic Gov. Bob Casey expected shortly thereafter.
Legislation to require the consent of parents before their daughters under the age of 18 can have abortions will probably pass both houses of the Michigan legislature and set up a grinding battle to override the expected veto of Democratic Gov. James Blanchard.
The short-term shift in the political climate surrounding abortion reflects two factors that are likely to govern the debate in the next several months: the reawakening of the abortion-rights movement as a potent force after years of lassitude, and the ability of each side to counter the other's advance in one arena with a victory of its own elsewhere.
The action in Pennsylvania, for example, will follow last week's collapse of a special session of the Florida legislature to enact restrictions on abortions in that state, and the vote here in Washington by the House to permit federally paid abortions for poor women who are victims of rape or incest.
But President Bush is expected to veto the congressional legislation and that, along with the easy approval of the Pennsylvania measure, is likely to mute the abortion-rights activists' claims of momentum and underline the challenges faced by this resurgent movement.
"It's great to feel good for once in 15 years," says Harrison Hickman, a consultant to abortion-rights advocates, reflecting the relief of his compatriots after last week's victories, the first major events since the Supreme Court, in its July 3 Webster decision, permitted the states to enact restrictions on abortions.
"But how many more times we're going to feel good in the next 15 is another question."
Indeed, abortion-rights activists still face their greatest tests.
"The pro-choice movement has shown -- finally -- that it can mobilize," says Glen Halva-Neubauer, a Furman University political scientist who specializes in how state legislators handle the abortion question.
"But it still hasn't shown that it can win in a state like Pennsylvania or Missouri, where abortion has been clearly an electoral issue and where it's been an emotional issue for a long time."
The foes of abortion hold the strong whip hand in Pennsylvania, where abortion-rights activists are so much on the defensive that their strategy is less to fight the proposed legislation than it is to stress how the state legislature doesn't reflect the viewpoints of the state's citizens.
As a result, GOP state Rep. Stephen Freind of Delaware County, the legislature's leading foe of abortion, has been given all but free rein to press a strict seven-point plan to restrict abortion and, he hopes, to force the Supreme Court directly to reassess its 1973 Roe v. Wade decision that established the right of abortion in the first place.
The Freind legislation -- the state's House Judiciary Committee approved it in Harrisburg this week and the full Pennsylvania House is expected to take up the bill next Tuesday -- includes a provision to ban abortions after 24 weeks of pregnancy, except to avert the death of the mother.
Mr. Freind calculates that the provision, which attacks the trimester standards that Roe established, will "make it necessary" for the Supreme Court to review Roe and, perhaps, to overturn it.
But the Pennsylvania measure also includes an "informed consent" provision that may become widely imitated by abortion foes who want to make women contemplating abortion as uncomfortable as possible with the procedure and with themselves.
Under this legislation, a woman must be informed 24 hours before the operation of the details of the procedure and its risks.
"Regardless of whether one supports or opposes the right to an abortion," Mr. Freind argues, "it is virtually impossible for any rational human being to disagree with the concept that a woman has the right to have all of the appropriate materials and advice made available to her before she makes a decision which, one way or the other, might remain with her for the rest of her life."
In Michigan, where the state Senate is expected to approve parental-consent legislation by the end of next week, Gov. Blanchard is the principal obstacle for anti-abortionists.
Susan Rogin, a consultant to abortion-rights activists in the state, takes comfort from the fact that the state's House abortion opponents "haven't been able to muster the votes to overturn a veto on abortion in 16 years."
But proponents believe they may be able to shake enough votes loose to override the veto if they are successful in portraying the legislation as a matter of parents' rights.
In Illinois, lawmakers will vote before next spring on legislation requiring physicians to perform tests on fetuses at 20 weeks to determine their gestational age, weight and lung maturity along with a provision requiring that, if fetuses survive an abortion, a second doctor must be on hand to help it survive.
The legislation failed by one vote to clear the House Rules Committee Tuesday, but anti-abortionists still may succeed in bringing the measure to the floor this fall.
Pamela Sutherland, executive director of the Illinois Planned Parenthood Council, says she and her allies are "cautiously optimistic" they can defeat it if it comes to a floor vote.
Abortion foes in Wisconsin, meanwhile, expect a parental-consent bill to be sent to the state assembly floor by early November and are hopeful of prevailing in both houses by next March.
In Texas, abortion opponents want to pass parental-consent legislation along with a statewide ban on the use of public funds, personnel and facilities for abortion, and viability tests for fetuses 19 weeks and older.
The anti-abortionists are urging GOP Gov. Bill Clements to press the issues in a special session scheduled to run Nov. 14 to Dec. 13.
"The prognosis is only fair," says Kathie Roberts, administrative director of the Texas Right to Life Committee.
"Next year is an election year and the legislators just don't want to do anything about this now."
This legislative activity comes as both sides are undertaking new mobilization efforts, plunging into gubernatorial races in Virginia and New Jersey, and girding for next autumn's state elections.
At the same time, abortion foes have developed a national legislative strategy, deciding to move on what Jacki Ragan, the National Right to Life Committee's director of state organizational development, calls "reasonable measures that an overwhelming mainstream majority of Americans support."
These include bans on the use of abortion for birth control and sex selection, and the public funding of alternatives for abortion.
"Those who are on the other side can hardly oppose alternative funding if they continue to insist on calling themselves 'pro-choice' rather than `pro-abortion,'" says Mary Spaulding, the group's associate state legislative coordinator.
Over the weekend, the National Abortion Rights Action League singled out eight politicians, including Pennsylvania's Mr. Freind, as 1990 targets and held a Washington seminar designed to train its leaders in political techniques, including how to put the anti-abortionists on the defensive in state legislatures.
"We now see pro-choice legislators going on the offensive for the first time," says Kate Michelman, executive director of the group.
Wall Street
When I was just a child And confronted by my fears, The things that I thought would get me Had fangs and pointed ears.
Nothing much has changed -- My periodic scares Are still from hostile animals, Only now, they're bulls and bears.
-- Pat D'Amico.
Daffynition
Trained dolphins: pur-poises.
-- Marrill J. Pederson.
This maker and marketer of cartridge tape systems said it completed the sale of 2.85 million shares of common priced at $10 a share in an initial public offering.
The company said that it is selling two million shares and that the rest are being sold by certain stockholders.
Proceeds will be used for capital expenditures and working capital.
Goldman, Sachs & Co. and Montgomery Securities Inc. are co-managing the offering.
Congress sent President Bush an $18.4 billion fiscal 1990 Treasury and Postal Service bill providing $5.5 billion for the Internal Revenue Service and increasing the Customs Service's air-interdiction program nearly a third.
Final approval came on a simple voice vote in the Senate, and the swift passage contrasted with months of negotiations over the underlying bill which is laced with special-interest provisions for both members and the executive branch.
An estimated $33 million was added for university and science grants, including $1.5 million for Smith College.
And Southwest lawmakers were a driving force behind $54.6 million for U.S.-Mexico border facilities, or more than double the administration's request.
More than $1.8 million is allocated for pensions and expenses for former presidents, and the budget for the official residence of Vice President Quayle is more than doubled, with $200,000 designated for improvements to the property.
Even the Office of Management and Budget is remembered with an extra $1 million to help offset pay costs that other government departments are being asked to absorb.
Within the IRS, nearly $1.95 billion is provided for processing tax returns, a 12% increase over fiscal 1989 and double what the government was spending five years ago.
Investigation and taxpayer service accounts would grow to $1.6 billion, and Congress specifically added $7.4 million for stepped up criminal investigations of money laundering related to drug traffic.
The large increase in Customs Service air-interdiction funds is also intended to counter smuggling, and the annual appropriations level has more than quadrupled in five years.
The $196.7 million provided for fiscal 1990 anticipates the purchase of a Lockheed P-3 surveillance aircraft and five Cessna Citation II jets.
Despite administration reservations, the plan has had the quiet backing of customs officials as well as influential lawmakers from Cessna's home state, Kansas.
Among legislative provisions attached to the bill is a ban on any Treasury Department expenditure for enforcement of a 1986 tax provision intended to counter discrimination in employee-benefit plans.
Small-business interests have lobbied against the so-called Section 89 tax rules.
Repeal is considered likely now, but the Treasury Department bill has been used as a vehicle to raise the profile of the issue and block any action in the interim.
Less noticed is a bit of legislative legerdemain by Houston Republicans on behalf of HEI Corp. of Texas to retroactively "move" a Missouri hospital from one county to the next to justify higher Medicare reimbursements.
The provision seeks to wipe out an estimated $1.4 million in claims made by the Health Care Finance Administration against HEI, which owned the hospital in Sullivan, Mo., during most of the four-year period -- 1983-1987 -- covered in the amendment.
In a separate development, a private meeting is scheduled this morning between House Appropriations Committee Chairman Jamie Whitten (D., Miss.) and Sen. Dale Bumpers (D., Ark.) in an effort to end a dispute which for two weeks has delayed action on an estimated $44 billion agriculture bill.
A House-Senate conference reached agreement Oct. 5 on virtually all major provisions of the bill, but final settlement has been stalled because of differences between the two men over the fate of a modest Arkansas-based program to provide technical information to farmers seeking to reduce their dependence on chemical fertilizers and pesticides.
The program's nonprofit sponsors received $900,000 in fiscal 1989 through an Extension Service grant, but Mr. Whitten has been adamant in insisting that the program be cut in 1990.
The 79-year-old Mississippian takes a more orthodox, entrenched view of agriculture policy than those in the movement to reduce chemical use, but as a master of pork-barrel politics, he is believed to be annoyed as well that the project moved to Arkansas from a Tennessee center near Memphis and the northern Mississippi border.
Michael F. Klatman, director of corporate public relations at Data General Corp., was named to the new position of vice president, corporate communications, of this maker of data storage equipment.
B.A.T Industries PLC may delay aspects of its defensive restructuring plan -- including the sale of its Saks Fifth Avenue and Marshall Field units -- in the wake of the current upheaval in financial markets, company officials said.
The British conglomerate, planning its own defensive restructuring to fight off a #13.35 billion ($21.03 billion) takeover bid by Anglo-French financier Sir James Goldsmith, intends to press ahead with an extraordinary shareholder vote today to clear the way for its value-boosting measures.
If anything, the gyrations in world stock markets -- and in B.A.T's share price -- since last Friday's sharp Wall Street sell-off have increased the likelihood of shareholder approval for the restructuring, analysts and several big institutional holders said.
"Thank God we have some deal on the table," said Stewart Gilchrist, a director at Scottish Amicable Investment Managers, which intends to vote its roughly 1% stake in favor of the restructuring.
Investors in B.A.T have been on a roller coaster.
B.A.T has been London's best-performing blue chip over the past six months, up 40% against a 4% rise in the Financial Times 100-Share Index.
But this week, B.A.T has been hit harder than other big U.K. stocks -- first by the market gyrations, then by Tuesday's San Francisco earthquake, which could leave B.A.T's Farmers Group Inc. insurance unit facing big claims.
B.A.T rose five pence (eight cents) to 756 pence ($11.91) in London yesterday as a late market rally erased a 28-pence fall earlier in the day.
To fight off predators, B.A.T plans to spin off about $6 billion in assets, largely by selling such U.S. retailing units as Marshall Field and Saks and by floating its big paper and U.K. retailing business via share issues to existing holders.
Proceeds will help pay for a planned buy-back of 10% of its shares and a 50% dividend increase.
"I think the restructuring will get the required support," said Michael Pacitti, an analyst at London stockbroker UBS Phillips & Drew.
"The shareholders effectively will support the share price by clearing the share buy-back."
But B.A.T's restructuring, which was never going to happen quickly, now will take longer because of the market upheaval.
Company officials, holders and analysts who previously expected the disposals to be substantially complete by the end of next year's first half now say the market gyrations could delay the actions well into the second half.
"We aren't forced sellers.
We don't have an absolute deadline and if market conditions are truly awful we might decide it is not the right time," to take particular steps, said Michael Prideaux, a B.A.T spokesman.
Even if B.A.T receives approval for the restructuring, the company will remain in play, say shareholders and analysts, though the situation may unfold over the next 12 months, rather than six.
The new B.A.T will be a smaller tobacco and financial-services hybrid whose price-earnings ratio may more closely reflect the lower-growth tobacco business than the higher-multiple financial-services business, these holders believe.
Thus B.A.T's restructuring may only make the company a more manageable target for other corporate predators -- possibly such acquisitive bidders as Hanson PLC.
"The last few days will surely slow down the pace of events," says Scottish Amicable's Mr. Gilchrist.
"But I wouldn't write off" Sir James or other potential bidders.
Among possible delays, the sales of Saks and Marshall Field -- which were expected to be on the block soon after the crucial Christmas season -- may slide into the second quarter or second half.
Analysts estimate that sales of the two businesses could raise roughly $2 billion.
B.A.T isn't predicting a postponement because the units "are quality businesses and we are encouraged by the breadth of inquiries," said Mr. Prideaux.
But the delay could happen if B.A.T doesn't get adequate bids, he said.
People familiar with B.A.T say possible acquirers for the units include managers from both retailing chains, and General Cinema Corp., which is interested in bidding for Saks.
Other potential bidders for parts of B.A.T's U.S. retail unit include Dillard Department Stores Inc., May Department Stores Co. and Limited Inc.
B.A.T has declined to identify the potential bidders.
Though Sir James has said he intends to mount a new bid for B.A.T once approval from U.S. insurance regulators is received, jitters over prospects for junk-bond financing and U.S. leverage buy-outs are making investors more skeptical about Sir James's prospects.
His initial offer indicated he needed to raise as much as 80% of the takeover financing through the debt markets.
Market uncertainty also clouds the outlook for B.A.T's attracting a premium price for its U.S. retailing properties.
Finally, Tuesday's California earthquake initially knocked 3.7% off B.A.T's share price in London yesterday because of fears of the potential claims to Los Angeles-based Farmers, which has a substantial portion of its property and casualty exposure in California.
On Farmers, Mr. Prideaux said it is too early to quantify the level of potential claims.
He added B.A.T "has no expectation of a material impact on Farmers.
Bridge and highway collapses will disrupt truck and auto transportation in the San Francisco Bay area for months to come.
But rail, air and ocean-shipping links to the area escaped Tuesday's earthquake with only minor damage, and many are expected to be operating normally today, government and corporate transport officials said.
Air traffic at San Francisco International Airport was running about 50% of normal yesterday afternoon, but airport officals said they expect a return to full operations by Saturday.
The major gateway to Asia and one of the nation's 10 busiest airports was closed to all but emergency traffic from the time the quake hit Tuesday afternoon, until 6 a.m. PDT yesterday when controllers returned to the tower.
Getting to and from the airport in coming weeks may be the problem, however.
"People's ability to drive throughout the bay area is greatly restricted," said a spokesman for the American Automobile Association.
Tom Schumacher, executive vice president and general manager of the California Trucking Association in Sacremento, said his organization urged trucking firms to halt all deliveries into the Bay area yesterday, except for emergency-medical supplies.
"Some foodstuff shipments will probably resume Thursday," he said.
"Right now most of the roads into the Bay area are closed, but the list of closings changes about every 20 minutes.
This {Wednesday} morning the San Mateo bridge was open and now we are informed that it is closed," Mr. Schumacher said.
United Parcel Service, Greenwich, Conn., said its operations in the San Francisco area have been reduced to 40% of normal.
A UPS spokesman said that although none of the company's terminals, trucks or airplanes were damaged in the quake, road shutdowns and power failures have impeded its pickup and delivery of packages.
The spokesman noted four-hour to five-hour traffic delays on the San Mateo bridge, for example.
In addition, power failures prevented its package-sorting facilities from operating, causing delays.
But freight railroads reported that damage to their facilities was relatively minor, with Santa Fe Pacific Corp.'s rail unit the least affected by the quake.
Santa Fe stopped freight trains Tuesday night while its officials inspected track but resumed service at 10:45 p.m. when they found no damage.
Union Pacific Corp.'s rail unit said that except for damage to shipping containers in its Oakland yard, its track, bridges and structures were unharmed.
That railroad is operating trains but with delays caused by employees unable to get to work.
Southern Pacific Transportation Co., the hardest hit of the three railroads in the Bay area, said service on its north-south coastline, which is used by an Amtrak train between Los Angeles and Seattle, was suspended temporarily because of kinked rails near the epicenter of the quake.
But service on the line is expected to resume by noon today.
"We had no serious damage on the railroad," said a Southern Pacific spokesman.
"We have no problem to our freight service at all expect for the fact businesses are shut down."
Amtrak said it suspended train service into its Oakland station, which sustained "heavy structural damage" during the quake.
The passenger railroad said it terminated some runs in Sacramento, relying on buses to ferry passengers to the Bay area.
Amtrak said it planned to resume some train operations to Oakland late yesterday.
Rail-transit operations suffered little damage, according to Albert Engelken, deputy executive director of the American Public Transit Association in Washington.
The Bay Area Rapid Transit "withstood the earthquake perfectly," said Mr. Engelken, adding that the rail system was running a full fleet of 45 trains during the day to provide an alternative for highway travelers.
"The highway system is screwed up" by the earthquake, Mr. Engelken said.
"The transit system is how people are going to be getting around."
He added that San Francisco's trolley cars and trolley buses were also running at full service levels.
Although air-traffic delays in San Francisco were significant yesterday, they didn't appear to spread to other airports.
The earthquake shattered windows at San Francisco International's air-traffic control tower and rained pieces of the ceiling down on controllers, three of whom suffered minor injuries.
Terminals at San Francisco International also were damaged, but the tower itself was intact.
Tuesday night, thousands were diverted to other airports and had to wait a day to resume travel.
Runways at San Francisco weren't damaged, but traffic was being limited yesterday to 27 arrivals and 27 departures an hour -- down from 33 to 45 an hour normally -- mainly because the noise level in the control tower was overwhelming without the windows, an FAA spokeswoman said.
While the airport was closed, flights were diverted to airports in Sacramento and Stockton, Calif.; Reno and Las Vegas, Nev.; and Los Angeles.
United Airlines, the largest carrier at San Francisco, was operating only 50% of its scheduled service in and out of the area because of damage to its terminal, which in turn was causing delays for travelers headed to the Bay area.
A United spokesman said 14 of its 21 gates were unusable, mainly because of water damage caused when a sprinkler system was triggered by the tremors.
The United spokesman said none of its people were injured at the airport; in fact, as the airport was being evacuated Tuesday night, two babies were born.
Yesterday, the United ticket counter was active, with people trying to get flights out, but the airline said demand for seats into the city also was active, with people trying to get there to help family and friends.
The airports in San Jose and Oakland were both fully operational by noon yesterday, the Federal Aviation Administration said.
In terms of diversions, Denver's Stapleton International may have experienced the most far-flung: A United flight from Japan was rerouted there.
"I think that's the first nonstop commercial passenger flight from Japan to land here," an airport spokesman said.
A Japan Air Lines spokesman said its flights into and out of San Francisco weren't affected, but getting information about its operations was difficult.
Its telecommunications headquarters in Burlingame, Calif., had been knocked out since the quake.
"We're in the dark," he said.
Whitbread & Co. put its spirits division up for sale, triggering a scramble among global groups for the British company's brands.
Whitbread already has been approached by "about half a dozen" companies interested in buying all or part of the spirits business, a spokesman said.
Analysts expect the spirits operations and some California vineyards that also are being sold to fetch about #500 million ($788.8 million).
Among the brands for sale are Beefeater gin, the No. 2 imported gin in the U.S., and Laphroaig single-malt whiskey.
Also for sale are Buckingham Wile Co., which distributes Cutty Sark blended whiskey in the U.S., and Whitbread's Atlas Peak Vineyards in California's Napa Valley.
Beefeater alone is worth as much as #300 million, analysts said.
Whitbread bought the Beefeater distillery two years ago for #174.5 million.
That purchase represented an attempt by Whitbread, a venerable British brewer, to become a major player in the global liquor business.
But Whitbread has been squeezed by giant rivals amid widespread consolidation in the industry.
Now, it wants to concentrate on beer and its newer hotel and restaurant operations.
For rival liquor companies, the Whitbread auction is a rare opportunity to acquire valuable brands.
"It's not very often something like this comes up," said Ron Littleboy, a liquor company analyst at Nomura Research Institute in London.
"The division will be sold off quite rapidly," predicted Neill Junor, an analyst at London brokers County NatWest WoodMac.
Among possible buyers, Grand Metropolitan PLC might find Beefeater a useful addition to its portfolio.
Grand Met owns Bombay gin, the No. 3 imported gin in the U.S.; rival Guinness PLC has the No. 1 imported brand, Tanqueray.
The Whitbread spirits auction "is an extremely interesting development . . . and naturally we'll be considering it carefully," a Grand Met spokesman said.
Guinness, which owns several leading whiskey brands plus Gordon's gin, the world's No. 1 gin, is considered less likely to bid for the Whitbread spirits.
A Guinness spokesman declined to comment.
Two other global liquor giants, Canada's Seagram Co. and Britain's Allied-Lyons PLC, also are possible buyers.
Seagram's gin is the world's No. 2 gin brand, but the company doesn't own any of the major gin brands imported in the U.S.
Allied-Lyons, while powerful in whiskey, doesn't own any major white-spirit brands.
"We will certainly have to take a look at" the Whitbread spirits business, an Allied-Lyons spokesman said.
"We would certainly like to have a major white-spirits brand in our portfolio."
A Seagram spokesman in New York wouldn't comment.
Smaller liquor companies, such as Brown-Forman Corp. and American Brands Inc. of the U.S., also are likely to be interested.
Such companies "are increasingly being left behind" in the global liquor business, says Nomura's Mr. Littleboy.
In New York, a spokesman for American Brands wouldn't comment.
Brown-Forman, a Louisville, Ky. distiller, also declined to comment.
Whitbread's wine, spirits and soft-drink operations had trading profit of #35.4 million on sales of #315.5 million in the year ended Feb. 25.
The company, which is retaining most of its wine and all of its soft-drink interests, didn't break out results for the businesses it plans to sell.
But analysts estimate their trading profit at #30 million.
Whitbread had total pretax profit in the year ended Feb. 25 of #223.2 million, on sales of #2.26 billion.
Whitbread's spirits auction occurs amid a parallel shakeup in the British beer industry.
Earlier this year, the government announced plans to foster increased competition in the industry.
British brewers currently own thousands of pubs, which in turn sell only the breweries' beer and soft drinks.
Under new rules, many of the country's pubs would become "free houses," selling beers of their choice.
Whitbread now intends to bolster its brewing interests, in an effort to grab a share of sales to free houses.
The company, which last month paid #50.7 million for regional British brewer Boddington Group PLC, has about 13% of the British beer market.
Whitbread also owns the license to brew and distribute Heineken and Stella Artois beers in Britain.
In addition, Whitbread intends to focus on its newer hotel, liquor store and restaurant businesses in Europe and North America.
In Britain, those interests include the Beefeater steakhouse chain and joint ownership with PepsiCo Inc. of the country's Pizza Hut chain.
In Canada and the U.S., Whitbread owns The Keg chain of steak and seafood restaurants.
Focusing on beer, restaurants and hotels means "we can concentrate our skills and resources more effectively," Peter Jarvis, Whitbread's managing director, said in a statement.
The spirits business "would require substantial additional investment to enable it to compete effectively in the first division of global players."
Whitbread also announced that Mr. Jarvis, who is 48, will become the company's chief executive March 1.
At that time Sam Whitbread, the company's chairman and a descendant of its 18th-century founder, will retire from executive duties.
He will retain the honorary title of non-executive chairman.
The Treasury plans to raise $700 million in new cash with the sale Tuesday of about $10 billion in two-year notes to redeem $9.29 billion in maturing notes.
The offering will be dated Oct. 31 and mature Oct. 31,
Tenders for the notes, available in minimum $5,000 denominations, must be received by 1 p.m. EDT Tuesday at the Treasury or at Federal Reserve banks or branches.
NEWHALL LAND & FARMING Co., Valencia, Calif., announced a 2-for-1 split in the real estate limited partnership's units and increased its regular quarterly cash distribution 33%, to 40 cents a unit.
The real estate limited partnership also said it will pay a special year-end cash distribution of 10 cents a unit.
Both distributions are payable Dec. 4 to limited partners of record Nov. 3.
Mellon Bank Corp. said directors authorized the buy-back of as many as 250,000 common shares.
The bank holding company said stock repurchased will be used to meet requirements for the company's benefit plans.
Mellon has 36.6 million shares outstanding.
Champion International Corp.'s third-quarter profit dropped 17%, reflecting price declines for certain paper products, operating problems at certain mills, and other factors.
The paper producer reported that net income fell to $102.1 million, or $1.09 a share, from $122.4 million, or $1.29 a share, in the year-earlier period.
Sales rose 2.6% to $1.32 billion from $1.29 billion.
In New York Stock Exchange composite trading, Champion's shares rose 25 cents to $32.125.
Digital Equipment Corp. is planning a big coming-out party on Tuesday for its first line of mainframe computers.
But an uninvited guest is expected to try to crash the party.
On the morning of the long-planned announcement, International Business Machines Corp. is to introduce its own new mainframe.
"Their attitude is, `You want to talk mainframes, we'll talk mainframes,'" says one computer industry executive.
"They're deliberately trying to steal our thunder," a Digital executive complains.
"Maybe we should take it as a compliment."
Digital's target is the $40 billion market for mainframe computers, the closet-sized number-crunchers that nearly every big company needs to run its business.
IBM, based in Armonk, N.Y., has dominated the market for decades.
That doesn't scare Digital, which has grown to be the world's second-largest computer maker by poaching customers of IBM's mid-range machines.
Digital, based in Maynard, Mass., hopes to stage a repeat performance in mainframes, and it has spent almost $1 billion developing the new technology.
A spoiler, nimble Tandem Computers Inc. in Cupertino, Calif., jumped into the fray earlier this week with an aggressively priced entry.
IBM appears more worried about Digital, which has a broad base of customers waiting for the new line, dubbed the VAX 9000.
"It's going to be nuclear war," says Thomas Willmott, a consultant with Aberdeen Group Inc.
The surge in competition is expected to stir new life into the huge mainframe market, where growth has slowed to single digits in recent years.
IBM's traditional mainframe rivals, including Unisys Corp., Control Data Corp. and NCR Corp., have struggled recently.
Digital is promising a new approach.
Robert M. Glorioso, Digital's vice president for high performance systems, says Digital's mainframe is designed not as a central computer around which everything revolves, but as part of a decentralized network weaving together hundreds of workstations, personal computers, printers and other devices.
And unlike IBM's water-cooled mainframes, it doesn't need any plumbing.
The challengers will have a big price advantage.
Digital is expected to tag its new line from about $1.24 million to $4.4 million and up, depending on configuration.
That's about half the price of comparably equipped IBM mainframes.
Tandem's pricing is just as aggressive.
The heightened competition will hit IBM at a difficult time.
The computer giant's current mainframe line, which has sold well and has huge profit margins, is starting to show its age.
The new 3090s due next week will boost performance by only about 8% to 10%.
And IBM isn't expected to deliver a new generation of mainframes until 1991.
Still, no one expects IBM's rivals to deliver a knockout.
IBM has a near-monopoly on mainframes, with an estimated 70% share of the market.
IBM is five times the size of Digital -- and 40 times the size of Tandem -- and wields enormous market power.
It counts among its customers a majority of the world's largest corporations, which entrust their most critical business information to IBM computers.
"We're not going to walk in and replace a company's corporate accounting system if it's already running on an IBM mainframe," concedes Kenneth H. Olsen, Digital's president.
He says Digital will target faster-growing market segments such as on-line transaction processing, which includes retail-sales tracking, airline reservations and bank-teller networks.
Tandem, which already specializes in on-line transaction processing, is a potent competitor in that market.
A key marketing target for Digital will be the large number of big customers who already own both Digital and IBM systems.
One such company is Bankers Trust Co.
Stanley Rose, a vice president, technological and strategic planning at Bankers Trust, says that despite Digital's low prices, "we aren't about to unplug our IBM mainframes for a DEC machine.
The software conversion costs would dwarf any savings."
But Mr. Rose is still looking seriously at the 9000.
Bankers Trust uses Digital's VAX to run its huge money-transfer and capital markets accounts, juggling hundreds of billions of dollars each day, he says.
As that system grows, larger computers may be needed.
"In the past, customers had to go to IBM when they outgrew the VAX.
Now they don't have to," he says.
"That's going to cost IBM revenue."
Analysts say Digital can expect this pent-up demand for the new VAX to fuel strong sales next year.
Barry F. Willman, an analyst at Sanford C. Bernstein & Co., estimates the 9000 could boost sales by more than $1 billion in the fiscal year beginning in July.
He bases the estimate on a survey of hundreds of Digital's largest customers.
Although Digital will announce a full family of mainframes next week, it isn't expected to begin shipping in volume until next year.
The first model available will be the 210, which is likely to appeal to many technical and scientific buyers interested in the optional super-charger, or vector processor, says Terry Shannon of International Data Corp., a market research concern.
Four more models, aimed squarely at IBM's commercial customers, are expected to begin shipping in late June.
Most analysts don't expect the new mainframes to begin contributing significantly to revenue before the fiscal first quarter, which begins next July 1.
Digital's new line has been a long time coming.
The company has long struggled to deliver a strong mainframe-class product, and made a costly decision in 1988 to halt development of an interim product meant to stem the revenue losses at the high end.
Digital's failure to deliver a true mainframe-class machine before now may have cost the company as much as $1 billion in revenue in fiscal 1989, Mr. Willman says.
IBM will face still more competition in coming months.
Amdahl Corp., backed by Japan's Fujitsu Ltd., has a growing share of the market with its low-priced, IBM-compatible machines.
And National Advanced Systems, a joint venture of Japan's Hitachi Ltd. and General Motors Corp.'s Electronic Data Systems, is expected to unveil a line of powerful IBM-compatible mainframes later this year.
NOTE:
NAS is National Advanced Systems, CDC -- Control Data Corp., Bull NH Information Systems Inc.
Source: International Data Corp.
Compiled by Publishers Weekly from data from large-city bookstores, bookstore chains and local bestseller lists across the U.S.
Copyright 1989 by Reed Publishing USA.
The frenetic stock and bond markets cooled off, but the dollar slumped.
Stocks rose slightly as trading activity slowed from the frenzied pace earlier this week.
Prices of long-term Treasury bonds hovered in a narrow band most of the day, finishing little changed despite the dollar's weakness and fears about a wave of government borrowing coming soon.
Helped by futures-related program buying, the Dow Jones Industrial Average gained 4.92 points to close at 2643.65.
But the Dow Jones Transportation Average fell for the seventh-consecutive session as more investors dumped UAL shares.
Bond prices rallied early yesterday morning as traders scrambled to buy Treasury issues on fears that the Northern California earthquake might lead to a stock-market debacle.
But when stocks held steady, Treasury bonds later retreated.
Speculation that the Federal Reserve will lower interest rates in coming weeks helped push the dollar down while boosting stocks, traders said.
But many investors remain wary about stocks, partly because they expect continued turbulence in the junk-bond market that would make it more difficult to finance corporate takeovers.
"I'm surprised we didn't see more volatility" in stocks, said Raymond F. DeVoe Jr., market strategist at Legg Mason Wood Walker.
"I think the problems in the junk-bond area are just beginning, and this will be very unsettling for companies that have issued junk bonds.
In a bull market, credit does not matter," Mr. DeVoe added.
"But when it does matter, then it's the only thing that matters."
However, many institutional investors are reacting to the stock market's plunge as "a great buying opportunity," said Charles I. Clough, chief investment strategist at Merrill Lynch Capital Markets.
"Things are beginning to settle down.
The markets are returning to normalcy."
Oil prices initially rose on fears that the massive earthquake in Northern California would disrupt production.
But prices later reversed course, finishing slightly lower, as investors concluded that any cuts wouldn't be large and that foreign oil producers would quickly pick up the slack.
In major market activity:
Stock prices rose.
New York Stock Exchange volume shrank to 166.9 million shares from 224.1 million Tuesday.
Advancers on the Big Board outpaced decliners by 822 to 668.
Bond prices were little changed in sluggish activity.
The yield on the Treasury's 30-year issue fell slightly to 8.03%.
The dollar dropped.
In New York late yesterday, the currency was at 141.45 yen and 1.8485 marks, down from 142.75 yen and 1.8667 marks late Tuesday.
James L. Madson, 46 years old, was named a vice president and assistant general manager of this producer of copper and other minerals.
He will succeed Arthur E. Himebaugh as general manager Feb. 1, when Mr. Himebaugh retires.
AMR Corp. posted an 8.8% drop in third-quarter net income and said the fourth quarter will be "disappointing" as well, primarily because of slimmer profit margins and increased fuel costs.
AMR's earnings decline comes a year after the parent company of American Airlines and the rest of the airline industry set profit records.
Some analysts say the latest results only seem pale by comparison with a spectacular second half of 1988.
Still, AMR's stumble doesn't bode well for the rest of the industry.
The Fort Worth, Texas, company is generally regarded as one of the best-run in the business, and its difficulties are likely to be reflected industrywide as other major carriers report third-quarter results over the next several days.
Meanwhile, the company's board, which had said nothing publicly about investor Donald Trump's recently withdrawn $7.5 billion offer for AMR, issued a statement condemning "ill-conceived and reckless" bids and saying it was "pleased" that Mr. Trump had backed out.
In the third quarter, AMR said, net fell to $137 million, or $2.16 a share, from $150.3 million, or $2.50 a share.
Revenue rose 17% to $2.73 billion from $2.33 billion a year earlier.
AMR's chairman, Robert L. Crandall, said the results were due to an 11% year-to-year increase in fuel prices and a slight decrease in yield, an industry measure analogous to profit margin on each seat sold.
"We think these trends will continue and will produce a very disappointing fourth quarter as well," he said.
Tim Pettee, an analyst with Merrill Lynch & Co., said: "The business turned faster than expected.
Costs are giving them a little bit of trouble, and the whole industry is having a pricing problem."
For the nine months, AMR's net rose 15% to $415.9 million, or $6.59 a share, from $360.1 million, or $5.99 a share.
Revenue jumped 22% to $7.89 billion from $6.46 billion.
AMR's board, in a statement after a regular meeting yesterday, said: "Ill-considered and reckless acquisition proposals adversely affect employee, financial and business relationships and are contrary to the best interests of AMR shareholders. . . .
AMR has not been, and is not, for sale."
Mr. Crandall said the company's current decline in earnings is exactly the kind of situation that an excessively leveraged company laden with debt from a takeover would find difficult to weather.
"Our very disappointing third-quarter results and the discouraging outlook for the fourth quarter underscore the importance of an adequate capital base," he said.
Christopher Whittington, 51-year-old deputy chairman of this British investment-banking group and chairman of Morgan Grenfell & Co., the group's main banking unit, has retired from his executive duties.
Succeeding Mr. Whittington as deputy chairman of the group is Anthony Richmond-Watson, 43, currently a main board member.
Succeeding Mr. Whittington at Morgan Grenfell & Co. is Richard Webb, 50, currently deputy chairman.
Mr. Whittington will remain on the main group board as a nonexecutive director.
Without federal subsidies to developers of beach houses, the economic and structural damage by Hurricane Hugo in South Carolina would have been much less, as highlighted by your Oct. 3 editorial "Subsidizing Disaster."
Congress should stop throwing tax dollars out to sea by subsidizing the development of beach communities on ecologically fragile coastal barrier islands, such as the hard-hit Isle of Palms near Charleston.
As you mentioned, subsidies for development on a number of barrier islands were curtailed in 1982 by the Coastal Barrier Resource System.
The National Taxpayers Union would like Congress to add 800,000 acres to the 453,000 of shoreline in the system by enacting "The Coastal Barrier Improvement Act of 1989."
This bill simply says that if you want to develop property on a barrier island you have to do so without taxpayer support.
Private-property rights would be upheld because the legislation would not ban coastal development.
However, home builders would have to bear the full costs of such beach-house construction.
A Taxpayers Union study concluded the bill would save taxpayers up to $9.3 billion in barrier-island subsidies over 20 years.
Already, the 1982 legislation has saved an estimated $800 million.
Marshall Y. Taylor
Communications Director
National Taxpayers Union
The government said 13.1% of Americans, or 31.9 million people, were living in poverty in 1988.
While last year's figure was down from 13.4% in 1987 and marked the fifth consecutive annual decline in the poverty rate, the Census Bureau said the 1988 drop wasn't statistically significant.
The bureau's report also showed that while some measures of the nation's economic well-being improved modestly in 1988, the fruits of prosperity were shared less equitably than the year before.
Summarizing data derived from a March 1989 survey of 58,000 households, William Butz, associate director of the Census Bureau, said that "most groups either stayed the same or improved."
But, he added, "Since the late 1960s, the distribution of income has been slowly getting less equal.
There was no reversal {of that trend} between 1987 and 1988."
Per capita income, a widely used measure of a nation's economic health, hit a record in 1988, rising 1.7% after inflation adjustment to $13,120.
But the median income of American families fell 0.2%, the first time it has failed to rise since 1982.
Mr. Butz said the divergence in the two measures reflects changes in family size and structure, including the rising number of female-headed families and a sharp increase in income reported by Americans who aren't living in families.
As a result of last year's decline, the government's estimate for the number of people living below the poverty line declined by about 500,000.
The poverty threshold, defined as three times food expenses as calculated by the Agricultural Department, last year was $12,092 for a family of four.
The Census Bureau counts all cash income in determining whether families are below the line, but it doesn't consider other government benefits, such as Medicare.
Thanks largely to the continued growth of the U.S. economy, the poverty rate is now substantially lower than the 1983 peak of 15.3%, but the improvements have been modest in the past couple of years.
Poverty remains far more widespread among blacks than other Americans.
In 1988, 31.6% of blacks lived in poverty, compared with 10.1% for whites and 26.8% for Hispanics.
But two-thirds of all poor Americans were white.
More than half of poor families were headed by women living without men, the bureau said.
More than three-fourths of poor black families were headed by women.
The poverty rate of children under 18 years old dropped last year to 19.7% from 20.5% in 1987, but remained far higher than a decade ago.
The rate among the elderly -- 12% in 1988 -- wasn't significantly lower than the year before.
If it weren't for Social Security payments, more than three times as many elderly would be below the poverty line, Mr. Butz said.
The Census Bureau also said:
-- Some 17.2% of all money income received by families in 1988 went to the wealthiest 5% of all families, up from 16.9% in 1987.
That is the greatest share reported for any year since 1950, although changing definitions over the years distort the comparison.
-- The top fifth of all families got 44% of the income, up from 41.5% a decade earlier.
The bottom fifth of all families got 4.6% of the income, down from 5.2% a decade earlier.
-- Confirming other government data showing that wages aren't keeping pace with inflation, earnings of year-round, full-time male workers fell 1.3% in 1988 after adjusting for higher prices, the first such drop since 1982.
Earnings of female workers were unchanged.
-- Women working full-time earned 66 cents for every dollar earned by men, a penny more than in 1987 and seven cents more than in 1978.
-- Median household income -- which includes both those living in families and those who aren't -- rose 0.3% last year to $27,225 after inflation.
It rose sharply in the Northeast and Midwest and fell slightly in the South and West.
Median family income was $32,191, down 0.2%.
-- Per capita income of blacks, though still only 60% that of whites, rose 3.9% in 1988, while per capita income of whites rose only 1.5%.
-- Among married couples, the gap between blacks and whites narrowed sharply, as income of black families shot up 6.8% while income of whites didn't budge.
Fueling a controversy that has been simmering for years, the Census Bureau also said its figures would look far rosier if it recalculated the poverty threshold using an improved consumer-price measure adopted in 1983.
The bureau said some 3.5 million fewer people would have fallen below the poverty line in 1988 -- and the poverty rate would have been 10.5% instead of 13.1% -- under the alternative calculation.
Critics on the left and right have been calling for all sorts of revisions to the measure for years.
A report by the staff of the Joint Economic Committee of Congress released yesterday concluded, "It is misleading to make this change without adjusting for other changes."
The official poverty threshold is set by the Office of Management and Budget.
John E. Hayes Jr. was elected chairman, president and chief executive officer, succeeding David S. Black, who retired.
Mr. Hayes, 52 years old, left Southwestern Bell Telephone Co. in January, where he had been chairman, president and chief executive, to join Triad Capital Partners, a St. Louis company with interests in solid waste and recycling, telecommunications and international venture capital.
He has resigned his posts at Triad to take the Kansas Power positions.
Kansas Power said Mr. Black, 61, chose early retirement.
The space shuttle Atlantis boosted the Galileo spacecraft on its way to Jupiter, giving a big lift as well to an ambitious U.S. program of space exploration.
Seven years late in the launching, $1 billion over budget and a target of anti-nuclear protestors, Galileo has long been a symbol of trouble for the National Aeronautics and Space Administration.
But yesterday, as Atlantis rumbled into a patch of clear sky above Florida with storm clouds closing in on it, NASA sought to turn Galileo into a symbol of triumph.
"NASA did it right; that's the message," said J.R. Thompson, the agency's deputy administrator.
The $1.4 billion robot spacecraft faces a six-year journey to explore Jupiter and its 16 known moons.
If all goes well, it will parachute a probe into the dense Jovian atmosphere in July 1995 to pick up detailed data about gases that may be similar to the material from which the solar system was formed 4.6 billion years ago.
Jupiter is so enormous -- its mass is 318 times that of Earth -- that its gravity may have trapped these primordial gases and never let them escape.
Investigating Jupiter in detail may provide clues to what astronomer Tobias Owen calls the "cosmic paradox" of life: Jupiter and other bodies in the outer solar system are rich in elements such as hydrogen that are essential for life on Earth, but these planets are lifeless; Earth, on the other hand, has a diminished store of such material but is rich in life.
Some scientists have suggested that comets and asteroids may have brought enough of this kind of material from the outer solar system to Earth to spawn life.
Beginning in December 1995, Galileo will begin a two-year tour of the Jovian moons.
In 1979, two Voyager spacecraft sent back stunning photos of Jovian moons Io and Europa that showed them to be among the most intriguing bodies in the solar system.
The photos showed active geysers on Io spewing sulfurous material 190 miles into its atmosphere and indicated that Europa may have an ocean hidden under a thick sheet of ice.
Galileo's photos of Europa will be more than 1,000 times as sharp as Voyager's, according to Torrence Johnson, Galileo's project scientist, and may show whether it actually has the only known ocean other than those on Earth.
Atlantis lifted Galileo from the launch pad at 12:54 p.m. EDT and released the craft from its cargo bay about six hours later.
"Galileo is on its way to another world in the hands of the best flight controllers in this world," Atlantis Commander Donald Williams said.
"Fly safely."
The five-member Atlantis crew will conduct several experiments, including growing plants and processing polymeric materials in space, before their scheduled landing at Edwards Air Force Base, Calif., Monday.
The Galileo project started in 1977, and a number of project veterans were on hand to watch the launch.
An ebullient Mr. Johnson, wearing a NASA baseball cap and carrying a camera and binoculars, called the launch "fantastic."
Benny Chin, manager of the Galileo probe, compared it to watching a child leave home.
"I'm happy and sad," he said.
Anti-nuclear activists took a less positive view.
Having argued that Galileo's plutonium power source could have released lethal doses of radiation if the shuttle exploded yesterday, they weren't quieted by yesterday's successful launch.
Galileo will skim past Earth in 1990 and 1992, collecting energy from the planet's gravitational field to gain momentum for its trip to Jupiter.
The protesters point out that Galileo also could crash to Earth then.
They said they dropped plans to infiltrate the Kennedy Space Center after NASA beefed up its security.
One protest did get past NASA's guard, though; a computer virus caused anti-Galileo messages to flash onto some computer screens at NASA centers.
The successful launch continues a remarkable recovery in the U.S. space-science program.
An unmanned spacecraft, Magellan, already is heading to Venus and is due to begin mapping the planet next August.
Voyager 2 sent back spectacular photos of Neptune and its moon, Triton, this summer.
Next month, NASA plans to launch a satellite to study cosmic rays dating from the birth of the universe.
In December, the shuttle Columbia will try to retrieve a satellite that's been in orbit for nearly five years measuring the deleterious effects of space on materials and instruments.
Next March, the shuttle Discovery will launch the Hubble space telescope, a $1.5 billion instrument designed to see the faintest galaxies in the universe.
Not all of NASA's space-science work will be so auspicious, though.
Around Thanksgiving, the Solar Max satellite, which NASA repaired in orbit in 1984, will tumble back into the Earth's atmosphere.
NASA won't attempt a rescue; instead, it will try to predict whether any of the rubble will smash to the ground and where.
The Associated Press's earthquake coverage drew attention to a phenomenon that deserves some thought by public officials and other policy makers.
Private relief agencies, such as the Salvation Army and Red Cross, mobilized almost instantly to help people, while the Washington bureaucracy "took hours getting into gear."
One news show we saw yesterday even displayed 25 federal officials meeting around a table.
We recall that the mayor of Charleston complained bitterly about the federal bureaucracy's response to Hurricane Hugo.
The sense grows that modern public bureaucracies simply don't perform their assigned functions well.
Bally Manufacturing Corp. and New York developer Donald Trump have agreed in principle to a $6.5 million settlement of shareholder litigation stemming from Bally's alleged greenmail payment to Mr. Trump.
According to lawyers familiar with the settlement talks, the verbal agreement to end a lawsuit filed more than two years ago was reached last week and will soon be submitted to a federal judge in Camden, N.J.
In February 1987, Bally thwarted a possible hostile takeover bid from Mr. Trump by agreeing to buy 2.6 million of Mr. Trump's 3.1 million Bally shares for $83.7 million -- more than $18 million above market price.
The term greenmail refers to a situation where a company pays a premium over market value to repurchase a stake held by a potential acquirer.
Lawyers for shareholders, Bally and Mr. Trump all declined to talk publicly about the proposed settlement, citing a request by a federal court magistrate not to reveal details of the agreement until it is completed.
But some attorneys who are familiar with the matter said the $6.5 million payment will be shared by Bally and Mr. Trump, with the casino and hotel concern probably paying the bulk of the money.
The amount Bally and Mr. Trump will pay to settle the class-action suit pales in comparison to the $45 million Walt Disney Co. and Saul Steinberg's Reliance Group Holdings Inc. agreed to pay to settle a similar suit in July.
That settlement represented the first time shareholders were granted a major payment in a greenmail case.
Mr. Steinberg made a $59.7 million profit on the sale to Disney of his investment in the company in 1984.
But lawyers said Mr. Steinberg probably faced much more potential liability because, when he sued Disney during his takeover battle, he filed on behalf of all shareholders.
When Disney offered to pay Mr. Steinberg a premium for his shares, the New York investor didn't demand the company also pay a premium to other shareholders.
When Mr. Trump sued Bally, he sued only on behalf of himself.
Mr. Trump and Bally also appeared to have some leverage in the case because in the state of Delaware, where Bally is incorporated, courts have held that greenmail is often protected by the business-judgment rule.
That rule gives boards of directors wide latitude in deciding how to deal with dissident shareholders.
SENATE HEARS final arguments in impeachment trial of federal judge.
Yesterday, U.S. Judge Alcee Hastings faced his jury -- the full U.S. Senate -- and said, "I am not guilty of having committed any crime."
Seventeen articles of impeachment against the Florida judge, one of the few blacks on the U.S. bench, were approved by the House in August 1988.
The central charge against Judge Hastings is that he conspired with a Washington lawyer to obtain a $150,000 bribe from defendants in a criminal case before the judge, in return for leniency.
He is also accused of lying under oath and of leaking information obtained from a wiretap he supervised.
The Senate's public gallery was packed with Judge Hastings' supporters, who erupted into applause after he finished his argument.
Judge Hastings, who was acquitted of similar charges by a federal jury in 1983, claims he is being victimized and that the impeachment proceedings against him constitute double jeopardy.
But Rep. John Bryant (D., Texas), the lead counsel for the House managers who conducted a lengthy inquiry into Judge Hastings' activities, said "a mountain of evidence points to his certain guilt."
The Senate will deliberate behind closed doors today and is scheduled to vote on the impeachment tomorrow.
If the judge is impeached, as is thought likely, he will be removed from office immediately.
However, Judge Hastings has said he will continue to fight and is contemplating an appeal of any impeachment to the U.S. Supreme Court.
COMPANIES SEEKING to make insurers pay for pollution cleanup win court victory.
In a case involving Avondale Industries Inc. and its insurer, Travelers Cos., the Second U.S. Circuit Court of Appeals in New York ruled in favor of the company on two issues that lawyers say are central to dozens of pollution cases around the country.
Travelers and other insurers have maintained that cleanup costs aren't damages and thus aren't covered under commercial policies.
They also have argued that government proceedings notifying a company of potential responsibility don't fit the legal definition of a lawsuit; thus, such governmental proceedings aren't covered by the policies, the insurers say.
The appeals court disagreed on both counts.
Avondale was notified by Louisiana officials in 1986 that it was potentially responsible for a cleanup at an oil-recycling plant.
Avondale asked Travelers to defend it in the state proceeding, but the insurer didn't respond.
The appeals court upheld a district judge's ruling that the insurer had to defend the company in such proceedings.
The appeals court also said, "We think an ordinary businessman reading this policy would have believed himself covered for the demands and potential damage claims" stemming from any cleanup.
"This decision will have a very considerable impact," said Kenneth Abraham, professor of environmental law and insurance law at the University of Virginia, because many commercial insurance policies are issued by companies based in New York.
William Greaney, an attorney for the Chemical Manufacturers Association, said that while other appeals courts have ruled differently on whether cleanup costs are damages, the influence of the appeals court in New York "will make insurers sit up and listen."
He said the decision was the first in which a federal appeals court has ruled whether administrative government proceedings qualify as litigation.
Barry R. Ostrager, an attorney for Travelers, said, "there are procedural bases on which this case will be appealed further."
NEW YORK'S poor face nearly three million legal problems a year without legal help.
That is the conclusion of a report released by the New York State Bar Association.
The report was based on a telephone survey of 1,250 low-income households across the state, a mail survey of major legal-services programs and on-site interviews with individuals in the field.
"The report provides detailed documentation of the extent and nature of the problem and indicates how we may want to shape solutions," said Joseph Genova, chairman of the committee that oversaw the survey and a partner at the law firm of Milbank, Tweed, Hadley & McCloy.
According to the study, slightly more than 34% of those surveyed reported having at least one housing problem every year for which they had no legal help.
Nearly 36% ranked housing problems as their most serious unmet legal need.
Other areas targeted by the survey's respondents included difficulty obtaining or maintaining public benefits (22%), consumer fraud (15.4%), and health-care issues (15%).
During the 15-month survey, 43% of all legal-services programs said that at some period they were unable to accept new clients unless they had an emergency.
Mr. Genova said the committee may meet to propose solutions to the problems identified in the study.
PROSECUTOR TO JOIN Gibson Dunn:
Assistant U.S. Attorney Randy Mastro, who headed the government's racketeering case against the International Brotherhood of Teamsters, will join Gibson, Dunn & Crutcher in its New York office.
Mr. Mastro has been with the New York U.S. attorney's office for nearly five years.
In 1987 he became deputy chief of the civil division.
Mr. Mastro will do civil litigation and white-collar defense work for Gibson Dunn, which is based in Los Angeles.
FORMER APPLE COMPUTER Inc. general counsel John P. Karalis has joined the Phoenix, Ariz., law firm of Brown & Bain.
Mr. Karalis, 51, will specialize in corporate law and international law at the 110-lawyer firm.
Before joining Apple in 1986, Mr. Karalis served as general counsel at Sperry Corp.
After failing to find a buyer for the Sears Tower in Chicago, Sears, Roebuck & Co. is negotiating with Boston pension fund adviser Aldrich, Eastman & Waltch Inc. to refinance the property for close to $850 million, according to people close to the negotiations.
Under the proposed agreement involving the world's tallest building, Chicago-based Sears would receive about half the money through conventional mortgage financing and the other half as a convertible mortgage.
At the end of the term of the convertible loan, Sears could still own half the building, and AEW could own the other half.
Neither side would comment.
The parties are currently negotiating over who would manage the building, which will be emptied of 6,000 employees from Sears' merchandise group, which is moving elsewhere.
The new manager will face the daunting task of leasing 1.8 million square feet in a relatively soft Chicago real estate market.
Also, it has not yet been decided exactly how much of the mortgage AEW will be able to convert into equity.
Convertible mortgages have become an increasingly popular way to finance prestigious buildings of late.
In a convertible mortgage, the investor lends the building owner a certain amount in return for the option to convert its interest into equity, usually less than 50%, at the end of the loan term.
During the term, the lender can either receive a percentage of cash flow, a percentage of the building's appreciation or a fixed return.
The main advantage of a convertible mortgage is that it is not a sale and therefore does not trigger costly transfer taxes and reappraisal.
Sears said it would put the 110-story tower on the block almost a year ago as part of its anti-takeover restructuring.
But Japanese institutions shied away from bidding on the high-profile tower out of fear their purchase of the property would trigger anti-Japanese sentiment.
Last summer, Sears appeared to have a deal with Canadian developer Olympia & York Developments Ltd.
But that deal fell through in September after it became clear that the sale would lead to a major real estate tax reassessment, raising property taxes, and making it difficult to lease the building at competitive prices.
Real estate industry executives said Sears' investment banker, Goldman, Sachs & Co., sought financing in Japan.
However, Japanese authorities apparently were concerned that a refinancing also would attract too much publicity.
Sears then went back to AEW, the Boston pension adviser that had proposed a convertible debt deal during the first round of bids last spring.
AEW has $3.5 billion of real estate investments nationwide, according to a spokesman.
Tandy Corp. said it signed a definitive agreement to acquire two units of Datatronic AB of Stockholm for cash.
The amount wasn't disclosed.
The electronics maker and retailer previously estimated the sale price at between $100 million and $200 million for Datatronic's Victor microcomputer and Micronic hand-held computer subsidiaries.
In addition, Tandy will acquire rights to the Victor and Micronic names for computers.
During 1988, the Datatronic subsidiaries had combined sales in excess of $200 million.
The transaction will give Tandy a well-known European computer brand that includes 2,700 dealers and distributors marketing to medium-sized business and educational institutions.
Closing of the transaction is subject to certain conditions and regulatory approvals, the company said.
Two rules in pending congressional legislation threaten to hinder leveraged buy-outs by raising the price tags of such deals by as much as 10%.
Wall Street is seething over the rules, which would curtail the tax deductibility of debt used in most LBOs.
The provisions, in deficit-reduction bills recently passed by the House and Senate, could further cool the takeover boom that has been the driving force behind the bull market in stocks for much of the 1980s, some tax experts and investment bankers argue.
Indeed, some investment bankers have already started restructuring deals to cope with the expected rules.
Wall Street has all but conceded on the issue and is now lobbying for the less onerous Senate version of one of the provisions.
At issue is the deductibility of certain junk bonds that are used in most LBOs.
Such high-yield debt is similar to a zero-coupon bond in that it is sold at a discount to face value, with interest accruing instead of being paid to the holder.
Under current rules, that accrued interest is deductible by the company issuing the debt.
The House version of the legislation would kill that deduction, and label any such debt as equity, which isn't deductible.
The less-rigorous Senate version would defer the deductibility for roughly five years.
"You see these in just about every LBO," said Robert Willens, senior vice president in charge of tax issues at Shearson Lehman Hutton Inc. in New York.
"It becomes a source of cash" for the company making the LBO because it gets a deduction and doesn't have to repay the debt for several years.
Typically, Mr. Willens estimates, this type of debt makes up 15% to 20% of the financing for LBOs.
These types of bonds have been used in buy-outs of companies such as RJR Nabisco Inc., Storer Communications Inc. and Kroger Co.
A second provision passed by the Senate and House would eliminate a rule allowing companies that post losses resulting from LBO debt to receive refunds of taxes paid over the previous three years.
For example, if a company posted a loss of $100 million from buy-out interest payments, the existing rule would allow the concern to be able to receive a refund from the tax it paid from 1986 through 1989, when it may have been a profitable public company.
But that rule is being virtually overlooked by Wall Street, which is concentrating on coping with the deduction issue.
"Prices for LBOs have to come down if you don't have that feature," argued Lawrence Schloss, managing director for merchant banking at Donaldson, Lufkin & Jenrette Securities Corp. in New York.
Several Wall Street officials say the proposed legislation already is having an impact.
An investment group led by Chicago's Pritzker family recently lowered a $3.35 billion bid for American Medical International, Beverly Hills, Calif., because of the threat of the legislation.
Moreover, one investment banker, who requested anonymity, said his firm didn't raise the ante for a target company earlier this month after a stronger bid emerged from a public company that wasn't concerned about the financing provision.
"We would have paid more if we thought that law wasn't going to pass," he said.
One possible solution for Wall Street is to increase the equity part of the transaction -- that is, give lenders a bigger stake in the surviving company rather than just interest payments.
That would force the buy-out firm and the target company's management to reduce their level of ownership.
"The pigs in the trough may have to give a little bit of the slop back and then the deal can go through," said Peter C. Canellos, tax partner at Wachtell, Lipton, Rosen & Katz.
Another solution, said a tax lawyer who requested anonymity, is for firms to use convertible bonds that sell at a discount.
Since they have a lower interest rate, they wouldn't fall under the junk-bond category that would lose its deductibility.
The House version of the bill would make debt non-deductible if it pays five percentage points above Treasury notes, has at least a five-year maturity and doesn't pay interest for at least one year out of the first five.
The bill would then declare that the debt is equity and therefore isn't deductible.
The Senate bill would only deny the deduction until interest is actually paid.
Currently, even though the issuer doesn't pay tax, the debt holder is taxed on the accrued interest.
But those holders are often foreign investors and tax-exempt pension funds that don't pay taxes on their holdings.
The Senate estimates that its version of the provision would yield $17 million the first year and a total of $409 million over five years.
The House version would raise slightly more.
Even if Wall Street finds ways around the new rules, a Senate aide contends LBOs will become somewhat more difficult.
"There's no question it will make LBOs more expensive," he said.
"The interest deduction was the engine that made these things more productive.
The average publicly offered commodity fund fell 4.2% in September, largely because of the volatile markets in foreign currencies, according to Norwood Securities.
The firm said that losers outnumbered gainers by more than three to one among the 122 funds it tracks.
For the first nine months of the year, Norwood said the average fund has lost 3.3%.
The government moved aggressively to open the spigots of federal aid for victims of the California earthquake, but its reservoir of emergency funds must be replenished soon if the aid is to continue.
President Bush signed a disaster declaration covering seven Northern California counties.
The declaration immediately made the counties eligible for temporary housing, grants and low-cost loans to cover uninsured property losses.
In addition, an unusually wide array of federal agencies moved to provide specialized assistance.
The Department of Housing and Urban Development prepared to make as many as 100 vacant houses available for those left homeless, the Agriculture Department was set to divert food from the school-lunch program to earthquake victims, and the Pentagon was providing everything from radio communications to blood transfusions to military police for directing traffic.
But the pool of federal emergency-relief funds already is running low because of the heavy costs of cleaning up Hurricane Hugo, and Congress will be under pressure to allocate more money quickly.
In Hugo's wake, Congress allocated $1.1 billion in relief funds, and White House spokesman Marlin Fitzwater said $273 million of that money remains and could be diverted for quick expenditures related to the earthquake.
Now, though, enormous costs for earthquake relief will pile on top of outstanding costs for hurricane relief.
"That obviously means that we won't have enough for all of the emergencies that are now facing us, and we will have to consider appropriate requests for follow-on funding," Mr. Fitzwater said.
The federal government isn't even attempting yet to estimate how much the earthquake will cost it.
But Mr. Fitzwater said, "There will be, I think quite obviously, a very large amount of money required from all levels of government."
In Congress, lawmakers already are looking for ways to add relief funds.
Money could be added to a pending spending bill covering the Federal Emergency Management Agency, which coordinates federal disaster relief.
More likely, relief funds could be added to an omnibus spending bill that Congress is to begin considering next week.
But it isn't just Washington's relief dollars that are spread thin; its relief manpower also is stretched.
FEMA still has special disaster centers open to handle the aftermath of Hugo, and spokesman Russell Clanahan acknowledged that "we're pretty thin."
Mr. Clanahan says FEMA now possibly may have the heaviest caseload in its history.
To further complicate relief efforts, the privately funded American Red Cross also finds itself strapped for funds after its big Hugo operation.
"It's been a bad month money-wise and every other way," said Sally Stewart, a spokeswoman for the Red Cross.
"It just makes it a little rough when you have to worry about the budget."
The Red Cross has opened 30 shelters in the Bay area, serving 5,000 people.
Twenty-five trucks capable of cooking food were dispatched from other states.
All the precise types of federal aid that will be sent to California won't be determined until state officials make specific requests to FEMA, agency officials said.
And in the confusion after the earthquake, "the information flow is a little slow coming in from the affected area," said Carl Suchocki, a FEMA spokesman.
Still, some aid is moving westward from Washington almost immediately.
HUD officials said they will make available as many as 100 Bay area houses that are under HUD loans but now are vacant after the houses have been inspected to ensure they are sound.
Additional housing vouchers and certificates will be made available, officials said, and some housing and community-development funds may be shifted from other programs or made available for emergency use.
Another federal agency not normally associated with disaster relief -- the Internal Revenue Service -- moved quickly as well.
The IRS said it will waive certain tax penalties for earthquake victims unable to meet return deadlines or make payments because of the quake's devastation.
The agency plans to announce specific relief procedures in the coming days.
And the Treasury said residents of the San Francisco area will be able to cash in savings bonds even if they haven't held them for the minimum six-month period.
One advantage that federal officials have in handling earthquake relief is the large number of military facilities in the San Francisco Bay area, facilities that provide a ready base of supplies and workers.
Even before the full extent of the devastation was known, Defense Secretary Dick Cheney ordered the military services to set up an emergency command center in the Pentagon and prepare to respond to various FEMA requests for assistance.
By yesterday afternoon, Air Force transport planes began moving additional rescue and medical supplies, physicians, communications equipment and FEMA personnel to California.
A military jet flew a congressional delegation and senior Bush administration officials to survey the damage.
And the Pentagon said dozens of additional crews and transport aircraft were on alert "awaiting orders to move emergency supplies."
Two Air Force facilities near Sacramento, and Travis Air Force Base, 50 miles northeast of San Francisco, were designated to serve as medical-airlift centers.
Some victims also were treated at the Letterman Army Medical Center in San Francisco and at the Naval Hospital in Oakland.
In addition, 20 military police from the Presidio, a military base in San Francisco, are assisting with traffic control, and a Navy ship was moved from a naval station at Treasure Island near the Bay Bridge to San Francisco to help fight fires.
To help residents in Northern California rebuild, FEMA intends to set up 17 disaster assistance offices in the earthquake area in the next several days and to staff them with 400 to 500 workers from various agencies, said Robert Volland, chief of the agency's individual assistance division.
At these offices, earthquake victims will be helped in filling out a one-page form that they will need to qualify for such federal assistance as home-improvement loans and to repair houses.
And federal officials are promising to move rapidly with federal highway aid to rebuild the area's severely damaged road system.
The Federal Highway Administration has an emergency relief program to help states and local governments repair federally funded highways and bridges seriously damaged by natural disasters.
The account currently has $220 million.
And though federal law dictates that only $100 million can be disbursed from that fund in any one state per disaster, administration officials expect Congress to move in to authorize spending more now in California.
To get that money, states must go through an elaborate approval process, but officials expect red tape to be cut this time.
Keith Mulrooney, special assistant to Federal Highway Administrator Thomas Larson, also said that after the 1971 San Fernando earthquake in Southern California, the state set tougher standards for bridges, and with federal aid, began a program to retrofit highways and bridges for earthquake hazards.
The first phase of the program has been completed, but two other phases are continuing.
The two major structures that failed Tuesday night, he said, were both built well before the 1971 earthquake -- the San Francisco Bay Bridge, completed in the 1930s, and the section of I-880, built in the 1950s.
The I-880 section had completed the first phase of the retrofitting.
Laurie McGinley contributed to this article.
FARMERS REAP abundant crops.
But how much will shoppers benefit?
The harvest arrives in plenty after last year's drought-ravaged effort: The government estimates corn output at 7.45 billion bushels, up 51% from last fall.
Soybean production swells 24%.
As a result, prices paid to farmers for the commodities, which are used in products as diverse as bubble gum and chicken feed, plummet 20% to 33%.
But don't expect too much in the way of price breaks soon at the supermarket.
Economists expect consumer food prices to jump 5.5% this year to the highest level since 1980 and up from last year's 4.1% rise.
Next year may see a drop of one percentage point.
Beef prices, hovering near records since the drought, could drop in earnest this winter if ranchers expand herds.
Lower feed prices may help animals eat more cheaply, but humans have to factor in an expensive middleman: the processor.
Food companies probably won't cut their prices much, blaming other costs.
"Labor takes the biggest single chunk out of the `food dollar,'" says Frank Pankyo of the Food Institute.
Stokely says stores revive specials like three cans of peas for 99 cents.
Two cans cost 89 cents during the drought.
IF IN VITRO fertilization works, it usually does so after only a few tries.
Costly infertility problems and procedures proliferate as aging baby boomers and others decide to have children -- now.
It's estimated that one in six couples experiences infertility, and in 1987, Americans spent about $1 billion to fight the problem.
Only about five states now offer some form of insurance coverage, but more are expected.
A letter in the New England Journal of Medicine notes that while technology offers "almost endless hope . . . when to stop has become a difficult question. . . ."
The authors, from Boston's Beth Israel Hospital, say that 84% of the 50 births they followed occurred after only two in vitro cycles.
It adds that births were "extremely unlikely" after the fourth cycle and concludes couples who don't achieve a pregnancy after four to six procedures should be advised that success is unlikely.
Some couples continue to try.
"Such determination may translate into extreme physical, emotional and financial costs," the letter warns.
MARKET MOVES, these managers don't.
Only three of the 25 corporate pension fund managers attending a Lowry Consulting Group client conference say they plan to change the asset allocation mix in their portfolios because of the market drop.
WORLD ODDITIES come alive in a multimedia version of the Guinness Book of Records.
The $99 CD-ROM disk (it can only be played on an Apple Macintosh computer at the moment) combines animation, music and sound.
Among the Guinness disk's wonders: the world's loudest recorded belch.
ARTY FAX from David Hockney begins a tongue-in-cheek exhibit today at New York's Andre Emmerich Gallery.
One of the artist's earliest Fax works was "Little Stanley Sleeping," a portrait of his dog.
PACS GIVE and receive in a debatable duet with employees' favored charities.
The Federal Election Commission clears corporate plans to donate to an employee's chosen charity in exchange for the worker's gift to the company political action committee.
Latest approvals: Bell Atlantic's New Jersey Bell and General Dynamics.
Companies get more political clout plus a possible tax-deductible charitable donation -- so far no word from the IRS on deductibility.
Detroit Edison, the plan pioneer, generated $54,000 in matching funds this year, up from $39,000 in 1988.
But the utility may not continue next year.
"We're on a tight budget," says Detroit Edison's Carol Roskind.
Two election commission members opposed the matching plans.
Scott E. Thomas says the plans give employees "a bonus in the form of charitable donations made from an employer's treasury" in exchange for the political donation.
"The U.S. government could be, in effect, subsidizing political contributions to corporate PACs," he says.
New Jersey Bell awaits state clearance.
Despite federal approval, General Dynamics says it decided it won't go ahead with the matching program.
CHRISTMAS SHOPPERS find a helping hand from some catalog companies.
Blunt Ellis & Loewi estimates direct mail catalog sales rose to $12 billion last year.
And while it's too soon to tell how sales will fare in the important 1989 Christmas season, some companies take steps to ease the usual 11th-hour crush.
Spiegel promises a "Guaranteed Christmas," with a pledge to deliver goods before Christmas if ordered by Dec. 20.
And, for an extra $6, Land's End will deliver orders within two days; customers can designate the day.
Spiegel, which also owns Eddie Bauer and Honeybee, says that since 1987, sales have doubled during the week before Christmas.
An L.L. Bean spokeswoman notes: "People are just used to living in a last-minute society."
Blunt Ellis, a Milwaukee brokerage firm, says part of the reason catalog sales grow in popularity is because consumers have more money but less time to spend it.
L.L. Bean hires about 2,700 workers for the season rush, about 300 more than last year; Land's End hires 2,000.
BRIEFS:
Guarana Antarctica, a Brazilian soft drink, is brought to the U.S. by Amcap, Chevy Chase, Md.
New Product News says the beverage "looks like ginger ale, tastes a little like cherries and smells like bubble gum." . . .
"Amenities" planned for Chicago's new Parkshore Tower apartments include an on-site investment counselor.
Four years ago, Pittsburgh was designated the most-livable U.S. city by Rand McNally's Places Rated Almanac, and the honor did wonders to improve Pittsburgh's soot-stained image.
"People asked, is it really true?" says Maury Kelley, vice president, marketing services, for Beecham Products USA, a maker of health and personal-care products that used the ranking in its recruiting brochure.
Yuba City, Calif., meanwhile, ranked dead last among 329 metro areas.
Unamused, residents burned Rand McNally books and wore T-shirts that said: "Kiss my Atlas."
The almanac will be making new friends and enemies on Oct. 27, when an updated version will be released.
Pittsburgh figures it will be dethroned but plans to accept its ouster graciously.
The city's Office of Promotion plans media events to welcome its successor.
"We're encouraging a graceful transition," says Mary Kay Poppenberg, the organization's president.
"Our attitude is that (the ranking) is like Miss America.
Once you're Miss America, you're always Miss America."
Tell that to Atlanta, which Pittsburgh replaced as the most-livable city in 1985.
Many Atlantans thought Pittsburgh was an unworthy heir.
A columnist in the Atlanta Journal and Constitution wrote: "Who did the research for this report?
Two guys from Gary, Ind.?"
Not so.
Co-authors David Savageau and Richard Boyer, live in Gloucester, Mass., and Asheville, N.C., respectively.
"Atlanta," Mr. Savageau sniffs, "has unrealistic pretensions to world-class status."
The new edition lists the top 10 metropolitan areas as Anaheim-Santa Ana, Calif.; Boston; Louisville, Ky.; Nassau-Suffolk, N.Y.; New York; Pittsburgh; San Diego; San Francisco; Seattle; and Washington.
Mr. Savageau says earthquake or not, San Francisco makes the list.
But attention also rivets on who finishes last, and Pine Bluff, Ark. -- which finished third to last in 1981 and second to last in 1985 -- is certainly in the running.
"I hate to dignify the publication by commenting on the obscene rating," Mayor Carolyn Robinson says, adding that cities have no way to rebut the book.
"It's like fighting your way out of a fog.
You don't know which way to punch.
Northrop Corp.'s third-quarter net income fell 25% to $21.5 million, or 46 cents a share, while General Dynamics Corp. reported nearly flat earnings of $76.5 million, or $1.83 a share.
Los Angeles-based Northrop recorded an 8.2% decline in sales as B-2 Stealth bomber research-and-development revenue continued to ebb and high costs on some other programs cut into profit.
The aerospace concern earned $28.8 million, or 61 cents a share, a year earlier.
Sales in the latest period were $1.25 billion, down from $1.36 billion in the 1988 quarter.
At St. Louis-based General Dynamics, sales rose 10% to $2.52 billion from $2.29 billion.
It earned $76.4 million, or $1.82 a share, in the 1988 quarter.
General Dynamics credited significant earnings gains in its general aviation and material service segments, an earnings recovery in submarine operations, and higher military aircraft sales.
Northrop said sales fell because of the decline in B-2 development dollars from the government as the plane continues its initial production stage and because fewer F/A-18 fighter sections are being produced in its subcontract work with prime contractor McDonnell Douglas Corp.
In composite trading on the New York Stock Exchange, Northrop shares closed at $21.125, off 25 cents.
General Dynamics closed at $54.875, up 50 cents.
Northrop, which since early 1988 has declined to accept fixed-price contracts for research and development, said earnings were hurt by excessive costs on a number of such contracts won years ago.
Among them were the ALQ-135 electronic countermeasures system for the F-15 fighter.
Northrop's interest expense also soared to $35 million from $17 million a year ago.
It said debt remained at the $1.22 billion that has prevailed since early 1989, although that compared with $911 million at Sept. 30, 1988.
The backlog of undelivered orders at Northrop on Sept. 30 was $4.68 billion, down from $5.16 billion a year earlier.
For the nine months, Northrop reported a net loss of $46.9 million, or $1 a share, compared with profit of $190.3 million, or $4.05 a share, in 1988.
Sales dipped 3.6% to $3.92 billion from $4.07 billion.
At General Dynamics, factors reducing earnings in the military aircraft segment included higher levels of cost-sharing in development of the Advanced Tactical Fighter, and the high cost of an advanced version of the F-16 fighter.
F-16 deliveries also have fallen "slightly behind schedule," although a return to the previous schedule is expected in 1990, the company said.
Backlog at General Dynamics rose to $16.5 billion from $15.8 billion.
Its interest expense surged to $21.5 million from $12.4 million.
For the nine months, General Dynamics earned $210.3 million, or $5.03 a share, up marginally from $208.8 million, or $4.97 a share, on a 4.9% rise in sales to $7.41 billion from $7.06 billion.
Lotus Development Corp. reported a surprisingly strong 51% increase in third-quarter net income on a 32% sales gain, buoyed by strong demand for a new version of its 1-2-3 computer spreadsheet.
The results topped analysts' expectations and the earnings growth of competitors, prompting traders to all but forget the product-launch delays that bogged down the company for much of the past two years.
Yesterday, in heavy, national over-the-counter trading, Lotus shares rose to $32.50, up $1.25 apiece, capping a threemonth run-up of more than 40%.
Lotus said net rose to $23 million, or 54 cents a share, on sales of $153.9 million.
A year ago, net was $14.3 million, or 31 cents a share, on sales of $116.8 million.
For the nine months, net of $38.5 million, or 92 cents a share, trailed the year earlier's $49.9 million, or $1.08 a share.
Sales rose to $406 million from $356 million the year earlier.
In the first half, Lotus struggled to keep market share with costly promotions while customers awaited the launch of 1-2-3 Release 3, the upgraded spreadsheet software.
Lotus's results were about 10% higher than analysts' average expectations and compared favorably with the 36% earnings rise reported a day earlier by rival Microsoft Corp. of Redmond, Wash.
The company said results were bolstered by upgrades to Release 3 by previous customers and improved profit margins, the result of manufacturing-cost controls.
Rick Sherlund, a Goldman Sachs analyst, said Lotus had upgrade revenue of about $22 million in the quarter, twice what he had expected.
Also, he estimated unit shipments of 1-2-3 in all its forms were about 315,000, up 7% from 1988's quarterly average.
Demand for the new version was enabling Lotus to raise prices with distributors and to hold market share against Microsoft and other competitors that tried to exploit the earlier delays in Release 3's launch, Mr. Sherlund added.
He estimated that 1-2-3 outsold Microsoft's Excel spreadsheet by four-to-one in the quarter, and held a 70% or better share of the spreadsheet market.
Silicon Valley heaved a sigh of relief yesterday.
Though details were sketchy in the aftermath of the violent earthquake that shook the high-tech corridor along with the rest of the San Francisco Bay area, a spot check of computer makers turned up little, if any, potentially lingering damage to facilities or fabrication equipment.
Analysts and corporate officials said they expected practically no long-term disruption in shipments from the Valley of either hardware or software goods.
Intel Corp., Advanced Micro Devices Inc. and National Semiconductor Corp. were all up and running yesterday, though many workers were forced to stay home because of damaged roadways; others elected to take the day off.
"These systems are more rugged than many people would believe," said Thomas Kurlak, who tracks the computer industry for Merrill Lynch Research.
"It's not the end of the world if you shake them up a little bit."
Other companies, including International Business Machines Corp. and Hewlett-Packard Co., completely idled their operations because of Tuesday evening's temblor, which registered 6.9 on the Richter scale.
Personnel spent the morning inspecting buildings for structural weaknesses, mopping up water from broken pipes and clearing ceiling tiles and other debris from factory floors.
Still, many were confident that "in a day or two, everything should be back to normal," according to a spokeswoman for the Semiconductor Industry Association, based in Cupertino.
IBM, for instance, said it anticipates returning to a normal work schedule by the weekend at its San Jose plant, which puts out disk drives for the 3090 family of mainframes.
A Hewlett-Packard spokeswoman said that, while "things are a big mess," some 18,000 Valley employees have been called back to work today.
Apple Computer added that it was being "cautiously optimistic," despite not yet closely eyeballing all of its 50 buildings in the region.
Even the carefully calibrated machinery in its giant Fremont plant, to the north of the Valley, was believed to be undamaged.
Sun Microsystems Inc. and Tandem Computers Inc. also signaled that they should recover quickly.
Digital Equipment Corp., with major facilities in Santa Clara, Cupertino, Palo Alto and Mountain View, said that all of its engineering and manufacturing sites had reported to corporate headquarters in Maynard, Mass., Tuesday night.
None sustained "significant" damage, a spokesman said, adding that "the delicate manufacturing process machines were checked and were all found to be operating normally."
For many companies, of course, there is still a slew of nagging problems to grapple with, some of which have the potential to become quite serious.
For example, a spokesman for Advanced Micro Devices said the Sunnyvale chip maker is worried about blackouts.
A sudden surge or drop in electric power could ruin integrated circuits being built.
But, given what might have happened to the fragile parts that are at the heart of the microelectronics business, the bulk of Valley companies seemed to be just about shouting hosannas.
Several factors apparently spared the Valley -- a sprawling suburban stretch from San Jose to Palo Alto -- from the kind of impact felt in San Francisco, an hour's drive north.
For one thing, buildings there tend to be newer and, thus, in step with the latest safety codes.
Also, the soil in the Valley is solid, unlike the landfill of San Francisco's downtown Marina District, which was hit with fires and vast destruction.
In addition, some microelectronics companies said they were prepared for tremulous conditions like Tuesday's.
Their machine tools are even bolted to the shop floor.
Intel said that over the past decade, it has installed computer sensors and shutoff valves, sensitive to the shake of an earthquake, in the pipes that snake through its plants.
Like other large Valley companies, Intel also noted that it has factories in several parts of the nation, so that a breakdown at one location shouldn't leave customers in a total pinch.
That's certainly good news for such companies as Compaq Computer Corp., Houston, which has only a four-day supply of microprocessors from the Valley on hand because of a just-in-time manufacturing approach that limits the buildup of inventory.
Compaq said it foresees no difficulties in obtaining parts in the immediate future.
Computer makers were scrambling to help customers recover from the disaster.
Digital Equipment has set up disaster-recovery response centers in Dallas, Atlanta and Colorado Springs, Colo.
These units were handling calls both from people in the San Francisco area and from computers themselves, which are set to dial Digital automatically when trouble arises.
They then run remotely controlled self-diagnostic programs.
Digital also said it has dispatched teams of technicians to California.
Meanwhile, several other major installations around the Valley -- America's center of high-tech -- said they, too, fared as well as could be expected.
Lawrence Livermore National Laboratory, where the Energy Department tests and conducts research on nuclear weapons, had only "superficial damage," a spokesman said.
At Lockheed Corp.'s missiles and space systems group in Sunnyvale, about 40 miles south of San Francisco, workers were asked to head to work yesterday after it was realized that "there were no show-stoppers" in the 150-plus buildings on its one-square-mile campus.
Several engineering and research offices needed closer scrutiny to make sure they weren't in danger of crumbling, but "the bulk of the place is in pretty good shape," an official said.
One of Lockheed's most lucrative sectors -- accounting for more than half the aerospace company's $10.59 billion in sales in 1988 -- the missiles and space group is the prime Pentagon contractor on the Trident II ballistic missile.
It also generates pieces of the missile shield called the Strategic Defense Initiative.
Fortunately, the Hubble Space Telescope -- set to be launched on the shuttle next year in a search for distant solar systems and light emitted 14 billion years ago from the farthest reaches of the universe -- was moved from Sunnyvale to the Kennedy Space Center in Florida at the beginning of October.
John R. Wilke contribued to this article.
Michael Maynard offered the world a faster way to break eggs.
As thanks, the egg industry tried to break him.
And the egg producers have done a pretty good job.
They tried to put Mr. Maynard out of business by an act of Congress.
Egg-industry lobbying helped persuade six states to ban Mr. Maynard's automatic egg-breaking machine because of fears over salmonella.
His company, Misa Manufacturing Inc., was forced to seek protection from creditors under federal bankruptcy law in 1987 and has since been liquidated.
Monthly sales of his Egg King machine -- which he now is marketing through a new company -- have sunk to about half a dozen from a peak of 75, says the 46-year-old businessman.
Mr. Maynard isn't the first entrepreneur to bump up against entrenched interests.
But his case is notable both for the scale of the fight -- it isn't often that a congressional hearing is held to determine whether one small businessman is a threat to the republic -- and for what it tells about the pitfalls of marketing a new product.
Now one might ask why people who sell eggs would fight someone who is trying to make it easier to crack them.
Part of the answer lies in the nature of the industry.
Many larger egg producers are also egg processors, who crack, inspect, and sanitize billions of eggs, turning them into powdered, liquified or frozen egg products.
However, dozens of bakers, restaurant chefs and other food preparers who flocked to Mr. Maynard's defense say that products ranging from egg bread to eclairs lose some zip when the eggs come in 30-pound cans instead of shells.
But for companies that use hundreds of eggs a day, breaking them by hand can get, well, out of hand.
The idea behind the Egg King is pretty simple: put the eggs into a cylinder that contains perforated baskets, spin them at a high speed to break the shells and strain the edible part through the baskets.
One Egg King -- which at just under four feet tall and two feet wide has been likened to the robot R2-D2 -- can crack about 20,000 eggs an hour.
Because fresh eggs are less expensive than processed ones, a big egg user can recover the Egg King's $3,390 cost in a few months, says Mr. Maynard.
Such centrifugal egg breakers have been around since the 1890s.
But when Mr. Maynard came forward with his machine in the early 1970s nobody else was offering them in the U.S.
The main reason: salmonella.
Chickens carry this bacteria, which can cause upset stomachs and, in rare cases, death among people.
Hens sometimes pass salmonella to the eggs, and it can also be found on unclean shells.
Thus, any machine that breaks large amounts of eggs at once has the potential to spread salmonella if a bad egg gets in with the good ones.
Mr. Maynard claims this is a manageable problem.
The Egg King carries written instructions to break only high-grade eggs that have been properly sanitized and, as an added precaution, to use the eggs only in products that will be cooked enough to kill bacteria.
With nearly 4,000 machines in use, there have been no salmonella problems as long as instructions were followed, Mr. Maynard boasts.
He says the handful of salmonella cases involving products that may have used eggs broken by an Egg King stemmed from a failure to adequately cook the products.
But he says that's no more a reason for banning Egg Kings than bad drivers are a reason for banning cars.
Opponents don't buy such arguments.
"Human nature being what it is, people don't always follow instructions," says Jack Guzewich, chief of food protection for the New York state Health Department.
Leading the assault against the Egg King has been United Egg Producers.
The Decatur, Ga., trade group has issued a "briefing book" that claims the machine is "a health hazard" and that Mr. Maynard is trying "to make a fast buck at the expense of the nation's egg producers."
The UEP declines to comment, but the group's attorney, Alfred Frawley, says the group's actions are motivated solely by "health concerns."
An early battleground was the U.S. Department of Agriculture.
Mr. Maynard initially won approval for his machine to be used at egg-processing facilities regulated by the USDA's Food Safety Inspection Service.
Unfortunately for Mr. Maynard, another branch of the USDA, the Agricultural Marketing Service, was in charge of eggs.
After receiving complaints from egg producers, this branch got the other branch to rescind its approval, thus limiting the machine's potential market to bakeries and restaurants and other establishments that aren't regulated by the USDA.
The egg producers also lobbied the Food and Drug Administration.
But the FDA in a 1985 letter to the United Egg Producers said that there was "little likelihood" of a health problem as long as instructions were followed.
So the producers went to Capitol Hill, where a congressman from Georgia introduced a measure to ban centrifugal egg-breaking machines.
Mr. Maynard, whose company at the time was based in Santa Ana, Calif., enlisted his local congressman, and the battle was joined.
Mr. Maynard's forces finally defeated the measure, though it took a vote on the floor of the House of Representatives to do it.
Even then, opponents managed to get a congressional hearing to examine what one congressman called an "unscrupulous" method for breaking eggs.
Foiled in their effort to get a national ban, the egg producers turned their attention to the states.
So far, New York, New Jersey, Nebraska, Georgia, Michigan and Minnesota have outlawed Mr. Maynard's device, citing health concerns.
An antitrust suit that Mr. Maynard's company filed in Los Angeles federal court against the United Egg Producers and others only added to the entrepreneur's woes.
The judge dismissed the suit and ordered Mr. Maynard's company to pay over $100,000 in legal fees to the defendants' lawyers.
Mr. Maynard says the ruling pushed his company into bankruptcy court.
Now he has moved to Oklahoma where costs are lower, and started a new company, Adsi Inc., to market his machine.
But, so far, the change of scenery hasn't ended his string of bad breaks.
Mr. Maynard recently fell from a horse and fractured his arm.
Michelle Pfeiffer can't chew gum and sing at the same time.
But on the evidence of "The Fabulous Baker Boys," that may be the only thing she can't do, at least when she's acting in movies.
As the tough, slinky lounge chanteuse in "The Fabulous Baker Boys," Ms. Pfeiffer sings for herself, and more than passably well.
Her Susie Diamond handles a song the way the greats do, like she's hearing the way it should sound inside her head and she's concentrating on matching that internal tone.
Yet her intensity stops and starts with the music.
When she isn't performing for an audience, she prepares for a song by removing the wad of gum from her mouth, and indicates that she's finished by sticking the gum back in.
Like almost everything in this wonderfully romantic and edgy movie, Ms. Pfeiffer's Susie seems like someone you've seen before, in numerous show-biz stories (even her name, Susie Diamond, sounds like a character Marilyn Monroe must have played).
Yet nothing about "Baker Boys," and certainly nothing about Ms. Pfeiffer, really is like something from the video vault.
Steve Kloves, the young writer and director (he isn't yet 30), has only one produced picture to his credit; he wrote the screenplay for "Racing With the Moon," a lovely coming-of-age picture set in the '40s.
Both movies are infused with the nostalgic sensibility of someone much older, someone who doesn't dismiss dreams, but who also has enough experience to see his limits.
However, Mr. Kloves directs his own material without sentimentality and at its own eccentric pace; "Baker Boys" is both bluesy and funny.
He's put a fresh spin on material that could come off terribly cliched; for example, the way Susie wows an audience the first time she sings with the Baker Boys.
Of course, it doesn't hurt that Mr. Kloves has made up for his lack of experience behind the camera with technicians who know exactly what they're doing.
Much of the picture's sensuality emerges from cinematographer Michael Ballhaus's slyly seductive lens work.
After working for years with Werner Rainer Fassbinder, the late German director, and more recently with Martin Scorsese ("After Hours," "The Color of Money," "The Last Temptation of Christ"), Mr. Ballhaus has developed a distinctively fluid style.
And Dave Grusin's witty score embraces the banal requirements of banquet-hall musicianship ("Feelings" is a must) without condescension.
Though Ms. Pfeiffer has the flashy part -- she gets the best comic bits and to wear glamorous dresses and spiked heelsthe boys are pretty great, too.
What seemed like a good idea, to cast the Bridges brothers (Jeff and Beau) as the Baker brothers, actually turned out to be a good idea.
Anyone who's tried to appear "natural" in front of a camera knows that it's much more natural to end up looking like a stiff.
So it's quite possible that the terrific play between the brothers isn't natural at all, that Jeff and Beau had to work like crazy to make their brotherly love -- and resentment and frustration and rage -- seem so very real.
When the movie opens the Baker brothers are doing what they've done for 15 years professionally, and twice as long as that for themselves: They're playing proficient piano, face-to-face, on twin pianos.
They're small time in the small time-hotels (not the best ones) and restaurants in Seattle.
Yet they don't disparage their audiences by disparaging their act.
They wear tuxedos most nights, unless circumstances (a regular gig at a "tropical" lounge, for example) require them to wear special costumes, like Hawaiian shirts.
Plump Beau, looking eager to please with his arched eyebrows and round face, plays the older brother, Frank.
Frank plans the program, takes care of business, and approaches the work like any other job.
He's even able to think of a job that takes him out of the house 300 nights a week as an ordinary job.
He's got a wife and two kids and a house in the suburbs; the audience sees only the house, and only near the end of the movie.
Frank grovels a little for the bookers, probably no more or less than he would have to if he worked for a big corporation.
On his off-hours he wears cardigan sweaters.
Jeff Bridges is the younger brother, Jack, who fancies himself the rebellious artist; he lives in a loft with his sick dog and the occasional visit from the little girl upstairs, who climbs down the fire escape.
Yet Jack's the one who can remember every dive they ever played, and when, and he dutifully shows up for work night after night (he consoles himself with booze and by showing up at the last minute).
Looking leaner than he has in a while, the younger Mr. Bridges's Jack is sexy and cynical and a far sadder case than Frank, who's managed to chisel his dreams to fit reality without feeling too cheated.
He can live with little pleasures.
Mr. Kloves has put together some priceless moments.
These include Jennifer Tilly's audition to be the Baker Boys' girl singer.
Ms. Tilly of the tweety-bird voice showed great comic promise during her stint as the mobster's girlfriend on the television show, "Hill Street Blues."
Here she delivers, especially during her enthusiastically awful rendition of the "Candy Man," which she sings while prancing around in a little cotton candy pink angora sweater that couldn't be more perfect.
(It matches her voice.)
And Ms. Pfeiffer's particular version of "Making Whoopee" -- and the way Mr. Ballhaus photographs her, from the tips of her red high heels right up her clingy red velvet dress -- might make you think of Marilyn Monroe if Ms. Pfeiffer hadn't gone and become a star in her own right.
VIDEO TIP:
If you'd like to see the first time Michelle Pfeiffer sang on screen, and you have a lot of patience, take a look at "Grease 2."
You'll find her there.
Better yet, check out the emergence of her comic persona in "Married to the Mob," Jonathan Demme's delightful Mafia comedy.
International Proteins Corp. definitively agreed to pay $49 million and 2,850,000 of its shares for Hanson PLC's Ground Round restaurant subsidiary.
Shareholders of International Proteins, a food and agriproducts company, will vote on the transaction at a meeting late next month.
Hanson is a London producer of consumer and other goods.
International Proteins shares didn't trade yesterday on the American Stock Exchange.
They closed Tuesday in composite trading at $13.625, down 37.5 cents, giving the stock portion of the transaction an indicated value of $38.8 million.
Control Data Corp. agreed to sell its idle supercomputer manufacturing plant here to Minnesota Mining & Manufacturing Co. for $5.8 million.
The tentative agreement calls for 3M to use the 115,000-square-foot plant and 19 acres of land for research laboratories.
Control Data has been seeking a buyer for the facility since it folded its ETA Systems Inc. supercomputer unit this past April.
General Dynamics Corp. was awarded contracts totaling $589 million for one Navy Trident submarine and for Air Force research on the National Aerospace plane.
Grumman Corp. won a $58.9 million Navy contract for 12 F-14 aircraft.
Raytheon Co. was issued a $19.2 million Air Force contract for support of the Milstar communications satellite.
McDonnell Douglas Corp. got a $12.5 million Air Force contract for support work on the National Aerospace plane.
Denis C. Smith was named to the new post of vice president of world-wide advanced materials operations for this chemicals concern.
Mr. Smith, 50 years old, was formerly responsible for advanced materials, which include plastic composites and alloys, in North America only.
Himont is 81%-owned by Montedison S.p.A. of Milan, Italy.
Galveston-Houston Co. said it will redeem all 3,950 shares of its privately held 6.5% convertible Series C preferred stock Nov. 8.
Holders can either convert each share into 421 shares of the company's common stock, or surrender their shares at the per-share price of $1,000, plus accumulated dividends of $6.71 a share.
Galveston-Houston makes and markets products for the construction, mining and energy industries.
Bank Building & Equipment Corp. of America, which previously said accounting discrepancies its auditors uncovered would hurt earnings and require restatement of earlier results, increased its projections of the negative fiscal impact, and said it was exploring the company's sale.
Bank Building, which builds and equips banks, had announced it would restate the first-three quarters of this fiscal year, which ends Oct. 31.
On Oct. 5, the company estimated after-tax effects on the year's earnings would be "at least" $1.3 million.
Yesterday, the company said the negative after-tax effect on earnings for the year will be about $3.3 million.
For the nine months ended July 31, Bank Building had a net loss of $1 million, on revenue of $66.5 million.
Bank Building, which expects to report a fourth-quarter loss, said it engaged advisers to "explore financial alternatives for the company including the possible sale of the company or one or more of its units."
Company auditors are continuing their review, and final restated figures aren't yet available.
Bank Building earlier said the restatement is necessitated by "certain errors in recording receivables and payables" at its Loughman Cabinet division.
That division's manager has been fired.
In American Stock Exchange composite trading, Bank Building closed at $4 a share, down 62.5 cents.
Gen. Paul X. Kelley, retired commandant of the U.S. Marine Corps, was elected a director of this plastics, specialty materials and aerospace concern, succeeding Jewel Lafontant, who resigned to accept a government position.
Rep. Mary Rose Oakar (D., Ohio) at last week's hearings on irregularities in programs at the Department of Housing and Urban Development:
I don't want to feel guilty representing my constituents.
And if I think that some people {on HUD Secretary Jack Kemp's} staff are off base in terms in which they're evaluating certain things affecting my hometown, I have to tell you something -- I'm not going to take it.
I think that I'm elected to represent the people that sent me here.
And one of our charges is to be an ombudsman for our area.
And if we're not ombudsman for our area, we ought to be thrown out of office.
On the other hand, if we're asking for something unreasonable or unethical and so on, then that's a whole different story.
But if I feel that there are situations where I'm trying to get housing for our area -- whatever it happens to be -- and I have to feel that I can't even ask a question, I've got to tell you, I think that's outrageous. .
I think these regulations that would prohibit well-operated programs in areas across this country would be wrong to change. . . .
I don't want to see some guidelines change that's going to inhibit my city's opportunity to use its money.
The Chicago Mercantile Exchange said it fined Capcom Futures Inc. $500,000 and accepted its withdrawal from membership as part of a settlement of disciplinary actions against the firm.
Capcom Futures is a Chicago subsidiary of Capcom Financial Services Ltd., a London financial firm that was implicated last year in a scheme to launder drug money.
The case is pending.
The firm was indicted in Tampa, Fla., on money-laundering charges.
In June, the Chicago Board of Trade said it suspended Capcom Financial.
The Capcom Futures unit withdrew from Board of Trade membership voluntarily in August, a Board of Trade spokesman said.
Capcom Futures, while neither admitting nor denying the Merc charges, said in a statement that the Merc charges were "technical in nature" and that "no customers were hurt" as a result of the violations cited by the Merc.
The Merc alleged that, among other things, from April 1987 through October 1988 Capcom Futures failed to document trades between Capcom Futures and people or entities directly or indirectly controlled by Capcom Futures shareholders.
Frederick W. Lang, 65 years old, the founder of this software services concern, was elected to the new post of chairman.
Formerly president and treasurer, Mr. Lang remains chief executive officer.
Victor C. Benda, 58, formerly executive vice president, succeeds Mr. Lang as president and becomes chief operating officer, a new post.
Maurice Warren, 56-year-old group managing director, was named chief executive officer of this food and agriculture group.
The post of chief executive has been vacant since July when Terry Pryce, 55, left the company.
Money-market mutual fund assets grew at nearly three times their usual rate in the latest week, as investors opted for safety instead of the stock market.
Money-fund assets soared $4.5 billion in the week ended Tuesday, to a record $348.4 billion, according to IBC/Donoghue's Money Fund Report, a Holliston, Mass.-based newsletter.
"We were expecting it, following the fall of the Dow Friday," said Brenda Malizia Negus, editor of Money Fund Report.
"It's the proverbial flight to safety."
Despite recent declines in interest rates, money funds continue to offer better yields than other comparable investments.
The average seven-day compound yield on the 400 taxable funds tracked by IBC/Donoghue's was 8.55% in the latest week, down from 8.60%.
Compound yields assume reinvestment of dividends and that current yields continue for a year.
Most short-term certificates of deposit are yielding about 8% or less at major banks, and the yields on Treasury bills sold at Monday's auction fell to 7.61% for three months and 7.82% for six months.
Money-fund assets have been rising at an average rate of $1.6 billion a week in recent months, Ms. Negus said, reflecting the relatively high yields.
In the latest week, funds open to institutions alone grew by $1.8 billion.
Some fund managers say inflows could increase in coming days as a result of stock selling in the wake of Friday's 190.58point drop in the Dow Jones Industrial Average.
"If you're selling equities, you don't start getting proceeds for five to seven days," said Frank Rachwalski, who manages the Kemper Money Market Fund.
Neal Litvack, marketing vice president for Fidelity Investments, said inflows Friday into Fidelity's Spartan and Cash Reserves money-market funds were about twice normal levels, with about half coming from equity and junk-bond funds.
Monday and Tuesday "were lackluster in comparison," he said.
"People aren't necessarily running scared," Mr. Litvack said.
"They're maintaining their attitude toward investing, which has leaned toward the conservative recently."
Money-fund yields tend to lag interestrate trends as portfolio managers adjust the maturities of their investments -- short-term Treasury securities, commercial paper and the like -- to capture the highest yields.
Maturities usually are shorter when rates are rising and longer when they are falling.
The average maturity of the funds tracked by IBC/Donoghue's remained at 38 days for the third consecutive week.
It was as short as 29 days at the start of this year, when rates were marching steadily upward, and hit 42 days in August.
The average seven-day simple yield of the funds fell to 8.21% this week from 8.26%.
The average 30-day simple yield was 8.26%, compared with 8.27% the week before, and the 30-day compound yield slid to 8.60% from 8.61%.
Some funds are posting yields far higher than the average.
The highest yielding taxable fund this week was Harbor Money Market Fund, with a seven-day compound yield of 12.75%.
That included capital gains that were passed along to customers.
Among the other high-yielding funds, Fidelity's Spartan Fund had a seven-day compound yield of 9.33% in the latest week.
The seven-day compound yield of the Dreyfus Worldwide Dollar Fund was 9.51%.
whose Della Femina McNamee WCRS agency created liar Joe Isuzu, among others -- announced a massive restructuring that largely removes it from the advertising business and includes selling the majority of its advertising unit to Paris-based Eurocom.
The complex restructuring, which was long expected, transforms London-based WCRS from primarily a creator of advertising into one of Europe's largest buyers of advertising time and space.
It also creates a newly merged world-wide ad agency controlled by Eurocom and headed jointly by New York ad man Jerry Della Femina and two top WCRS executives.
The merged agency's admittedly ambitious goal: to become one of the world's 10 largest agencies, while attracting more multinational clients than the agencies were able to attract alone.
WCRS's restructuring reflects the growing importance of media buying in Europe, where the only way to get a good price on advertising time and space is to buy it in bulk.
For Eurocom, meanwhile, the move gives it a strong U.S. foothold in Della Femina, and more than quadruples the size of its ad agency business world-wide.
It also gives the outspoken Mr. Della Femina -- who often generates as much publicity for himself as for his clients -- an international platform that he most certainly won't be loath to use.
According to terms, WCRS will pay 2.02 billion French francs ($318.6 million) for the 50% it doesn't already own of Carat Holding S.A., one of Europe's largest media buyers.
Meanwhile, Eurocom, which had held 20% of WCRS's ad unit, will pay #43.5 million ($68.5 million) to raise its stake to 60%.
That price also covers Eurocom raising to 60% its 51% stake in Europe's Belier Group, a joint venture ad agency network it owns with WCRS.
Eurocom will also have the right to buy the remaining 40% of the merged ad agency group in six years.
The transaction places the three executives squarely at the helm of a major agency with the rather unwieldy name of Eurocom WCRS Della Femina Ball Ltd., or EWDB.
The merged agency will include Della Femina McNamee based in New York, Eurocom's various agencies in France, the Belier Group in Europe and WCRS's other advertising and direct marketing operations.
Mr. Della Femina will be joint chairman with former WCRS executive Robin Wight.
Both will report to Tim Breene, a former WCRS executive who will be chief executive officer at the new agency.
In an interview in New York, Mr. Breene, fresh from a Concorde flight from Paris where executives had worked through most of the night, outlined big plans for the new agency.
"Our goal is to develop quite rapidly to a top-10 position . . . by the end of three years from now.
It implies very dramatic growth," he said.
He added that Eurocom and WCRS had agreed to provide a development fund of #100 million for acquisitions.
The new agency group is already in discussions about a possible purchase in Spain, while Mr. Breene said it also plans to make acquisitions in Scandinavia, Germany and elsewhere.
Cracking the top 10 within three years will be difficult at best.
Della Femina had billings of just $660 million last year and ranked as the U.S.'s 24th-largest ad agency.
The merged company that it now becomes part of will have billings of just more than $2.6 billion -- most of that in Europe -- bringing it to about 14th world-wide.
To make it to top-10 status, it would have to leapfrog over such formidable forces as Grey Advertising, D'Arcy Masius Benton & Bowles and Omnicom's DDB Needham.
The merged agency's game plan to attract multinational packaged-goods advertisers may prove equally difficult.
When WCRS created Della Femina McNamee out of the merger of three smaller agency units in 1988, it said it did so in order to attract larger clients, especially packaged-goods companies.
Since then, Della Femina won Pan Am as an international client and also does work for a few packaged-goods clients, including Dow Chemical Co.'s Saran Wrap.
But major packaged-goods players of the world -- such as Procter & Gamble, Colgate-Palmolive and Unilever -- have steadfastly eluded the agency.
"Three of our favorite names," Mr. Della Femina calls that roster, adding hopefully, "We're a much more attractive agency to large multinationals today than we were yesterday."
Still, the restructuring could create one of the most powerful alliances between advertising and media-buying firms that Europe has seen.
As part of the restructuring, WCRS and Eurocom said they will look for ways to combine their media buying across Europe.
What's more, both Eurocom and brothers Francis and Gilbert Gross, who founded Carat, will acquire 14.99% stakes in WCRS Group, creating a powerful link between Eurocom and Carat.
Carat will receive its WCRS stake as part of payment for the 50% Carat stake that WCRS is buying, while Eurocom said it expects to pay about #32 million for its WCRS stake.
Mr. Della Femina says he plans to remain heavily involved in the creative product at the world-wide agency, serving as a sort of "creative conscience."
Louise McNamee, Della Femina's president, will continue running the U.S. agency day-to-day.
They and other top executives signed long-term employment contracts and Mr. Della Femina will receive an additional multimillion-dollar sum, which some industry executives pegged at about $10 million.
WCRS Group, for its part, will now be able to follow its longstanding plan of becoming "a holding company for a series of media-related businesses," said Peter Scott, the firm's chief executive.
In addition to Carat, WCRS will hold onto its public relations, TV programming and other businesses.
WCRS says its debt will be cut to #24 million from #66 million as a result of the transaction.
For Carat, meanwhile, the alliance with Eurocom and WCRS is intended to strengthen its own push outside France.
Carat's Gross brothers invented the idea of large-scale buying of media space.
By buying the space in bulk, they obtain discounts as high as 50%, which they can pass on to customers.
They thus have won the French space-buying business of such advertising giants as Coca-Cola Co., Fiat S.p.A., Gillette and Kodak.
But now, other agencies are getting into the business with their own competing media-buying groups -- and Carat wants to expand to the rest of Europe.
To help finance the Carat purchase, WCRS said it plans an issue of Euroconvertible preferred shares once the market settles down.
But WCRS added that "in the light of the current uncertainty in the equity markets," it has arranged medium-term debt financing, which would be underwritten by Samuel Montagu & Co. Ltd.
Earthquake's Damage
Tuesday's earthquake brought the San Francisco ad scene to a screeching halt yesterday, with only a few staffers showing up at their offices, mainly to survey the damage or to wring their hands about imminent new-business presentations.
While no agencies reported injuries to employees, the quake damaged the offices of J. Walter Thompson, Chiat/Day/Mojo and DDB Needham, among others, spokesmen for those agencies said.
Staffers at Thompson, whose offices are in the ultramodern Embarcadero Center, watched pictures drop from the walls and then felt the skyscraper sway seven to eight feet, according to a spokeswoman.
Plaster fell and windows were broken at Chiat/Day/Mojo, a spokesman for that agency said.
Late yesterday afternoon, DDB Needham executives were scrambling to figure out what to do about a new business presentation that had been scheduled for today, a spokesman said.
DDB Needham's office building may have sustained structural damage, the spokesman added.
"All operations have stopped," he said.
A number of agencies, including Thompson and Foote, Cone & Belding, said some employees who live outside of San Francisco, fearful that they wouldn't be able to get home, spent the night at the agency.
Ad Notes. . . .
NEW ACCOUNT:
Chesebrough-Pond's Inc., Greenwich, Conn., awarded its Faberge hair care accounts to J. Walter Thompson, New York.
Thompson, a unit of WPP Group, will handle Faberge Organic shampoo and conditioner and Aqua Net hairspray.
The accounts, which billed about $7 million last year, according to Leading National Advertisers, were previously handled at Bozell, New York.
WHO'S NEWS:
William Morrissey, 44, was named executive vice president, world-wide director of McCann Direct, the direct marketing unit of Interpublic Group's McCann-Erickson agency.
He had been president and chief operating officer of Ogilvy & Mather Direct.
BOZELL:
Los Angeles will be the site of a new entertainment division for the ad agency.
The division will be headed by Dick Porter, who returns to Bozell after being vice president of media at MGM.
AC&R ADVERTISING:
The agency's three California offices, previously called AC&R/CCL Advertising, will now be called AC&R Advertising to match the name of its New York office.
AC&R Advertising is a unit of Saatchi & Saatchi Co.
NEW BEER:
Sibra Products Inc., Greenwich, Conn., awarded its Cardinal Amber Light beer account to Heidelberg & Associates, New York.
Budget is set at $1.5 million.
The new beer, introduced this week at a liquor industry convention, is imported from Switzerland's Cardinal brewery.
Heidelberg's first ads for the brand, which Sibra says will compete with imported light beer leader Amstel Light, feature the line "The best tasting light beer you've ever seen.
Diamond-Star Motors Corp., a joint venture of Chrysler Corp. and Mitsubishi Motors Corp. said it will begin shipping Mitsubishi Eclipse cars to Japan next week, emulating other Japanese auto ventures shipping U.S.-built vehicles back to Japan.
Diamond-Star said it will export about 1,500 Eclipse cars to Japan by year's end.
Honda Motor Co., the first Japanese auto maker to ship cars to Japan from the U.S., is now exporting more than 5,000 Accord Coupes a year from its Marysville, Ohio, factory.
One of the most remarkable features of the forced marches of the ethnic Turks out of Bulgaria over the past five months has been the lack of international attention.
The deportation of more than 315,000 men, women and children by the Bulgarian regime adds up to one of the largest migrations seen in the postwar years.
Yet some people are advancing a chilling casuistry: that what we are seeing is somehow the understandable result of the historical sins committed by the Turks in the 16th century.
Today's Turks in Bulgaria, in other words, deserve what is coming to them four centuries later.
As if this weren't enough, the Senate Judiciary Committee is getting into the act.
On Tuesday it approved Senator Bob Dole's proposed commemorative resolution designating April 24, 1990, as the "National Day of Remembrance of the 75th Anniversary of the Armenian Genocide of 1915-1923," suffered at the hands of the warring Ottoman Empire.
There can be no quibbling that the Armenians endured terrible suffering, but one has to wonder what possible good such a resolution will achieve.
It puts great strain on a longstanding U.S. friendship with Turkey, a country that has been one of America's strongest allies in NATO.
The resolution also comes at a time when Turkey has been seeking help from the United States in resolving its Bulgarian emigration controversy and pursuing democratic reforms that may lead to membership in the European Community.
Turkey has been fighting its past for years, and thus far has been only partially successful.
Must it now accept that one of its strongest allies blames it for the genocide of another people?
Such sentiment only encourages the adverse feelings toward Turkey that surfaced when Turkey asked for assistance in dealing with its Bulgarian emigration crisis.
Mr. Dole's odd effort notwithstanding, most of Turkey's political problems lie with the Europeans.
Part of the problem some Europeans have with Turkey seems to stem from its location -- Turkey isn't really part of Europe.
Why, they wonder, should it belong to the EC?
Another anti-Turkish hook is the Islamic faith of the majority of the Turkish people: Turkey, we are told, is not a Christian nation; its people simply won't fit in with the Western European Judeo-Christian tradition.
It's when these rationalizations fall on deaf ears that the old standby of retribution for treatment at the hands of the Ottoman Empire comes to the fore.
No one has to accept the sins of the Ottoman Empire to reject that argument.
Turkey in any event is long past it.
The country has in recent years accepted more than 500,000 refugees from at least four bordering nations.
Kurds, suffering what many people consider to be a current extermination campaign at the hands of Syria, Iran and Iraq have inundated eastern Turkey.
Now it is their fellow Turks arriving as refugees from Bulgaria.
The Turkish refugee tragedy and the ongoing crisis cannot be ignored and shuttled off to that notorious dustbin of history that has become so convenient recently.
Surely, the past suffering of any people at any time cannot be simply filed away and forgotten.
But what the Senate Judiciary Committee has done in supporting the strongly worded Armenian resolution achieves no useful end; it merely produces more controversy and embittered memories.
Congress has enough difficulty dealing with the realities of the world as it currently exists.
Bulgaria's government has been behaving beyond the pale for months, and the U.S. does its values no credit by ignoring that while casting its votes into the past.
Many in Washington say President Bush will have to raise taxes to pay for his war on drugs.
We have a better idea: Dismantle HUD to pay for the war on drugs.
Housing and Urban Development's budget is $17 billion.
From what we and the nation have been reading, the money isn't being spent very well.
The single most important contribution the government could make now to help the poor is to get the specter of drugs out of their neighborhoods.
If that takes money, take it away from this discredited federal department.
But of course the Democrats pillorying HUD in hearings and in the press have no such solution in mind.
Instead, they're scrambling to protect the very programs at the heart of the HUD scandal.
This month, HUD Secretary Jack Kemp unveiled a series of proposed reforms to improve management at HUD.
No doubt many of his ideas are worthy, but ultimately he is proposing to make fundamentally flawed programs work slightly more fairly and efficiently.
Congress is unlikely to go even that far.
Last week, Secretary Kemp ran into a buzzsaw of criticism from House Banking Committee members.
They were appalled, for instance, that he wanted to target more of the $3 billion Community Development Block Grant (CDBG) program to low-income projects and zero out the notorious "discretionary" funds that have allowed HUD officials to steer contracts to political cronies.
These development grants mainly enrich developers who want to put up shopping centers and parking garages.
They also give those in Congress political credit for bringing home the pork, and so they are popular with such Members as Mary Rose Oakar.
Rep. Oakar, a Democrat from Cleveland, wants a $6.9 million grant so Cleveland can build an 18-story Rock and Roll Hall of Fame.
She says it'd create 600 jobs and bring Cleveland tourist revenue.
HUD says the project doesn't qualify, and Mr. Kemp says that rock 'n' roll musicians and the music industry ought to put up the money.
At the hearing, Rep. Oakar started wailing about "phoney baloney regulations" that would stand between her and "housing for downtown Cleveland."
Rep. Chalmers Wylie, an Ohio Republican, rallied to the cause: "I think the gentlelady is making an important statement.
The implication that if a congressman calls about a project in his district there's something wrong, I think is most unfortunate."
We're sure some theologian can explain the difference between what the Republican consultants have been doing with HUD and what these gentleladies and gentlemen want to do with HUD.
Our view is that given Congress's attitude toward HUD, the place probably is beyond reform.
For more than 50 years the federal government has tried various ways to provide housing for the poor and revive cities.
In the process HUD has wasted untold billions, created slums and invited corruption.
Much of HUD's spending actually is disguised welfare for developers or the middle class.
That includes the CDBG funds and the Federal Housing Administration, which loans out money for private home mortgages and has just been discovered to be $4 billion in the hole.
Selling the FHA's loan portfolio to the highest bidder would save the taxpayers untold billions in future losses.
Some HUD money actually does trickle down to the poor, and zeroing out housing middlemen would free up more money for public housing tenants to manage and even own their units.
The rest ought to be used to clean out drugs from the neighbhorhoods.
Rival gangs have turned cities into combat zones.
Even suburban Prince George's County, Md., reported last week there have been a record 96 killings there this year, most of them drug-related.
Innocent bystanders often are the victims.
A man in a wheelchair was gunned down in the crossfire of a Miami drug battle.
A three-year-old Brooklyn boy was used as a shield by a drug dealer.
Decent life in the inner cities won't be restored unless the government reclaims the streets from the drug gangs.
Until then, the billions HUD spends on inner-city housing simply is wasted.
It's still unclear whether Secretary Kemp wants to completely overhaul the engine room at HUD or just tighten a few screws here and there.
No doubt he believes the place can be salvaged.
Having seen the hypocrisy with which Congress has addressed the HUD scandals, we disagree.
It's time to scrap the politically infested spending machine HUD has become and channel the resources into the drug war.
Randy Delchamps was named chairman and chief executive officer of this grocery chain.
Mr. Delchamps, 46 years old, succeeds A.F. Delchamps Jr., who died in a plane crash on Sunday at the age of 58.
Randy Delchamps retains his position as president.
Natural upheavals, and most particularly earthquakes, are not only horrible realities in and of themselves, but also symbols through which the state of a society can be construed.
The rubble after the Armenian earthquake a year ago disclosed, quite literally, a city whose larger structures had been built with sand.
The extent of the disaster stemmed from years of chicanery and bureaucratic indifference.
The larger parallel after the earthquake centered south of San Francisco is surely with the state of the U.S. economy.
Did the stock-market tremors of Friday, Oct. 13, presage larger fragility, far greater upheavals?
Are the engineering and architecture of the economy as vulnerable as the spans of the Bay Bridge?
The eerie complacency of the Reagan-Bush era has produced Panglossian paeans about the present perfection of U.S. economic and social arrangements.
A licensed government intellectual, Francis Fukuyama, recently announced in The National Interest that history is, so to speak, at an end since the course of human progress has now culminated in the glorious full stop of American civilization.
His observations were taken seriously.
But we are, in reality, witnessing the continuing decline of the political economy of capitalism: not so much the end of history but the history of the end.
The financial equivalent of the sand used by those Armenian contractors is junk bonds and the leveraged buy-outs associated with them.
Builders get away with using sand and financiers junk when society decides it's okay, necessary even, to look the other way.
And by the early 1980s U.S. capitalists had ample reason to welcome junk bonds, to look the other way.
By that time they found extremely low profit rates from non-financial corporate investment.
Government statistics in fact show that the profit rate -- net pretax profits divided by capital stock -- peaked in 1965 at 17.2%.
That same calculation saw profit rates fall to 4.6% in the recession year 1982 and the supposed miracle that followed has seen the profit rate rise only to 8.1% in 1986 and 8% in 1987.
Corresponding to the fall in profit rates was -- in the early 1980s -- the drop in the number arrived at if you divide the market value of firms by the replacement costs of their assets, the famous Q ratio associated with Prof. James Tobin.
In theory, the value attached to a firm by the market and the cost of replacing its assets should be the same.
But of course the market could decide that the firm's capital stock -- its assets -- means nothing if the firm is not producing profits.
This is indeed what the market decided.
By 1982 the ratio was 43.5%, meaning that the market was valuing every dollar's worth of the average firm's assets at 43 cents.
From the history of capitalism we can take it as a sound bet that if it takes only 43 cents to buy a dollar's worth of a firm's capital stock, an alert entrepreneur won't look the other way.
His assumption is that the underlying profitability rate will go up and the capital assets he bought on the cheap will soon be producing profits, thus restoring the market's faith in them.
Hence the LBO craze.
But here is where the entrepreneur made a very risky bet, and where society was maybe foolish to look the other way.
The profit rate is still low and the Q ratio was only 65% in 1987 and 68.9% in 1988.
Result: a landscape littered with lemons, huge debt burdens crushing down upon the arch and spans of corporate America.
The mounting risks did not go unobserved, even in the mid-1980s.
But there were enough promoters announcing the end of history (in this case suspension of normal laws of economic gravity) for society to continue shielding its eyes.
Mainstream economists and commentators, craning their necks up at the great pyramids of junk financing, swiveling their heads to watch the avalanche of leveraged buy-outs, claimed the end result would be a leaner, meaner corporate America, with soaring productivity and profits and the weaker gone to the wall.
But this is not where the rewards of junk financing were found.
The beneficiaries were those financiers whose icon was the topic figure of '80s capitalism, Michael Milken's $517 million salary in one year.
Left-stream economists I associate with -- fellows in the Union of Radical Political Economists, most particularly Robert Pollin of the economics faculty at the University of California at Riverside -- were not hypnotized in the manner of their pliant colleagues.
All along they have been noting the tremors and pointing out the underlying realities.
Profit rates after the great merger wave are no higher, and now we have an extremely high-interest burden relative to cash flow.
The consequences of building empires with sand are showing up.
In contrast to previous estimates reckoning the default rate on junk bonds at 2% or 3%, a Harvard study published in April of this year (and discussed in a lead story in The Wall Street Journal for Sept. 18) found the default rate on these junk bonds is 34%.
What is the consequence of a high-interest burden, high default rates and continued low profitability?
Corporations need liquidity, in the form of borrowed funds.
Without liquidity from the junk-bond market or cash flow from profits, they look to the government, which obediently assists the natural motions of the capitalist economy with charity in the form of cuts in the capital-gains tax rate or bailouts.
The consequence can be inflation, brought on as the effect of a desperate bid to avoid the deflationary shock of a sudden crash.
Attacks on inflation come with another strategy of capital of a very traditional sort: an assault on wages.
Mr. Fukuyama, peering through binoculars at the end of history, said in his essay that "the class issue has actually been successfully resolved in the West . . .
the egalitarianism of modern America represents the essential achievement of the classless society envisioned by Marx."
Mr. Fukuyama might want to consult some American workers on the subject of class and egalitarianism.
From its peak in 1972 of $198.41, the average American weekly wage had fallen to $169.28 in 1987 -- both figures being expressed in 1977 dollars.
In other words, after the glory boom of the Reagan years, wages had sunk from the post World War II peak by 16% as capitalists, helped by the government, turned down the screws or went offshore.
But there are signs now -- the strikes by miners, Boeing workers, telephone workers, etc. -- that this attack on wages is being more fiercely resisted.
These are long-term Richter readings on American capitalism.
The whole structure is extremely shaky.
Governments have become sophisticated in handling moments of panic (a word the London Times forbade my father to use when he was reporting the Wall Street crash in 1929).
But sophistication has its limits.
The S&L bailout could cost $300 billion, computing interest on the government's loans.
These are real costs.
Under what weights will the Federal Deposit Insurance Corporation totter?
Capitalism may now be engineered to withstand sudden shocks, but there are fault lines -- the crisis in profits, the assault on wages, the structural inequity of the system -- that make fools of those who claim that the future is here and that history is over.
Mr. Cockburn is a columnist for The Nation and LA Weekly.
Japan Air Lines, Lufthansa German Airlines and Air France reportedly plan to form an international air-freight company this year, a move that could further consolidate the industry.
Japanese newspaper Nihon Keizai Shimbun reported that the three giants plan to integrate their cargo computers and ground-cargo and air-cargo systems.
They reportedly will invest a total of 20 billion yen ($140 million) in the venture, whose headquarters would be in France or West Germany.
The action follows Federal Express Corp.'s acquisition of Flying Tiger Line Inc. in August.
After that, "it would make sense for airlines to talk about doing things jointly," said Cotton Daly, director of cargo services for New York consulting firm Simat, Helliesen & Eichner Inc.
Mr. Daly said such discussions are motivated by the competitive threat posed by Federal Express, United Parcel Service of America Inc. and other fast-growing air-freight companies.
Many airlines are talking about cargo ventures, and there have been rumors about such a tie between JAL and European airlines.
In Tokyo, a JAL spokesman said he couldn't confirm or deny the latest Japanese report.
But he said JAL is talking to Lufthansa and Air France about some sort of cargo venture.
"It is just one of a number of strategies JAL has embarked upon to come to terms with the situation in Europe after 1992," the deadline for ending trade barriers in the EC, he said.
In Frankfurt, a Lufthansa spokesman confirmed talks are under way, but declined to comment.
A Lufthansa spokeswoman in Tokyo said the head of Lufthansa's cargo operations had been in Toyko last week for talks with JAL.
In Paris, Air France declined to comment.
"Nothing is defined or signed at this point," Mr. Daly said of the talks.
Whatever accord the three carriers reach, he said, he is skeptical it would create a separate airline.
If the three companies pool their air-freight businesses, their clout would be considerable.
According to figures from the International Air Transport Association, they carried a combined 1.8 million tons of freight last year.
Federal Express and Flying Tiger, as separate companies, carried a combined 2.6 million tons.
Air France and Lufthansa last month concluded a far-reaching cooperation accord that includes air-freight activities.
They plan to increase cooperation in freight ground-handling and create a world-wide computer system to process cargo.
Other airlines would have access to the system, they said, and negotiations with partners were already under way.
Both European airlines operate extensive fleets of Boeing 747 freighters and 747 Combis, aircraft that carry both freight and passengers on the main deck.
They currently have large orders for cargo planes.
Several airlines, including Lufthansa, JAL and Cathay Pacific Airways, are working on a so-called global cargo system and are trying to attract other carriers to join, Mr. Daly said.
JAL also has signaled it is looking for toeholds in Europe before the end of 1992.
Last month, the carrier said it wanted to lease crews and planes from British Airways so it could funnel its passengers from London to other European destinations.
British Airways said it hasn't received a proposal from JAL.
But last week there were air-traffic negotiations between the U.K. and Japan, a likely first step to any commercial agreement between JAL and British Airways or another U.K. carrier.
Federal Paper Board Co. said it completed the previously announced purchase of Imperial Cup Corp., a closely held maker of paper cups based in Kenton, Ohio.
Terms weren't disclosed.
Imperial Cup has annual sales of approximately $75 million.
Federal Paper Board sells paper and wood products.
In a move to prevent any dislocation in the financial markets from the California earthquake, the Securities and Exchange Commission said it temporarily reassigned options listed on the Pacific Stock Exchange to the American, New York and Philadelphia stock exchanges and to the Chicago Board Options Exchange.
The decision, which affects millions of dollars of trading positions, was made late yesterday because the Pacific exchange's options floor was shut down as a result of Tuesday's earthquake.
The SEC, faced with a major squeeze on options positions, said it was necessary to ensure that options listed on the exchange could be traded today and tomorrow.
SEC Chairman Richard Breeden said the cooperation by the exchanges would enable investors to buy and sell options listed solely on the Pacific exchange, guaranteeing the liquidity of the market.
Officials at the four exchanges said well over 50 traders from the Pacific exchange were taking flights from San Francisco late yesterday to the American, New York and Philadelphia exchanges and to the CBOE, where they would continue making markets in the Pacific-listed options.
The Big Board said carpenters quickly erected a new options floor to accomodate 40 traders from the Pacific exchange.
In addition, specialists on the exchanges agreed to provide backup capital for market-making in Pacific exchange options traded on the exchanges.
Trading was light on the Pacific Stock Exchange yesterday, with workers at the exchange's main floor in San Francisco struggling to execute orders by flashlight as a result of a continuing power outage.
The most pressing problem was the suspension of options trading.
The Pacific exchange has options for 129 underlying stock issues, including highly active Hilton Hotels Corp., which is listed on the Big Board.
Investors were concerned that they might be unable to exercise options that expire tomorrow.
But professionals said throughout the day that the shutdown wouldn't be a cause for alarm even if it were to persist for several days.
"I've told my staff and clients that they still have the ability to exercise their options, because they are guaranteed by the Options Clearing Corp.," said Michael Schwartz, a senior registered options strategist at Oppenheimer & Co.
The SEC reassigned trading in the options, however, to allow investors to do more than simply exercise the options.
While the exchange's equities floor in San Francisco remained open on a limited basis, orders were being routed and executed in Los Angeles.
Workers could dial out, but they couldn't receive telephone calls.
"It's a very uncertain situation right now," said Navin Vyas, administrative assistant of trading floor operations of the exchange, which has daily volume of about 10 million shares.
Because the exchange's computer was rerouting orders to the exchange's trading operations in Los Angeles, "business is as usual" Mr. Vyas said.
"If one city is down, the other can take over."
Meanwhile, the brokerage firms in San Francisco were trying to cope.
Charles Daggs, chairman and chief executive officer of Sutro & Co., said traders came to work at 5 a.m. PDT -- many on foot because of uncertain road and traffic conditions -- but learned that they would have to await a required inspection by the city in order to turn the power back on at the company's two main facilities there.
That should happen by today, he said.
Traders worked with the help of sunlight streaming through windows, despite large cracks in the walls and a lack of incoming phone calls.
Also, most of the telecommunications equipment was out.
The traders were executing municipal bond, mutual fund and other orders through a sister firm, Tucker Anthony Inc., which is also owned by John Hancock Freedom Securities but is based in New York.
"We are having a regular day.
Volume is down out of San Francisco, but not out of the 11 outlying offices," Mr. Daggs added.
Sutro's Oakland office executed orders through the Sacramento office, which wasn't affected by the quake.
Others, like Prudential-Bache Securities Inc., which has eight offices in the San Francisco area, set up an 800 number yesterday morning for customers to obtain market commentary and other help.
At Kidder, Peabody & Co.'s Sacramento branch, Manager Janet White received calls yesterday morning from workers in San Francisco who offered to work in Sacramento.
Then she discovered that Quotron Systems Inc.'s Sacramento lines were down, because they are normally tied in through a system that goes through San Francisco.
So the Kidder brokers had to call other company offices to get quotes on stocks.
At Quotron, the company's National Call-In Center, which swung into action for the first time last month for Hurricane Hugo, assembled a tactical team at 5 a.m. yesterday to begin rerouting lines and restore service to brokers and traders.
The company dispatched as many as 200 people in the San Francisco area to do the work, though most of the rerouting was done by computer.
Service appeared to be down throughout the financial district in downtown San Francisco, while just parts of Oakland and San Jose were knocked out.
But Dale Irvine, director of the emergency center, said service was being restored to outlying San Francisco areas.
In Chicago yesterday, Options Clearing confirmed that it guarantees the Pacific exchange options.
The firm also will permit its members and the public "to exercise their put and call options contracts traded on the Pacific exchange" even if the exchange is closed, said Wayne Luthringshausen, chairman of Options Clearing.
(Put options give holders the right, but not the obligation, to sell a financial instrument at a specified price, while call options give holders the right, but not the obligation, to buy a financial instrument at a specified price).
Investors and traders in Pacific exchange options "are protected to the extent that they can convert their put and call options into the underlying instrument," Mr. Luthringshausen said.
"We are seeing such exercises today, in fact.
International Business Machines Corp. said its board approved the purchase of $1 billion of its common shares, a move that should help support its battered stock.
Even as the stock market has generally done well this year, IBM's shares have slipped steadily from its 52-week high of $130.875.
Yesterday's closing price of $101.75, down 50 cents, in composite trading on the New York Stock Exchange, puts the stock at about 1 1/2 times book value, which is as low as it has sunk over the past decade.
The announcement came after the market's close.
The move by IBM wasn't exactly a surprise.
The company has spent some $5 billion over the past 3 1/2 years to buy back 42 million common shares, or roughly 7% of those outstanding.
In addition, despite IBM's well-publicized recent problems, the computer giant still generates enormous amounts of cash.
As of the end of the second quarter, it had $4.47 billion of cash and marketable securities on hand.
As a result, some securities analysts had predicted in recent days that IBM would authorize additional purchases.
In Armonk, N.Y., a spokesman said that although IBM didn't view its spending as necessarily a way to support the stock, it thought the purchases were a good way to improve such financial measurements as per-share earnings and return on equity.
"We view it as a good long-term investment," the spokesman said.
In the short term, the move is likely to have little effect.
At yesterday's closing price, $1 billion would buy back about 10 million shares, or less than 2% of the roughly 580 million outstanding.
In addition, as of Sept. 30, the company still had authorization to buy $368 million of stock under a prior repurchase program.
Over the long term, however, IBM's stock repurchases -- along with its hefty, $4.84-a-share annual dividend and generally loyal following among large institutional investors -- are providing a floor for the stock price.
Although IBM last year produced its first strong results in four years and was expected to continue to roll this year, it began faltering as early as January.
First, it had trouble manufacturing a chip for its mainframes, IBM's bread-and-butter business.
Then it had a series of smaller glitches, including problems manufacturing certain personal computers and the delay in the announcement of some important workstations.
Finally, IBM had to delay the introduction of some high-end disk drives, which account for 10% of its $60 billion of annual revenue.
None of the problems is necessarily fatal, and they aren't all necessarily even related.
There are also other factors at work that are outside IBM's control, such as currency exchange rates.
The strong dollar, which reduces the value of overseas earnings and revenue when they are translated into dollars, is expected to knock 80 to 85 cents off IBM's per-share earnings for the full year.
Without that problem, IBM might have matched last year's earnings of $5.81 billion, or $9.80 a share.
Still, investors will take some convincing before they get back into IBM's stock in a big way.
Steve Milunovich, a securities analyst at First Boston, said that while investors were looking for an excuse to buy IBM shares a year ago, even the big institutional investors are looking for a reason to avoid the stock these days.
On Wall Street yesterday, northern California's killer earthquake was just another chance to make a buck.
At the opening bell, investors quickly began singling out shares of companies expected to profit or suffer in some way from the California disaster, including insurers, construction-related companies, refiners and housing lenders.
Brokerage houses jumped in, touting "post-quake demand" stocks, and Kidder, Peabody & Co. set up a toll-free hot line for San Franciscans who might need emergency investment advice and help in transferring funds.
"Wall Street thinks of everything in terms of money," says Tom Gallagher, a senior Oppenheimer & Co. trader.
However, he added, such event-driven trading moves typically last only a few hours and are often made without full information.
The most popular plays of the day were insurance companies such as General Re Corp., which rose $2.75 to $86.50, Nac Re Corp., up $2 to $37.75, American International Group Inc., up $3.25 to $102.625, and Cigna Corp., up 87.5 cents to $62.50.
Yesterday, the brokerage firm Conning & Co. said insurers will use the earthquake as an excuse to raise insurance rates, ending their long price wars.
Before this bullish theory surfaced, some insurance stocks initially fell, indicating that investors thought the quake might cost insurers a lot of money.
In fact, Fireman's Fund Corp., which ended the day off 50 cents to $36.50, said earthquake damage would slightly hurt fourth-quarter profit.
On the prospect for rebuilding northern California, investors bid up cement-makers Calmat Co., up $2.75 to $28.75, and Lone Star Industries Inc., up $1.75 to $29.25.
Bridge and road builders had a field day, including Kasler Corp., up $2.125 to $9.875, Guy F. Atkinson Co., up 87.5 to $61.875, and Morrison Knudsen Corp., which reported higher third-quarter earnings yesterday, up $2.25 to $44.125.
Fluor Corp., a construction engineering firm, gained 75 cents to $33.375.
But home-building stocks were a mixed bag.
Timber stocks got a big boost.
Georgia Pacific Corp., up $1.25 to $58, and Maxxam Inc., up $3 to $43.75, both reported strong profits.
Merrill Lynch & Co. touted Georgia-Pacific, Louisiana Pacific Corp. and Willamette Industries Inc. as the best post-quake plywood plays.
Other gainers were companies with one or more undamaged California refineries.
Tosco Corp. jumped $1.125 to $20.125 and Chevron Corp., despite a temporary pipeline shutdown, rose $1 to $65.
Meanwhile, shares of some big housing lenders got hit, on the likelihood that the lenders' collateral -- people's homes -- suffered physical damage and perhaps a loss in value.
Wells Fargo & Co. fell 50 cents to $81.50, and BankAmerica Corp. fell 50 cents to $31.875.
Some California thrift stocks also fell, including Golden West Financial Corp. and H.F. Ahmanson & Co., which reported lower earnings yesterday.
"Property values didn't go up in California yesterday," says one money manager.
Pacific Gas & Electric Co. fell 37.5 cents to $19.625.
One of its power generators was damaged, though the company said there won't be any financial impact.
Pacific Telesis Group lost 62.5 cents to $44.625.
A computer failure delayed its earnings announcement, and some investors think it might have extra costs to repair damaged telephone lines.
Heavy construction, property-casualty insurance and forest products were among the best performing industry groups in the Dow Jones Equity Market Index yesterday.
Friday's stock market plunge claimed its second victim among the scores of futures and options trading firms here.
Petco Options, an options trading firm owned by the family of the deceased former Chicago Board of Trade chairman Ralph Peters, is getting out of the trade clearing, or processing and guaranteeing, business after sustaining a multimillion dollar loss Friday, options industry officials said.
Nearly 75 options traders on the Chicago Board Options Exchange who cleared trades through Petco, including a handful of traders who lost between $500,000 to $1 million themselves as a result of Friday's debacle, are trying to transfer their business to other clearing firms, CBOE members said.
Timothy Vincent, Petco chief executive officer, confirmed that Petco was withdrawing from the clearing business.
"The owners of the company got a look at the potential risks in this business, and after Monday they felt they didn't want to be exposed any more," he said.
He added that Petco remained in compliance with all industry capital requirements during the market's rapid plunge Friday and Monday's rebound.
A CBOE spokeswoman declined comment on Petco.
Over the weekend Fossett Corp., another options trading firm, transferred the clearing accounts of about 160 traders to First Options of Chicago, a unit of Continental Bank Corp., because it couldn't meet regulatory capital requirements after Friday's market slide.
The unprecedented transfer of accounts underscored the options industry's desire not to have its credibility tarnished by potentially widespread trading defaults on Monday.
The CBOE, American Stock Exchange, Options Clearing Corp. and Stephen Fossett, owner of Fossett, joined in putting up $50 million to guarantee the accounts at First Options.
The head of another small options clearing firm, who asked not to be identified, said that the heightened volatility in the financial markets in recent years makes it increasingly difficult for any but the largest financial trading firms to shoulder the risk inherent in the highly leveraged options and futures business.
Prior to the introduction of financial futures in the late 1970s, most trading firms clustered around the LaSalle Street financial district here were family operations handed down from one generation to the next.
Most also were relatively undercapitalized compared with the size of most Wall Street securities firms.
Mr. Peters, a LaSalle Street legend among the post-World War II generation of commodity traders, was rumored to have amassed a multimillion-dollar fortune from commodity trading and other activities by the time he died in May.
Part of a Series}
Betty Lombardi is a mild-mannered homemaker and grandmother in rural Hunterdon County, N.J.
But put her behind a shopping cart and she turns ruthless.
If Colgate toothpaste offers a tempting money-saving coupon, she'll cross Crest off her shopping list without a second thought.
Never mind that her husband prefers Crest.
Some weeks when her supermarket runs a double-coupon promotion, she boasts that she shaves $22 off her bill.
Money isn't the only thing that makes her dump once favorite brands.
After she heard about the artery-clogging hazards of tropical oils in many cookies, she dropped Pepperidge Farm and started buying brands free of such oils.
"I always thought Pepperidge Farm was tasty and high quality," Mrs. Lombardi says.
"But I don't want any of that oil for my grandkids."
(Pepperidge Farm says it can't tell exactly how many customers it has lost, but it hopes to remove the objectionable tropical oil from all its products by year end.)
Clearly, people like Mrs. Lombardi are giving marketers fits.
She represents a new breed of savvy consumer who puts bargain prices, nutritional and environmental concerns, and other priorities ahead of old-fashioned brand loyalty.
While brand loyalty is far from dead, marketing experts say it has eroded during the 1980s.
Marketers themselves are partly to blame: They've increased spending for coupons and other short-term promotions at the expense of image-building advertising.
What's more, a flood of new products has given consumers a dizzying choice of brands, many of which are virtually carbon copies of one other.
"Marketers have brought this on themselves with their heavy use" of promotions, contends Joe Plummer, an executive vice president at the D'Arcy Masius Benton & Bowles ad agency.
"Without some real product improvements, it's going to be difficult to win that loyalty back."
The Wall Street Journal's "American Way of Buying" survey this year found that most consumers switch brands for many of the products they use.
For the survey, Peter D. Hart Research Associates asked some 2,000 consumers, including Mrs. Lombardi, whether they usually buy one brand of a certain type of product or have no brand loyalty.
More than half the users of 17 of the 25 products included in the survey said they're brand switchers.
Overall, 12% of consumers aren't brand loyal for any of the 25 product categories.
About 47% are loyal for one to five of the products.
Only 2% are brand loyal in 16 to 20 of the categories, and no one is loyal for more than 20 types of products.
For such products as canned vegetables and athletic shoes, devotion to a single brand was quite low, with fewer than 30% saying they usually buy the same brand.
Only for cigarettes, mayonnaise and toothpaste did more than 60% of users say they typically stick with the same brand.
People tend to be most loyal to brands that have distinctive flavors, such as cigarettes and ketchup.
Kathie Huff, a respondent in the Journal survey from Spokane, Wash., says her husband is adamant about eating only Hunt's ketchup.
He simply can't stomach the taste of Heinz, she says.
The 31-year-old homemaker adds, "The only other thing I'm really loyal to is my Virginia Slims cigarettes.
Coke and Pepsi are all the same to me, and I usually buy whichever brand of coffee happens to be on sale."
Brand imagery plays a significant role in loyalty to such products as cigarettes, perfume and beer.
People often stay with a particular brand because they want to be associated with the image its advertising conveys, whether that's macho Marlboro cigarettes or Cher's Uninhibited perfume.
Loyalty lags most for utilitarian products like trash bags and batteries.
Only 23% of trash-bag users in the Journal survey usually buy the same brand, and just 29% of battery buyers stick to one brand.
Underwear scored a middling 36% in brand loyalty, but consumer researchers say that's actually quite high for such a mundane product.
"In the past, you just wore Fruit of the Loom and didn't care," says Peter Kim, U.S. director of consumer behavior research for the J. Walter Thompson ad agency.
"The high score reflects the attempts to make underwear more of a fashion image business for both men and women."
He believes there's opportunity for a smart gasoline marketer to create a strong brand image and more consumer loyalty.
What loyalty there is to gas brands, he believes, is a matter of stopping at the most conveniently located service stations.
Brand loyalty was stronger among older consumers in the Journal survey.
Nearly one-fourth of participants age 60 and older claim brand loyalty for more than 10 of the 25 products in the survey; only 9% of those age 18 to 29 have such strong allegiance.
Higher-income people also tend to be more brand loyal these days, the Journal survey and other research studies indicate.
Marketers speculate that more affluent people tend to lead more pressured lives and don't have time to research the products they buy for the highest quality and most reasonable price.
An established brand name is insurance that at least the product will be of acceptable quality, if not always the best value for the money.
It's sort of loyalty by default.
Meanwhile, "the bottom end of the market is becoming less loyal," says Laurel Cutler, vice chairman of the ad agency FCB/Leber Katz Partners.
"They're buying whatever's cheaper."
The biggest wild card in the brand loyalty game: How those hotly pursued but highly unpredictable baby boomers will behave as they move into middle age.
They grew up with more brand choices than any generation and have shown less allegiance so far.
But now that they're settling down and raising families, might they also show more stability in their brand choices?
Mr. Kim of J. Walter Thompson doesn't think so.
He believes baby boomers will continue to be selective in their brand loyalties.
"Earlier generations were brand loyal across categories," he says, "but boomers tend to be brand loyal in categories like running shoes and bottled water, but less so in others like toilet paper and appliances."
While not as brand loyal as in the past, consumers today don't buy products capriciously, either.
Rather, they tend to have a set of two or three favorites.
Sometimes, they'll choose Ragu spaghetti sauce; other times, it will be Prego.
Advertisers attribute this shared loyalty to the striking similarity among brands.
If a more absorbent Pampers hits the market, you can be sure a new and improved Huggies won't be far behind.
The BBDO Worldwide ad agency studied "brand parity" and found that consumers believe all brands are about the same in a number of categories, particularly credit cards, paper towels, dry soups and snack chips.
"When there's a clutter of brands, consumers simplify the complexity by telling themselves, 'All brands are the same so what difference does it make which I buy,'" says Karen Olshan, a senior vice president at BBDO.
"Too often, advertising imagery hasn't done a good job of forging a special emotional bond between a brand and the consumer."
But given such strong brand disloyalty, some marketers are putting renewed emphasis on image advertising.
A small but growing number of companies are also trying to instill more fervent brand loyalty through such personalized direct-marketing ploys as catalogs, magazines and membership clubs for brand users.
While discount promotions are essential for most brands, some companies concede they went overboard in shifting money from advertising to coupons, refunds and other sales incentives.
Some people argue that strong brands can afford to stop advertising for a time because of the residual impact of hundreds of millions of dollars spent on advertising through the years.
But most companies are too afraid to take that chance.
And perhaps with good reason.
Says Clayt Wilhite, president of the D'Arcy Masius ad agency's U.S. division, "Every time 24 hours pass without any advertising reinforcement, brand loyalty will diminish ever so slightly -- even for a powerful brand like Budweiser."
Consider, for example, what happened to Maxwell House coffee.
The Kraft General Foods brand stopped advertising for about a year in 1987 and gave up several market share points and its leadership position in the coffee business.
But since returning to advertising, Maxwell House has regained the lost share and is running neck and neck with archrival Folgers.
"Now, Philip Morris {Kraft General Foods' parent company} is committed to the coffee business and to increased advertising for Maxwell House," says Dick Mayer, president of the General Foods USA division.
"Even though brand loyalty is rather strong for coffee, we need advertising to maintain and strengthen it."
Campbell Soup Co., for one, has concluded that it makes good sense to focus more on its most loyal customers than on people who buy competitive brands.
"The probability of converting a non-user to your brand is about three in 1,000," says Tony Adams, the company's vice president for marketing research.
"The best odds are with your core franchise.
Our heavy users consume two to three cans of soup a week, and we'd like to increase that."
So Campbell is talking to its "brand enthusiasts," probing their psychological attachment to its soup.
In one consumer focus group, a fan declared that, "Campbell's soup is like getting a hug from a friend."
That helped persuade the company to introduce a new advertising slogan: "A warm hug from Campbell's."
Insurers face the prospect of paying out billions of dollars for damages caused by this week's California earthquake.
Getting a grip on the extent of the damages is proving a far more difficult task than what insurers faced after Hurricane Hugo ripped through the Caribbean and the Carolinas last month.
The earthquake's toll, including possible deep structural damage, goes far beyond the more easily observed damage from a hurricane, says George Reider, a vice president in Aetna Life & Casualty Insurance Co.'s claims division.
But investors are betting that the financial and psychological impact of the earthquake, coming so soon after the hurricane, will help stem more than two years of intense price-cutting wars among business insurers.
Reflecting that logic, insurance-company stocks posted strong gains.
Aetna and other insurers are hiring engineers and architects to help them assess structural damage.
Most insurers already have mobilized their "catastrophe" teams to begin processing claims from their policyholders in northern California.
Since commercial air travel is interrupted, Aetna, based in Hartford, Conn., chartered three planes to fly claims adjusters into Sacramento and then planned for them to drive to the Bay area.
About 25 adjusters were dispatched yesterday afternoon, along with laptop computers, cellular phones and blank checks.
Some adjusters, already in other parts of California, drove to the disaster area with recreational vehicles and mobile homes that could be used as makeshift claims-processing centers.
Insurers will be advertising 800 numbers -- probably on the radio -- that policyholders can call to get assistance on how to submit claims.
State Farm Mutual Automobile Insurance Co., the largest home and auto insurer in California, believes the losses from the earthquake could be somewhat less than the $475 million in damages it expects to pay out for claims resulting from Hurricane Hugo.
State Farm, based in Bloomington, Ind., is also the largest writer of personal-property earthquake insurance in California.
Earthquake insurance is sold as a separate policy or a specific endorsement "rider" on a homeowner's policy in California, because of the area's vulnerability to earthquakes.
State Farm said about 25% of its policyholders in California have also purchased earthquake insurance.
Allstate Insurance Co., a unit of Sears, Roebuck & Co., said about 23% of its personal property policyholders -- about 28% in the San Franciso area -- also have earthquake coverage.
The Association of California Insurance Companies estimated damage to residential property could total $500 million, but only $100 million to $150 million is insured, it said.
Officials from the American Insurance Association's property-claim service division, which coordinates the efforts of the claims adjusters in an area after a natural disaster, will be flying to San Francisco today.
They expect to have a preliminary estimate of the damages in a day or two.
Roads and bridges in the Bay area appear to have suffered some of the most costly damage.
Highways, such as the section of Interstate 880 that collapsed in Oakland, generally don't have insurance coverage.
Industry officials say the Bay Bridge -- unlike some bridges -- has no earthquake coverage, either, so the cost of repairing it probably would have to be paid out of state general operating funds.
However, the bridge, which charges a $1 toll each way, does have "loss of income" insurance to replace lost revenue if the operation of the bridge is interrupted for more than seven days.
That coverage is provided by a syndicate of insurance companies including Fireman's Fund Corp., based in Novato, Calif., and Cigna Corp., based in Philadelphia.
Earthquake-related claims aren't expected to cause significant financial problems for the insurance industry as a whole.
Instead, even with the liabilities of two natural disasters in recent weeks, analysts said the total capital of the industry is likely to be higher at year end than it was at midyear.
Indeed, the earthquake could contribute to a turnaround in the insurance cycle in a couple of ways.
For example, insurers may seek to limit their future exposure to catastrophes by increasing the amount of reinsurance they buy.
Such increased demand for reinsurance, along with the losses the reinsurers will bear from these two disasters, are likely to spur increases in reinsurance prices that will later be translated into an overall price rise.
Reinsurance is protection taken out by the insurance firms themselves.
"We are saying this is the breaking point, this is the event that will change the psychology of the marketplace," said William Yankus, an analyst with Conning & Co., a Hartford firm that specializes in the insurance industry.
His firm, along with some others, issued new buy recommendations on insurer stocks yesterday.
Among the insurance stocks, big gainers included American International Group, up $3.25 to $102.625; General Re Corp., up $2.75 to $86.50; Aetna, up $2.375 to $59.50; and Marsh & McLennan Inc., up $3.125 to $75.875.
Still, a few individual companies, most likely smaller ones, could be devastated.
"I think there is a damned good chance someone is going to hit the skids on this," said Oppenheimer & Co. analyst Myron Picoult.
He suspects some insurers who had purchased reinsurance to limit their exposure to catastrophes will discover that reinsurance was used up by Hurricane Hugo.
British, West German, Scandinavian and other overseas insurers are bracing for big claims from the San Francisco earthquake disaster.
Although it's unclear how much exposure the London market will face, U.K. underwriters traditionally have a large reinsurance exposure to U.S. catastrophe coverage.
Jack Byrne, chairman of Fireman's Fund, said this disaster will test the catastrophe reinsurance market, causing these rates to soar.
The catastrophe losses sustained by insurers this year will probably be the worst on an inflation-adjusted basis since 1906 -- when another earthquake sparked the Great San Francisco Fire.
Orin Kramer, an insurance consultant in New York, estimates that the 1906 San Francisco destruction, on an inflation-adjusted basis, included insured losses of $5.8 billion.
He is estimating this week's disaster will generate insured losses of $2 billion to $4 billion, following about $4 billion in costs to insurers from Hurricane Hugo.
Silicon Graphics Inc.'s first-quarter profit rose sharply to $5.2 million, or 28 cents a share, from $1 million, or six cents a share, a year ago.
The maker of computer workstations said a surge of government orders contributed to the increase.
Revenue rose 95% to $86.4 million from $44.3 million the year earlier.
In national over-the-counter trading, the company closed yesterday at $23.25 a share, down 25 cents.
Hunter Environmental Services Inc. said it reached a preliminary accord on the sale of its environmental consulting and services business for about $40 million and assumption of related debt.
The buyer wasn't identified.
The company said it also is making progress in negotiating the buy-out of its design division by management.
In addition, Hunter said it will use proceeds from a private placement of $8 million of preferred shares to purchase an interest in a start-up company to underwrite environmental impairment insurance.
Hunter wants to concentrate its resources on the insurance business and on a project to store hazardous wastes in salt domes.
Jaguar PLC's chairman said he hopes to reach a friendly pact with General Motors Corp. within a month that may involve the British luxury-car maker's producing a cheaper executive model.
Sir John Egan told reporters at London's Motorfair yesterday he "would be disappointed if we couldn't do {the deal} within a month."
He said the tie-up would mean Jaguar could "develop cars down range {in price} from where we are" by offering access to GM's high-volume parts production.
Besides creating joint manufacturing ventures, the accord is expected to give GM about a 15% stake that eventually would rise to about 30%.
Jaguar figures a friendly alliance with GM will fend off unwelcome advances from Ford Motor Co.
But Ford, Jaguar's biggest shareholder since lifting its stake to 10.4% this week, is pressing harder for talks with Sir John.
"We're getting to the point where we are going to have to meet" with him, one Ford official said yesterday.
Ford probably will renew its request for such a meeting soon, he added.
Sir John has spurned Ford's advances since the U.S. auto giant launched a surprise bid for as much as 15% of Jaguar last month.
Ford has signaled it might acquire a majority interest later.
"I'm not obligated to sit down and talk to anybody," the Jaguar chairman asserted yesterday.
He didn't rule out negotiations with Ford, however.
The fiercely proud but financially strapped British company prefers to remain independent and publicly held, despite Ford's promise of access to cash and technological know-how.
Sir John noted that GM, a longtime Jaguar supplier, agrees "we should remain an independent company."
He said Jaguar started negotiating with GM and several other car makers over a year ago, but the rest "dropped by the wayside ever since the share price went above #4 ($6.30) a share."
Jaguar shares stood at 405 pence before Ford's initial announcement, but the subsequent takeover frenzy has driven them up.
The stock traded late yesterday on London's stock exchange at 673 pence, up 19 pence.
Developing an executive-model range would mark a major departure for Britain's leading luxury-car maker.
A typical British executive car is mass produced and smaller than a luxury car.
It generally fetches no more than #25,000 ($39,400) -- roughly #16,000 less than the highest-priced Jaguars, which are all known for their hand-crafted leather work.
"We have designs for such {executive} cars, but have never been able to develop them," Sir John said.
GM's help would "make it possible {for Jaguar} to build a wider range of cars."
An executive model would significantly boost Jaguar's yearly output of 50,000 cars.
"You are talking about a couple hundred thousand a year," said Bob Barber, an auto-industry analyst at U.K. brokerage James Capel & Co.
A pact with GM may emerge in as little as two weeks, according to sources close to the talks.
The deal would require approval by a majority of Jaguar shareholders.
"We have to make it attractive enough that {holders} would accept it," Sir John said.
That may be difficult, the Jaguar chairman acknowledged, "when you have somebody else breathing down your neck.
" Ford probably would try to kill the proposal by enlisting support from U.S. takeover-stock speculators and holding out the carrot of a larger bid later, said Stephen Reitman, European auto analyst at London brokers UBS Phillips & Drew.
Ford can't make a full-fledged bid for Jaguar until U.K. government restrictions expire.
The anti-takeover measure prevents any outside investor from buying more than 15% of Jaguar shares without permission until Dec. 31, 1990.
But with its 10.4% stake, Ford can convene a special Jaguar shareholders' meeting and urge them to drop the restrictions prematurely.
"It's a very valuable weapon in their armory," which could enable Ford to bid sooner for Jaguar, observed Mr. Barber of James Capel.
Otherwise, Jaguar may have to tolerate the two U.S. auto giants each owning a 15% stake for more than a year.
"It would be difficult to see how a car company can be owned by a collective," Sir John said.
"It has never been done before, but there's always a first.
Although two Baby Bells showed strong growth in access lines, usage and unregulated business revenue, one reported a modest gain in third-quarter net while the other posted a small drop.
Ameritech Corp.'s earnings increased 2.8%, after strong revenue gains were offset somewhat by refunds and rate reductions imposed by regulators in its Midwest territory.
BellSouth Corp.'s third-quarter earnings dropped 3.8% as a result of debt refinancing, the recent acquisition of a cellular and paging property and rate reductions in its Southeast territory.
BellSouth
At BellSouth, based in Atlanta, customer access lines grew by 162,000, or 3.5%, during the 12-month period ended Sept.
For the third quarter, total operating revenue grew 2.6% to $3.55 billion from $3.46 billion.
Total operating expenses increased 3.5% to $2.78 billion from $2.69 billion.
Overall access minutes of use increased 10.3% and toll messages jumped 5.2%.
BellSouth Chairman and Chief Executive Officer John L. Clendenin said three factors accounted for the drop in third-quarter earnings.
The refinancing of $481 million in long-term debt reduced net income by $22 million, or five cents a share, but in the long run will save more than $250 million in interest costs.
The company previously said that the recent acquisition of Mobile Communications Corp. of America would dilute 1989 earnings by about 3%.
In addition, earnings were reduced by rate reductions in Florida, Kentucky, Alabama, Tennessee and Louisiana.
Ameritech
At Ameritech, based in Chicago, customer access lines increased by 402,000, or 2.6%, and cellular mobile lines increased by 80,000, or 62.3%, for the 12-month period ended Sept. 30.
For the third quarter, revenue increased 1.9% to $2.55 billion from $2.51 billion.
Operating expenses increased 2.6% to $2.04 billion, including one-time pretax charges of $40 million for labor contract signing bonuses.
Local service revenue increased 3.5% and directory and unregulated business revenue jumped 9.5%.
But network access revenue dropped 4% and toll revenue dropped 1.4%.
a-reflects 2-for-1 stock split effective Dec. 30, 1988.
b-reflects extraordinary loss of five cents a share for early debt retirement.
c-reflects extraordinary loss of five cents a share and extraordinary gain of 14 cents a share from cumulative effect of accounting change.
The Wall Street Journal "American Way of Buying" Survey consists of two separate, door-to-door nationwide polls conducted for the Journal by Peter D. Hart Research Associates and the Roper Organization.
The two surveys, which asked different questions, were conducted using national random probability samples.
The poll conducted by Peter D. Hart Research Associates interviewed 2,064 adults age 18 and older from June 15 to June 30, 1989.
The poll conducted by the Roper Organization interviewed 2,002 adults age 18 and older from July 7 to July 15, 1989.
Responses were weighted on the basis of age and gender to conform with U.S. Census data.
For each poll, the odds are 19 out of 20 that if pollsters had sought to survey every household in the U.S. using the same questionnaire, the findings would differ from these poll results by no more than 2 1/2 percentage points in either direction.
The margin of error for subgroups -- for example, married women with children at home -- would be larger.
In addition, in any survey, there is always the chance that other factors such as question wording could introduce errors into the findings.
Program traders were buying and selling at full steam Monday, the first trading session after the stock market's 190.58-point plunge Friday.
They accounted for a hefty 16% of New York Stock Exchange volume Monday, the fourth busiest session ever.
On Friday, 13% of volume was in computer-guided program trades.
In August, by contrast, program trading averaged 10.3% of daily Big Board turnover.
Program traders were publicly castigated following the 508-point crash Oct. 19, 1987, and a number of brokerage firms pulled back from using this strategy for a while.
But as the outcry faded by the spring of 1988, they resumed.
Some observers thought that after Friday's sharp drop, the firms would rein in their program traders to avoid stoking more controversy.
But the statistics released yesterday show the firms did nothing of the sort.
One reason, they said, was that the official reports on the 1987 crash exonerated program trading as a cause.
Stock-index arbitrage is the most controversial form of program trading because it accelerates market moves, if not actually causing them.
In it, traders buy or sell stocks and offset those positions in stock-index futures contracts to profit from fleeting price discrepancies.
Under the exchange's definitions, program trading also describes a number of other strategies that, in the opinion of some traders, don't cause big swings in the market.
The Big Board's disclosure of program trading activity on these two days was unusual.
Though it collects such data daily, its monthly reports on program trading usually come out about three weeks after each month ends.
The September figures are due to be released this week.
The Big Board declined to name the Wall Street firms involved in the activity Friday and Monday, or the type of strategies used.
But traders on the exchange floor, who can observe the computer-guided trading activity on monitor screens, said most of the top program-trading firms were active both days.
Through August, the top five program trading firms in volume were Morgan Stanley & Co., Kidder, Peabody & Co., Merrill Lynch & Co., PaineWebber Group Inc. and Salomon Brothers Inc.
Though brokerage officials defended their use of program trading, one sign of what an issue it remains was that few executives would comment on the record.
Besides reciting the pardon for program trading contained in the Brady Commission report, they said stock-index arbitrage was actually needed Monday to restore the markets' equilibrium.
On Friday, the stock-index futures market was unhinged from the stock market when the Chicago Mercantile Exchange halted trading in Standard & Poor's 500 futures contract -- a "circuit breaker" procedure instituted after the 1987 crash and implemented for the first time.
Futures trading resumed a half-hour later, but the session ended shortly thereafter, leaving the stock market set up for more sell programs, traders said.
By Monday morning, they said, stock-index arbitrage sell programs helped re-establish the link between stocks and futures.
But stunning volatility was produced in the process.
The Dow Jones Industrial Average plunged a breathtaking 63.52 points in the first 40 minutes of trading Monday as stock-index arbitrage sell programs kicked in.
At about 10:10 a.m. EDT, the market abruptly turned upward on stock-index arbitrage buy programs.
By day's end, the Dow industrials had rebounded 88.12 points, or nearly half of Friday's drop.
FREDERICK'S OF HOLLYWOOD Inc., Los Angeles, said its board voted a 50% increase in the specialty boutique-store operator's semiannual dividend, to five cents a common share.
The dividend is payable Dec. 15 to stock of record Nov. 15.
Valley National Corp. reported a third-quarter net loss of $72.2 million, or $3.65 a share, and suspended its quarterly dividend because of potential losses on its Arizona real estate holdings.
The Phoenix-based holding company for Arizona's largest bank said it added $121 million to its allowance for losses on loans and for real estate owned.
The company earned $18.7 million, or 95 cents a share, a year earlier.
For the nine months, Valley National posted a net loss of $136.4 million, or $6.90 a share.
It had profit of $48.6 million, or $2.46 a share, in the 1988 period.
Valley National had been paying a quarterly dividend of 36 cents a share.
"The Arizona real estate market continues to be depressed, and there is still uncertainty as to when values will recover," James P. Simmons, chairman, said.
The decision to increase the loan-loss reserve and suspend the dividend is "both prudent and in the best long-term interest of the shareholders," he said.
Valley National said it made the decision on the basis of an "overall assessment of the marketplace" and the condition of its loan portfolio and after reviewing it with federal regulators.
The addition to reserves comes on top of a provision of $199.7 million that was announced in June.
In July, Moody's downgraded $400 million of the company's debt, saying the bank holding company hadn't taken adequate write-offs against potential losses on real estate loans despite its second-quarter write-down.
Richard M. Greenwood, Valley National's executive vice president, said then that the company believed the write-downs were "adequate" and didn't plan to increase its reserves again.
Bruce Hoyt, a banking analyst with Boettcher & Co., a Denver brokerage firm, said Valley National "isn't out of the woods yet."
The key will be whether Arizona real estate turns around or at least stabilizes, he said.
"They've stepped up to the plate to take the write-downs, but when markets head down, a company is always exposed to further negative surprises," Mr. Hoyt said.
Valley National closed yesterday at $24.25 a share, down $1, in national over-the-counter trading.
Two years of coddling, down the drain.
That's the way a lot of brokers feel today on the second anniversary of the 1987 stock-market crash.
Ever since that fearful Black Monday, they've been tirelessly wooing wary individual investors -- trying to convince them that Oct. 19, 1987, was a fluke and that the stock market really is a safe place for average Americans to put their hard-earned dollars.
And until last Friday, it seemed those efforts were starting to pay off.
"Some of those folks were coming back," says Leslie Quick Jr., chairman, of discount brokers Quick & Reilly Group Inc.
"We had heard from people who hadn't been active" for a long time.
Then came the frightening 190-point plunge in the Dow Jones Industrial Average and a new wave of stock-market volatility.
All of a sudden, it was back to square one.
"It's going to set things back for a period, because it reinforces the concern of volatility," says Jeffrey B. Lane, president of Shearson Lehman Hutton Inc.
"I think it will shake confidence one more time, and a lot of this business is based on client confidence."
Brokers around the country say the reaction from individual investors this week has been almost eerie.
Customers and potential customers are suddenly complaining about the stock market in the exact way they did in post-crash 1987.
"The kinds of questions you had before have resurfaced," says Raymond A. "Chip" Mason, chairman of regional brokerage firm Legg Mason Inc., Baltimore.
"I can just tell the questions are right back where they were: `What's going on?,' `Can't anything be done about program trading?,' `Doesn't the exchange understand?,' `Where is the SEC on this?'"
Mr. Mason says he's convinced the public still wants to invest in common stocks, even though they believe the deck is stacked against them.
But "these wide swings scare them to death."
All of this is bad news for the big brokerage firms such as Shearson and Merrill Lynch & Co. that have big "retail," or individual-investor, businesses.
After expanding rapidly during the bull-market years up to the 1987 crash, retail brokerage operations these days are getting barely enough business to pay the overhead.
True, the amount of money investors are willing to entrust to their brokers has been growing lately.
But those dollars have been going into such "safe" products as money market funds, which don't generate much in the way of commissions for the brokerage firms.
At discount brokerage Charles Schwab & Co., such "cash-equivalent" investments recently accounted for a record $8 billion of the firm's $25 billion of client's assets.
The brokers' hope has been that they could soon coax investors into shifting some of their hoard into the stock market.
And before last Friday, they were actually making modest progress.
A slightly higher percentage of New York Stock Exchange volume has been attributed to retail investors in recent months compared with post-crash 1988, according to Securities Industry Association data.
In 1987, an average 19.7% of Big Board volume was retail business, with the monthly level never more than 21.4%.
The retail participation dropped to an average 18.2% in 1988, and shriveled to barely 14% some months during the year.
Yet in 1989, retail participation has been more than 20% in every month, and was 23.5% in August, the latest month for which figures are available.
Jeffrey Schaefer, the SIA's research director, says that all of his group's retail-volume statistics could be overstated by as much as five percentage points because corporate buy-backs are sometimes inadvertently included in Big Board data.
But there did seem to be a retail activity pickup.
But "Friday didn't help things," says Mr. Schaefer.
With the gyrations of recent days, says Hugo Quackenbush, senior vice president at Charles Schwab, many small investors are absolutely convinced that "they shouldn't play in the stock market."
Joseph Grano, president of retail sales and marketing at PaineWebber Group Inc., still thinks that individual investors will eventually go back into the stock market.
Investors will develop "thicker skins," and their confidence will return, he says.
Friday's plunge, he is telling PaineWebber brokers, was nothing more than a "tremendous reaction to leveraged buy-out stocks."
Meanwhile, PaineWebber remains among the leaders in efforts to simply persuade investors to keep giving Wall Street their money.
"It's more of an important issue to keep control of those assets, rather than push the investor to move into (specific) products such as equities," Mr. Grano says.
"The equity decision will come when the client is ready and when there's a semblance of confidence."
It could be a long wait, say some industry observers.
"Some investors will tiptoe back in," says Richard Ross, a market research director for Elrick & Lavidge in Chicago.
"Then there'll be another swing.
Given enough of these, this will drive everyone out except the most hardy," he adds.
Mr. Ross, who has been studying retail investors' perception of risks in the brokerage industry, said a market plunge like Friday's "shatters investors' confidence in their ability to make any judgments on the market."
The long-term outlook for the retail brokerage business is "miserable," Mr. Ross declares.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
Washington, D.C. --
$200 million of general obligation tax revenue anticipation notes, Series 1990, due Sept. 28, 1990.
About $190 million were offered through Shearson Lehman Hutton Inc.
Shearson is offering the notes as 6 3/4% securities priced to yield 6.15%.
J.P. Morgan Securities Inc. is offering the remaining $10 million of notes.
The notes are rated MIG-1 by Moody's Investors Service Inc.
Standard & Poor's Corp. has them under review.
Federal National Mortgage Association --
$400 million of Remic mortgage securities being offered in 16 classes by Bear, Stearns & Co.
The offering, Series 1989-83, is backed by Fannie Mae 9% securities.
The offering used at-market pricing.
Separately, Fannie Mae issued $400 million of Remic mortgage securities in 12 classes through First Boston Corp.
The offering, Series 1989-84, is backed by Fannie Mae 9% securities.
Pricing details weren't available.
The two offerings bring Fannie Mae's 1989 Remic issuance to $31 billion and its total volume to $43.3 billion since the program began in April 1987.
Societa per Azioni Finanziaria Industria Manaifatturiera (Italy) --
$150 million of 9% depository receipts due Nov. 27, 1994, priced at 101.60 to yield 9.07% less fees, via Bankers Trust International Ltd.
Fees 1 7/8.
Mitsubishi Corp. Finance (Japanese parent) --
$100 million of 8 5/8% bonds due Nov. 1, 1993 priced at 101 1/4 to yield 8.74% annually less full fees, via Yamaichi International (Europe) Ltd.
Fees 1 5/8.
Indian Oil Corp. (India) --
$200 million of floating-rate notes due November 1994, paying six-month London interbank offered rate plus 3/16 point and priced at par via Credit Suisse First Boston Ltd.
Guaranteed by India.
Fees 0.36.
Notes offered at a fixed level of 99.75.
National Westminster Bank PLC (U.K.) --
#200 million of undated variable-rate notes priced at par via Merill Lynch International Ltd.
Initial interest rate set at 0.375 point over three-month Libor.
Subsequent margins set by agreement between NatWest and Merrill.
If no margin agreed, there is a fallback rate of Libor plus 0.75 point in years one to 15, and Libor plus 1.25 point thereafter.
Keihin Electric Express Railway Co. (Japan) --
$150 million of bonds due Nov. 9, 1993, with equity-purchase warrants, indicating a 4% coupon at par via Yamaichi International (Europe) Ltd.
Each $5,000 bond carries one warrant, exercisable from Dec. 1, 1989, through Nov. 2, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Oct. 24.
Seiren Co. (Japan) --
110 million Swiss francs of privately placed convertible notes due March 31, 1994, with an indicated 0.25% coupon at par, via Bank Leu Ltd.
Put option on March 31, 1992, at an indicated 109 to yield 3.865%.
Callable on March 31, 1992, at 109, also beginning Sept. 30, 1992, from 101 1/2 and declining half a point semiannually to par.
Each 50,000 Swiss franc note is convertible from Nov. 20, 1989, to March 17, 1994, at an indicated 5% premium over the closing share price Oct. 25, when terms are scheduled to be fixed.
N. Nomura & Co. (Japan) --
50 million Swiss francs of privately placed convertible notes due March 31, 1994, with an indicated 0.5% coupon at par, via Bank Julius Baer.
Put option on March 31, 1992, at an indicated 108 1/4 to yield 3.846%.
Each 50,000 Swiss franc note is convertible from Nov. 20, 1989, to March 17, 1994, at a 5% premium over the closing share price Oct. 21, when terms are scheduled to be fixed.
Aegon N.V. (Netherlands) --
250 million Dutch guilders of 7 3/4% bonds due Nov. 15, 1999, priced at 101 1/4 to yield 7.57% at issue price and 7.86% less full fees, via AMRO Bank.
Fees 2.
Continental Airlines --
a four-part, $71 million issue of secured equipment certificates priced through Drexel Burnham Lambert Inc.
The size of the issue was decreased from an originally planned $95.2 million.
In addition, a planned two-part offering of $58 million in unsecured notes wasn't offered.
The first part, consisting of $2.5 million of 11 1/4% secured equipment certificates due June 15, 1990, was priced at 98.481 with a yield to maturity of 13.75%.
The second part, consisting of $28 million of 11 3/4% secured equipment certificates due June 15, 1995, was priced at 87.026 with a yield to maturity of 15.25%.
The third part, consisting of $18.5 million of 12 1/8% secured equipment certificates due April 15, 1996, was priced at 85.60 with a yield to maturity of 15.75%.
The fourth part, consisting of $22 million of 12 1/2% secured equipment certificates due April 15, 1999, was priced at 85.339 with a yield to maturity of 15.50%.
The issue was rated single-B-2 by Moody's and single-B by S&P.
All parts of the issue are callable at any time at par.
Continental Airlines is a unit of Texas Air Corp.
John V. Holmes, an investment-newsletter publisher, and three venture-capital firms he organized were enjoined from violating the registration provisions of the securities laws governing investment companies.
As part of an agreement that settled charges brought by the Securities and Exchange Commission, a receiver was also appointed for the three venture-capital firms.
Mr. Holmes was the subject of a page one profile in The Wall Street Journal in 1984, after the SEC questioned him about ties between him and companies he touted in a newsletter.
In 1986, in another consent agreement with the SEC, Mr. Holmes was enjoined from violating the stock-registration and anti-fraud provisions of the securities laws.
Without any admission or denial of guilt by Mr. Holmes, that agreement settled SEC charges that Mr. Holmes sold unregistered securities and misled investors.
In charges filed last week in federal district court in Charlotte, N.C., the SEC alleged that Venture Capitalists Inc., Venture Finance Corp. and New Ventures Fund Inc., all of Charlotte, failed repeatedly to file proper documents.
The SEC also charged that Mr. Holmes acted as an officer or director of New Ventures, in violation of his previous consent agreement.
"Some companies were delinquent in filings and other actions, all of which cost money," Mr. Holmes said.
Two of Mr. Holmes's business associates who worked for Venture Capitalists, Kimberly Ann Smith and Frederick Byrum, also consented to being enjoined from violations of registration provisions of the securities laws.
Ms. Smith also agreed to a permanent injunction barring her from acting as an officer, director or investment adviser of any mutual fund, unit investment trust or face-amount certificate company.
Mr. Byrum and Ms. Smith couldn't be reached for comment.
In consenting to the injunctions, none of the individuals or companies admitted or denied the allegations.
Senate Republicans have settled on a proposal that would cut the capital-gains tax for individuals and corporations.
At the same time, a small group of Senate Democrats are working on a similar plan and may introduce it soon.
Sen. Bob Packwood (R., Ore.), the lead sponsor of the GOP proposal, said he intends to unveil the plan today and to offer it as an amendment to whatever legislation comes along, particularly this month's bill to raise the federal borrowing limit.
He gave 10-to-1 odds that a capital-gains tax cut of some sort would be approved this year, though it probably won't be included in the pending deficit-reduction bill.
He added that he expects to talk to the Democrats who also wanted to cut the gains tax about drafting a joint proposal.
For individuals, the Packwood plan would exclude from income 5% of the gain from the sale of a capital asset held for more than one year.
The exclusion would rise five percentage points for each year the asset was held until it reached a maximum of 35%.
The exclusion would apply to assets sold after Oct. 1, 1989.
As an alternative, he said, taxpayers could chose to reduce their gains by an inflation index.
For corporations, the top tax rate on the sale of assets held for more than three years would be cut to 33% from the current top rate of 34%.
That rate would gradually decline to as little as 29% for corporate assets held for 15 years.
The Packwood plan would also include a proposal, designed by Sen. William Roth (R., Del.), that would expand and alter the deduction for individual retirement accounts.
The Roth plan would create a new, non-deductible IRA from which money could be withdrawn tax-free not only for retirement, but also for the purchase of a first home and to pay education and medical expenses.
Current IRAs could be rolled over into the new IRAs but would be subject to tax.
For their part, the group of Democrats are working on a plan that, like the Packwood proposal, would grant larger exclusions to assets the longer they were held by individuals and companies.
Newly acquired assets would get a bigger break than those currently held.
An extra exclusion would be given to long-held stock in small and medium-size corporations just starting up.
No one in the Senate is considering the capital-gains plan passed by the House.
That plan would provide a 30% exclusion to assets sold over a 2 1/2-year period ending Dec. 31, 1991.
After then, the House measure would boost the tax rate to 28% and exclude from tax the gain attributable to inflation.
Senators are focusing on making a capital-gains differential permanent.
Separately, Chairman Dan Rostenkowski (D., Ill.) of the House Ways and Means Committee said he didn't want the capital-gains tax cut or any other amendments attached to the pending bill raising the federal borrowing limit.
The current debt limit expires Oct. 31.
He also urged House and Senate negotiators to rid the deficit-reduction bill of all provisions that increase the budget deficit, including the House-passed capital-gains provision.
From a helicopter a thousand feet above Oakland after the second-deadliest earthquake in U.S. history, a scene of devastation emerges: a freeway crumbled into a concrete sandwich, hoses pumping water into once-fashionable apartments, abandoned autos.
But this quake wasn't the big one, the replay of 1906 that has been feared for so many years.
Despite the tragic loss of more than 270 lives, and damage estimated in the billions, most businesses and their plants and offices in the Bay area weren't greatly affected.
The economic life of the region is expected to revive in a day or two, although some transportation problems may last weeks or months.
A main factor mitigating more widespread damage was the location of the quake's epicenter -- 20 miles from the heart of the Silicon Valley and more than 50 miles from downtown San Francisco and Oakland.
Also, the region's insistence on strict building codes helped prevent wider damage.
The tremendous energy of the quake was dissipated by the distance, so that most parts of the valley and the major cities suffered largely cosmetic damage -- broken windows, falling brick and cornices, buckled asphalt or sidewalks.
Of course, the quake was the worst since the emergence of the computer era turned Silicon Valley into the nation's capital of high technology.
Like other major American cities, the San Francisco -- Oakland area owes its current prosperity more to its infrastructure of fiber-optic cables linking thousands of computer terminals and telephones than to its location astride one of the world's great natural harbors.
When the tremors struck, the region's largely unseen high-tech fabric held up surprisingly well despite the devastation visible from the air.
Michael L. Bandler, vice president for network technology at Pacific Bell Telephone Co., says nearly all the network's computer switches, which move thousands of calls a minute from one location to another, changed to battery power when the city lost power.
The battery packs have enough power for only three hours, but that gave emergency crews time to turn on an emergency system that runs primarily on diesel fuel.
Of some 160 switches in Pacific Bell's network, only four went down.
One of those was in Hollister, Calif., near the earthquake's epicenter.
Few telephone lines snapped.
That's because the widely used fiber-optic cable has been installed underground with 25 extra feet of cable between junction points.
The slack absorbs the pulling strain generated by an earthquake.
Nevertheless, phone service was sporadic; many computer terminals remained dark, and by late yesterday a third of San Francisco remained without power.
Business in the nation's fourth-largest metropolitan region was nearly paralyzed; an estimated one million members of the work force stayed at home.
The economic dislocation was as abrupt as the earthquake itself, as virtually all businesses shut down.
The $125-billion-a-year Bay area economy represents one-fourth of the economy of the nation's most populous state and accounts for 2% to 3% of the nation's total output of goods and services, according to the Center for Continuing Study of the California Economy in Palo Alto.
In high-tech, the Bay area accounts for 15% to 20% of the U.S. computer-related industry.
"This has been a major disruption for the Bay area economy," says Pauline Sweezey, the chief economist at the California Department of Finance.
"Obviously, things are going to have to go on hold for many companies."
The damage to the Bay area's roadways could cause significant economic hardship.
A quarter of a million people cross the Bay Bridge every day, far more than the 100,000 that use the Bay Area Rapid Transit system (BART) -- which was working but wasn't stopping in the city's Financial District yesterday afternoon because electricity was shut off and the area was being checked for gas leaks.
California state transportation officials interviewed by telephone say they nevertheless don't expect serious problems for commerce in and out of the Bay area.
All major roadways except Interstate 880, known as the Nimitz Freeway, and the Bay Bridge were open by 1 p.m. yesterday.
Officials expect difficulty routing traffic through downtown San Francisco.
The earthquake caused many streets to buckle and crack, making them impassible.
Other roads were obstructed by collapsed buildings and damaged water and power lines, an emergency relief spokesman says.
San Francisco Mayor Art Agnos estimated the damage to his city alone at $2 billion.
But many predicted that the commercial disruption would be short-lived.
Of the scores of companies contacted by this newspaper, few reported any damage that they didn't expect to have remedied within a day or two.
It is possible, of course, that some of the most seriously damaged companies couldn't be reached, particularly in areas nearest the epicenter.
Typical, perhaps, was the situation at New United Motor Manufacturing Inc., the General Motors Corp.-Toyota joint-venture auto plant in Fremont, about 35 miles south of Oakland.
Ten of the plant's workers were injured when the quake hit about a half-hour into the afternoon shift; seven were hospitalized.
Metal racks on the plant floor fell over, and water mains ruptured, a spokeswoman says.
The plant was evacuated and workers sent home.
But the plant was able to resume limited production of its Toyota Corollas and Geo Prizms by 6 a.m. yesterday, and absenteeism was only 7% of the work force, about twice normal.
Computer maker Hewlett-Packard Co., based in Palo Alto, says one of its buildings sustained severe damage when it was knocked off its foundation.
Other buildings had broken glass, dangling light fixtures and broken pipes, a spokesperson says, estimating the cost of reconstruction "in the millions."
Most banks were closed but were expected to reopen today with few problems anticipated.
At the Federal Reserve Bank of San Francisco, Vice President Robert Fienberg says operations were "steaming along as usual" yesterday afternoon.
`When the quake hit, we turned on our emergency generator and brought our computers up," he says.
The Fed serves as a middleman for banks, taking checks from one bank and sending them to another, an operation that it handled smoothly Tuesday night after the quake.
"The volume we received from the banks was a lot lower than usual," he says.
A disaster-contingency plan in which the Los Angeles Fed would come to San Francisco's aid wasn't needed, he adds.
Most of the telephone problems in the immediate aftermath stemmed from congestion.
The telephone network simply couldn't handle the large number of people seeking to make a call at the same time.
The volume resulted in dial-tone delays that were as short as 15 seconds and as long as five minutes.
Mr. Bandler puts traffic volume at 10 to 50 times normal.
American Telephone & Telegraph Co., MCI Communications Inc. and United Telecommunications' U S Sprint unit were blocking phone calls into the Bay area to alleviate congestion.
The companies block traffic much as highway on-ramps are blocked when traffic backs up.
William E. Downing, Pacific Bell's vice president of customer services for the Bay area, says most long-distance companies were blocking about 50% of all calls.
Pacific Telesis says its Pacific Bell unit also was blocking about 50% of its calls locally.
Ironically, the long-term effect of the earthquake may be to bolster the Bay area's economic fortunes and, indeed, the nation's gross national product.
It may also lead to new safeguards in major construction projects such as double-deck highways.
"It would in the near-term give a boost to the San Francisco economy because there will be an influx of people to help," says Beth Burnham Mace, a regional economist at DRI/McGraw Hill, a Lexington, Mass., forecasting firm.
The construction industry is sure to feel increased demand.
"There will be a big influx of federal dollars and gains in state, federal and local employment," Ms. Mace says.
Adds Stacy Kotman, an economist at Georgia State University, "There's nothing positive about an earthquake, but it will probably generate more construction activity."
Wall Street reacted swiftly yesterday to the disaster by bidding up stocks of construction and related companies.
Shares of Lone Star Industries Inc., a cement maker, rose sharply in anticipation of stepped-up demand.
In Greenwich, Conn., Lone Star spokesman Michael London says, "Obviously with an earthquake of this size, there are likely to be construction projects that wouldn't otherwise have been anticipated.
But any increase isn't likely to be any kind of a surge.
It's something likely to be spread out over a long period of time.
There will be a lot of repair work that won't require the quantities of cement or concrete that new constructon would."
Lone Star's San Francisco facilities weren't damaged in the quake.
The earthquake is likely to reduce GNP negligibly in the near term and then could raise it a bit as rebuilding begins.
The first effects are, of course, negative as work is disrupted and people lose income and cut spending.
Corporate profits may also dip initially.
Many of the lost tourism dollars won't be recovered; many trips delayed never take place.
Subsequently, however, the ill effects are likely to be offset, at least in economic terms, as construction activity begins.
Because of the way the government keeps its books, the damage to the Bay Bridge, however costly, won't be counted as a minus.
The money spent on repairs will be counted as a plus.
"It's very difficult to model the long-term impact of this," says Andrew Goldberg, who studies the public-policy and crisis-management aspects of earthquakes at the Center for Strategic International Studies in Washington, D.C.
"You certainly can say it's going to be extremely severe.
We really are talking about shutting down a major American city for a number of days, maybe for a few weeks."
Mr. Goldberg says the cost of the earthquake will definitely top $1 billion and could reach $4 billion.
He cautions that early damage estimates are often low; the damage totals in Hurricane Hugo increased tenfold as more information was received.
The earthquake damage, of course, would have been far greater if the epicenter had been in downtown San Francisco.
A direct hit on a major city, Mr. Goldberg figures, would cause $20 billion to $40 billion of damage.
Experts caution that it is far too soon for reliable estimates of the quake's total damage, but it's clear that insurers are likely to pay out enormous sums.
Jack Byrne, the chairman of Fireman's Fund Corp., which is based in Novato, Calif., estimates insured losses resulting the earthquake could total $2 billion.
The impact on the insurance industry "will be big and harsh, but less than {Hurricane} Hugo," says Mr. Byrne, who toured the Bay area by car yesterday afternoon to get a sense of the company's exposure to the earthquake.
Mr. Byrne says Fireman's Fund will probably pay hundreds of millions in primary claims, but, after taxes and use of its reinsurance lines, the company's fourthquarter charge against earnings shouldn't top $50 million.
The company was able to assess its damage liability quickly because it has computerized maps of Northern California showing the exact locations of all the property it insures.
Fireman's Fund had claims adjusters on the streets of San Francisco right after sunrise yesterday and was paying as many claims as it could right on the spot.
Fireman's Fund insures 37,300 homes and autos and 35,000 businesses in the Bay area.
In addition to paying for earthquake and fire damage, the insurer must cover worker-compensation claims and also losses due to businesses being shut down by lack of power or phone service.
But many Californians may not have adequate insurance coverage to pay for damages to their property.
The Independent Insurance Agents of America says fewer than one of every five California homeowners has earthquake insurance.
A somewhat higher percentage of people living in the Bay area have bought the additional insurance protection, but the great majority aren't covered.
Earthquake insurance typically runs $200 or more a year for a small house.
Whatever the long-term economic effect, the scene from the helicopter above Oakland is one of tragedy.
Gargantuan sections of a double-decker freeway have been heaved about like plastic building blocks.
Atop them sit cars and trucks abandoned in a terrifying scramble to safety the day before.
In areas where the freeway made giant concrete sandwiches of itself lie cars that police say have been flattened into foot-thick slabs.
On the periphery, rescue workers seem, from the air, to move in slow motion.
They peck away at the 1 1/2-mile section of rubble, searching for more of the 250 people thought to have died here.
About 20 other deaths were also attributed to the earthquake.
The heart of the earthquake, 6.9 on the Richter scale, was 50 miles to the south, near Santa Cruz, but its terrible fist struck here on the Nimitz Freeway, a major artery serving the Bay Bridge between Oakland and San Francisco.
Along the way, the quake toppled a mall in Santa Cruz, knocked down buildings in San Francisco's fashionable Marina District and sent a wall of bricks crashing on motorists in the city's Financial District.
Just a short span across the bay to the west, the quake also showed its mettle: A four-square-block area of the Marina District lies smoldering under a steady stream of seawater being pumped onto rubble to prevent it from blazing anew.
Many of the buildings, mostly condominiums and apartments, were flattened almost instantly as the underlying soil -- much of it landfill -- was literally turned to ooze by the quake's intensive shaking, rupturing gas lines.
Onlookers say three persons died when one of the buildings exploded into a fireball shortly after the quake struck.
Efforts to fight the blaze were hampered because water mains were severed as well.
From the air, ribbons of yellow fire hose carry water from the bay to high-pressure nozzles trained on the site.
As onlookers stand behind barricades, helmeted firemen and building inspectors survey rows of nearby buildings that were twisted from their foundations and seem on the verge of collapse.
In the Marina District, residents spent yesterday assessing damage, cleaning up and trying to find friends and neighbors.
Evelyn Boccone, 85 years old, has lived in the district most of her life.
Her parents lost everything in the 1906 earthquake.
"Now, we realize what our mothers must have gone through," she says.
"We always heard about the earthquake, but as children we didn't always listen.
PRINCE HENRI is the crown prince and hereditary grand duke of Luxembourg.
An article in the World Business Report of Sept. 22 editions incorrectly referred to his father, Grand Duke Jean, as the crown prince.
Resolution Funding Corp. plans to sell $4.5 billion of 30-year bonds Wednesday in the agency's first sale of securities.
The new bonds will be dated Oct. 30 and mature Oct. 15, 2019.
Tenders for the bonds, available in minimum denominations of $1,000, must be received by 1 p.m. EDT Wednesday at Federal Reserve banks.
Refcorp, created by the thrift-overhaul law enacted in August, will use the proceeds to merge or sell off ailing savings-and-loan institutions.
Congress authorized $50 billion to be borrowed to pay for the thrift bailout.
Of that amount, $20 billion has already been borrowed by the Treasury Department.
Unless otherwise specified in a particular offer, the bonds won't be subject to redemption prior to maturity.
Interest payments on the bonds will be payable semiannually.
The bonds are subject to federal taxation in the U.S., including income taxes.
At the state and local level, the bonds are subject to surtaxes and estate, inheritance and gift taxes, but exempt from taxation as to principal and interest.
G.D. Searle & Co., a Monsanto Co. unit, is launching a program to give consumers more information about its drugs when doctors prescribe them.
Called Patients in the Know, the program features fact sheets designed to be easy to understand.
The sheets tell how the medicine works, describe how to use it and list its possible side effects.
They are designed to be given to patients by their doctors when the medicines are prescribed and include space for the doctor to write special instructions.
In addition, Searle will give pharmacists brochures on the use of prescription drugs for distribution in their stores.
Consumer groups have long advocated that drug companies and doctors make more information available to patients.
"We believe that every drug that's marketed to a consumer should have a consumer label," said Douglas Teich of the Public Citizen Health Research Group, a Ralph Nader affiliate.
Dr. Teich said Searle is "the only company I know that voluntarily" will make consumer information available.
According to federal officials and drug-industry studies, nearly half of the 1.6 billion prescriptions filled each year aren't used properly, meaning that money is wasted on some prescriptions and patients are deprived of the benefits of medication.
"We think it's very important to provide as much information as possible on the drugs consumers take," said Searle Chairman Sheldon Gilgore.
Bond prices rambled yesterday as investors kept close watch on the stock market and worried about a wave of new supply.
Early yesterday, bonds rose as investors rushed to buy Treasury securities on the prospect that stocks would plummet in the aftermath of the massive California earthquake.
For example, some securities analysts warned that stocks of certain insurance companies, which face massive damage claims, would get hit hard.
But when the Dow Jones Industrial Average rose instead, bonds drifted lower.
With stocks not a major focus, "we're waiting for the next guiding light," said Brian J. Fabbri, chief economist at Midland Montagu Securities Inc.
"If the stock market tremors are behind us, then the bond market will go back to looking at the next batch of economic numbers to determine" where interest rates are heading.
The Treasury's benchmark 30-year bond, which jumped 3/8 point, or about $3.75 for each $1,000 face amount, during the first hour of trading, ended little changed.
Interest rates barely budged from Tuesday's levels.
Most junk bonds, which have been battered in recent weeks, continued a slow recuperation and ended unchanged to slightly higher.
But some so-called high-quality junk issues fell as some mutual funds sold their most liquid issues to raise cash.
RJR Holdings Capital Corp.'s 14.7% bonds due 2009 fell one point.
Other RJR issues fell between 1/2 point and 1 1/2 point.
In the latest sign of how difficult it is to place certain junk bonds, Continental Airlines said it was forced to scale back the size of its latest offering.
Continental, a unit of Texas Air Corp., slashed the size of its note offering from $150 million to $71 million.
The move had been widely expected.
In the multipart offering, the company sold a portion of secured notes but shelved all the unsecured notes.
A Continental spokeswoman said the notes may be offered at a later date.
"This was not a do-or-die deal," she said.
"I think this is a market that required some level of security.
It did not make sense to offer unsecured paper in an unsettling market."
Investors have been speculating for weeks about the market's ability to place the $7 billion to $10 billion of new junk bonds scheduled to be sold by year end.
Supply troubles were also on the minds of Treasury investors yesterday, who worried about the flood of new government securities coming next week.
"We're being bombarded by new Treasury and agency debt offerings," said William Sullivan Jr., director of money-market research at Dean Witter Reynolds Inc.
"The market is concerned about its ability to underwrite all this debt at current levels."
In addition to the $15.6 billion of Treasury bills to be sold at next week's regular Monday auction, the government will sell $10 billion of new two-year Treasury notes.
And Resolution Funding Corp. said late yesterday that it will sell $4.5 billion of 30-year bonds Wednesday.
Refcorp is the financing unit of Resolution Trust Corp., a new government agency created to rescue the nation's troubled thrifts.
Its securities have been dubbed "bailout bonds" by traders.
In when-issued trading, the two-year Treasurys had a yield of about 7.88%.
In the municipal market, all eyes were on California debt as investors tried to gauge the financial ramifications of Tuesday's earthquake.
But traders said the quake had only a minor impact on the trading of California state and local municipal debt.
"There are certain bonds traders refer to as `earthquake' bonds because the (issuers) are on top of the San Andreas fault," said Zane Mann, editor of the California Municipal Bond Advisor, a newsletter for investors.
Since those bonds already pay a slightly higher yield, an extra premium for the earthquake risk, they weren't materially affected.
But some bond market analysts said that could quickly change if property casualty insurance companies scramble to sell portions of their municipal portfolios to raise cash to pay damage claims.
"Insurance companies will foot a substantial amount of the bill to reconstruct San Francisco," said Charles Lieberman, chief economist at Manufacturers Hanover Securities Corp.
He also expects the performance of municipals to lag Treasurys as California is forced to issue new debt over time to repair public facilities.
A report issued late yesterday by Standard & Poor's Corp. concluded the quake won't cause "wide-scale credit deterioration" for issuers and debt issues in the 12-county area of Northern California affected by the quake.
Treasury Securities
Treasury bonds ended narrowly mixed in quiet trading.
The benchmark 30-year bond ended at a price of 100 29/32 to yield 8.03%, compared with 100 28/32 to yield 8.04% Tuesday.
The latest 10-year notes were quoted late at a price of 99 26/32 to yield 8%, compared with 99 25/32 to yield 8.01%.
Short-term rates were little changed.
Corporate Issues
Investment-grade corporate bonds ended 1/4 point lower.
The Continental junk bond offering, underwritten by Drexel Burnham Lambert Inc., was the only new issue priced yesterday.
In the four-part offering, the $71 million of secured equipment certificates was priced to yield 13.75% to 15.75%.
Municipals
Municipal bonds ended about 1/8 to 3/8 point lower, hurt by the circulation of two "bid-wanted" lists totaling $655 million.
Chemical Securities Inc. is acting as agent for the seller.
Meanwhile, some California issues were down a touch more than the broad market, but traders said there hadn't been much investor selling because of the quake.
But New York City general obligation bonds came under selling pressure.
Traders said a steady stream of bonds was put up for sale yesterday, pushing yields for longer maturities up 0.05 percentage point.
Traders said investors were reacting to recent negative news on the city's finances and are nervous ahead of the Nov. 7 election.
Washington, D.C., topped the competitive slate yesterday with a sale of $200 million of general obligation tax revenue anticipation notes.
In late trading, New Jersey Turnpike Authority's 7.20% issue of 2018 was off 1/4 point at 98 bid.
The yield was 7.35%, up 0.01 percentage point.
Mortgage-Backed Securities
Mortgage securities ended little changed after light dealings.
There was no appreciable market impact from the California earthquake.
Dealers said there was some concern that insurance companies might be forced to sell mortgage securities to help pay earthquake-related claims, but no selling materialized.
The Federal Home Loan Mortgage Corp. and Federal National Mortgage Association, two dominant issuers of mortgage securities, have a sizable amount of California home loans in their mortgagebacked pools.
But their potential quake exposure is seen as small given that they require a financial cushion on all the loans they purchase.
And because Northern California home prices are so high, loans from the region often are too large to be included in Freddie Mac and Fannie Mae pools.
Meanwhile, Government National Mortgage Association 9% securities for November delivery ended at 97 29/32, unchanged.
Freddie Mac 9% securities were at 97 4/32, down 1/32.
In derivative markets, Fannie Mae issued two $400 million real estate mortgage investment conduits backed by its 9% securities.
Foreign Bonds
British government bonds, or gilts, ended moderately lower as equities there recovered from Tuesday's drop.
The Treasury's 11 3/4% bond due 2003/2007 fell 11/32 to 111 31/32 to yield 10.08%, while the 12% notes due 1995 were down 7/32 to 103 22/32 to yield 11.04%.
Traders said today may be an anxious day for the market.
Several key economic figures are due out and Chancellor of the Exchequer Nigel Lawson is scheduled to give the annual "Mansion House" address to the financial community.
The chancellor sometimes has used the occasion to announce major economic policy changes.
Economists don't expect any such changes in this year's address, given Mr. Lawson's apparent reluctance to adjust policy currently.
Meanwhile, Japanese government bonds retreated in quiet trading, stymied by the dollar's resiliency.
Japan's bellwether 4.6% bond due 1998 ended on brokers' screens at 95.75 to yield 5.315%.
In West Germany, investors stayed on the sidelines as the bond market searched for direction.
The government's 7% issue due October 1999 fell 0.05 point to 99.90 to yield 7.01%.
The Berlin Wall still stands.
But the man who built it has fallen.
East Germany yesterday removed Erich Honecker, one of the staunchest holdouts against the reform rumbling through the Communist world, in an effort to win back the confidence of its increasingly rebellious citizens.
But while it was a move that stunned the East bloc, it hardly ushers in an era of reform -- at least anytime soon.
For the Politburo replaced Mr. Honecker, who had led East Germany for 18 years and before that headed its security apparatus, with a man cut of the same cloth: Egon Krenz, the most recent internal-security chief and a longtime Honecker protege.
East Germany, it is clear, is no Poland, where the Communist Party now shares power with the democratically elected Solidarity union.
Nor is it a Hungary, where yesterday the parliament approved constitutional changes meant to help turn the Communist nation into a multiparty democracy.
Still, any change in East Germany has enormous implications, for both East and West.
It raises the long-cherished hopes of many Germans for reunification -- a prospect that almost equally alarms political leaders in Moscow, Washington and Western Europe.
Mr. Krenz, 52, was named the new party chief just minutes after the Party's 163-member Central Committee convened in East Berlin.
Although the East German news agency ADN claimed Mr. Honecker had asked to be relieved of his duties for "health reasons," West German government sources said the 26-man Politburo had asked for his resignation at a separate meeting late Tuesday.
(Mr. Honecker was twice hospitalized this summer for a gall bladder ailment and his physical condition has been the subject of intense speculation in the Western media.)
ADN said Mr. Honecker, a hard-line Stalinist who in 1961 supervised the construction of the Berlin Wall, also was relieved of his title as head of state and his position as chief of the military.
Mr. Krenz is expected to be formally named to all three positions once the nation's parliament convenes later this week.
Mr. Honecker's ignoble fall culminates nearly two decades of iron-handed leadership during which Mr. Honecker, now 77 years old, built East Germany into the most economically advanced nation in the Soviet bloc.
His grip on power unraveled this summer as thousands of his countrymen, dissatisfied by the harshness of his rule, fled to the West.
Thousands more have taken to the streets in the last month in East Germany's largest wave of domestic unrest since a workers' uprising in 1953.
In Washington, the Bush administration took a characteristically cautious and skeptical view of the leadership change.
The official line was to offer warmer ties to Mr. Krenz, provided he is willing to institute reforms.
But U.S. officials have strong doubts that he is a reformer.
President Bush told reporters: "Whether that {the leadership change} reflects a change in East-West relations, I don't think so.
Because Mr. Krenz has been very much in accord with the policies of Honecker."
One top U.S. expert on East Germany added: "There is no clear-cut champion of reform, that we know of, in the East German leadership."
Indeed, Mr. Krenz said on East German television last night that there will be no sharing of power with pro-democracy groups.
He said, while dialogue is important, enough forums already exist "in which different interests" can express themselves.
The removal of Mr. Honecker was apparently the result of bitter infighting within the top ranks of the Communist party.
According to West German government sources, Mr. Honecker and several senior Politburo members fought over the last week to delay any decisions about a leadership change.
But, with public demonstrations in the country growing in size and intensity, Mr. Honecker and several key allies lost out in this battle, officials say.
Those allies included Politburo members Guenter Mittag, who has long headed economic affairs, and Joachim Hermann, chief of information policy.
Both men were also relieved of their duties yesterday.
Although other resignations may follow, it's still not clear to what extent the change in party personnel will alter the government's resistance to fundamental change.
Clearly, the central figure in this process is Egon Krenz.
Born in 1937 in a Baltic Sea town now part of Poland, he was eight years old when World War II ended.
Like West German Chancellor Helmut Kohl, he represents the postwar generation that has grown up during Germany's division.
Since joining the Politburo in 1983 as its youngest member, Mr. Krenz had acquired the nickname "crown prince," a reference to the widely held view that he was the hand-picked successor to Mr. Honecker.
In fact, the two men have had strikingly similar career paths, both having served as chief of internal security before their rise to the top party position.
Moreover, both men have hewn to a similar hard-line philosophy.
Notably, one of Mr. Krenz's few official visits overseas came a few months ago, when he visited China after the massacre in Beijing.
He later defended the Chinese government's response during a separate visit to West Germany.
East German Protestantism in particular fears Mr. Krenz, in part because of an incident in January 1988 when he was believed to have ordered the arrest of hundreds of dissidents who had sought refuge in the Church.
However, Mr. Krenz also has a reputation for being politically savvy.
His shrewd ability to read the shifting popular mood in East Germany is best illustrated by his apparent break with his old mentor, Mr. Honecker.
Indeed, according to West German government sources, he was one of the leaders in the power struggle that toppled Mr. Honecker.
In recent days, Mr. Krenz has sought to project a kinder image.
According to a report widely circulating in East Berlin, it was Mr. Krenz who ordered police to stop using excessive force against demonstrators in Leipzig.
"He doesn't want to have the image of the gun man," says Fred Oldenburg, an expert at the Bonn-sponsored Institute of East European and International Studies in Cologne.
"He's not a reformer -- he wants to have the image of a reformer."
As part of his image polishing, Mr. Krenz is expected to take modest steps toward reform to rebuild confidence among the people and reassert the party's authority.
Besides sacking other senior Politburo officials who allied themselves with Mr. Honecker, Mr. Krenz could loosen controls on the news media, free up travel restrictions, and establish a dialogue with various dissident groups.
But will it be enough?
West German government officials and Western analysts are doubtful.
"He doesn't signify what people want, so the unrest will go on," Mr. Oldenburg predicts.
At the same time, the expectations of the East German people are great and will continue to grow.
Says one West German official: "What's necessary now is the process of democratization.
Not just that people are being heard but that their interests are being taken seriously."
Chancellor Kohl, meanwhile, has invited Mr. Krenz to open discussions with Bonn on a wide range of subjects.
Reports in the West German press, citing sources in East Germany, suggest Mr. Krenz may serve only as a bridge between Mr. Honecker and a genuine reform leader.
Adding to that speculation is Mr. Krenz's reputation as a heavy drinker, who is said to also suffer from diabetes.
"This is a dynamic process and we're experiencing the first step," the Bonn official adds.
The selection of Mr. Krenz may also disappoint Moscow.
Soviet leader Mikhail Gorbachev has pressed hard for a change in East Germany's rigid stance.
Two reform-minded party leaders favored by Moscow as possible successors to Mr. Honecker, Dresden party secretary Hans Modrow and Politburo member Guenter Schabowski, were passed over.
If Mr. Krenz sticks to rigid policies the pressure from the Soviet Union could intensify.
In Moscow, Mr. Gorbachev sent Mr. Krenz a congratulatory telegram that appeared to urge the new leadership to heed growing calls for change.
According to the Soviet news agency Tass, "Gorbachev expressed the conviction that the leadership of the Socialist Unity Party of {East} Germany, being sensitive to the demands of the time, . . . will find solutions to complicated problems the GDR {German Democratic Republic} encountered."
A force of younger pro-Gorbachev members in the East German bureaucracy has for some time been pushing for relaxation within their country.
The older generation has been torn between a fear of tampering with the status quo and a fear of what might happen if they didn't.
From the perspective of East Germany's old guard, reforms that smack of capitalism and Western-style democracy could eliminate their country's reason for being.
Unlike the other nations of the bloc, East Germany is a creature of the Cold War.
Erasing the differences still dividing Europe, and the vast international reordering that implies, won't endanger the statehood of a Poland or a Hungary.
But it could ultimately lead to German reunification and the disappearance of East Germany from the map.
Which is what the Old Guard fears.
"I'm sure they'll formulate a reform that will be a recipe for the GDR's future as a separately identifiable state," says Michael Simmons, a British journalist whose book on East Germany, entitled "The Unloved Country," was published this month.
Up to now, that recipe has consisted of a dogged effort by former leader Walter Ulbricht to establish the country's international legitimacy, followed by Mr. Honecker's campaign to build the East bloc's only successful Stalinist economy into a consumer paradise.
Neither man achieved perfection.
Early in 1987, Mr. Honecker and his team stopped paying thin compliments to Mr. Gorbachev and joined with Romania in rejecting any necessity for adjustments in their systems.
The less-self-confident Czechoslovaks and Bulgarians, in contrast, declared their intentions to reform, while doing nothing concrete about it.
The East German media soon began presenting Mr. Gorbachev's speeches only as sketchy summaries, and giving space to his opponents.
By late 1988, they were banning Soviet publications.
The country abandoned its former devotion to socialist unity and took to insisting instead that each country in the bloc ought to travel its own road.
Mr. Honecker spoke of "generally valid objective laws of socialism" and left no room for debate.
With this year's dislocations in China and the Soviet Union, and the drive to democracy in Poland and Hungary, the East German leadership grew still more defensive.
Politburo member Joachim Herrman confessed to a "grave concern" over Hungarian democracy.
"Under the banner that proclaims the `renewal of socialism,'" he said, "forces are at work that are striving to eliminate socialism."
Some loyal voices, in and out of the East German Communist party, saw the nation's unrest coming.
The first signs were economic.
Despite heavily subsidized consumer industries, East Germans have for years watched the West pull farther out ahead.
In 1988, for the first time, economic growth came to a dead stop.
Gingerly, some economists began to blame central planning.
Some writers in theoretical journals even raised the notion of introducing democracy, at least in the workplace.
By summer, an independent reform movement was saying out loud what it had only whispered before.
But they are stalwart socialists.
Their proclaimed purpose is to cleanse East Germany of its Stalinist muck, not to merge with the West.
One of their pastors has envisioned a "new utopia" of "creative socialism."
Meanwhile, the man Mr. Krenz replaces has left an indelible mark on East German society.
Imprisoned by the Nazis during World War II for his political beliefs, Mr. Honecker typified the postwar generation of committed Communist leaders in Eastern Europe who took their cues from Moscow.
He was a "socialist warrior" who felt rankled by West Germany's enormous postwar prosperity and the Bonn government's steadfast refusal to recognize the legitimacy of his state.
Finally, during his first and only state visit to Bonn two years ago, he won some measure of the recognition he had long sought.
But ultimately he was undone by forces unleashed by his own comrade, Mr. Gorbachev.
Mr. Honecker's removal "was bound to happen," says one aide to Chancellor Kohl.
"It was only a matter of time."
The European Community Commission increased its forecast for economic growth in the EC in 1989 to 3.5%, slightly higher than its June projection of 3.25%.
In its annual economic report for 1989-1990, the commission also projected 1990 gross domestic product growth for the 12 EC members at 3%.
EC inflation was seen at 4.8% in 1989, higher than 1988's 3.6% price rise.
However, inflation for 1990 was seen slowing to 4.5%.
Leading EC growth forecasts in 1989 was Ireland, seen growing 5% at constant prices.
Slower growth countries included Greece, at 2.5%, the U.K., at 2.25%, and Denmark, at 1.75%.
Inflation is expected to be highest in Greece, where it is projected at 14.25%, and Portugal, at 13%.
At the other end of the spectrum, West German inflation was forecast at 3% in 1989 and 2.75% in 1990.
Nestle Korea Ltd. opened a coffee and non-dairy-creamer plant in Chongju, South Korea.
An official at Nestle Korea, a 50-50 joint venture between Nestle S.A. and the Doosan Group, said the new facility will manufacture all types of soluble, roasted and ground coffee, coffee mix and nondairy coffee creamer.
The South Korean coffee market, consisting mostly of instant coffee, was estimated at about 100 billion won ($150.7 million) last year.
Brands made by the Kraft General Foods unit of Philip Morris Cos. had about 95% of the market share.
Nestle currently has only about a 2% share with its Taster's Choice coffee.
Poland plans to start negotiations soon on purchasing natural gas from Iran, the official Islamic Republic News Agency reported.
The agency said Polish Prime Minister Tadeusz Mazowiecki told Iranian Deputy Foreign Minister Mahmoud Vaezi of Poland's willingess to purchase the gas during Mr. Vaezi's current visit to Warsaw.
The agency didn't mention possible quantities and didn't say how the gas would be delivered.
A Chinese official harshly criticized plans to close a British naval base in downtown Hong Kong.
Hong Kong officials announced last week that the base will be relocated to a small island to allow downtown redevelopment.
But Beijing wants to use the base for the People's Liberation Army after 1997, when the territory returns to Chinese sovereignty.
Ke Zaishuo, head of China's delegation to a Chinese-British Liaison Committee on Hong Kong, accused Britain of trying to impose a fait accompli and said, "This is something we cannot accept."
The Israeli and Soviet national airlines have reached preliminary agreement for launching the first direct flights between Tel Aviv and Moscow, a spokesman for the Israeli airline, El Al, said.
El Al director Rafi Har-Lev and top officials of the Soviet Union's Aeroflot negotiated a preliminary pact in Moscow this week, the spokesman said.
He added that concluding the deal requires approval by the governments of both countries, which have never had direct air links.
The chairman and a director of one of the Republic of Singapore's leading property companies, City Development Ltd., or CDL, were charged yesterday with criminal breach of trust of some 800,000 Singapore dollars (about US$409,000).
Kwek Hong Png, chairman of CDL, and director Quek Leng Chye were arrested by the republic's Corrupt Practices Investigation Bureau Tuesday night.
In addition to abetting in the alleged criminal breach of trust, Kwek Hong Png was also charged with dishonestly receiving S$500,000 that had been stolen.
Both men were charged in a subordinate court and released on bail of S$1 million.
The charges are the culmination of weeks of rumors concerning CDL that have depressed the company's share price and to a lesser extent the shares of all companies owned by CDL's controlling Quek family, brokers in Singapore say.
The Queks control the Hong Leong Group, which has widespread interests in manufacturing, property and finance in both Malaysia and Singapore.
News of the arrest and charging of the two men helped to push prices on the Singapore Stock market sharply lower in early trading yesterday, but brokers said that the market and CDL shares recovered once it became apparent the charges were limited to the two men personally.
One of the two British companies still making hard toilet paper stopped production of it.
British Tissues decided to do away with its hard paper after a major customer, British Rail, switched to softer tissues for train bathrooms. . . .
Peasants in Inner Mongolia have partly dismantled a 20-mile section of China's famed Great Wall, the official People's Daily said.
The paper said the bricks were used to build homes and furnaces and, as a result, the wall "is in terrible shape.
Wednesday, October 18, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 8 15/16% high, 8 5/8% low, 8 3/4% near closing bid, 8 7/8% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.45% 30 to 44 days; 8.25% 45 to 74 days; 8.30% 75 to 99 days; 7.75% 100 to 179 days; 7.50% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.55% 30 days; 8.45% 60 days; 8.375% 90 days.
CERTIFICATES OF DEPOSIT: 8.05% one month; 8.02% two months; 8% three months; 7.98% six months; 7.95% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market: 8.53% one month; 8.48% three months; 8.40% six months.
BANKERS ACCEPTANCES: 8.42% 30 days; 8.30% 60 days; 8.28% 90 days; 8.15% 120 days; 8.05% 150 days; 7.95% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 5/8% to 8 1/2% two months; 8 5/8% to 8 1/2% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 1/2% to 8 3/8% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 11/16% three months; 8 1/2% six months; 8 1/2% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 8.50%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS: Results of the Monday, October 16, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.37% 13 weeks; 7.42% 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac):
Posted yields on 30-year mortgage commitments for delivery within 30 days.
9.88%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae):
Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.83%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.50%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
A grand jury here indicted Norton Co.'s former director of advanced-ceramics research, charging him with interstate transportation of stolen property.
Norton and General Electric Co. last month filed a lawsuit against the former research manager, Chien-Min Sung, charging him with stealing trade secrets.
Mr. Sung formerly worked at General Electric in research on synthetic diamonds.
The criminal charges brought against him involved GE technology, according the court documents.
If convicted, he could be imprisoned for up to 10 years and fined $250,000.
Mr. Sung couldn't be reached for comment.
He earlier denied the allegations against him in the lawsuit by Norton and GE.
Norton makes sandpaper and other abrasives, diamond tools, specialty plastics and ceramics.
As the citizens of San Francisco and surrounding communities began assessing the damage from Tuesday's devastating earthquake, NBC News began assessing the damage from what some said was a failure to provide comprehensive coverage in the earthquake's initial moments.
"In terms of coverage, it was a disaster equal to the earthquakes," said Eric Premner, president for broadcasting of King Broadcasting Co., which owns the NBC affiliate in Seattle, Wash.
While rival ABC News outstripped the competition in live coverage of the event by sheer luck -- the network was broadcasting the World Series from Candlestick Park when the quake struck -- NBC News was unable to get its signal out of San Francisco for the first hour after the quake.
"I have to attribute the lackluster performance to a natural disaster," said Mr. Premner.
"So before I start to be really critical of NBC, I would like to know more about what happened."
There were no complaints from affiliates of CBS Inc. and Cable News Network, a unit of Turner Broadcasting System Inc.
But that was not the case at NBC News, which has been dogged with the image of not being aggressive on major breaking stories.
Last summer, the affiliates bitterly complained to network executives about the poor coverage of the student uprising in China.
"I was not pleased with the slow start, and neither was NBC News," said Guy Hempel, general manager of NBC affiliate WAVE in Louisville, Ky.
A spokesman for National Broadcasting Co., a unit of General Electric Co., said the network was "looking into what happened."
The stations said they were pleased with the extended coverage yesterday, including a special five-hour edition of "Today."
Don Browne, director of news at NBC News, said in an interview that "we couldn't get a signal out of San Francisco.
We were out of the box.
It was horrible.
The comment we're hearing is that we were slow out of the box, but beat everyone else in the stretch."
NBC broadcast throughout the entire night and did not go off the air until noon yesterday.
The quake postponed the third and fourth games of the World Series.
In place of the games, ABC said it planned to broadcast next week's episodes of its prime-time Wednesday and Thursday lineups, except for a one-hour special on the earthquake at 10 p.m. last night.
The series is scheduled to resume Tuesday evening in San Francisco.
"There are no commercials to make up for since we're going to eventually broadcast the World Series," said a network spokesman.
Pinnacle West Capital Corp. said it suspended indefinitely its common stock dividend and reported a 91% plunge in third-quarter net income.
The announcement, made after the close of trading, caught analysts by surprise.
The company closed at $12 a share, down 62.5 cents, in composite trading on the New York Stock Exchange.
Pinnacle West slashed its quarterly dividend to 40 cents per share from 70 cents in December, saying at the time that it believed the new, lower dividend was "sustainable."
A company spokesman said the decision to eliminate the dividend resulted from a quarterly appraisal and that circumstances had changed since the December announcement.
He declined to elaborate.
Edward J. Tirello Jr., an analyst at Shearson Lehman Hutton Inc., speculated that the sudden dividend elimination presages an expensive agreement with thrift regulators over the company's insolvent MeraBank savings and loan unit.
Analysts have estimated that Pinnacle West may have to inject between $300 million and $400 million into the MeraBank unit before turning the thrift over to federal regulators.
The latest financial results at the troubled utility and thrift holding company, based in Phoenix, Ariz., reflect continuing problems at MeraBank and losses in real-estate, venture-capital and uranium-mining operations.
Third-quarter net income slid to $5.1 million, or six cents a share, from $56 million, or 65 cents, a year earlier.
Utility operations, the only company unit operating in the black in the latest period, had a 26% drop in profit, to $86.3 million, largely as a result of outages at the company's huge Palo Verde nuclear facility and the cost of purchased replacement power.
In other operations, losses at MeraBank totaled $85.7 million in the latest quarter, compared with a $2.5 million profit a year earlier.
The latest quarter includes a $42.7 million addition to loan-loss reserves.
As recently as August, the company said it didn't foresee a need for substantial additions to reserves.
Pinnacle's SunCor Development Co. real-estate unit's loss narrowed to $13.8 million from $78.4 million.
The latest period included a $9 million write-down on undeveloped land, while the year-earlier period included a $46 million reserve for real-estate losses.
Losses at its Malapai Resources Co. uranium-mining unit narrowed to $3.4 million from $18 million a year ago, which included a $9 million write-down of utility inventories.
Losses at El Dorado Investment Co., the venture-capital operation, widened to $6.8 million from $425,000 a year earlier.
The latest quarter included a $6.6 million write-down of investments.
Equitec Financial Group said it will ask as many as 100,000 investors in 12 of its public real-estate limited partnerships to give approval to rolling them up into a new master limited partnership.
Under the proposal by Equitec, a financially troubled real-estate syndicator, New York-based Hallwood Group Inc. would replace Equitec as the newly formed master limited partnership's general partner and manager.
Shares of the new partnership would trade on an exchange like a stock.
Hallwood is a merchant bank whose activities include the ownership, management and financial restructuring of shopping centers, office buildings, apartments and other real estate.
In a statement, Equitec Chairman Richard L. Saalfeld said the transfer will benefit both the company and investors in the 12 limited partnerships included in the proposed rollup.
While he didn't describe the partnerships' financial condition, he said their operations "continue to drain the resources of Equitec."
Equitec posted a $3.3 million net loss in the second quarter on $11.8 million of revenue, compared with a net loss of $12.9 million in the year-earlier period on revenue of $9.1 million.
In New York Stock Exchange composite trading, Equitec closed at $2.625 a share, unchanged.
Because of Tuesday's earthquake in Northern California, company officials couldn't immediately be reached for additional comment.
A spokesman for Hallwood said the 12 limited partnerships, which were marketed by brokerage firms and financial planners between 1979 and 1984, raised several hundred million dollars from investors.
With airline deals in a tailspin, legendary Wall Street trader Michael Steinhardt could have trouble parachuting out of USAir Group, traders say.
Only a week ago, when airline buy-out fever was already winding down, Mr. Steinhardt was engaged in a duel with USAir.
He was threatening to take over the carrier, after spending an estimated $167 million to build an 8.4% USAir stake for his investment clients.
The would-be raider even hired an investment banker to give teeth to his takeover threat, which was widely interpreted as an effort to flush out an acquirer for USAir, or for his own stake.
In fighting USAir, Mr. Steinhardt was pitted against another investor, billionnaire Warren Buffett, who bought into USAir to help fend off Mr. Steinhardt.
Mr. Buffett's firm, Berkshire Hathaway, holds a much bigger stake in the carrier than Mr. Steinhardt's firm, Steinhardt Partners.
Now, in the wake of UAL's troubles in financing its buy-out, the airline raiding game has been grounded.
Instead of hoping to sell his USAir stake at analysts' estimated buy-out price of $80 a share, Mr. Steinhardt is stuck with roughly 3.7 million USAir shares that cost him $45, on average, but yesterday closed at 40 1/2, up 1/4, in New York Stock Exchange composite trading.
"It doesn't make sense to parachute out at this price," Mr. Steinhardt says, though he has stopped his takeover talk and now commends USAir managers' "operating skills."
At the current price, the USAir holding represents 9% of all the assets that Mr. Steinhardt manages.
A week ago, USAir stock briefly soared above 52 after a report in USA Today that Mr. Steinhardt might launch a hostile bid for the carrier, though takeover speculators say they were skeptical.
"If USAir is worth 80 as a takeover and the stock went to 52, the market was saying Steinhardt's presence wasn't worth anything, in terms of getting a deal done," says a veteran takeover speculator.
Traders say this all goes to show that even the smartest money manager can get infected with crowd passions.
In trying to raid USAir, Mr. Steinhardt abandoned his usual role as a passive investor, and ran into snags.
Moreover, unlike Mr. Buffett, who often holds big stakes in companies for years, Mr. Steinhardt hasn't in the past done much long-term investing.
Mr. Steinhardt, who runs about $1.7 billion for Steinhardt Partners, made his name as a gunslinging trader, moving in and out of stocks with agility -- enriching himself and his investment clients.
Meanwhile, his big losses, for instance in 1987's crash, generally have been trading losses.
So, some see a special irony in the fact that Mr. Steinhardt, the trader, now is encumbered with a massive, illiquid airline holding.
Analysts say USAir stock might lose four or five points if the Steinhardt stake was dumped all at once.
As a result, Mr. Steinhardt must reconcile himself to selling USAir at a loss, or to holding the shares as an old-fashioned investment.
"Long-term investing -- that's not Steinhardt's style," chuckles an investor who once worked at Steinhardt Partners.
"He doesn't usually risk that much unless he thinks he has an ace in the hole," adds another Steinhardt Partners alumnus.
In recent days, traders say USAir has been buying its own shares, as part of a program to retire about eight million USAir shares, though the carrier won't discuss its buy-back program.
If USAir stepped up its share purchases, that might be a way for Mr. Steinhardt to get out, says Timothy Pettee, a Merrill Lynch analyst.
But USAir might not want to help Mr. Steinhardt, he adds.
In 1987, USAir Chairman Edwin Colodny stonewalled when Trans World Airlines Chairman Carl Icahn threatened to take over the carrier.
Mr. Icahn, a much more practiced raider than Mr. Steinhardt, eventually sold a big USAir stake at a tiny profit through Bear, Stearns.
Mr. Steinhardt also could take that route.
He confers big trading commissions on Wall Street firms.
However, with airline stocks cratering, he might not get a very good price for his shares, traders say.
Especially galling for Mr. Steinhardt, say people close to him, is that USAir's Mr. Colodny won't even take his telephone calls.
While USAir isn't considered absolutely takeover-proof, its defenses, including the sale in August of a 12% stake in the company to Mr. Buffett's Berkshire Hathaway, are pretty strong.
USAir's deal with Mr. Buffett "wasn't exactly a shining example of shareholder democracy," Mr. Steinhardt says.
Since last April, the investor has made seven so-called 13D filings in USAir, as he bought and sold the company's stock.
Such disclosures of big holdings often are used by raiders to try to scare a company's managers, and to stir interest in the stock.
But of course it would be highly unusual for an investment fund such as Steinhardt Partners to take over a company.
USAir and Mr. Buffett won't talk about Mr. Steinhardt at all.
Analysts say USAir has great promise.
By the second half of 1990, USAir stock could hit 60, says Helane Becker of Shearson Lehman Hutton.
She thinks traders should buy the stock if it tumbles to 35.
But meanwhile, USAir is expected to show losses or lackluster profit for several quarters as it tries to digest Piedmont Airlines, which it acquired.
Moreover, some investors think a recession or renewed airfare wars will pummel airline stocks in coming months.
However, Mr. Steinhardt says he's "comfortable holding USAir as an investment."
While he has bought and sold some USAir shares in recent days, he says that contrary to rumors, he hasn't tried to unload his holding.
Mr. Steinhardt adds that he bought USAir stock earlier this year as "part of a fundamental investment in the airline group."
In 1989, Mr. Steinhardt says he made money trading in Texas Air, AMR and UAL.
Overall, his investments so far this year are showing gains of about 20%, he adds.
Does Mr. Steinhardt regret his incursion into the takeover-threat game?
People close to the investor say that was an experiment he is unlikely to repeat.
"I don't think you'll find I'm making a radical change in my traditional investment style," Mr. Steinhardt says.
Addington Resources Inc. said it called for redemption on Nov. 21 its $25.8 million outstanding of 8% convertible subordinated debentures due 2013.
The debentures were issued in the face amount of $46 million on July 11, 1988, the Ashland, Ky., coal mining, water transportation and construction company said.
The company said the redemption is permitted because the price of Addington's stock has equaled or exceeded $19.60 for 20 consecutive trading days, a condition set in the terms of the debentures.
Debenture holders are expected to convert most of the debentures into common because the value of the stock received in a conversion would exceed the $1,103.11 redemption price.
Commodore International Ltd. said it will report a loss for the first quarter ended Sept. 30 because sales of personal computers for the home market remained weak in some major countries.
That will mark the second consecutive quarterly loss for Commodore and will raise additional questions about whether it can sustain the turnaround it had seemed to be engineering.
Commodore, West Chester, Pa., had said in August that it was consolidating manufacturing to cut costs and expected to be profitable in the fiscal first quarter.
Commodore said that its announcement is based on preliminary information and that the situation could look different by the time final results are announced early next month.
In fact, Commodore's fiscal fourth-quarter loss was $2 million narrower than Commodore had expected a few weeks after the quarter closed.
Still, even results approaching break-even would mark a sharp weakening compared with fiscal 1989 first-quarter earnings of $9.6 million, or 30 cents a share, on sales of $200.2 million.
Reflecting concerns about Commodore's outlook, its stock has plunged more than 50% since May, closing yesterday unchanged at $8.875 a share in composite trading on the New York Stock Exchange.
The price can be expected to erode further, because the loss estimate came after the market closed.
Commodore has seemed to be setting the stage recently for progress in the U.S., where its personal-computer sales have been so dismal for years that Commodore is close to dropping off research firms' market-share charts.
Commodore has assembled an experienced management team, it has persuaded many more dealers to carry its products and it has unleashed a slick advertising campaign.
But those represent long-term strategies that probably won't succeed quickly, even if they turn out to be the right ones.
In the meantime, the strategies will increase expenses.
Commodore had been counting on its consumer business to stay sufficiently healthy to support its efforts in other areas -- mainly in getting schools and businesses to use its Amiga, which has slick graphics yet has been slow to catch on because it isn't compatible with Apple Computer Inc. or International Business Machines Corp. hardware.
But sales to consumers have become difficult during the past several months, even in West Germany, which has been by far Commodore's strongest market.
The Commodore 64 and 128, mainly used for children's educational software and games, had surprised market researchers by continuing to produce strong sales even though other low-profit personal computers now operate several times as fast and have much more memory.
Commodore has said it expects sales to rebound, but market researchers have said that sales of the low-end products may finally be trailing off.
Stock prices closed slightly higher in the first routine trading day since Friday's big plunge.
Some issues were affected by Tuesday's devastating earthquake in the San Francisco area.
Activity continued to slow from the hectic pace set during the market's plunge late Friday and its rebound Monday, as players began to set their sights on events coming later this week.
The Dow Jones Industrial Average drifted through the session within a trading range of about 30 points before closing with a gain of 4.92 at 2643.65.
Broader averages also posted modest gains.
Standard & Poor's 500-Stock Index rose 0.60 to 341.76, the Dow Jones Equity Market Index rose 0.71 to 320.54 and the New York Stock Exchange Composite Index gained 0.43 to 189.32.
Some 822 New York Stock Exchange issues advanced in price, while 668 declined.
But the Dow Jones Transportation Average went down for the seventh consecutive session, due largely to further selling in UAL.
The average dropped 6.40 to 1247.87 and has now lost 21.7% of its value since the losing streak began Oct. 10.
Big Board volume dropped to 166,900,000 shares, in line with the level of trading over the past few weeks, from 224.1 million Tuesday.
Traders cited anticipation of the consumer price report for September, due today, and tomorrow's expiration of October stock-index futures and options as major factors in the slowdown.
In addition, activity at a number of San Francisco-based brokerage houses was curtailed as a result of the earthquake, which knocked out power lines and telephone service throughout the Bay area.
Stocks retreated to session lows just after the opening amid worries about the market impact of the quake, but quickly snapped back to higher levels with the help of futures-related program buying.
The early move essentially established the day's trading range, and traders said they saw little of the program activity that has battered the market recently.
"I didn't expect it to be this quiet.
I expected to see more volatility as some of the institutions who were spooked last Friday did some selling," said Raymond F. DeVoe, a market strategist at Legg Mason Wood Walker, Baltimore.
Mr. DeVoe said he expects prices to show some renewed instability over the next few sessions as institutions re-evaluate their stance toward the market in light of its decline.
"I would suspect that a lot of investment committees are looking into whether (they) want to be in stocks at all," he said.
Insurance stocks were sold at the opening amid concerns about the level of damage claims the companies would receive as a result of the earthquake.
But those issues recovered quickly and turned higher because of expectations that the quake and the recent Hurricane Hugo would set the stage for an increase in premium rates.
Issues of insurance brokers were especially strong.
Marsh & McLennan advanced 3 1/8 to 75 7/8, Alexander & Alexander Services climbed 2 to 32 and Corroon & Black firmed 1 7/8 to 37 1/2.
Elsewhere in the group, General Re rose 2 3/4 to 86 1/2, American International Group gained 3 1/4 to 102 5/8, Aetna Life & Casualty added 2 3/8 to 59 1/2 and Cigna advanced 7/8 to 62 1/2.
Loews, the parent of CNA Financial, rose 1 3/8 to 123 1/8.
Companies in the construction, engineering and building-products sectors were among other beneficiaries of earthquake-related buying.
The heavy-construction sector was the session's best performer among Dow Jones industry groups; Fluor rose 3/4 to 33 3/8, Morrison Knudsen gained 2 1/4 to 44 1/8, Foster Wheeler added 3/8 to 18 1/4 and Ameron climbed 2 3/8 to 39 3/4.
Among engineering firms, CRS Sirrine rose 5/8 to 34 1/4 on the Big Board and four others rallied on the American Stock Exchange: Jacobs Engineering Group, which gained 1 1/8 to 25 3/8, Greiner Engineering, which rose 3 1/2 to 22 1/2; Michael Baker, which added 1 1/4 to 15 1/4, and American Science & Engineering, up 1/2 to 8 1/2.
Within the building-materials group, Georgia-Pacific climbed 1 1/4 to 58 and Louisiana-Pacific added 1 to 40 3/4 after Merrill Lynch recommended the forest-products issues.
CalMat advanced 2 3/4 to 28 3/4, Lone Star Industries gained 1 3/4 to 29 1/4, Lafarge rose 1 to 19 1/2, Southdown added 5/8 to 24 5/8 and Eljer Industries rose 1 1/4 to 24 7/8.
Pacific Gas & Electric fell 3/8 to 19 5/8 in Big Board composite trading of 1.7 million shares and Pacific Telesis Group slipped 5/8 to 44 5/8 as the companies worked to restore service to areas affected by the quake.
Chevron added 1 to 65.
The company, based in San Francisco, said it had to shut down a crude-oil pipeline in the Bay area to check for leaks but added that its refinery in nearby Richmond, Calif., was undamaged.
Other companies based in the area include Hewlett-Packard, which rose 1/4 to 49; National Semiconductor, which went up 1/4 to 7 5/8, and Genentech, which eased 1/4 to 19 5/8.
None of the firms reported any major damage to facilities as a result of the quake.
BankAmerica eased 1/2 to 31 7/8 and Wells Fargo lost 1/2 to 81 1/2; the two bank holding companies, based in San Francisco, were forced to curtail some operations due to the temblor.
Among California savings-and-loan stocks, H.F. Ahmanson eased 3/8 to 22 1/4, CalFed slid 3/4 to 24 1/8, Great Western Financial dropped 1/2 to 21 1/4 and Golden West Financial fell 5/8 to 29 1/4.
UAL, the parent company of United Airlines, swung within a 14-point range during the course of the session before closing at 191 3/4, down 6 1/4, on 2.3 million shares.
British Airways, a member of the group that had offered $300 a share for UAL in a leveraged buy-out, said it had yet to receive a revised proposal and it was "in no way committed" to the completion of a bid.
Separately, investor Marvin Davis withdrew his backup $300-a-share takeover offer.
While UAL faltered, AMR, the parent of American Airlines, pulled out of its recent nosedive by rising 3/4 to 74.
The stock had been on the decline since the financing for the UAL buy-out fell through on Friday and developer Donald Trump subsequently withdrew a takeover offer of $120 a share for AMR.
Also, AMR was the most active Big Board issue; 2.8 million shares changed hands.
GTE added 1 1/4 to 65 3/8.
PaineWebber repeated a buy recommendation on the stock and raised its 1990 earnings estimate by 35 cents a share, to $5.10.
Colgate-Palmolive advanced 1 5/8 to 63 after saying it was comfortable with analysts' projections that third-quarter net income from continuing operations would be between 95 cents and $1.05 a share, up from 69 cents a year ago.
Springs Industries dropped 1 3/8 to 36.
Analysts at several brokerage firms lowered their 1989 and 1990 earnings estimates on the company after its third-quarter results proved disappointing.
Trinova third-quarter loss after a charge for a planned restructuring, which will include the closing or downsizing of about 25% of its plants and a work force cut of about 1,500 over three years.
The Amex Market Value Index snapped a five-session losing streak by rising 2.91 to 378.07.
Volume totaled 12,500,000 shares.
Carnival Cruise Lines Class A rose 1 1/4 to 22 3/8.
The company, citing market conditions, postponed a $200 million debt offer.
Philip Morris Cos. posted a 20% jump in third-quarter profit on a 45% revenue increase, reflecting strength in the company's cigarette, food and brewing businesses.
Net income rose to $748 million, or 81 cents a share, from the year-earlier $621 million, or 67 cents a share.
Per-share figures have been adjusted for a 4-for-1 stock split paid earlier this month.
The New York-based tobacco, food and beer concern said revenue increased to $11.25 billion from $7.74 billion.
In composite trading on the New York Stock Exchange, Philip Morris closed at $43.375, up 12.5 cents.
Philip Morris disclosed little detailed information about performance by major business lines except to say that most, including Philip Morris U.S.A., Kraft General Foods and Miller Brewing Co., posted increased revenues.
For the nine months, net increased 4.4% to $2.08 billion, or $2.25 a share, from $2 billion, which included $273 million reflecting the effect of an accounting change.
Granges Inc., citing depressed gold prices, said it plans to suspend operations for an indefinite period at its Tartan gold mine in Manitoba.
Granges said in Vancouver, British Columbia, that the production halt will be phased in over a 10-week period.
Tartan currently produces gold at a cash operating cost of $393 an ounce, which is high by industry standards and $25 or so above the current spot price.
Granges said it also plans in the third quarter to write down the carrying value of the Tartan mine by 2.5 million Canadian dollars (US$ 2.12 million), and to write off most of the C$6.3 million carrying value of its Windflower gold property in British Columbia.
Granges didn't say what impact the moves would have on total gold output or earnings, and company officials weren't available.
Computer Associates International Inc., Garden City, N.Y., and Digital Equipment Corp. said they agreed to jointly develop software to help manage Digital's Vax computers.
Computer Associates has carved out a huge business selling such software for use in managing networks of International Business Machines Corp. computers but needs to find new markets if it is to maintain its growth rate of 30% and more each year.
The market for system-management software for Digital's hardware is fragmented enough that a giant such as Computer Associates should do well there.
At the same time, the market is smaller than the market for IBM-compatible software.
For one thing, Digital, Maynard, Mass., has sold fewer machines.
In addition, its machines are typically easier to operate, so customers require less assistance from software.
Wang Laboratories Inc., Lowell, Mass., beset by declining demand for its computers, reported a $62.1 million, 38-cents-a-share loss in its first quarter ended Sept. 30.
Revenue fell 12.7% to $596.8 million from $684 million, although some of the decline was caused by discontinued operations.
Wang had previously forecast a loss.
The company reiterated that it expects another loss in the second quarter and for the full year, although it expects a profitable fourth quarter.
A year ago, Wang had earnings of $13.1 million, or eight cents a share, in its first quarter, including a $3.1 million loss from discontinued operations.
The latest period loss included a $12.9 pretax charge for severance payments.
Dayton Hudson Corp. said it accepted for purchase seven million common shares at $62.875 each, under the terms of a Dutch auction self-tender offer.
The offer expired at 12:01 a.m. yesterday.
In a Dutch auction, the buyer sets a price range and holders give a price in that range at which they're willing to sell their shares.
The buyer then picks a price and buys shares at that price from holders who offered to sell at that price or lower.
Dayton Hudson's repurchase offer, representing about 9% of its common shares outstanding, had established a range of between $60 and $65 for the buy-back.
Dayton Hudson said it accepted all odd-lot shares tendered at or below the final $62.875 price; the preliminary proration factor for other shares tendered at or below the final price is 98%.
The Minneapolis-based retailer said it expects to pay for the seven million shares next Thursday.
Tendered shares not purchased will be returned to holders.
In New York Stock Exchange composite trading, Dayton rose $1 to $61.125.
Continental Bank Corp.'s third-quarter net income slipped 11% despite a big gain from the sale of the company's London headquarters building.
The $55 million gain on the sale was offset by lower interest income, poorer results from foreign-exchange trading and a $9 million loss on the sale of a unit, Securities Settlement Corp.
Chicago-based Continental earned $65.2 million, or $1.04 a share, compared with $73.6 million, or $1.19 a share, a year earlier.
The 1988 quarter also included one-time gains totaling about $35 million.
The bank, which has loss reserves equal to about half its long-term and medium-term loans to less-developed nations, said it doesn't think additional reserves are required.
Enron Corp. said a subsidiary and two United Kingdom firms are studying the feasibility of constructing a 1,500 megawatt gas-fired power plant in northern England as an outgrowth of the government's privatization program.
Enron Power Corp., a unit of the Houston natural gas pipeline company, would design, construct and run the plant.
Gas to fuel it would be piped from the North Sea.
A subsidiary of Britain's Imperial Chemical Industries would buy electricity and steam from the proposed station.
Surplus power would be sold on the open market, Enron said.
Also participating in the study, Enron said, is the National Power division of Britain's Central Electricity Generating Board.
Upon privatization, National Power will be responsible for 70% of the country's power generating business.
Viacom Inc., New York, reported that its third-quarter loss widened to $21.7 million, or 41 cents a share, primarily because of interest expense of $70.1 million.
A year ago, Viacom had a net loss of $56.9 million, or $1.07 a share.
Interest expense in the 1988 third quarter was $75.3 million.
In the year-ago quarter, Viacom also paid preferred stock dividends of $17 million; Viacom exchanged its preferred stock for debt in March.
The communications and entertainment company said revenue rose to $345.5 million, from $311.6 million.
Viacom attributed the improvement to higher earnings from operations in its networks segment, which includes the MTV and Showtime networks.
Viacom said it also restructured bank debt under a $1.5 billion unsecured bank agreement that offers significant interest rate savings.
Sumner M. Redstone, Viacom's chairman, said Viacom "emerged from our leveraged buy-out structure and gained substantial operating and financial flexibility through" the bank pact.
Trinova Corp., Maumee, Ohio, said it is launching an extensive restructuring of its core business, and took a charge that resulted in a loss of $29.7 million, or 87 cents a share, for the third quarter.
Trinova said it will close, move or overhaul 40 of its 170 manufacturing facilities and over the next three years cut 1,500 jobs from its current world-wide payroll of 22,300 employees.
Most of the factory closings and job cutbacks will affect Trinova's Aeroquip operations, which manufacture automotive plastics, hoses and other industrial and automotive parts.
Hoses and plastics together account for about 42% of Trinova's total annual sales.
In a separate announcement, Trinova said the Aeroquip group has agreed to sell its spring-brake, piston-brake and related businesses to Midland Brake Inc. of Branford, Conn.
Terms weren't disclosed.
To provide for the restructuring's costs, Trinova said it took an after-tax charge of $38.5 million, or $1.13 a share, in the third quarter.
The $29.7 million net loss compares with net income of $19.6 million, or 57 cents a share, a year earlier.
Sales rose 8% to $456.2 million from $422 million.
Trinova closed at $25, down $1, in New York Stock Exchange composite trading.
A group of investors, including Giancarlo Parretti's Pathe Communications Corp. and Sasea Holding S.A., have agreed to buy 76.66% of Odeon Finanziaria, a financially troubled Italian TV station.
Florio Fiorini, managing director of Geneva-based Sasea, said the investors would pay only a symbolic one lira for the station, "but we have agreed to raise the capital that will enable the company to continue operating.
It's sort of a Chapter 11 situation," he added, referring to the U.S. bankruptcy law that protects companies from creditors while they restructure.
Milan-based Odeon, which draws about 3% of Italian TV viewers, has debt of 250 billion lire ($181.9 million), Mr. Fiorini said.
He added that details of the recapitalization still have to be worked out, but that Pathe will take 50% of Odeon, Rome film producer Bruno Lucisano will take 10% and the remaining 16.66%, currently owned by Sasea, will eventually be sold to other investors.
Calisto Tanzi, Odeon's owner, will retain his 23.34% stake.
Italy's Supreme Court this year ordered Parliament to write a law that will regulate media ownership.
"We think that it's going to be far more favorable to own a station before the law is passed than to try to buy one afterward," Mr. Fiorini said.
San Francisco area officials gave the media high marks for helping people find shelter and obtain emergency information after Tuesday's catastrophic earthquake.
"The press has been doing an excellent job.
They are telling people what roads are closed and just keeping the public informed has helped to keep the panic down," said James Ball, a station supervisor at Daly City Police Department.
Mr. Ball noted that television stations featured people holding up phone books, explaining where to call for help.
Radio stations provided an emergency number for people who smelled gas but didn't know how to turn off their gas supply.
Kim Schwartz, a spokesperson for the American Red Cross in Los Angeles, said television and radio stations in San Francisco played a "very positive role" by providing the address of 28 shelters of the Red Cross and by giving out the Red Cross number for contributions to help earthquake victims (1-800-453-9000).
The San Francisco Examiner issued a special edition around noon yesterday that was filled entirely with earthquake news and information.
The Examiner and the San Francisco Chronicle were able to publish despite Tuesday's quake, which occurred close to deadline for many newspapers.
Sterling Software Inc. said it lost its bid to supply software services to the National Aeronautics and Space Administration's Ames Research Center at Moffett Field, Calif.
Sterling, which estimated the value of the contract at $150 million, said NASA selected another bidder for final negotiations.
In 1988, Dallas-based Sterling protested a similar decision by NASA involving the same contract, claiming it had submitted the lowest bid.
As a result, last March the General Services Administration board of contract appeals directed NASA to reopen negotiations on the contract.
Sterling said it had requested a briefing by NASA but had not decided whether to protest the agency's latest decision.
Consolidated Rail Corp., New York, reported that third-quarter net income climbed 4.8% to $87 million, or $1.27 a share, exceeding analysts' expectations.
In the year-earlier quarter, the freight railroad earned $83 million, or $1.21 a share.
James A. Hagen, chairman and chief executive officer, noted that earnings advanced "in the face of a drop in business, brought on by the general economic slowdown."
Revenue slipped 4.6% to $835 million from $876 million.
For the rest of 1989, Mr. Hagen said, Conrail's traffic and revenue "will reflect the sluggish economy, but Conrail will continue to take steps to control and reduce costs."
For the nine months, Conrail earnings grew 0.4% to $229 million, or $3.34 a share, from $228 million, or $3.31 a share.
Revenue was flat at $2.59 billion.
Georgia Gulf Corp., hurt by declining sales and falling chemical prices, said third-quarter earnings fell 13% to $46.1 million from $53.1 million in the year-earlier period.
Sales declined 10% to $251.2 million from $278.7 million.
The Atlanta-based chemical manufacturer said lower prices hurt margins for most products.
"We did see some relief in raw material costs, but it wasn't sufficient to offset the drop in sales prices," James R. Kuse, the company's chairman and chief executive officer said in a statement.
On a per-share basis, quarterly earnings remained at $1.85, the same as last year, because of the company's share buy-back program.
Georgia Gulf had 24.9 million shares outstanding on average in the quarter, compared with 28.6 million in the third quarter of 1988, adjusted for a stock split paid in January 1989.
In composite New York Stock Exchange trading, stock in Georgia Gulf, which has been mentioned as a takeover candidate, rose $2.125 a share to close at $46.125.
This temblor-prone city dispatched inspectors, firefighters and other earthquake-trained personnel to aid San Francisco.
But a secondary agenda among officials in the City of Angels was to learn about the disaster-contingency plans that work and those that don't.
Los Angeles Mayor Tom Bradley used the opportunity to push the City Council harder to pass a measure establishing a loss-recovery reserve of $100 million.
The amount would help Los Angeles cope in the first few weeks after its own anticipated quake, while waiting for federal assistance to arrive.
After San Francisco Mayor Art Agnos spoke on television of the need for building inspectors to check the soundness of buildings, Los Angeles dispatched 32 inspectors to help.
And the county of Los Angeles placed its firefighters and sheriffs on alert, ready to send in reinforcements, and alerted San Francisco that the city has 1,000 hospital beds at its disposal.
Two Los Angeles radio stations initiated Red Cross donation campaigns, and one Los Angeles bank manager forked over $150,000 of his own money for relief purposes, the Red Cross said.
The Los Angeles Red Cross sent 2,480 cots, 500 blankets, and 300 pints of Type-O blood.
It is also pulling 20 people out of Puerto Rico, who were helping Huricane Hugo victims, and sending them to San Francisco instead.
The Arizona Corporations Commission authorized an 11.5% rate increase at Tucson Electric Power Co., substantially lower than recommended last month by a commission hearing officer and barely half the rise sought by the utility.
The ruling follows a host of problems at Tucson Electric, including major write-downs, a 60% slash in the common stock dividend and the departure of former Chairman Einar Greve during a company investigation of his stock sales.
The Arizona regulatory ruling calls for $42 million in added revenue yearly, compared with a $57 million boost proposed by the commission hearing officer.
The company had sought increases totaling $80.3 million, or 22%.
The decision was announced after trading ended.
Tucson Electric closed at $20.875 a share, down 25 cents, in New York Stock Exchange composite trading.
A Tucson Electric spokesman said the utility was disappointed by the commission's decision and "concerned about the financial integrity of the company.
South Korean President Roh Tae Woo, brushing aside suggestions that the won be revalued again, said the currency's current level against the dollar is "appropriate."
His comments, made in response to reporters' questions at the National Press Club here, signaled that Seoul is resisting U.S. pressure for a further rise in the currency's value.
The U.S. wants a higher won to make South Korea's exports more expensive and help trim Seoul's trade surplus.
Many South Korean business people want a devaluation instead, arguing that the won's recent gains already have weakened the country's export performance.
Mr. Roh also said South Korea is taking steps that would free the won to respond to market forces.
Seoul has pointed to its lack of a foreign exchange market as one reason the won's value remains heavily controlled.
Mr. Roh said a U.S. demand for the removal of South Korean import quotas on beef will be resolved "satisfactorily" but gave no hint when that will happen.
Speaking to a joint meeting of Congress earlier, he said South Korea can't move quickly on such agricultural trade issues "without causing political and social trauma.
Great American Bank said its board approved the formation of a holding company enabling the savings bank to pursue nontraditional banking activities under a new federal law.
The proposed holding company's primary purpose would be to allow Great American to continue engaging in real estate development activities, it said.
Those activities generated $26.1 million in operating profit last year.
But according to Great American, such profits don't count toward meeting the San Diego savings bank's new capitalization requirements under 1989 federal law.
The new real estate unit would have a separate capital structure to comply with the law.
The proposed holding company would also consolidate Great American Bank in San Diego and its Tucson, Ariz., savings bank into a single, federally chartered institution in San Diego.
The consolidation is expected to save $1 million a year in administrative costs, a Great American spokesman said.
Dale Lang, who this week completed the acquisition of the publisher of Ms. and Sassy, is candid about the challenge he is taking on.
Mr. Lang admits that Ms. is "in dire straits" and that Sassy needs big promotional dollars to keep it alive.
But the 57-year-old publisher has moved quickly and boldly to deal with the magazines' problems.
Last Friday, he told the staff of Ms. that the magazine in January would begin publishing without advertising.
Mr. Lang will do away with expensive circulation drives, not to mention sales staff, and attempt to publish the 17-year-old magazine supported by circulation revenue alone.
"Any fool can publish a money-losing magazine.
I want to publish one that succeeds," said Mr. Lang.
"For Ms., it's time to publish for the reader, not the advertiser."
As for Sassy, which competes directly with News Corp.'s Seventeen magazine, Mr. Lang says that in the next two years he will spend $6 million promoting and improving the magazine.
Though Sassy has grown quickly since its debut in March 1988, it has been the target of conservative lobbyists and skittish advertisers who bristled at its frank editorial matter on teen-age problems.
Mr. Lang said the former Australian owners of Sassy were "blind-sided by the Moral Majority. . . .
Their reaction was to do nothing and ride it out."
He said Sassy will keep its irreverent tone, but added, "We will keep a close watch on the editorial content of the magazine."
Sassy already has recovered; circulation has quickly passed the 500,000 mark and advertising pages have stabilized this year at more than 300.
What's more, Mr. Lang says he has what all publishers wish for: a bona fide niche.
"Seventeen is written more for mothers, not their daughters," said Mr. Lang.
"But Sassy has a different spirit.
It gets more mail in a month than McCall's got in a year, and it's not from mothers.
I feel about Sassy like I did about Working Woman 10 years ago."
Mr. Lang took on Ms. and Sassy with the acquisition of Matilda Publications Inc. by his newly formed Lang Communications.
Lang owns 70% of Matilda, while Citicorp owns the rest through its Citicorp Venture Capital Partners.
Two weeks ago, Citicorp and Mr. Lang pumped $800,000 into Matilda just to keep the doors open.
Industry observers have congratulated Mr. Lang on what some call his "courageous" handling of Ms., but his track record in magazine publishing in general has gotten mixed reviews.
Besides Ms. and Sassy, closely held Lang Communications includes Success, a magazine for entrepreneurs and small businesses, and Working Woman and Working Mother, two monthly magazines.
Working Woman, with circulation near one million, and Working Mother, with 625,000 circulation, are legitimate magazine success stories.
The magazine Success, however, was for years lackluster and unfocused.
Only recently has it been attractively redesigned and its editorial product improved.
Success is expected to gain at least because of the recent folding of rival Venture, another magazine for growing companies.
Working Woman and Working Mother have operated as part of Working Woman/McCall's Group, a less-than-successful joint venture between Mr. Lang and Time Warner Inc.
The joint venture is being undone, with McCall's magazine being sold last summer to the New York Times Co.'s Magazine Group for about $80 million, and Time Warner agreeing to sell back its 50% interest in Working Woman and Working Mother to Mr. Lang.
Executives at Time Inc. Magazine Co., a subsidiary of Time Warner, have said the joint venture with Mr. Lang wasn't a good one.
The venture, formed in 1986, was supposed to be Time's low-cost, safe entry into women's magazines.
Mr. Lang surprised Time soon after joining forces when he said he would negotiate rates individually with advertisers, a practice common in broadcasting but considered taboo by magazine publishers.
In addition, McCall's put in a less than stellar performance.
Until a recent comeback, it saw steep losses in ad pages and circulation.
Time executives complained about the shoddy editorial quality, and in the end, one Time executive who asked not to be identified said, "Frankly, McCall's and the joint venture were an embarrassment."
Mr. Lang feels that Time's priorities changed.
"Their management changed right after {the venture was formed}, and I don't think they were comfortable getting into the competitive wars of women's service magazines."
Today, Mr. Lang believes his magazines will offer what many women's magazines don't.
"We write straight for women on their level," he said.
"We don't have passive readers."
Mr. Lang points out that even Success, in part, fits the company's image, since about 30% of its readership is female.
Mr. Lang has named Carol Taber, 43, as group publisher of New York-based Lang Communications.
She will oversee Working Woman, Working Mother and Success magazines, and retain her post as publisher of Working Woman.
The sale price of McCall's -- twice what Mr. Lang originally paid for it -- will finance Lang Communications' buy-back of Time Warner's 50% interest in Working Woman and Working Mother.
Mr. Lang says he isn't scouting new acquisitions, at least for now.
"We would have to go outside to banks to get the money and I am not ready to do that," he said.
"Besides, we have enough on our plate.
There is plenty of work to be done on what we have.
Britain's Monopolies and Mergers Commission Wednesday cleared Rhone-Poulenc S.A.'s purchase of a specialty bulk-chemical unit from Monsanto Co., saying the purchase was unlikely to have any lasting impact on U.K. industrial consumers.
The commission, which was asked to study the deal by the Department of Trade and Industry after its announcement in February, said the diversity of global supply of chemicals used in making analgesic drugs was great enough to offset the dominant U.K. market share Rhone-Poulenc would gain through the acquisition.
The French chemical giant would hold an 80% share of the U.K. market for salicylic acid, methyl salicylate and bulk aspirin.
The commission found that if the British government attempted to block the merger, Rhone-Poulenc would likely respond by closing the salicylates plant Monsanto operates in Wales, removing the matter from U.K. jurisdiction.
Morrison Knudsen Corp. posted third-quarter net income of $7.9 million, or 69 cents a share, continuing a rebound from steep year-ago losses.
In the third quarter a year-earlier, the construction and engineering concern posted a loss of $51.2 million, or $4.68 a share.
Revenue in the latest quarter rose 14% to $589 million from $515.1 million.
In composite trading on the New York Stock Exchange, Morrison gained $2.25 to $44.125.
Morrison said the engineering and construction segment performed well, with the mining and MK-Ferguson operations making important contributions.
Boise, Idaho-based Morrison had losses totaling $186 million over the two years ended in December, but it has surged back to profitability as a result of cost-cutting and shedding of unprofitable operations.
In the nine months, the company's net income was $21.5 million, or $1.88 a share, compared with a year-earlier loss of $97.8 million, or $8.96 a share.
Revenue rose 17% to $1.62 billion from $1.39 billion.
The House Ethics Committee officially cited Rep. Jim Bates (D., Calif.) for sexually harassing two female employees, but didn't recommend formal disciplinary action.
Rep. Bates said he accepted the finding, but one of the victims, Dorena Bertussi, denounced the ethics panel's action as "absurd."
Acting more than a year after Ms. Bertussi filed a complaint, the panel issued a "letter of reproval" saying Rep. Bates had admitted conduct that violated a House rule forbidding discrimination against employees on account of their sex.
It ordered Rep. Bates to write letters of apology to Ms. Bertussi and to a second complainant, Karen Dryden.
Rep. Bates said he would write the letters as ordered.
"I accept the resolution of the matter by the Ethics Committee," he said.
The panel also warned Rep. Bates that any further violations "may result in a recommendation that disciplinary action be considered."
But Ms. Bertussi asked, "Who in their right mind is going to file another complaint with the Ethics Committee?"
Rep. Bates has publicly begged for forgiveness from voters and was re-elected with 60% of the vote last November.
Mesa Airlines said the takeover offer it received earlier this week from StatesWest Airlines is for a combination of cash and securities valued by StatesWest at $10 a Mesa share.
Both companies are regional carriers in the Southwest.
When it made the offer, StatesWest declined to disclose details and asked Mesa to do the same.
But Farmington, N.M.-based Mesa said the offer was for $7 in cash and unspecified StatesWest securities valued at $3 a share.
Based on the number of Mesa shares outstanding not already owned by StatesWest, the proposed takeover would have a value of about $15.3 million.
StatesWest owns 7.25% of Mesa.
Last week, Mesa rejected a general proposal from StatesWest that the two carriers combine.
In response to the specific offer, Gary Risley, Mesa vice president, said management will ask directors to employ a financial consultant to advise them.
Hawker Siddeley Group PLC, a U.K. engineering company, reported a 16% jump in pretax profit for the six-month period ending June 30.
Pretax profit rose to #93.2 million ($146.8 million) from #80.6 million ($127 million), matching analysts' expectations, which ranged from #90 million to #95 million.
Profit after taxes and minority interests increased 16% to #55.2 million from #47.6 million in the year-earlier period, while earnings per share rose 16% to 27.9 pence (44 cents) from 24.1 pence (38 cents).
Hawker Siddeley said its core electrical products division enjoyed strong growth, with a 20% rise in operating profit during the period.
Fleet/Norstar Financial Group reported a 12% increase in net income in the third quarter, led by a 43% gain in its financial services group.
Fleet's net was $96.4 million, or 86 cents a primary share, compared with $85.8 million, or 79 cents a share, a year earlier.
The Providence, R.I., financial services group, which includes commercial-credit, leasing and mortgage-banking operations, contributed $30.6 million to net, up from last year's $21.3 million.
Fleet also noted that, unlike other banking companies in the Northeast, it has been only marginally hurt by nonperforming loans that have resulted from the slumping regional real estate market.
Fleet reported nine-month net of $279.0 million, or $2.51 a primary share, up from $248.2 million, or $2.28 a share, a year earlier.
Benj. Franklin Federal Savings & Loan Association said it expects to post a third-quarter net loss of about $8 million, or $1.04 a share, as a result of adding $11 million in loan-loss reserves.
The Portland, Ore., thrift, which has $5.2 billion of assets, had net income in last year's third quarter of $1.8 million, or 23 cents a share.
Franklin said it expects to report earnings for the latest quarter next week.
The additional reserves relate to possible write-downs of certain assets held by Franklin and its subsidiaries and the default of a bond in its investment portfolio, the thrift said.
According to a spokeswoman, they also relate to changes Franklin will have to make in its accounting procedures to comply with new federal capitalization requirements for thrifts.
The company's shares closed yesterday at $4.25, off 25 cents, in national over-the-counter trading.
Arkla Inc. said that as part of a program to improve profitability it will take a total of $189 million in after-tax charges by year end.
It also announced an initial public offering of 18% of its gas exploration and production subsidiary.
The Shreveport, La., natural gas company said the charges, though partially offset by a one-time gain from the offering, will result in a full-year after-tax loss.
Last year, the company had net income of $117.3 million, or $1.30 a share.
Arkla said it will report $179 milllion in one-time charges against continuing operations for the third quarter, reflecting settlement of certain natural gas contracts.
It said it will take a $10 million fourth-quarter charge against discontinued operations, reflecting certain write-downs and the planned sale of a unit.
Arkla said its initial offering of 18% of Arkla Exploration Co. is expected to result in a net gain of about $90 million, which will be used to pay down Arkla debt.
Arkla Exploration owns sizable gas and crude-oil reserves in the South and Southwest.
South Africa negotiated a new debt agreement with its major foreign creditors for about $8 billion of its foreign debt outstanding, said Chris Stals, governor of the Reserve Bank and the country's chief debt negotiator.
The new agreement will last for 3 1/2 years starting July 1, 1990, when the current agreement expires.
The announcement coincides with the start of the Commonwealth Ministers Conference in Kuala Lumpur, where proposals for renewed sanctions against South Africa, including moves to block settling of a new debt agreement, were scheduled to be discussed.
As with the previous pact, the new agreement covers the country's debt "inside the net," which applies mainly to repayments due to overseas creditor banks by the private sector.
The agreement calls for South African debtors to make repayments in eight installments, starting in December of next year.
The redemption then would be at 1.5% of the total debt, increasing to 2.5% in February 1991, and to 3% at six-month intervals thereafter.
A revised provision would be included for the conversion of short-term claims inside the net to long-term loans outside the net.
These claims would be repayable over a 10-year period.
Foreign debt falling outside the net of affected indebtedness -- which Mr. Stahl estimated at $12 billion -- would remain not subject to the debt arrangements.
New York Times Co. said net income rose in the third quarter because of a one-time gain on the sale of the company's cable-TV system.
Net surged to $210.8 million, or $2.68 a share, from $26.7 million, or 33 cents a share, a year earlier.
The latest quarter included a gain of $193.3 million, or $2.46 a share, from the sale of New York Times Cable, completed in August.
Exclusive of the gain, operating profit declined 35% to $16.4 million, or 21 cents a share, from $25.2 million, or 31 cents a share.
The decline primarily reflected the dilution from acquiring McCall's, Golf World (U.S.) and Sailing World magazines; lower equity earnings from the forest-products group because of price discounting and an unfavorable exchange rate, and an 8.7% decline in advertising linage at the New York Times, the company's flagship newspaper.
Advertising volume at the company's 35 regional newspapers decreased 1.1%.
The company said the negative factors are expected to continue into next year.
Revenue rose 6.4% to $415.3 million from $390.5 million.
Democrat Gene Taylor won a special election to fill the congressional seat vacated by the death of Republican Larkin Smith, taking back the GOP's lone redoubt in Mississippi's House delegation.
Mr. Taylor's overwhelming victory against Republican Tom Anderson reclaims a seat the Republicans had held for 17 years and gives the Democrats their fifth victory in the seven special House elections held this year.
Mr. Taylor, a 36-year-old state senator from Bay St. Louis, won 65% of the vote in a district that has voted Republican in the past five presidential elections and that was once represented by Republican U.S. Sen. Trent Lott.
Mr. Taylor's victory was an embarrassment for both state and national Republicans.
Mr. Anderson, a former Lott aide, received campaign assistance from the senator and from President Bush, who visited the district last week.
Even so, Mr. Taylor carried all but one of the district's dozen counties.
Rep. Smith died in a plane crash on Aug. 13.
Wall Street Journal reporters called companies with headquarters or facilities in the Bay area in a bid to assess the damage to their operations caused by Tuesday's earthquake.
The calls reached many, but certainly not all, of the publicly held companies with operations in the area.
In most cases damage to company facilities and operations was minimal.
ADIA SERVICES INC., Menlo Park, temporary personnel agency, annual sales of $504 million, OTC, said all 30 offices in Bay area were working, but in various states of disarray.
Business was slow because many companies were closed yesterday.
ADVANCED MICRO DEVICES INC., Sunnyvale, integrated circuit maker, annual sales of $1.12 billion, NYSE, had only minor structural damage.
Most of its 4,500 workers were at work yesterday, and no production slowdown was anticipated as long as electricity remains available.
AMDAHL CORP., Sunnyvale, computer maker, annual sales of $1.8 billion, Amex, was closed yesterday and no damage estimates were available.
AMERICAN BUILDING MAINTENANCE INDUSTRIES Inc., San Francisco, provider of maintenance services, annual revenue of $582 million, NYSE, had some damage to headquarters and lost phone service, but operations were moved to a branch office and are running smoothly thanks to a decentralized computer system the company had developed before the quake.
AMERICAN PRESIDENT COS., Oakland, shipping concern, annual sales of $2.2 billion, NYSE, had little damage to the cranes, dock or rail track at its container-ship facility near the collapsed Route 880 overpass.
The company expects to work a ship due in today with minimal delays, despite sporadic power.
ANACOMP INC., Indianapolis, NYSE, said its Xidex Corp. unit, a Sunnyvale maker of computer disks and microfilm with annual sales of $637 million, had only minor damage and is fully operational.
ANTHEM ELECTRONICS INC., San Jose, distributor of electronic parts, annual sales of about $300 million, NYSE, sustained very little damage, anticipated being "in 100% operating condition" by midday.
APPLE COMPUTER CO., Cupertino, computer maker, annual sales of $4.07 billion, OTC, sustained some structural damage.
Offices were closed yesterday.
APPLIED MATERIALS INC., Santa Clara, maker of computer-chip machine systems, annual sales of $490 million, OTC, had slight damage to headquarters, no damage to manufacturing plants.
Company, with 1,750 workers in area, is fully functional.
ATARI CORP., Sunnyvale, maker of personal computers and software, annual sales of $700 million, Amex, had minor damage and expects to be fully operational by tomorrow.
BANKAMERICA Corp., San Francisco, bank holding company, annual revenue of $10.2 billion, NYSE, yesterday had no power at its headquarters, 80 of its 433 Northern California branches were closed and 250 of 750 automatic teller machines were closed in the area.
Securities trading was conducted in a backup facility in Concord.
BECHTEL CORP., San Francisco, engineering and construction concern, annual sales of $4 billion, had only minor structural damage at its three buildings in the city, but its computers were knocked out.
Backup computer tapes were hand-carried to an IBM office in Philadelphia, and the company expects its mainframe to be up in a few days.
Workers, except for senior management, were asked not to report for work yesterday.
BIO-RAD LABORATORIES INC., Hercules, biological research and clinical-products leader, $200 million in annual sales, Amex, said its Richmond warehouse north of San Francisco was closed because of debris and fallen shelves.
It expects to be fully operational by next week.
BORLAND INTERNATIONAL, Scotts Valley, personal computer and software designer, annual sales of $72 million, had heavy damage to its headquarters and was conducting business from its parking lot.
The company doesn't expect any shipping delays.
BUSINESSLAND INC., San Jose, computer retail company, annual sales of $1.1 billion, NYSE, said all 16 corporate office and stores in the area were open with the exception of a retail center in San Francisco's business district.
That facility should reopen today.
CARTER HAWLEY HALE STORES Inc., Los Angeles, retailer, annual sales of $2.79 billion, NYSE, said nine of its 22 Emporium stores in the area were closed because of water damage, broken windows and fallen displays.
A spokesman said sales are expected to be hurt, but the losses are covered by insurance.
CHEVRON CORP., San Francisco, oil company, annual sales of $25.2 billion, NYSE, had minor damage to downtown headquarters, but structural damage closed two of its seven buildings in San Ramone industrial park.
Company expects to be fully operational by next week.
CLOROX Co., Oakland, consumer products, annual sales of $1.36 billion, NYSE, was closed yesterday but plans to reopen today or tomorrow.
Meanwhile, orders are being routed through Kingsford Products unit in Louisville, Ky., but computer problems mean they must be processed manually.
Expects to be fully operational early next week.
COHERENT INC., Palo Alto, laser maker, annual sales of $159 million, was closed yesterday but expects to reopen today.
CONSOLIDATED FREIGHTWAYS INC., Menlo Park, trucking company, $2.69 billion in annual sales, NYSE, had structural damage to CF Motor Freight subsidiary's office in Palo Alto, no damage in Menlo Park.
COOPER COMPANIES INC., Palo Alto, medical products maker, annual sales of $628 million, NYSE, had little damage and was in full operation yesterday.
DAYTON HUDSON CORP., Minneapolis, retailer, annual sales of $12.2 billion, NYSE, closed seven of its 13 Bay-area Target discount stores and nine of its 20 Mervyn's department stores because of pending reviews by structural engineers or requests from authorities, who were trying to keep shoppers off the freeways.
The company expects to reopen three Target stores and all but two Mervyn's today or tomorrow.
DIASONICS INC., South San Francisco, maker of magnetic resonance imaging equipment, annual sales of $281 million, Amex, had minor damage, mostly in a stockroom.
The company plans to be fully operational today.
DIGITAL EQUIPMENT CORP., Maynard, Mass., computer maker, annual sales of $12.7 billion, NYSE, had structural damage at its San Francisco sales office but no appreciable damage elsewhere in the area, including its Cupertino plant.
DREYER'S GRAND ICE CREAM INC., Oakland, ice cream maker, annual sales of $225 million, OTC, said it is delivering ice cream wherever roads are passable.
EVEREX SYSTEMS INC., Fremont, maker of personal computers and peripherals, annual sales of $377 million, OTC, had minor damage and was almost fully operational yesterday.
EXXON Corp., New York, oil company, NYSE, said its refinery northeast of San Francisco was operating at a slightly reduced rate as a precaution in case of aftershocks.
FORD MOTOR CO., Dearborn, Mich., auto maker, annual sales of $92.4 billion, NYSE, said its three Ford Aerospace unit facilities in the Bay area, including a satellite-assembly operation in Palo Alto, had no major damage.
GAP Inc., San Bruno, clothing retailer, annual sales of $1.25 billion, NYSE, expects most of its stores to return to full operation and all 2,500 of its Bay-area workers to be back at work by today.
GENENTECH INC., South San Francisco, biotechnology company, annual sales of $334.8 million, NYSE, sustained no major damage and expects to be fully operational today.
GENERAL ELECTRIC CO., Fairfield, Conn., consumer, industrial products and broadcasting concern, annual sales of $50 billion, NYSE, said its GE Nuclear Energy unit, with 1,600 Bay-area employees, had only minor damage at its San Jose headquarters.
Business wasn't disrupted.
GENERAL MOTORS CORP., Detroit, auto maker, annual sales of $123.6 billion, NYSE, sustained about 10 injuries to workers and some ruptured water mains at its New United Motor Manufacturing Inc. facility in Fremont, a joint venture with Toyota Motor Corp.
There was limited production of some models yesterday, but it wasn't clear when the normal 750-car-a-day pace will resume.
Plant officials are still assessing damage to parts suppliers and Port of Oakland facilities that handle shipments to the plant.
GOLDEN WEST FINANCIAL CORP., Oakland, savings and loan, annual revenue of $1.4 billion, NYSE, had only minor damage to a few branches and no injured employees.
HEWLETT-PACKARD Co., Palo Alto, personal computer and electronic equipment maker, annual sales of $9.8 billion, NYSE, said there will be a "minimal suspension" of manufacturing for an undefined period.
The computer system was operating, so orders could be taken.
The company has 18,000 employees and more than 70 buildings in the Bay area.
One building in Palo Alto may be damaged beyond repair.
Others had lesser damage and there were no injuries among workers.
Damage will be "easily in the millions," the company said.
HEXCEL Corp., Dublin, manufacturer of engineered parts, annual sales of $399 million, NYSE, had little damage beyond some phone trouble.
HOMESTAKE MINING CO., San Francisco, gold and general miner, annual sales of $432.6 million, NYSE, said its headquarters was closed yesterday because of power failures and lack of water, but that it may reopen today.
It expects any impact on its business to be slight.
HOMESTEAD FINANCIAL CORP., Millbrae, financial services concern, annual revenue of $562 million, OTC, said three of its 17 Bay-area branches were closed yesterday.
The company expects all branches to reopen today.
INMAC CORP., Santa Clara, maker of computer accessories, annual sales of $250 million, OTC, said telephones were out at its headquarters but service should be restored by today.
The company said it was doing a brisk business in computer power-surge protectors, cables and uninterruptable power sources.
INTEL Corp., Santa Clara, semiconductor maker, annual sales of $2.87 billion, OTC, had some damage and few people were at work yesterday.
INTERNATIONAL BUSINESS MACHINES Corp, Armonk, N.Y., maker of business machines, NYSE, said flooding caused by broken water pipes closed its San Jose plant, which makes high-end data-storage devices.
The plant and its 8,500 employees gradually will resume operations over the next several days, the company said.
Also closed yesterday were the company's Santa Teresa software-development lab and the Almaden research center.
The concern's National Service Division opened a center for emergency service in Walnut Creek as part of its disaster-recovery plan.
KAISER ALUMINUM & CHEMICAL, Oakland, metal and chemical maker, annual sales of $2.22 billion, had slight structural damage to its 28-story headquarters building and employees stayed home yesterday to allow crews to clean up.
LOCKHEED CORP., Calabasas, aerospace and defense concern, annual sales of $10.59 billion, NYSE, said its Lockheed Missiles & Space division closed its Santa Cruz test facility because of power outages and landslides.
The closing, affecting 266 employees, will continue at least until roads are cleared.
It wasn't known to what extent, if any, the facility was damaged.
It also wasn't known what the impact will be on the division's work, which includes the Navy's Trident submarine-based missile program and the Air Force's Strategic Defense Initiative.
The division had only minor damage at its Sunnyvale headquarters and plant in Palo Altos, and no delays in deliveries are expected.
LONGS DRUG STORES INC., Walnut Creek, drugstore chain, annual sales of $1.9 billion, NYSE, had only minor damage and only four of its 75 Bay-area stores, all in the Santa Cruz area, were closed.
All are expected to reopen soon.
LSI LOGIC CORP., Milpitas, maker of customized integrated circuits, annual sales of $550 million, NYSE, has halted manufacturing at its three plants in the area while they are inspected for structural damage.
The company expects to resume full operations by today.
R.H. MACY & Co., New York, retailer, annual sales of $7 billion, said there was minor damage to its 24 Macy stores and nine I. Magnin stores in the Bay area.
MEASUREX CORP., Cupertino, maker of computer integrated manufacturing processes, annual sales of $265 million, NYSE, had only minor damage but workers spent most of yesterday cleaning up.
NATIONAL SEMICONDUCTOR CORP., Santa Clara, semiconductor maker, annual sales of $1.65 billion, NYSE, said it had no major structural damage at its 30 Bay-area buildings, but two workers were injured.
Production resumed yesterday.
Piping in a waste-treatment plant needed immediate repairs.
NORDSTROM INC., Seattle, retailer, annual sales $2.33 billion, OTC, five of this 59-store chain's nine stores in the Bay Area were closed yesterday, damage appears primarily cosmetic, hopes to reopen four of the stores by today and the fifth by Saturday.
ORACLE SYSTEMS CORP., Belmont, provider of computer programming and software services, annual sales $584 million, four of 12 offices and buildings in the Belmont and San Mateo areas were closed, 95% of computer and telephone systems are operating, expects to be back to full operation by the end of the week.
PACIFIC GAS & ELECTRIC CO., San Francisco, electric, gas and water supplier, annual sales $7.6 billion, some minor damage to headquarters, undetermined damage to four nearby substations, severe structural damage to a major power plant at Moss Landing, extensive damage to gas lines and electric lines, 400,000 residences without electricity and 69,000 without gas, cannot reconnect electricity until it is certain there are no gas leaks, no predictions on when this will happen.
PACIFIC TELESIS GROUP, San Francisco, telecommunications holding company, annual sales of $9.5 billion, no damage to headquarters, but no power, the power failure has caused a delay in the release of the company's earnings report, major concern is subsidiaries, Pacific Bell and Pacific Telesis Cellular, both of which sustained damage to buildings, structural damage to several cellular sites in Santa Cruz, volume of calls on cellular phones 10 times the usual, causing a big slowdown.
PROCTER & GAMBLE CO., Cincinnati-based company's Folgers Coffee plant in South San Francisco was closed following the earthquake, no injuries or major damage, other plants around country can make up for any lost production.
QUANTUM CORP., Milpitas, manufactures rigid disc drives for small business computers, word processors, annual sales $120.8 million, OTC, open for business, minor structural damage.
RAYCHEM CORP., Menlo Park, plastics manufacturer, annual sales $1 billion, no major damage and no production slowdown is anticipated.
ROSS STORES INC., Newark, discount apparel chain, annual sales $576 million, two of 28 stores in Bay Area closed, both could open as early as today.
SAFEWAY STORES INC., Oakland, retail food chain, annual sales of $13.6 billion, some structural damage to headquarters and no power; major problems transporting products to those stores that remained open; no numbers on how many stores closed.
CHARLES SCHWAB & CO., San Francisco, discount brokerage firm, annual sales of $392 million, had only minor damage to headquarters building and was up and running for yesterday's market open.
Firm will not, however, resume 24-hour service until power in city is restored.
Office closed yesterday at 4:30 p.m. EDT.
SEAGATE TECHNOLOGY, Scotts Valley, maker of hard disk drives for computers, annual sales of $1.37 billion, OTC, closed to assess what appeared to be minor damage to some of its 20 buildings.
SOUTHERN PACIFIC TRANSPORTATION CO., San Francisco, railroad, annual sales of $2.41 billion, had only minor damage to headquarters and tracks, and expects to be fully operational tomorrow.
St. Louis Southwestern Railway Co. unit halted all service Tuesday night but has since restored some freight lines and limited commuter service between San Francisco and San Jose.
SUN MICROSYSTEMS INC., Mountain View, maker of desktop computers, annual sales $1.77 billion, OTC, no injured employees and very little damage to buildings.
Closed yesterday due to power difficulties.
TANDEM COMPUTERS INC., Cupertino, computer maker, annual sales of $1.6 billion, NYSE, said it had no significant damage and should be fully operational within a week.
Many employees stayed home yesterday, but customer service was being maintained.
TRANSAMERICA CORP., San Francisco, financial services and insurance company, annual sales of $7.9 billion, NYSE, said its headquarters, the well-known downtown pyramid-shaped building, was intact but closed yesterday.
VARIAN ASSOCIATES INC., Palo Alto, instrumentation and semiconductor equipment company, annual sales of $1.3 billion, had only minor damage and no slowdowns were anticipated.
VLSI TECHNOLOGY INC., San Jose, maker of semiconductor products, annual sales $171.9 million, OTC, minimal damage to facilities, no injuries, expected operations to return to normal late yesterday.
WATKINS-JOHNSON CO., defense-oriented electronics manufacturer, annual sales $292 million, NYSE, minor damage to headquarters and plant in Palo Alto, no damage to San Jose plant, "still assessing" damage at Scotts Valley plant, where main product is furnaces for semiconductor production.
WELLS FARGO & CO., San Francisco, bank holding company, annual revenue $4.9 billion, NYSE, minor damage at headquarters, 12 branches out of 170 in Northern California sustained structural damage that will preclude them from opening in the near future, 45 locations with at least one automatic teller machine inoperable, central computer systems are operating, no injuries.
WYSE TECHNOLOGY INC., San Jose, maker of video display terminals and workstations and IBM/PC compatible computers, annual sales of $452 million, slight structural damage at headquarters, no injuries, expects to be back to full operation today.
3COM CORP., Santa Clara, maker of computer communications systems, annual sales of $386 million, OTC, slight structural damage to headquarters, communications systems already fully operational.
Could the collapse of I-880 have been prevented?
That was the question structural engineers and California transportation officials were asking themselves yesterday as rescue workers began the gruesome task of trying to extract as many as 250 victims from beneath the concrete slabs of the double-deck Nimitz Freeway in Oakland that caved in during Tuesday's temblor.
After touring the area, California Gov. George Deukmejian late yesterday called for an inquiry into the freeway's collapse, blaming the disaster on substandard construction, the Associated Press reported.
The impact of the destruction of this 2.5-mile stretch of highway was tragically measured in lost lives.
But there are other long-term effects that raise serious questions about the ability of California's infrastructure to withstand a major temblor.
It could easily be two years before the well-traveled artery that helps connect Oakland with San Francisco is reopened, and the cost to build a new stretch of highway could soar to more than $250 million, said Charles J. O'Connell, deputy district director in Los Angeles of the California Department of Transportation, nicknamed Caltrans.
Caltrans in Sacramento said total damage from the collapsed highway is estimated at around $500 million.
The aftershocks of the highway tragedy are reverberating in Los Angeles as well, as local politicians spoke yesterday against plans to bring double-decking to Los Angeles freeways by 1994.
Caltrans plans to add a second deck for buses and car pools above the median of a 2.5-mile stretch of the Harbor Freeway just south of Los Angeles, near the Memorial Coliseum.
Los Angeles County Supervisor Kenneth Hahn yesterday vowed to fight the introduction of double-decking in the area.
Caltrans abandoned double-decking in the early 1970s, following the 1971 Sylmar earthquake that destroyed freeway sections just north of Los Angeles, Mr. O'Connell explained.
That temblor measured 6.1 on the Richter scale; Tuesday's was
So why even consider stacking freeways now?
"We've run out of places to build freeways in L.A., and the only place to go is up," Mr. O'Connell said, although he acknowledges there are many obstacles, including cost.
But as for safety, he says double-deck freeways built today with the heavily reinforced concrete and thicker columns required after the Sylmar quake should withstand a calamitous temblor of 7.5 to 8 on the Richter scale.
Reasons for the collapse of the Nimitz Freeway were sketchy yesterday.
But most structural engineers attributed the destruction to improper reinforcement of the columns that supported the decks, and the fact that the ground beneath the highway is largely landfill and can become unstable, or "liquefy," in a major quake.
The two-story roadway, designed in the mid-1940s and completed in 1957, was supported by columns that apparently lacked the kind of steel reinforcement used in highways today.
While the pillars did have long metal bars running vertically through them for reinforcement, they apparently lacked an adequate number of metal "ties" that run horizontally through the column, said Leo Parker, a structural engineer in Los Angeles.
Caltrans today uses a variation of the design Mr. Parker describes, with spiraling steel rods inside.
But in the case of the Nimitz Freeway, the lack of such support caused the core of the columns to crumble and buckle under the weight of the second deck, crushing motorists who were lined up in bumper-to-bumper rush-hour traffic on the lower deck nearly 15 feet below.
Officials of the state agency didn't have any immediate explanation why the reinforcement didn't hold up.
Caltrans reinforced the highway in 1977 as part of a $55 million statewide project, using steel cables to tie the decks of the freeway to the columns and prevent the structure from swaying in a quake.
Caltrans spokesman Jim Drago in Sacramento declined to identify the engineering firm that did the reinforcement work.
Liability in the bridge and road collapses will revolve around whether government took "reasonable care" to build and maintain the structures, says John Messina, a Tacoma, Wash., personal-injury attorney who specializes in highway design and maintenance cases.
The firm brought in to strengthen the structure could be liable as well.
The results of the quake certainly raise questions about whether reasonable care was taken, Mr. Messina says.
Given the seismic history of the Bay Area, "it seems to me that a 6.9 earthquake is a foreseeable event."
Caltrans' Mr. Drago defended the agency's work on the Nimitz Freeway.
"The work was done properly," he said.
"Basically, we had a severe earthquake of significant duration and it was just something the structure couldn't withstand."
Ironically, Caltrans this year began working on a second round of seismic reinforcements of freeways around the state, this time wrapping freeway columns in "steel blankets" to reinforce them.
But only bridges supported with single rows of columns were top priority, and the Nimitz Freeway, supported by double rows, was left out, Mr. Drago explained.
"The reason is that the technology is such that we're not able to retrofit multi-column structures," he said.
Charles McCoy in San Francisco and John R. Emshwiller in Los Angeles contributed to this article.
Lionel Corp.'s board unanimously rejected a tender offer of $8 a share, or $95.4 million, for as much as 90% of Lionel by a group with a 9.9% stake in the toy retailer.
Lionel also urged holders of its stock and debt not to tender their securities, saying it wants to remain independent to pursue its business strategy.
Lionel also said the offer by Robert I. Toussie Limited Partnership is inadequate, and full of conditions that leave it "subject to substantial uncertainty."
In addition, Lionel began a lawsuit in federal District Court in New York seeking to enjoin the offer, alleging, among other things, violations of federal securities law and fraudulent manipulation of the market for Lionel's securities.
Robert I. Toussie, general partner of the investment group, said the Lionel response reflected management's entrenched position, saying officials had failed to come up with a better alternative to his group's offer.
Mr. Toussie said he would respond to Lionel's suit after his lawyers review it.
Efforts by a federal mediator to reignite talks between Boeing Co. and the Machinists union apparently failed, and no further meetings are scheduled.
Company officials and union representatives didn't meet face to face, but the mediator shuttled between the two groups.
In a statement issued after the meeting, the aerospace giant said it won't increase its offer although adjustments within the proposed pay-and-benefit mix are possible.
Machinists already have rejected a proposal that called for a 4% pay increase and 8% bonus in the first year.
In the second year, workers would receive a 3% wage boost and a 3% bonus, followed by a 3% increase without a bonus in the third year.
"The company will not budge on anything," said a spokesman for the union.
As the strike enters its 15th day today, some members are getting nervous, the spokesman conceded, but the majority of the 55,000 Machinists are prepared to "wait it out as long as it takes.
United Merchants & Manufacturers Inc. said its president, Uzi Ruskin, withdrew his proposal to acquire control of the New York textile and clothing company.
Last month, Mr. Ruskin proposed, among other things, to buy 3.5 million shares, or 38%, for $4 apiece.
Coupled with his current 1.2 million shares and 4% held by an associate, the stake would have given him control of 55% of the concern.
In a Securities and Exchange Commission filing, Mr. Ruskin had said that holders of the other 45% of United Merchants would receive one-half share of a new preferred stock for each of their shares.
A special committee of United Merchants directors said that in view of uncertainties regarding various legal and financial considerations, it couldn't recommend the plan to the full board.
The company is exploring, with a major financial institution, the development of a plan to boost the value of the company for its holders, Mr. Ruskin said.
In a separate SEC filing, Albert Safer, who holds 6.46% of United Merchants, said he retained investment bank Lazard Freres & Co. for advice as he evaluates the possibility of making a bid for the textile maker.
On Friday, Mr. Safer, a Newark, N.J., textile businessman, signed a confidentiality agreement under which United Merchants would provide him with nonpublic information.
The White House is making sure nobody will accuse it of taking this crisis lightly.
In the aftermath of the California earthquake, President Bush and his aides flew into a whirlwind of earthquake-related activity yesterday morning.
Some of it was necessary to get federal help flowing to victims, but some seemed designed mostly to project an image of a White House in action.
Mr. Bush and his aides were accused of responding too slowly after the Exxon Valdez oil tanker split open in Alaskan waters and Hurricane Hugo struck the Carolina coast, and they clearly don't want a repeat of those charges now.
So the White House announced that Mr. Bush got his first earthquake briefing of the day at 6:30 a.m. from chief of staff John Sununu.
By noon, Mr. Bush had taken two phone calls from Vice President Dan Quayle, who was in California; made a televised statement of concern; signed a disaster proclamation; received a written report from the Federal Emergency Management Agency; and visited FEMA headquarters.
Mr. Bush himself essentially acknowledged that he and his aides were trying to head off criticism.
On his FEMA visit, Mr. Bush said that he hoped there would be "less carping" about the emergency office's performance this time, adding that the agency "took a hit" for its reaction to Hurricane Hugo.
The White House already is talking of Mr. Bush visiting the California earthquake site this weekend.
He visited the Hugo devastation but not until after local leaders urged him to do so.
Beazer PLC, a major British building materials and construction concern, reported a 24% jump in pretax profit for its latest financial year, helped largely by contributions from its U.S. unit, Koppers Co.
Pretax profit for the year to June 30 rose to #142.5 million ($224.5 million) from #114.7 million ($180.7 million), broadly matching analysts' expectations.
Profit after taxes and minority interests but before extraordinary items increased 22% to #92.6 million from #75.6 million a year earlier, while fully diluted earnings per share rose to 29.90 pence (47 cents) from 24.68 pence (39 cents).
The lethal shudders that wracked the San Francisco Bay Area -- rated a 6.9 on the Richter scale -- didn't match the great earthquake of 1906, rated at 8.25.
The difference of just 1.35 points on the scale, designed by Charles Richter of CalTech in the 1930s, means the older quake was "10 to 20 times stronger," says Lane Johnson, director of the University of California Berkeley Seismographic Station.
The ground ruptured along a 20-to-30-mile stretch of the San Andreas Fault on Tuesday, Mr. Johnson added.
In 1906, the rupture was 300 miles long and a couple feet wide.
Though the epicenter of Tuesday's temblor was located 10 miles north of the town of Santa Cruz, and 50 miles south of San Francisco, its havoc hopscotched up the coast in seemingly random fashion.
But the greatest damage was visited on buildings and roadways perched upon landfill, as were the Marina District of San Francisco and the Bay Bridge -- two areas of maximum devastation.
"Landfill -- loose and unconsolidated earth -- may feel like rock but it behaves like liquid when you shake it," said Douglas Segar, professor of geosciences at San Francisco State University in a televised interview.
"It liquefies in a patchwork quilt pattern.
Our quake behaved much like the Mexico City earthquake, where great damage was miles from the epicenter."
Mr. Johnson, of the Berkeley seismographic station, said: "Landfill can be done if it's properly compacted.
You can drive piles on it and build on it."
He cited the example of San Francisco's financial district, where many new glass towers survived almost unscathed.
But the public policy issues raised by earthquake damage will be difficult to address, Mr. Johnson predicted.
"The attention span of the public is short," he said.
"We've known for years and years we've got lots of old {pre-1950s} unreinforced brick and masonry buildings."
One old building, the Golden State Bank Building on Front Street, had its yellow brick facade sheared off by the shock of the quake, leaving a wedge of its third floor open to the air, while piles of dusty bricks tumbled to the street below narrowly missing rush-hour pedestrians and cars.
Reinforcing such old building stock, Mr. Johnson said, "comes down to money.
It's a danger.
We know it's there.
And sooner or later, we have to do something about it."
The urgency is heightened because this week's earthquake -- while major and followed by hundreds of aftershocks -- didn't release enough pent-up energy tension along the faultlines to preclude more and bigger quakes soon.
"The big one is still due," Mr. Johnson predicted in an interview.
"The Bay Area has three very dangerous faults, the San Andreas, the Hayward fault and the Calaveras fault.
It {Tuesday's quake} hasn't solved our problem.
In California, this is the reality.
Coca-Cola Co. may be about to intensify the cola wars.
Coke said it will test market a caffeine-free version of its flagship brand, Coca-Cola Classic, beginning next week in Charlotte, N.C.
Other, as yet unnamed, cities will follow.
If all goes well, the product will be rolled out for national sales sometime next year, a Coke spokesman said.
After the confusion surrounding the change of the Coke formula in 1985, Coca-Cola was reluctant to clutter the Classic name with a brand extension.
But now, the soft-drink giant appears willing to take the risk.
"The name Classic Coke has tremendous value, and they haven't merchandised that name before," says Jesse Meyers, publisher of the trade journal Beverage Digest.
The Coke spokesman said a caffeine-free Classic should help increase volume of the original brand.
Indeed, analysts have said that the absence of new products, among other factors, has limited sales growth throughout the industry.
Coke now leads Pepsi in market share in caffeine-free diet colas but trails Pepsi in sales of caffeine-free sugared colas, according to Beverage Digest.
Coke introduced a caffeine-free sugared cola based on its original formula in 1983.
It switched to a caffeine-free formula using its new Coke in 1985.
Coke has been studying the possibility of introducing a caffeine-free Classic for a year, a company spokesman said.
He said large increases in sales of other non-caffeine soft drinks make the timing right now.
CALIFORNIA STRUGGLED with the aftermath of a Bay area earthquake.
As aftershocks shook the San Francisco Bay area, rescuers searched through rubble for survivors of Tuesday's temblor, and residents picked their way through glass-strewn streets.
In Oakland, hopes faded for finding any more survivors within the concrete and steel from the collapse of an interstate highway.
At least 270 people were reported killed and 1,400 injured in the rush-hour tremor that caused billions of dollars of damage along 100 miles of the San Andreas fault.
Bush declared the region a major disaster area and the military was mobilized to prevent looting.
The baseball commissioner said the third game of the World Series between the Giants and the Athletics would be played Tuesday in Candlestick Park.
HONECKER WAS OUSTED as leader of East Germany amid growing unrest.
The 77-year-old official, who oversaw the building of the Berlin Wall, was removed during a meeting of the 163-member Communist Party Central Committee in East Berlin.
Honecker, who was reported ill following gall-bladder surgery in August, said he was resigning for health reasons.
He was succeeded by internal-security chief Egon Krenz, 52, a hard-liner who quickly ruled out any sharing of power with pro-democracy groups.
Honecker's departure came after weeks of street protests and an exodus to the West of East Germans who had become disenchanted with his rule.
HUNGARY ADOPTED constitutional changes to form a democratic system.
At a nationally televised legislative session in Budapest, the Parliament overwhelmingly approved changes formally ending one-party domination in the country, regulating free elections by next summer and establishing the office of state president to replace a 21-member council.
The country was renamed the Republic of Hungary.
Like other Soviet bloc nations, it had been known as a "people's republic" since
The voting for new laws followed dissolution of Hungary's Communist Party this month and its replacement by a Western-style Socialist Party.
The space shuttle Atlantis blasted into orbit from Cape Canaveral, Fla., and its crew of five astronauts launched the nuclear-powered Galileo space probe on a flight to the planet Jupiter.
The $1.4 billion robot spacecraft's exploratory mission is to take six years.
The shuttle is slated to return Monday to California.
South Korea's President Roh addressed a joint House-Senate meeting and urged patience over U.S. demands for the opening of Seoul's markets to more American goods, saying trade issues would be "resolved to mutual satisfaction."
He also said tragic results could follow any "hint of weakening" of the U.S. defense commitment to Seoul.
The Census Bureau reported that 13.1% of the U.S. population, or 31.9 million people, were living in poverty in 1988.
Last year's figure was down from 13.4% in 1987 and marked the fifth consecutive annual decline in the poverty rate.
Per capita income rose 1.7% to $13,120, but median family income fell 0.2%.
The Bush administration accused Israeli Prime Minister Shamir of hindering peace efforts in the Mideast with "unhelpful" and disappointing statements.
Shamir said Tuesday that he was prepared to risk a policy conflict with the U.S. over an Egyptian plan to hold direct Israeli-Palestinian talks, which the premier's Likud bloc opposes.
Cuba was elected to the U.N. Security Council for the first time since its Castro-led revolution 30 years ago.
The election was by secret ballot in the General Assembly.
The U.S. didn't openly oppose Cuba's seating as the Latin American council delegate.
Britain's Prime Minister Thatcher told a Commonwealth summit in Kuala Lumpur, Malaysia, that sanctions against South Africa were "utterly irresponsible," officials said.
But other nations at the opening of the 49-nation meeting of Britain and its former colonies pressed for continued or stronger embargoes in an effort to end apartheid.
Arab officials in Saudi Arabia said three-week-old talks by Lebanese lawmakers aimed at ending Lebanon's civil war appeared about to collapse.
Christian legislators are insisting on a Syrian troop pullout from Lebanon before agreeing to political changes giving the nation's Moslems a greater role in Beirut's government.
Colombia's judges launched a 72-hour strike to press security demands following Tuesday's murder of a High Court justice in Medellin.
The country's narcotics traffickers claimed responsibility for the slaying.
Most of the country's 20,000 judges and judicial employees joined the work stoppage.
Charles S. Mitchell, a vice president with Homart Development Co., the real estate development subsidiary of Sears, Roebuck & Co., was named president of Figgie Properties, a real estate development unit.
He succeeds William Kohut, who resigned earlier this year.
Also, Richard A. Barkley, a former marketing executive with FMC Corp., was appointed president of Continental Container Systems, a producer of can closing machinery that Figgie acquired late last year.
Figgie is a fire protection, electronics and industrial products concern.
Dow Chemical Co. said third-quarter net income slipped 6.8% from a record year-ago quarter.
The decline broke a streak of 10 quarters in which Dow posted earnings increases.
Dow's third-quarter net fell to $589 million, or $3.29 a share, from $632 million, or $3.36 a share, a year ago.
Sales in the latest quarter rose 2% to $4.25 billion from $4.15 billion a year earlier.
Dow closed at $94.625 a share, up 75 cents, in New York Stock Exchange composite trading.
A spokeswoman said Dow is comfortable with Wall Street expectations that full-year earnings will total about $14.60 a share, compared with last year's record net of $2.4 billion, or $12.76 a share.
But that signal on full-year profit casts doubt on whether Dow will improve on its year-ago fourth-quarter net of $3.44 a share, or $635 million.
Dow would earn $14.85 a share for the year if it equaled that year-ago fourth-quarter performance.
Dow officials were signaling that the company would earn less than $15 a share this year even before they announced in July a plan to acquire 67% of Marion Laboratories Inc.
That acquisition could further dilute earnings per share this year, the company spokeswoman said.
Dow hasn't said exactly what impact the Marion acquisition will have on 1989 earnings.
Dow blamed the third-quarter earnings drop on several factors, including softer prices for polyethylene and other basic chemicals, a slower U.S. economy and a stronger dollar, which made Dow's exports from the U.S. more expensive to overseas customers.
Another problem was a 7% increase in operating costs at a time when revenue was rising by only 2%.
For the first nine months of the year, Dow earned $2.06 billion, or $11.41 a share, up 17% from $1.76 billion, or $9.32 a share, a year ago.
Sales for the latest nine months rose 7.7% to $13.34 billion from $12.38 billion in the year-ago period.
Whether or not "great cases make bad-law" -- as Justice Holmes asserted -- who can doubt that when great confirmation hearings turn on the nominee's response to these great cases they make bad judicial history?
Ethan Bronner's "Battle for Justice: How the Bork Nomination Shook America" (Norton, 399 pages, $22.50) is a spirited narrative of the nastiest of these hearings, done with journalistic verve, but with a flawed legal philosophy.
While the book amply justifies its subtitle, the title itself is dubious.
What shook America was not a battle for justice but for naked power, in which an army of judicial activists rolled over a judge they had demonized.
In its basic structure and style the book is novelistic, with piquant character portrayal, hard-wire action and devious intrigue of the sort more likely to be encountered in a Washington docudrama than in a constitutional history.
Mr. Bronner seems to believe that the hearings could have gone either way.
I doubt that.
Given Democratic frustration with the Reagan victories and Court appointments, the contingency plans in place, and Mr. Bork's paper trail of vulnerable writings, it was pretty clear that Judge Bork never stood much chance of being confirmed.
As Mr. Bronner himself says, the smell of "raw meat" was in the air.
Perhaps because they won, Mr. Bork's attackers come through more vividly than his defenders.
Ralph Neas was the organizing genius, whipping a conglomerate of pressure groups into an irresistible attacking force.
Harvard's Laurence Tribe was the constitutional heavy, laying out legal strategies for the senators and witnesses to follow.
But it was Ted Kennedy who scored most effectively with his searing portrayal of "Robert Bork's America" -- the parade of imaginary horribles that would follow logically, he claimed, from the positions Mr. Bork had taken over the space of two decades.
Sen. Kennedy, never mind his dubious credentials for the moral high ground, emoted brilliantly.
I add two others.
Republican Sen. Arlen Specter of Pennsylvania engaged the nominee in a verbal contest aimed at showing that Mr. Bork was willing to stretch the Constitution in one area (free speech) while remaining rigid in all the others.
It achieved a good media play, and enabled Sen. Specter and others to vote against Mr. Bork out of "conscience."
Further ammunition came from left legal theorist Ronald Dworkin, who in the New York Review of Books painted a picture of a constitutional zombie willfully reading his personal prejudices into the Constitution, particularly in the area of "original intent."
The charge of being "outside the mainstream" of legal thought gravely undercut Mr. Bork's scholarly standing, leaving him bleeding on the platform.
The nomination still might have been salvaged if a number of Democratic moderates in the South and Southwest had broken party lines.
But Democratic Sen. Bennett Johnson of Louisiana reminded the little band that anti-Bork blacks and women could furnish the margin to punish them in their next Senate elections.
Demographics converged with "mainstream" and demonizing to seal Robert Bork's fate.
The upshot?
Mr. Bork's opponents chose the battlefield, held it and kept it.
Yet with the smooth confirmation of Anthony Kennedy, an "80 percenter" only slightly less supportive of judicial restraint than Mr. Bork, the Democrats may have won the battle but lost the war.
Another upshot, however, was the chilling message the Bork hearings sent into the judicial culture from which the Supreme Court draws its talent.
The word went forth to every law school that those with federal court ambitions must travel a safe constitutional journey, with no paper trail and no bite to their tongue or pen.
Unfortunately, the author simply doesn't supply the philosophical frame to sustain his reportorial talents.
He has too readily swallowed the case for the activist law school culture.
Probing more deeply into the doctrine of "judicial restraint," he would have found a long history going back to the great decisions of Justice Holmes.
He would discover it also in Alexander Bickel, a subtle constitutional scholar, Mr. Bork's closest friend at Yale, whose influence on the judge goes well beyond Mr. Bronner's reporting.
Still, the long view of Robert Bork as constitutional thinker must be a spotty one.
His strength lies in his majoritarian doctrine, which keeps the Court clear of transient group pressures and leaves most decisions in a democracy to elected legislatures and executives.
Unfortunately, Mr. Bork failed to distinguish between such pressures and the emergence of great issues critical to a society that must be settled judicially if it is to cohere.
The question of segregated schools, in Brown vs. Board of Education, was such an issue.
In our time abortion has become another, best left to a line of Supreme Court decisions rather than to the chaos of 50 state legislatures.
A reflective and growing consensus of Americans clearly wishes to apply the right to privacy in contraceptive matters (decided in the Griswold case) to abortion as well.
One can understand Mr. Bork's fear that the new right to privacy will become intolerably stretched, though a Supreme Court composed of men and women with realism, guts and a sense of limits should be able to manage it.
What is certain is that if Americans allow another happening like the degrading Bork confirmation circus, it will be at their peril.
Mr. Lerner is a writer and historian living in New York.
Sotheby's Inc., the world's biggest auction house, is taking a huge Wall Street-style risk on the outcome of the sale of art from the estate of John T. Dorrance Jr., the Campbell Soup Co. heir.
The Financial Services division has guaranteed the Dorrance family that it will receive a minimum of $100 million for the collection, regardless of what the bids for the art works total, people close to the transaction say.
The collection, which includes two early Picassos, a van Gogh, a Monet, other paintings, furniture and porcelains, went on sale last night in the first of six auctions.
What Sotheby's is doing closely resembles an underwriting by an investment bank.
A corporation that wants to sell stock or bonds goes to a Wall Street firm, which purchases the securities outright, accepting the financial risk of finding buyers.
If the investment bank can sell the securities at a higher price than it paid the issuer, it makes a profit.
At the initial sale last night, for example -- the sale featuring the Impressionists masters -- bids totaled $116 million.
That was slightly above Sotheby's presale estimate of $111 million.
Normally, Sotheby's would have earned 20% of the total in commissions.
Instead, people familiar with the transaction said, the auction house opted to forgo that percentage in order to obtain the collection and in exchange for taking a bigger chunk of proceeds exceeding $100 million.
Art dealers say that while auction houses occasionally guarantee the seller of a highly desirable work of art a minimum price, a financial commitment of this size is unprecedented.
Diana D. Brooks, president of Sotheby's North America division, vehemently denies it offered the Dorrance heirs a money-back guarantee, calling such reports "inaccurate."
Buried in the glossy hardbound catalog for the sale, however, appears the statement, "Sotheby's has an interest in the property in this catalog."
Explains a Sotheby's spokeswoman, the statement "means exactly what it says.
We have some level of financial interest" in the collection.
"We don't disclose specifics."
Frank Mirabello, a lawyer for the Dorrance estate with the Philadelphia law firm of Morgan, Lewis & Bockius, declines to comment on the financial arrangements.
Sotheby's made the $100 million guarantee to keep the Dorrance collection away from its archrival, auction house Christie's International PLC; Christie's has handled smaller sales for the Dorrance family over the years.
When Christie's officials asked why the firm wasn't picked to sell the Dorrance collection, representatives of the Dorrance family "told us it was a question of financial considerations," said Michael Findlay, Christie's head of impressionist and modern paintings.
Collectors who have made their money on Wall Street have become an increasingly important part of the art business and their money has helped fuel the art boom, but recently it appears Sotheby's has been returning the compliment.
In November 1987, Sotheby's essentially offered a Wall Street-style "bridge loan" of about $27 million to Australian businessman Alan Bond to enable him to purchase Vincent van Gogh's "Irises" for $53.9 million.
It was the highest bid in history for a work of art.
But two weeks ago, Sotheby's said that it has the painting under lock and key because the loan had not been fully repaid.
Sotheby's is offering such deals because it's an art sellers' market, at least where the best works are concerned, says Ralph Lerner, an attorney and author of the book "Art Law."
"There seems to be a lot of art for sale, but there's more competition.
The competition gives the seller the ability to cut a better deal," he says.
The Dorrance family will still receive a substantial portion of the auction proceeds above $100 million, people familiar with the transaction said.
But it's likely that Sotheby's will take a higher than usual commission, called an override, on the amount exceeding the guarantee.
Sotheby's has been aggressively promoting the Dorrance sale.
At a news conference last May announcing plans for the auction, Sotheby's estimated its value in excess of $100 million.
More recently, Sotheby's has predicted the collection will fetch $140 million.
That's the highest estimate for a single collection in auction history.
The decision to put the entire collection on the block stunned many, since Mr. Dorrance had served as chairman of the Philadelphia Museum of Art, and it had been assumed many of the works would be donated to the institution.
At last night's sale, 13 of 44 works that sold were purchased by Aska International Gallery, the art-acquisition unit of Aichi Financial, a Japanese conglomerate that owns 7.5% of Christie's.
Meanwhile, Sotheby's guarantee is raising eyebrows in the art world.
"The consumer has to throw out the idea that the auction house is a disinterested middleman," says New York art dealer David Tunick.
While he adds that he has no problem with auction houses who sell works in which they have a financial interest, "It ought not to be hidden in some small print."
In such situations, he says, the house "is going to put the best light on things."
For example, an auction house's comments on the condition of a work of art that is up for sale should be looked at with "very open eyes," he says.
"There's more and more of this cash-up-front going on at every level," says Bruce Miller, president of Art Funding Corp., an art lender.
Dealers and auction houses "know if they don't lay out a half a million for this, another one will; it's that competitive."
In January, two small New York galleries, the Coe Kerr Gallery and Beadleston Fine Arts, snatched a major art collection owned by the Askin family away from rival auction-house bidders with an up-front payment of about $25 million.
A Christie's spokeswoman said that while the auction house sometimes waives its seller's commission to attract art works -- it still gets a commission from the buyer -- Christie's won't offer financial guarantees because "Christie's believes its primary role is as an auction house, and therefore as an agent {for buyer and seller}, not as a bank.
Egon Krenz, the man tapped yesterday to become East Germany's new leader, faces the same task that has fallen to neighboring socialist colleagues: reforming a country in crisis.
But unlike the other new leaders in the East Bloc, Mr. Krenz will face an immediate threat to his nation's very existence: German reunification.
Mr. Krenz, age 52, is known as an old-guard ironfist, one likely to continue the method of running a country that the Berlin Wall made famous.
Even if he were to change his stripes and become another Milton Friedman, however, he would still stand a good chance of losing a country.
Mr. Krenz almost certainly will be a younger version of Erich Honecker, his rigid predecessor as dictator.
Mr. Krenz has followed much the same career path as Mr. Honecker: Both spent years overseeing the Freie Deutsche Jugend, the youth group that is the communist regime's principal tool for stamping young Germans into socialist citizens.
More recently, Mr. Krenz has been in charge of East German security, and is the youngest member of the ruling Politburo.
Faced with another Mr. Honecker, so many despairing East Germans are likely to flee that the two German peoples will get their reunification, de facto, on West German ground.
But if East Germany's arthritic Politburo does loosen up enough to permit Mr. Krenz to make serious efforts at reform, he will face a challenge just as fundamental.
Abandoning socialism means abandoning the East German state's reason for existence, and with it the justification for its watchdogs and its Wall.
In this scenario it's hard to imagine that a pale imitation of the Federal Republic could avoid being pulled into some kind of tie -- economic, federal or stronger -- with West Germany.
Mr. Krenz may need a bit of time to consolidate his empire, which would do a lot to promote Reunification Scenario One.
Cartoonists in West Germany have already mocked the exodus by imagining an advertisement placed by Mr. Honecker: "Wanted: one people."
The West German embassies in Prague, Budapest and Warsaw are continuing to find refugees at their gates.
Of course East Germany, true to its tradition, could tighten its borders yet further.
Two of the last gestures of the Honecker regime were to close the border to Czechoslovakia and install halogen lights in some spots along the frontier.
But with world-wide opinion -- even, apparently in Moscow -- against East Germany, the country would have to turn itself into an Albania to clamp down further on refugees.
There have been some reports that Mr. Krenz is moving to "soften" his reputation, notably rumors that it was he who kept East Germany's state police off protesters' backs at the country's dismal 40th anniversary celebrations earlier this month.
But even if he effects a Hyde-to-Jekyll transformation, he will face a serious ideological crisis and Reunification Scenario Two.
The problem is one that East Germany shares with other half-states, such as North Korea, but one it must shoulder alone in the East Bloc.
When Poland moves to reform, it can at least lean on its past: However flawed and short-lived Joseph Pilsudski's interwar republic, it was a nonsocialist democracy.
Czech reformers can recall the Wilsonian ideals of the same period in their country.
Even the Soviet Union has Peter the Great to rediscover, should it choose to.
But East Germany is merely "the land of truly existing socialism."
Beyond that, it has to compete with West Germany for a claim to the German identity.
Up to now, the main weapon of the "worker and peasant state" has been the ideology of socialism.
With talk today of a second economic miracle in West Germany, East Germany no longer can content itself with being the economic star in a loser league.
Without Moscow's military and party behind it, East Germany runs the risk of disintegrating.
If it goes capitalist, and increases trade with West Germany, it will convert itself, willy-nilly, into an economic annex of the Federal Republic.
There's a certain cruel logic at work here: It's particularly appropriate -- and tragic -- that the land that produced Karl Marx should prove socialism's failure in an experiment that uses its own people as controls.
There may be forces that would delay this scenario.
Ideologues are the last to surrender, and Germans are an ideological people.
The protesters who greeted Mikhail Gorbachev at East Berlin's airport earlier this month weren't shouting "Go U.S.A" -- they were chanting "Gorby, Help Us."
Ideologues on the other side of the border can also slow the process.
Helmut Kohl's governing conservative coalition is proving admirably true to the West German constitution by making more than 500,000 people of German descent automatic citizens this year alone.
But within the government and in the think tanks outside it, many West Germans maintain that they don't want immediate reunification.
Politically, this currently is wisdom -- particularly given a nervous neighboring France.
But it would be ironic if Germany's reunification, just like its division, eventually were the result of actions in centers of power other than Bonn and Berlin.
In a statement that was as close as East Germany gets to practicing "glasnost", Otto Reinhold, an East German party theorist, actually acknowledged the reunification dilemma.
"The main problem," Mr. Reinhold said in an East German radio interview monitored by Radio Free Europe in Munich, stems from the fact that "the GDR is different" from other East European states.
"What kind of right to exist," he asked, "would a capitalist German Democratic Republic have alongside a capitalist Federal Republic?"
That's a question East Germany can't answer easily, no matter what its new leader does.
Miss Shlaes is editorial features editor of The Wall Street Journal/Europe.
INSURERS ARE FACING billions of dollars in damage claims from the California quake.
But most businesses in the Bay area, including Silicon Valley, weren't greatly affected.
Computer and software companies in the region are expecting virtually no long-term disruption in shipments.
Also, investors quickly singled out stocks of companies expected to profit or suffer from the disaster.
Leveraged buy-outs may be curbed by two rules in pending congressional legislation.
The provisions, in deficit-reduction bills recently passed by the House and Senate, could raise the price tags of such deals by up to 10% and cool the takeover boom.
A bill giving the Transportation Department the power to block airline leveraged buy-outs cleared a House panel.
But Secretary Skinner said he would urge Bush to veto the bill.
Housing starts sank 5.2% in September to a seven-year low.
The drop, following a 6.2% decline in August, indicates the industry is still being hurt by the Fed's anti-inflation battle.
IBM plans to buy back $1 billion of its common shares, a move likely to help the computer giant's battered stock.
The buy-back, which wasn't a complete surprise, was announced after the stock market had closed.
A capital-gains tax cut plan has been worked out by Senate Republicans.
A similar proposal may be introduced soon by Senate Democrats.
British Airways said it is seeking improved terms and a sharply lower price in any revised bid for United Air's parent.
The British carrier also confirmed it isn't committed to going forward with any new bid.
UAL's stock fell $6.25, to $191.75.
Stock prices rose slightly as trading slowed, while bonds ended little changed despite a slumping dollar.
The Dow Jones industrials gained 4.92, to 2643.65.
But investors remain wary about stocks, partly because of turmoil in the junk-bond market.
B.A.T Industries may delay part of its defensive restructuring plan, including the sale of its Saks Fifth Avenue and Marshall Field units.
The British conglomerate cited the recent turmoil in financial markets.
WCRS Group announced a major restructuring that largely removes it from the advertising business.
The London-based concern will sell most of its ad unit to France's Eurocom.
Commodore International expects to post its second consecutive quarterly loss because of weak personal computer sales in some markets.
Jaguar hopes to reach a friendly accord with General Motors within a month that may involve producing a cheaper executive model.
Sears is negotiating to refinance its Sears Tower for close to $850 million, sources said.
The retailer was unable to find a buyer for the building.
Whitbread of Britain put its spirits division up for sale, setting off a scramble among distillers.
The business includes Beefeater gin.
Markets --
Stocks: Volume 166,900,000 shares.
Dow Jones industrials 2643.65, up 4.92; transportation 1247.87, off 6.40; utilities 213.97, off 0.57.
Bonds: Shearson Lehman Hutton Treasury index 3371.36, off
Commodities: Dow Jones futures index 129.90, up 0.18; spot index 130.36, up 0.39.
Dollar: 141.45 yen, off 1.30; 1.8485 marks, off 0.0182.
The dollar finished softer yesterday, tilted lower by continued concern about the stock market.
"We're trading with a very wary eye on Wall Street," said Trevor Woodland, chief corporate trader at Harris Trust & Savings Bank in New York.
"No one is willing to place a firm bet that the stock market won't take another tumultuous ride."
News of the major earthquake in California Tuesday triggered a round of dollar sales in early Asian trade, but most foreign-exchange dealers said they expect the impact of the quake on financial markets to be short-lived.
Despite the dollar's lackluster performance, some foreign-exchange traders maintain that the U.S. unit remains relatively well bid.
Harris Trust's Mr. Woodland noted that the unit continues to show resilience in the face of a barrage of "headline negatives" in recent weeks, including rate increases in Europe and Japan, aggressive central bank intervention, a 190-point plunge in New York stock prices, an unexpectedly poor U.S. trade report and action by the Federal Reserve to nudge U.S. rates lower.
While Mr. Woodland doesn't predict a significant climb for the U.S. unit in light of recent moves in interest rates around the world, he noted that "its downside potential is surprisingly and -- for dollar bulls -- "impressively" limited.
In late New York trading yesterday, the dollar was quoted at 1.8485 marks, down from 1.8667 marks late Tuesday, and at 141.45 yen, down from 142.75 yen late Tuesday.
Sterling was quoted at $1.5920, up from $1.5753 late Tuesday.
In Tokyo Thursday, the U.S. currency opened for trading at 140.97 yen, down from Wednesday's Tokyo close of 142.10 yen.
Since Friday's dive in stock market prices, the Fed has injected reserves into the banking system in an effort to calm the markets and avert a repeat of 1987's stock market debacle.
Some analysts note that after last week's stock market tailspin and Tuesday's California earthquake, it's hard to gauge where the central bank wants the key federal funds rate.
They say that the earthquake, by preventing many banks from operating at full capacity, has given the Fed an additional reason to keep liquidity at a high level.
The Fed did, in fact, execute $1.5 billion of liquidity-enhancing customer repurchase agreements, the third set of repurchase orders in three days.
Analysts said the additional liquidity should tend to reduce the federal funds rate.
For now, traders say the foreign exchange market is scrutinizing both federal funds and events on Wall Street.
They note that the dollar remains extremely vulnerable to the slightest bad news from the stock exchange.
Indeed, the U.S. unit edged lower as the Dow Jones Industrial Average dropped about 13 points in early trading.
A slight recovery in the stock market gave currency traders confidence to push the dollar higher before the unit dropped back by day's end.
Some dealers noted that nervousness over the recent sharp dive in stock prices could intensify following suggestions by Bank of Japan Governor Satoshi Sumita that appeared to advise Japanese investors to be very careful in investing in U.S. leveraged buy-outs.
Dealers suggest that the only positive news on the horizon that could detract attention from equities transactions is September's U.S. consumer price data.
The figures, due for release Friday, are expected to show an uptick in inflation to 4.8% from 4.7% in August.
If the figures show a hefty rise in inflation, they could militate against easing by the Fed.
On the Commodity Exchange in New York, gold for current delivery rose $1.30 to $368.70 an ounce in moderate trading.
Estimated volume was three million ounces.
In early trading in Hong Kong Thursday, gold was at $368.15 an ounce.
Crude prices spurted upward in brisk trading on the assumption that heavy earthquake damage occurred to San Francisco area refinery complexes, but the rise quickly fizzled when it became apparent that oil operations weren't severely curtailed.
Trading on little specific information, market players overnight in Tokyo began bidding up oil prices.
The rally spread into European markets, where traders were still betting that the earthquake disrupted the San Francisco area's large oil refining plants.
By yesterday morning, much of the world was still unable to reach San Francisco by telephone.
West Texas Intermediate was bid up more than 20 cents a barrel in many overseas markets.
At the opening of the New York Mercantile Exchange, West Texas Intermediate for November delivery shot up 10 cents a barrel, to $20.85, still on the belief that the refineries were damaged.
In the San Francisco area, roughly 800,000 barrels a day of crude, about a third of all the refining capacity in California, is processed daily, according to industry data.
For more than the past year, even the rumor of a major West Coast refinery shutdown has been enough to spark a futures rally because the gasoline market is so tight.
But yesterday, as the morning wore on, some major West Coast refinery operators -- including Chevron Corp., Exxon Corp. and the Shell Oil Co. unit of Royal Dutch/Shell Group -- said their refineries weren't damaged and were continuing to operate normally.
Most said they shut down their petroleum pipeline operations as a precaution but didn't see any immediate damage.
Gasoline terminals were also largely unhurt, they said.
"It's hard to imagine how the markets were speculating, given that nobody could get through to San Francisco," said one amazed oil company executive.
As the news spread that the refineries were intact, crude prices plunged, ending the day at $20.56 a barrel, down 19 cents.
Gasoline for November delivery was off 1.26 cents a gallon to 54.58 cents.
Heating oil finished at 60.6 cents, down 0.45 cent.
"The market was basically acting on two contradictory forces," said Nauman Barakat of Shearson Lehman Hutton Inc.
"One is the panic, the earthquake in San Francisco, which is positive."
But once that factor was eliminated, traders took profits and focused on crude oil inventories, Mr. Barakat said.
After the market closed Tuesday, the American Petroleum Institute had reported that crude stocks increased by 5.7 million barrels in the week ended Friday, which traders viewed as bearish.
But some market players still think earthquake speculation could have more impact on the oil markets.
"The problem is that while on the surface everything is all right, the question is," said Mr. Barakat, "was there any structural damage to the pipelines or anything else."
In other commodity markets yesterday:
COPPER:
Futures prices eased on indications of improvement in the industry's labor situation.
The December contract declined 1.85 cents a pound to $1.2645.
According to one analyst, workers at the Cananea copper mine in Mexico, which hasn't been operating since it was declared bankrupt by the Mexican government in late August, are set to return to work.
The analyst said it will take about two to three months before the mine begins to produce copper in significant quantities.
He added that, while there hasn't been any official announcement as yet, the Highland Valley mine strike in British Columbia, which has lasted more than three months, is regarded as settled.
Another analyst said the Cananea return to operation may not be as near as some expect.
"There are still negotiations taking place on whether there will be a loss of jobs, which has been a critical issue all along," he said.
Nevertheless, the increasing likelihood that these two major supply disruptions will be resolved weighed on the market, the analysts agreed.
Both of these mines are normally major suppliers of copper to Japan, which has been buying copper on the world market.
The first analyst said that the Japanese, as well as the Chinese, bought copper earlier in the week in London, but that this purchasing has since slackened as the supply situation, at least over the long term, appears to have improved.
"The focus for some time has been on the copper supply, and good demand has been taken for granted," he said.
"Now that the supply situation seems to be improving, it would be best for traders to switch their concentration to the demand side."
He noted the Commerce Department report yesterday that housing starts in September dropped 5.2% from August to 1.26 million units on an annualized basis, the lowest level in seven years.
"Along with these factors, other economic reports suggest a slowing of the economy, which could mean reduced copper usage," he said.
SUGAR:
Futures prices extended Tuesday's gains.
The March delivery ended with an advance of 0.16 cent a pound to 14.27 cents, for a two-day gain of 0.3 cent.
According to one dealer, Japan said it has only 40,000 tons of sugar remaining to be shipped to it this year by Cuba under current commitments.
The announcement was made because of reports Tuesday that Cuba would delay shipments to Japan scheduled for later this year, into early next year.
The dealer said the quantity mentioned in the Japanese announcement is so small that it's meaningless.
One analyst said he thought the market continued to be supported to some degree by a delay in the Cuban sugar harvest caused by adverse weather.
The dealer said India might be the real factor that is keeping futures prices firm.
That country recently bought 200,000 tons of sugar and had been expected to seek a like quantity last week but didn't.
"It's known they need the sugar, and the expectation that they will come in is apparently giving the market its principal support," the dealer said.
LIVESTOCK AND MEATS:
The Agriculture Department is expected to announce tomorrow that the number of cattle in the 13 major ranch states slipped 4% to 8.21 million on Oct. 1 compared with the level a year earlier, said Tom Morgan, president of Sterling Research Corp., Arlington Heights, Ill.
Cattle prices have risen in recent weeks on speculation that the government's quarterly report will signal tighter supplies of beef.
Among other things, the government is expected to report that the number of young cattle placed on feedlots during the quarter slipped 3%.
Feedlots fatten cattle for slaughter, so a drop indicates that the production of beef will dip this winter.
Indeed, some analysts expect the government to report that the movement of young cattle onto feedlots in the month of September in seven big ranch states dropped 8% compared with the level for September 1988.
The following issues were recently filed with the Securities and Exchange Commission:
Health Care Property Investors Inc., offering of 2,250,000 shares of common stock, via Merrill Lynch Capital Markets, Alex. Brown & Sons Inc. and Dean Witter Reynolds Inc.
Union Pacific Corp., shelf offering of up to $500 million debt securities and warrants.
United Technologies Corp., shelf offering of up to $500 million unsubordinated non-convertible unsecured debt securities.
A new drug to prevent the rejection of transplanted organs has been successfully used on more than 100 patients at the University of Pittsburgh, according to researchers.
The drug, which is still in the experimental phase, hasn't been approved yet by the Food and Drug Admistration, and its long-term effects are unknown.
But researchers say the drug, called FK-506, could revolutionize the transplantation field by reducing harmful side effects and by lowering rejection rates.
Rejection has been the major obstacle in the approximately 30,000 organ transplants performed world-wide each year.
Researchers began using the drug in February on patients who had received kidney, liver, heart and pancreas transplants.
Only two of 111 transplants have been rejected.
The drug, discovered in 1984, is metabolized from soil fungus found in Japan.
The Pittsburgh patients are the first humans to be given the drug, which is made by Fujisawa Pharmaceutical Co.
"We're shocked by it, because it's worked so fast," said Dr. Thomas E. Starzl, director of the University of Pittsburgh Transplantation Program, at a news conference here yesterday.
"We consider it a life-saving drug, like one for AIDS," said Dr. John Fung, an immunologist at the University of Pittsburgh.
Researchers say they believe FK-506 is 100 times more effective than the traditional anti-rejection drug, cyclosporine, made by Swiss pharmaceutical giant Sandoz Ltd.
They are also encouraged by the relatively mild side effects of FK-506, compared with cyclosporine, which can cause renal failure, morbidity, nausea and other problems.
"The side effects {of cyclosporine} have made the penalty for its success rather high," Dr. Starzl said.
Dr. Fung said that FK-506 would not be available in the market for at least a year, and that the FDA approval process usually takes three years to five years.
There are no firm plans to expand the experimental program beyond the University of Pittsburgh, whose hospital performs the most transplants in the world.
Researchers couldn't estimate the cost of the drug when it reaches the market, but they said FK-506 will enable patients to cut hospital stays by 50% and reduce the number of blood tests used to monitor the dosage of cyclosporine and other drugs among transplant recipients.
Dr. Starzl said the research has been largely financed by the National Institute of Health and by university funds, and that Fujisawa didn't give the hospital any grants.
He said that the research team had no financial stake in the drug.
"We've known for six months the effect of this drug, and our advice to our people has been not to buy the company's stock," Dr. Starzl said, adding that profiting from FK-506 wouldn't be ethical.
Economist David N. Laband's Sept. 27 editorial-page article, "In Hugo's Path, a Man-Made Disaster," decries the control of price gouging, swiftly ordered by South Carolina's governor after Hurricane Hugo.
According to Mr. Laband, "screaming" for price controls occurs when income redistribution "threatens to hit home."
To be sure, the threat has hit home down here.
Yet in Mr. Laband's rehash of free-market logic, human greed and self-interest are the only permissible psychological reactions.
Allowing uncontrolled prices for necessities would indeed shorten the lines at stores, as he contends.
But not because resources are going to their most efficient use, leaving scarce goods "allocated to those buyers who place the highest value on them."
Rather, lines would diminish because at higher prices many victims could not afford necessities such as food and medical supplies.
It is inhumane to imply that a poor, unemployed woman cannot receive immediate relief for her family at fair prices because she does not have as much to protect as a rich family.
Moreover, essential relief supplies such as ice must be distributed throughout the population because of potential health problems from spoiled food and possible outbreak of disease.
Such spillover effects give the state a right to intervene in the marketplace and temporarily coordinate allocation of resources.
Fortunately, volunteers and charities are not motivated by self-interest, but by altruism.
Why should they have to co-exist with opportunists rushing in to turn a quick profit?
These latter-day scalawags would be ill-advised to take advantage of the situation, if they ever expect to face the people of South Carolina again.
The government is actually protecting avaricious ice-baggers and other profiteers who cannot see beyond their own short-term gain.
South Carolina deserves an A for its quick and timely relief efforts.
Mr. Laband, meanwhile, gets an A for his rote recital of economic-efficiency arguments.
Give him an F for his failure to understand the ethics of economic equity.
Signed by 25 students
Of Douglas Woodward's Honors Economics Class,
University of South Carolina
Columbia, S.C.
Mr. Laband gives us an idea why economists' predictions are usually wrong.
They set up absurd situations, detached from reality, and then try to reason from them.
I'm surprised he didn't advocate letting people loot, since that behavior can also be foreseen in a disaster and "every individual has an incentive to alter the distribution of income in his favor."
Price controls were "so fervently embraced by Charleston" because price gouging in this situation is equivalent to looting.
Suzanne Foster
Galax, Va.
Mr. Laband described one of the more insidious threats we face when dealing with disasters such as Hugo -- anti-profiteering ordinances such as that by the Charleston City Council as it thrashed about trying to Do Something.
Since he concentrated on the economic folly of such ordinances, he didn't mention certain other of their effects.
They divert law-enforcement resources at a time they are most needed for protecting lives and property.
Also, rather than increase supplies, they reduce them and encourage hoarding.
And they, or even the prospect of them, discourage disaster preparedness in the form of speculative advance stocking of supplies by merchants.
N. Joseph Potts
Miami Lakes, Fla.
Would Mr. Laband also suggest that the Red Cross, Salvation Army, military units, police, fire departments, rescue units and individual citizens cease their efforts to assist Hugo's victims because they interfere with his concept of the "free market"?
What about those caring people all over the country who are donating food, water and other necessities of life to these people who could be any of us?
Should they, too, stop "messing with" his free market?
Maybe he thinks they should also sell to the highest bidder.
And what about insurance firms?
Should they be required to pay claims based on exorbitant costs for labor and materials?
Mr. Laband should beware, since he lives in South Carolina.
In a free market, his insurance rates can be raised to recover insurance-company losses.
John W. Rush
Marietta, Ga.
Having been through several tornadoes and hurricanes, I have a different perspective.
Mine comes from seeing thriving communities devastated -- but only temporarily.
Their recovery came surprisingly fast, and always with the help of neighbors.
The shock of seeing homes destroyed and city services disrupted may cause some to confuse priorities such as the true economic value of a freezer full of meat.
In Texas after Hurricane Alicia, major grocery chains used their truck fleets to ship essential goods to Houston, no gouging, just good will.
Tom Mongan
Victoria, Texas
We here in the affected areas were dazzled by Mr. Laband's analysis of time values and his comparisons of effectiveness concerning research and development.
His theoretical approach and its publication in this venerable paper are no doubt a noteworthy accomplishment for him.
Too bad theory fails in practice.
We consumers tend to have long memories.
The businesses subscribing to Mr. Laband's effective price system will be remembered when normalcy returns.
Perhaps, considering the value of our time, we will be unable to patronize their establishments in the post-Hugo era.
I have a question for Mr. Laband: How do I explain to the single mother of three standing in line next to me for the past three hours that the two bags of ice she needs to keep her children's food edible will take her last $20?
I'm sure she'll appreciate what an efficient reaction to her problems the price system has created.
Chris Edgar
Myrtle Beach, S.C.
This seems to be the season for revivals in Chicago.
Though the Cubs' championship season ended with the National League playoffs, a revival of the Organic Theater's production of "Bleacher Bums," a play in nine innings set in the Wrigley Field bleachers, continues within spitting distance of the ballpark.
Revivals of a different sort also are being offered by our two major theater troupes, the Goodman and Steppenwolf.
Each is more problematic than an unexpected divisional baseball championship, but both help explain why Chicago remains a vital center of this country's regional theater movement.
The Goodman is offering a modernized version of Moliere's "The Misanthrope" through Nov. 4.
The original is a comedy about Alceste, a man who sees falseness and vanity in everyone except himself.
He is the jealous friend of Philinte, and the jealous lover of Celimene.
The play is filled with intrigue, dishonesty and injustice.
Twenty-five years ago the poet Richard Wilbur modernized this 17th-century comedy merely by avoiding "the zounds sort of thing," as he wrote in his introduction.
Otherwise, the scene remained Celimene's house in 1666.
Assuming modern audiences readily understand that Moliere's social indictment covers their world as well as 17th-century Paris, Mr. Wilbur concentrated his formidable artistry on rendering the Alexandrine French verse into sprightly and theatrical English iambic pentameter.
The Wilbur translation is remarkable -- well worth a read and even better seen in the theater if you ever have the opportunity.
But if you happen to be coming to Chicago in the next few weeks, don't fail to have a look at Robert Falls's "The Misanthrope" at the Goodman.
If Mr. Wilbur's translation is a finely ground lens through which we see the pettiness and corruption of 17th-century Paris, Mr. Falls's production is a mirror in which we see ourselves.
Mr. Falls, the Goodman's artistic director, took a recent adaptation by Neil Bartlett and significantly adapted it.
Mr. Bartlett had slimmed Moliere's cast of characters to six and set them in the London media world of Thatcherite Britain.
Mr. Falls transfers the setting to Hollywood, and transforms the characters into what passes for aristocracy there -- agents, producers, actors, writers and sycophants.
It works.
Mr. Bartlett managed to more or less maintain Moliere's Alexandrine verse form, 12 syllable lines in rhyming couplets.
Mr. Falls kept the form, but Americanized it with Mr. Bartlett's further help.
With a splendid cast led by David Darlow as Alceste, Christina Haag as Celimene and, especially, William Brown as a Philinte who plays the Hollywood game but harbors authentic values and feelings, the Goodman production barrels through an all-night Hollywood party with exuberance and wit.
If this version, with its references to Steven Spielberg, Spago and "thirtysomething" attracts younger audiences who might stay away from the classical version, then Messrs. Bartlett and Falls are justified in abandoning Mr. Wilbur.
A 300-year-old play may be easier to revive than one merely 25.
The Steppenwolf Theatre Company, back from a critical and box office success in London with its adaptation of Steinbeck's "The Grapes of Wrath," opened the new season with Harold Pinter's "The Homecoming," first produced by the Royal Shakespeare Company in 1965.
Back then, Mr. Pinter was not only the angry young British playwright, but also the first to use silences and sentence fragments and menacing stares, almost to the exclusion of what we previously understood to be theatrical dialogue.
When "The Homecoming" was first produced on this side of the Atlantic, actors and directors were reverential.
Silences were lengthy -- nobody moved or gestured.
Nobody smiled onstage, and nobody in the audience was encouraged to laugh.
This kind of theater was new to us.
Also, it was not a funny time over here, what with the Vietnam War, the '68 Democratic convention, assassinations and riots.
But under Jerry Perry's direction the current Steppenwolf production, scheduled to play through Nov. 19, breaks through the flat and boring ritual that "The Homecoming" had become.
Led by a near-perfect performance by Alan Wilder as Max, the father, the play is at once an appalling and hilarious dissection of a family's rage, bitterness, fear and isolation.
Encouraged by Mr. Wilder's sly grins, embarrassed grimaces and sputtering rages, the audience gets the joke and begins to laugh before the end of the first act.
Three of the family members, Max and his two sons, Lenny and Joey, live off the flesh: Max is a retired butcher, Lenny a pimp and Joey an aspiring boxer.
Sam, Max's brother, has escaped the flesh by working as a liveried chauffeur and never seeking a wife.
Teddy, the eldest of Max's sons, has made the most dramatic escape by becoming a professor of philosophy at an American university.
Though it's clearly Max's wife who held sway here until her death, now none of the other male residents of this misbegotten household can challenge Max.
The play concerns Teddy's homecoming with his wife of six years, Ruth.
Curiously, Randall Arney as Teddy seems the only cast member unable to get beyond the zombie approach to a Pinter character.
As Ruth, Moira Harris, a large and beautiful woman who may be our next Colleen Dewhurst, begins almost immediately to overpower each of the men.
In the end, Teddy returns alone to America, leaving Ruth in Max's chair.
We have seen her develop within a few hours from a shy and unknown in-law to a goddess of the flesh who will replace the dead mother, and then some.
While Steppenwolf was in London with "The Grapes of Wrath," Bruce Sagan, the president of its board of directors, quietly returned to Chicago to buy a piece of real estate in the city's rapidly reviving North Halsted Street restaurant and theater district.
Within a year he hopes Steppenwolf will move into a new 500-seat theater on that site.
The troupe currently performs in a converted dairy that seats 211 and provides little capacity for staging anything beyond a simple one-set production.
"If we wanted to stage `Death of a Salesman,' " Mr. Sagan says, "Willie Loman would have to live in a ranch house because of the low ceiling."
Steppenwolf needs the extra seats even more than the fly space.
It's currently forced to turn away many potential subscribers beyond the 13,000 who can be accommodated in its present digs.
For all the attention that Chicago theater has received during the past decade, not one new building has been devoted to it.
Mr. Sagan, a former publisher and real estate developer, has put together an $8 million financial package that includes approximately $4 million of tax exempt bonds issued by the State of Illinois (the first time that a state has used its educational facilities authority to support construction of a theater), and approximately $1 million in grants from the National Endowment for the Arts, the MacArthur Foundation, and a few other deep pockets.
The rest, he is confident, can be raised.
His board members alone have pledged $800,000 and he is just beginning to massage local foundations and corporations.
Mr. Sagan compares the importance of Steppenwolf with Orson Welles's Mercury Theater in the '30s.
But Welles's theater company turned out to have a brief -- one might say a mercurial -- existence.
What will Mr. Sagan do with his new theater building if the allure of Hollywood and Broadway proves too much for such Steppenwolf stalwarts as John Malkovich ("Dangerous Liaisons"), Joan Allen ("The Heidi Chronicles"), and Glenne Headly ("Lonesome Dove"), and the company crumbles?
"That's OK," Mr. Sagan replies.
"Let this building be Steppenwolf's legacy to Chicago theater."
Mr. Henning is a Chicago-based law firm management consultant and a writer.
After enduring three days of heavy selling, the beleaguered Nasdaq over-the-counter market finally rebounded, rising sharply in hearty trading.
The Nasdaq Composite Index jumped 0.7%, or 3.35, to 463.28.
It rose more than the New York Stock Exchange Composite, which improved 0.2%.
Among bigger stocks, the Nasdaq 100 Index rose 1%, or 4.56, to 453.05, while the Dow Jones Industrial Average was up 0.2%.
Richard Bruno, head of OTC trading at PaineWebber, said the OTC market has a habit of lagging big moves on the New York Stock Exchange.
While the industrial average rallied on Monday following last Friday's collapse, the OTC market, which didn't suffer too badly during the correction, tumbled.
"Our market got hit a lot harder on Monday than the listed market," Mr. Bruno said.
"We're just recovering and getting back to business as usual.
I'm encouraged by the action."
The trading pace was busy, with 4,343 issues and 147.6 million shares changing hands.
Advancing issues beat declining ones, 1,271 to 811.
Much of the jockeying by OTC traders and investors centered on shares of companies that might be financially affected by damage from the devastating earthquake in northern California.
As investors speculated about the long- and short-term implications, shares of a number of companies that might either profit or face problems because of the disaster were actively traded.
Heading the list: insurance, construction and technology companies located in the San Francisco Bay Area.
Insurance-related stocks were mixed as investors tried to figure out how to assess the impact of the property damage and deaths on those concerns.
Traders said property-casualty companies with the heaviest exposure in the San Francisco area include the OTC's Safeco and Ohio Casualty.
Frank Gilmartin, a trader who follows insurance stocks for Fox-Pitt Kelton, said his strategy was to sell early.
Then, if the stocks fell sharply, he planned to begin buying them aggressively, on the theory that the companies that insure against property damage and accidents will have to raise rates eventually to compensate for the claims they will pay to earthquake victims and victims of last month's Hurricane Hugo.
As well, reinsurers and insurance brokerage companies will have improved profits.
Many investors expected damage from the hurricane to be the catalyst for higher rates in the industry, which has been depressed because of low rates arising from intense competition.
But Mr. Gilmartin said the hurricane damage wasn't extensive enough to prompt premium boosts.
"The companies just gave back what they had reserved for," he said.
"Now, they'll have to increase their coffers to protect for the future and that means rate increases."
Overall OTC insurance issues were mixed.
Safeco fell 1/8 to 32 5/8 on 462,900 shares.
Ohio Casualty rose 1/4 to 51 3/4 on 137,200 shares.
St. Paul Cos. jumped 2 to 59 3/4 on 517,500 shares.
Academy Insurance fell 1/32 to 1 3/16; but volume totaled 1.2 million shares.
The Nasdaq Insurance Index jumped 4.15 to 529.32 on the day, while the barometer of big insurance and banking issues climbed 1.72 to 455.29.
Investors expect SunGard Data Systems, a company that provides disaster recovery services for computer-dependent businesses, to profit from the earthquake.
SunGard's stock rose 1 3/4 to 21 1/4 on 194,000 shares.
Shares of Kasler, a California road and bridge builder, were heavily traded, jumping 2 1/8 to 9 7/8 on 1.3 million shares.
Guy F. Atkinson added 7/8 to 16 7/8, on 335,700 shares.
The company, based in San Francisco, provides industrial infrastructure engineering and construction services.
Traders were initially nervous about shares of companies, including many leading OTC computer companies, such as Apple Computer with offices in the vicinity of the area damaged by the quake.
But most of those stocks fared well.
Apple Computer gained 1 to 48 1/4; Ashton-Tate rose 3/8 to 10 3/8.
Intel also added 3/8 to 33 7/8.
But Sun Microsystems slipped 1/4 to 17 1/4.
Shares of biotechnology companies in the area were also higher.
Chiron was up 1/2 to 27 and Cetus gained 1/2 to 16 3/8.
The stocks of computer-related companies located outside California improved, too.
Microsoft advanced 1 7/8 to 80 1/2 and Lotus Development added 1 1/4 to 32 1/2.
In other earthquake-related news, Hambrecht & Quist's OTC market makers were excused from trading yesterday and its positions were frozen for the day by the National Association of Securities Dealers.
Power couldn't be restored at the company's San Francisco headquarters to allow trading yesterday morning.
In New York, Roger Killion, a Hambrecht executive vice president, said he expects OTC trading at the company to resume this morning, either in New York or in San Francisco.
In other trading, Medco Containment Services gained 7/8 to 15 on 1.9 million shares after reporting a loss for the first quarter, which ended Sept. 30.
The company earned $6.6 million in the year-earlier quarter.
Jaguar's American depositary receipts added 3/8 to 10 3/4 on volume of 1.1 million.
Analysts in London believe investors, despite their stampede to dump takeover stocks, should hold on tight to their Jaguar shares, this newspaper's Heard on the Street column said yesterday.
Amgen rose 1 1/2 to 50 3/4 in heavy trading.
Analysts figure Amgen could benefit as a result of troubles facing its competitor, Genetics Institute, over the anti-anemia drug EPO.
Genetics Institute disclosed recently that it is embroiled in a dispute with Boehringer Mannheim, which distributes the drug, regarding the usability of some batches.
Ciba-Geigy Ltd. and Chiron Corp. said they extended their offer for Connaught BioSciences Inc., valued at 866 million Canadian dollars (US$736 million) to Oct. 27.
The companies earlier said they didn't want to raise their offer to match a rival bid by Institut Merieux S.A. of C$37 a share, or C$942 million.
But they said the C$30-a-share bid, which was due to expire Monday, may still be extended or varied.
Merieux, a vaccine manufacturer based in Lyon, France, is 51%-held by French state-owned Rhone-Poulenc S.A.
Ciba-Geigy is a major pharmaceutical concern based in Basel, Switzerland.
Chiron, another pharmaceutical concern, is based in Emeryville, Calif.
Connaught is a biotechnology research and vaccine manufacturing concern.
Institut Merieux's bid for Toronto-based Connaught has run into problems with the Canadian government, which told Merieux last week that it wasn't convinced that the proposed acquisition would be of "net benefit" to Canada.
Merieux officials are expected to meet with federal officials in Ottawa today to discuss the decision.
Within minutes after the stock market closed Friday, I called Sen. Bill Bradley of New Jersey, advised him that the Dow Jones Industrial Average had declined by 190 points late that afternoon, and cheerfully informed him that he and his fellow Democrats were to blame.
They had dealt a major setback that afternoon to President Bush's capital-gains tax cut proposal, which had seemed in the bag after it passed the House overwhelmingly earlier in the month.
Sen. Bradley has it in his mind that such a tax cut would unravel the tax reform he helped engineer in 1986.
But he knows that as many as 20 of his fellow Democrats are disposed to vote for the cut, popular among their constituents.
As a result, he took the lead in arguing that the cut should be blocked on procedural grounds.
He helped persuade 10 of these senators to support him and Majority Leader George Mitchell on these grounds.
The budget reconciliation had to be dealt with by the Oct. 15 deadline, and these Senate Democrats refused to agree to allow a vote to append capital gains to the budget bill, knowing it would pass.
Denied a vote on substance, the GOP leadership in the Senate on Friday morning was confronted with a hard choice.
It could throw in the towel and hope to win on capital gains late this month, or it could follow the White House strategy, to veto reconciliation unless capital gains was appended.
The U.S. Chamber of Commerce has been in the forefront in supporting the Bush proposal.
It endorsed the White House strategy, believing it to be the surest way to victory.
At noon Friday, a senior White House official advised Richard Rahn, the Chamber's chief economist, that the White House would not agree to a budget reconciliation bill unless it had firm assurances that a vote on substance would be permitted in the Senate.
Two hours later, the first word emerged on Capitol Hill that the administration had agreed to reconciliation with no such assurances from Senate Democrats.
Mr. Rahn was shocked, telephoning the office of Richard Darman, director of the Office of Management and Budget, and the administration's chief strategist on this issue.
He left a message accusing Mr. Darman of selling out.
It was the Senate Republicans, though, who had edged away from the veto strategy.
The stock market reacted as Mr. Rahn did, crumbling as it absorbed the news that Mr. Darman's strategy had been abandoned.
The stock market, after all, represents the collective expectations about the value of the future income stream of the nation's capital stock, discounted to present value.
Why should it be so surprising that a 30% cut in the capital-gains tax would have such an enormous impact on the value of the nation's capital stock?
The total value of privately held assets is easily more than $15 trillion.
The value traded on the exchanges is close to $3 trillion.
If the tax on any gain to those assets was doubled, wouldn't the value fall to the owners of the assets?
Isn't it reasonable to assume that the asset you own would be worth more if the government suddenly announced that if you sold it, you would be able to keep 30% more of its gain than you previously believed?
Indeed, the stock market's steady advance this year tracked with President Bush's success in advancing his capital-gains proposal.
A 30% cut in this year's capital gains alone amounts to roughly $50 billion.
We're talking real money.
When Richard Rahn advised the financial press that the market crash was caused by the setback to capital gains, he was generally ignored and mildly ridiculed.
Instead, the press corps readily accepted the notion that a snag in the takeover financing of United Airlines instantly knocked 7% off the value of the nation's capital stock and caused convulsions around the world.
Mr. Rahn was pointing out an elephant rumbling through Wall Street while conventional wisdom had fastened on the UAL flea.
Why is this happening?
For one thing, quite a number of the leading spokesmen on Wall Street are not portfolio managers, who understand that the value of assets is greatly affected by how government taxes those assets.
They are economists and financial reporters who sympathize with the view that a capital-gains tax cut benefits the rich.
Yet they somehow think that Wall Street is indifferent to losing the tax cut that seemed so close Friday morning and is now problematic.
The market rebound Monday followed weekend assurances from Mr. Darman that the administration has other plans to win the cut, which is alive and well.
Sen. Bradley's argument is that a capital-gains tax cut would be bad for the economy in the longer run.
It would inevitably lead to an increase in marginal income-tax rates in 1990, he thinks, when the White House is forced to ask for higher taxes to meet budget targets.
That is, with capital gains cut, the glue of the 1986 accord will be gone, and political realities will push up income-tax rates.
The counter-argument, which he has heard, is that if he and his fellow Democrats are successful in killing the president's proposal, the revenue gap will open up tremendously in 1990 because of the weakened economy.
In this atmosphere, there would be no serious consideration of tax increases.
If Sen. Bradley would permit a vote on capital gains, though, it would pass, Christmas retail sales would be strong instead of burdened by a falling stock market, the 1990 economy would be robust, and the revenue gains at every level of government, including New Jersey's, would be surprisingly high.
No tax increases would be necessary.
The struggle over capital gains is the most important game in town.
In Washington and on Wall Street.
Mr. Wanniski is president of Polyconomics Inc., of Morristown, N.J.
Federal prosecutors said they have obtained a guilty plea from another person in the government's ongoing probe of illegal payments in the record industry.
William Craig, an independent record promoter, pleaded guilty to payola and criminal tax charges, according to a statement issued by Gary Feess, the U.S. attorney here.
Payola is the practice of making illegal, undisclosed payments to radio station personnel in return for getting the stations to play certain songs over the air.
As part of his plea agreement with the government, the 44-year-old Mr. Craig faces a maximum of three years in prison.
In return, Mr. Craig agreed to cooperate in the government's continuing payola probe, says a spokeswoman for the U.S. attorney's office.
Mr. Craig and three others were indicted last year as part of that payola probe.
Two other defendants previously pleaded guilty, and charges against the third were dropped.
Companies listed below reported quarterly profit substantially different from the average of analysts' estimates.
The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share.
Estimated and actual results involving losses are omitted.
The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days.
Otherwise, actual profit is compared with the 300-day estimate.
Grumman Corp. was awarded a $53.1 million Navy contract for advanced acquisition of six E-2C tactical control aircraft.
LTV Corp. won a $25 million Army contract for missile test equipment.
Unisys Corp. received a $24.4 million Air Force contract for computer programming.
Ford Aerospace & Communications Corp., a unit of Ford Motor Co., was awarded a $15.9 million Air Force contract for computer improvements.
Rockwell International Corp. was issued a $12.5 million Air Force contract for changes in the National Aerospace Plane.
The Tennessee Valley Authority issued $4 billion in bonds in the federal utility's first public debt offering in 15 years.
Proceeds from the bonds, with coupon rates in the 8% range, will be used to replace bonds with an average interest rate of 13.1%.
The TVA said the refinancing should save $75 million a year in interest payments.
The refinancing is part of the TVA's strategy of dealing with what has been an intractable problem: its staggering $18.5 billion debt, most of which is owed to the Treasury Department's Federal Financing Bank.
The TVA currently plans to issue a total of $6.7 billion in bonds to refinance its high-interest debt.
The $4 billion bond issue also will help the TVA meet its goal of not raising rates for another year, said William F. Malec, the agency's chief financial officer.
The bond issue is TVA's first public offering since the Financing Bank was created in 1974, primarily to finance the TVA.
But the offering almost didn't happen.
The TVA, in fact, decided to proceed with the bond offering following an agreement last week with the Financing Bank, which allows TVA to keep borrowing short term from the bank for two years after it goes to the public market.
The Treasury contended that TVA couldn't borrow from both it and the public debt market.
The $4 billion in bonds break down as follows: $1 billion in five-year bonds with a coupon rate of 8.25% and a yield to maturity of 8.33%; $1 billion in 10-year bonds with a coupon rate of 8.375% and a yield to maturity of 8.42%; $2 billion in 30-year bonds with five-year call protection, a coupon rate of 8.75% and a yield to maturity of 9.06%.
Managing the bond issue is a group of investment banks headed by First Boston Corp. and co-managed by Goldman, Sachs & Co., Merrill Lynch Capital Markets, Morgan Stanley & Co., and Salomon Brothers Inc.
Mutual-fund czar John M. Templeton has put his money where his moniker is, pouring $1.4 million into one of his own funds, the Templeton Value Fund.
Mr. Templeton owns shares in several of the 33 funds that his firm manages, but only in three of the 10 available to U.S. investors, according to filings with the Securities and Exchange Commission.
Those are Templeton Global Income, Templeton Emerging Markets and now the Value Fund.
Why did he add the Value Fund to the list?
Because he's very bullish on the emerging growth stocks that make up the fund's portfolio, Mr. Templeton said from his Bahamas hideaway.
"Emerging growth stocks haven't been popular in America for years, they've been neglected," he said, and their prices often trail the market as a whole.
Mr. Templeton's 147,300-share purchase in the closed-end fund came before the U.S. stock market's plunge last Friday, but still proved slightly profitable.
Mr. Templeton bought his shares in several separate purchases between Aug. 30 and Sept. 28, according to reports with the SEC.
He bought at share prices ranging from $9.375 to $9.625.
The fund closed yesterday in New York Stock Exchange composite trading at $9.625, up 12.5 cents.
In addition, Mr. Templeton received a dividend of 22 cents a share Oct. 5.
RIVER RUN:
A senior vice president and a vice president at James River Corp. sold the majority of their shares in the Richmond, Va., paper-products concern in late August and early September, reports filed with the SEC show.
The executives, who got $30.88 a share for the stock, showed good timing.
In Big Board trading yesterday, James River shares closed at $28.375, down 12.5 cents.
On Sept. 6, Robert Joseph Sherry, the firm's senior vice president of employee and public relations, sold 4,000 shares, leaving himself with 1,062 shares of James River.
Including a sale of stock last February, Mr. Sherry has sold 88% of his stake in the company this year, according to SEC filings.
Mr. Sherry declined to comment when asked about the sales.
James A. Toney, a vice president, sold 1,500 shares Aug. 28.
He still has 1,143 shares, according to SEC files.
Mr. Toney also declined to comment.
INTEREST-RATE PLAYER:
Cincinnati Gas & Electric Co. tops the companies portion of the accompanying Insider Trading table this week.
Three of the utility's directors have at least doubled their holdings in the company since July.
The largest purchase was by Dudley Taft, who bought 4,400 shares for $125,075.
Mr. Taft, who is also president of Taft Broadcasting Co., said he bought the shares because he keeps a utility account at the brokerage firm of Salomon Brothers Inc., which had recommended the stock as a good buy.
Salomon Brothers confirmed that it has had a buy recommendation on the stock for about two years.
"Cincinnati Gas & Electric is in good shape," Mr. Taft said, and utilities are "a good investment because interest rates are going down."
Mr. Taft paid an average of $28.43 for each share.
The stock closed yesterday on the Big Board at $28.75, down 12.5 cents.
The two other directors bought 1,000 and 1,900 shares, respectively, at prices between $28.15 a share and $28.75 a share, filings with the SEC show.
The two couldn't be reached for comment.
A company spokesman said he couldn't explain their sudden bullishness.
"I don't know of any news or anything unusual happening here," said Bruce Stoecklin, director of media services.
Peter Pae in Pittsburgh contributed to this article.
T. Rowe Price Associates Inc. said directors recommended stockholders approve a 2-for-1 stock split and an increase in authorized shares to 25 million from 10 million.
Stockholders will vote on the proposal at a meeting Dec. 13.
T. Rowe Price is an investment adviser to mutual funds, institutions and individuals.
In one of the first indoor air-pollution cases to go to trial, a state-court jury decided in favor of the defendant, Burlington Industries Inc.
The verdict, reached late last week in Cincinnati, may end an eight-year legal battle for the Greensboro, N.C., carpet maker.
Glenn and Sharon Beebe of Cincinnati had sued the com- pany in 1981 after installing Burlington carpets in their office.
The Beebes alleged that toxic fumes from the carpets made them sick.
As a result of their illness, the Beebes said, they lost $1.8 million in wages and earnings.
In addition, they said that months of exposure to the chemicals has left them sensitive to a wide range of commonly used substances.
The case had been closely watched because attorneys anticipate increasing litigation nationally over the so-called sick-building syndrome.
Plaintiffs' lawyers say that buildings become "sick" when inadequate fresh air and poor ventilation systems lead pollutants to build up inside.
Anthony J. Iaciofano, a lawyer for Burlington, said the company believes the Beebes' symptoms were not related to the carpeting.
He said that ill effects from new carpets manifest themselves immediately but that the Beebes' symptoms appeared months later.
Catherine Adams, the Beebes' lawyer, said the verdict would not discourage other plaintiffs from filing such suits.
Scientists are only beginning to understand what causes sick-building syndrome and much of that research was unavailable when the Beebes filed the case, she said.
The Beebes now believe that a prime culprit for their injuries was fumes from an adhesive used in the carpeting.
But the Beebes didn't come to that conclusion until time limits had elapsed for adding the adhesives maker as a defendant in the case, Ms. Adams said.
The Beebes have not yet decided whether to appeal.
TIMES SQUARE development opponents are dealt setback.
The Appellate Division of New York State Supreme Court dismissed six lawsuits attempting to block a $2.5 billion project planned for 42nd Street in Manhattan.
Opponents of the project had claimed that the city and the state of New York, which are co-sponsoring the project, had failed to adhere to environmental guidelines.
All but two of the 40 or so lawsuits that have been filed since the project's 1984 approval have been dismissed before the trial stage.
The two that remain haven't yet reached the pre-trial fact-finding stage.
State officials said the court's ruling clears the way for proceedings to condemn buildings in the area.
"This project is ready to move," said State Urban Development Corp. Chairman Vincent Tese.
But developers of four planned office towers cautioned that obstacles still remain.
As part of the agreement with the state, the developers -- a partnership of Park Tower Realty and Prudential Insurance Co. of America -- said they would not proceed with condemnation proceedings while there was "significant litigation" pending.
Park Tower General Counsel Matthew Mayer said the development team will have to review two additional lawsuits before putting up a $155 million letter of credit to cover condemnation costs.
Also, he said, the partnership is waiting to see whether the appellate division's ruling will be appealed.
The plan, which has been plagued with delays and business-related setbacks, seeks to transform the area from a seedy thoroughfare to a more wholesome office and theater district.
State and city officials are still negotiating with developers to renovate historic theaters and build and operate a merchandise mart and hotel.
FEDERAL JUDGE EXPANDS role of U.S. courts in extradition decisions.
U.S. District Judge Jack B. Weinstein of Brooklyn, N.Y., ruled that a man implicated in an attack on an Israeli passenger bus in 1986 can be extradited to Israel for trial.
A magistrate had initially refused the request, ruling that the attack had been a political act for which the man, Mahmoud El-Abed Ahmad, would be exempt from extradition.
However, Judge Weinstein wrote in his opinion late last month that terrorism and acts of war against civilians cannot be defined as political acts.
Judge Weinstein also ruled that judges must consider prior to extradition whether the defendant will be treated fairly in a foreign court.
To do so, the judge said, the U.S. courts must review the judicial process in the foreign country independently of the State Department's assessment.
He said that in this case he concurred with the State Department's decision that Mr. Ahmad should be extradited.
Mr. Ahmad's lawyer said he would appeal.
Lawyers close to the case said they believed the ruling was unprecedented.
"Up until now the courts have said it is not their role to supervise the foreign country's courts," said Jacques Semmelman, the assistant U.S. attorney on the case.
FORMER CANADIAN AMBASSADOR to the U.S. Allan E. Gotlieb has joined the Philadelphia law firm of Pepper, Hamilton & Scheetz as a consultant.
Mr. Gotlieb, who serves as a consultant to Stikeman, Elliott, one of Canada's biggest law firms, is advising Pepper Hamilton's Washington office on legal matters related to Canadian-U.S. investment, corporate finance and international transactions.
QUOTABLE:
In a speech prepared for delivery in New York yesterday, retired Justice Lewis Powell contested the notion that the last Supreme Court term marked a turn toward conservatism: "Commentators who agreed on little else unanimously proclaimed a `shift in direction' on the court. . . .
I take these pronouncements, like many that have preceded them in past years, with a grain of salt.
In an era of `sound bites' and instant opinion polls it is dangerous to apply broad labels to a single term.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
THE YOM KIPPUR WAR, WHEN EGYPT CRASHED into Israel on Oct. 6, 1973, the holiest day in the Jewish calendar, lasted barely a month.
But one far-afield effect is still with us.
The Arab states, always bitterly resentful of U.S. support toward Israel, realized they held an irresistable weapon -- oil.
Early in October, six Arab nations in the Persian Gulf jacked up prices sharply.
On Oct. 22, led by Saudi Arabia, the world's largest exporter, they embargoed oil shipments to the U.S. and to the Netherlands, Israel's staunchest European ally.
The timing was perfect.
The Arabs had tried embargos before.
In 1956, when Britain, France and Israel invaded Egypt to seize the Suez Canal, Arab producers cut off supplies to Europe.
Texas simply pumped harder.
U.S. oil supplies, however, had peaked in 1970 and 1971 and by 1973 were declining.
Imports, then six million barrels a day, came primarily from Venezuela and Canada.
But Middle East supplies were growing in importance.
By 1973, the U.S. was bringing in two million barrels of Arab oil a day, more than 10% of the 17.3 million barrels consumed daily.
Politics and economics conspired.
Japan and Europe, far more dependent on Mideast oil than the U.S., wouldn't offend the Arabs or trade off their precious supplies.
The U.S. did manage to supply the Dutch with oil by relabeling supplies; once oil is shipped, no one can tell its source.
But car-happy Americans panicked, and so did the U.S. and other oil-consuming governments.
"Shortage" and "crisis" became buzz words, although neither really applied.
The spot dislocations that showed up were largely the result of confusion (much of it in Washington), though that was cold comfort for drivers waiting in mile-long lines at the gas pumps.
The embargo lasted only six months, but the price hikes became a fact of life.
What the Arabs started, inflation finished.
Once and for all, $5-a-barrel crude oil and 35-cents-a-gallon gasoline were history.
Times may be tough on Wall Street for some, but a few bosses are making as much as ever -- or more.
At Bear Stearns Cos., for example, the 15 executive officers led by Chairman Alan "Ace" Greenberg got a pay increase to $35.9 million for the 14-month period ended June 30 from $22.9 million for the 12 months ended April 30, 1988.
The figures don't include substantial dividends on holdings of Bear Stearns stock.
Mr. Greenberg himself was paid $4.5 million, before an estimated $1.5 million in dividends, up from $2.4 million the year before.
The increase is noted in the brokerage firm's latest proxy statement filed with the Securities and Exchange Commission.
Because it operates on a fiscal year, Bear Stearns's yearly filings are available much earlier than those of other firms.
The latest period includes 14 months instead of 12 because Bear Stearns changed to a fiscal year ending in June instead of April.
Meanwhile, Bear Stearns's 650 stock and bond salesmen saw thinner paychecks over the past year, which the company says reflected lower commission revenue caused by a decline in investor activity in the markets.
However, Bear Stearns on Monday reported improved earnings for its first quarter, ended Sept. 29, partly because of a 31% increase in commissions during the quarter.
William J. Montgoris, chief financial officer, defended the lofty salaries at Bear Stearns.
"All of us are on a base salary of $200,000 if the firm makes nothing -- and that's pretty low as far as Wall Street goes," Mr. Montgoris said.
However, Bear Stearns has never had an unprofitable year since its founding 65 years ago.
Four Bear Stearns executives besides the 62-year-old Mr. Greenberg were paid $3 million or more before dividends for the 14 months ended in June.
According to the proxy statement, James E. Cayne, 55, Bear Stearns's president, made $3.9 million; an executive vice president, Michael L. Tarnopol, 53, made nearly $3.4 million; and two executive vice presidents, Vincent J. Mattone, 44, and William J. Michaelcheck, 42, made about $3.3 million each.
Mr. Montgoris said the firm has a "straight mathematical formula" for determining compensation, based on the firm's earnings.
"Just because a particular element of the firm is down," such as stockbrokerage, "doesn't mean the executive committee should be paid less," he said.
Morgan Grenfell Group PLC said John Craven, group chief executive officer, is taking over the chairmanship of the merchant banking group from Sir Peter Carey, who is retiring.
Mr. Carey will remain a member of the merchant bank's board.
Mr. Craven is widely credited with refocusing Morgan Grenfell's energies on its core corporate finance, fund management and banking activities over the past year.
Last year, Morgan Grenfell shut down its ailing U.K. securities operations.
Mr. Craven said his move to the chairmanship means he will take a less active role in the day-to-day management of the group, but he added that the merchant bank's strategic focus remains unchanged.
Mr. Craven joined Morgan Grenfell as group chief executive in May 1987, a few months after the resignations of former Chief Executive Christopher Reeves and other top officials because of the merchant bank's role in Guinness PLC's controversial takeover of Distiller's Co. in 1986.
Morgan Grenfell had advised Guinness on the bid, which was surrounded by allegations that Guinness used artificial means to support the bid's value.
Morgan Grenfell said Michael Dobson, currently group deputy chief executive, will assume the chief executive position.
The merchant bank also announced that finance director David Eward is taking early retirement for personal reasons.
His duties will be taken over by Anthony Richmond-Watson, who has been elected deputy chairman.
News of Mr. Eward's retirement comes one day after Morgan said that Christopher Whittington resigned as chairman of Morgan's banking subsidiary to join a financial services firm.
Mr. Craven said both Messrs. Eward and Whittington had planned to leave the bank earlier, but Mr. Craven had persuaded them to remain until the bank was in a healthy position.
"If there's any coincidence about the departures it's that they are leaving at a time when the business is in reasonably good shape and going forward very well."
Last month, Morgan Grenfell announced its pretax profit rose 49.6% to #32.8 million in the first half, boosted by a healthy growth in its domestic and international corporate finance business.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
Lockheed Corp. -- $300 million of 9 3/8% notes due Oct. 15, 1999, priced at 99.90 to yield 9.39%.
The issue was priced at a spread of 137.5 basis points above the Treasury's 10-year note.
Rated single-A-3 by Moody's Investors Service Inc. and single-A by Standard & Poor's Corp., the issue will be sold through underwriters led by Goldman, Sachs & Co.
California Health Facilities Financing Authority -- $144.35 million of revenue bonds for Kaiser Permanente, due 19931999, 2004, 2008, 2018 and 2019, tentatively priced by a PaineWebber Inc. group to yield from 6.25% in 1993 to 7.227% in 2018.
Serial bonds were priced to yield to 6.80% in 1999.
There are about $10 million of 7% bonds priced at 99 1/4 to yield 7.081% in 2004; about $15 million of 7% bonds priced at 98 1/2 to yield 7.145% in 2008; about $88.35 million of 7% bonds priced at 97 1/4 to yield 7.227% in 2018; and about $15 million of 6 3/4% bonds priced to yield 7.15% in 2019.
The bonds are rated double-A-2 by Moody's and double-A by S&P, according to the lead underwriter.
Pennsylvania Higher Education Facilities Authority -- approximately $117 million of revenue bonds for Hahnemann University, Series 1989, due 1990-2002, 2009 and 2019, priced late Monday by a Merrill Lynch Capital Markets group to yield from 6% in 1990 to 7.282% in 2019.
Serial bonds were priced to yield from 6% in 1990 to 7.10% in 2002.
There are about $25.6 million of 7.2% term bonds due 2009, priced to yield 7.25%, and about $66.8 million of 7.2% term bonds due 2019, priced at 99 to yield 7.282%.
The bonds are insured and rated triple-A by Moody's and S&P.
Connecticut -- $100.4 million of general obligation capital appreciation bonds, College Savings Plan, 1989 Series B, priced by a Prudential-Bache Capital Funding group.
The zero-coupon bonds were priced to yield to maturity from 6.25% in 1994 to 6.90% in 2006, 2007 and 2009.
The bonds have received a rating of double-A-1 from Moody's, and a double-A-plus rating is expected from S&P, the underwriter said.
Oregon -- $100 million of general obligation veterans' tax notes, Series 1989, dated Nov. 1, 1989, and due Nov. 1, 1990, through a Chemical Securities Inc. group.
The group is offering the notes priced as 6 3/4% securities to yield 6.25%.
The notes are rated MIG-1 by Moody's and SP1-plus by S&P.
University of Medicine and Dentistry of New Jersey -- $55.8 million of Series C bonds priced by a Prudential-Bache Capital Funding group.
The bonds, rated single-A by Moody's and double-A by S&P, were priced to yield from 6.20% in 1992 to 7.26% in 2019.
All serial bonds are being offered at par except those due 2002.
Federal Home Loan Mortgage Corp. -- $500 million of Remic mortgage securities being offered in eight classes by Salomon Brothers Inc.
The offering, Series 104, is backed by Freddie Mac 9% securities.
The issue used at-market pricing.
Federal National Mortgage Association -- $350 million of Remic mortgage securities being offered in 11 classes by Greenwich Capital Markets.
The offering, Series 1989-82, is backed by Fannie Mae 9 1/2% securities and used at-market pricing.
The issue brings Fannie Mae's 1989 Remic issuance to $30.2 billion and its total volume to $42.3 billion since the program began in April 1987.
Hanshin Electric Railway Co. (Japan) -- $150 million of bonds due Nov. 2, 1993, with equity-purchase warrants, indicating a 4% coupon at par, via Nomura International Ltd.
Each $5,000 bond carries one warrant, exercisable from Nov. 16, 1989, through Oct. 19, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Oct. 24.
Toyobo Co. (Japan) -- $150 million of bonds due Nov. 1, 1993, with equity-purchase warrants, indicating a 4% coupon at par, via Daiwa Europe Ltd.
Each $5000 bond carries one warrant, exercisable from Nov. 15, 1989, to Oct. 18, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Oct. 23.
Sammi Steel Co. (Korea) -- $50 million of bonds due Nov. 8, 1994, with equity-purchase warrants, indicating a 1 1/4% to 1 3/4% coupon at par, via Merrill Lynch International Ltd. and Dong Suh Securities Co.
Each $5,000 bond carries one warrant, exercisable from May 8, 1991, through Oct. 8, 1994, to buy company shares at an expected premium of 75% to 85% to the closing share price when terms are fixed Oct. 18.
Redland International Funding PLC (U.K. parent) -- 150 million Australian dollars of 15 3/8% bonds due Nov. 8, 1996, priced at 101 3/4 to yield 15.44% less full fees, via JP Morgan Securities Ltd.
Guaranteed by Redland PLC.
Fees 2.
Tennessee Valley Authority -- A $4 billion, three-part offering of power bonds priced through an underwriting group led by First Boston Corp.
The size of the issue was increased from an originally planned $3 billion.
The first part, consisting of $2 billion of bonds due Oct. 1, 2019, with a five-year non-call provision, was priced as 8 3/4% securities at 96.808 to yield 9.06%.
The 30-year issue was priced at a spread of 105 basis points above the Treasury's 30-year bellwether bond.
The second part, consisting of $1 billion of noncallable bonds due Oct. 1, 1999, was priced as 8 3/8% securities at 99.691 to yield 8.42%.
The 10-year issue was priced at a spread of 43 basis points above the Treasury's 10-year note.
The third part, consisting of $1 billion of noncallable bonds due Oct. 1, 1994, was priced as 8 1/4% securities at 99.672 to yield 8.33%.
The five-year issue was priced at a spread of 43 basis points above the Treasury's comparable note.
The issue is rated triple-A by Moody's and triple-A by S&P.
Par Pharmaceutical Inc. said it named its interim president and chief executive officer, Kenneth I. Sawyer, to those posts permanently, and elected him to the board.
Par also said it was advised by the U.S. attorney for Maryland that it is one of a number of companies being investigated by a federal grand jury for alleged violations of the federal Food, Drug and Cosmetic Act.
Par, a generic-drug maker that has been plagued by management problems, was already the subject of a federal criminal inquiry into the drug-approval process and a Food and Drug Administration investigation.
A Par spokesman said he understood the criminal investigation in Maryland relates to matters Par disclosed in July, when Par said it filed false drug information with the FDA.
At the time, the company said it was recalling one of its drugs and had stopped selling two others.
The spokesman said he also understood that the inquiry related to the existence of an "off-the-record" production book.
The book noted changes made at the manufacturing level that weren't disclosed to the FDA.
Par said it is cooperating in the investigation.
Also yesterday, Ashok Patel, a former Par official who pleaded guilty to providing an FDA employee an illegal gratuity of $3,000, was sentenced by a federal judge in Baltimore to one year of community service and a $150,000 fine.
Mr. Patel also was placed on three years' probation.
Mr. Patel resigned as senior vice president of Par in April.
In July, Par and a 60%-owned unit agreed to plead guilty in that inquiry, as did another former Par official.
Mr. Sawyer began running the company on an interim basis in late September.
Par said it selected him for the posts of president and chief executive on a permanent basis because of his experience in the industry and his performance at Par.
Perry Levine, chairman, said Mr. Sawyer had "taken significant steps" to restore the company's credibility and sense of professionalism and integrity.
Just after midnight Monday, federal spending started to drop by $16 billion.
What do you say we all close down the poker game, go home and bank the $16 billion?
That's essentially what budget director Richard Darman is suggesting, and we think he deserves as much support as he can get.
If human beings can't cut federal spending honestly -- and they can't -- let the computers do it.
Congress, with a measure of White House complicity, has been manipulating the spending accounts for years under the cover of omnibus appropriations bills.
(Indeed without earlier manipulations, the current sequester of $16 billion would have been even larger.)
We suspect voters are fed up with the finagling.
Consider, for instance, that even yesterday's widely publicized sequester is likely to be traduced if business as usual is allowed to prevail.
Under the law, Gramm-Rudman's across-the-board-cuts in federal programs are supposed to be permanent.
Social Security and spending for poor people are exempted.
However, the Associated Press's account of the Monday sequester order signed by President Bush neatly captured the contempt Congress shows toward the notion of a legally binding commitment:
"Lawmakers have been saying for weeks that they plan to roll back the cuts as soon as they agree to a compromise on a deficit-cutting bill."
Mr. Darman's inclination to save the sequester was backed up yesterday by White House Press Secretary Marlin Fitzwater:
"There is some feeling here that the cuts are the way to go.
It will reduce spending in a very effective fashion."
This attitude is being waved away by sophisticates around Washington as little more than tough talk.
It looks to us like a golden opportunity for George Bush to chop off at the knees all this talk about a timid, unserious presidency.
Mr. Bush would be acting in the public interest if he let the Washington elites who manipulate these budgets -- the bureaucrats, the lobbyists, the congressional staffers -- live for just one year on a restricted diet.
Ask Tommy Lasorda; thin is in.
Senator Phil Gramm pointed out Monday that in the 20 years before Gramm-Rudman was enacted in 1985, federal spending grew by about 11% a year; since the law, it's grown at under 5% annually.
Another major factor in this positive trend was Ronald Reagan's decision early in his presidency to fight the budget war on the expenditure side rather than raising taxes.
George Bush's continued support of the tax dam sustains this strategy of pressuring Congress to make choices among competing priorities, rather than just saying yes to all the grateful special-interest constituencies that fill the PAC trough.
If Washington's elites ever succeed in bursting the tax dam, Americans will be engulfed in a red sea of new spending programs, such as federalized child care.
Child care was one of the many "extraneous" bills pulled out of the Senate's reconciliation bill last Friday.
Others were the capital-gains cut, Section 89 repeal, the disabled workers bill, and the unprecedented reconsideration of the catastrophic health act.
All this stuff still is in the House's 1,878-page reconciliation bill, and many Members say they're reluctant to pull out cherished bills, just to see them die.
Republicans especially want a guarantee from the House leadership that they'll get an up-or-down vote on the bills.
House Speaker Foley ought to deliver that promise.
This is the way government is supposed to work, with politicians taking responsibility for votes that their constituents can identify, instead of concealing them in the great reconciliation garbage truck.
We have as much nostalgia as anyone for those leafy, breezy days in Washington when honorable men and women dickered over budgets and even log-rolled a bit to see that the bridges got build, roads paved, soldiers paid or that the desperately poor were cared for.
Those days are gone.
Nor do we see any reason to believe that a metropolitan Washington that has gotten fat and rich and lazy in the shadow of the federal colossus will change much on its own initiative.
Save the sequester, and let Washington scream.
The New York Stock Exchange said a seat sold for $436,000, down $39,000 from the previous sale Oct. 4.
Seats are currently quoted at $425,000 bid and $475,000 offered.
The $475,000 sale price earlier this month was the lowest in nearly three years.
Exchange seats hit a peak of $1,150,000 in September 1987.
The Canadian government auctioned 750 million Canadian dollars (US$637.5 million) of 9.25% bonds due Dec. 15, 1994.
The average accepted yield bid was 9.617% for a price equivalent of 98.523.
Proceeds of the sale will be used to redeem C$675 million of government bonds maturing Nov. 1 and for general government purposes.
Northern Trust Corp. said its board adopted a shareholder rights plan aimed at deterring unwanted takeover bids, but said it's not aware of any plan to acquire the banking concern.
Under Northern Trust's plan, shareholders were issued rights that, in the event of certain attempted takeovers, allow holders to buy shares in the company at half price.
National Patent Development Corp. said it plans to purchase as many as 200,000 common shares of its 81%-controlled Interferon Sciences Inc. unit in periodic, open-market purchases.
The 200,000 shares are about 23% of Interferon's common shares outstanding, excluding National Patent's stake.
Noting the recent Food and Drug Administration approval of Interferon's genital warts treatment, National Patent said it believes Interferon's stock is undervalued.
Japanese investors, reassured by Monday's strong rally on Wall Street, erased most of that day's losses on the Tokyo Stock Exchange.
But analysts said the rebound didn't remove the cautious mood from the market.
In London, stocks closed lower in volatile trading as an opening rally was obliterated by worse-than-expected U.S. trade figures.
Paris shares had a similar reaction, but most other European bourses posted gains, as did all major Asian and Pacific stock markets.
Tokyo's Nikkei Index of 225 stocks jumped 527.39 points to close at 34996.08.
The rise came a day after the year's biggest drop on Monday, when the Nikkei fell 647.33, or 1.8%, in response to Friday's 6.9% plunge on Wall Street.
In early trading Wednesday in Tokyo, the Nikkei index rose 19.30 points to 35015.38.
On Tuesday, the broader-based Tokyo Stock Price Index of issues listed in the first section, which fell 45.66 Monday, rose 41.76, or 1.61%, to 2642.64.
Trading was relatively thin at an estimated 650 million shares, though brisker than Monday's 526 million.
Advancing issues outnumbered decliners 821-201, with 103 unchanged.
"We're back to square one," said Simon Smithson, an analyst in Japan for Kleinwort Benson International Inc.
Japanese domestic institutions, including trust banks and investment management firms, that had been on the sidelines during Monday's fall were back in the market, analysts said.
Foreign investors reportedly started off selling but later joined in the buying.
The Tokyo rally seemed to confirm the view, frequently expressed in Japan in the past few days, that the drop in New York was a local problem related to merger and acquisition activity in the U.S.
"This time we don't really have to worry about Tokyo," said an official at Daiwa Securities Co.
"Nothing has changed fundamentally in the Tokyo market."
But even though Tokyo appears unharmed by recent market volatility, analysts and traders say there are still a few concerns on the horizon.
In particular, Japanese investors will be keeping a wary eye on Wall Street to see whether Monday's 88.12-point rally holds up as fresh U.S. economic data are released.
"People are placing small bets.
There's no huge buying," said Stephen Hill, head of equity sales at Jardine Fleming Securities Ltd. in Tokyo.
"Really brave views right now would be foolhardy."
Yesterday's buyers favored real estate, construction and other large-capitalization issues, reflecting the fact that many Tokyo investors now feel safer with domestically oriented stocks, analysts said.
They also are concerned about the persistent strength of the dollar against the yen, as a weaker yen leads to higher import prices in Japan and adds to domestic inflationary pressures.
Currency concerns also weigh heavily on interest rate-sensitive stocks such as banking and other financial issues because of fears that Japanese interest rates might have to rise to keep the dollar in check.
Among steel shares, NKK rose 19 to 705 yen ($4.97) a share, and Nippon Steel gained 17 to 735.
Construction shares that gained included Shimizu, which rose 130 to 2,080.
In the real estate sector, Mitsui Real Estate Development was up 100 at 2,760, and Mitsubishi Estate gained 80 to 2,360.
London's Financial Times-Stock Exchange 100-share index fell 27.9 points to 2135.5.
It was down more than 40 points a half-hour before the close, marking a 61.5-point turnaround from its high, reached in the first 15 minutes of trading.
The narrower Financial Times 30-share index fell 29.6 to 1730.7.
Volume was an active 643.3 million shares, about double the recent levels but down from 959.3 million the previous day, which U.K. traders have dubbed "Manic Monday."
Prices opened strongly on the basis of Monday's Wall Street rally and yesterday's gains in Tokyo.
But the advance faltered as index-options traders and investors jittery about the U.K. economic outlook took over.
The unexpectedly wide U.S. August trade deficit of $10.77 billion hit an already jittery U.K. market in midafternoon.
Michael Hicks, who manages sales and trading for brokerage concern Societe Generale Strauss Turnbull, said: "It's a nervous market.
It was all over the place.
If you bought, you wish you hadn't, and if you sold, you wish you hadn't."
He said the current market "is all about sentiment, and the sentiment in London is 90% anxiety and worry."
Britain's economic fundamentals, he said, "don't look very bright."
Dealers said London showed signs of calming in midafternoon after Wall Street avoided sharp losses despite the trade report, but a wave of futures-related selling later in the session sent buyers back to the sidelines.
Still, some sectors found buying interest after being actively sold in recent weeks.
Merchant banks were stronger across the board.
Morgan Grenfell, which has been mentioned in takeover rumors, rose 20 to 392 pence ($6.18) a share.
S.G. Warburg, a rumored target of some European banking concerns, finished 22 higher at 400.
Hambros rose 5 to 204, and Schroders rose 25 to #12.75.
On the corporate front, Ford Motor announced that it raised its stake in U.K. luxury car maker Jaguar to 10.4% from 5%.
Jaguar shares jumped 23 before easing to close at 654, up 6.
Amstrad, a British computer hardware and communications equipment maker, eased 4 to 47.
It announced a 52% plunge in pretax profit for the latest year.
Brewery stocks were firm to higher on talk of early bargain-hunting, but most ended below their peaks.
Bass ended up 3 higher at 966, Guinness closed at 589, down 7, and Scottish & Newcastle dropped 11 to 359, but Whitbread Class A shares rose 17 to 363.
Dealers said there was late talk of a Whitbread sale of brewing operations to Scottish & Newcastle.
The most active shares were major blue-chips, particularly oils and utilities such as British Gas and British Telecommunications.
Traders attributed the action in them largely to defensive positioning in a volatile market.
British Gas finished at 197, down 2, on 13 million shares, British Petroleum fell 8 to 291 on 9.4 million shares, and British Telecom was 4 lower at 261 on turnover of 10 million shares.
Cable & Wireless fell 20 to 478.
Also in active trading, British Steel fell 1 to 124 as 20 million shares changed hands.
Racal Electric, which traded 11 million shares, declined 12 to 218.
In other European markets, share prices closed sharply higher in Frankfurt and Zurich and posted moderate rises in Stockholm, Amsterdam and Milan.
Paris closed lower, and most Brussels shares were unable to trade for a second consecutive day because of technical problems.
South African gold stocks closed higher.
Elsewhere, share prices rebounded in Hong Kong, Sydney, Singapore, Wellington, Taipei, Manila and Seoul.
In Hong Kong, Sydney and Singapore -- the largest of those exchanges -- stocks recovered one-third to one-half of the ground they lost in Monday's plunge, with major market indexes posting gains of 3.6% to 4.4%.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
Zurn Industries Inc. said it received approval to proceed on four separate projects with a total contract value of $59 million.
The projects include construction of a 29,400 kilowatt waste-to-energy plant for Ada Cogeneration L.P., Ada, Mich.; a steam generating plant at Ontario, Calif., that Zurn will own and operate, and two waste-water control projects in Orange County, Calif.
AVX Corp. and Unitrode Corp. said they completed the previously reported sale of Unitrode's San Diego-based Passive Components division to AVX.
AVX, a New York-based maker of passive electronic products, paid $11 million in cash to Unitrode, a Lexington-based maker of semiconductor products.
Passive Components makes capacitors and filters used to protect electronics.
Consolidated Papers Inc. said it plans to spend $495 million on new paper-manufacturing equipment and facilities.
The producer of paper used in magazines and by commercial printers said spending on the expansion is planned to begin in the first quarter of 1990.
The expansion is subject to approval by federal and Wisconsin environmental regulators.
THE STOCK of Applied Power Inc., which split 2-for-1 in May, has risen since August 1988.
In yesterday's edition, it was incorrectly stated that the company's share price has softened since August 1988.
The stock market's dizzying gyrations during the past few days have made a lot of individual investors wish they could buy some sort of insurance.
After all, they won't soon forget the stock bargains that became available after the October 1987 crash.
But while they want to be on the alert for similar buying opportunities now, they're afraid of being hammered by another terrifying plunge.
The solution, at least for some investors, may be a hedging technique that's well known to players in the stock-options market.
Called a "married put," the technique is carried out by purchasing a stock and simultaneously buying a put option on that stock.
It's like "fire insurance," says Harrison Roth, the senior options strategist at Cowen & Co.
Because a put option gives its owner the right, but not the obligation, to sell a fixed number of shares of the stock at a stated price on or before the option's expiration date, the investor is protected against a sudden drop in the stock's price.
But most investment advisers don't recommend using married puts all the time.
That's because the cost of buying put options eats into an investor's profit when stock prices rise.
"This is the type of fire insurance you only buy when the nearby woods are on fire," says Mr. Roth.
"You always want your house insured, but you don't always feel the need for your investments to be insured."
In addition to hedging new stock purchases, the married-put technique can be used to protect stocks that an investor already owns.
In either case, the investor faces three possible outcomes:
-- If the stock goes up in price between now and the put's expiration date, the put will probably expire worthless.
The investor will be out the cost of the put, which is called the "premium," and this loss will reduce the stock-market profit.
-- If the stock stays at the same price between now and the put's expiration date, the investor's loss will be limited to the cost of the put, less any amount realized from a closing sale of the put.
The worst-case scenario would be if the put expires worthless.
-- If the price of the stock declines, the put will increase in value.
Once the stock price is less than the exercise price, or "strike price," of the put, the gain will match the loss on the stock dollar for dollar.
The put establishes a minimum selling price for the stock during its life.
When a stock falls below the put's strike price, the investor simply sells the stock at a loss and simultaneously sells the put at a profit.
Or, the investor can exercise the put, by tendering the stock to his or her broker in return for payment from another investor who has sold a put on the same stock.
Brokers handle such transactions through the Options Clearing Corp., which guarantees all option trades.
The accompanying table shows how this strategy would work for three stocks.
Though not reflected in the table, an investor should know that the cost of the option insurance can be partially offset by any dividends that the stock pays.
For example, Tenneco Inc. pays a quarterly dividend of 76 cents, which would be received before the February option expires and, thus, reduce the cost of using the technique by that amount.
In this case, the investor's risk wouldn't exceed 3.6% of the total investment.
To simplify the calculations, commissions on the option and underlying stock aren't included in the table.
There are more than 650 stocks on which options may be bought and sold, including some over-the-counter stocks.
But some investors might prefer a simpler strategy then hedging their individual holdings.
They can do this by purchasing "index puts," which are simply put options on indexes that match broad baskets of stocks.
For instance, the most popular index option is the S&P 100 option, commonly called the OEX.
It is based on the stocks that make up Standard & Poor's 100-stock index.
Unlike options on individual issues, index options are settled only in cash, and no stock is ever tendered.
But while index options are convenient, they have several disadvantages.
For one thing, an investor's portfolio might not closely match the S&P 100.
As a result, the OEX insurance may or may not fully protect an investor's holdings in the event of a market decline.
In addition, OEX options were suspended from trading last Friday afternoon, after the stock-market sell-off got under way and trading in the S&P-500 futures contract was halted.
So an investor who wanted to realize a profit on OEX puts after the trading suspension would have been out of luck.
On the other hand, only a handful of individual issues were suspended from trading on Friday.
Normally, once the underlying investment is suspended from trading, the options on those investments also don't trade.
Ultimately, whether the insurance provided by purchasing puts is worthwhile depends on the cost of the options.
That cost rises in times of high market volatility.
But it still might be cheaper than taking a major hit.
The protection from using married puts is clearly superior to that afforded by another options strategy some investors consider using during troubled times: selling call options on stocks the investor owns.
A call option is similar to a put, except that it gives its owner the right to buy shares at a stated price until expiration.
Selling a call option gives an investor a small buffer against a stock-market decline.
That's because it reduces the cost of the stock by the amount of premium received from the sale of the call.
But if the price of the stock rises above the strike price of the option, the stock is almost certain to be called away.
And in that case, the investor misses out on any major upside gain.
These calculations exclude the effect of commissions paid and dividends received from the stock.
All prices are as of Monday's close.
Hopes for quick enactment of pending deficit-reduction legislation faded as efforts to streamline the House version in advance of a House-Senate conference broke down.
House leaders had hoped to follow the Senate's lead by getting an agreement from House committee chairmen under which they would drop items that wouldn't reduce the fiscal 1990 budget deficit from the House-passed bill before the negotiations with the Senate began.
But the effort became snagged on the question of what would become of other issues, ranging from cutting the capital-gains tax to child care to repeal of catastrophic-illness insurance.
"Many members feel there are important features of the House bill that should be enacted," Speaker Thomas Foley (D., Wash.) said.
"If there is any support for reducing the bill, it is conditioned on their desire to see them passed in another form."
Now those items will be discussed in a House-Senate conference, which could begin as soon as today, with the expectation that they could either be resolved there or placed into other legislation.
"You've got to give these chairmen the opportunity to see if they can work things out," said House Budget Committee Chairman Leon Panetta (D., Calif.).
"This is a democratic process -- you can't slam-dunk anything around here."
White House Budget Director Richard Darman has said he would continue to press to keep the capital-gains provision in the final version of the bill unless the House drops many of its costly provisions.
Senate leaders had hoped to be able to send a compromise version of the measure to President Bush by the end of the week, but Speaker Foley said that wasn't likely.
Failure to pass the bill meant that $16.1 billion in across-the-board spending cuts took effect Monday under the Gramm-Rudman budget law.
The bill must be enacted before the cuts can be restored.
TRADING VOLUME in Standard & Poor's 500 stock-index futures contracts on the Chicago Mercantile Exchange Monday totaled 73,803 contracts.
Yesterday's edition incorrectly reported Monday's trading volume as a record for the S&P 500 contract.
NCNB Corp. raised $1 billion in new capital during the third quarter.
In yesterday's edition, the amount of new capital was misstated.
McCormick Capital Inc. said its tender offer to buy back as many as 1.1 million, or 44%, of its common shares at $3 apiece, which expired Friday evening, was oversubscribed.
The developer and manager of futures-investment limited partnerships said preliminary results indicate that about 1,749,000 shares had been tendered, giving a preliminary proration factor of 0.6287.
The final proration factor will be announced Monday.
Northgate Exploration Ltd. said it is proposing to amalgamate four of its associated companies.
Under a proposed two-step amalgamation involving share swaps, ABM Gold Corp., a gold exploration and management company, will merge with Neptune Resources Corp., United Gold Corp. and Inca Resources Inc.
ABM will also increase its stake in Sonora Gold Corp. to 42% from 26%.
Northgate said it will own about 50% of the equity and 81% of the votes of ABM after the amalgamation.
The amalgamations are subject to regulatory approval and require approval by shareholders of ABM, Inca, United and Neptune at special meetings on Nov. 10.
Steven C. Walker, senior vice president of this bank holding company, was named president, chief executive officer and a director of both Commercial National and Commercial National Bank.
He succeeds James E. Burt III, who resigned from all three posts to pursue other interests.
Cincinnati Microwave Inc. said it introduced two radar detectors.
One unit, called the Escort, uses a new digital signal-processing technology to detect radar signals much sooner than was previously possible, the company said.
The other, called the Solo, is battery operated and is the first high-performance radar detector that doesn't need a power cord, the company said.
A surprising surge in the U.S. trade deficit raised fears that the nation's export drive has stalled, and caused new turmoil in financial markets.
The merchandise trade deficit widened in August to $10.77 billion, the Commerce Department reported, a sharp deterioration from July's $8.24 billion and the largest deficit of any month this year.
Exports fell for the second month in a row, while imports rose to a record.
"This is one of the worst trade releases we've had since the dollar troughed out in 1987," said Geoffrey Dennis, chief international economist at James Capel Inc.
Like most analysts, Mr. Dennis was hesitant to read too much into one month's numbers; but he said, "It indicates perhaps that the balance in the U.S. economy is not as good as we've been led to believe."
The number had a troubling effect on Wall Street, suggesting that more fundamental economic problems may underlie last Friday's stock market slide.
The Dow Jones Industrial Average tumbled more than 60 points after the report's release, before recovering to close 18.65 points lower at 2638.73.
"This bad trade number raises some deeper issues about the market decline," said Norman Robertson, chief economist for Mellon Bank.
"It raises questions about more deep-seated problems, the budget deficit and the trade deficit and the seeming lack of ability to come to grips with them."
The trade report drew yet another unsettling parallel to October 1987.
On Oct. 14 of that year, the announcement of an unusually large August trade deficit helped trigger a steep market decline.
The slide continued until the record 508-point market drop on Oct. 19.
In 1987, however, the news was the latest in a string of disappointments on trade, while the current report comes after a period of improvement.
The bleak trade report was played down by the Bush administration.
Commerce Secretary Robert Mosbacher called the worsening trade figures "disappointing after two very good months."
And White House spokesman Marlin Fitzwater said the deficit was "an unwelcome increase," adding that "we're hopeful that it simply is a one-month situation and will turn around."
But the figures reinforced the view of many private analysts that the improvement in the U.S. trade deficit has run out of steam.
"The figures today add further evidence to support the view that the improvement in the U.S. trade deficit has essentially stalled out at a level of about a $110 billion annual rate," said Jeffrey Scott, a research fellow at the Institute for International Economics here.
"That's still an improvement over last year, but it leads one to conclude that basically we've gotten all the mileage we can out of past dollar depreciation and past marginal cuts in the federal budget deficit."
Exports declined for the second consecutive month in August, slipping 0.2% to $30.41 billion, the Commerce Department reported.
Imports, on the other hand, leaped 6.4% to a record $41.18 billion.
Not only was August's deficit far worse than July's, but the government revised the July figure substantially from the $7.58 billion deficit it had initially reported last month.
Many economists contend that deep cuts in the U.S. budget deficit are needed before further trade improvement can occur.
That's because the budget deficit feeds an enormous appetite in this country for both foreign goods and foreign capital, overwhelming the nation's capacity to export.
"People are sick and tired of hearing about these deficits, but the imbalances are still there and they are still a problem," said Mr. Robertson.
In addition, the rise in the value of the dollar against foreign currencies over the past several months has increased the price of U.S. products in overseas markets and hurt the country's competitiveness.
Since March, exports have been virtually flat.
At the same time, William T. Archey, international vice president at the U.S. Chamber of Commerce, notes: "Clearly the stronger dollar has made imports more attractive" by causing their prices to decline.
Most economists expect the slowing U.S. economy to curb demand for imports.
But they foresee little substantial progress in exports unless the dollar and the federal budget deficit come down.
"The best result we could get from these numbers would be to see the administration and Congress get serious about putting the U.S. on an internationally competitive economic footing," said Howard Lewis, vice president of international economic affairs at the National Association of Manufacturers.
"That must start with cutting the federal budget deficit."
August's decline in exports reflected decreases in sales of industrial supplies, capital goods and food abroad and increases in sales of motor vehicles, parts and engines.
The jump in imports stemmed from across-the-board increases in purchases of foreign goods.
The numbers were adjusted for usual seasonal fluctuations.
Alan Murray contributed to this article.
(In billions of U.S. dollars, not seasonally adjusted)
*Newly industrialized countries: Singapore, Hong Kong, Taiwan, South Korea
Steve Jobs took a step back from the frontier of personal-computer technology in an effort to spur sales of Next Inc.'s new machine.
Mr. Jobs moved to remedy a couple of his computer's drawbacks yesterday by lowering the entry-level price for a Next machine by $1,500, or 23%, if the buyer chooses a hard-disk drive as an alternative to Next's optical-storage device.
The hard drive, which is the storage device of choice for virtually every desktop computer user, also now will supplement Next's futuristic optical device if buyers pay full price.
Mr. Jobs, co-founder of Apple Computer Inc., founded Next four years ago in the hopes of fomenting a revolution in the way desktop computers are designed and used.
His Next computer, introduced about a year ago and aimed primarily at university computer users, sports snazzy graphics, digital sound, built-in networking and a sleek black design.
But the computer was proving a hard sell because of its high price, a lack of software and an optical data-storage device that was too slow.
The machine began shipping at the end of last year.
The closely held company hasn't disclosed sales.
However, most universities that have bought the machines say they are buying small numbers for evaluation purposes.
Universities can now buy a Next computer without an optical storage device for $4,995.
A computer with the optical device will still cost $6,495, but from now on Next will outfit every computer with a hard drive and supply one at no cost to those who have already bought Next machines.
Commercial customers can purchase the same system through Businessland Inc., a computer retailer based in San Jose, Calif., for roughly $3,000 more.
Mr. Jobs said the changes were prompted by requests from customers who are frustrated with the performance of the optical device, which isn't offered as standard equipment by any rivals.
Another factor was that customers were asking, "Why don't you give us a cheaper system?" Mr. Jobs said at a conference on university computing here.
Optical-storage devices can handle very large amounts of data and make it far easier to edit film clips or audio recordings with a computer.
But the technology, while reliable, is far slower than the widely used hard drives.
To get around the delays caused by the optical device, Businessland, which is Next's exclusive dealer to corporations, has for months been advising customers to purchase hard drives with the machines.
Next's decision to rely on the more-established hard drive in every Next computer doesn't signal a retreat from optical storage, said Mr. Jobs, who for years has said this technology will play a crucial role in the next decade.
"We're extremely committed to optical storage technology" he said.
"We think everything will go this way in a few years."
He said that the next generation of optical drives will be as fast as hard drives, but he depends on outside suppliers for the devices.
But university computer specialists, who welcomed the move, called it a necessary retreat from the cutting edge of technology and one that's likely to increase Next's sales on campuses.
"From the standpoint of being on the forefront of technology, this is a step backward," said Jerry W. Sprecher, a senior computing manager for the California state university system.
"But it will definitely boost Next's sales."
Universities, however, say Next's prices must go even lower before large numbers of students purchase the machine.
"We'd still like to see a student model," priced at about $3,500, said Ronald Johnson, director of academic computing at Minnesota's Gustavus Adolphus College, which has bought eight Next machines.
Broad acceptance of Next's computer also is hindered by difficulty in distributing software for it.
Most software is distributed on cheap floppy disks, but the Next computer doesn't come with a device that reads them.
Next's computer also needs more software applications, but Mr. Jobs said he expects more soon.
He said he expects Lotus Development Corp. to introduce a Next version of its popular 1-2-3 spreadsheet program in 1990.
Educators added that Next needs to soon offer a color version of its computer.
Every major maker offers computers with color displays.
Next won't comment on when it will do the same, but is believed to have a color model under development.
Donald J. Amaral, 37 years old, was named president and chief operating officer of this owner and operator of hospitals, nursing centers and retirement hotels.
He succeeds as president, Don Freeberg, who remains chairman and chief executive officer.
The position of chief operating officer is new.
Ashton-Tate Corp. reported a net loss of $19.4 million, or 74 cents a share, for the third quarter, which was burdened by severance costs and the expense of upgrading its database software inventories.
The software company said revenue slid 28% to $53.9 million.
This contrasts with the year-ago quarter, when the company had net income of $11.7 million, or 45 cents a share, on revenue of $75.7 million.
For the nine months, Ashton-Tate had a loss of $27.6 million, or $1.05 a share.
In the year-ago period, the company had profit of $34.3 million, or $1.32 a share.
Revenue in the period slid almost 8% to $203.2 million from about $220 million last year.
Edward M. Esber, chairman, president and chief executive officer, attributed the decline to reduced domestic revenue because of $4.9 million spent to upgrade existing software inventories to the new database IV Version 1.1, and $1.8 million spent on the recent reduction in work force.
He said the company was "encouraged by feedback" it received from selected customers now testing Version 1.1.
The red ink came as no surprise to Wall Street, but analysts said they saw ominous hints of a further delay in volume shipments of Version 1.1, a harbinger of continued losses in the fourth quarter.
"The loss is in line with our expectations," said John C. Maxwell III, an analyst with Dillon, Read & Co. in New York.
He added gross margins and operating profit "eroded quite dramatically" from the prior quarter, along with sales of existing software product lines like Multimate and Framework.
"The success of a new product in the database line is needed.
And while the company hasn't made a definite statement, it now looks like that's not going to be anytime soon," Mr. Maxwell said.
The company said in a statement that it expects to ship new products "during the next two quarters."
"It now looks like database IV Version 1.1 isn't going to be {widely} available until the first quarter of 1990," said David Bayer, an analyst with Montgomery Securities in San Francisco.
"This is the second delay now in getting the product out the door.
It does prolong the pain somewhat."
Mr. Maxwell said unless the company can start shipments of the new product sometime this quarter, the fourth-quarter loss is likely to be "comparable to the third quarter's."
If the company can start to ship during this quarter, it could stem some, if not all of the red ink, he said.
In national over-the-counter trading, Ashton-Tate closed yesterday at $10 a share, up 62.5 cents.
Tuesday, October 17, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 8 11/16% high, 8 5/8% low, 8 5/8% near closing bid, 8 11/16% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.40% 30 to 44 days; 8.325% 45 to 59 days; 8.10% 60 to 89 days; 8% 90 to 119 days; 7.85% 120 to 149 days; 7.70% 150 to 179 days; 7.375% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.50% 30 days; 8.40% 60 days; 8.375% 90 days.
CERTIFICATES OF DEPOSIT: 8.05% one month; 8.02% two months; 8% three months; 7.98% six months; 7.95% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market: 8.50% one month; 8.50% three months; 8.45% six months.
BANKERS ACCEPTANCES: 8.38% 30 days; 8.28% 60 days; 8.23% 90 days; 8.13% 120 days; 8.03% 150 days; 7.93% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 5/8% to 8 1/2% one month; 8 9/16% to 8 7/16% two months; 8 9/16% to 8 7/16% three months; 8 1/2% to 8 3/8% four months; 8 7/16% to 8 5/16% five months; 8 7/16% to 8 5/16% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 5/8% one month; 8 9/16% three months; 8 7/16% six months; 8 7/16% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 8.50%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS: Results of the Monday, October 16, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.37% 13 weeks; 7.42% 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days.
9.88%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.80%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.50%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Ethyl Corp. reported that third-quarter net income fell 12% from a year-earlier quarter helped by a gain from discontinued operations.
Profit from continuing operations rose 19%.
The chemicals and insurance company said net in the latest quarter was $54.8 million, or 45 cents a share.
In the year-earlier quarter, net was $62.2 million, or 51 cents a share.
The previous-year quarter included $16.1 million from businesses spun off as Tredegar Industries Inc.
Revenue was $613.7 million, up 18% from $521.2 million a year ago.
Ethyl said pretax profit from its insurance segment, excluding investment gains, rose 28% in the latest quarter to $28.6 million from $22.4 million.
In the chemicals segment, pretax profit rose 7% to $69.2 million from $64.9 million.
The company's chemicals interests include, among other things, petroleum additives, pharmaceuticals ingredients and polysilicon used by the semiconductor industry.
For the nine months, Ethyl said net fell 2% to $168.7 million, or $1.40 a share, from $172.2 million, $1.42 a share, a year ago.
Net in the latest period included $11.9 million from discontinued operations and a charge of $6.2 million from a plant closing.
In the year-ago period, net included $32.7 million from discontinued operations.
Revenue was $1.79 billion, up 18% from $1.52 billion a year earlier.
In New York Stock Exchange composite trading, Ethyl closed at $25.875 a share, up 12.5 cents.
Tribune Co., helped by a hefty boost in performance at its broadcasting and entertainment operations, said net income jumped 21% in its third quarter ended Sept. 24 on a 3% increase in revenue.
The broadcasting and newspaper concern, based in Chicago, said net was $62.7 million, or 77 cents a primary share, up from $51.6 million, or 69 cents a share.
Per-share figures this year reflect $6.8 million in preferred-share dividends; the 1988 quarter didn't have such a payout.
Revenue rose to $590.7 million from $575.1 million.
Nine-month net climbed 19% to $174.8 million, or $2.21 a primary share, from $147.5 million, or $1.94 a share.
Nine-month per-share figures for 1989 reflect $12.9 million in preferred dividends that had no counterpart in the year-earlier quarter.
Revenue rose 4% to $1.79 billion.
In New York Stock Exchange composite trading Friday, Tribune closed at $49.375, down $4.75.
Enserch Corp. said about 12 million, or 93%, of the publicly traded units of its limited partnership, Enserch Exploration Partners Ltd., were tendered in response to an offer that expired Monday.
Enserch said the tendered units will raise its ownership of the partnership to more than 99% from 87%.
About 900,000 units will continue to be publicly traded on the New York Stock Exchange, Enserch said.
Enserch had offered one-half a share of its common and $1 in cash for each unit.
The public sector borrowing requirement, the most widely used measure of Britain's government deficit or surplus, showed a deficit of #200 million in September, compared with a deficit of #765 million in August and a deficit of #1.08 billion in September 1988, the Treasury said.
In the six months since the current fiscal year began April 1, the surplus totaled #500 million, compared with a surplus of #3.6 billion in the year-earlier period.
The government is projecting a #14 billion surplus for the fiscal year.
The reported figures for the public sector borrowing requirement include receipts from the sale of state-owned industries.
Excluding those receipts, the government deficit would have totaled about #2.5 billion in the first six months, compared with #1.3 billion a year earlier, the Treasury said.
French crude-steel production in September was 1,616,000 metric tons, unchanged from a year earlier, according to the National Steel Manufacturers' Association.
The association said the September total brought French output for the first nine months this year to 14,789,000 tons, up 4.5% from a year earlier.
Prospect Group Inc., whose recent hostile tender offer for Recognition Equipment Inc. failed for lack of financing, apparently has gained a measure of control over the troubled company anyway.
As part of what a Recognition spokeswoman termed an "amiable agreement," Prospect Group will wind up with control of top management posts and an increased stake in the maker of data management equipment.
In a management restructuring, Thomas L. Ringer resigned as chairman, chief executive and a director, while Israel Sheinberg resigned as a director.
Mr. Sheinberg remains as executive vice president.
Thomas M. Hurley and Robert A. Vanourek, who had been designated to take over Recognition's top spots had Prospect's tender offer succeeded, were named co-chief executives and directors.
Mr. Hurley was formerly a vice president and general manager of an Avery International division; Mr. Vanourek was a former group vice president of Pitney Bowes Inc.
In addition, the agreement calls for Gilbert H. Lamphere, chairman of Prospect Group's executive committee, to be named chairman of a restructured board that will include four new independent directors.
Also named to the revised board was Thomas A. Loose, Recognition's senior vice president and general counsel.
Prospect, a New York-based leveraged buy-out firm, also agreed to invest $15 million in Recognition, which in turn agreed to repurchase as much as $20 million of its stock.
That would increase Prospect's ownership of the company's fully-diluted shares outstanding to 20% from 14.1%.
Under the agreement, Prospect is permitted to increase its stake in Recognition to 30%.
Beyond that, Prospect said it wouldn't offer to acquire additional shares for less than $11.25 a share during the next year or less than $14.06 a share during the subsequent two years.
Recognition also said it obtained a commitment from Chemical Bank and Bank of Boston to convert an estimated $18 million in bank debt to a new, 24-month secured term loan to be repaid through the sale of certain assets.
In August, Recognition said it was in violation of certain terms of its debt agreements with bank lenders because of a $3.9 million loss for the third quarter ended July 31.
The company attributed the loss to declining revenue and litigation costs relating to criminal charges against the company and two former executives, William G. Moore Jr. and Robert W. Reedy.
The former executives were indicted last October on charges of fraud, theft and conspiracy related to efforts by the company to win $400 million in Postal Service contracts.
Recognition Equipment said it expected to put the agreement with Prospect to a vote of its stockholders at a special meeting in January.
In New York Stock Exchange composite trading, Recognition rose 87.5 cents to $6.625.
Prospect slipped 25 cents to $10.50 in national over-the-counter trading.
General Motors Corp.'s Chevrolet division, reacting to slow sales, said it will offer $800 rebates on its 1990 Beretta, the two-door version of its core compact-car line.
Sluggish sales of the Beretta, and its four-door sister car, the Corsica, prompted GM to idle the two plants that build the automobiles for a total of three weeks this month.
The Corsica and Beretta make up the highest-volume car line at Chevrolet, but sales of the vehicles are off 9.6% for the year, and fell a steep 34% during early October.
Chevrolet already is offering an $800 rebate on the 1990-model Corsica.
The latest rebate is good for all Beretta models.
Chevrolet buyers can take the rebate, or get discount financing at rates ranging from 6.9% on 24-month loans to 10.9% on 60-month loans.
StatesWest Airlines said it submitted an offer to the directors of Mesa Airlines to acquire the Farmington, N.M., carrier.
Except to characterize its offer as "fair and generous and in the best interests of Mesa shareholders," StatesWest declined to discuss details of its proposal.
It also asked Mesa to keep the proposal confidential.
A Mesa official confirmed receipt of the offer and said directors would meet to consider it.
Last week, Mesa rejected a proposal by StatesWest to acquire it or merge.
StatesWest has a 7.25% stake in Mesa, which operates 20 twin-engine and two single-engine turboprops among 42 cities in New Mexico, Arizona, Wyoming, Colorado and Texas.
StatesWest operates four twin-engine turboprop aircraft, connecting 10 cities in California, Arizona and Nevada.
The carrier hasn't yet turned a profit.
The former president of FirstSouth F.A., a defunct Arkansas thrift, pleaded guilty to conspiring to inflate the institution's earnings by concealing worthless loan guarantees.
Roderick D. Reed III, who was also chief operating officer of FirstSouth, could receive a maximum sentence of five years in federal prison and a $250,000 fine.
A sentencing date hasn't been set.
Mr. Reed admitted he conspired to conceal an agreement not to enforce loan guarantees executed by Dallas real-estate developers A. Starke Taylor III and George S. Watson, both of whom were FirstSouth stockholders.
Neither Mr. Taylor nor Mr. Watson have been charged with criminal wrongdoing.
By concealing the non-enforcement agreement, certain transactions with Messrs. Taylor and Watson were entered on FirstSouth's books as loans, allowing the thrift to report fees and interest as current income, according to the U.S. attorney's office in Little Rock, Ark.
The conspiracy was part of an effort by Mr. Reed to hide FirstSouth's shaky financial condition from federal regulators, according to federal prosecutors and regulators.
The $1.68 billion thrift was declared insolvent and closed in December 1986.
FirstSouth's former chairman and chief executive officer, Howard Weichern, is also charged with conspiring to conceal the agreements with Messrs. Watson and Taylor.
Mr. Weichern is scheduled for trial Jan. 3 before federal Judge Stephen Reasoner of Little Rock.
I approached "Mastergate," Larry Gelbart's new comedy at the Criterion Center, with considerable trepidation.
Nothing, I assumed, would be more hopelessly dated than a political satire on the Iran-Contra affair.
I had underestimated, however, both Mr. Gelbart's wit and the persistence of scandal in Washington.
Though the play clearly is framed around the events of Iran-Contra, it takes in the wide sweep of scandals over the past 30 years.
In fact, at one point Merry Chase (Melinda Mullins), a cool, carefully coiffed television announcer, recites a list of a dozen or more scandals of recent years, concluding with those affecting the Department of Housing and Urban Development and the savings and loan industry.
Onstage, a congressional hearing is in progress, complete with elegant crystal chandelier overhead and a lifesize reproduction of the signing of the Constitution in the background.
The witness table is center stage and below it, the paraphernalia for the ever-present media, in this case TNN, the Total News Network.
Not only are there camera operators on all sides, but the proceedings are shown on monitors throughout the theater.
The metaphor of theater is not entirely coincidental.
Mr. Gelbart clearly feels that all the participants in a congressional hearing -- the witnesses, the lawyers, the interrogators and the news media -- are performers.
As the story of "Mastergate" unfolds, we learn that the Internal Revenue Service confiscated one of the properties of a foreign financier who owes the government millions in taxes.
The man, it seems, has a Lichtenstein corporation, licensed in Libya and sheltered in the Bahamas.
He himself lives in a "consecutive series of unnumbered houses in a town in Switzerland."
The property seized by the IRS is a Hollywood film studio, Master Pictures Incorporated (MPI).
Supposedly the IRS will sell off the assets of MPI, but before it can, a lowly IRS agent is called into the hospital room of Wylie Slaughter, the dying head of the Central Intelligence Agency.
The lowly agent, Abel Lamb, who as you might guess, is being led to the slaughter, is ordered to take over the studio.
Soon the studio is producing a $40 million picture called "Tet, the Motion Picture," to distinguish it from "Tet, the Offensive," as well as "Tet, the Book" and "Tet, the Album."
The picture, to be made in the Central American country of San Elvador, is a cover for sending $800 million of arms to Los Otros, the rebel group attempting to regain neighboring Ambigua, which has been taken over by the leftist dictator Dr. Overtega, a former podiatrist, who leads a revolutionary band of foot soldiers.
The man handling all this for the now-deceased Slaughter is Major Manley Battle, Mr. Gelbart's stand in for Col. Oliver North.
Director Michael Engler has assembled a top-flight cast to carry out the impersonations of well-known political figures and to play the stock characters who invariably show up at congressional hearings.
Daniel von Bargen is ramrod-stiff but totally assured as Major Battle, mixing just the right brand of self-righteousness and patriotism; Jeff Weiss is fire, brimstone and teary-eyed emotionalism as the far-right senator who serves as a friendly interrogator of Major Battle; Zach Grenier is maddeningly officious playing a succession of lawyers; Joseph Daly has the perfect "aw, shucks" demeanor of George Bush in his portrayal of the vice president; and Ann McDonough is first-rate as a succession of witnesses' wives.
With one she is pregnant, with Major Battle she is knitting an American flag, and as the vice president's wife she rushes in with white hair, wearing a tailored suit and pearls, imitating Barbara Bush's gestures down to the last detail.
Though it's clear that Mr. Gelbart's sympathies do not lie with the far right, it's also true that he is evenhanded in dispensing his satirical jabs, taking sharp aim at senators and congressmen of all stripes and particularly at the media.
Mr. Gelbart also has fun with language.
"Mastergate" is subtitled "a play on words," and Mr. Gelbart plays that game as well as anyone.
He describes a Mastergate flunky as one who experienced a "meteoric disappearance" and found himself "handling blanket appeals at the Bureau of Indian Affairs."
This interest in words goes beyond puns and playfulness, however.
Mr. Gelbart deplores the obfuscation, the circumlocution and the debasement of language he sees on all sides.
As the hearings begin, the self-important Sen. Bowman (Jerome Kilty) announces: "Let me emphaticize one thing at the outset: We are not looking for hides to skin nor goats to scape."
Major Battle himself speaks in pure Pentagonese: "Without further monetary-stroke-military aid, scores of Ambiguan freedom lovers, who had gone way out on their life and limbs for us, were literally cut off at the knees without a paddle."
At another point he intones: "Publicity is a small price to pay for secrecy."
The evening is short -- 95 minutes without an intermission -- but even so, as the play progresses the thrust of Mr. Gelbart's satire loses its sharpness as his targets pop up ever more predictably.
Most of the evening, though, is filled with rare and welcome wit.
In "Mastergate," Mr. Gelbart has provided us not just one but two commodities that have all but disappeared from the Broadway theater: sharp political satire and an even sharper appreciation of the value of language.
The Federal National Mortgage Association set up a three-member office of the chairman and elected James A. Johnson as vice chairman, effective Jan. 1.
Mr. Johnson has been a managing director at Shearson Lehman Hutton since 1985, and before that was president of Public Strategies, a Washington consulting firm.
He is well-known in Democratic circles, having been executive assistant to Vice President Walter Mondale and chairman of Mr. Mondale's 1984 presidential campaign.
At Fannie Mae, he will take responsibility for the corporation's financial and legal areas and will work with David Maxwell, chairman and chief executive officer, and Roger Birk, president and chief operating officer, on strategic planning.
Mr. Johnson, 45 years old, has been a consultant on strategy to Fannie Mae for the past 3 1/2 years.
In an interview, he said Fannie Mae faces a number of challenges with the restructuring of the thrift industry and the push to broaden its activities overseas.
"There's no shortage of major things to do," he said.
Fannie Mae also said James A. Aliber, chairman of First Federal of Michigan and a director since 1985, moved up the date of his retirement from the board to accommodate Mr. Johnson's election as a director.
The board has 13 members elected by holders and five presidential appointees.
Fannie Mae, a federally chartered, shareholder-owned corporation, operates a secondary market for mortgage loans, buying loans from lenders, packaging some into securities for sale to investors and keeping the rest in its portfolio.
"The New Crowd" by Judith Ramsey Ehrlich and Barry J. Rehfeld (Little, Brown, 444 pages, $19.95), describes the displacing of the old "our crowd" Jewish Wall Street banking grandees by such new business barons as Saul Steinberg, Carl Icahn, Sanford Weill and Bruce Wasserstein.
Its many lively stories include the Gutfreund-Postel holiday cheer imbroglio.
These two New Crowd families lived in the same apartment building, with the Postel penthouse perched on top of the Gutfreund duplex.
The penthouse elevator started up from the Gutfreund landing, and Susan Gutfreund used to turn off its light, to give the impression that there was no higher floor.
Eventually, Mr. Postel broke his toe in the dark.
Then the Gutfreunds determined to put up a 22-foot Christmas tree, weighing a quarter of a ton, to amaze their holiday guests.
For this, a crane needed to be mounted on the Postels' terrace.
The Postels did not give permission.
But the Gutfreund workers went ahead anyway, only to be captured "in flagrante" by Joan Postel, who called the police.
Before the Gutfreunds finally left this unfriendly environment for a prodigious duplex on Fifth Avenue and an 18th-century mansion with a specially excavated $1 million garage in Paris, the Postels had obtained an injunction to prevent any future hoisting of trees, and in a neighborly spirit hit both the Gutfreunds and the building with a $35 million lawsuit.
Nothing less, it seemed, could console them for their traumas.
Where had all the money come from?
The young John Gutfreund had been discovered by Billy Salomon of Salomon Bros. when he was still a bearded liberal, and put to work as a trader, and then as a rough-and-tumble syndicator.
" `Get off your . . .,' he would bellow," say the authors.
Rising in the firm, he became powerful and bland, though his new wife, Susan, made him shine in the gossip columns with her profligate spending habits and flamboyant frocks.
After he had been head of the company for 3 1/2 years, he and his partners sold it to Phibro, a powerful commodity trading outfit, for $550 million in Phibro stock.
Limited partner Billy Salomon, whose family name had been on the firm's door for 70 years and who had hoped it would be there forever, was not consulted.
Mr. Gutfreund collected $32 million, while Billy Salomon got $10 million, much less than if he had conducted the sale.
"I felt betrayed," he later said.
Worse, Salomon's timing had been off.
Its profits, unlike Phibro's, soared over the next two years, and had it held out, Salomon could have gotten an even bigger bundle.
The book also recounts the not dissimilar maneuvers surrounding the changing of the guard at Lehman Bros. and other grand old firms.
Often the genteel, conservative, long-term-oriented investment bankers were displaced by crude traders: "When angered, he cursed so forcefully that his face reddened and his pale-blue eyes narrowed into tiny slits," the authors say of Lehman's Lewis Glucksman.
The earlier generation of "our crowd" bankers -- Belmonts, Warburgs, Lehmans, Baches and Schiffs -- had stressed above all probity, tradition, continuity and reputation.
They were old-fashioned elegant gentlemen, who happened to be of German Jewish extraction.
But in the harsh world of today's Wall Street they have lost out to more aggressive and sometimes less scrupulous successors.
The cuckoo prefers the nests of other birds and heaves out their eggs.
But the old guard hired the New Crowd people: It brought in its own cuckoos.
So, as the Old Crowd toppled from the branch, it shouldn't have been too surprised.
The old guard had every right, however, to disdain the newcomers' new ways of making money, such as greenmail.
(A Fortune article on Saul Steinberg was entitled, "Fear and Loathing in the Corporate Boardrooms.")
Their other staple has been corporate takeovers, often hostile and financed by junk bonds.
Hostile takeovers are quite a new phenomenon.
Sometimes they are constructive, but often not.
First, by making management focus on short-term results, they inhibit building for the future -- just the opposite of Japan.
Second, a long-term shareholder of a good company needn't worry too much when the stock price drops temporarily: It will bounce back.
But if a raider takes over when the stock is weak, the shareholder never gets his recovery.
The raiders, meanwhile, have evolved their own pattern for spending their new millions.
As described in "The New Crowd," they take on ambitious new wives, move to Greenwich, Conn., or Bedford, N.Y., buy OK pictures, and let their wives share the wealth with decorators.
Having donated heavily to museums, they demand a place on their boards.
The book is patronizing about this nouveau riche struggle for respectability, which has its tawdry aspects.
However, on balance, the charity game helps America.
If those who have the money don't get involved with the museums and the charities, then City Hall will do it, badly.
It has been rightly observed that the main thing wrong with tainted money is, t'aint enough of it.
A handful of the New Crowd operators have crossed the line from the immoral to the illegal, and have ended up in the slammer or paying huge fines:
Ivan Boesky, Dennis Levine, Martin Siegel, Victor and Steven Posner, and now Michael Milken and perhaps Leona Helmsley.
The glitzy office that Ivan Boesky vacated for a prison cell had previously contained commodity operators Marc Rich and "Pinky" Green, today fugitives from a potential century apiece of jail sentences.
The Old Crowd is deeply concerned by the backlash from all this.
However, the phenomenon is not specifically Jewish.
It has always been true that those outside the club want to climb in, and that a few will cut corners in the process.
Some pretty seamy stuff built the turn-of-the-century families' Fifth Avenue and Newport palazzi and endowed their daughters' weddings to foreign noblemen.
Mr. Boesky was a piker compared to Jay Gould and Jim Fiske, and Commodore Vanderbilt thought nothing of bribing judges and legislators.
So who knows?
In a generation or two some of the New Crowd may attain true respectability, perhaps to be displaced in turn by a later flock of unscrupulous raptors.
Or perhaps Wall Street, when it has suffered enough, will realize that finance is a service industry, and change its ethos.
Mr. Train is president of Train, Smith Investment Counsel, New York.
Dallas investor Harold C. Simmons said he raised his stake in Lockheed Corp. to 10.62% from 10.43% of the aerospace and electronics concern's common shares.
In a Securities and Exchange Commission filing, Mr. Simmons said he and companies he controls, NL Industries Inc. and NL Chemicals Inc., hold 6,744,600 shares of Lockheed, of Calabasas, Calif.
They include 122,700 shares bought Friday for between $47.125 and $48 each.
In composite trading on the New York Stock Exchange, Lockheed closed at $46.125 a share, down 12.5 cents.
Earlier this week, Mr. Simmons objected to published reports quoting him as saying he planned to sell his Lockheed stake because "the defense industry seems to be getting more uncertain."
Valhi Inc., another of Mr. Simmons' companies, responded to an article Monday in The Wall Street Journal, which credited a story in the Sunday Los Angeles Daily News.
Valhi said the articles didn't accurately reflect Valhi and its affiliates' intentions toward Lockheed.
Instead, Valhi said, they may increase, decrease or retain their Lockheed holdings, depending on a number of conditions.
Canada, which is preparing to speed up tariff cuts with the U.S., recorded a 47% narrowing in its trade surplus with the U.S. in August, Statistics Canada, a federal agency, reported.
U.S. exports to Canada jumped 11.2% in August from July while U.S. imports from Canada rose only 2.7%.
As a result, Canada's trade surplus with the U.S. narrowed to C$656.5 million (US$558 million) in August from C$1.23 billion (US$1.04 billion) in July.
U.S. exports benefited in August from heavy Canadian spending on new plant and equipment and a pickup in Canadian auto demand, Canadian officials said.
The U.S. and Canada, which do more trade than any other pair of nations, are to meet next month to arrange an acceleration of planned tariff cuts under the U.S.-Canada free trade agreement.
Industries in both countries have requested a speedup of tariff cuts on hundreds of products.
Some tariffs were eliminated when the trade pact took effect Jan. 1.
The remainder were to be phased out in five or 10 annual installments, with all tariffs eliminated by January 1998.
The two countries aim to reach an agreement by early December on a package of accelerated tariff cuts that would take effect early next year.
Canadian officials said the trade pact has kindled an export interest among many small Canadian companies that previously had little or no foreign sales.
For such businessmen, the Canadian government is organizing 55 missions this year to U.S. states bordering on Canada.
The businessmen are introduced to potential agents and distributors and instructed in trade procedures.
The U.S. Commerce Department is planning to try out similar trips on U.S. businessmen in coming months under its Canada First! Outreach Program.
Participants in the U.S. missions to Canada are to be assisted by members of the Service Corps of Retired Executives, a volunteer group, in dealing with their export challenges.
The Canadian government also has recently opened new trade offices in San Diego; San Juan, Puerto Rico; Miami; Princeton, N.J., and Denver, bringing the total number of such Canadian offices in the U.S. to 27.
The U.S. has six trade promotion offices in Canada.
Canada's export effort has been blunted by robust home market demand and by an 18% appreciation of the Canadian dollar against its U.S. counterpart in the past three years that has made Canadian goods more costly in the U.S.
Canada's trade surplus with all countries narrowed to C$203.5 million in August from C$528.3 million in July, Statistics Canada said.
Loral Corp. said it received a $325 million order from Turkey's Ministry of Defense, the largest contract the company ever has received.
Loral will provide to Turkey an electronic countermeasures system for its fleet of F-16 aircraft.
The system provides radar-threat warning and electronic jamming capabilities.
The defense electronics maker said delivery will begin in October 1991 and run through mid-1995.
Loral said the contract with Turkey will provide opportunities for Loral to supply that country with other defense systems.
Crown Resources Corp. said it reached a definitive agreement to acquire the Gold Texas Resources Ltd. shares it doesn't already own.
Under the proposed agreement, Gold Texas holders will receive 1.43 Crown shares for each of the 1.1 million Gold Texas shares not owned by Crown, which already owns 65%.
The arrangement is subject to approval by the Supreme Court of British Columbia province, Crown said.
Gold Texas is based in Vancouver, British Columbia, and Crown Resources is based in Denver.
Both are mining concerns.
Apogee Robotics Inc. said its board extended until Feb. 1 the exercise period of Apogee's existing stock purchase warrants outstanding.
The expiration date had been Nov. 3.
Each of the 1,075,000 warrants entitle the holders to purchase one share of Apogee common stock for $2.25.
Apogee was quoted in the over-the-counter market yesterday at $2 bid.
Bank of New England Corp., seeking to streamline its business after a year of weak earnings and mounting loan problems, said it will sell some operations and lay off 4% of its work force.
The bank holding company also reported that third-quarter profit dropped 41%, to $42.7 million, or 61 cents a share, from the year-earlier $72.3 million, or $1.04 a share.
Among its restructuring measures, the company said it plans to sell 53 of its 453 branch offices and to lay off 800 employees.
Altogether, employment is expected to decline to less than 16,000 from the current level of about 18,000.
Walter Connolly, chairman, said in an interview that the company expects to record pretax gains of $100 million to $125 million from the sale of its leasing operations and of certain financial processing services.
In a prepared statement, the company said it expects to realize those gains before year end.
Nonperforming assets continued to pile up in the latest quarter, rising to $900 million, or 3.52% of loans and leases, from $667 million, or 2.68%, at the end of the second quarter.
Some $170 million of the $233 million increase in nonperforming loans was related to real estate, and roughly three-quarters of that was in the troubled New England market, according to Richard Driscoll, vice chairman.
Mr. Driscoll said that, despite continued weakness in the region's real estate market, Bank of New England expects the rate of increase in nonperforming assets to slow in coming quarters.
Mr. Connolly noted that net third-quarter charge-offs, at $63 million, improved slightly from the $67 million in the second quarter.
And he indicated that more substantial improvement is expected in the next couple of quarters.
The company increased its loan loss reserve to $354 million from $342 million at the end of the second quarter.
Total assets slipped to $31.4 billion, from $32 billion as of June 30.
Among other restructuring measures, the bank said it will close its loan production offices in Chicago, New York and Philadelphia.
The Chicago office figured prominently in the bank's problems earlier this year, when $65 million in loans to Chicago businessman William Stoecker went sour.
In an internal memorandum to employees, Messrs. Connolly and Driscoll described the restructuring as an effort to continue rationalizing operations assembled during a series of mergers over the past five years.
Italy's wholesale price index rose 0.4% in August from July and was up 6.1% from a year earlier, the state statistical institute reported.
The index registered 196.1 in August, compared with 195.4 in July and with 184.9 in August 1988.
The year-on-year rise in August was slightly down from the 6.4% rate in July.
The index has a base of 100 set in 1980 and isn't seasonally adjusted.
U.S. steel imports in August fell 14% from a year earlier to 1,531,000 tons, according to the American Iron and Steel Institute.
The trade group's compilation of Commerce Department data showed that August imports, the second largest monthly total of the year, were up 5% from July's 1,458,000 tons but below last year's high of 1,979,000 tons in June 1988.
August imports claimed 18.5% of the U.S. market, compared with 19.3% in July and 20.5% in August 1988.
The latest month's figures show that imports of steel from European Community nations fell to 466,000 tons from 481,000 a month earlier, while imports from Japan rose to 323,000 tons from 288,000 in July.
Imports from Canada rose to 272,000 tons in August from 209,000 in July.
The American Institute for Imported Steel said imports for the first eight months of 1989 were below the level allowed by the Voluntary Restraint Agreement program.
The institute said that, excluding semifinished steel products, year-to-date imports represented 15.2% of consumption, compared with a permitted maximum of 18.5%.
Japanese machinery makers received orders totaling 1.465 trillion yen ($10.33 billion) in August, up 14% from a year earlier, the Economic Planning Agency said.
"Equipment orders on the domestic side were particularly strong in shipping and power utilities," said an agency official.
The latest report compares with a modest 9.9% increase in July machinery orders from a year earlier.
In August, soon after Wang Laboratories Inc. reported a staggering $424.3 million loss and replaced its president, two Boston sales representatives sent customers a letter saying: "We fully expect that you will soon be reading stories in the press reporting the `Amazing Comeback at Wang.'"
How soon Wang will stage a comeback, or if it will at all, are still matters of debate.
But Wang salespeople are trying to cope with the biggest challenge any marketer can face: selling the products of a company that is on the ropes.
"If your prospect is feeling risk the whole time and you're not feeling as if you're backed up by a stable company, you've lost it before you've begun," says Mary Ann Cluggish, a Wellesley, Mass., sales trainer and consultant who works with high technology companies.
It can happen in any industry.
Consider the difficulties faced by Audi salespeople when the car was tainted by false charges of sudden acceleration, or Exxon dealers' problems in the wake of the Valdez oil spill.
Like thousands of salespeople before them, Wang's are finding ways to combat the bad news.
"It's very important that we exude confidence, even though within the family we know there's a lot of hard work ahead," said Richard Miller, the Lowell, Mass., computer concern's new president, in a video message to salespeople a month after he took over.
Wang got into financial trouble because of bloated overhead and overly optimistic sales forecasts.
Its mainline minicomputers and word processors have lost ground to cheaper personal computers.
Last year it funded its high employment by heavy borrowing, and it suffered huge losses when sales turned down instead of rising.
After the company reported red ink for the fiscal third quarter, Wang's marketing department provided the sales force answers to questions such as "How could you not have known you were going to lose $55 million?" and "Is Wang still a viable company?"
Salespeople try to push their products and avoid discussions of finances.
Responding to such questions is "defensive," says Kenneth Olissa, Wang's vice president, marketing.
"That's antithetical to the art of selling."
Moreover, he notes that analyzing financial results "poses a problem for a salesman who isn't particularly familiar with a balance sheet."
At one sales strategy meeting, an executive suggested ordering salespeople to become experts on the annual report.
Mr. Miller vetoed that: "Even I can't understand all the footnotes," he says.
Instead, he says, if the salespeople can get the customers to consider Wang's products on their merits, he or a top financial officer will try to assuage the fears about finances.
Mike Metschan, a salesman in Wang's Austin, Texas, office, has a breezier method: "We tell them $3 billion companies don't go out of business.
We tell them all the major companies are having financial difficulties."
Numerous computer companies are having sales slumps and earnings declines, but very few have had losses comparable to Wang's or are carrying such a large debt load.
Mr. Miller says that after a sharp sales slump in July and August, sales stabilized in September.
Although Wang will report a loss for the first quarter ended Sept. 30 and the full fiscal year, Mr. Miller says he expects the company will return to profitability by the fourth quarter.
Experts on sales technique say anyone representing a troubled company must walk a fine line.
"If a salesman jeopardizes his credibility in this time of trouble, it will be a problem for the long run," says George Palmatier, a Minden, Nev., sales consultant and author of "The Marketing Edge."
Still, says John Sullivan, a management recruiter with Daniel Roberts Inc. of Boston, who has held senior sales positions at Polaroid and Atari: "The customer will react to strength.
Ignore the present condition.
Show it's business as usual."
That isn't easy.
Wang's customers are data processing managers who want to be sure that their suppliers are stable, wellrun companies that will be around to fix bugs and upgrade computers for years to come.
For buyers, "these are career-risking decisions," says Jean Conlin, who supervises a network of Wang computers in the admissions department at Boston University.
The university is considering installing a $250,000 system to store applications electronically.
"Before the really bad news, we were looking at Wang fairly seriously," she says.
But "their present financial condition means I'd have a hard time convincing the vice president in charge of purchasing."
Ms. Conlin adds: "At some point we'd have to ask, `How do we know that in three years you won't be in Chapter 11?'"
During the past year, Wang has developed new products and a new strategy and hired a new president.
Wang's overall product line is "still not as good as other vendors, but they've come a long way," says Steven Wendler, a consultant with market researcher Gartner Group, Stamford, Conn.
"They were on the road to recovery in terms of customer attitudes until this bad quarter happened."
The first priority for Wang's sales force is to make sure it holds on to existing customers.
Wang's installed base is one of its greatest assets, and many of those customers remain extremely loyal.
But even before Wang's latest financial troubles surfaced, some customers "were trying to wall off their Wang installations" so other departments wouldn't add Wang, says Chris Christiansen, a former Wang marketer who is now a market analyst with Meta Group, a market research firm in Stamford, Conn.
One Wang salesman who left the company in July recalls that when he tried to sell products to Eastman Kodak, he worked "to muster support from internal allies," but "those allies became skeptical as they saw the downtrend.
The more recent losses were really devastating."
New customers, the source of higher commissions for salespeople and the key to Wang's long-term viability, are even tougher.
Rick Lynch, a former top salesman in Wang's Boston office, referring to Wang's mainstay computer line, says: "You can't sell a VS to a new customer."
Mr. Lynch left Wang this summer for Oracle Systems Inc., a software vendor.
The financial problems are particularly frustrating for salespeople pushing Wang's image systems, which convert paper forms to electronic documents.
Consultants say that Wang's technology is among the best available in the image market.
But salespeople often found that news of Wang's problems superseded their sales efforts.
William Tait, a former sales manager in Indianapolis, says that his office had all but sold a $1.5 million image system to pharmaceutical maker Eli Lilly & Co.
"When they were making the decision, all hell broke loose with the finances."
He says the Lilly executives told him they couldn't take the risk with Wang.
Mr. Tait say he doesn't blame Lilly.
Buyers have to rely on a supplier "continually upgrading and replacing the product," he says.
"When a company realizes that, it's hard to go with Wang."
For Mr. Tait, who says he used to earn as much as $150,000 a year at Wang, it was one more reason to quit.
He is now president of Eastate Homes Inc., an Indianapolis contractor.
It can be hard for a salesperson to fight off feelings of discouragement.
Brian Petre, a former Wang salesman in upstate New York, says: "You have pride in your job.
You think you can go out and turn things around.
It's a tough thing when you can't.
The reason doesn't relate to your selling skills."
Discouragement feeds on itself.
"The problem is, if people get down in the dumps, they stop selling," says Mike Durcan, a laid-off sales manager in Wang's Austin office.
One key for salespeople is to boost their own morale.
Paul Hellman, a Framingham, Mass., sales and management consultant and author of "Ready, Aim, You're Hired," says: "The bad news is, you'll be rejected more.
The good news is, it's not your fault."
So, he advises, make goals achievable.
For instance, he suggests that salespeople making telephone calls should say to themselves: "All I want to do today is get 50 rejections."
But Mr. Miller, Wang's new president, recently warned his salespeople about negativism.
"Our customers watch us for the hidden message," he said.
"Look a customer right in the eye and say, `I'm glad to be at Wang.
Blinder International Enterprises Inc., the parent of beleaguered penny-stockbroker Blinder, Robinson & Co., said its shareholders approved a previously announced name change to Intercontinental Enterprises Inc.
"The parent company is diversifying into other industries around the world," said president Meyer Blinder in explaining the name change.
"Everytime we talked about Blinder International, {people} thought it was the brokerage house."
Mr. Blinder said the change wasn't related to the brokerage's recent troubles, which have included sharp declines in earnings, run-ins with the securities regulators and lawsuits by former customers.
The company said it expects the name change to take effect within a week.
Olin Corp. said third-quarter net income rose 26% on the strength of its chemical business.
Net was $24 million, or $1.15 a share, up from $19 million, or 90 cents a share, a year earlier.
Sales rose 7.4% to $580 million from $540 million.
Olin said its chemical segment had profit of $22 million, up from $15 million a year ago, largely because of gains in electrochemicals such as caustic soda.
The company said the gains were tied to volume increases and higher prices.
The market for electrochemicals include the paper, water-purification and textile industries.
The chemical segment had a $6 million gain on the sale of ammonia and urea businesses, which was offset by a $6 million charge for future environmental expenditures.
Profit in Olin's defense and ammunition segment rose to $8 million from $7 million.
The metals segment, hurt by a strike, had break-even results, against $3 million a year ago.
In the first nine months, net rose 21% to $93 million, or $4.52 a share, from $77 million, or $3.62 a share a year ago.
Sales rose 13% to $1.91 billion from $1.69 billion.
In New York Stock Exchange composite trading, Olin closed at $58.50 a share, down 25 cents.
GTE Corp. and MCI Communications Corp. reported strong earnings gains to record levels for the third quarter.
Southwestern Bell Corp. and Cincinnati Bell posted slight declines.
GTE Corp.
GTE said net income rose 18%, aided by higher long-distance calling volumes and an increase in telephone lines in service.
Pretax operating profit from telephone operations rose 8.2% but profits from telecommunications products and electrical products were flat.
Revenues rose 8.8% to $4.35 billion from $4.0 billion.
The company said the quarter included a 10% increase in local-exchange usage for long-distance calling and a 5% increase in the number of access lines in service.
Earlier rate reductions in Texas and California reduced the quarter's revenue and operating profit $55 million; a year earlier, operating profit in telephone operations was reduced by a similar amount as a result of a provision for a reorganization.
Revenue in the telecommunications products and services unit rose 27% to $728.8 million, but operating profit was unchanged at $26.3 million, partly because of start-up expenses.
Electrical products' sales fell to $496.7 million from $504.5 million with higher world-wide lighting volume offset by lower domestic prices and the impact of weaker currencies in Europe and South America.
Operating profit of $37.2 million was unchanged.
In composite trading on the New York Stock Exchange, GTE rose $1.25 to $64.125.
MCI Communications Corp.
MCI, which stepped up efforts to sell long-distance telephone service to residential customers, reported a 59% jump in earnings.
Revenue rose 23% to $1.67 billion from $1.36 billion.
Operating profit grew 57% to $269 million from $171 million, while operating margins rose to 16.1% from 15.9% the previous quarter and 12.6% a year ago.
Daniel Akerson, MCI chief financial officer, said the company sees further improvements in operating margins.
"We think we can take it to the 18% range over next 18 to 24 months," he said.
In national over-the-counter trading, MCI fell $2.625 to $42.375.
Charles Schellke, an analyst with Smith Barney, Harris Upham & Co., said some investors apparently expected slightly better revenue growth.
The company said that residential traffic grew faster than business traffic and attributed that to its new PrimeTime calling plan that competes with American Telephone & Telegraph's Reach Out America plan.
MCI claims about 12% of the overall long-distance telephone market but just under 10% of the $23 billion residential market.
It has been trying to improve its share of the residential market.
The company wants its business mix to more closely match that of AT&T -- a step it says will help prevent cross subsidization.
Mr. Akerson said MCI recorded "another solid cash positive quarter," its fourth in a row, but declined to comment on whether the company is considering a dividend or is planning any acquisition.
The current quarter, he said, "looks fine.
We think revenue will continue to grow and that we can control costs and thus improve profitability."
Southwestern Bell Corp.
Southwestern Bell Corp. said net dropped 8.7%, mainly the result of four extraordinary items: a franchise tax refund that its Southwestern Bell Telephone Co. unit received last year; a production shift of several Yellow Pages directories to the fourth quarter from the third; a rate refund in Missouri and a one-time adjustment to phone company revenues.
Revenue slipped 1.2% to $2.21 billion from $2.23 billion.
The earnings drop had been expected.
Chairman Zane E. Barnes said Southwestern Bell's "businesses are healthy and are continuing to grow."
The company reported a 3.1% increase in the number of access lines in service, and also said its Southwestern Bell Mobile Systems unit added 30,000 new customers, with a current total of about 333,000.
Southwestern shares fell 50 cents to $55.875 in composite trading on the New York Stock Exchange.
Cincinnati Bell Inc.
Cincinnati Bell Inc. said net declined 1.8%.
The company noted that the year-ago period was particularly strong, with an increase of nearly 70%.
Revenue jumped nearly 17% to $223.3 million from $191.4 million.
In composite trading on the New York Stock Exchange, Cincinnati Bell fell 25 cents to $29.
The company said that the number of access lines dropped slightly in the quarter, a decline attributed to seasonal fluctuations.
For the year, however, access lines in service have increased 5.5%.
Chairman D.H. Hibbard said the company has set a new five year goal of doubling revenues to about $1.8 billion while steadily increasing net.
Rockwell International Corp.'s Tulsa unit said it signed a tentative agreement extending its contract with Boeing Co. to provide structural parts for Boeing's 747 jetliners.
Rockwell said the agreement calls for it to supply 200 additional so-called shipsets for the planes.
These include, among other parts, each jetliner's two major bulkheads, a pressure floor, torque box, fixed leading edges for the wings and an aft keel beam.
Under the existing contract, Rockwell said, it has already delivered 793 of the shipsets to Boeing.
Rockwell, based in El Segundo, Calif., is an aerospace, electronics, automotive and graphics concern.
Frank Carlucci III was named to this telecommunications company's board, filling the vacancy created by the death of William Sobey last May.
Mr. Carlucci, 59 years old, served as defense secretary in the Reagan administration.
In January, he accepted the position of vice chairman of Carlyle Group, a merchant banking concern.
SHEARSON LEHMAN HUTTON Inc.
Thomas E. Meador, 42 years old, was named president and chief operating officer of Balcor Co., a Skokie, Ill., subsidiary of this New York investment banking firm.
Balcor, which has interests in real estate, said the position is newly created.
Mr. Meador had been executive vice president of Balcor.
In addition to his previous real-estate investment and asset-management duties, Mr. Meador takes responsibility for development and property management.
Those duties had been held by Van Pell, 44, who resigned as an executive vice president.
Shearson is about 60%-held by American Express Co.
Great American Bank, citing depressed Arizona real estate prices, posted a third-quarter loss of $59.4 million, or $2.48 a share.
A year earlier, the savings bank had earnings of $8.1 million, or 33 cents a share.
For the nine months, it had a loss of $58.3 million, or $2.44 a share, after earnings of $29.5 million, or $1.20 a share, in the 1988 period.
Great American said it increased its loan-loss reserves by $93 million after reviewing its loan portfolio, raising its total loan and real estate reserves to $217 million.
Before the loan-loss addition, it said, it had operating profit of $10 million for the quarter.
The move followed a round of similar increases by other lenders against Arizona real estate loans, reflecting a continuing decline in that market.
In addition to the increased reserve, the savings bank took a special charge of $5 million representing general and administrative expenses from staff reductions and other matters, and it posted a $7.6 million reduction in expected mortgage servicing fees, reflecting the fact that more borrowers are prepaying their mortgages.
Arbitragers weren't the only big losers in the collapse of UAL Corp. stock.
Look at what happened to UAL's chairman, Stephen M. Wolf, and its chief financial officer, John C. Pope.
On a day some United Airlines employees wanted Mr. Wolf fired and takeover stock speculators wanted his scalp, Messrs. Wolf and Pope saw their prospective personal fortunes continue to plummet as shares of UAL, United's parent company, dived $24.875 on the Big Board to close at $198.
Including Monday's plunge, that has given the two executives paper losses of $49.5 million, based on what they would have realized had the pilots and management-led buy-out of UAL gone through at $300 a share.
When bank financing for the buy-out collapsed last week, so did UAL's stock.
Even if the banks resurrect a financing package at $250 a share, the two executives would still get about $25 million less than they stood to gain in the initial transaction.
Mr. Wolf owns 75,000 UAL shares and has options to buy another 250,000 at $83.3125 each.
In the $300-a-share buyout, that totaled about $76.7 million.
By yesterday's close of trading, it was good for a paltry $43.5 million.
Of course, Mr. Wolf, 48 years old, has some savings.
He left his last two jobs at Republic Airlines and Flying Tiger with combined stock-option gains of about $22 million, and UAL gave him a $15 million bonus when it hired him.
His 1988 salary was $575,000, with a $575,000 bonus.
The 40-year old Mr. Pope hasn't changed jobs enough -- at least the right ones -- to stash away that kind of money.
United paid him a $375,000 bonus to lure him away from American Airlines, and he was paid a salary of $342,122 last year with a $280,000 bonus.
Mr. Pope owns 10,000 UAL shares and has options to buy another 150,000 at $69 each.
That came to a combined $37.7 million under the $300-a-share buy-out, but just $21.3 million at yesterday's close.
Of the combined $114.4 million the two men were scheduled to reap under the buy-out, they agreed to invest in the buy-out just $15 million, angering many of the thousands of workers asked to make pay concessions so the buy-out would be a success.
United's directors voted themselves, and their spouses, lifetime access to the Friendly Skies -- free first-class travel, and $20,000 a year for life as well.
Conceivably, in a scaled-back buy-out, they could be bumped back to coach seats for life.
Thomas H. Johnson, president of the Coatedboard division of Mead Corp., was named president of Manville Forest Products Corp., a Manville unit, and senior vice president of Manville Corp.
Mr. Johnson succeeds Harry W. Sherman, who resigned to pursue other interests, in both positions.
Manville is a building and forest products concern.
US Facilities Corp. said Robert J. Percival agreed to step down as vice chairman of the insurance holding company.
"There was a difference of opinion as to the future direction of the company," a spokeswoman said.
Mr. Percival declined to comment.
In a statement, US Facilities said Mr. Percival's employment contract calls for him to act as a consultant to the company for two years.
He will also remain a director, US Facilities said, but won't serve on any board committees.
Mr. Percival will be succeeded on an interim basis by George Kadonada, US Facilities chairman and president.
In the same statement, US Facilities also said it had bought back 112,000 of its common shares in a private transaction.
Terms weren't disclosed.
The buy-back represents about 3% of the company's shares, based on the 3.7 million shares outstanding as of Sept. 30.
In national over-the-counter trading yesterday, US Facilities closed at $3.625, unchanged.
Three leading drug companies reported robust third-quarter earnings, bolstered by strong sales of newer, big-selling prescriptions drugs that provide hefty profit margins.
Merck & Co. reported a 25% increase in earnings; Warner-Lambert Co.'s profit rose 22% and Eli Lilly & Co.'s net income rose 24%.
The results were in line with analysts' expectations.
Merck & Co.
Merck, Rahway, N.J., continued to lead the industry with a strong sales performance in the human and animal health-products segment.
A stronger U.S. dollar reduced third-quarter and first-nine-month sales growth 2% and 3%, respectively.
International sales accounted for 47% of total company sales for the nine months, compared with 50% a year earlier.
Sales for the quarter rose to $1.63 billion from $1.47 billion.
Mevacor, Merck's new cholesterol-lowering drug, had higher sales than any other prescription medicine has ever achieved in the U.S. in the year following introduction, the company said.
The drug was introduced in West Germany this year.
Intense competition, however, led to unit sales declines for a group of Merck's established human and animal-health products, including Aldomet and Indocin.
In New York Stock Exchange composite trading yesterday, Merck shares closed at $75.25, up 50 cents.
Warner-Lambert Co.
Warner-Lambert, Morris Plains, N.J., reported sales that were a record for any quarter and the eighth quarter in a row of 20% or more per-share earnings growth.
Spurred by growth in world-wide sales of the company's prescription drugs, Warner-Lambert said 1989 will be the best year in its history, with per-share earnings expected to increase more than 20% to about $6.10.
Sales for the quarter rose to $1.11 billion from $1.03 billion.
Prescription-drug world-wide sales rose 9% in the quarter to $340 million; U.S. sales rose 15%.
The segment's growth was led by sales of the cardiovascular drugs Lopid, a lipid regulator, and Dilzem, a calcium channel blocker.
World-wide sales of Warner-Lambert's non-prescription health-care products, such as Halls cough tablets, Rolaids antacid, and Lubriderm skin lotion, increased 3% to $362 million in the third quarter; U.S. sales rose 5%.
Confectionery products sales also had strong growth in the quarter.
World-wide sales of Trident gum, Certs breath mints, and Clorets gum and breath mints, increased 12% to $277 million.
Warner-Lambert shares closed at $109.50 a share, up $1.50, in Big Board composite trading yesterday.
Eli Lilly & Co.
Lilly attributed record third-quarter and nine-month results to world-wide gains for pharmaceuticals, medical instruments and plant-science products despite poor exchange rates for the dollar that slowed sales abroad.
Earnings continued to pace sales because of a lower tax rate, profit from the renegotiation of the debt instrument received from Faberge Inc. in connection with Lilly's sale of Elizabeth Arden Inc. in 1987, and net proceeds from the settlement of patent litigation at Lilly's Hybritech Inc. unit.
Third-quarter sales of the Indianapolis, Ind., company rose 11% to $1.045 billion from $940.6 million.
Nine-month sales grew 12% to $3.39 billion from $3.03 billion a year earlier.
Sales of Prozac, an anti-depressant, led drug-sales increases.
Higher sales of pesticides and other plant-science products more than offset a slight decline in the sales of animal-health products to fuel the increase in world-wide agricultural product sales, Lilly said.
Advanced Cardiovascular Systems Inc. and Cardiac Pacemakers Inc. units led growth in the medical-instrument systems division.
Lilly shares closed yesterday in composite trading on the Big Board at $62.25, down 12.5 cents.
Reuben Mark, chairman of Colgate-Palmolive Co., said he is "comfortable" with analysts' estimates that third-quarter earnings rose to between 95 cents and $1.05 a share.
That compares with per-share earnings from continuing operations of 69 cents the year earlier; including discontinued operations, per-share was 88 cents a year ago.
The per-share estimates mean the consumer-products company's net income, increased to between $69.5 million and $76 million, from $47.1 million the year-before period.
Analysts estimate Colgate's world-wide third-quarter sales rose about 8% to $1.29 billion.
Mr. Mark attributed the earnings growth to strong sales in Latin America, Asia and Europe.
Results were also bolstered by "a very meaningful" increase in operating profit by Colgate's U.S. business, Mr. Mark said.
Operating profit at Colgate's U.S. household products and personal-care businesses jumped 25% in the quarter, Mr. Mark added.
He said the improvement was a result of cost savings achieved by consolidating manufacturing operations, blending two sales organizations and focusing more carefully the company's promotional activities.
The estimated improvement in Colgate's U.S. operations took some analysts by surprise.
Colgate's household products business, which includes such brands as Fab laundry detergent and Ajax cleanser, has been a weak performer.
Analysts estimate Colgate's sales of household products in the U.S. were flat for the quarter, and they estimated operating margins at only 1% to 3%.
"If you could say their business in the U.S. was mediocre, but great everywhere else, that would be fine," says Bonita Austin, an analyst with Wertheim Schroder & Co.
"But it's not mediocre, it's a real problem."
Mr. Mark conceded that Colgate's domestic business, apart from its highly profitable Hill's Pet Products unit, has lagged.
"We've done a lot to improve {U.S.} results, and a lot more will be done," Mr. Mark said.
"Improving profitability of U.S. operations is an extremely high priority in the company."
To focus on its global consumer-products business, Colgate sold its Kendall health-care business in 1988.
H. Anthony Ittleson was elected a director of this company, which primarily has interests in radio and television stations, increasing the number of seats to five.
Osborn also operates Muzak franchises, entertainment properties and small cable-television systems.
Mr. Ittleson is executive, special projects, at CIT Group Holdings Inc., which is controlled by Manufacturers Hanover Corp.
The Boston Globe says its newly redesigned pages have a "crisper" look with revamped fixtures aimed at making the paper "more consistent" and "easier to read."
Maybe so -- if you can find where your favorite writer went.
Beantown scribes, who spare no invective when taking on local luminaries such as Michael "Pee Wee" Dukakis, or New England Patriots Coach Raymond "Rev. Ray" Berry, yesterday poured ridicule on new drawings of Globe columnists that replaced old photos in the revamped pages this week.
By late last night, Globe Managing Editor Thomas Mulvoy, bending to the will of his troops, scrapped the new drawings.
For a few days at least, he says, no pictures or drawings of any kind will adorn the columns.
Trouble was, nobody thought they looked right.
Globe columnist Mike Barnicle -- in the second attack on his employer in as many weeks -- averred that his shadowy countenance was so bad, it looked "like a face you'd find on a bottle of miracle elixir that promises to do away with diarrhea in our lifetime."
Mr. Barnicle reminded readers that he still hasn't forgiven Globe management for questioning a $20 expense chit he submitted for parking his car while chasing a story.
"I thought {the drawing} a cross between someone you'd spot whipping open his trench coat . . . or a guy who boasted he'd been Charles Manson's roommate for the last 19 years," he said.
Mr. Barnicle was hardly kinder to the renderings of colleagues Michael Madden ("appears to be a pervert"), Will McDonough ("looks as if he drove for Abe Lincoln") or Bella English, whose "little girl now screams hysterically every time she sees a newspaper."
Lynn Staley, the Globe's assistant managing editor for design, acknowledges that the visages were "on the low end of the likeness spectrum."
Rival Boston Herald columnist Howie Carr, who usually rails at Statehouse "hacks" and nepotism, argued that the new drawings were designed to hide Mr. Madden's "rapidly growing forehead" and the facial defects of "chinless" Dan Shaughnessy, a Globe sports columnist.
"But think of the money you, the reader, will save on Halloween," said Mr. Barnicle.
"Instead of buying masks for your kids, just cut out the columnists' pictures. . . .
Deeply ingrained in both the book review "Kissing Nature Good-bye" by Stephen MacDonald (Leisure & Arts, Sept. 27) and the books reviewed is the assumption that global warming is entirely a result of human activity.
Is such a view justified?
In the absence of humans, would the Earth enjoy a constant climate over the long term?
Clearly not.
About 20,000 years ago the last ice age ended.
Enormous ice sheets retreated from the face of North America, northern Europe and Asia.
This global warming must have been entirely natural -- nobody would blame it on a few hundred thousand hunter-gatherers hunting mammoths and scratching around in caves.
Furthermore, no bell has yet rung to announce the end of this immense episode of natural global warming.
It is probably continuing and may well account for most of, or all of, present-day global warming.
I bow to no one in my regard for our terrestrial heritage, but if we are serious about global warming we must look at the big picture and not allow the Dominant Culture to lock us into the capitalist-exploiters-greedy-American-consumers-global- warming scenario as the sole model for discussion.
Jocelyn Tomkin Astronomy Department University of
The Internal Revenue Service plans to restructure itself more like a private corporation.
In addition, the tax-collecting agency says that it will take the unusual step of looking to the private sector to fill two new high-level positions to guide the 120,000-employee agency: a comptroller to oversee daily finances and a chief information officer to update the information system, which includes probably the largest computer data base in the world.
The IRS also said that it would create the position of chief financial officer, who will be hired from within the agency.
IRS Commissioner Fred T. Goldberg said the changes are intended to bring "accountability" to the agency, which has an annual budget of more than $5 billion and collects about $1 trillion a year.
"My assessment and everyone's assessment is that we do not have the kinds of information that let us responsibly and effectively formulate and execute our budget," Mr. Goldberg said.
"And we don't have internal controls and discipline that we need to have to spend $5 billion properly."
Mr. Goldberg, who took over as head of the IRS in July, has been disturbed by what he considers the inefficiency, waste and lack of coordination among the branches of the vast federal agency.
The IRS operates on a computer system designed in 1961, which it has been trying to modernize for years.
And the agency, which operated throughout fiscal 1989 with a $360 million budget shortfall, has been under a hiring freeze since last fall.
The new commissioner says that closer scrutiny of how the agency uses its resources will go a long way toward enhancing its ability to collect more tax revenue.
"I think that you will see a significant improvement in the budget formulation and execution process which, in turn, I believe will result in a significant increase in revenue," he said.
The IRS hopes to fill the new positions soon.
Customarily, it would appoint career civil servants from within the agency, but Mr. Goldberg said he plans to "scour the world" for the chief information officer and the comptroller.
Although the jobs will probably pay between $70,000 and $80,000 a year, IRS officials are confident that they can attract top-notch candidates from the private sector.
"You're telling someone they can spend the next three or four or five or six years of their life bringing about the most difficult and costly modernization of an information system on the civil side ever," Mr. Goldberg said.
"On the comptroller side, you're developing and making work financial controls governing a $6 billion budget.
When Maj. Moises Giroldi, the leader of the abortive coup in Panama, was buried, his body bore several gunshot wounds, a cracked skull and broken legs and ribs.
They were the signature of his adversary, Panamanian leader Manuel Antonio Noriega.
The rebel officer's slow and painful death, at the headquarters of Panama's Battalion-2000 squad, was personally supervised by Gen. Noriega, says a U.S. official with access to intelligence reports.
Leaping into rages, sinking into bouts of drunkenness and mistrust, Mr. Noriega has put to death some 70 of his troops involved in the coup, according to U.S. officials monitoring crematoriums and funeral parlors in Panama City.
He is now changing the place he sleeps every night, sometimes more than once a night.
His meals are most often prepared by women he trusts -- his full-time mistress, Vicky Amado, and her mother, Norma.
And he is collecting the names of those who telephoned the coup-makers to congratulate them during their brief time in control of his headquarters.
More enemies to be dealt with.
In the two weeks since the rebellion, which the U.S. hesitantly backed, Mr. Noriega has been at his most brutal-and efficient-in maintaining power.
Yet, while the failed coup is a major U.S. foreign policy embarrassment, it is merely the latest chapter in a byzantine relationship between Mr. Noriega and Washington that stretches back three decades.
America's war on the dictator over the past two years, following his indictment on drug charges in February 1988, is the legacy of that relationship.
Before American foreign policy set out to destroy Noriega, it helped create him out of the crucible of Panama's long history of conspirators and pirates.
For most of the past 30 years, the marriage was one of convenience.
In 1960, for example, when Mr. Noriega was both a cadet at an elite military academy in Peru and a spy-in-training for the U.S. Defense Intelligence Agency, he was detained by Lima authorities for allegedly raping and savagely beating a prostitute, according to a U.S. Embassy cable from that period.
The woman had nearly died.
But U.S. intelligence, rather than rein in or cut loose its new spy, merely filed the report away.
Mr. Noriega's tips on emerging leftists at his school were deemed more important to U.S. interests.
From that point on, the U.S. would make a practice of overlooking the Panamanian's misadventures.
The U.S. has befriended and later turned against many dictators, but none quite so resourceful.
The 55-year-old Mr. Noriega isn't as smooth as the shah of Iran, as well-born as Nicaragua's Anastasio Somoza, as imperial as Ferdinand Marcos of the Philippines or as bloody as Haiti's Baby Doc Duvalier.
Yet he has proved more resilient than any of them.
And out of necessity: The U.S. can make mistakes and still hope to remove him from power, but a single error on his part could cost him his life.
"The U.S. underestimated Noriega all along," says Ambler Moss, a former Ambassador to Panama.
"He has mastered the art of survival."
In keeping with America's long history of propping up Mr. Noriega, recent U.S. actions have extended rather than shortened his survival.
Mr. Noriega might have fallen of his own weight in 1988 because of Panama's dire economic situation, says Mr. Moss, but increasing external pressure has only given him additional excuses for repression, and a scapegoat for his own mismanagement.
"If the U.S. had sat back and done nothing, he might not have made it through 1988," Mr. Moss contends.
Perhaps most important, Mr. Noriega's allies have intervened to encourage -- in some cases, to demand -- that the dictator maintain his grip of the throne.
One Colombian drug boss, upon hearing in 1987 that Gen. Noriega was negotiating with the U.S. to abandon his command for a comfortable exile, sent him a hand-sized mahogany coffin engraved with his name.
"He is cornered," says the Rev. Fernando Guardia, who has led Catholic Church opposition against Noriega.
"The Americans have left him without a way out.
It is easy to fight when you don't have any other option."
His chief advantage in the fight: his intimate knowledge of American ways and weaknesses.
Mr. Noriega often tells friends that patience is the best weapon against the gringos, who have a short attention span and little stomach for lasting confrontation.
The U.S. discovered the young Tony Noriega in late 1959, when he was in his second year at the Chorrillos Military Academy in Lima, according to former U.S. intelligence officials.
The contact occurred through Mr. Noriega's half-brother, a Panamanian diplomat based in Peru named Luis Carlos Noriega Hurtado.
Luis Carlos, knowing that helping the Americans could advance the career of any Panamanian officer, relayed Tony's reports on the leftist tendencies he observed among his fellow students and, more important, among his officers and instructors.
A spy was born.
It was a heady experience for the pockmarked and slightly built Mr. Noriega, who was known to his friends as Cara la Pina -- pineapple face.
Born the illegitimate son of his father's maid, he was raised on the mean streets of the central market district of Panama City.
Tony was four years older than most of his fellow cadets, and gained admission to the academy because his brother had falsified his birth certificate.
He considered himself intellectually superior to his Peruvian peers, many of whom were wayward sons sent by their well-off families to the highly disciplined, French-modeled academy as a sort of reform school.
In his peaked military cap and neatly pressed, French-made uniform, Noriega felt more respected and powerful than ever in his underprivileged life, friends from the period say.
"He had an elegant uniform with gold buttons in a country where there was a cult of militarism, where officers were the elite with special privileges," recalls Darien Ayala, a fellow student in Peru and a lifelong friend.
Mr. Noriega's relationship to American intelligence agencies became contractual in either 1966 or 1967, intelligence officials say.
His commanding officer at the Chiriqui Province garrison, Major Omar Torrijos, gave him an intriguing assignment: Mr. Noriega would organize the province's first intelligence service.
The spy network would serve two clients: the Panamanian government, by monitoring political opponents in the region, and the U.S., by tracking the growing Communist influence in the unions organized at United Fruit Co.'s banana plantations in Bocas del Toros and Puerto Armuelles.
United Fruit was one of the two largest contributors to Panama's national income.
Satisfying its interests was a priority for any Panamanian leader.
Mr. Noriega's initial retainer was only $50 to $100 a month, plus occasional gifts of liquor or groceries from the American PX, a former intelligence official says.
It was modest pay by American standards, but a healthy boost to his small military salary, which fellow officers remember as having been $300 to $400 monthly.
"He did it very well," recalls Boris Martinez, a former Panamanian colonel who managed Mr. Noriega and his operation.
"He started building the files that helped him gain power."
A National Guard job assumed by Capt. Noriega in 1964 -- as chief of the transit police in David City, capital of the Chiriqui Province -- was tailor-made for an aspiring super-spy.
By pressuring taxi and bus drivers who needed licenses, he gained a ready cache of information.
He knew which local luminaries had been caught driving drunk, which had been found with their mistresses.
This proved particularly valuable to the Panamanian government in 1967, when union leaders were planning a May Day march that the government feared could turn violent.
Mr. Noriega had learned that a local union leader was sleeping with the wife of his deputy.
So he splashed the information on handbills that he distributed throughout the banana-exporting city of Puerto Armuelles, which was ruled by United Fruit Co.
The campaign so divided union leaders that the government found them far easier to control.
"It was like a play on Broadway," recalls Mr. Martinez.
"Noriega managed the whole thing.
He was superb.
Noriega was an expert at bribing and blackmailing people."
During his years in Chiriqui, however, Mr. Noriega also revealed himself as an officer as perverse as he was ingenious.
Rodrigo Miranda, a local lawyer and human-rights monitor, recalls an intoxicated Noriega visiting prisoners in their cells at the 5th Zone Garrison headquarters in David, where he had his offices.
Mr. Noriega would order them all to take off their clothes and run around the courtyard naked, laughing at them and then retreating to his office.
"People started wondering if something was wrong with him," Mr. Miranda recalls.
But through this period, so far as the U.S. military was concerned, Mr. Noriega was a model recruit.
He signed up for intelligence and counter-intelligence training under American officers at Fort Gulick in Panama in July 1967, according to a copy of a 1983 resume with details Mr. Noriega has since classified as secret.
He flew to Fort Bragg, N.C., in September of that year for a course in psychological operations, returning to the School of the Americas in Panama for a two-month course called "military intelligence for officers."
Some American officers interpreted his eagerness and studiousness as a sign of loyalty, but they did so falsely.
He rose to chief of intelligence in Panama's socalled G-2 in 1970 after providing populist dictator Torrijos the critical support to defeat a coup attempt against him a year earlier.
He became Gen. Torrijos's inseparable shadow, and the holder of all Panama's secrets.
Mr. Noriega, by now a lieutenant colonel, expanded his contacts to include the Cubans -- not to mention the Israelis, the Taiwanese and any other intelligence service that came knocking.
When U.S. diplomats complained to the CIA of Col. Noriega's moonlighting, intelligence experts always insisted that his allegiance was first to the Americans.
"Early on in the State Department, we took to calling him the rent-a-colonel, in tribute to his ability to simultaneously milk the antagonistic intelligence services of Cuba and the United States," recalls Francis J. McNeil, who, as deputy assistant secretary of state for inter-American affairs, first ran across reports about Mr. Noriega in 1977.
"Some of us wondered how our intelligence people could put so much stock in his information when he was just as close to the Cubans."
Even at this early stage, drugs caused additional concerns.
During the Nixon administration, the Drug Enforcement Administration became dismayed at the extent of the G-2's connections to arrested drug traffickers.
One DEA agent drew up a list of five options for dealing with Col. Noriega, one of which was assassination.
The head of the DEA at the time, John Ingersoll, scotched the assassination plan.
But he did fly to Panama to scold dictator Torrijos on the drug ties of Panamanian officials, including Mr. Noriega.
Mr. Ingersoll later recalled that Gen. Torrijos seemed afraid to act on the concerns of the U.S.
"Everybody was afraid of him," Mr. Ingersoll says.
Mr. Noriega became an even greater threat in 1976, when U.S. intelligence services discovered that he had been buying recordings of electronically monitored conversations from three sergeants working for the U.S. Army's 470th Military Intelligence Group.
The tapes included wiretaps of Gen. Torrijos's own phone, according to American intelligence officials.
"We caught him with his hands on our cookie jar," says former CIA Director Stansfield Turner.
For the first time, the U.S. considered cutting Mr. Noriega from its intelligence payroll -- and the deliberations were intense, Mr. Turner says.
"In the world of intelligence, if you want to get information, you get it from seedy characters.
The question is how much you get tied in with seedy characters so they can extort you."
Intelligence officials to this day worry whether Mr. Noriega sold sensitive information on the recordings to the Cubans or others.
Mr. Turner was troubled enough to cancel the U.S. contract with the rent-a-colonel at the beginning of the Carter administration.
The U.S. soon found new cause for concern: gun-running.
Prosecutors in Southern Florida indicted five Panamanians on charges of illegally running arms to Sandinista rebels trying to overthrow the Nicaraguan government of Mr. Somoza.
They included one of Mr. Noriega's closest friends and business partners, Carlos Wittgreen.
And the investigators were quickly closing in on Mr. Noriega himself.
At the time, though, in 1979, the U.S. was once again flirting with its longtime Latin American spy.
Mr. Noriega made plans to fly to Washington for a meeting with his counterpart at the Pentagon.
Dade County and federal authorities, learning that he intended to fly through Miami, made plans to arrest him on the gun-running charges as soon as he hit U.S. soil.
It was a Friday in June.
The Pentagon foiled the plan.
According to military officers at the time, word was passed to Mr. Noriega by his American hosts that the police would be waiting.
On Monday, U.S. officials received a routine, unclassified message from the military group commander in Panama.
"Due to health reasons, Lt. Col. Noriega has elected to postpone his visit to Washington," it read.
Prosecutors in Miami received yet another setback.
Their original indictment against Mr. Wittgreen, the friend of Mr. Noriega, and the other four was dismissed on a technicality.
But now, along with reindicting Mr. Noriega's pal, they intended to charge Mr. Noriega himself, on allegations that he was involved in the illegal trading of some $2 million in arms.
In January 1980, Jerome Sanford, as assistant U.S. attorney, was summoned to a meeting with a Federal Bureau of Investigation agent assigned to the Bureau of Alcohol, Tobacco and Firearms in Miami.
Panamanian dictator Torrijos, he was told, had granted the shah of Iran asylum in Panama as a favor to Washington.
Mr. Sanford was told Mr. Noriega's friend, Mr. Wittgreen, would be handling the shah's security.
It wouldn't be a good idea to indict him -- much less Mr. Noriega, the prosecutor was told.
After prodding from Mr. Sanford, U.S. Attorney Jack Eskenazi pleaded with Justice Department officials in Washington to let the indictment proceed.
"Unfortunately," Mr. Eskenazi wrote in a letter, "those of us in law enforcement in Miami find ourselves frequently attempting to enforce the laws of the United States but simultaneously being caught between foreign policy considerations over which we have no control."
The letter, along with a detailed prosecution memo, sat on the desks of Justice officials for months before the case died a quiet death.
"I think if we had been allowed to go ahead then we wouldn't have the problems we have now," Mr. Sanford says.
"If he had been found guilty, we could have stopped him."
In August 1983, Mr. Noriega took over as General and de-facto dictator of Panama, having maneuvered his way to the top only two years after the mysterious death in a plane crash of his old boss Omar Torrijos.
Soon, the military became a veritable mafia controlling legal and illegal businesses.
The Reagan administration also put Mr. Noriega's G-2 back on the U.S. payroll.
Payments averaged nearly $200,000 a year from the U.S. Defense Intelligence Agency and the CIA.
Although working for U.S. intelligence, Mr. Noriega was hardly helping the U.S. exclusively.
During the Reagan years he expanded his business and intelligence contacts with the Cubans and the Sandinistas.
He allegedly entered into Panama's first formal business arrangement with Colombian drug bosses, according to Floyd Carlton, a pilot who once worked for Mr. Noriega and who testified before the U.S. grand jury in Miami that would ultimately indict the Panamanian on drug charges.
But Mr. Noriega was convinced the Reagan White House wouldn't act against him, recalls his close ally Jose Blandon, because he had an insurance policy: his involvement with the Contra rebels in Nicaragua.
Mr. Blandon says the general allowed the Contras to set up a secret training center in Panama.
Mr. Noriega also conveyed intelligence from his spy operation inside the Nicaraguan capital of Managua.
And on at least one occasion, in the spring of 1985, he helped arrange a sabotage attack on a Sandinista arsenal in Nicaragua.
Although, his help for the Contra cause was limited, it was enough to win him important protectors in the Reagan administration, says Sen. Patrick Leahy, a Vermont Democrat who then served on the Senate Intelligence Committee.
"Noriega played U.S. intelligence agencies and the U.S. government like a violin," he says.
An incident in 1984 suggested one additional means by which Mr. Noriega might have maintained such influence with Washington -- by compromising U.S. officials.
Curtin Windsor, then the ambassador to Costa Rica, recalls being invited to Panama by Mr. Noriega's brother Luis Carlos for a weekend of deep sea fishing and "quiet, serious conversation" on the Aswara Peninsula.
Mr. Windsor notified Everett E. Briggs, the U.S. ambassador to Panama, of the invitation.
"Briggs screamed," Mr. Windsor recalls.
He says Mr. Briggs told him he was being set up for a "honey trap," in which Mr. Noriega would try to involve him in an orgy and then record the event "with sound and video."
Mr. Briggs, on vacation after resigning his position at the National Security Council, couldn't be reached for comment.
As Mr. Noriega's political troubles grew, so did his offers of assistance to the Contras, an apparent attempt to curry more favor in Washington.
For instance, he helped steal the May 1984 Panamanian elections for the ruling party.
But just one month later, he also contributed $100,000 to a Contra leader, according to documents released for Oliver North's criminal trial in Washington, D.C.
Yet, his political setbacks mounted.
Mr. Noriega was accused of ordering in 1985 the beheading of Hugo Spadafora, his most outspoken political opponent and the first man to publicly finger Mr. Noriega on drug trafficking charges.
He then ousted President Nicholas Ardito Barletta, a former World Bank official with close ties to the U.S., after Mr. Barletta tried to create a commission to investigate the murder.
And, all the while, Panama's debt problems continued to grow.
Mr. Noriega was growing desperate.
In late 1986, he made an offer he thought the U.S. couldn't refuse.
As recounted in a stipulation that summarized government documents released for the North trial, Mr. Noriega offered to assassinate the Sandinista leadership in exchange "for a promise to help clean up Noriega's image and a commitment to lift the {U.S.} ban on military sales to the Panamanian Defense Forces."
"North," the document went on, referring to Oliver North, "has told Noriega's representative that U.S. law forbade such actions.
The representative responded that Noriega had numerous assets in place in Nicaragua and could accomplish many essential things, just as Noriega had helped {the U.S.} the previous year in blowing up a Sandinista arsenal."
Col. North conveyed the request to his superiors and to Assistant Secretary of State Elliot Abrams, who relayed it to Secretary of State George Shultz.
Mr. Noriega's proposal was turned down.
And Mr. Shultz curtly told Mr. Abrams that the general should be told that only he could repair his tarnished image.
The end of the marriage was at hand.
Within weeks the unfolding Iran-Contra scandal took away Mr. Noriega's insurance policy.
The death of CIA Director William Casey and resignation of Oliver North allowed anti-Noriega political forces to gain influence.
Public protests against him were triggered in June 1987 due to charges by Diaz Herrera, his former chief of staff, that Mr. Noriega had stolen the 1984 election and had ordered the killing of Messrs. Spadafora and Torrijos.
Few American officials were willing any longer to defend him.
Lawyers in Miami -- this time working virtually without impediment -- prepared to have him indicted on drug charges in February 1988.
During negotiations with American officials in May 1988 over proposals to drop the U.S. indictments in exchange for his resignation, Mr. Noriega often asked almost plaintively how the Americans, whom he had helped for so many years, could turn against him.
Now, neither side -- the U.S. nor Mr. Noriega -- has an easy out.
President Bush has sworn to bring him to justice.
Mr. Noriega believes he hasn't any alternative but to continue clutching to power.
It is a knock-out battle -- perhaps to the death.
In the end, is Mr. Noriega the political equivalent of Frankenstein's monster, created by a well-intentioned but misguided foreign power?
Not quite, Sen. Leahy contends.
"For short-term gains, people were willing to put up with him.
That allowed him to get stronger and stronger," he says.
"I don't think we created him as much as we fed him, nurtured him and let him grow up to be big and strong.
UPJOHN Co. reported that third-quarter net income rose to $96 million, or 52 cents a share, from $89.6 million, or 49 cents a share, a year earlier.
Yesterday's edition provided analysts' estimates for the company when actual earnings were available.
Industrial production declined 0.1% in September, reinforcing other signs that the manufacturing sector continues its slowing trend.
The Federal Reserve Board said output of the nation's factories, mines and utilities expanded at an annual rate of 1.3% in the third quarter, substantially slower than the 3.3% annual rate in the second quarter.
"Capital spending and exports, which have been the driving force in this expansion, are showing clear signs of having the steam taken out of them," said Robert Dederick, economist for Northern Trust Co. in Chicago.
The new reports of sluggishness, which were foreshadowed by an earlier Labor Department report that manufacturing payrolls dropped by 105,000 in September, give the Fed another reason to further ease its grip on credit and lower interest rates.
"They need to do something about this," said Maury Harris, economist at PaineWebber Group Inc.
The Fed also said U.S. industry operated at 83.6% of capacity last month, down from 83.8% in August.
Measures of manufacturing activity fell more than the overall measures.
Factory output dropped 0.2%, its first decline since February, after having been unchanged in October.
Factories operated at 83.7% of capacity, the lowest rate in more than a year and down from 84.1% in September.
The declines mainly reflected widespread weakness in durable goods, those intended to last more than three years.
The biggest drop was recorded by primary metals producers, a category that includes the steel industry.
Output of business equipment was unchanged in September.
Production of factory equipment, one indication of the strength of manufacturers' investment spending, fell 0.3%.
Some economists expect further declines in investment spending.
"Whenever corporate profits are weak that means capital spending is going to soften subsequently," Mr. Harris said.
"You haven't seen the full effect of that yet."
A decline in truck production more than offset a sharp rise in auto assemblies, the Fed noted.
Analysts don't expect the September surge in auto production to be repeated in the coming months.
Here is a summary of the Federal Reserve Board's report on industrial production in September.
The figures are seasonally adjusted.
142.3% of the 1977 average.
Robin Honiss, president and chief executive officer of this bank holding company, was elected to the additional posts of chairman, president and chief executive of the company's New England Savings Bank subsidiary.
William R. Attridge resigned those posts, as well as a seat on NESB's board.
NESB is also the parent of Omnibank.
Lung-cancer mortality rates for people under 45 years of age have begun to decline, federal researchers report.
The drop is particularly large for white males, although black males and white and black women also show lower mortality rates.
A report in this week's issue of the Journal of the National Cancer Institute also projects that overall U.S. mortality rates from lung cancer, the leading cause of cancer death, should begin to drop in several years if cigarette smoking continues to abate.
The report, which comes 25 years after the U.S. Surgeon General issued a report warning against the dangers of smoking, is the strongest indication to date that the reduction in smoking is leading to lower death rates from lung cancer.
"What this is saying is that the surgeon general's message is having an impact," said Melvyn Tockman, an epidemiologist at the Johns Hopkins School of Hygiene and Public Health in Baltimore.
The National Cancer Institute report compares mortality rates of two groups of people between the ages of 35 and 44 a decade apart.
The death rate from lung cancer of white males aged 35 to 44 in the mid-1970s was 13.4 per 100,000, but the mortality rate of the same age group in the mid-1980s was 9.6, a decline of 28.7%.
Measured the same way, the decline for black males was 14.2%.
The drop in mortality rates for women was less steep -- 8.9% for blacks and 5.3% for whites.
The study, by Susan Devesa, William Blot and Joseph Fraumeni of the institute's staff, also shows that the incidence of lung cancer as well as the death rate declined over the decade for all groups in the 35-44 age bracket, except black men.
Although lung-cancer mortality rates are increasing for the nation as a whole, the report projects that death rates will begin to decline in the 1990s for men and after the year 2000 for women.
Lung-cancer mortality rates increase with age and are continuing to rise for all age groups over 55, with sharp increases for everybody but white men.
But Dr. Fraumeni, one of the authors of the report, said "the declining rates we're seeing for younger people we believe may be a harbinger of declining mortality in the future."
However, he stressed that the improvement depends on a continued reduction in smoking.
"Even though these favorable trends in lung-cancer mortality affect all sex and race groups, they can't be taken for granted," the report says.
"Smoking prevention programs should reach larger segments of the population, especially children, adolescents and minorities."
An editorial in the NCI Journal says the report of declining lung-cancer mortality "among young men and women in the U.S. indicates that we finally may be winning the battle -- this even in a country where the tobacco industry spends over $2 billion a year for promotion of the addictive habit of smoking."
But the editorial, by Jan Stjernsward of the World Health Organization, notes that tobacco consumption and lung-cancer mortality rates are rising in developing countries.
"Non-smoking should be established as the norm of social behavior" around the world, the editorial says, through the enactment of laws that limit advertising, boost tobacco prices and promote anti-smoking education.
Asked for comment, Walker Merryman, a vice president of the Tobacco Institute, said new efforts to restrict tobacco advertising in the U.S. could violate the First Amendment protection of free speech.
According to the American Cancer Society, smoking is responsible for 85% of the lung-cancer cases among men and 75% among women.
The NCI report attributes the differences in mortality rates by race to different smoking patterns.
A higher proportion of black men smoke than white men.
While nearly equal percentages of black and white women currently smoke, in both sexes more whites have given up smoking than blacks.
In comparing changes in mortality rates over the past decade, the NCI study looked only at blacks and whites.
Asians and native Americans weren't studied; Hispanics were included with whites.
Recent changes in average annual age-specific lung-cancer rates per 100,000 population by race and sex.
White Males
White Females
Black Males
Black Females
Directors elected R. Marvin Womack, currently vice president/product supply, purchasing, to head the company's Washington, D.C., office.
As vice president/national-government relations, Mr. Womack will work with P&G's top management and with the company's government-relations staff "to represent P&G's interests at the federal level," said John G. Smale, chairman and chief executive officer.
Mr. Smale said the appointment "recognizes the growing influence of government on our business."
Mr. Womack, 53 years old, has been with the big producer of household products, food and pharmaceuticals for 30 years.
Traders trying to profit from the recent volatility in financial markets invaded the Nasdaq over-the-counter market, prompting even more swings in stock prices.
After gaining strength during a brief run-up when trading began, the Nasdaq Composite Index weakened under selling pressure.
The forces at work included computer-guided trading, as well as profit-driven market makers and institutional investors who had bought stock on the cheap during the recent correction.
During the last two hours of trading, the composite almost drew even on the day before slipping again.
The Nasdaq Composite closed down 1.05, or 0.2%, to 459.93.
The action was confined to Nasdaq's biggest and most liquid stocks, traders said.
The Nasdaq 100 Index began the day at 449.89, lost 2% at one point, and was up 0.4% at another.
The barometer of the biggest nonfinancial stocks settled at 448.49, off 1.40.
Its counterpart, the Nasdaq Financial Index, was weak for most of the day, sliding 2.51 to 453.57 by the end of trading.
The volatility was dizzying for traders.
"The market must have turned up and down 15 different times," commented Lance Zipper, head of OTC trading at Kidder Peabody.
"Every time you thought it was going into a rally it gave up, and every time you thought it would rally it came down.
This is a tough market."
Mr. Zipper said the market is still settling down after the recent correction.
Most of trading action now is from professional traders who are trying to take advantage of the price swings to turn a quick profit, he and other traders said.
"Everybody's confused and no one has an opinion that lasts longer than 30 seconds," said Mr. Zipper.
"A lot of the professional traders are just going back and forth.
They're just as confused."
William Rothe, head of OTC trading at Alex. Brown & Sons, in Baltimore, said program trading is keeping the markets unsettled.
He believes that the volatile conditions created by program trading has "thoroughly confused" investors about where the market is headed.
Program trading is "benefiting a few to the detriment of many and I wish someone would do something about it," he complained.
Trading activity cooled off from Monday's sizzling pace.
Share turnover subsided to 161.5 million.
Advancing and declining issues finished about even.
Of the 4,345 stocks that changed hands, 1,174 declined and 1,040 advanced.
One big technology issue, Novell, rode the roller coaster.
The stock, which finished Monday at 29 1/2, traded as high as 29 3/4 and as low as 28 3/4 before closing at 29 1/4, down 1/4.
It was a jarring day for investors in Genetics Institute.
The stock tumbled 2 3/4 on news that it might have to take a charge against earnings if it can't successfully resolve a dispute with its European licensee, Boehringer Mannheim, over its anti-anemia drug, EPO.
The stock recovered somewhat to finish 1 1/4 lower at 26 1/4.
In a statement, Genetics Institute said the dispute with Boehringer centers on questions of the usability of certain batches of EPO material valued at $13.6 million.
Earlier this week, Genetics Institute reported wider losses in its fiscal third quarter ended Aug. 31.
Price Co. jumped 2 1/4 to 44 on 1.7 million shares.
The wholesaler of cash and carry merchandise reported fiscal fourthquarter earnings that were better than analysts had expected.
The company also pleased analysts by announcing four new store openings planned for fiscal 1990, ending next August.
That will bring the total for the year to 10, from five during fiscal 1989.
"Every year we've been waiting for stepped-up expansion from the company.
The news couldn't have been better," said Linda Kristiansen, a Dean Witter Reynolds analyst, in an interview.
Intermec, a maker of optical character-recognition devices, also reported higher third-quarter earnings.
Its shares added 3/4 to 30 3/4.
But favorable earnings wasn't a guarantee that a stock's price would improve yesterday.
MCI Communications tumbled 2 5/8 to 42 3/8 on 4.7 million shares even though the telecommunications giant reported a 63% increase in third-quarter profit.
CoreStates Financial slipped 3/8 to 43 1/8 in active trading after reporting that third-quarter earnings improved to $1.27 a share from $1.15 a share a year earlier.
However, the bank holding company's loan-loss reserves rose to $177.3 million from $154 million a year earlier.
A&W Brands lost 1/4 to 27.
But its thirdquarter earnings rose to 26 cents a share from 18 cents a share last year.
Capital Associates dropped 1 to 5 3/8.
The company, which leases technology equipment, reported substantially lower net income for its fiscal first quarter, which ended Aug. 31.
Robert M. Jelenic, 39, was named president and chief operating officer of this closely held publisher.
The post had been vacant for more than a year.
Mr. Jelenic had been executive vice president for operations.
In addition, Ralph Ingersoll II, 43, chairman and chief executive, said he would take on additional responsibilities as editor in chief of the company.
John Wilpers resigned as editor in chief.
Mr. Ingersoll remains editor in chief of the company's recently launched daily, the St. Louis Sun.
Also, Jean B. Clifton, 28, was named executive vice president, treasurer and chief financial officer.
Michael Applebaum resigned after less than a year in the posts.
Ms. Clifton had been executive financial assistant to the chairman.
Certainly conservative environmentalists can defend their limited government position by differentiating between Old Environmentalism and New Environmentalism ("Journalists and Others for Saving the Planet," by David Brooks, editorial page, Oct. 5).
Old Environmentalism involved microbe hunters and sanitationists.
It started with improvements in hygiene made possible by affordable soap and washable underwear during the Industrial Revolution.
Then cast-iron sewer pipe and the flush toilet were followed by sewage- and water-treatment plants toward the end of the 19th century.
Medicine in the 19th century was dedicated mostly to combating sepsis and diagnostic analysis.
Then the 20th century saw the evolution of private-sector wonder drugs, which promulgated medical therapy.
The process dramatically increased our average life expectancy, eliminated much pain and constantly improved health and well-being.
Most public-health measures were handled at the local level.
New Environmentalism probably started in 1962 with the publication of Rachel Carson's book "Silent Spring."
Shortly thereafter, hysterical articles began to appear predicting that advanced industrial societies would produce a blackened, uninhabitable planet possibly by the turn of the century.
These apocalyptic predictions were advanced by such stalwarts as Paul Ehrlich, Barry Commoner, Rene Dubois and George Wald.
Writing in the 1960s Ms. Carson suggested that the human race could be eliminated in 20 years, and Mr. Wald suggested that life on earth might end by 1985.
Mr. Ehrlich predicted unprecedented famine by 1980.
There were many more.
Thousands of chemical products were categorized as carcinogenic, with recommendations that they be banned from industrial use because they produced malignant tumors in overdosed rats.
Unknown before 1960 were the inconclusive effects of acid rain, greenhouse warming and ozone depletion, all of which required burgeoning political power and gargantuan expense.
Meanwhile, the New Environmentalists systematically opposed the methods of the Old Environmentalists.
Local pollution problems require cheap energy and capital for their solution.
But the New Environmentalists oppose private wealth creation (which, they claim, depletes natural resources) and nuclear power (even though it would counteract the greenhouse effect).
They are in the forefront of opposing the search for new landfills and methods of incineration and even oppose new methods of research such as genetic engineering.
New Environmentalism is an emotional attack on proven methods of improving our quality of life and a bid for political power.
Let's rationalize our priorities by solving pollution problems at the local level as heretofore.
Harry Lee Smith Alpharetta, Ga.
Your story missed some essential points of the conference on "The Global Environment: Are We Overreacting?"
First and foremost, the vignettes presented by the various scientists represent a general consensus among specialists working in the respective aspects of the global environment.
Consider, for example, the greenhouse effect and climate change; numerous blue-ribbon scientific committees, including one from the National Academy of Science, judge there is a greater than 50% probability of a grave problem in the offing.
The point was to answer the question in the conference title, not to try to create news stories for the event itself.
Nor was it intended to dictate a set of prescriptive solutions, although various points were raised.
Each speaker was asked to address a specific topic, not deliver a point of view.
Each scientist independently concluded society and government are underreacting when it comes to substantive policy change.
This leads to a very special sense of urgency.
If the media decide to work harder at educating the public about these complex and technical issues, that hardly can be termed non-objective journalism.
The environment can no longer be a normal issue, to be dealt with on a business-as-usual basis with comfortable increments of change.
We have literally altered the chemistry and physics of our planet's atmosphere.
This portends consequences from what we have already done that will be very destabilizing to social and economic systems.
The problems of the environment are so interrelated, so inextricably entwined with our current way of life and so large that it is unlikely we will be able to address them effectively unless major changes are made in less than 10 years.
The consensus from the scientific community is that there is sufficient evidence to advise major policy changes.
No, we are not overreacting.
Thomas E. Lovejoy Assistant Secretary for External Affairs Smithsonian Institution
Coca-Cola Enterprises Inc., fulfilling its dismal earnings forecast for 1989, said its third-quarter net income fell 68% on flat revenue.
Stung by higher marketing costs and slowing volume growth, the giant Coke bottling operation said net fell to $12.7 million, or six cents a share, from $39.9 million, or 26 cents a share, the year earlier.
The results met estimates of analysts, who had already slashed their projections after the company said in late August that its 1989 earnings could tumble as much as 37%.
A company spokesman said yesterday that Coca-Cola Enterprises sticks by its 1989 forecast.
Third-quarter revenue was flat at $1.02 billion.
The year-ago results, however, included the operations of a bottling business, which was sold last December.
Excluding that bottling business, Coca-Cola Enterprises' volume, measured by cases of soda, rose only 1%.
The volume is well below the industry's 4% to 5% growth rate of recent years, but in line with other soft-drink companies for the third quarter.
The latest third-quarter volume also compares with a very strong 10% growth in the year-ago quarter.
Coca-Cola Enterprises blamed the lower volume on its soft-drink prices, which were about 3% higher in the third quarter.
Consumers have been accustomed to buying soft-drinks at discounted prices for several years.
Coca-Cola Enterprises said it had to boost spending for trade and dealer incentives to try to keep volumes from slipping.
The company said it expects consumers will adjust to higher-priced soft drinks.
A spokesman attributed the bulk of a 14% increase in selling, administrative and general expenses -- to $324.9 million -- to marketing costs.
"They're out there promoting like crazy, trying to get prices up by promotion," said Roy Burry, an analyst with Kidder, Peabody & Co.
For the nine months, Coca-Cola Enterprises' net fell 31% to $65 million, or 39 cents a share, from $93.8 million, or 63 cents a share.
Revenue was flat at about $2.97 billion.
Coca-Cola Enterprises, which is 49%-owned by Coca-Cola Co., also said it repurchased about 1.2 million of its common shares during the third quarter.
The buy-back is part of a 25-million-share repurchase plan, under which Coca-Cola Enterprises so far has acquired a total of 9.7 million shares.
Separately, Purchase, N.Y.-based PepsiCo Inc., as expected, said fiscal third-quarter net rose 11% to $269.3 million, or $1.02 a share, from $241.6 million, or 91 cents a share.
Sales rose 25% to $3.90 billion from $3.13 billion.
The year-ago quarter's results include an after-tax charge of $5.9 million from the sale of a winery in Spain.
In composite trading on the New York Stock Exchange, Coca-Cola Enterprises closed at $16.375 a share, down 62.5 cents.
PepsiCo closed at $58.50 a share, up $1.375.
L.J. Hooker Corp. is expected to reach an agreement in principle this week to sell Merksamer Jewelers Inc. to management, say executives familiar with the talks.
L.J. Hooker, based in Atlanta, filed for Chapter 11 bankruptcy protection earlier this year.
Currently, its parent company, Hooker Corp. of Sydney, Australia, is being managed by a court-appointed liquidator.
It is expected that GE Capital Corp., a financial-services subsidiary of General Electric Co., will provide much of the funding for the proposed leveraged buy-out of Merksamer, based in Sacramento, Calif.
A spokesman for GE Capital declined to comment.
GE Capital has a working relationship with L.J. Hooker.
It is providing $50 million in emergency financing to the company and has agreed to buy as much as $75 million in receivables from B. Altman & Co. and Bonwit Teller, L.J. Hooker's two fully owned department-store chains.
Sam Merksamer, chief executive officer of the nationwide jewelry chain, and Sanford Sigoloff, chief executive of L.J. Hooker Corp., both declined to comment.
Currently, Mr. Merksamer owns 20% of the company; L.J. Hooker acquired its 80% interest in the firm in May 1986.
At the time, the Merksamer chain had 11 stores in operation.
Today, there are 77 units, all located in shopping malls.
In recent weeks Mr. Merksamer has approached a number of his suppliers and asked them to provide letters of intent saying they will continue shipping merchandise to the chain following the buy-out, say those familiar with the situation.
This year, a number of retail leveraged buyouts have failed, causing jitters among suppliers, and Mr. Merksamer apparently wanted assurances that he won't have delivery problems.
For the year ended June 30, 1989, Merksamer Jewelers had $62 million of revenue and operating profit of $2.5 million.
The jewelery chain was put up for sale in June.
According to those familiar with the situation, other bidders included Ratners Group PLC of London and Kay Jewelers Inc.
First Boston Corp. is advising L.J. Hooker on the sale of the Merksamer business.
Merksamer was the first in a series of retail acquisitions made by L.J. Hooker.
The company was founded in Sacramento in 1929 by two brothers, Ralph and Walter Merksamer, who operated as DeVon's Jewelers.
In 1979, the pair split the company in half, with Walter and his son, Sam, agreeing to operate under the Merksamer Jewelery name.
The sale of Merksamer Jewelers is subject to approval by Judge Tina Brozman of U.S. Bankruptcy Court.
As earlier reported, L.J. Hooker this week received a $409 million bid for its three shopping malls, plus other properties from a consortium led by Honolulu real-estate investor Jay Shidler and A. Boyd Simpson, an Atlanta developer and former L.J. Hooker senior executive.
The offer, which didn't include the Merksamer chain, is being reviewed by Mr. Sigoloff.
Robert J. Regal was named president and chief executive officer of this company's Universal-Rundle Corp. unit.
Mr. Regal had been president and chief executive of RBS Industries Inc.
Robert H. Carlson, previous president and chief executive of Universal-Rundle, will assume the title of chairman of the unit, a vitreous-china maker.
The days may be numbered for animated shows featuring Alf, the Karate Kid and the Chipmunks.
NBC, a leader in morning, prime-time and late night programs but an also-ran on Saturday mornings, when children rule the TV set, is contemplating getting out of the cartoon business.
Instead, network officials say, it may "counterprogram" with shows for an audience that is virtually ignored in that time period: adults.
"There is talk of some revamping and we're certainly heading in the direction of less and less animation," said Joseph S. Cicero, vice president of finance and administration for National Broadcasting Co., a unit of General Electric Co.
Mr. Cicero said that NBC Entertainment president Brandon Tartikoff, who declined to be interviewed, is "looking at options now and may put some things into the schedule by mid-season."
He declined to elaborate.
NBC's options could range from news-oriented programming to sports shows, although the network declined to comment.
One major NBC affiliate, KCRA in Sacramento, plans to cancel the NBC Saturday morning line-up as of January and replace it with a local newscast.
The one-hour program will be repeated with updates throughout Saturday mornings.
"We feel there is an opportunity for an audience that is not being served by any network, so we want to take the lead," says KCRA's general manager, John Kueneke.
"We don't need cartoons anymore.
They only accounted for 5%, at best, of the station's total revenues."
An NBC spokesman says the network will "closely monitor" the Sacramento situation, and says it is the only station to defect.
Spokesmen for the television networks of CBS Inc. and Capital Cities/ABC Inc., say there are no plans to alter the children's line-up on Saturday mornings.
The youthful audience for Saturday programming is no longer dependent on the networks.
There has been a surge in syndicated children's shows to independent stations, as well as competition from videocassettes for kids and from cable outlets such as Nickelodeon and the Disney Channel.
At the same time, there appears to be a market for news-oriented programming; Turner Broadcasting System Inc.'s Cable News Network has its highest ratings, outside of prime time, on Saturday mornings.
NBC has on previous occasions considered replacing cartoons with a Saturday version of "Today," which is produced by NBC News.
The network's own production company, NBC Productions, supplies a half-hour family-oriented show titled "Saved By The Bell."
NBC Productions or NBC News could supply the network with other Saturday morning shows, a move that would control costs.
Animated shows, which are made by outside production companies, cost the network about $300,000 per episode.
Rohm & Haas Co. said third-quarter net income skidded 35% to $32.6 million, or 49 cents a share.
In the year-earlier quarter, the chemicals company had net of $49.8 million, or 75 cents a share.
Sales were $623 million, up 0.5% from $619.8 million a year ago.
Rohm & Haas, which plans to start operating seven new production units this year, attributed the profit slide partly to higher start-up expense.
The company also cited the stronger dollar, which cuts the value of overseas profit when it is translated into dollars.
In addition, the company said, it was hurt by higher than previous-year costs for raw materials, though those costs have declined since the second quarter.
Incrementally higher production of those chemicals which remain in heavy demand also has forced up costs, such as overtime pay.
For the nine months, Rohm & Haas net totaled $155 million, or $2.33 a share, down 17% from $187.8 million, or $2.82 a share, a year ago.
Sales rose 5.2% to $2.04 billion from $1.94 billion the previous year.
In New York Stock Exchange composite trading, Rohm & Haas closed at $33 a share, down $1.75.
Michael A. Gaskin, 55 years old, was named president and chief executive officer of this manufacturer of industrial robots, succeeding Walter K. Weisel.
Mr. Weisel, 49, resigned as president and chief executive and will work on special projects, said John J. Wallace, chairman.
Mr. Gaskin formerly was president and chief executive of Taylor & Gaskin Inc. and was a director of Prab Robots since 1985.
Stephen N. Wertheimer was named managing director and group head of investment banking in Asia, based in Tokyo.
Mr. Wertheimer, 38 years old, had been a first vice president in the industrial group in investment banking.
He succeeds Everett Meyers, who resigned in May.
This is written to correct a misquotation in your Oct. 3 article "Deaths From Advanced Colon Cancer Can Be Reduced by Using Two Drugs."
In this article, I was alleged to have said, "Any patient with high-risk colon cancer is really getting short shrift if he's not getting this therapy."
I didn't say this, and I'm totally opposed to the philosophy expressed by the quote.
I have not offered and will not offer routine therapy with the two drugs, levamisole and 5-fluorouracil, to any of my colon-cancer patients.
With this treatment we have reduced deaths in high-risk colon cancer by one-third -- but this leaves the two-thirds who are dying of cancer.
This is not nearly good enough.
I believe any physician who truly cares about cancer patients, both today and tomorrow, should offer the hope of something better than that.
My statement, read verbatim from a printed text available to all reporters attending the National Cancer Institute news conference, was the following: "New clinical trials are already in operation seeking to improve these results.
These research protocols offer to the patient not only the very best therapy which we have established today but also the hope of something still better.
I feel any patient with high-risk cancer is getting short shrift if he is not offered this opportunity."
We have very exciting prospects for far more impressive advances in the treatment of colon cancer during the years immediately ahead.
This hope, however, will never be realized if we use levamisole and 5-fluorouracil as a stopping point.
Charles G. Moertel M.D. Mayo Clinic Rochester, Minn.
The oil and auto industries, united in their dislike of President Bush's proposal for cars that run on alternative fuels, announced a joint research program that could turn up a cleaner-burning gasoline.
Officials of the Big Three auto makers and 14 petroleum companies said they are setting out to find the most cost-effective fuel for reducing cities' air-pollution problems, with no bias toward any fuel in particular.
However, their search notably won't include natural gas or pure methanol -- the two front-running alternative fuels -- in tests to be completed by next summer.
Instead, the tests will focus heavily on new blends of gasoline, which are still undeveloped but which the petroleum industry has been touting as a solution for automobile pollution that is choking urban areas.
Environmentalists criticized the program as merely a public-relations attempt to head off a White House proposal to require a million cars a year that run on cleaner-burning fuels by 1997.
While major oil companies have been experimenting with cleaner-burning gasoline blends for years, only Atlantic Richfield Co. is now marketing a lower-emission gasoline for older cars currently running on leaded fuel.
The initial $11 million research program will conduct the most extensive testing to date of reformulated gasolines, said Joe Colucci, head of fuels and lubricants at General Motors Corp. research laboratories.
It will compare 21 different blends of gasolines with three mixtures of up to 85% methanol.
A second phase of research, which is still being planned, will test reformulated gasolines on newer engine technologies now being developed for use in 1992 or 1993 cars.
There was no cost estimate for the second phase.
"The whole idea here is the automobile and oil companies have joint customers," said Keith McHenry, a senior vice president of technology at Amoco Corp.
"And we are looking for the most cost-effective way to clean up the air."
But David Hawkins, an environmental lawyer with the Natural Resources Defense Council, said the research appears merely to be a way to promote reformulated gasoline.
Oil and auto companies supported a move on Capitol Hill last week to gut Mr. Bush's plans to require auto makers to begin selling alternative-fueled cars by 1995.
Instead, a House subcommittee adopted a clean-fuels program that specifically mentions reformulated gasoline as an alternative.
The Bush administration has said it will try to resurrect its plan when the House Energy and Commerce Committee takes up a comprehensive clean-air bill.
William Seidman, chairman of the Federal Deposit Insurance Corp., said Lincoln Savings & Loan Association should have been seized by the government in 1986 to contain losses that he estimated will cost taxpayers as much as $2 billion.
Mr. Seidman, who has been the nation's top bank regulator, inherited the problems of Lincoln, based in Irvine, Calif., after his regulatory role was expanded by the new savings-and-loan bailout law.
He made his comments before House Banking Committee hearings to investigate what appears to be the biggest thrift disaster in a scandal-ridden industry.
The inquiry also will cover the actions of Charles Keating Jr., who is chairman of American Continental Corp., Lincoln's parent, and who contributed heavily to several U.S. senators.
Mr. Seidman told the committee that the Resolution Trust Corp., the agency created to sell sick thrifts, has studied Lincoln's examination reports by former regulators dating back to 1986.
"My staff indicated that had we made such findings in one of our own institutions, we would have sought an immediate cease-and-desist order to stop the hazardous operations," Mr. Seidman said.
When Lincoln was seized by the government, for example, 15% of its loans, or $250 million, were to borrowers who were buying real estate from one of American Continental's 50 other subsidiaries, according to Mr. Seidman.
But the government didn't step in until six months ago, when thrift officials put Lincoln into conservatorship -- the day after American Continental filed for Chapter 11 bankruptcy protection from creditors.
The bankruptcy filing, the government has charged in a $1.1 billion civil lawsuit, was part of a pattern to shift insured deposits to the parent company, which used the deposits as a cache for real-estate deals.
The deposits that have been transferred to other subsidiaries are now under the jurisdiction of the bankruptcy court.
"I think it's fairly clear {Mr. Keating} knew," that regulators were set to seize Lincoln, Mr. Seidman said.
Further investigation, he said, may result in further actions against Lincoln's executives, said Mr. Seidman, "including fraud actions."
Mr. Keating, for his part, has filed suit alleging that regulators unlawfully seized the thrift.
Leonard Bickwit, an attorney in Washington for Mr. Keating, declined to comment on the hearings, except to say, "We will be responding comprehensively in several forums to each of these allegations at the appropriate time."
Lincoln's treatment by former thrift regulators, in an agency disbanded by the new law, has proved embarrassing for five senators who received thousands of dollars in campaign contributions from Mr. Keating.
Mr. Seidman said yesterday, for example, that Sen. Dennis DeConcini (D., Ariz.), who received $48,100 in contributions from Mr. Keating, phoned Mr. Seidman to request that he push for a sale of Lincoln before it would be seized.
After the government lawsuit was filed against Lincoln, Sen. DeConcini returned the campaign contributions.
The senator's spokesman said yesterday that he pushed for the sale of Lincoln because "hundreds of Arizona jobs {at Lincoln} were on the line."
Senate Banking Committee Chairman Donald Riegle (D., Mich.) has also returned contributions he received from Mr. Keating a year ago.
Sens. John Glenn (D., Ohio), John McCain, (R., Ariz.) and Alan Cranston (D., Calif.) also received substantial contributions from Mr. Keating and sought to intervene on behalf of Lincoln.
House Banking Committee Chairman Henry Gonzalez (D., Texas) said Sen. Cranston volunteered to appear before the House committee, if necessary.
But a committee staff member said the panel is unlikely to pursue closely the role of the senators.
At the hearing, Mr. Seidman said the RTC has already pumped $729 million into Lincoln for liquidity.
He also held out little hope of restitution for purchasers of $225 million in American Continental subordinated debt.
Some of those debtholders have filed a suit, saying they believed they were buying government-insured certificates of deposit.
"We have no plans at this time to pay off those notes," he said.
Eastern Airlines' creditors committee, unhappy with the carrier's plans for emerging from bankruptcy-law proceedings, asked its own experts to devise alternate approaches to a reorganization.
Representatives of the accounting firm of Ernst & Young and the securities firm of Goldman, Sachs & Co., hired by creditors to consult on Eastern's financial plans, told the committee in a private meeting yesterday that Eastern's latest plan to emerge from bankruptcy-law protection is far riskier than an earlier one which won the creditors' approval.
According to one person present at the meeting, Eastern's new plan is financially "overly optimistic."
Asked about the consultants' reports, an Eastern spokeswoman said "we totally disagree."
She said they have "oversimplified and made some erroneous assumptions that make their analysis completely off-base."
At a later news conference here, Frank Lorenzo, chairman of Eastern's parent Texas Air Corp., said Eastern was exceeding its goals for getting back into operation and predicted it would emerge from Chapter 11 protection from creditors early next year, operating with more service than it originally had scheduled.
He insisted, as he has before, that creditors would be paid in full under the plan.
Mr. Lorenzo made no mention of creditors' negative response to his plan.
"We're in the process of discussing an amended plan with the creditors and anticipate filing that amended plan shortly," Mr. Lorenzo told reporters.
"We're meeting and surpassing our goals," he added.
In July, Eastern and its creditors agreed on a reorganization plan that called for Eastern to sell $1.8 billion in assets and to emerge from bankruptcy-law protection at two-thirds its former size.
But after selling off pieces such as its East Coast shuttle, its Philadelphia hub and various planes, Eastern hit a stumbling block.
It couldn't sell its South American routes, one of the major assets marked for disposal.
Those routes, valued by the creditors' professionals at about $400 million, were to be sold to AMR Corp.'s American Airlines.
A last-minute snag in negotiations with AMR, over an unrelated lawsuit between American and another Texas Air unit, caused the deal to collapse.
Eastern ultimately decided it would have to keep and operate the routes itself, which would leave it with less cash for its reorganization.
It also would leave Eastern a bigger carrier than the scaled-down one proposed under the initial plan.
Those changes in its condition meant the reorganization plan previously presented to creditors would have to be revamped.
Since then, Eastern has been negotiating with creditors over revisions, but the creditors committee has been having problems with the revisions.
The committee has two groups of experts it calls on to analyze Eastern's plans.
Both said the new plan wouldn't work.
Ernst & Young said Eastern's plans will miss its projections of earnings before interest, tax and depreciation by $100 million, and that Eastern's plan presented no comfort level, according to a source present at yesterday's session.
Experts from Goldman Sachs estimated Eastern would miss the same mark by $120 million to $135 million, the source said.
The experts said they expected Eastern would have to issue new debt to cover its costs, and that it would generate far less cash than anticipated.
Other costs also would increase, including maintenance, because Eastern has an older fleet.
At the news conference, Mr. Lorenzo and Eastern President Phil Bakes presented a far rosier assessment.
Flanked by flight attendants, pilots and gate agents dressed in spiffy new blue uniforms, they said Eastern has exceeded its operational goals and is filling its seats.
Starting next month, Eastern will begin flying 775 flights daily instead of the previously announced 700, they said.
Mr. Bakes declined to give out Eastern's daily losses, but said he didn't expect Eastern would have to dip into the cash from asset sales currently held in escrow.
These accounts hold several hundred million dollars, primarily from asset sales.
The plan Eastern hopes to pursue, he said, calls for Eastern to have $390 million in cash by year's end.
Both he and Mr. Lorenzo predicted that plan might be confirmed in January.
As to negotiations with creditors, Mr. Lorenzo said in remarks after the conference "we'll have to see how they {talks} come along."
However, he added, "it's not a requirement that the plan be accepted by creditors.
It must be accepted by the court."
Under bankruptcy law, Eastern has exclusive rights for a certain period to develop its own reorganization plan.
That deadline has been extended once and could be extended again.
If Eastern can get creditor support, court confirmation of its plan could be relatively swift.
But creditors are free to press for court approval of their own plan, or the court could ignore both sides and draw its own.
In any event, some people familiar with the case question whether the court will act by January as forecast by Mr. Lorenzo and Mr. Bakes.
Eastern sought bankruptcy-law protection a few days after a crippling strike began March 4.
Mr. Lorenzo told reporters the reorganization Eastern is pursuing would create a carrier 85% to 90% of the size of the pre-bankruptcy Eastern.
He projected it would be operating about 1,000 flights a day by late spring, only slightly fewer than the carrier's old volume of 1,050 a day.
HOPES OF SIMPLIFYING the corporate minimum tax before 1990 are weakening.
The method of calculating the 20% tax, paid if it exceeds tax figured the regular way, is due for a change in 1990, thanks to 1986's tax act.
But most experts agree that the concept that is to be introduced drags in great complexity; they have been trying to head it off this year.
Ways and Means Chairman Rostenkowski backed a simplification plan in the pending House tax bill, but the plan turns out to be a big revenue loser.
Now the Senate's stripped-down bill omits any proposal to deal with the corporate tax.
Proponents of simplification fear that the chances of getting it into the final bill are waning.
"We hear it has low priority on the House side," says Samuel Starr of Coopers & Lybrand, CPAs.
If the law isn't changed, he says, "we are left staring at rules that are almost impossible to implement, because there are so many complex depreciation calculations to do."
But Congress still could resolve the issue with other legislation this year or next, Starr adds.
HUGO'S RAVAGES may be offset by immediate claims for tax refunds.
This law aids hurricane-wracked locales named by the president as disaster areas, as well as regions so designated after other 1989 disasters.
It lets victims elect to deduct casualty losses on either 1989 or amended 1988 returns, whichever offers the larger tax benefit; they have until April 16 to choose.
Amending a 1988 return to claim a refund brings cash faster; but for personal losses, there are other factors to consider, notes publisher Prentice Hall.
A loss -- after insurance recoveries -- is deductible only to the extent that it exceeds $100 and that the year's total losses exceed 10% of adjusted gross income; victims may pick the year when income is lower and deductions higher.
In filing an original (not amended) return, a couple should consider whether damaged property is owned jointly or separately and whether one spouse has larger income; that may determine whether they should file jointly or separately.
THE IRS DELAYS several deadlines for Hugo's victims.
Returns for 1988 from people with six-month filing extensions were due Monday, but the IRS says people in the disaster areas won't be penalized for late filing if their returns are marked "Hugo" and postmarked by Jan. 16.
Interest will be imposed on unpaid taxes, but late-payment penalties on the returns will be waived if the balance due and paid is 10% or less of the liability.
IRS Notice 89-136 describes this and other deadline relief for Hugo's victims.
Among the provisions: Fiscal-year taxpayers with returns due last Monday won't be penalized if they file -- or request an extension -- and pay tax due by Nov. 15.
Excise-tax returns due by Oct. 31 or Nov. 30 may be delayed to Jan. 16.
Extensions can't be granted for filing employment-tax returns due Oct. 31 or for depositing withheld taxes, but late penalties will be abated for deposits made by Nov. 15.
The notice also grants relief for certain estate-tax returns.
ONE-DAY JAUNTS in a chartered boat were perks for permanent staffers of American Business Service Corp., a Costa Mesa, Calif., supplier of temporary workers.
The IRS denied cost deductions because few of the temps got to go aboard.
But the Tax Court said the limitations were reasonable and realistic and allowed the deductions.
USED-CAR BUYERS who try to avoid sales tax by understating prices paid in private deals are the targets of a New York drive.
Estimating that the state may lose $15 million a year, officials announced the filing of 15 criminal actions and "hundreds" of civil penalties.
WHEN AN IRA OWNER dies, the trustee of the individual retirement account must file forms 5498 reporting market values relating to the decedent and each beneficiary, with copies to the executor and beneficiaries.
IRS Revenue Procedure 89-52 describes the reporting requirements.
BIGGER THAN A BREADBOX was this cash hoarder's reputation for honesty.
People often cite frugality and distrust of banks to justify cash caches to the IRS.
Gregory Damonne Brown of Fremont, Calif., a hardworking, reclusive young bachelor, told that story to the Tax Court.
But judges usually find the real aim is to escape tax on hidden income; and the IRS said Brown must have had such income -- although it uncovered no source -- because he deposited $124,732 in a bank account in 1982-84 while reporting income of only $52,012.
Brown's story:
The deposits came from savings kept in a Tupperware breadbox; he saved $47,000 in 1974-81 by living with family members and pinching pennies and $45,000 of secret gifts from his remorseful father, who had abandoned the family in 1955.
Brown had no proof; but testimony of his mother and stepmother about his father and of an ex-employer about his honesty and habits satisfied a judge that Brown was truthful and his tale of gifts was possible.
The IRS offered no evidence of hidden sources of taxable income, so Judge Shields rejected its claims.
BRIEFS:
Asked how he made charitable gifts of $26,350 out of reported two-year income of $46,892, Thomas H. McFall of Bryan, Texas, told the Tax Court he had understated his income.
The court rejected his incredible claims, denied his deductions, and imposed a negligence penalty. . . .
Rep. Schaefer (R., Colo.) entered a bill to exempt from tax rewards for tips leading to the arrest of violent criminals.
Kay Peterson mounts her bicycle and grinds up yet another steep, rocky path seemingly suitable only for mountain goats.
After a tortuous climb, she is rewarded by a picture-postcard vista: a glade of golden aspens under an azure Indian-summer sky.
This place is 12 miles into the back country -- a day-long trudge for a hiker, but reached by Ms. Peterson and six others in a mere two hours of pedaling fat-tired mountain bikes.
"This," says Ms. Peterson, "is what it's all about."
Twelve hundred miles away, rangers at a Napa County, Calif., state park are among the many who don't quite share the enthusiasm.
This summer, speeding bikers were blamed for an accident in the Napa County park, in which a horse -- spooked on a trail that was closed to bikers -- broke its leg.
The animal had to be destroyed; the bikers fled and were never found.
In numerous parks near San Francisco, rangers have been forced to close trails, set up speed traps and use radar guns to curb fast and reckless riding.
They have even sent helicopters in pursuit of bikers after hikers and equestrians complained they were being driven from trails.
"We were being overrun," says Steve Fiala, trails coordinator of the East Bay Regional Park District.
Two years ago, the district decided to limit the bikes to fire roads in its 65,000 hilly acres.
From about 200,000 six years ago, the number of mountain bikes in the U.S. is expected to grow to 10 million in 1990.
At least half that growth will have come in the past three years alone.
The controversy kicked up by the proliferation of these all-terrain bicycles is one of the most divisive storms to blow through the national conservation movement in recent memory.
Bikers -- many of them ardent environmentalists -- proclaim their sport an efficient, safe, fitness-promoting way to get back to nature, while asserting a right, as taxpayers, to pedal on public lands.
But the bikes' burgeoning numbers, safety concerns and fear that they damage fragile landscapes have prompted pleas, from the Sierras to the Eastern Seaboard, to ban them from the back country.
Key to the issue is that the bikes, in skillful hands, can go virtually anywhere, and in reckless hands can become vehicles of terror.
An adept bicyclist can leap from a dead stop to the top of a picnic table without losing balance.
Such skills allow riders to fly down treacherous mountain grades at speeds of up to 40 miles an hour -- a thrill for the cyclist but a nightmare for unsuspecting hikers or equestrians.
For harried public-land managers across the nation, the response is increasingly to shut the gates.
The state of California, following the lead of some regional parks, recently adopted regulations that closed nearly all hiking paths in state parks to mountain bicycles.
The move largely consigns them to roads used by motorized vehicles.
Most other states have enacted similar bans.
The bikes are unwelcome on trails in national parks.
Even the U.S. Forest Service, whose lenient "multiple-use" philosophy permits motorized vehicles on thousands of miles of its trails across the U.S., has begun to close some lands to the bikes, including major portions of the popular Pacific Crest Trail, which stretches from California to Canada.
Often these closings come after vigorous anti-bike lobbying by conservation organizations, the politically potent Sierra Club among them.
Sierra has been instrumental in securing a number of the California bans.
It has been waging an all-out campaign to beat back a proposal, pushed by Utah bike groups, to allow the cycles in federally designated wilderness areas, where they are now prohibited.
Yet Sierra's hard-line stance has created something of a rift in the organization, which estimates that 17% of its 500,000 members own mountain bikes.
Pressure from these members prompted the club recently to soften its anti-bike rhetoric; it no longer, for example, lumps the bikes into the same category as motorcycles and other terrain-marring off-road vehicles.
But the club still insists that public lands ought to be closed to the bikes unless studies indicate the bikes won't injure the environment or other users.
"I have a mountain bike, yet as a hiker I've been run off the road by kids careening down a fire trail on them," says Gene Coan, an official at Sierra's headquarters in San Francisco, echoing the concerns of many members.
"People who feel that cyclists should be banned from an area aren't looking at the whole picture," complains Mark Langton, associate editor of Mountain and City Biking magazine in Canoga Park, Calif.
Mr. Langton is among the legions of bikers who got their first taste of wilderness as hikers or backpackers.
He says fellow bikers show the same concern for the land that they demonstrated as hikers; many are appalled that the conservation community would suddenly consider them the enemy.
To fight back, activists such as Mr. Langton are forming groups to lobby land managers over access issues and undertake education programs to show that the bikes can responsibly share trails.
Mr. Langton's group, Concerned Off-Road Bicyclists Association, mounted petition drives to help keep open certain Santa Monica Mountain trails designated for closing.
Biking groups in Montana, Idaho, Michigan and Massachusetts have won similar concessions, says Tim Blumenthal, mountain bike editor of Bicycling magazine.
These groups have been trying to improve the mountain biker's image; in the San Francisco-area park district where a ranger was clobbered by a cyclist this summer bikers have formed a volunteer patrol to help rangers enforce regulations, and to school riders in proper trail etiquette.
Even staunch anti-bike Sierra members concede that 10% of all riders cause most of the problems.
While some are renegade riders who simply scorn regulations, much bad riding simply reflects ignorance that can be corrected through "education and peer pressure," says Jim Hasenauer, a director of the International Mountain Biking Association.
"I think we're making progress."
Few would have foreseen such a furor when, a decade ago, some Marin County bicycle enthusiasts created a hybrid bike using fat tires, lightweight metallurgy and multi-gear technology.
They wanted a machine that would allow them to pedal into rugged terrain then inaccessible to cycles.
They got a machine more responsive, more stable and in many ways easier to ride than the thin-tired racing bikes that then were the rage.
When the bikes first entered mass production in 1981, they were dismissed as a fad.
Last year, 25% of the 10 million bicycles sold in the U.S. were mountain bikes.
In California, a bellwether market, they accounted for more than 80% of all bike sales.
The majority of the bikes never even make it into the high country.
City dwellers love them because they shift smoothly in traffic, bounce easily over curbs and roll through road glass with far fewer flat tires than racing bikes.
Crested Butte, population 1,200, is a bastion of the sport.
By one estimate, everyone here under 50 owns at least one bike.
The town is home to the Mountain Bike Hall of Fame and it hosts the annual Fat Tire Bike Week.
This summer, the jamboree attracted more visitors than the busiest week of the town's winter ski season.
David Lindsey, chairman of the Fat Tire Bike celebration, muses that the bike's popularity may be a combination of technology and nostalgia.
"The mountain bike feels as comfortable as the `paperboy' bike you had as a kid, but it can do so much more," he says.
The following issues were recently filed with the Securities and Exchange Commission:
Canada's Province of Nova Scotia, shelf offering of up to $550 million of debentures.
Golar Gas Holding Co., a subsidiary of Gotaas-Larsen Shipping Corp., offering of $280 million first preferred ship mortgage notes, via Merrill Lynch Capital Markets.
H.F. Ahmanson & Co., offering of four million shares of noncumulative convertible preferred stock, Series B., via Goldman, Sachs & Co, First Boston Corp., and Merrill Lynch.
Shared Technologies Inc., offering of 2.5 million common shares, via Smetek, Van Horn & Cormack Inc. and Oakes, Fitzwilliams & Co.
Stock-market tremors again shook bond prices, while the dollar turned in a mixed performance.
Early yesterday, investors scrambled to buy Treasury bonds for safety as stock prices plummeted and fears mounted of a replay of Friday.
But stocks later recovered, erasing most of their early declines.
That cut short the rally in Treasury bonds and depressed prices moderately below late Monday's levels.
The Dow Jones Industrial Average, down more than 60.25 points early in the day, finished 18.65 points lower at 2638.73.
Long-term Treasury issues declined about half a point, or $5 for each $1,000 face amount.
"The stock market clearly is leading the bond markets," said Jack Conlon, an executive vice president at Nikko Securities.
"People are breathing a major sigh of relief that the world didn't end Monday morning" or yesterday.
Gold, a closely watched barometer of investor anxiety, was little changed.
The dollar initially fell against other major currencies on news that the U.S. trade deficit surged in August to $10.77 billion.
But the dollar later rebounded, finishing slightly higher against the yen although slightly lower against the mark.
Federal Reserve officials sent another signal of their determination to shore up investor confidence.
In an apparent attempt to keep a lid on short-term interest rates, the Fed once again pumped money into the banking system.
But the Fed move was a small gesture, traders said.
Fed officials appear reluctant to ease their credit grip any further because a bold move doesn't appear necessary, several investment managers said.
The Fed has allowed a key short-term interest rate to decline about one-quarter percentage point.
The federal funds rate on overnight loans between banks has been hovering around 8 3/4%, down from 9% previously.
Although stocks have led bonds this week, some traders predict that relationship will reverse during the next few weeks.
Nikko's Mr. Conlon fears a huge wave of Treasury borrowing early next month will drive down Treasury bond prices.
That, coupled with poor third-quarter corporate-earnings comparisons, "will make trouble for the equity market for the next two to three months," he says.
But several other traders contend investors have overreacted to junk-bond jitters, and that stock prices will continue to recover.
"They shot the whole orchestra just because the piano player hit a bad note," said Laszlo Birinyi, president of Birinyi Associates Inc., referring to the stock market's plunge Friday on news of trouble in financing the UAL Corp. buy-out.
In major market activity: Treasury bond prices fell.
The yield on 30-year Treasury bonds climbed back above 8%, ending the day at 8.03%.
The dollar was mixed.
Late yesterday in New York, the dollar rose to 142.75 yen from 141.80 yen Monday, but fell to 1.8667 marks from 1.8685 marks.
The Consumer News and Business Channel cable network and U.S. News & World Report have formed a joint venture to produce cable program versions of special issues of the magazine.
The programs will run on the cable network the Sunday evening immediately prior to the release of the special issue of U.S. News & World Report.
CNBC is a joint venture of the National Broadcasting Co., a unit of General Electric Co., and Cablevision System Corp.
Advertisers will be offered an advertising package, which for a single price, will include time on the CNBC program and ad pages in the special guides.
CNBC will produce six, one-hour programs, beginning in April 1990.
The first program scheduled in the joint venture is "The 1990 Homeowner's Guide."
Other programs and special issues will be based on themes of health, jobs, personal finance, the best colleges, and investments.
The programs will be written and produced by CNBC, with background and research provided by staff from U.S. News & World Report.
Skoal Daze
I've learned the hard way that too much booze Takes revenge the next day about nine; No wonder I say, "I drink to your health" -- It certainly isn't to mine!
--George O. Ludcke.
Spaced Out
Those supermarket tabloids Make me feel slow Because I still haven't seen
-- Bruce Kafaroff.
Daffynition
Repression: emote control.
-- Daisy Brown.
Weyerhaeuser Co. reported a one-time gain and strong wood-product sales that offset weakness in pulp and paper to fuel a 15% jump in third-quarter net income to $166.8 million, or 78 cents a share.
In the 1988 third quarter, the forest-products company reported profit of $144.9 million, or 69 cents a share.
Sales rose 9% to $2.57 billion from $2.36 billion.
For the nine months, the company posted a 14% rise in profit to $469.8 million, or $2.21 a share, from $410.3 million, or $1.95 a share.
Sales rose 9% to $7.54 billion from $6.95 billion.
Results for the 1989 third quarter and nine months include a pretax loss of $33 million from the company's business improvement and refocusing program, and a gain of $49 million on the sale of a subsidiary's common stock.
Forest-products operations strengthened in the third quarter, while paper operations were dogged by higher costs, soft newsprint exports and a strong Japanese yen.
Some competing forest-products firms have recently reported improved results due to strong pulp and paper business.
Weyerhaeuser's pulp and paper operations were up for the nine months, but full-year performance depends on the balance of operating and maintenance costs, plus pricing of certain products, the company said.
Looking ahead to the fourth quarter, the company said export log and lumber markets will be weak, while panel and plywood markets will be stronger.
Pulp and paper performance depends on cost and price variables, the company said.
Bankers Trust New York Corp. became the latest major U.S. bank to increase reserves for its loans to less-developed countries, making a $1.6 billion third-quarter addition to its provision.
The bank also said it expects to report a $1.42 billion loss for the third quarter and a loss for the full year.
The new reserves bring the company's provision for loans to Third World countries to $2.6 billion, or 85% of Bankers Trust's medium and long-term loans to these countries.
"Step up to the plate and take the big swing.
Get the problem behind you and don't look back," said James J. McDermott, analyst at Keefe, Bruyette & Woods, in approving of the move.
Bankers Trust "has had the capacity to do this for some time," the analyst said.
He expects Citicorp to take a similar step this year.
Citicorp yesterday reported a 9% third-quarter earnings drop, which analysts called a bit disappointing, while Manufacturers Hanover Corp. posted a $789 million loss for the quarter after adding $950 million to its reserve for loans to less-developed countries.
Three other major U.S. banks posted earnings increases.
Wells Fargo & Co. of San Francisco posted a 17% jump.
PNC Financial Corp., the parent of Pittsburgh National Bank, reported net income climbed 9.8%, while net for Banc One Corp. of Columbus, Ohio, grew 3.8%.
Citicorp
Analysts were only slightly disappointed by Citicorp's numbers.
"There's nothing in here that's horrible and nothing to make you think they're setting the world on fire," said Carole Berger, analyst for C.J. Lawrence, Morgan Grenfell Inc.
Earnings from the bank's global consumer business grew 27%.
"The consumer business continues to drive the earnings stream," said Mr. McDermott of Keefe, Bruyette & Woods.
Corporate finance and trading results in member countries of the Organization for Economic Cooperation and Development were "relatively flat, sometimes choppy," the bank said, and profit for the area sank 27%.
The cross-border loan portfolio reflected "adjustment problems and episodic payment patterns," the bank said no interest payments from Argentina in the nine months and none from Brazil in the third quarter, while Venezuela brought itself "substantially current."
Overall, the portfolio narrowed its quarterly loss to $70 million from $80 million a year earlier.
"People were waiting to see if we would take an additional provision" for medium-term and long-term loans to less-developed countries, a Citicorp spokesman said.
But he reiterated the bank's position that it is comfortable with the current level of $2.6 billion, covering about 30% of the $8.9 billion of such loans outstanding.
Ronald I. Mandle, analyst at Sanford C. Bernstein & Co., called Citicorp's venture-capital gains of $93 million before taxes "strong."
A "concerning" item the analyst cited was the 10% jump in expenses, which the bank attributes to costs of expanding both its consumer credit-card operations and its overseas branch business.
Citicorp's spokesman said, however, that the bank is maintaining those expenses in proportion to revenue growth.
Wells Fargo
Wells Fargo continued to generate one of the highest profit margins among major banks, minimizing a drop in net interest margin with 13% third-quarter growth in high-yielding business loans and similar growth in mortgages.
Its margin fell only seven basis points, or 7/100ths of a percentage point, from a year ago, compared with a 13-point drop at Security Pacific Corp. and much larger declines among banks in other parts of the country.
As a result, Wells Fargo's net interest income rose $36.3 million, or 7%, to $537 million for the quarter.
Non-interest income fell slightly to $191.9 million from $193.3 million, while Wells Fargo continued to rigorously control non-interest expense, which was almost flat at $393.4 million.
The combination of solid loan growth with tight expense control gave Wells Fargo a 1.25% return on average assets for the quarter, about 40% higher than Security Pacific's and a profit ratio matched by only two or three other major banks in the U.S.
Wells Fargo's return on equity increased to 24.4% from 23.8%.
Wells Fargo has sold all of its non-trade loans made to less-developed countries, and managed to partly reverse the sharp rise in domestic non-accrual loans, which fell 8% from the previous quarter to $806.8 million from $880.9 million.
But the amount was still 39% higher than the year-ago level, and 25% higher as a percentage of total loans.
That trend, and Wells Fargo's heavy exposure to leveraged buy-outs, are about the only worries analysts have about Wells Fargo's financial picture.
Wells Fargo is rebuilding its loan-loss reserve, which increased to $711 million at Sept. 30 from $664 million the previous quarter but was down from $852 million a year ago, when the bank still had some shaky foreign loans.
Manufacturers Hanover
Manufacturers Hanover said that excluding the addition to its reserves, certain tax benefits, and a one-time $16 million gain on the sale of an interest in a foreign leasing company, third-quarter earnings were $75 million.
The comparable year-earlier number was $56 million, a spokesman said.
The bank's additional provisions brought reserves for loans to less-developed countries to $2.4 billion, covering 36% of its medium and long-term loans outstanding to these nations.
The net interest margin-the difference between the bank's cost of funds and what it receives as interest payments -- improved in the quarter, as did certain areas of wholesale banking.
Fees from syndicating loans dropped 48%, to $21 million.
"We didn't take part in a lot of deals" in the quarter "because their credit quality was poor," the spokesman said.
Expenses unrelated to interest rose 5.4%, to $541 million.
PNC Financial
PNC Financial cited higher income from sources unrelated to interest and said it continues to cut costs.
Net interest income in the third quarter edged up 1.4%, to $317.7 million.
Trust income grew 15%, to $49.9 million, while service charges, fees and commissions increased 22%, to $79.4 million.
The bank's total allowance for credit losses was $502.1 million, or 1.82% of total loans.
Prime Minister Rajiv Gandhi set a date next month for general elections that some analysts say could cost him and his ruling Congress (I) Party control of the government.
Other analysts say the Indian leader could retain control with a slim majority or be forced to rule as the dominant partner in a coalition with other parties.
Elections in this large, diverse and passionate nation are always hard to predict.
Much depends on the opposition, a loose group of regional and ideological parties led by former Gandhi cabinet minister Vishwanath Pratap Singh.
The biggest certainty is that the elections will be a vote for or against Mr. Gandhi and his five years in power -- five years of ups and downs, promises and disappointments and wide fluctuations in popularity.
Yesterday, four days after an unusual parliamentary defeat for the ruling party, Mr. Gandhi called elections for the lower house of Parliament on Nov. 22 and 24.
The elections will be held in different states on one of the two days.
(The lower house's five-year term expires in January; the Parliament's upper house is appointed.)
The elections will be a rigorous test for the 45-year-old prime minister and Congress (I), which in various forms has ruled for 40 of India's 42 years of independence.
After a landslide win in 1984 in polls held after the assassination of his mother, Indira Gandhi, Mr. Gandhi saw his popularity begin a roller coaster ride.
His early promises to make India a modern nation remain bogged down in bloated bureaucracy.
His pledge to clean up local administration and Indian politics, including his own party, went unfulfilled.
His "Mr. Clean" image was muddied by an arms-kickback scandal, which will be a major campaign issue.
Some analysts predict that disappointment in Mr. Gandhi's spent pledge to reduce corruption and heavy-handed local government will crest at the polls.
"There's a wide feeling of indignation across the country," says Bhabani Sen Gupta of the Center for Policy Research, in New Delhi.
"I think the people will be judging the regime by a petty policeman, by a corrupt revenue collector.
This could be a big protest against an administrative failure."
Even if the Congress (I) retains control of the government, Mr. Gandhi's ability to push through major initiatives might be hobbled by a thinner majority.
Economic analysts call his trail-blazing liberalization of the Indian economy incomplete, and many are hoping for major new liberalizations if he is returned firmly to power.
The Lok Sabha, or lower house of Parliament, has 542 elected and two appointed seats.
In 1984, the Congress (I) captured 405 seats, the largest victory in the history of Indian democracy.
The landslide was fueled by panic that prevailed in India at the time.
Mrs. Gandhi had been assassinated by separatist Sikhs, and many Indians feared their country might split apart.
In the previous three general elections, similar national issues clinched the vote.
In 1971, the Congress Party won after India's victory in the Bangladesh war.
In 1977, Mrs. Gandhi was thrown out of office after her 19-month emergency rule, and in 1980, after her successors made a mess of their three years in power, she was restored to office.
Most political analysts say that if Mr. Gandhi's opposition unites to field single candidates in most precincts, the Congress (I) will lose big.
But if the opposition remains fractured, the Congress (I) could win a small majority, or lead a coalition government.
Chimanbhai Mehta, a parliamentarian and former Gandhi ally, predicts Congress (I) will win only 150 seats, a quarter of the house, if the opposition fields single candidates in 80% of the races.
Analysts say the opposition will struggle this week to unite, and its success will be clear only when it announces its final list of parliamentary candidates.
The arms-kickback scandal is likely to be one of the big talking points in the campaign, but it's unclear how it is viewed by average Indian voters.
In 1986, India signed a $1.4 billion contract with AB Bofors, a unit of Nobel Industries Sweden AB, to purchase 400 artillery pieces.
The contract was negotiated by the countries' two prime ministers, and was supposed to be free of commissions or agents' costs.
In April 1987, evidence surfaced that commissions were paid.
The opposition charged that the money was used to bribe Indian government officials, an allegation denied by Mr. Gandhi's administration.
But many of his statements on the issue in Parliament subsequently were proven wrong by documentary evidence.
The scandal has faded and flared, but recent disclosures propelled it back onto the front pages, and that has helped galvanize the opposition, which last week blocked passage of two constitutional amendment bills.
It was the first time in 20 years that such government bills were defeated.
In a country where a bribe is needed to get a phone, a job, and even into a school, the name Bofors has become a potent rallying cry against the government.
That illustrates the kind of disappointment many Indians feel toward Mr. Gandhi, whom they zestfully elected and enthusiastically supported in his first two years in power.
His term has produced no spectacular failures in politics, in the economy or on the military front, and has chalked up some successes.
But the average Indian had tremendous hope in the youthful leader and his promise to make both government and the ruling party more effective and less corrupt.
His failures in those two areas deeply, and sometimes bitterly, disappointed many Indians.
"We don't like the Congress (I)," says Sooraji Jath, a farmer in the western state of Gujarat.
"The Congress government is taking the farmers' bread and not giving us any support.
When there are well problems, light problems, road problems, the government tells us to forget it."
The greatest thing going for Mr. Gandhi and the Congress (I) Party is the poor reputation of the opposition.
Even if it unites for the elections, its coherence is likely to be temporary.
When the Congress (I) lost the 1977 election, following Mrs. Gandhi's hated emergency rule, a similar coalition took power and then disintegrated.
Many Indians fear a repeat of that experience.
March 24, 1986:
AB Bofors, a unit of Nobel Industries Sweden AB, enters into a $1.4 billion contract with India's Defense Ministry to supply 400 Bofors FH-77B 155-mm field howitzer guns.
In 1985, Prime Minister Rajiv Gandhi, in his talks with then Swedish Prime Minister Olof Palme, imposed the condition that the contract have no middlemen.
April 16, 1987:
Swedish National Radio reports that about $40 million -- nearly 3% of the total contract -- was paid by Bofors as commissions to middlemen.
June 1, 1987:
Sweden's National Audit Bureau releases its report confirming payment of about $40 million to unidentified Indians.
The report says that investigations were severely hampered by lack of cooperation from Bofors.
Bofors says it can't disclose the names of the middlemen because it would jeopardize industrial confidentiality.
A portion of the report containing names of the middlemen is withheld by officials citing bank secrecy requirements.
Aug. 6, 1987:
Prime Minister Gandhi tells the Indian Parliament, ". . . neither I nor any member of my family has received any consideration in these transactions.
That is the truth."
Aug. 26, 1987:
Bofors admits payments of $41 million to middlemen.
April 22, 1988:
The Hindu newspaper publishes facsimiles of bank documents for foreign-exchange remittances and letters between Bofors and certain private companies related to the sale of the guns to India.
April 26, 1988:
A parliamentary investigative committee dominated by the Congress (I) Party concludes that there were no middlemen in the deal and no payment to any Indian individual or company.
July 18, 1989:
The comptroller and auditor-general of India reports serious lapses in the government's technical and financial evaluation of the Bofors deal.
Sept. 15, 1989:
Retired army Chief of Staff Krishnaswami Sundarji discloses in an interview that he suggested in May 1987 that the government cancel the Bofors contract.
According to Gen. Sundarji, that would have forced Bofors to disclose the names of the middlemen who received kickbacks from the company.
His recommendation was rejected by the government.
Oct. 9. 1989:
The Hindu newspaper publishes the withheld portion of the Swedish National Audit Bureau's report.
The disclosures state that commissions were paid by Bofors to an Indian agent of the arms company.
Parsow Partnership Ltd. and Elkhorn Partners L.P. said they may seek proposals from third parties relating to a sale or restructuring of CACI International Inc.
In a filing with the Securities and Exchange Commission, Parsow and Elkhorn, which together hold 8.685% of CACI's common shares, said they think it is in the best interest of CACI stockholders that the company be sold.
CACI, based in Arlington, Va., said it hadn't seen the filing by Parsow and Elkhorn and therefore had no comment.
The partnerships said they may seek board representation, and they may seek the support of CACI's board and other major shareholders in connection with their plans.
According to the filing, Parsow and Elkhorn are based in Elkhorn, Neb., and are controlled by the same general partner, Alan S. Parsow.
Their combined stake consists of 880,500 CACI common shares, including 86,500 shares bought in the past 60 days at $2.3125 to $2.4375 a share.
Additional shares may be bought or sold in the open market, in private transactions or otherwise, depending on market conditions and other factors.
The inverse trading relationship between bonds and stocks was interrupted yesterday as bonds fell despite a modest decline in stock prices.
But bond investors continue to keep a close watch on the jittery stock market.
In early trading, investors were bidding bond prices higher as stocks tumbled and fears mounted that Friday's stock market debacle would be repeated.
But a partial recovery in the Dow Jones Industrial Average, which had been down more than 60 points in midmorning, dashed those expectations.
Treasury bonds also were hurt late in the day by a $4 billion offering by the Tennessee Valley Authority and the prospect of a huge amount of new agency debt.
"Bond investors were hoping that stock prices would continue to fall," said Roger Early, a vice president at Federated Investors Inc., Pittsburgh.
"When stocks stabilized, that was a disappointment."
Meanwhile, for the second straight day, the bond market paid little attention to the Federal Reserve's open market operations.
Fed officials injected more cash into the banking system by arranging $1.5 billion of repurchase agreements during the usual pre-noon intervention period.
The move was meant to keep a lid on interest rates and to boost investor confidence.
"The intervention has been friendly, meaning that they really didn't have to do it," said Maria Fiorini Ramirez, money-market economist at Drexel Burnham Lambert Inc.
She said a more aggressive move wasn't needed.
The Fed also appears reluctant to ease credit conditions further.
It already has allowed the closely watched federal funds rate to decline 1/4 percentage point to about 8 3/4% from its previous target level of about 9%.
The rate, which banks charge each other on overnight loans, is considered an early signal of changes in Fed policy.
It ended at about 8 11/16% yesterday, but was as low as 8 1/2% Monday.
The Treasury's benchmark 30-year bond fell more than 1/2 point, or over $5 for each $1,000 face amount, while the yield moved above 8% for the first time since Thursday.
Investment-grade corporate, municipal and mortgage-backed securities also fell.
But most junk bonds closed unchanged after opening slightly higher on bargain-hunting by institutional investors.
Some so-called high-quality junk issues, such as R.H. Macy & Co.'s 14 1/2% subordinated debentures, rose.
The Macy's issue closed up about one point at a bid price of 97.
The TVA's public debt offering was its first in 15 years.
Strong investor demand prompted it to boost the size of the issue from $3 billion.
Traders said hedging related to the TVA pricing also pressured Treasury bonds.
"Underwriters of the TVA bonds reduced their market risk by selling Treasurys to cover at least part of their {TVA} holdings," said James R. Capra, a senior vice president at Shearson Lehman Government Securities Inc.
The TVA bonds also "served to remind the market that there will be even more new supply," said Lawrence N. Leuzzi, a managing director at S.G. Warburg Securities & Co.
Today the Treasury will announce the size of its next two-year note sale and Resolution Funding Corp. will announce details of its first bond offering.
Some traders estimate $9.75 billion of new two-year Treasurys will be sold next week, and they expect Refcorp to offer $4 billion to $6 billion of long-term "bailout" bonds.
Refcorp was created to help fund the thrift bailout.
Another agency issue came to market yesterday.
The Office of Finance of the Federal Home Loan Banks said it priced a four-part $2.27 billion bond offering for the banks to yield from 8.125% to 8.375%.
The release of several economic reports had little impact on the market, including a report that the U.S. trade deficit expanded to a surprisingly wide $10.77 billion in August, up from a revised $8.24 billion in July.
The August gap was expected to have expanded to $9.1 billion.
Treasury Securities
Treasury securities were essentially flat to about 1/2 point lower.
The benchmark 30-year bond was quoted late at 100 28/32 to yield 8.04%, compared with 101 19/32 to yield 7.97% Monday.
The latest 10-year notes were quoted late at 99 25/32 to yield 8.01%, compared with 100 1/32 to yield 7.97%.
Short-term rates increased.
The discount rate on three-month bills rose to 7.52% for a bond-equivalent yield of 7.75%.
The rate on six-month bills rose to 7.53% for a bond-equivalent yield of 7.92%.
Corporate, Other Issues
Investment-grade corporate bonds ended 1/4 to 1/2 point lower, while most junk bonds ended unchanged.
The TVA's huge $4 billion offering dominated attention in the new-issue market.
TVA offered $2 billion of 30-year bonds priced to yield 9.06%; $1 billion in 10-year notes priced to yield 8.42%; and $1 billion in five-year notes priced to yield 8.33%.
The TVA, which operates one of the nation's largest electric power systems, is a corporation wholly owned by the U.S. government.
Yesterday's bond sale was part of a $6.7 billion refinancing plan to pay off high-interest debt the TVA owes the Federal Financing Bank, an arm of the Treasury.
Meanwhile, Lockheed Corp. priced a $300 million note offering to yield 9.39%.
Mortgage-Backed Securities
The derivative mortgage-backed market revived after a brief hiatus as two new Remics totaling $850 million were offered and talk circulated about two more issues that could be priced today.
The revival of the real estate mortgage investment conduit market reflected the relative calm in the mortgage market after two days of volatile trading.
Dealers noted that it's difficult to structure new Remics when prices are moving widely.
The two Remics priced were a $500 million Federal Home Loan Mortgage Corp. issue underwritten by Salomon Brothers Inc. and a $350 million Federal National Mortgage Association deal underwritten by Greenwich Capital Markets.
The Remic issuance supported prices of Freddie Mac and Fannie Mae securities, which held up better than Government National Mortgage Association securities during an afternoon sell-off.
Ginnie Mae 9% securities for November delivery ended at 97 29/32, down 7/32; 9 1/2% securities at 99 31/32, down 6/32; and 10% securities at 101 29/32, down 5/32.
Freddie Mac 9% securities were at 97 5/32, down 3/32.
The Ginnie Mae 9% issue was yielding 9.43% to a 12-year average life assumption, as the spread above the Treasury 10-year note held at 1.42 percentage points.
Municipals
Confusion over the near-term trend for rates dominated the municipal arena, as gyrations in the stock market continued to buffet bonds.
Long tax-exempt dollar bonds were mostly flat to 3/8 point lower after a whipsaw session of moving inversely to stocks in modest dealer-led trading.
Prices of pre-refunded municipal bonds were capped by news that Chemical Securities Inc., as agent for a customer, will accept bids today for two large lists of bonds that include many such issues.
The lists total $654.5 million.
Pre-refunded bonds are called at their earliest call date with the escrowed proceeds of another bond issue.
Meanwhile, several new issues were priced.
Underwriters led by PaineWebber Inc. set preliminary pricing for $144.4 million of California Health Facilities Financing Authority revenue bonds for Kaiser Permanente.
Tentative reoffering yields were set from 6.25% in 1993 to 7.227% in 2018.
As part of its College Savings Plan, Connecticut offered $100.4 million of general obligation capital appreciation bonds priced to yield to maturity from 6.25% in 1994 to 6.90% in 2006, 2007 and 2009.
A Chemical Securities group won a $100 million Oregon general obligation veterans' tax note issue due Nov. 1, 1990.
The 6 3/4% notes yield 6.25%.
Foreign Bonds
West German government bond prices took a wild roller-coaster ride, pulled down by Monday's U.S. stock market gains then up by a wider-than-expected U.S. trade deficit and falling U.S. stock prices.
West Germany's 7% bond due October 1999 was at 99.95 late yesterday, off 0.10 point from Monday, to yield 7.01%.
The 6 3/4% notes due April 1994 were up 0.10 point to 97.85 to yield 7.31%.
British government bonds surged on renewed volatility in the stock market.
The Treasury 11 3/4% bond due 2003/2007 rose 23/32 to 112 10/32 to yield 10.03%.
But Japanese bonds ended weaker.
The benchmark No. 111 4.6% bond due 1998 ended on brokers' screens at a price of 96, off 0.15 point to yield 5.27%.
A House-Senate conference approved an estimated $67 billion fiscal 1990 spending bill that provides a 28% increase for space research and development and incorporates far-reaching provisions affecting the federal mortgage market.
The current ceiling on home loans insured by the Federal Housing Administration would be increased to $124,875.
Separately, the bill gives authority to the Bush administration to facilitate the refinancing of federally subsidized loans for low-income and moderate-income homeowners.
The second provision, affecting so-called 235 mortgages, has met strong opposition from investment bankers represented by the Public Securities Association.
And a squad of influential former Senate aides employed by the Wall Street firm Salomon Brothers came to the Capitol in a vain attempt to strip the provision.
By an 11-2 margin, Senate negotiators voted to preserve the 235 mortgage refinancing plan, and despite powerful allies, the opposition found itself undercut by an unusual alliance of liberals and conservatives.
The government currently is subsidizing an estimated 23,000 loans above 11% under the 235 program, and however disruptive to private investors, the refinancing is expected to yield at least $15 million in savings in fiscal 1990.
This sum has been guarded jealously by appropriators anxious to offset spending elsewhere, and conservative Sen. Phil Gramm cast the fight as a populist stand against monied interests.
"We are stewards here, not of the mortgage companies, but the taxpayers," said the Texas Republican.
The action came as the administration won final congressional approval of $9 million in assistance for elections scheduled in Nicaragua in February.
The bulk of the money would be funneled through the National Endowment for Democracy, but the legislation is so vaguely written that it has been dogged by questions regarding the money's true purpose and its ultimate destination.
The Senate had refused late Friday to invoke cloture and limit debate, but behind the bipartisan leadership, a solid majority took shape yesterday and brushed aside amendments seeking to cut the total package or steer it away from direct aid to political parties.
Final approval -- on a 64-35 roll call -- was never in doubt, but the opposition drew an unusual mix of senators, including Republicans Jesse Helms and Warren Rudman and Democrats Bill Bradley and John Glenn.
The money will be applied for voter registration and election monitoring, but more than half is likely to go to the Union Nacional Opositora party.
Critics warned such cash contributions may only undercut the opposition party's standing, and one irony is that under Nicaraguan law a major portion of the opposition party's funds must be shared with the government's Supreme Electoral Council.
Within the appropriations conference yesterday, the $67 billion measure is the second largest of the annual domestic spending bills and covers a disparate collection of accounts for science, housing, veterans and the environment.
The decision to raise the ceiling on FHA home loans still faces strong opposition in the House.
But it is driven by the same fiscal pressures that have forced lawmakers to resort to various bookkeeping devices to juggle as much as $1 billion in spending that would otherwise put the bill over budget.
These costs will complicate the budget picture in fiscal 1991, and the measure further commits Congress to a set of costly projects, including the first construction funds for the space station.
The station is promised $1.8 billion within the $5.36 billion provided for research and development in the National Aeronautics and Space Administration, and the nation's high-speed aerospace plane -- cut by the Senate -- could receive as much as $60 million in new funds or transfers.
Similarly, the House agreed to add back $62 million to continue work on the advanced communications technology satellite, being developed by General Electric Co.
And while setting a statutory limit of $1.6 billion on the automated space probe, the conference appropriated $30 million for the start-up of the CRAF-Cassini mission, a successor to the Voyager space probe.
Among major domestic agencies, the Environmental Protection Agency stands to receive increases significantly beyond those sought by the administration, with pollution abatement and control accounts growing by 14% to about $829.9 million.
An estimated $1.57 billion is separately allocated for the National Science Foundation, and within the Housing and Urban Development Department, more than $9.2 billion is provided for federally assisted housing, including an expanded effort to modernize public housing units that serve the poorest families.
To an unusual degree, the massive bill has become a vehicle for lawmakers to earmark funds for projects in home states.
While the practice was discouraged in the past, the conference agreement is laced with veterans' hospitals, environmental projects and urban grants designated for specific communities.
The most striking example yesterday may have been in community development funds, where the two houses had separately approved a total of 27 projects valued at $20 million, and the conference added 15 more valued at $8 million to ostensibly preserve "balance" between the House and Senate.
Yesterday's conference agreement is the second major bill to emerge from negotiations this week, as appropriators approved a fiscal 1990 transportation bill late Monday that includes a sweeping ban on smoking on most domestic airline flights.
An exemption will remain for flights longer than six hours to Hawaii and Alaska, but estimates by the tobacco industry yesterday indicate all but about 30 flights would be covered.
Separately, a third conference report covering an $18.4 billion Treasury and Postal Service bill was sent to the Senate after passing the House on a 383-30 roll call yesterday.
And after weeks of delay, the appropriations process is beginning to take some final shape.
Defense and foreign aid are the two most critical areas remaining from the administration's standpoint.
And among domestic programs, the most serious threat is White House opposition to abortion riders attached to separate bills funding the District of Columbia and Department of Health and Human Services.
The same issue threatens to spill over to the foreign aid debate, and Mr. Bush also is threatening to veto any agreement that preserves Senate-passed provisions renewing U.S. support for the United Nations Fund for Population Activities.
In a sharply written letter, Rep. David Obey, chairman of the House appropriations subcommittee for foreign operations, warned Mr. Bush that the result of his "ultimatum" could weaken efforts to accommodate the administration elsewhere.
"As a result of your ultimatum," writes the Wisconsin Democrat, "I guess there is no longer any point in taking administration views into account on other items in conference, inasmuch regardless of their resolution you apparently intend to veto this bill.
Markets usually get noticed because they soar or plunge.
Gold, which hasn't risen or fallen significantly in quite some time, yesterday achieved what may be a new level of impassiveness: The most actively traded futures contracts closed unchanged despite nervous fluctuations in both the dollar and the stock market.
The settlement prices of the December, February and April gold contracts were even with Monday's final prices.
The December 1989 contract, which has the greatest trading volume, ended at $371.20 an ounce.
The other months posted advances of 10 cents to 20 cents an ounce.
According to one analyst, Bernard Savaiko of PaineWebber, New York, the stock market's ability on Monday to rally from last Friday's decline -- which seemed to indicate that the economy wasn't going to fall either -- took the starch out of precious metals prices, and out of gold's, in particular.
Yesterday, gold traded within a narrow range.
Gold tried to rally on Monday but ran into the same situation that has subdued gold prices for more than a year: selling by gold producers, who want to fix the highest possible price for their gold.
"December delivery gold is trading in a range of $365 to $375 {an ounce} and is having difficulty breaking out above that," Mr. Savaiko said.
"Producers at the moment regard that area a good one in which to sell gold."
Also, Mr. Savaiko noted, stock market investors seeking greater safety are veering toward buying bonds rather than precious metals because "we are tending more toward a disinflationary economy that doesn't make gold and precious metals attractive."
Jeffrey Nichols, president of APMS Canada, Toronto precious metals advisers, said there is little to motivate gold traders to buy the metal.
"Investors in the U.S. and Europe are comfortable with the actions of the {Federal Reserve} in its willingness to supply liquidity to financial system, which helped the stock market rebound on Monday," he said.
There isn't any rush on the part of investors in the West to buy gold, he said.
"They still bear the memory of October 1987, when they bought gold after the stock market crashed and ended up losing money because gold prices subsequently fell," Mr. Nichols said.
"It's an experience they don't want to repeat."
At the moment gold traders aren't concerned about inflation, he said, and as for the dollar, "gold's association with the currency has been diminishing recently so drops in the currency aren't having much impact on gold."
Dinsa Mehta, chief bullion trader for Chase Manhattan Bank, said: "There is little incentive on the part of traders to sell gold because the stock market may go lower and gold may retain some of its `flight to safety' quality.
There is little incentive to buy gold because if the stock market goes higher, it may be just a false alarm.
This is keeping the gold traders handcuffed."
The most remarkable feature about yesterday's action was that the price of roughly $370 an ounce was regarded as attractive enough by gold producers around the world to aggressively sell gold, Mr. Mehta said.
"I don't know what it means over the long run, but for the short term, it appears that gold producers are grateful for the $10 or so that gold has risen over the past week or so," he said.
Previously, he noted, gold producers tended to back off from a rising gold market, letting prices rise as much as possible before selling.
Mr. Mehta observed that the U.S. merchandise trade deficit, which rose sharply in August, according to yesterday's report, has been having less and less impact on the gold market.
"The dollar hasn't reacted much to it, so gold hasn't either," he said.
In other commodity markets yesterday:
ENERGY:
Crude oil prices rose slightly in lackluster activity as traders in the pits tried to assess action in the stock market.
Since stock market indexes plummeted last Friday, participants in all markets have been wary.
When traders become confident that the stock market has stabilized, oil prices are expected to rise as supply and demand fundamentals once again become the major consideration.
Crude oil for November delivery edged up by 16 cents a barrel to $20.75 a barrel.
Heating oil prices also rose.
November gasoline slipped slightly.
SUGAR:
Futures prices rose on a report that Cuba may seek to postpone some sugar shipments.
The March contract advanced 0.14 cent a pound to 14.11 cents.
According to an analyst, Cuba can't meet all its shipment commitments and has asked Japan to accept a delay of shipments scheduled for later this year, into early next year.
"Japan is perceived as a wealthy nation that can turn elsewhere in the world market and buy the sugar," the analyst said.
It was the possibility of this demand that helped firm prices, the analyst said.
Another analyst noted that Cuba has been deferring shipments in recent years.
"To the professionals in the trade it didn't cause much surprise.
The March futures contract traded as high as 14.24 cents, but couldn't sustain the advance," he said.
LIVESTOCK AND MEATS:
The prices of cattle, hogs and pork belly futures contracts rebounded as livestock traders shook off fears that the Friday stock market plunge would chill consumer spending, which in turn would hurt retail sales of beef and pork.
The prices of most livestock futures contracts had dropped sharply Monday.
Cattle futures prices were also supported yesterday by signs that supermarket chains are making plans to increase their promotions concerning beef.
GRAINS AND SOYBEANS:
The prices of most soybean and soybean-meal futures contracts rose amid rumors that the Soviet Union is interested in buying from the U.S. or South America about 250,000 metric tons of soybeans and as many as 400,000 metric tons of soybean meal.
Traders are especially sensitive to reports of possible U.S. soybean sales because U.S. exports are lagging.
Since Sept. 1, about 13 million fewer bushels of U.S. soybeans have been sold overseas than for the same period last year.
Corn futures prices rose slightly while wheat prices settled mixed.
Moody's Investors Service Inc., fretting about increasing competitive pressure on Ryder, placed about $2.8 billion in company securities under review for possible downgrade.
Ratings under review are Ryder's A-1 collateral trust debentures, A-2 senior notes and bonds, A-2 preferred stock and the company's Prime-1 rating for commercial paper.
Moody's said it is assessing the strategies Ryder's management may follow in addressing significant challenges in some major markets.
The rating agency said it is focusing especially on the transportation service company's efforts to control costs, improve margins and enhance its competitive position in its primary business, vehicle leasing and rental.
The nations of southern Africa know a lot about managing elephants; their herds are thriving.
But the nations of Europe and North America have decided they know better.
At this week's U.N. conference in Lausanne, they imposed a global ivory ban that seeks to overturn local policies.
A Zimbabwean delegate argued that the ban would "guarantee the extinction of the elephant."
Legitimate ranchers, who have an interest in preserving the herds, would go out of business.
Poachers would control the underground trade.
Many delegates were willing to craft a compromise, but U.S. delegate Constance Harriman and others thundered that down.
The Greens from the First World wanted a morality play, not a negotiation.
Fortunately, the nations of southern Africa haven't totally surrendered their sovereignty.
Five countries announced they would not honor what one Zimbabwean delegate wryly called the "made in Switzerland" solution.
In fact, they seemed a mite resentful.
The director of Zimbabwe's Wildlife Department described American conservationists as "fat little puppies from urban environments who don't know a thing about Africa."
That's not fair; they're not all fat.
HUGO'S BLAST generates pleas for aid from South Carolina small businesses.
The Small Business Administration has received more than 5,000 formal requests for disaster loans because of the hurricane.
About 45% of requests for SBA relief loans, which also are available to homeowners, come from small businesses, compared with a 25% business share after most disasters.
The SBA expects to make about $1 billion in Hurricane Hugo loans.
The disaster fund is replenished by loan repayments.
Hardest hit by Hugo in South Carolina were small retailers tied to the tourist industry and businesses in agriculture and cultivated seafood.
The State Development Board set up a Hugo Hotline to accept business-to-business help.
After NBC weather man Willard Scott broadcast the hot-line number, it was flooded with 10,000 calls.
Last week, the U.S. Chamber of Commerce began using its national TV show to seek help, such as equipment, for business owners.
Local bankers and accountants help applicants fill out forms.
"It helps us, and people feel better talking to someone who's gone through the same thing," an SBA official says.
HEALTH BENEFITS remain a central lobbying effort, even as Section 89 fades.
The Senate, after deleting Section 89 repeal from its deficit-reduction bill, still is expected to join the House in voting to kill the law, which forces companies to provide comparable benefits to laborers and executives alike.
In lobbying on other health-coverage topics, the National Federation of Independent Business will press for legislation that would give self-employed people a 100% tax deduction for their own health plans, up from 25% currently.
And the group will urge that the federal government pre-empt state rules on what must be covered by employers' health insurance.
Small-business groups also will fight the medical-leave provision of legislation that would expand parental leaves.
And they still oppose as too costly an employer-paid health insurance bill sponsored by Sen. Edward Kennedy (D., Mass.) despite his proposal to phase in small business only gradually.
There is also worry that the Pepper Commission studying long-term health care will again push lawmakers toward employerpaid solutions.
The Section 89 victory could have a downside by making it harder to oppose lawmakers on other health proposals.
"With the repeal of Section 89, we can no longer say they're discouraging businesses from offering health plans," says Christine Russell, the Chamber of Commerce's small-business advocate.
JUMPING THE GUN:
Sen. Lloyd Bentsen (D., Texas) was outraged after a private word to John Motley, lobbyist for the National Federation of Independent Business, resulted in a news release saying that the Senate Finance Committee chairman would recommend repeal of Section 89.
Even though the announcement was true in the end, it was issued without the senator's permission.
"I blew it," Mr. Motley says apologetically.
"It was a timing mistake."
PRISON-SHOP BLUES:
Sen. Strom Thurmond (R., S.C.) protests pending legislation to end the preference that the federal prison system gets in selling prisoner-made furniture and other goods to government agencies.
Small-business suppliers want prisons to stop getting high priority, especially as prison production grows with swelling inmate populations.
Last year, the prisons' sales to the Pentagon totaled $336 million.
REPAIR SHOPS SCRAP for more access to work on auto-emissions systems.
Groups representing some independent auto-repair shops join a compromise on the Clean Air legislation worked out between environmentalists and Rep. Henry Waxman (D., Calif.).
The plan would increase the warranty on auto-emission systems to eight years or 80,000 miles from five years or 50,000 for major parts.
But the warranty on simpler parts would be lowered to two years or 24,000 miles.
The garage owners say they would benefit because car owners would be less likely to go back to dealers for the simpler repairs after two years.
The repair shops aren't united, however.
Shops represented by the Automotive Service Industry Association and the Motor Equipment Manufacturers Association oppose any increase in warranty length.
They say the longer the warranty, the longer customers will automatically return to new-car dealers, which then find non-warranty work that might otherwise go to repair shops.
The House Energy Committee will debate the issue later this month.
Stan Hathcock, an Atlanta garage owner who opposes a longer warranty, estimates that the current plan costs him as much as $15,000 a year in lost business.
SMALL TALK:
Some 70% of graduates who recently earned an M.B.A. degree say they'd prefer to work in or own a small company, yet most take jobs with large concerns, says a survey by the Foster McKay Group, a New York recruiting firm. . . .
Cardinal Scientific Inc. of Waldorf, Md., seeks a Small Business Innovation Research grant to produce a "nozzle assembly for an Army mass delousing outfit.
Banc One Corp. said Frank E. McKinney plans to retire as the bank holding company's president effective Jan. 12.
Banc One said "it is contemplated" that John B. McCoy, chairman and chief executive officer, will assume the additional position of president upon Mr. McKinney's retirement.
Mr. McKinney, 50 years old, was chairman and chief executive of American Fletcher Corp., Indianapolis, when that bank holding company merged into Banc One in January 1987.
The company said Mr. McKinney plans to retire because the process of affiliating American Fletcher into Banc One "is considered completed."
Mr. McKinney will continue as chairman of the board and chairman of the executive committee of Banc One Indiana Corp., the successor company to American Fletcher Corp., but will no longer be active in day-to-day management.
He will remain on the Banc One board.
The Treasury plans to raise $1.55 billion in new cash with the sale Monday of about $15.6 billion in short-term bills to redeem $14.1 billion in maturing bills.
The offering will be divided evenly between 13-week and 26-week bills maturing on Jan. 25, 1990, and April 26, 1990, respectively.
Tenders for the bills, available in minimum $10,000 denominations, must be received by 1 p.m. EDT Monday at the Treasury or at Federal Reserve banks or branches.
Moody's Investors Service Inc. said it lowered ratings on about $650 million of Beatrice Co. debt, citing the closely held Chicago food concern's proposed recapitalization.
The ratings concern said it downgraded Beatrice notes, Euronotes and certain industrial revenue bonds to single-B-1 from Ba-3 and the company's subordinated debentures to single-B-3 from single-B-2.
Moody's said the proposed recaptilization may "limit the company's ability to realize its profit potential" and that paying dividends from a new series of preferred could squeeze "basic business operations."
A Beatrice spokesman didn't return calls seeking comment.
Beatrice, which went private in an $8.2 billion leveraged buy-out in 1986, said last month that it might borrow again to help pay investors as much as $983 million in preferred stock and debt securities.
When the Soviets announced their last soldier had left Afghanistan in February, the voices of skepticism were all but drowned out by an international chorus of euphoria.
It was "the Soviets' Vietnam."
The Kabul regime would fall.
Millions of refugees would rush home.
A resistance government would walk into Kabul.
Those who bought that illusion are now bewildered.
Eight months after Gen. Boris Gromov walked across the bridge into the U.S.S.R., a Soviet-controlled regime remains in Kabul, the refugees sit in their camps, and the restoration of Afghan freedom seems as far off as ever.
But there never was a chance that the Afghan resistance would overthrow the Kabul regime quickly and easily.
Soviet leaders said they would support their Kabul clients by all means necessary -- and did.
The U.S. said it would fully support the resistance -- and didn't.
With the February 1987 U.N. accords "relating to Afghanistan," the Soviet Union got everything it needed to consolidate permanent control.
The terms of the Geneva accords leave Moscow free to provide its clients in Kabul with assistance of any kind -- including the return of Soviet ground forces -- while requiring the U.S. and Pakistan to cut off aid.
The only fly in the Soviet ointment was the last-minute addition of a unilateral American caveat, that U.S. aid to the resistance would continue as long as Soviet aid to Kabul did.
But as soon as the accords were signed, American officials sharply reduced aid.
In February 1989, when the Soviets said they had completed their pullout, the U.S. cut it further.
Not so the Soviets.
Gen. Gromov himself said Soviet troops expected to leave behind more than $1 billion of military equipment and installations for the Kabul regime.
Since the troop withdrawal, Moscow has poured in an additional $200 to $300 million worth per month -- nearly $2 billion since February, equivalent to the total U.S. aid to the resistance in nine years.
This includes what Deputy Foreign Minister Yuli Vorontsov fetchingly called "new peaceful long-range weapons," including more than 800 SCUD missiles.
By early May, Moscow had delivered, for example, 1,000 trucks, about 100 tanks, artillery and hundreds of other combat vehicles.
Later that month, it added an entire tank brigade, including 120 T-72 tanks and more than 40 BMP state-of-the-art infantry fighting vehicles.
By September, a new Reinforced Motorized Rifle Brigade with an additional 300 combat vehicles, 1,000 more trucks and 10,000 Soviet-trained Afghan troops had arrived in Kandahar.
In the last few weeks, Moscow has added FROG-7B missiles, the bomber version of the An-12, MiG-23BN high-altitude aircraft, MiG-29s, which can outfly Pakistan's U.S.-built F16s, and Sukhoi SU-27 fighter-bombers, which can outfly the MiG-29s.
Moscow claims this is all needed to protect the Kabul regime against the guerrilla resistance.
It is well-known that the regular Afghan infantry is filled with reluctant conscripts.
But this is not the entire Afghan army, and it is no longer Kabul's only military force.
Complete units have been trained and indoctrinated in the U.S.S.R. and other East bloc nations; 30,000 to 40,000 of these troops have returned.
In addition, the regime has established well-paid paramilitary forces totaling more than 100,000, including 35,000 Soviet-trained troops of the Interior Ministry (KHAD/WAD), which still is directed by 1,500 Soviet KGB officers.
Even if not all these forces are committed to the regime, they are now dependent on it.
And thousands of Afghan children have been taken to the Soviet Union, where they are hostage for the behavior of their families.
Since 1981, Indian military advisers have been assisting the Kabul regime.
In preparation for the withdrawal, Moscow, Kabul and New Delhi signed two agreements for several hundred newly civilian Indian experts to replace some of the more visible Soviet military personnel.
Cuban military personnel also have been active in Afghanistan since 1979.
The Soviets cut a deal with Iran: a future Iranian role in Afghanistan in exchange for Iranian support of Soviet policy.
The deal was symbolized by the restoration of the Shi'ite Sultan Ali Keshtmand to the Afghan prime ministry.
Moreover, serious questions have been raised about the claimed withdrawal of Soviet forces.
Before his assassination in 1988, President Zia of Pakistan repeatedly stated that fresh Soviet troops were being inserted into Afghanistan even as others were ostentatiously withdrawn.
Rep. Bill McCollum (R., Fla.) reports that these included 20,000 to 30,000 Soviet Central Asian KGB Border Guards, ethnically indistinguishable from Afghans and wearing unmarked uniforms.
Meanwhile, the Kabul regime is increasingly successful at portraying the resistance as bloody-minded fanatics.
In this they are aided by years of American, European, Pakistani and Saudi support for the most extreme factions -- radical Islamic fanatics with leaders whose policies are anathema to the Afghan public.
This heavy outside support for the worst has undermined better, moderate leaders.
In autumn last year, for example, the regime garrison at Kandahar was prepared to surrender the city to resistance moderates.
At the last minute, however, Pakistani officials sent in Gulbuddin Hekhmatyar, perhaps the most hated and feared of the extremists, with a demand that the surrender be made to his forces.
The deal fell through, and Kandahar remains a major regime base.
The resistance lacks not only air power, armor and expertise but often such essentials as maps, mine detectors, or even winter gloves.
Experienced resistance commanders wanted to use guerrilla action and siege tactics to wear down the regime.
Instead, they were pressured by Pakistan's ISI, the channel for their support, into attacking Jalalabad.
They took more than 25% casualties; journalists report that they faced minefields without mine detectors.
The wonder is not that the resistance has failed to topple the Kabul regime, but that it continues to exist and fight at all.
Last summer, in response to congressional criticism, the State Department and the CIA said they had resumed military aid to the resistance months after it was cut off; but it is not clear how much is being sent or when it will arrive.
For months the resistance has been defenseless against air attack.
Thus far there is no indication that they have been re-supplied with Stingers or other anti-aircraft weapons.
Indeed, U.S. officials have indicated to the press that the continuation of aid depends on what success the weakened resistance achieves by the end of this year.
Moscow and Kabul must have found that information useful.
For a decade U.S. policy has been incoherent, based on miscalculation and the defense of bureaucratic and political turf.
No settlement negotiated by others can force the Afghan people to give up their struggle.
A cutoff of U.S. military aid would merely abandon them to die in vain.
Creation of a new, realistic U.S. policy is long overdue.
Ms. Klass, editor and co-author of "Afghanistan: The Great Game Revisited" (Freedom House), directs the Freedom House program on Afghanistan/Southwest Asia.
Nothing stirred the soul of Ronald Reagan and his disciples as much as the crusade to aid Nicaragua's Contra rebels, or the dream of building a space-based defense shield to knock out Soviet nuclear missiles.
Yet under Mr. Reagan's preferred successor, President Bush, those two cherished national-security causes are withering on the vine.
And, surprisingly, little more than a whimper of protest is being heard, even though Reaganauts once breathed fire supporting the Contras and the Strategic Defense Initiative.
"The programs have arthritis," says Rep. Henry Hyde, a conservative Republican from Illinois.
Yet, he asserts, "you look around . . . and you say, `Who are the leaders?
Who is going to carry the water?'"
It isn't surprising that President Bush hasn't led a crusade to pump up the Contras or SDI.
Though he nominally supports both programs, Mr. Bush hasn't been a passionate champion of either cause, as Mr. Reagan was.
What's surprising is that there isn't more of a conservative outcry as the Bush administration lets the programs slip down the national-priority list.
A combination of factors -- a weariness among some conservatives, a decline in the perception of a Soviet threat and a preoccupation with other issues -- seem to explain the strange tranquility.
Above all, though, conservative Republicans who have championed both the Contras and SDI are reluctant to attack a Republican president for failing to do more -- though that reluctance may be receding.
"We want to complain, we want to say something about it, and we're going to as it gets worse," says Rep. Dan Burton, an Indiana Republican who has been a staunch Contra backer.
"But it's like kicking your father in the pants.
You hate to do it because he's your father."
Mr. Burton says conservatives' unhappiness with Mr. Bush's cautious handling of the recent unsuccessful coup in Panama will make them more willing to speak out.
Of course, neither President Bush nor the Congress has actually abandoned the Contras or SDI.
Mr. Bush has struck a deal with congressional leaders to provide nonlethal aid to the Contras until Nicaragua holds national elections next February.
But the administration has dropped any effort to win military aid for the rebels.
And the administration's deal with Congress gives several congressional committees the right to cut off even humanitarian aid next month, though the committees are likely to let aid continue until February.
Most analysts think there's little prospect the Contras can be a significant fighting force without U.S. arms, and after the February election their future in any form will be murky at best.
Instead of focusing on the Contras, Mr. Bush has switched to urging members of Congress -- most recently in a White House meeting yesterday -- to approve financing for the election campaign of political opponents of Nicaragua's Sandinista government.
The administration continues to support SDI, or Star Wars, and it recently lobbied to persuade the Senate to restore some of the funds it planned to cut from the program.
And just last week, Defense Secretary Dick Cheney gave a strong speech listing "compelling reasons" to push ahead with SDI and saying he'd urge President Bush to veto a defense bill with "inadequate" funding for the program.
But the strong pitch by Mr. Cheney may be too little too late to prevent damage to SDI.
The House has already voted for a deep cut in funding, and in the end the program's backers will be hard pressed to head off some reduction in spending next year.
And while the defense secretary is speaking out, President Bush himself hasn't launched any high-visibility campaign to drum up support, as President Reagan did.
The administration also acknowledges that it isn't pursuing Mr. Reagan's original vision of an "impenetrable shield" protecting the whole U.S., but rather a more modest version.
More ominous to SDI supporters, the Bush administration appears to have tacitly accepted a new arms-control proposal from the Soviet Union that spells long-term trouble for Star Wars.
The Soviets have agreed to complete a treaty cutting strategic weapons without including restrictions on space-based defenses.
But the Soviets also are insisting that they will reserve the right to withdraw from the completed strategic-arms treaty later on if the U.S. does SDI testing or deployment that the Soviets think violates the existing anti-ballistic-missile treaty.
It will be hard down the road to persuade Congress to approve money for SDI plans if lawmakers fear those plans could scuttle a completed treaty.
As a result, Frank Gaffney, a former Reagan Pentagon aide who now heads the Center for Security Policy, charges that the administration's "professions of continued commitment to development and deployment of the SDI program strain credulity."
Still, proponents may be shying away from more drumbeating because they sense political tides have turned against arming the Nicaraguan rebels or boosting spending on SDI -- particularly when the public perceives the Soviet threat is declining under Mikhail Gorbachev.
In fact, because communism seems to be beating a global retreat, some conservatives may simply be so pleased that their anti-communist philosophy is prevailing that they don't have the fire at the moment to push controversial programs.
"The short of it is that the most hard-bitten among us cannot get into too sour a mood with communism collapsing," says Mitchell Daniels, a former Reagan White House aide who now is president of the Hudson Institute.
Some activists are toiling to raise the profile of the two causes.
But they say they can't make much headway because of a lack of willing leaders in a position to turn the tide.
One longtime champion of these programs in Congress, Republican whip Newt Gingrich of Georgia, is distracted by questions about his ethics, conservatives note.
Other conservative champions, like Wyoming Republican Sen. Malcolm Wallop, a longtime SDI advocate, don't have the clout with the Bush White House that they enjoyed with President Reagan.
Above all, though, proponents say neither the Contra nor the SDI cause can be pushed much further without more presidential support.
"For there to be wind in the sails of any program, the chief executive has to be blowing in the sails," says Rep. Burton.
All this causes Rep. Hyde to muse about an alternate way to drum up more enthusiasm.
"What I'd like to see, if he is up to it, is for Reagan to take to the hustings to regenerate enthusiasm for SDI," the congressman says.
We're sorry to report that on Monday President Bush accepted the resignation of William Allen as chairman of the U.S. Civil Rights Commission.
Mr. Allen, appointed by President Reagan, grew understandably tired of dealing with the guerrilla tactics of his enemies.
His recent speech, provocatively titled "Blacks? Animals? Homosexuals? What is a Minority?" caused an uproar when its title leaked out.
Mr. Allen's commissioners voted to call his unread speech "thoughtless, disgusting and unnecessarily inflammatory."
Commissioner Mary Francis Berry said it was "another sad episode in the saga of the unguided missile who is chairman."
Rep. Don Edwards, the California Democrat, warned Mr. Allen that the speech would be "outside the scope of the commission's jurisdiction."
Thomas Stoddard, head of the Lambda Legal Defense Fund, called the prospect of the speech "frankly shocking."
We've actually read the speech.
Mr. Allen began it with a warning to his hosts, a California church group that opposes rights for homosexuals.
He said that other participants in the conference "do not believe that the rights of Americans should be guaranteed to citizens who are homosexual," but that "I mean to persuade you to the opposite view."
He recalled to the audience a "strange, infelicitous" analogy he once heard arguing "now that we have finally recognized that American blacks have rights, we need to do the same for animals.
" Mr. Allen objected to this analogy because it seems to "assimilate the status of blacks to that of animals -- as a mere project of charity, of humaneness."
Rights on such a basis, whether for blacks or homosexuals, are "mere indulgences," he said, subject to being taken back.
He says the title of his speech was to make his point that Americans have rights as individuals, not as members of certain select groups.
His speech criticized the "idiocy of notions of protected groups in society" as opposed to individual equality or, as he put it, in "a common destiny as Americans."
Instead of lobbying for special treatment, Mr. Allen said that homosexuals and others should try to ensure equal treatment under the law and not aim for special privileges that would risk "invidious retrenchment with government complicity."
This hardly sounds like an anti-homosexual screed.
What's really going on here?
The three most important things to understand about Mr. Allen is that he is a black conservative intellectual -- a triple threat to the liberal establishment.
Mr. Allen, who teaches government at prestigious Harvey Mudd College in California and will remain a member of the commission, has spent years arguing that civil rights are individuals' rights.
He last made waves when he dared to defend an Indian girl who had been adopted by non-Indian parents off her reservation.
Mr. Allen quickly ran up against the liberal establishment again, which somehow elevated the vague concept of "Indian rights" above the rights of individual Indians.
There is a huge divide between Mr. Allen's we're-all-in-this-together view and the divisive litigation approach of the civil rights groups.
Indeed, the gap is so large that Mr. Allen's critics refuse to engage the debate.
Their ridicule of him is no substitute for argument.
Their effort to run him out of Washington is an embarrassment to the original purpose of their own movement.
We hope the next head of the Civil Rights Commission will be as brave as Mr. Allen in making the case for equality of civil rights.
Bearings Inc. said its chairman, John R. Cunin, will retire as an officer of the company on Jan. 2.
George L. LaMore, president and chief executive officer, will become chairman and chief executive upon Mr. Cunin's retirement.
John C. Dannemiller, executive vice president and chief operating officer, will become president and chief operating officer.
Mr. Cunin, 65 years old, was chief executive of the distributor of bearings and power-transmission products from 1982 to 1988.
He will continue as a director.
Mr. LaMore, 63, a 48-year veteran at Bearings, has been president since 1983.
Mr. Dannemiller, 51, joined Bearings in August 1988 from Leaseway Transportation Corp., where he was president and chief operating officer.
He has been a Bearings director since 1985.
The appointments are part of a planned succession at the company.
Soviet leader Mikhail Gorbachev opened a major U.S. trade exhibition in Moscow and spent two hours touring some of the 150 stalls representing such blue-chip companies as General Motors Corp., International Business Machines Corp. and Johnson & Johnson.
At the Archer-Daniels-Midland Co. stand, Mrs. Nelson Rockefeller, a board member, offered him a soy burger.
He didn't bite.
The exhibition by the U.S.-U.S.S.R. Trade and Economic Council underscores the growing U.S. interest in that nation's market, though trade between the two countries is a minuscule $3 billion.
The Soviet president and his prime minister, Nikolai Ryzhkov, spent the longest time, about 15 minutes, at the IBM stand, where they got souvenir computer-chip key rings.
At the GM stall, they barely looked at a gleaming Cadillac, preferring to talk about cooperation possibilities.
In Beijing, meantime, China opened an international aviation show, but the West's embargo on military deals and uncertainty about the nation's stability kept many foreign exhibitors away.
Officials said 91 companies from 14 countries, including the U.S., had displays, down from about 260 firms from more than 20 countries at the last show in
Japanese air-conditioner maker Daikin Industries Ltd. was fined two million yen ($14,000) for exporting to the Soviet Union a chemical solution that could be used in missile-guidance systems.
A Daikin executive in charge of exports when the high-purity halogenated hydrocarbon was sold to the Soviets in 1986 received a suspended 10-month jail sentence.
Judge Masaaki Yoneyama told the Osaka District Court Daikin's "responsibility is heavy because illegal exports lowered international trust in Japan."
Sale of the solution in concentrated form to Communist countries is prohibited by Japanese law and by international agreement.
A Soviet legislative panel rejected as not radical enough a government proposal on decentralizing economic control.
The newspaper Leninskoye Zamya said the committee decided the plan to parcel out economic powers previously exercised by Moscow to the country's 15 republics "doesn't reflect the radical changes in the Soviet federation."
The committee gave the government until Nov. 15 to revise the proposal.
The move reflected the growing confidence of the revamped Supreme Soviet.
Scott Paper Co. said it is abandoning a proposed $650 million tree-farming project in Indonesia because it no longer expects to use as much eucalyptus pulp as previously anticipated.
The eucalyptus plantation and pulp mill, which would have covered about 175,000 acres in the Irian Jaya region, had been approved by Indonesia's investment board.
But it was opposed by some environmentalists as a threat to Irian Jaya's forests and a potential source of social unrest for the primitive tribes who inhabit them.
Yaohan Departmentstore Co. of Japan is moving its international-operations headquarters and holding company to Hong Kong to gain from the British colony's economic advantages and tax structure.
With funds of 5.56 billion Hong Kong dollars (US$712 million), the new company, Yaohan International Co., plans to acquire 10 of Hong Kong's top restaurants.
It also intends to set up an international wholesale market with the Singapore government next May and to open a department store in Bangkok and shopping centers in Malaysia, Taiwan, Canada, Chicago and Seattle by December 1990.
The chain currently has 90 retail outlets in Japan, seven in the U.S., three in Hong Kong and a dozen more scattered around the globe.
Major European auction houses are turning increasingly to specialized sales.
Christie's will soon have a sale of Dada and Symbolist art while Sotheby's is luring collectors with sales of Swiss, German, Spanish, Australian and Canadian paintings.
In Brussels, Hotel de Ventes Horta auctioned pistols and sabers-along with paintings and jewels.
Berlin's Villa Grisebach will auction art works with pre-sale estimates of less than $1,600 on Nov. 25.
The auction house, known for its sales of top-drawer 19th and 20th century works, is providing "a service to clients who don't want to sell just their fabulous oil paintings," says Villa Grisebach's Vivien Reuter.
Antwerp auctioneer Campo is less concerned with market niches than with Belgium's crushing tax and auction-fee burden.
"Everything has to be the same between countries," says Campo's Stefan Campo, who is asking clients to sign protest petitions.
"Then there'll be fair competition."
Ending tax-free shopping in the European Community after 1992 could threaten more than 3,000 jobs, the International Duty Free Confederation said.
Instead of banning such shopping, the confederation proposed amending controls to be sure the privilege isn't abused. . . .
British and Argentine diplomats opened talks in Madrid aimed at restoring ties severed because of their 1982 war over the Falkland Islands.
Britain's U.N. representative and delegation head Crispin Tickell called the first meeting "good, interesting and businesslike.
Polaroid Corp., benefiting from staff-reduction savings, reported a strong gain in third-quarter operating results and net income of $29.9 million, or 40 cents a share, after preferred-stock requirements.
Analysts said the numbers were better than expectations, partly because of strong profit margins and a positive foreign-currency translation.
However, they said the company's flat revenue was a disappointment, and an indication that sales of Polaroid's new conventional film in the U.S. have been sluggish.
Revenue in the third quarter was $437.7 million, almost unchanged from $436.3 million a year earlier.
Polaroid reported operating profit before taxes and interest costs of $63.1 million for the third quarter, more than double the year-before $24 million.
Charges for staff cuts and other restructuring produced a net loss of $54.1 million, or 77 cents a share, in 1988's third quarter.
"I'm somewhat skeptical about the underlying demand" for Polaroid products, said Michael Ellmann, an analyst with Wertheim Schroder & Co.
"If you believe that a good performance next year is contingent on an acceleration of revenue, there isn't a lot here to base optimism on."
Alex Henderson, an analyst with Prudential-Bache, says Polaroid officials told him yesterday that U.S. sales of the company's new conventional film product, introduced in the second quarter, have been "disappointing" after a promising start.
Sam Yanes, a Polaroid spokesman, said "I don't know about disappointing," but added that the company hasn't been able to get the product on the shelves of some mass-merchandise, discount retailers that it had hoped would be carrying the product already.
Mr. Yanes said the film, One Film, is currently carried at about 15,000 retail outlets, including drugstores and supermarkets.
For the nine months, Polaroid reported earnings of $98.5 million, or $1.27 a share.
Last year, the company had a nine-month loss of $15.1 million, or 23 cents a share.
In New York Stock Exchange composite trading, Polaroid closed at $47, up $1.125.
Why is the stock market suddenly so volatile?
Yesterday, the Dow Jones Industrial Average did a now familiar dance: It plunged 60.25 points before lunch, with most of the drop occurring in 25 minutes.
Then, it rebounded to finish down only 18.65 points.
And those swings paled beside Friday's 190.58-point plunge and Monday's 88.12-point recovery.
"It's madness -- that in an hour you can whack off so much value," says Stanford Calderwood, chairman of Trinity Investment Management Corp., Boston.
And, apparently, it is here to stay.
Richard Bernstein, senior quantitative analyst at Merrill Lynch & Co, says, "My gut feel is that we'll live with those swings for a while."
There are many reasons for the market's jumpiness: new trading vehicles such as stock-index futures and options; computer-driven strategies like program trading; and crowd psychology.
But most are linked by a single theme: liquidity -- the ability to get in and out of the market quickly.
Prices are moving up and down so fast because investors are employing ways to turn over shares at ever-faster rates and increasingly acting in concert.
"Institutions are herding animals," says Peter Anderson, who heads the pension-fund management arm of IDS Financial Services Inc.
"We watch the same indicators and listen to the same prognosticators.
Like lemmings, we tend to move in the same direction at same time."
And that, naturally, exacerbates price movements.
Institutions -- who now account for most trading -- count on being able to buy and sell big blocks of stock at an eye-blink.
But when they discover that markets aren't always as liquid as they supposed -- markets jump.
On Monday, for instance, Howard Ward, a principal at Scudder, Stevens & Clark, found that "you couldn't buy blue-chips at quoted prices without paying up."
And when many firms had to "pay up," Monday's sudden rally was sparked.
Trading in futures and options, some people believe, can add to volatility.
Investors believe they can can rely on such derivative securities to get in and out of the stock market without actually selling any stocks; that is, a way of staying liquid even when they own stocks.
These and other modern trading methods "tend to promote dramatic shifts in assets," says George Douglas, first vice president at Drexel Burnham Lambert Inc.
"It's the idea that what goes in easy can come out easy" -- so that bouts of higher volatility get built into the stock market.
One new investment style called "asset allocation" shifts portfolio weightings between stocks, bonds and cash when computer models say one is more attractive.
For instance, First Quadrant Corp., an asset allocator based in Morristown, N.J., said it quickly boosted stock positions in its "aggressive" accounts to 75% from 55% to take advantage of plunging prices Friday.
It added another 5% Monday before stocks rallied.
When they did, the firm reduced those stock holdings to about 70%.
A classic example of institutions' hunger for liquidity is portfolio insurance, now widely discredited.
Before the 1987 crash, an estimated $60 billion in institutional money was managed under this hedging technique.
The idea was to "insure" the value of a portfolio by selling futures when stock prices dropped -- eliminating the need to sell the stocks themselves.
But in October 1987, when portfolio insurers rushed to sell at the same time, they overwhelmed both the stock and futures markets.
Yet even today, institutions are quietly practicing forms of portfolio insurance by nervously rushing to and fro in the markets.
Others are doing "index arbitrage"a strategy of taking advantage of price discrepancies between stocks and futures.
Unlike traditional buy-and-hold strategies, all of the above require that market makers be on hand to provide liquidity by buying and selling stocks in a crunch.
But institutions say Wall Street brokerage firms are less willing to make markets.
Brokers don't deny that.
Wall Street traders say that, with institutional brokerage commissions far lower than in the 1970s, securities firms can't afford to take the risk of buying too much stock.
"I think everyone's a little more leery," says Jack Baker, head of equity trading at Shearon Lehman Hutton Inc.
"The institutions have driven (commission) rates down to the point where it makes no sense to commit capital," says Tom Gallagher, senior executive vice president in charge of institutional trading at Oppenheimer & Co.
"Why should I risk money for a guy for who's paying me five cents a dance?
All you get is risk."
Lack of liquidity can also result from exchange "reforms."
Many traders say that "circuit breakers" put in place to damp volatility after the 1987 crash actually added to volatility when the stock market plunged Friday.
The circuit breakers caused a 30-minute shutdown in trading in Standard & Poor's 500-stock index futures contract as the markets were falling.
"With the futures-trading halt, you could only sell stocks" to cut exposure to the market, says a money manager.
"It was scary to people thinking that they couldn't get their trades off."
"It was like they put you in a room with a gorilla and told you there were three doors to exit," said one Chicago-based futures trader.
"Then they said, `By the way, two of the doors are locked.'"
The takeover mania also adds to volatility.
UAL Corp. is a good example.
Valued as a buy-out target, the airline stock was trading at nearly $280 a share.
When the deal ran into trouble, the stock tumbled; it closed at $198 yesterday.
Presumably, UAL is now trading closer to its value based on earnings.
By contrast, traditional buy-and-hold investors are unlikely to generate sudden price moves.
Scott Black, a value-oriented money manager who heads Delphi Management Inc., points out that for those who invest on fundamentals, "the value of a stock from day to day doesn't change all that much."
Some experts say markets aren't as volatile as widely assumed.
Hans Stoll, finance professor at Vanderbilt University, says the current volatility in U.S. markets pales in comparison to the 1930s, decades before derivative instruments such as options and futures were introduced.
"I just can't believe that the innovations in the financial market are causing any of this volatility," he says.
And Robert D. Arnott, president of asset allocator First Quadrant, notes that before Friday's tailspin, daily volatility on the New York Stock Exchange in recent weeks had reached "historically low levels."
Some people tend to ignore that a 50-point move is less in percentage terms than it was when the stock market was lower.
John J. Phelan Jr., chairman of the Big Board, asserts that "1988 and 1989 have been two of the least volatile years in the last 30 or 40 years."
But the low average volatility Mr. Phelan is talking about isn't any comfort in a period of rapid stock-market moves like the past week.
In addition, Sanford Grossman, a Wharton School finance professor, says volatile jumps in stock prices will continue as long as liquidity falls short of the voracious demands of institutions "who can go out and say `I have a billion dollars of stocks to sell.'"
Some people think the search for liquidity is fruitless.
In 1936, John Maynard Keynes wrote that "of the maxims of orthodox finance none, surely, is more antisocial than the fetish of liquidity."
It leads investors to focus on short-term price movements -- "a game of musical chairs," he called it -- rather than on long-term fundamental valuation.
James A. White contributed to this article.
The National Aeronautics and Space Administration said a computer virus has infected one of its networks and is spreading anti-nuclear messages related to its Galileo space probe, which is to be launched today.
Charles Redmond, a NASA spokesman, said the agency discovered the virus on Monday on the collection of computer networks collectively called Internet and expected 100 university centers to be infected by today.
Although the network isn't connected to the computer systems that operate either Galileo or the shuttle, part of the network will carry analyses of Galileo data once the craft gets spaceborn.
Mr. Redmond said the intruder hadn't yet done any harm but the agency feared "garbage data could be substituted for real data."
He estimated it could take a day for a computer security manager to expunge the virus from a computer system.
The intruder, among the broadest yet to hit a research network, appeared to affect only Digital Equipment Corp. hardware that uses Digital's VAX/VMS operating system.
It is unrelated to the much-publicized virus that last year infected Arpanet, a much larger network used by researchers at universities, laboratories and government agencies around the world.
In the lingo of computer security, the NASA intruder is technically a computer worm, Mr. Redmond said.
A worm resides in the operating system of a computer and spreads by boring into other computers contacted through networks.
The Galileo worm apparently was hatched on a computer in France hooked up to NASA's Space Physics Analysis Network, Mr. Redmond said.
NASA said the Galileo worm hadn't affected its computers or the computers of other government agencies because they had modified their systems to reject worms.
But Mr. Redmond said the worm hit universities that hadn't elected to make the changes.
Michael Alexander, a senior editor at Computerworld, a trade publication, said he was told that the worm gets into a computer center by looking for obvious passwords -- such as ones that are the same as the user's name.
If it finds one and gets into the system, it will display a screen when a user logs on that says, "Worms Against Nuclear Killers. . . .
You talk of times of peace for all, and then prepare for war."
In addition, Mr. Alexander said, the worm sends strange messages to other machines at the center -- such as, "George Orwell was an optimist," or "Don't feed the bats tonight."
The worm also looks for elementary passwords that confer more privileges on the user.
The passwords are included in the system software when it is installed but are supposed to be replaced as soon as the system is up and running.
If it finds one of those passwords, Mr. Alexander said, the worm will do such things as change users' passwords to a series of random numbers, preventing them from signing on to the network.
NASA estimated that, on Monday, about four computer centers were affected.
Yesterday, the number grew to 40; today the number is expected to grow to 100.
NASA said it will take about a week before it knows exactly how many centers of the 6,000 connected to Internet were affected and the extent of the damage, if any.
Anti-nuclear activists have protested the launch of the Galileo space probe to Jupiter because it uses plutonium to generate the electricity needed to run the craft.
Activists fear that if the shuttle carrying Galileo into orbit should explode, or if Galileo itself crashes into the Earth during the two times it flies close to the planet, fatal levels of plutonium would be released into the atmosphere.
So far Galileo has been delayed twice, once because of a computer malfunction connected with a space-shuttle engine, and yesterday because of the weather.
NASA said the Galileo worm had nothing to do with either delay.
Mr. Alexander of Computerworld said hackers have gone after SPAN before.
He said the Chaos Computer Club, of West Germany, once managed to invade SPAN and do such things as change the value of pi, messing up some calculations.
It is now a commonplace that prosecutors are bringing criminal indictments in cases where until a few years ago only a civil action at most would have been brought.
Yet it is also axiomatic that the power to create new crimes belongs only to the legislature, and not to courts.
Beginning in the early 19th century, with U.S. v. Hudson and Goodwin, the Supreme Court has repeatedly held that a judicial power to declare conduct to be against the public interest and hence criminal, while well established in British law, would usurp legislative authority under the doctrine of separation of powers.
That's the conventional theory anyway.
In practice, however, the line between interpretation and redefinition of the criminal law long ago began to blur.
In particular, a common law of white-collar crime has developed with surprising rapidity over the past decade.
For example, although insider trading has long been criminal, it has never been statutorily defined.
In 1983, the Supreme Court tried to supply a workable definition in the Dirks v. SEC decision, which found that liability depended on whether the tipper had breached his fiduciary duty to the corporation in order to obtain "some personal gain" and whether the tippee knew or recklessly disregarded this fact.
Gradually, however, lower courts and prosecutors have pushed this definition to its breaking point.
Consider the facts underlying the 1989 conviction of Robert Chestman.
Prior to a tender offer by A&P for Waldbaum Inc. in 1986, the founder of the Waldbaum's supermarket chain called an elderly relative to tell her to assemble her stock certificates for delivery.
She called her daughter to take her to the bank, who, in turn, persuaded her husband, a Mr. Loeb, to run this errand.
Hearing of this information, the husband discussed it with his broker, Mr. Chestman, and Mr. Chestman then bought for his own account and other clients.
Basically, Mr. Chestman was a fourth-level tippee.
Did Mr. Loeb, his tipper, breach a fiduciary duty (and, if so, to whom)?
Did Mr. Loeb seek personal gain (and if so, how)?
Or did Mr. Chestman only hear a market rumor (which one may lawfully trade upon)?
The line seems awfully thin for criminal-law purposes.
A second illustration is supplied by the recent guilty plea entered by Robert Freeman, formerly head of arbitrage at Goldman, Sachs & Co.
Essentially, Mr. Freeman had invested heavily in the Beatrice leveraged buy-out, when he was told by another prominent trader, Bernard "Bunny" Lasker, that the deal was in trouble.
After placing orders to sell, Mr. Freeman called Martin Siegel, an investment banker at Kidder, Peabody & Co., who was advising on the deal, to confirm these rumors.
Mr. Siegel asked Mr. Freeman who his source was and, on hearing that it was Bunny Lasker, responded: "Well, your bunny has a good nose."
The illegal "tip" of the bunny's good nose was then largely a confirmation of rumors already known to many in the market.
Had the case gone to trial the same issues would have surfaced:
Was there a fiduciary breach in order to obtain personal gain?
Did Mr. Freeman have notice of this?
Finally, was the information material?
Yet, all these issues are subsidiary to a more central issue: Who is and who should be making the criminal law here?
It is not my contention that either Mr. Chestman or Mr. Freeman was an innocent victim of prosecutorial overzealousness.
Arguably, both were on notice that their behavior was at least risky.
But even if they behaved recklessly, reasons still exist to fear and resist this steady process of case-by-case judicial extension of the law of insider trading.
Courts and legislatures make decisions in very different ways and are each susceptible to very different kinds of errors.
After-the-fact judicial examination of an actor's conduct has always been the common law's method.
When only civil liability is involved, this method has the undeniable strengths of factual specificity and avoidance of overgeneralization.
Still, case-by-case retrospective decision making of this sort is vulnerable to the tunnel vision caused by a fixation on ad hoc (and usually sleazy) examples.
When a court decides that a particular actor's conduct was culpable and so extends the definition of insider trading to reach this conduct, it does not see the potentially enormous number of other cases that will be covered by the expanded rule.
Thus, a court is poorly positioned to make judgments about the social utility of the expanded rule.
For example, in focusing on Mr. Freeman's attempt to gain nonpublic information about a deal's collapse, one does not naturally think about the reverse side of the coin: What if the rumor had been false?
Can a security analyst call an investment banker to make certain that a seemingly improbable rumor is in fact false?
In the past, not only would reputable professionals have rushed to check out such rumors with the company, but companies listed on the major stock exchanges were encouraged by the exchanges to respond openly to such inquiries from securities analysts.
Today, after Mr. Freeman's plea, there is an uncertainty that is both unfair and inefficient.
In this light, the comparative advantages of legislative law-making become clear: (1) Before it acts, the legislature typically will hear the views of representatives of all those affected by its decision, not just the immediate parties before the court; and (2) the legislature can frame "bright line" standards that create less uncertainty than the fact-bound decisions of courts.
Although legislative lines can result in under-inclusion (which explains why the SEC has long resisted a legislative definition of insider trading), judicial lawmaking inevitably creates uncertainty because of the shadowy outer edges and implications of most judicial decisions.
At least when the stakes are high, uncertainty in turn results in overinclusion, as individuals do not dare to approach an uncertain line closely.
The federal mail and wire fraud statutes provide even better illustrations of the rapid evolution of a federal common law of white-collar crime.
In 1987, the Supreme Court attempted in McNally v. U.S. to halt the inexorable expansion of these statutes by adopting a rule of strict construction for ambiguous criminal statues.
Yet, late last year, Congress effectively reversed this decision by enacting a one-sentence statute that defined fraud to include any scheme to deprive another of "the intangible right of honest services."
At a stroke, this may criminalize all fiduciary breaches (and possibly all misrepresentations by an agent or employee).
Such a statute illustrates the fundamental problem: Congress finds it is easier to pass sweepingly moralistic prohibitions, which the courts must thereafter interpret, than to engage in the difficult line-drawing distinctions that are inherently its responsibility.
We are confronted less with a judicial power grab than with a legislative giveaway.
Predictably, when confronted with morally dubious behavior, prosecutors will exploit the latitude such openended statutes give them.
Over the long run, however, sleazy cases will make bad law.
Mr. Coffee is a professor at Columbia Law School.
Corning Inc. posted a 38% decline in third-quarter net income to $76.5 million, or 80 cents a share, from $123.9 million, or $1.37 a share, a year earlier.
The year-earlier figure included a one-time gain of $59.9 million from the sale of Corning's stakes in Japanese businesses.
Without the gain, operating profit was $64 million, or 71 cents a share.
The telecommunications, specialty glass, ceramic products and laboratory-services concern said the latest quarter included a tax-loss carry-forward of $600,000.
A year earlier, net included a $700,000 taxlow carry-forward.
Sales rose 14% to $715 million from $625.4 million.
Corning's chairman and chief executive officer, James R. Houghton, said operating performance continued to be strong in the telecommunications and health and science segments.
But the specialty-material segment slowed somewhat and consumer products continued below expectations.
As for joint ventures, Mr. Houghton said profit was "essentially flat" due primarily to a slow recovery at Samsung-Corning Co. in Korea following a strike at a major customer and the disruption of shipments to China.
Also, profit was hurt by the strength of the dollar overseas which negatively affected the company's currency-exchange rate.
In New York Stock Exchange composite trading, Corning closed at $38.50, down 75 cents.
UAL, the hair-trigger stock that exploded Friday's market bombshell, briefly traumatized traders again yesterday.
Within 10 minutes after an 11:13 a.m. trading halt in UAL, parent of United Airlines, the Dow Jones Industrial Average plunged nearly 27 points to a 60.25-point deficit.
Computer-guided buying then kicked in, and the industrials regained 27 points in five minutes.
The lightning moves show that the stock market remains fragile and volatile -- ready to jump at the slightest rumor -- a few days after its shocking 190.58-point plunge.
Nervous investors continued to limit their buying to blue-chip stocks while dumping takeover-related issues.
The industrial average closed down 18.65, to 2638.73.
New York Stock Exchange volume was a heavy 224,070,000 shares.
Decliners on the Big Board outnumbered advancers, 931 to 658.
UAL was watched closely and traded heavily.
The stock tumbled 24 7/8 to 198 on volume of 2.8 million shares.
The market is still very touchy about rumors and news on pending takeovers.
UAL, which is trying to reconstruct a buy-out bid that banks wouldn't finance, represents the future of one of the most powerful ingredients in the bull market-corporate restructuring.
An important element of this phenomenon -- the now-shaky market for junk bonds, used often to finance restructurings and takeovers -- continued to cast a pall over stocks.
"It was a very nervous day," said John Geary, partner of the Big Board specialist firm Ziebarth, Geary.
The volatility won't end soon.
This Friday brings the "double witching hour," Wall Street's nickname for the monthly simultaneous expiration of a variety of stock index futures, index options and options on individual stocks.
Traders are already buckling their seat belts.
Previous monthly expirations of the Major Market Index futures and Standard & Poor's 100-stock index options have produced spectacular volatility.
"We are in one of those phases where you are going to get a lot of volatile expiration action," said Donald Selkin, head of stock-index research at Prudential-Bache Securities.
Investors were buying yesterday, but they were running scared to premier blue chips such as Procter & Gamble, which jumped 3 3/8 to 127.
Investors "are buying stocks that have predictable earnings," said Edward J. Laux, head of block trading at Kidder Peabody.
Along the way, investors dumped takeover stocks and shares of banks that have leveraged-buy-out debt and risky real estate loans on their books.
"These loans are more of a focus than lesser-developed-country debt now," said William Bee, senior block trader at Prudential-Bache Securities.
Chase Manhattan, which sold 14 million additional shares at 40 1/8 Monday through an underwriting group led by Goldman Sachs, closed down 1/8 to 40.
Citicorp fell 1/2 to 32, and Manufacturers Hanover slipped 3/8 to 40 1/4.
Chase and Citicorp's Citibank are involved in the UAL buy-out financing.
Both Citicorp and Manufacturers Hanover reported earnings yesterday.
In the first hour of trading, about one million shares a minute changed hands on the Big Board as big stock-index arbitrage sell programs pushed prices lower.
(In stock-index arbitrage, traders buy or sell big baskets of stocks against offsetting positions in futures.)
Traders said many of the sell programs are positions being established ahead of this Friday's expiration.
Aside from computer-guided selling, airline stocks took a beating as well.
The Dow Jones Transportation Average fell 49.96 to close at 1254.27.
AMR, the parent of American Airlines, continued to retreat in the wake of New York developer Donald Trump's decision to withdraw his $120-a-share takeover bid.
The stock fell 3 1/4 to 73 1/4 on 3.4 million shares.
Delta Air Lines fell 1 7/8 to 67 7/8, USAir Group dropped 3/4 to 40 1/4, Southwest Airlines dipped 1/2 to 25 and Alaska Air Group slid 3/8 to 24 1/4.
But Texas Air, the owner of Continental and Eastern airlines, bucked the group's decline by rising 7/8 to 14 5/8 in American Stock Exchange trading.
Eastern said it is ahead of schedule in resuming its operations after filing earlier this year for Chapter 11 bankruptcy protection, from which it expects to emerge early next year.
Philip Morris, the most active Big Board issue for the second consecutive session, was unchanged at 43 1/4 on 3.9 million shares.
Other blue-chip consumer issues also fared relatively well: PepsiCo rose 1 3/8 to 58 1/2; Coca-Cola Co. was unchanged at 66 3/4; McDonald's also closed unchanged at 30 1/2, and Merck rose 1/2 to 75 1/4.
Broader averages also fell.
Standard & Poor's 500-stock index fell 1.69 to 341.16, and the New York Stock Exchange Composite Index fell 0.88 to 188.89.
Among the takeover-related stocks that sold off yesterday were Disney, which closed down 2 1/8 to 121 1/4.
Philips Industries tumbled 3/8 to 22 7/8; Hilton Hotels fell 2 1/2 to 92 and Holiday Corp. fell 2 1/8 to 69 7/8.
Among other blue chips, Exxon gained 1/8 to 45 1/2.
International Paper fell 1 3/8 to 51 1/2, Union Carbide eased 7/8 to 25, Chevron gained 1/8 to 64, and Eastman Kodak closed down 3/4 to 44 1/4.
The only industry group to show a gain from the industrial average's record high on Oct. 9 is restaurants.
Among the three worst-performing groups, with declines of 10% to 20%, are airlines, casinos and securities brokers.
Trading also was heavy in the over-the-counter market.
The Nasdaq composite index closed down 1.05 to 459.93 on volume of 161.5 million shares.
"The environment is a lot more trading-oriented," said Gary Rosenbach, manager of equity trading at the OTC stock firm Needham & Co. in New York.
"Because there is a lot more volatility now, if guys see that they can make a quick 10% or 15% profit, they'll take it."
Compaq Computer gained 2 1/8 to 103 3/4 on two million shares, reflecting market optimism about the prospects for its newly introduced notebook-sized computer.
B.F. Goodrich dropped 1 3/8 to 49 1/8.
The company's third-quarter earnings were below both analysts' forecasts and the year-earlier level.
Blue Arrow added 1/2 to 17 1/4.
The British company plans to change its name to Manpower, the name of its U.S. unit, and write off part of nearly $1.2 billion in good will as a possible prelude to reincorporating in the U.S.
Dravo rose 5/8 to 16 1/8.
Shearson Lehman Hutton began its coverage of the company with favorable ratings.
Intertan jumped 2 1/4 to 56 7/8.
The company reported that earnings from operations for the September quarter were up about 25% from a year earlier.
Bay Financial, which said it may be forced to file under Chapter 11 if it can't reach an agreement with its lenders to relieve its debt burden, plunged 1 3/8 to 2 1/8.
The Amex Market Value Index fell 1.25 to 375.16.
Volume totaled 16,800,000 shares.
Among active Amex issues, the American depositary receipts of B.A.T Industries fell 1/4 to 11 3/4 on turnover of 885,800.
Investment bankers and retailers said the turmoil on Wall Street may benefit managers who plan to bid for U.S. retailing units of the British firm because takeover prices may not be as high as before the recent correction.
Fruit of the Loom slipped 1/8 to 12 3/8 on 501,200 shares.
DWG Corp. jumped 1 1/4 to 15 on 454,100 shares.
Carnival Cruise Lines Class A dropped 1 to 21 1/8 on 331,400 shares.
Amex issues with big percentage price gains included two Eastern Air Lines preferred stocks, reacting to the news about improved recovery in flight schedules after the company filed for bankruptcy protection.
Eastern's Class F preferred rose 12%, or 1 1/4, to 11 3/4; the Class E preferred gained 7%, or 5/8, to 10 1/4.
The biggest percentage gainer on the Amex was Enviropact, which jumped 23%, or 5/8, to 3 3/8 on volume of 29,000 shares.
On Monday, the company, a provider of environmental consulting services, reported a wider fiscal fourth-quarter loss and predicted a loss for its fiscal 1990 first quarter, but said a profit is expected for all of fiscal 1990.
But its auditor, Ernst & Young, said Enviropact's financial situation raises "substantial doubt about its ability to continue as a going concern."
Mission Resource Partners advanced 8%, or 1 3/8, to 18 7/8.
Sonja Steptoe and David Wilson contributed to this article.
ONE LIBERTY PROPERTIES Inc. declared a dividend of 40 cents a share on its $16.50 cumulative convertible preferred stock, payable Jan. 2 to stock of record Dec. 8.
But directors of the Great Neck, N.Y., real estate investment trust didn't act on the common stock dividend.
And they won't consider such a dividend, the trust added, before results are available for the first quarter of 1990.
In part, the trust cited the need to retain cash for possible acquisitions.
According to a spokesman, One Liberty will have paid out as dividends the required amount of its taxable income to maintain its legal status as a real estate investment trust.
Banks are continuing to go after individual investors, despite falling interest rates.
Yields on small-denomination certificates of deposit fell at about half the rate of so-called jumbo CDs this week, according to Banxquote Money Markets, an information service based here.
Investors can get slightly higher yields on deposits below $50,000 than they can on deposits of $90,000 and up.
"Banks want to remain competitive," said Norberto Mehl, chairman of Banxquote.
"October is a big rollover month and perhaps they anticipate greater demand . . . among people leaving the stock market."
Some bankers are reporting more inquiries than usual about CDs since Friday.
"Reports from branches are that there has been greater interest in the last day or so," said Steven Braitman, a vice president at Chemical Bank in New York.
Chemical said deposits Monday were about $5 million higher than usual and it expects more activity as investors receive the proceeds from sales of stock.
"This is no time to be playing in the street . . .
the Dow has more ups and downs than an elevator," proclaimed an advertisement Monday in New York newspapers, touting Lincoln Savings Bank's one-year CD.
Harold Jones, Lincoln's chief retail banking officer, said there hasn't yet been "a discernible response," although the ad included a coupon that could arrive later in the week.
Friday's market rout came smack in the middle of the heaviest month for CD rollovers, when a number of banks and thrifts already have promotions under way.
First National Bank of Boston, for example, is offering certain new depositors an extra quarter of a percentage point on six-month and 12-month CDs.
Some banks actually boosted yields on the shortest term CDs in the latest week.
New York's Citibank, for instance, increased the yield on small-denomination three-month CDs to 8% from 7.9%.
On average, however, three-month CDs at major banks are yielding a tenth of a percentage point less than they were a week ago.
Average yields on CDs aimed at individual investors fell less than half as much as yields on Treasury bills sold at Monday's auction.
Six-month CDs of $50,000 and less yielded an average 8.02% in the week ended Tuesday, down from 8.10%, according to Banxquote.
The yield on six-month T-bills fell to 7.82% on Monday, from 8.01% the week before.
Meanwhile, the average yield on six-month CDs of more than $90,000 fell to 7.93% in the latest week, according to Banxquote, from 8.10% the week before.
Mr. Mehl noted that actual rates are almost identical on small and large-denomination CDs, but yields on CDs aimed at the individual investor are boosted by more frequent compounding.
CDs sold by major brokerage houses, which like jumbo CDs tend to closely follow interest rate trends, also posted larger drops in yields.
A six-month, broker-sold CD, for example, was yielding an average 8.09% in the latest week, a fifth of a percentage point lower than the week before.
In late April, when interest rates were at their recent highs, short-term CDs sold by brokers were offering yields half a percentage point or more higher than banks.
CD yields are generally expected to fall further in coming weeks.
"What happened in the stock market and the bigger trade deficit" reported yesterday "make it unlikely that short-term interest rates will rise" any time soon, said Mr. Mehl of Banxquote.
"Even before the market drop, rates were down about half a percentage point," said Robert J. Hutchinson, senior vice president for retail marketing at Manufacturers Hanover Trust Co. in New York.
"That puts pressure on CD rates.
Conservatives have an important decision to make this fall.
At the recent meetings of the World Bank and International Monetary Fund, the Bush administration announced its intention to decide by yearend the size of the next increase in the IMF's capital base.
While the U.S. share of the increase probably will not reach the $12 billion or more implicit in the IMF's request for a doubling of its $90 billion capital, the administration probably will agree to a multibillion-dollar increase.
This would be consistent with its unwavering support for the Brady Plan and G-7 exchange-rate intervention, and with its financial commitment to Mexico, Poland and others.
The IMF has several reasons for requesting the increase.
Its role in the economies of developing countries has grown steadily since the 1970s.
The size and pace of disbursements will accelerate further under the Brady Plan, which promises larger and earlier disbursements to approved countries.
At least three other factors have encouraged the IMF to insist on increased capital.
First, it argues that its capital base must be increased in order to maintain its size relative to world financial markets, for which it feels some responsibility.
Second, the World Bank's recent $75 billion capital increase -- $14 billion from the U.S. -- has left the IMF feeling less than first fiddle among international financial institutions.
Third, the IMF would like to meet Japan's request for increased ownership (currently 4.5%).
Japan has supported a larger role for the IMF in developing-country debt issues, and is an important financial resource for IMF-guided programs in developing countries.
While international politics may argue for the capital increase, there is a clear economic case against it.
Opponents of the increase argue that the IMF practices central planning while supporting ineffective governments.
They question whether the IMF has any role in developing countries, given its original mandate to assist industrial countries in balance-of-payments emergencies.
Opponents show that there are already more funds available than commendable reform efforts.
They worry that new IMF funding of developing countries will simply end up substituting IMF debt for reschedulable commercial bank debt, a bad trade all around.
They believe microeconomics, which addresses the problems of markets, investment climate and management practices, is the key to developing-country growth, not the IMF's Keynesian focus on trade deficits, quarterly targets and government debt.
They point at the numerous developing-country governments that have inflated, taxed and regulated themselves into despair under successive IMF programs.
Decisions on increases in the IMF's capital base traditionally are made by the administration, with subsequent authorization by Congress.
The last U.S. congressional authorization, in 1983, was a political donnybrook and carried a $6 billion housing program along with it to secure adequate votes.
The politics of the 1990 congressional authorization are likely to be similar to those of previous authorizations.
Liberals may support the stabilizing, quasi-governmental role of the IMF on two conditions: that the administration give assurances that liberal Democrats' support will not be used against them in congressional re-election campaigns; and that the legislation address -- with dollars -- social and environmental concerns.
Conservative Republicans will be given the choice of supporting or fighting their party's popular president in an election year.
A U.S. decision to refuse the IMF its capital increase, or limit it to 25%, would bring a major change in international economic policy, and could not be taken lightly.
Commentators would fret over the implications for the G-7 coordination process and the stability of world financial markets.
Because commercial banks and the developing-country governments believe they will get a piece of any capital increase, a scaled-down IMF mission would leave both feeling shortchanged.
Furthermore, a U.S. rejection of the capital increase (and transfer of shares to Japan) would give Japan an argument against future calls for economic burden-sharing.
On the other hand, a decision to increase the IMF's capital would reinforce the central economic role of multilateral institutions in developing countries.
With the increase, even more developing-country energy and talent would be diverted from creating profitable economic systems to setting up economic planning ministries that generate IMF-approved economic plans.
Upping the ante could slow economic development even further, as countries delay market-opening steps in anticipation of richer multilateral support.
Conservatives should take a position prior to the administration's year-end deadline.
The issues are too important to be left to the financial and budget ministries fighting over the size of the capital increase, rather than its purpose.
If conservatives don't support an increase in the IMF's capital, then it is incumbent on them to speak up now and explain the alternative.
Mr. Malpass directs the Republican staff of the Joint Economic Committee of Congress.
The Chicago Mercantile Exchange fined and suspended two commodities traders accused of making prearranged trades with each other that allegedly cheated a customer.
Merc officials said Gary N. Roberts was disciplined following the exchange's investigation of his trading in several commodities pits from July to November 1988.
The Merc said Mr. Roberts withheld from the market certain orders in cooperation with another trader, David Stein.
The Merc fined Mr. Roberts $15,000 and suspended his trading membership for three years.
Also, he and Mr. Stein were ordered to make restitution of $35,000 to a customer.
Mr. Stein was fined $25,000 and suspended for three years.
Messrs. Roberts and Stein couldn't be reached for comment.
The Merc said that as part of the disciplinary settlement, neither man admitted, nor denied the alleged violations.
Neither was among the 46 traders indicted last August in a federal investigation of traders at both the Merc and the Chicago Board of Trade.
In a move that could pose a new competitive challenge to Time Warner Inc.'s powerful Home Box Office, cable giant Tele-Communications Inc. agreed to buy half of Showtime Networks Inc. from Viacom Inc. for $225 million.
The purchase comes after nearly three years of on-again off-again talks between TCI and Viacom, which has also discussed the sale of an interest in Showtime with other cable operators.
Showtime is a distant No. 2 to Home Box Office, and in May filed a $2.5 billion antitrust suit against Time Warner, charging the company and its HBO and American Television cable units with conspiring to monopolize the pay TV business.
HBO has close to 24 million subscribers to its HBO and Cinemax networks, while Showtime and its sister service, The Movie Channel, have only about 10 million, according to Paul Kagan Associates, a Carmel, Calif., research firm.
For TCI, the investment in Showtime puts it in an unusual position; as the largest cable operator, with control of close to 12 million of the nation's 52 million cable subscribers, TCI is HBO's largest customer.
But TCI President John Malone has long been concerned about HBO's dominance of the pay TV business, and has been eager to keep Showtime as a healthy competitor.
"It is important to the cable industry that we have a vibrant and competitive pay-television marketplace," Mr. Malone said in a statement.
In a telephone interview, Robert Thomson, TCI senior vice president, said Showtime's suit against HBO "doesn't involve us, and nothing we're doing here bears any relationship to that."
He added, "We don't intend to be drawn into it," noting that TCI won't play any active role in the management of Showtime.
Linking up Showtime with the largest cable operator in the U.S. could sharply boost its subscribers.
TCI said it may bring in other cable operators as investors, a practice it has employed in the past with investments in other cable networks, such as The Discovery Channel.
Additional cable partners could boost subscribers even further.
Time Warner declined comment.
In addition to owning HBO, Time Warner owns American Television & Communications Inc., the nation's second largest cable operator after TCI.
Viacom also owns cable systems, but it is the 14th largest operator of such systems, with less than one million subscribers.
The TCI investment is a big victory for Viacom's chief executive officer, Frank Biondi, and Winston H. Cox, president of the Showtime unit.
"This takes any question of Showtime's viability and puts it away once and for all," Mr. Biondi said in a telephone interview.
The fight between HBO and Showtime is particularly acrimonious because Mr. Biondi is the former chief executive of HBO, and Mr. Cox served as chief of marketing for the service.
They were both hired by Sumner Redstone, the Boston billionaire who took control of Viacom three years ago in a leveraged buy-out.
Time Warner has vigorously denied all of Viacom's allegations.
Boeing Co., already struck by its Machinists union, briefly called off contract talks with its engineers and labeled their demands "grossly excessive."
Later, however, the company agreed to meet on Monday with the Seattle Professional Engineering Employees Association after a federal mediator intervened, according to the union.
A spokesman for the engineers said the company asked the union to reduce its demands, which included a 19% pay hike in the first year and 8% in the second and third years.
The union represents about 28,000 engineers and technical workers.
Its contract expires Dec. 1.
Meanwhile, a federal mediator is scheduled to meet today with Boeing officials and representatives of 55,000 striking Machinists.
"It will take several meetings to resolve this," said a spokesman for the Machinists union.
"We don't want to bring back something the members will reject."
Machinists already have rejected a package that would have provided a 10% pay raise plus bonuses over the three-year life of the contract.
It also would have reduced mandatory overtime.
Investor Asher Edelman increased his stake in Intelogic Trace Inc. and cleared the way for additional purchases.
It wasn't clear, however, whether the actions were related to a battle between the corporate raider and New York attorney Martin Ackerman for control of Datapoint Corp., a San Antonio, Texas-based data-processing systems maker.
Intelogic Trace, a computer services company, was spun off to Datapoint holders in 1985, after Mr. Edelman gained control.
After Mr. Ackerman announced he was soliciting consents from shareholders in order to wrest control of Datapoint from Mr. Edelman, the corporate raider purchased 30% of Datapoint's shares.
In a Securities and Exchange Commission filing, Mr. Edelman said from Sept. 29 to Oct. 13, he acquired 309,500 shares of Intelogic common shares for $2.25 to $2.375 each.
The purchases increased his stake to 16.2% of the shares outstanding.
The filing also said certain provisions which apply to persons acquiring 20% or more of Intelogic common stock, were waived by Intelogic for Mr. Edelman, who is chairman of the company.
Mr. Edelman couldn't be reached for comment.
The federal government should make free, voluntary testing for the AIDS virus the cornerstone of an expanded campaign to stop the spread of acquired immune deficiency syndrome, the Hudson Institute recommended.
"By encouraging massive, routine, voluntary testing we can enable society to voluntarily segregate itself sexually into two groups: those who carry the virus and those who do not," the Indianapolis research organization said in a new report.
The report takes a more alarmed view of AIDS and recommends a more sweeping response than many other analyses.
It warns that the AIDS epidemic "may reduce the rate of growth of the work force, curb productivity gains and slow economic growth."
It contends that current government policy is failing to stem the AIDS epidemic because it suggests the use of condoms can make sex "safe."
But the report says: "The only safe sex is sex between uninfected partners," and testing is the only way to learn of infection.
Hudson's researchers estimated that it would cost less than $650 million a year to test the entire population between the ages of 12 and 65 years old.
In addition, the report recommends that federal and state governments provide free treatment to all who test positive.
An unexpectedly sharp widening in the U.S. trade gap for August dragged the dollar lower Tuesday, but profit-taking on short positions helped the currency rebound to close mixed against major counterparts.
While the market kept careful tabs on Wall Street's gyrations, it shrugged off a modest downturn in equities to bid the dollar well above the day's lows.
Soon after the release of the U.S. trade figures, the dollar plunged to an intraday low of 140.95 yen.
It also declined against the mark but didn't reach its intraday low of 1.8435 marks until two hours later.
The unit stabilized about midday New York time at around 1.85 marks and 141 yen, prompting unconfirmed rumors that the U.S. Federal Reserve had intervened to blunt the unit's tumble.
The dollar finished at its intraday highs.
Dealers noted that the foreign exchange market's initial bearish reaction to the U.S. trade figures was tempered later by a "calmer reassessment of the data."
The U.S. Commerce Department reported a $10.77 billion deficit in August, compared with a revised July deficit of $8.24 billion.
Economists had expected a $9.1 billion gap.
The August figure reflected a 6.4% rise in imports and a 0.2% drop in exports.
Marc M. Goloven, an economist with Manufacturers Hanover Trust in New York, said that while the figures appear to indicate a sadly deteriorating U.S. trade performance, there's still enough positive news in the data to justify buying dollars.
He said that while the U.S. trade gap with Canada has widened significantly, the trade deficit with Western Europe and Japan continues to narrow.
And he added that manufactured goods exports are still rising.
The dollar's near-term path remains foggy, according to currencny analysts, who characterize the market as "bewildering."
In late New York trading yesterday, the dollar was quoted at 1.8667 marks, down from 1.8685 marks late Monday, and at 142.75 yen, up from 141.85 yen late Monday.
Sterling was unchanged at $1.5753.
In Tokyo Wednesday, the U.S. currency opened for trading at 142.55 yen, unchanged from Tuesday's Tokyo close.
Later, the U.S. currency fell to about 142.25 yen on news reports of the San Francisco earthquake.
Some analysts remain bullish and point out that the dollar continues to be well bid despite key rate increases in Europe and Japan, several weeks of aggressive dollar sales by the world central banks -- some traders estimate that the barrage of sales topped $12 billion -- and a 190-point plunge on the New York Stock Exchange.
They note that the U.S. unit is trading at the upper end of the presumed target zones established by the Group of Seven trading partners.
The G-7 comprises West Germany, the U.S., France, the U.K., Italy, Canada and Japan.
The so-called Louvre accord was seen to have set ranges of 1.70 marks to 1.90 marks and 120 yen to 140 yen.
They say that the recent injection of liquidity into the U.S. banking system has been modest, and they don't anticipate significant easing by the U.S. Federal Reserve.
The Fed arranged $1.5 billion of customer repurchase agreements Tuesday, the second repurchase agreement in two days.
The move, which injects capital into the system, is seen as an effort to reassure the finanicial markets that the U.S. central bank is ready to provide the ample liquidity.
But other analysts contend that while the Fed's move to loosen credit hasn't been aggressive, it nevertheless sends a clear signal that, at least for now, the Fed has relaxed its grip on credit.
They add that the Fed has allowed the key federal funds interest rate to dip to about 8 5/8% from its levels of just below 9% last week.
The federal funds rate is the overnight lending rate that banks charge each other.
Market participants said that the mark continues to post the most significant gains against the dollar.
On the Commodity Exchange in New York, gold for current delivery settled at $367.40 an ounce, up 10 cents.
Estimated volume was a moderate 3.5 million ounces.
In early trading in Hong Kong Wednesday, gold was at $366.55 an ounce.
National Semiconductor Corp. said it settled a four-year-old patent infringement case against Linear Technology Corp. by accepting a $3 million payment from Linear in exchange for granting Linear irrevocable licenses for all products involved.
The two companies also agreed to settle any future property rights issues over the next 10 years through binding arbitration, both companies said.
The products are so-called analog integrated circuits that have applications in the consumer electronics, automobile and electronic instrumentation markets.
Linear Technology, Milpitas, Calif., called the settlement "positive," since products covered by the disputed patents account for about 20% of its annual sales.
The electronics concern said it already has paid $2 million of the settlement to National Semiconductor, Santa Clara, Calif., and will pay the remaining $1 million in equal installments over the next eight quarters.
The payments aren't expected to have an impact on coming operating results, Linear added.
NBC's winning streak has been canceled.
The National Broadcasting Co., a unit of General Electric Co., had its record-breaking 68-week reign as the prime-time ratings leader snapped yesterday by ABC-TV, a subsidiary of Capital Cities/ABC Inc.
In the ratings compiled by the A.C. Nielsen Co., ABC, which broadcast the World Series, topped the competition with a 14.8 rating and 25 share.
NBC was second with a 13.9 rating and 24 share followed by CBS Inc.'s television network with a 12.5 rating and 21 share.
(A ratings point represents 904,000 television households; shares indicate the percentage of sets in use.)
The first two games of the World Series between the Oakland Athletics and San Francisco Giants didn't finish in the top 10; instead they landed in 16th and 18th place.
The highest-rated show continues to be ABC's "Roseanne."
NBC had five of the top 10 shows; ABC had four and CBS had one.
CBS held the previous record for consecutive No. 1 victories -- 46 weeks -- during the 1962-63 season.
Procter & Gamble Co., Cincinnati, expanding its presence in the food service market, said it acquired Maryland Club Foods, a coffee supplier, from an investor group led by F. Philip Handy of Winter Park, Fla.
Terms weren't disclosed.
Houston-based Maryland Club Foods, which had sales of about $200 million last year, sells coffee under the Maryland Club and Butter-Nut brands to restaurants, hotels, offices and airlines.
The acquisition "gives us additional production capacity for the food service coffee business and a stronger distribution network," a P&G spokesman said.
P&G already sells its Folgers ground roast coffee to food service concerns, but not to as many markets as Maryland Club.
For example, P&G up until now hasn't sold coffee to airlines and does only limited business with hotels and large restaurant chains.
Maryland Club also distributes tea, which fits well with P&G's Tender Leaf brand, and hot cocoa products.
The company said the acquisition has been completed and reviewed by the Federal Trade Commission.
The purchase includes a coffee-roasting plant in Omaha, Neb., and a leased facility in Houston.
MACMILLAN BLOEDEL Ltd. said it borrowed 215 million Dutch guilders (US$102 million) from a group of Dutch institutional investors.
MacMillan Bloedel, a Vancouver, British Columbia, forest products concern, said the 8.1% loan is due Oct. 16, 1996.
Funds will be used to repay existing short-term debt and to finance capital spending, it said.
President Bush will veto a bill funding the Departments of Labor, Education and Health and Human Services because it would allow federal funding of abortions for victims of rape and incest, the White House said.
Mr. Bush had threatened a veto previously.
But he put off a firm decision while his aides and legislators searched for a compromise that would tighten requirements for such abortions in a way acceptable to the president.
White House Press Secretary Marlin Fitzwater said negotiations between Bush aides and lawmakers ended Monday without success.
Most lawmakers think it will be extremely difficult for Mr. Bush's opponents on the abortion issue to round up the votes needed to override the veto.
But there still may be prolonged debate and political maneuvering that holds up the $156.7 billion funding bill for the fiscal year that began Oct. 1.
Mr. Bush has said he personally approves of abortions in the cases of rape, incest and danger to the life of the mother.
But he has opposed Medicaid funding of abortions for poor women who say they are victims of rape and incest, arguing that those exceptions are enforced so loosely that they open the way for abortions for other women.
NEWSPAPERS:
Media General Inc. intends to sell two of its West Coast weekly newspaper chains, Golden West Publishing Inc. and Highlander Publications, which together comprise 31 papers.
Media General said it has had inquiries from potential buyers and expects to complete a sale in 1989.
It wouldn't discuss a price.
Lee Dirks & Associates is to sell the chains.
J.P. Morgan & Co., New York, will help the statutory managers of DFC New Zealand Ltd. to evaluate the failed investment bank's condition.
Earlier this month, the Reserve Bank of New Zealand, the country's central bank, appointed the managers to run the investment bank and pay creditors.
DFC asked the central bank to appoint managers after it revised loan-loss provisions to around the same level of shareholders' funds of 180 million New Zealand dollars (US$105.4 million).
DFC is held 80% by National Provident Fund, New Zealand's largest pension fund, and 20% by Salomon Brothers Inc., the investment-bank and securities-firm subsidiary of Salomon Inc. in New York.
A spokeswoman for J.P. Morgan, parent of the bank Morgan Guaranty Trust Co., confirmed its appointment to assist the managers but declined to elaborate.
The managers said in a brief statement yesterday that Morgan will help evaluate DFC's position and help determine alternatives.
The managers don't expect to complete the evaluation until Nov. 30.
An experimental vaccine can alter the immune response of people infected with the AIDS virus, a prominent U.S. scientist said.
However, that doesn't mean they can benefit from the vaccine.
Its effectiveness can't be determined until a large clinical trial is undertaken by the Army in January, according to Robert Redfield, chief of acquired immune deficiency syndrome research at Walter Reed Army Institute of Research.
Dr. Redfield's report on early experiments using an AIDS vaccine made by MicroGeneSys Inc. of West Haven, Conn., came at a meeting of AIDS vaccine researchers in Florida late Monday.
The vaccine, VaxSyn HIV-1, has been safely given to 14 people, some of whom are experiencing substantial increases in certain antibodies.
"The conventional wisdom used to be that you couldn't modify the immune response of an infected individual" by innoculating them with synthetic viral proteins, Dr. Redfield said.
"We've demonstrated that you can."
He said certain volunteers developed kinds of antibodies associated with early AIDS.
Other antibodies sparked by the preparation are of a sort rarely present in large quantities in infected or ill individuals, he added.
One of the mysteries of AIDS remains why infected people produce large quantities of antibodies, but deteriorate nonetheless.
Cross & Trecker Corp. said it reached an agreement to sell its Wiedemann division to recently created Murata Wiedemann Inc., a U.S. affiliate of Murata Machinery Ltd. of Kyoto, Japan.
The agreement also includes the purchase of Cross & Trecker's Warner & Swasey (Switzerland) AG unit by a European affiliate of Murata Machinery.
Cross & Trecker is also selling its equity interest in a Japanese joint venture, Murata Warner Swasey, to Murata Machinery.
Cross & Trecker, a Bloomfield Hills, Mich., machine-tool maker, said the net sales price of the total transaction is $24 million.
The Wiedemann division was one of three businesses put up for sale in Cross & Trecker's restructuring program announced in July.
Cross & Trecker said negotiations are under way for the sale of another company, RobertsCorp.
The average interest rate fell to 8.292% at Citicorp's $50 million weekly auction of 91-day commercial paper, or corporate IOUs, from 8.483% at last week's sale.
Bids totaling $465 million were submitted, and accepted bids were at 8.292%.
Citicorp also said that the average rate fell to 7.986% at its $50 million auction of 182-day commercial paper from 8.1255% at last week's sale.
Bids totaling $415 million were submitted, and accepted bids were at 7.986%.
The bank holding company will auction another $50 million of commercial paper in each maturity next Tuesday.
Matra S.A. reported its 1989 first-half profit soared 88%, and indicated that its previous estimate of a 50% rise in earnings for all of 1989 will be exceeded by a wide margin.
The French electronics and defense group said attributable consolidated net profit for the first six months of 1989 totaled 244 million francs ($38.4 million), compared with 130 million francs ($20.5 million) in the corresponding period of
Operating profit climbed 51%, to 572 million francs from 378 million in the first half of 1988.
Matra said the sharp improvement in net profit partly reflected a decline of 59 million francs in the group's net loss from nonrecurring items in the first half of this year to 104 million francs from 163 million a year earlier.
There was also a decline in the group's net financial costs to 25 million francs from 50 million a year before.
These movements were offset, however, by a steep rise in corporate income tax payments to 199 million francs from 35 million in the first six months of 1988.
Matra said the sharp rise in its first-half earnings was based on a 15% gain in consolidated revenue to 10.16 billion francs from 8.85 billion a year earlier.
Rep. Lee Hamilton (D., Ind.) said he and Rep. Byron Dorgan (D., N.D.) are backing away from their proposal to make the Treasury Secretary a voting member of the Federal Reserve panel that sets monetary policy.
Rep. Hamilton said the bill will be modified substantially to call for two meetings each year between the Fed's open market committee and the Treasury Secretary, the chairman of the Council of Economic Advisers and the director of the Office of Management and Budget.
The original bill was strongly opposed by the Fed and publicly criticized by friends of the Fed as an attempt to undermine the central bank's independence.
Fed critics, however, hailed it as a long overdue attempt to bring a measure of openness and democracy to the setting of monetary policy.
Rep. Hamilton said the purpose of the meetings would be to "improve communications and perhaps coordination between the executive branch and the Fed."
Fed Chairman Alan Greenspan meets regularly for lunch with Treasury Secretary Nicholas Brady and talks frequently with Budget Director Richard Darman and Michael Boskin, chairman of the Council of Economic Advisers.
The administration officials don't ordinarily meet with the entire membership of the open market committee.
B.F. Goodrich Co. said third-quarter profits dropped 34% because of lower prices for polyvinyl chloride materials, the company's largest product group.
Net fell to $40.1 million, or $1.50 a share, from $60.7 million, or $2.32 a share, a year earlier.
Sales for the quarter slipped 2.7% to $601.3 million from $618.1 million.
Polyvinyl chloride capacity "has overtaken demand and we are experiencing reduced profit margins as a result," said John D. Ong, chairman and chief executive.
Prices for general-purpose PVC resin have dropped more than 15% since last December, he said.
The plastic resin is used in a wide range of products, including siding, pipe and electrical wire insulation.
Goodrich's vinyl-products segment reported operating profit for the quarter of $30.1 million, less than half the $64.1 million of the year-earlier quarter.
Third-quarter operating profit of the specialty-chemicals group declined slightly to $24.3 million from $24.9 million.
But operating profit from aerospace products rose nearly 50% to $15 million from $10.1 million.
In New York Stock Exchange composite trading, shares of the Akron, Ohio-based company fell $1.375 to $49.125.
Fiat S.p.A., Italy's leading industrial group, is conducting "concrete" talks with West Germany's Daimler-Benz AG on a series of projects in the aerospace sector, Fiat officials said.
However, the officials said it was too early to disclose the nature of the proposed projects or indicate when the talks might be concluded.
Daimler-Benz Chairman Edzard Reuter told Milan's financial daily Il Sole 24 Ore that talks are taking place between both companies' aerospace units.
"While Mr. Reuter's comments please us very much, there currently are no talks in progress regarding the automotive industry," a Fiat spokeswoman said.
In the interview, Mr. Reuter said he is thinking foremost of cooperation in the truck sector, but "in the long run, I don't want to rule out that we can also come a bit closer in personal cars."
Roberto Morelli, Italy analyst for County Natwest Securities in London, said that right now "the market isn't being influenced by that kind of news," referring to the conditional nature of the talks mentioned by Mr. Reuter and by the uncertainty surrounding world stock exchanges this week.
Paul Tanner was named president, chief executive officer and chairman of this oil and natural gas company.
He succeeds John A. Boudreau, who resigned for personal reasons.
Mr. Tanner had been president of Penn Pacific's National Southwest Capital Group subsidiary.
Mr. Boudreau will remain with Penn Pacific as a director and a member of the executive committee.
He has also agreed to become president of a new subsidiary to be formed to make future acquisitions, the company said.
Spooked investors, despite their stampede to dump takeover stocks, should hold on tight to their Jaguar shares.
That's the view of some analysts here who argue that Britain's leading maker of luxury cars still may have two U.S. auto giants battling for it.
Yesterday, Ford Motor disclosed that it has raised its holding in Jaguar to 10.4% from 5%.
Both Ford and its rival General Motors recently set their sights on grabbing significant minority stakes in the British company.
Ford's latest move increases the pressure on GM to complete its current talks with Jaguar quickly.
GM is likely to reach the cooperative operating pact it has been seeking in about two weeks, knowledgeable individuals say.
At that point investors may face a long, bumpy ride.
A victor in the fight for Jaguar may not emerge until after the expiration late next year of British government takeover restrictions.
The curbs prevent a buyer from purchasing more than 15% of Jaguar shares without permission.
"This is an exceptionally odd takeover battle," says London analyst Christopher Will of Shearson Lehman Hutton.
Jaguar's American depositary receipts were up 3/8 yesterday in a down market, closing at 10 3/8.
(Jaguar's ADRs make the company one of the most widely held United Kingdom stocks in the U.S., with more than one-fourth of its shares owned there.)
Jaguar topped the most-active list for the U.S. over-the-counter market Monday.
And on London's Stock Exchange Monday, 18.5 million shares were traded, far above the usual volume.
Ford's share purchases undoubtedly accounted for much of Monday's heavy trading.
Last week, many Jaguar shareholders took their money and ran.
Fears that Ford's ardor might be cooling put Jaguar shares into reverse after GM confirmed its friendly negotiations with Jaguar.
But yesterday's announcement indicates that Ford hasn't lost interest.
Both Shearson's Mr. Will and Stephen Reitman, European auto analyst at the London brokerage firm UBS-Phillips & Drew, recently switched their Jaguar recommendations to hold from buy.
"Sit tight" through the coming volatility, Mr. Reitman suggests, though he concedes that many small investors will find Jaguar's zigzags "too hard to swallow."
But a crucial point is how Ford reacts when GM, the world's largest auto maker, firms up its proposed deal with Jaguar.
At the moment, Ford executives will say little beyond reiterating their desire to raise Ford's Jaguar stake to about 15%.
GM is expected to inject roughly #200 million ($316 million) by acquiring some Jaguar shares, and then win Jaguar management's promise of an eventual 30% stake.
Analysts believe the car makers also will create joint ventures to develop new executive models, doubling Jaguar's yearly output of 50,000 cars.
Jaguar shareholders would have to bless such a far-reaching accord.
Ford might challenge the proposal by offering a full bid if holders and the U.K. government agreed to drop the anti-takeover barrier early.
"I think Ford is going to come out with full guns blazing," Mr. Reitman says.
"Ford wants {Jaguar} very much."
U.S. takeover-stock speculators, who may own between 20% and 30% of Jaguar, could give Ford enough votes to block the GM deal.
GM might counterbid.
Then, Mr. Will says, "you get a bidding war between two very rich, very determined international companies."
He believes Jaguar's share price could zoom to between #8 and #10 ($12.60 to $15.80).
"There's quite a bit of value left in the {Jaguar} shares here even though they have run up" lately, says Doug Johnson, a fund manager for Seattle-based Safeco Asset Management.
At the moment, he intends to keep the firm's 180,000 Jaguar shares.
The risk is that Jaguar's share price could slump if GM's agreement with Jaguar effectively locks out its U.S. rival.
"Ford's appetite to attack {Jaguar} could gradually wane over time, particularly if Saab is a reasonably attractive proposition," says John Lawson, an auto analyst at London's Nomura Research Institute.
He thinks Saab-Scania AB on Friday will announce the sale of 50% of its car division to Ford; the companies have been discussing closer cooperation for months.
Clifford Stahl, president and chief investment officer of C-S Capital Advisors Inc., two weeks ago sold his Cincinnati firm's 107,100 Jaguar ADRs at about 10 each, making a tidy profit on a holding purchased at 4 7/8 in early May.
"I thought the probabilities of {a bidding war} happening were less," he says.
Of course, that was before Ford's latest move.
Jaguar (OTC; Symbol: JAGRY)
Business: Luxury cars
Year ended Dec. 31, 1988:
Revenue: $1.71 billion
Net income: $44.9 million; or 25 cents a share
First half ended, June 30, 1989:
Net loss: $1.7 million vs. net income: $21.2 million; or 12 cents a share
Averae daily trading volume: Ordinary shares outstanding: 182.9 million
NOTE: All figures are translated into U.S. dollars based on current exchange rates.
A.F. Sloan, 60 years old, announced that he will retire next April as chairman and chief executive officer of this snack food and bakery products maker.
No replacement was immediately named.
Mr. Sloan plans to remain on the board until his current term expires in April 1991, a Lance spokesman said.
Newport Electronics Inc. of Santa Ana, Calif., said Milton B. Hollander, who holds a 49.4% stake, requested a special shareholders' meeting next Wednesday to remove four current directors and elect an alternative slate.
Mr. Hollander's High Technology Holding Co. of Stamford, Conn., acquired most of its stake last August in an $11-a-share tender offer for Newport, a maker of electronic-measuring devices.
Newport said Mr. Hollander is asking shareholders to retain only one director, James R. Lees, a Newport vice president.
The board isn't proposing a slate of its own and the other four current directors don't want to serve beyond the special meeting date, Newport said.
Mr. Hollander "is the new owner and wants to exercise control," said Barret B. Weekes, Newport's chairman.
Sandoz AG, a major Swiss chemical and pharmaceutical group, said that its group sales rose 25% to 9.482 billion francs ($5.80 billion) in the first nine months of this year, with strong gains in all divisions.
A year earlier sales totaled 7.567 billion francs.
Positive currency rates and strong sales growth led to a substantial rise in consolidated profit in the period, although the company didn't provide figures, as is customary with Swiss companies.
Sandoz said it expects a "substantial increase" in consolidated profit for the full year, barring major currency rate changes.
Amstrad PLC, a British maker of computer hardware and communications equipment, posted a 52% plunge in pretax profit for the latest year.
The #76.6 million ($120.6 million) in pretax profit for the 12 months to June 30 was down from #160 million ($252 million) a year earlier and below market expectations of #80 million and #90 million.
The slump in profit, which came despite steady sales, was attributed to increased costs for parts and problems with model introductions.
Amstrad's profit after taxes fell a similarly steep 51%, to #51.1 million from #105 million a year earlier.
Sales edged up fractionally to #626.3 million from #625.4 million a year earlier.
Microsoft Corp.'s earnings growth continued to outstrip that of most of its competitors and customers in the personal-computer industry, as it reported a 36% jump in fiscal first-quarter earnings on a 33% revenue gain.
The Redmond, Wash. company, a bellwether provider of operating systems and software for personal-computer makers and users, reported net income for the quarter ended Sept. 30 of $49.6 million, or 87 cents a share, up from $36.6 million, or 65 cents a share, in the year-ago period.
Revenue rose to $235.2 million, from $176.4 million.
Microsoft previously indicated it would have a strong quarter by forecasting its revenue gain on Oct. 4, causing a $6.50 a share jump in its stock.
But its stock jumped again yesterday as it disclosed surprisingly strong margins on those sales.
Microsoft's stock rose $2.875 a share in national over-the-counter trading to $78.625.
The stock had hit a high of $81 a share early last week but collapsed to $73.50 in the Friday stock plunge.
The company had been experiencing softening margins because of increased sales of software applications, which have lower margins than do operating systems.
But the company said that trend was offset in the first quarter by better economies of scale and efficiencies in manufacturing.
As a result, Microsoft's cost of goods, as a percentage of sales, fell 17% from the year-ago quarter and 13% from the previous period.
The trend drove up the aftertax margin -- net income as a percentage of revenues -- to 21.1% in the quarter, compared with 20.7% a year earlier.
Microsoft officials said the strong results also reflected continuing high demand for its software applications and operating systems.
While it has predicted that overall growth in unit sales of personal computers is slowing to about a 10% yearly rate, its own products are selling at a much faster rate because many are geared to the high-performance end of the market.
That segment continues to post strong quarter-to-quarter gains, while the low-end, or commodity segment, of the industry is experiencing sluggish growth or even sales declines.
Compared with its previous quarter, the final period of its 1989 fiscal year, net rose 9%, and sales rose 7%.
Control Data Corp., Minneapolis, signed a joint development agreement with MIPS Computer Systems Inc. to incorporate an emerging computing architecture in future machines.
MIPS is a leader in what is known as reduced-instruction set computing, or RISC, a technology combining microprocessors and sophisticated software.
In joining MIPS, Control Data follows several competitors in embracing RISC as a new design approach.
Digital Equipment Corp., Tandem Computers Inc., NEC Corp. and Group Bull, among others, have similar arrangements with MIPs, based in Sunnyvale, Calif.
Control Data said it expects its first RISC-based mainframe machine to be introduced next year.
The accord with MIPS calls for Control Data to share its expertise in data storage, the companies said.
Control Data also said it is developing what it called a "supermainframe" computer, the Cyber 2000, intended for scientists, engineers and other users of generalpurpose high-performance computers.
UAL'S STOCK SKIDDED an additional $24.875, to $198, as British Airways indicated it may balk at any hastily revised version of the aborted $6.79 billion buy-out of United Air's parent.
UAL has fallen $87.25, or 31%, in the three trading days since disclosure of the buy-out's collapse jolted the stock market.
Meanwhile, investor Marvin Davis said he remains interested in UAL, but he dropped his earlier $300-a-share back-up bid.
Stock prices fell broadly in heavy trading, dominated by futures-related program selling and further declines by UAL and other airline stocks.
The Dow Jones industrials closed off 18.65 points, at 2638.73, after plunging over 60.25 points in the morning.
Bond prices ended lower after an early rally, while the dollar was mixed.
The U.S. trade deficit swelled to $10.77 billion in August, prompting worries that the nation's export drive had stalled.
Exports declined for the second month in a row, while imports rose to a record.
An analyst called it one of the worst trade reports since the dollar bottomed out in
Industrial output fell 0.1% in September, the latest sign manufacturing is slowing.
An analyst cited weaker capital spending and exports.
Bankers Trust added $1.6 billion to reserves for Third World loans, the latest big bank to take such a step.
It expects a $1.42 billion quarterly loss.
Citicorp posted a 9% drop in quarterly profit.
Manufacturers Hanover had a loss due to a big reserve addition.
Bank of New England plans to sell some operations and lay off 4% of its work force after a year of weak earnings and mounting loan problems.
Eastern Airlines' creditors have begun exploring alternative approaches to a Chapter 11 reorganization because they are unhappy with the carrier's latest proposal.
Tele-Communications agreed to buy half of Showtime Networks from Viacom for $225 million.
The move could pose a new challenge to Time Warner's Home Box Office.
The CFTC plans to curb dual trading on commodities markets, in which traders buy and sell both for their own account and for clients.
The move is likely to anger traders.
FDIC Chairman Seidman said that Lincoln Savings & Loan of California should have been seized in 1986 to contain losses he estimated will cost taxpayers as much as $2 billion.
A $67 billion spending bill was approved by House-Senate conferees that includes major provisions affecting the federal mortgage market.
Hooker's U.S. unit is expected to agree in principle this week to sell its Merksamer Jewelers chain to management, according to executives.
The deficit-reduction bill became snagged over efforts to streamline the House version of the legislation in advance of a House-Senate conference.
Integrated Resources said talks have ended with another potential buyer of its core businesses.
Three big drug makers posted robust third-quarter earnings.
Merck's profit climbed 25%, Warner-Lambert's 22% and Eli Lilly's 24%.
Markets --
Stocks: Volume 224,070,000 shares.
Dow Jones industrials 2638.73, off 18.65; transportation 1254.27, off 49.96; utilities 214.54, off 0.19.
Bonds: Shearson Lehman Hutton Treasury index 3377.43, off
Commodities: Dow Jones futures index 129.72, unchanged; spot index 129.97, off 0.19.
Dollar: 142.75 yen, up 0.95; 1.8667 marks, off 0.0018.
Paul Ely, general partner of Alpha Partners, a venture-capital firm based in Menlo Park, Calif., was named a director of this computer company.
Mr. Ely, 57 years old, temporarily increases the board to seven members.
However, director Thomas O'Rourke has said he won't seek re-election at the company's annual meeting next month.
BroadBeach Associates Inc., the Los Angeles investment partnership whose $62-a-share bid for McGill Manufacturing Co. was topped recently by a competing offer from a Swedish concern, disclosed that it sold its entire 7% McGill stake.
McGill, a Valparaiso, Ind., ball-bearing manufacturer, had rebuffed BroadBeach's proposal.
It has since asked holders not to immediately tender their shares under a recent $72-a-share, or $104 million, bid from AB SKF of Sweden, until McGill directors have completed their evaluation.
In a Securities and Exchange Commission filing, BroadBeach said it sold the 101,000 McGill shares for $7.3 million in a private transaction on Oct. 12.
BroadBeach didn't identify the buyer of the shares, but the date of the selloff followed by one day the Swedish concern's tender offer, and the indicated price of the shares sold equals SKF's $72-a-share tender offer price.
A BroadBeach spokeswoman said the company sold the stock in the open market and thus couldn't identify the buyer or buyers.
Luis Nogales, 45 years old, has been elected to the board of this brewer.
Mr. Nogales, former president of United Press International and the Univision Spanish-language network, most recently co-founded Nogales Castro Partners, a California-based media acquisition firm.
Mr. Nogales, the first Hispanic person to serve as a Coors director, is an addition to the board, increasing its membership to nine.
Hachette S.A., a European media and publishing group, reported a small rise in its attributable first-half group profit, excluding exceptional items, to 133.8 million francs ($21.1 million) from 130.1 million francs a year earlier.
The Paris-based group said its earlier projection -- that group profit for all of 1989 would be close to the 322.7 million francs posted for 1988 -- remains valid.
Taking into account nonrecurring gains and losses, Hachette's group net income for the first six months of this year totaled 246.6 million francs, practically double the year-earlier figure of 124.5 million francs.
Analysts said Hachette's earnings in the second half might be boosted by a capital gain from the sale of the Paris headquarters of a newspaper-delivery company that is 49% owned by Hachette.
Oncor Inc., Gaithersburg, Md., said it received approval from the U.S. Food and Drug Administration to market a genetic test that will assist in diagnosis and treatment of leukemia and lymph cancer.
The B/T gene rearrangement test is more accurate than existing tests for diagnosing the type of cancer, whether it has spread or whether there is a recurrence following treatment, said Oncor President Stephen Turner.
Mr. Turner said the test initially will be used in conjunction with biopsies and other tests, but eventually might become the benchmark for tumor analysis.
Mr. Turner said the test will be shipped in 45 days to hospitals and clinical laboratories.
Dr. Wyndham Wilson, a cancer treatment specialist at the National Cancer Institute, said the test is widely used in research centers but isn't having a major impact because it is only occasionally useful in choosing the most effective treatment.
But the test may prove to be more sensitive in determining whether a tumor has spread or returned following treatment, Dr. Wilson said.
"We don't know yet how useful it's going to be," he said.
Oncor, a six-year-old developer of genetic medical tests, projects that the cancer test will help it to post its first-ever profit during the first quarter of 1990, Mr. Turner said.
The company will charge $35 for a test and projects about $2 million in revenue from the test during the first 12 months of marketing, he said.
Unilab Corp., Norcross, Ga., said it acquired the clinical laboratories of closely held Central Diagnostic Laboratory Inc. in a cash and securities transaction valued at $85 million.
Unilab said its wholly owned MetWest Inc. unit paid $25 million in cash, provided $30 million in notes and $30 million in preferred stock to acquire Central's labs in the Western U.S.
Unilab, which provides clinical laboratory services, competed with Central, based in Tarzana, Calif., in a number of areas.
Beyond removing a competitor, the combination should provide "synergies," said Fred Harlow, Unilab's chief financial officer.
It also will hand Unilab new markets.
In Los Angeles, for example, Central has had a strong market position while Unilab's presence has been less prominent, according to Mr. Harlow.
Consumers may want to move their telephones a little closer to the TV set.
Couch-potato jocks watching ABC's "Monday Night Football" can now vote during halftime for the greatest play in 20 years from among four or five filmed replays.
Two weeks ago, viewers of several NBC daytime consumer segments started calling a 900 number for advice on various life-style issues.
And the new syndicated "reality" show "Hard Copy" records viewers' opinions for possible airing on the next day's show.
Interactive telephone technology has taken a new leap in sophistication, and television programmers are racing to exploit the possibilities.
Eventually viewers may grow bored with the technology and resent the cost.
But right now programmers are figuring that viewers who are busy dialing up a range of services may put down their remote control zappers and stay tuned.
"We've been spending a lot of time in Los Angeles talking to TV production people," says Mike Parks, president of Call Interactive, which supplied technology for both ABC Sports and NBC's consumer minutes.
"With the competitiveness of the television market these days, everyone is looking for a way to get viewers more excited."
One of the leaders behind the expanded use of 900 numbers is Call Interactive, a joint venture of giants American Express Co. and American Telephone & Telegraph Co.
Formed in August, the venture weds AT&T's newly expanded 900 service with 200 voice-activated computers in American Express's Omaha, Neb., service center.
Other long-distance carriers have also begun marketing enhanced 900 service, and special consultants are springing up to exploit the new tool.
Blair Entertainment, a New York firm that advises TV stations and sells ads for them, has just formed a subsidiary -- 900 Blair -- to apply the technology to television.
The use of 900 toll numbers has been expanding rapidly in recent years.
For a while, high-cost pornography lines and services that tempt children to dial (and redial) movie or music information earned the service a somewhat sleazy image, but new legal restrictions are aimed at trimming excesses.
The cost of a 900 call is set by the originator -- ABC Sports, for example -- with the cheapest starting at 75 cents.
Billing is included in a caller's regular phone bill.
From the fee, the local phone company and the long-distance carrier extract their costs to carry the call, passing the rest of the money to the originator, which must cover advertising and other costs.
In recent months, the technology has become more flexible and able to handle much more volume.
Before, callers of 900 numbers would just listen and not talk, or they'd vote "yes" or "no" by calling one of two numbers.
(People in the phone business call this technology "900 click.")
Now, callers are led through complex menus of choices to retrieve information they want, and the hardware can process 10,000 calls in 90 seconds.
Up to now, 900 numbers have mainly been used on local TV stations and cable channels.
MTV used one to give away the house that rock star Jon Bon Jovi grew up in.
For several years, Turner Broadcasting System's Cable News Network has invited viewers to respond nightly to topical issues ("Should the U.S. military intervene in Panama?"), but even the hottest controversies on CNN log only about 10,000 calls.
The newest uses of the 900-interactive technology demonstrate the growing variety of applications.
Capital Cities/ABC Inc., CBS Inc. and General Electric Co.'s National Broadcasting Co. unit are expected to announce soon a joint campaign to raise awareness about hunger.
The subject will be written into the plots of prime-time shows, and viewers will be given a 900 number to call.
Callers will be sent educational booklets, and the call's modest cost will be an immediate method of raising money.
Other network applications have very different goals.
ABC Sports was looking for ways to lift deflated halftime ratings for "Monday Night Football."
Kurt Sanger, ABC Sports's marketing director, says that now "tens of thousands" of fans call its 900 number each week to vote for the best punt return, quarterback sack, etc.
Profit from the calls goes to charity, but ABC Sports also uses the calls as a sales tool: After thanking callers for voting, Frank Gifford offers a football videotape for $19.95, and 5% of callers stay on the line to order it.
Jackets may be sold next.
Meanwhile, NBC Sports recently began "Scores Plus," a year-round, 24-hour 900 line providing a complex array of scores, analysis and fan news.
A spokesman said its purpose is "to bolster the impression that NBC Sports is always there for people."
NBC's "On-Line" consumer minutes have increased advertiser spending during the day, the network's weakest period.
Each weekday matches a sponsor and a topic: On Mondays, Unilever N.V.'s Lever Bros. sponsors tips on diet and exercise, followed by a 30-second Lever Bros. commercial.
Viewers can call a 900 number for additional advice, which will be tailored to their needs based on the numbers they punch ("Press one if you're pregnant," etc.).
If the caller stays on the line and leaves a name and address for the sponsor, coupons and a newsletter will be mailed, and the sponsor will be able to gather a list of desirable potential customers.
Diane Seaman, an NBC-TV vice president, says NBC has been able to charge premium rates for this ad time.
She wouldn't say what the premium is, but it's believed to be about 40% above regular daytime rates.
"We were able to get advertisers to use their promotion budget for this, because they get a chance to do couponing," says Ms. Seaman.
"And we were able to attract some new advertisers because this is something new."
Mr. Parks of Call Interactive says TV executives are considering the use of 900 numbers for "talk shows, game shows, news and opinion surveys."
Experts are predicting a big influx of new shows in 1990, when a service called "automatic number information" will become widely available.
This service identifies each caller's phone number, and it can be used to generate instant mailing lists.
"Hard Copy," the new syndicated tabloid show from Paramount Pictures, will use its 900 number for additional purposes that include research, says executive producer Mark B. von S. Monsky.
"For a piece on local heroes of World War II, we can ask people to leave the name and number of anyone they know who won a medal," he says.
"That'll save us time and get people involved."
But Mr. Monsky sees much bigger changes ahead.
"These are just baby steps toward real interactive video, which I believe will be the biggest thing yet to affect television," he says.
Although it would be costly to shoot multiple versions, TV programmers could let audiences vote on different endings for a movie.
Fox Broadcasting experimented with this concept last year when viewers of "Married . . . With Children" voted on whether Al should say "I love you" to Peg on Valentine's Day.
Someday, viewers may also choose different depths of news coverage.
"A menu by phone could let you decide, `I'm interested in just the beginning of story No. 1, and I want story No. 2 in depth," Mr. Monsky says.
"You'll start to see shows where viewers program the program.
Integrated Resources Inc., the troubled financial-services company that has been trying to sell its core companies to restructure debt, said talks with a potential buyer ended.
Integrated didn't identify the party or say why the talks failed.
Last week another potential buyer, Whitehall Financial Group -- which had agreed in August to purchase most of Integrated's core companies for $310 million -- ended talks with Integrated.
Integrated said that it would continue to pursue "other alternatives" to sell the five core companies and that a group of senior executives plans to make a proposal to purchase three of the companies -- Integrated Resources Equity Corp., Resources Trust Co. and Integrated Resources Asset Management Corp.
A price wasn't disclosed.
Integrated also said it expects to report a second-quarter loss wider than the earlier estimate of about $600 million.
The company didn't disclose the new estimate but said the change was related to Integrated's failure to sell its core businesses, as well as "other events," which it didn't detail, that occurred after its announcement last week that it was in talks with the unidentified prospective buyer.
Meanwhile, a number of top sales producers from Integrated Resources Equity will meet this afternoon in Chicago to discuss their options.
The unit is a loosely constructed group of about 3,900 independent brokers and financial planners who sell insurance, annuities, limited partnerships, mutual funds and other investments for Integrated and other firms.
The sales force is viewed as a critical asset in Integrated's attempt to sell its core companies.
Whitehall cited concerns about how long Integrated would be able to hold together the sales force as one reason its talks with Integrated failed.
In composite trading on the New York Stock Exchange yesterday, Integrated closed at $1.25 a share, down 25 cents.
Integrated has been struggling to avoid a bankruptcy-law filing since June, when it failed to make interest payments on nearly $1 billion of debt.
Integrated senior and junior creditors are owed a total of about $1.8 billion.
AN EARTHQUAKE STRUCK Northern California, killing more than 50 people.
The violent temblor, which lasted about 15 seconds and registered 6.9 on the Richter scale, also caused the collapse of a 30-foot section of the San Francisco-Oakland Bay Bridge and shook Candlestick Park.
The tremor was centered near Hollister, southeast of San Francisco, and was felt as far as 200 miles away.
Numerous injuries were reported.
Some buildings collapsed, gas and water lines ruptured and fires raged.
The quake, which also caused damage in San Jose and Berkeley, knocked out electricity and telephones, cracked roadways and disrupted subway service in the Bay Area.
Major injuries weren't reported at Candlestick Park, where the third game of baseball's World Series was canceled and fans evacuated from the stadium.
Bush vowed to veto a bill allowing federal financing for abortions in cases of rape and incest, saying tax dollars shouldn't be used to "compound a violent act with the taking of an unborn life."
His pledge, in a letter to Democratic Sen. Byrd, came ahead of an expected Senate vote on spending legislation containing the provision.
East Germany's Politburo met amid speculation that the ruling body would oust hard-line leader Honecker, whose rule has been challenged by mass emigration and calls for democratic freedoms.
Meanwhile, about 125 refugees flew to Duesseldorf, West Germany, from Warsaw, the first airlift in East Germany's refugee exodus.
The World Psychiatric Association voted at an Athens parley to conditionally readmit the Soviet Union.
Moscow, which left the group in 1983 to avoid explusion over allegations that political dissidents were being certified as insane, could be suspended if the misuse of psychiatry against dissenters is discovered during a review within a year.
NASA postponed the liftoff of the space shuttle Atlantis because of rain near the site of the launch pad in Cape Canaveral, Fla.
The flight was rescheduled for today.
The spacecraft's five astronauts are to dispatch the nuclear-powered Galileo space probe on an exploratory mission to Jupiter.
Senate Democratic leaders said they had enough votes to defeat a proposed constitutional amendment to ban flag burning.
The amendment is aimed at skirting a Supreme Court ruling that threw out the conviction of a Texas flag-burner on grounds that his freedom of speech was violated.
Federal researchers said lung-cancer mortality rates for people under 45 years of age have begun to decline, particularly for white males.
The National Cancer Institute also projected that overall U.S. mortality rates from lung cancer should begin to drop in several years if cigarette smoking continues to abate.
Bush met with South Korean President Roh, who indicated that Seoul plans to further ease trade rules to ensure that its economy becomes as open as the other industrialized nations by the mid-1990s.
Bush assured Roh that the U.S. would stand by its security commitments "as long as there is a threat" from Communist North Korea.
The Bush administration is seeking an understanding with Congress to ease restrictions on U.S. involvement in foreign coups that might result in the death of a country's leader.
A White House spokesman said that while Bush wouldn't alter a longstanding ban on such involvement, "there's a clarification needed" on its interpretation.
India's Gandhi called for parliamentary elections next month.
The balloting, considered a test for the prime minister and the ruling Congress (I) Party, comes amid charges of inept leadership and government corruption.
Gandhi's family has ruled independent India for all but five years of its 42-year history.
The Soviet Union abstained from a U.N. General Assembly vote to reject Israel's credentials.
It was the first time in seven years that Moscow hasn't joined efforts, led by Moslem nations, to expel Israel from the world body, and was viewed as a sign of improving Soviet-Israeli ties.
Israel was seated by a vote of 95-37, with 15 abstentions.
Black activist Walter Sisulu said the African National Congress wouldn't reject violence as a way to pressure the South African government into concessions that might lead to negotiations over apartheid.
The 77-year-old Sisulu was among eight black political activists freed Sunday from prison.
London has concluded that Austrian President Waldheim wasn't responsible for the execution of six British commandos in World War II, although he probably was aware of the slayings.
The report by the Defense Ministry also rejected allegations that Britain covered up evidence of Waldheim's activities as a German army officer.
An international group approved a formal ban on ivory trade despite objections from southern African governments, which threatened to find alternative channels for selling elephant tusks.
The move by the Convention on Trade in Endangered Species, meeting in Switzerland, places the elephant on the endangered-species list.
An assassin in Colombia killed a federal judge on a Medellin street.
An anonymous caller to a local radio station said cocaine traffickers had slain the magistrate in retaliation for the extraditions of Colombians wanted on drug charges in the U.S.
Libyan leader Gadhafi met with Egypt's President Mubarak, and the two officials pledged to respect each other's laws, security and stability.
They stopped short of resuming diplomatic ties, severed in 1979.
The reconciliation talks in the Libyan desert town of Tobruk followed a meeting Monday in the Egyptian resort of Mersa Metruh.
Alpine Group Inc. revised its exchange offer for $43.7 million face amount of 13.5% senior subordinated debt due 1996 and extended the offer to Oct. 27 from Oct. 12.
The Hackensack, N.J., company said holders would receive for each $1,000 face amount, $750 face amount of a new issue of secured senior subordinated notes, convertible into common stock at an initial rate of $6.50 a share, and 50 common shares.
The new notes will bear interest at 5.5% through July 31, 1991, and thereafter at 10%.
Under the original proposal, the maker of specialty coatings and a developer of information-display technologies offered $400 of notes due 1996, 10 common shares and $175 in cash for each $1,000 face amount.
Completion of the exchange offer is subject to the tender of at least 80% of the debt, among other things.
Alpine, which said it doesn't plan to further extend the offer, said it received $615,000 face amount of debt under the original offer.
The stock of UAL Corp. continued to be pounded amid signs that British Airways may balk at any hasty reformulation of the aborted $6.79 billion buy-out of United Airlines' parent.
UAL stock plummeted a further $24.875 to $198 on volume of more than 2.8 million shares in New York Stock Exchange composite trading.
The plunge followed a drop of $56.875 Monday, amid indications the takeover may take weeks to be revived.
The stock has fallen $87.25, or 31%, in the three trading days since announcement of the collapse of the $300-a-share takeover jolted the entire stock market into its second-worst plunge ever.
"This is a total bloodbath" for takeover-stock traders, one investment banker said.
Los Angeles financier Marvin Davis, who put United in play with a $5.4 billion bid two months ago, last night proffered both a ray of hope and an extra element of uncertainty by saying he remains interested in acquiring UAL.
But he dropped his earlier $300-a-share back-up bid, saying he must first explore bank financing.
Even as Citicorp and Chase Manhattan Corp. scrambled to line up bank financing for a revised version of the lapsed labor-management bid, British Airways, a 15% partner in the buying group, indicated it wants to start from scratch.
Its partners are United's pilots, who were to own 75%, and UAL management at 10%.
Adding insult to injury, United's 25,000-member Machinists' union, which helped scuttle financing for the first bid, yesterday asked UAL Chairman Stephen Wolf and other UAL directors to resign.
A similar demand was made by a group that represents some of United's 26,000 noncontract employees.
John Peterpaul, Machinists union general vice president, attacked Mr. Wolf as "greedy and irresponsible" for pursuing the buy-out.
Although Mr. Wolf and John Pope, UAL's chief financial officer, stood to pocket $114.3 million for stock and options in the buy-out, UAL executives planned to reinvest only $15 million in the new company.
The blue-collar machinists, longtime rivals of the white-collar pilots, say the buyout would load the company with debt and weaken its finances.
Confusion about the two banks' hurried efforts to round up financing for a new bid that the UAL board hasn't even seen yet helped send UAL stock spiraling downward.
And rumors of forced selling by takeover-stock traders triggered a 25-point downdraft in the Dow Jones Industrial Average around 11:15 a.m. EDT yesterday.
Yesterday's selling began after a Japanese news agency reported that Japanese banks, which balked at the first bid, were ready to reject a revised version at around $250 a share, or $5.65 billion.
Several reports as the day progressed gave vague or conflicting indications about whether banks would sign up.
Citicorp, for example, said only that it had "expressions of interest of a transaction from both the borrowers and the banks," but didn't have an agreement.
Late in the day, Mr. Wolf issued a onepage statement calling Mr. Peterpaul's blast "divisive and uncalled for."
But he gave few details on the progress toward a new bid, saying only, "We are working toward a revised proposal for majority employee ownership."
Meanwhile, in another sign that a new bid isn't imminent, it was learned that the UAL board held a telephone meeting Monday to hear an update on the situation, but that a formal board meeting isn't likely to be convened until early next week.
In London, British Airways Chairman Lord King was quoted in the Times as declaring he is "not prepared to take my shareholders into a hasty deal."
Observers said it appeared that British Air was angered at the way the bid has degenerated into confusion, as well as by the banks' effort to round up financing for what one called "a deal that isn't a deal."
The effort to revive the bid was complicated by the unwieldy nature of the three-party buying group.
The pilots were meeting outside Chicago yesterday.
But British Air, which was to have supplied $750 million out of $965 million in equity financing, apparently wasn't involved in the second proposal and could well reject it even if banks obtain financing.
A group of United's noncontract employees said in a statement, "The fact that Wolf and other officers were going to line their pockets with literally millions of dollars while instituting severe pay cuts on the nonunion employees of United is not only deplorable but inexcusable."
The machinists also asked for an investigation by the Securities and Exchange Commission into possible securities-law violations in the original bid for UAL by Mr. Davis, as well as in the response by UAL.
Last week, just before the bank commitments were due, the union asked the U.S. Labor Department to study whether the bid violated legal standards of fairness governing employee investment funds.
In his statement, Mr. Wolf said, "We continue to believe our approach is sound, and that it is far better for all employees than the alternative of having an outsider own the company with employees paying for it just the same."
Mr. Wolf has eschewed merger advice from a major Wall Street securities firm, relying instead only on a takeover lawyer, Peter Atkins of Skadden Arps Slate Meagher & Flom.
The huge drop in UAL stock prompted one takeover stock trader, George Kellner, managing partner of Kellner, DiLeo & Co., to deny publicly rumors that his firm was going out of business.
Mr. Kellner said that despite losses on UAL stock, his firm's health is "excellent."
The stock's decline also has left the UAL board in a quandary.
Although it may not be legally obligated to sell the company if the buy-out group can't revive its bid, it may have to explore alternatives if the buyers come back with a bid much lower than the group's original $300-a-share proposal.
At a meeting Sept. 1 to consider the labor-management bid, the board also was informed by its investment adviser, First Boston Corp., of interest expressed by buy-out funds including Kohlberg Kravis Roberts & Co. and Forstmann Little & Co., as well as by Robert Bass, Morgan Stanley's buy-out fund, and Pan Am Corp.
The takeover-stock traders were hoping that Mr. Davis or one of the other interested parties might re-emerge with the situation in disarray, or that the board might consider a recapitalization.
Meanwhile, Japanese bankers said they were still hesitant about accepting Citicorp's latest proposal.
Macmillan Inc. said it plans a public offering of 8.4 million shares of its Berlitz International Inc. unit at $19 to $21 a share.
The offering for the language school unit was announced by Robert Maxwell, chairman and chief executive officer of London-based Maxwell Communication Corp., which owns Macmillan.
After the offering is completed, Macmillan will own about 56% of the Berlitz common stock outstanding.
Five million shares will be offered in the U.S., and 3.4 million additional shares will be offered in concurrent international offerings outside the U.S.
Goldman, Sachs & Co. will manage the offering.
Macmillan said Berlitz intends to pay quarterly dividends on the stock.
The company said it expects to pay the first dividend, of 12.5 cents a share, in the 1990 first quarter.
Berlitz will borrow an amount equal to its expected net proceeds from the offerings, plus $50 million, in connection with a credit agreement with lenders.
The total borrowing will be about $208 million, the company said.
Proceeds from the borrowings under the credit agreement will be used to pay an $80 million cash dividend to Macmillan and to lend the remainder of about $128 million to Maxwell Communications in connection with a promissory note.
Proceeds from the offering will be used to repay borrowings under the short-term parts of a credit agreement.
Berlitz, which is based in Princeton, N.J., provides language instruction and translation services through more than 260 language centers in 25 countries.
In the past five years, more than 68% of its sales have been outside the U.S.
Macmillan has owned Berlitz since 1966.
In the first six months of this year, Berlitz posted net income of $7.6 million on sales of $106.2 million, compared with net income of $8.2 million on sales of $90.6 million.
Right away you notice the following things about a Philip Glass concert.
It attracts people with funny hair (or with no hair -- in front of me a girl with spiked locks sat beside a boy who had shaved his).
Whoever constitute the local Left Bank come out in force, dressed in black, along with a smattering of yuppies who want to be on the cutting edge.
People in Glass houses tend to look stoned.
And, if still conscious at the evening's end, you notice something else: The audience, at first entranced and hypnotized by the music, releases its pent-up feelings in collective gratitude.
Currently in the middle of a four-week, 20-city tour as a solo pianist, Mr. Glass has left behind his synthesizers, equipment and collaborators in favor of going it alone.
He sits down at the piano and plays.
And plays.
Either one likes it or one doesn't.
The typical Glass audience, which is more likely to be composed of music students than their teachers, certainly does.
The work, though, sounds like Muzak for spaceships.
Philip Glass is the emperor, and his music the new clothes, of the avant-garde.
His success is easy to understand.
Softly introducing and explaining his pieces, Mr. Glass looks and sounds more like a shaggy poet describing his work than a classical pianist playing a recital.
The piano compositions, which have been labeled variously as minimalist, Oriental, repetitive, cyclical, monophonic and hypnotic, are relentlessly tonal (therefore unthreatening), unvaryingly rhythmic (therefore soporific), and unflaggingly harmonious but unmelodic (therefore both pretty and unconventional).
It is music for people who want to hear something different but don't want to work especially hard at the task.
It is E-Z listening for the now generation.
Mr. Glass has inverted the famous modernist dictum "less is more."
His more is always less.
Far from being minimalist, the music unabatingly torments us with apparent novelties not so cleverly disguised in the simplicities of 4/4 time, octave intervals, and ragtime or gospel chord progressions.
But the music has its charm, and Mr. Glass has constructed his solo program around a move from the simple to the relatively complex.
"Opening" (1981), from Glassworks, introduces the audience to the Glass technique: Never straying too far from the piano's center, Mr. Glass works in the two octaves on either side of middle C, and his fingers seldom leave the keys.
There is a recognizable musical style here, but not a particular performance style.
The music is not especially pianistic; indeed, it's hard to imagine a bad performance of it.
Nothing bravura, no arpeggios, no ticklish fingering problems challenge the performer.
We hear, we may think, inner voices, but they all seem to be saying the same thing.
With "Planet News," music meant to accompany readings of Allen Ginsberg's "Wichita Vortex Sutra," Mr. Glass gets going.
His hands sit farther apart on the keyboard.
Seventh chords make you feel as though he may break into a (very slow) improvisatory riff.
The chords modulate, but there is little filigree even though his fingers begin to wander over more of the keys.
Contrasts predictably accumulate: First the music is loud, then it becomes soft, then (you realize) it becomes louder again.
"The Fourth Knee Play," an interlude from "Einstein on the Beach," is like a toccata but it doesn't seem to move much beyond its left-hand ground in "Three Blind Mice."
When Mr. Glass decides to get really fancy, he crosses his hands and hits a resonant bass note with his right hand.
He does this in at least three of his solo pieces.
You might call it a leitmotif or a virtuoso accomplishment.
In "Mad Rush," which came from a commission to write a piece of indeterminate length (Mr. Glass charmingly, and tellingly, confessed that "this was no problem for me"), an A section alternates with a B section several times before the piece ends unresolved.
Not only is the typical Glasswork open-ended, it is also often multiple in its context(s).
"Mad Rush" began its life as the accompaniment to the Dalai Lama's first public address in the U.S., when Mr. Glass played it on the organ at New York's Cathedral of St. John the Divine.
Later it was performed on Radio Bremen in Germany, and then Lucinda Childs took it for one of her dance pieces.
The point is that any piece can be used as background music for virtually anything.
The evening ended with Mr. Glass's "Metamorphosis," another multiple work.
Parts 1, 2, and 5 come from the soundtrack of Errol Morris's acclaimed film, "The Thin Blue Line," and the two other parts from incidental music to two separate dramatizations of the Kafka story of the same name.
When used as background in this way, the music has an appropriate eeriness, as when a two-note phrase, a descending minor third, accompanies the seemingly endless litany of reports, interviews and confessions of witnesses in the Morris film.
Served up as a solo, however, the music lacks the resonance provided by a context within another medium.
Admirers of Mr. Glass may agree with the critic Richard Kostelanetz's sense that the 1974 "Music in Twelve Parts" is as encyclopedic and weighty as "The Well-Tempered Clavier."
But while making the obvious point that both composers develop variations from themes, this comparison ignores the intensely claustrophobic nature of Mr. Glass's music.
Its supposedly austere minimalism overlays a bombast that makes one yearn for the astringency of neoclassical Stravinsky, the genuinely radical minimalism of Berg and Webern, and what in retrospect even seems like concision in Mahler.
Mr. Spiegelman is professor of English at Southern Methodist University and editor of the Southwest Review.
Honeywell Inc. said it hopes to complete shortly the first of two sales of shares in its Japanese joint venture, Yamatake-Honeywell, for about $280 million.
The company wouldn't disclose the buyer of the initial 16% stake.
Proceeds of the sale, expected to be completed next week, would be used to repurchase as many as 10 million shares of Honeywell stock, the company said.
Honeywell said it is negotiating the sale of a second stake in Yamatake-Honeywell, but indicated it intends to hold at least 20% of the joint venture's stock long term.
A 20% stake would allow Honeywell to include Yamatake earnings in its results.
Honeywell previously said it intended to reduce its holding in the Japanese concern as part of a restructuring plan which also calls for a reduction of dependence on weapons sales.
Yesterday a spokeswoman said the company was "pleased with our progress" in that regard and "hopes to provide additional details soon."
Honeywell said its Defense and Marine Systems group incurred delays in shipping some undisclosed contracts during the third quarter, resulting in lower operating profit for that business.
Overall, Honeywell reported earnings of $74.4 million, or $1.73 a share, for the three months ended Oct. 1 compared with a loss of $41.4 million, or 98 cents a share, a year earlier.
The previous period's results included a $108 million pretax charge related to unrecoverable contract costs and a $12.3 million pretax gain on real estate sales.
Sales for the latest quarter were flat, at $1.72 billion.
For the nine months, Honeywell reported earnings of $212.1 million, or $4.92 a share, compared with earnings of $47.9 million, or $1.13 a share, a year earlier.
Sales declined slightly to $5.17 billion.
Once again, your editorial page misstates the law to conform to your almost beatific misperceptions.
In an excursus of little relevance to his central point about private enforcement suits by environmental groups, Michael S. Greve informs your readers, ". . . the Clean Water Act is written upon the presumption -- the pretense, rather -- that nothing but zero risk will do; it establishes a legal standard of zero discharge" ("Congress's Environmental Buccaneers," Sept. 18).
This statement surely buttresses your editorial viewpoint that environmental protection is generally silly or excessive, but it is simply wrong.
The Clean Water Act contains no "legal standard" of zero discharge.
It requires that "discharges of pollutants" into the "waters of the United States" be authorized by permits that reflect the effluent limitations developed under section 301.
Whatever may be the problems with this system, it scarcely reflects "zero risk" or "zero discharge."
Perhaps Mr. Greve was confused by Congress's meaningless statement of "the national goal" in section 101, which indeed calls for the elimination of discharges -- by 1985, no less.
This fatuous statement was not taken seriously when enacted in 1972, and should not now be confused with the operative provisions of the statute.
Thus, you do the public a great disservice when Mr. Greve suggests, even facetiously, that the Clean Water Act prohibits the preparation of a scotch and water; your tippling readers may be led to believe that nothing but chance or oversight protects them, as they cower in the night with their scotch and waters, from the hairyknuckled knock of the Sierra Club at their doors.
Robert J. McManus
National Geographic, the sixth-largest U.S. magazine, is attracting more readers than ever and offers the glossy, high-toned pages that upscale advertisers love.
So why did advertising pages plunge by almost 10% and ad revenue by 7.2% in the first half?
To hear advertisers tell it, the magazine just hasn't kept up with the times.
Despite renewed interest by the public in such topics as the environment and the Third World, it hasn't been able to shake its reputation as a magazine boys like to flip through in search of topless tribe women.
Worse, it lagged behind competitors in offering now-standard gimmicks, from regional editions to discounts for frequent advertisers.
But now, the magazine is attempting to fight back, with an ambitious plan including a revamped sales strategy and a surprisingly aggressive ad campaign.
Advertisers don't think of the magazine first, says Joan McCraw, who joined in April as national advertising director.
"What we want to do is take a more aggressive stance.
People didn't believe we were in tune with the marketplace, and in many ways we weren't."
The 101-year-old magazine has never had to woo advertisers with quite so much fervor before.
It largely rested on its hard-to-fault demographics: 10.8 million subscribers in the first half, up from 10.5 million a year ago; an average age of 42 for readers -- at the height of their consuming years; loyalty to the tune of an 85% average subscription renewal rate.
The magazine had its best year yet in 1988, when it celebrated its centennial and racked up a 17% gain in ad pages, to 283.
But this year, when the hullabaloo surrounding its centennial died, so too did some advertiser interest.
The reason, ad executives say, is that the entire magazine business has been soft -- and National Geographic has some quirks that make it especially unattractive during a soft market.
Perhaps the biggest of those factors is its high ad prices -- $130,000 for a four-color page, vs. $47,000 for the Smithsonian, a comparable publication with a far smaller circulation.
When ad dollars are tight, the high page cost is a major deterrent for advertisers, who generally want to appear regularly in a publication or not at all.
Even though National Geographic offers far more readers than does a magazine like Smithsonian, "the page costs you an arm and a leg to develop any frequency,"says Harry Glass, New York media manager for Bozell Inc.
To combat that problem, National Geographic, like other magazines, began offering regional editions allowing advertisers to appear in only a portion of its magazines -- for example, ads can run only in the magazines sent to subscribers in the largest 25 markets.
But the magazine was slower than its competitors to come up with its regional editions, and until last year offered fewer of them than did competitors.
Time magazine, for example, has more than 100 separate editions going to different regions, top management, and other groups.
Another sticking point for advertisers was National Geographic's tradition of lumping its ads together, usually at the beginning or end of the magazine, rather than spreading ads out among its articles, as most magazines do.
And National Geographic's smaller-than-average size means extra production costs for advertisers.
But Ms. McCraw says the magazine is fighting back.
It now offers 30 regional editions, it very recently began running ads adjacent to articles, and it has been beefing up its sales force.
And it just launched a promotional campaign to tell chief executives, marketing directors, and media executives just that.
The centerpiece of the promotion is its new ad campaign, into which the magazine will pour about $500,000, mostly in the next few weeks.
The campaign, created by Omnicom Group's DDB Needham agency, takes advantage of the eye-catching photography that National Geographic is known for.
In one ad, a photo of the interior of the Sainte-Chapelle in Paris is paired with the headline, "The only book more respected than ours doesn't accept advertising."
Another ad pictures a tree ant, magnified 80 times, with the headline, "For impact far beyond your size consider our regional editions."
Ms. McCraw says she wants the campaign to help attract advertisers in 10 categories, including corporate, financial services, consumer electronics, insurance and food.
Her goal: to top 300 ad pages in 1990, up from about 274 this year.
Whether she can meet that ambitious goal is still far from certain.
"The ad campaign is meant to contemporize the thought of National Geographic," she says.
"We want it to be a '90s kind of image."
WCRS Plans Ad-Unit Sale
WCRS Group hopes to announce, perhaps today, an agreement to sell the majority of its ad unit to Paris-based Eurocom, a European ad executive said.
WCRS has been in discussions with Eurocom for several months.
However, when negotiations bogged down recently, WCRS's chief executive, Peter Scott, met in Paris with another French firm, Boulet Dru Dupuy Petit, or BDDP.
According to the executive, BDDP's involvement prompted renewed vigor in the WCRS-Eurocom talks and the two agencies were hoping to hammer out details by today.
Executives of the two agencies couldn't be reached last night.
Ad Notes. . . .
NEW ACCOUNT: Procter & Gamble Co., Cincinnati, awarded the ad accounts for its line of Professional Crisco vegetable shortening and oil products to Northlich, Stolley, LaWarre, Cincinnati.
Billings weren't disclosed.
Professional Crisco products are specially made for the foodservice industry.
WHO'S NEWS: Stephen Novick, 49, was named executive vice president, deputy creative director at Grey Advertising, New York.
He was executive vice president, director of broadcast production.
The Commodity Futures Trading Commission plans to restrict dual trading on commodity exchanges, a move almost certain to infuriate exchange officials and traders.
The CFTC said it will propose the restrictions after the release of a study that shows little economic benefit resulting from dual trading and cites "problems" associated with the practice.
Dual trading gives an exchange trader the right to trade both for his own account and for customers.
The issue exploded this year after a Federal Bureau of Investigation operation led to charges of widespread trading abuses at the Chicago Board of Trade and Chicago Mercantile Exchange.
While not specifically mentioned in the FBI charges, dual trading became a focus of attempts to tighten industry regulations.
Critics contend that traders were putting buying or selling for their own accounts ahead of other traders' customer orders.
Traders are likely to oppose such restrictions because dual trading provides a way to make money in slower markets where there is a shortage of customer orders.
The exchanges contend that dual trading improves liquidity in the markets because traders can buy or sell even when they don't have a customer order in hand.
The exchanges say liquidity becomes a severe problem for thinly traded contracts such as those with a long time remaining before expiration.
The CFTC may take those arguments into account by allowing exceptions to its restrictions.
The agency didn't cite specific situations where dual trading might be allowed, but smaller exchanges or contracts that need additional liquidity are expected to be among them.
Wendy Gramm, the agency's chairman, told the Senate Agriculture Committee that she expects the study to be released within two weeks and the rule changes to be completed by Thanksgiving.
The study, by the CFTC's division of economic analysis, shows that "a trade is a trade," a member of the study team said.
Whether a trade is done on a dual or non-dual basis, the member said, "doesn't seem to have much economic impact."
Currently, most traders on commodity exchanges specialize in trading either for customer accounts, which makes them brokers, or for their own accounts as socalled locals.
"The tests indicate that dual and non-dual traders are similar in terms of the trade executions and liquidity they provide to the market," Mrs. Gramm told the Senate panel.
Members of Congress have proposed restricting dual trading in bills to reauthorize CFTC operations.
The House's bill would prohibit dual trading in markets with daily average volume of 7,000 contracts or more, comprising those considered too difficult to track without a sophisticated computer system.
The Senate bill would force the CFTC to suspend dual trading if an exchange can't show that its oversight system can detect dual-trading abuses.
So far, one test of restricting dual trading has worked well.
The Chicago Merc banned dual trading in its Standard & Poor's 500-stock index futures pit in 1987.
Under the rules, traders decide before a session begins whether they will trade for their own account or for customers.
Traders who stand on the pit's top step, where most customer orders are executed, can't trade for themselves.
A Merc spokesman said the plan hasn't made much difference in liquidity in the pit.
"It's too soon to tell . . . but people don't seem to be unhappy with it," he said.
He said he wouldn't comment on the CFTC plan until the exchange has seen the full proposal.
But at a meeting last week, Tom Donovan, the Board of Trade's president, told commodity lawyers: "Dual trading is definitely worth saving.
It adds something to the market.
Japanese Firms Push Posh Car Showrooms
JAPANESE luxury-car makers are trying to set strict design standards for their dealerships.
But some dealers are negotiating looser terms, while others decline to deal at all.
Nissan Motor Co.'s Infiniti division likes to insist that every dealer construct and furnish a building in a Japanese style.
Specifications include a polished bronze sculpture at the center of each showroom and a tile bridge spanning a stream that flows into the building from outside.
"Infiniti has it down to the ashtrays," says Jay Ferron, a partner at J.D. Power & Associates, an auto research firm.
Toyota Motor Corp.'s Lexus division also provides specifications.
But only two-thirds of Lexus dealers are constructing new buildings according to the Lexus specs.
Some are even coming up with their own novel designs.
In Louisville, Ky., for example, David Peterson has built a Lexus dealership with the showroom on the second floor.
Yet some dealers have turned down Infiniti or Lexus franchises because they were unwilling or unable to meet the design requirements.
Lee Seidman of Cleveland says Infiniti "was a bear on interiors" but at least let him retrofit an existing building -- without the stream.
Mr. Seidman says he turned down a Lexus franchise in part because "the building was gorgeous but very expensive."
To head off arguments, Infiniti offers dealers cash bonuses and low-interest construction loans.
Dictation Device's Saga Plays Back a Lesson
PRODUCTS DON'T have to be first to be winners.
That's the lesson offered through one case study featured in a design exhibit.
Dictaphone Corp. was caught off guard in 1974 when its main competitor, Lanier Office Products of Japan, introduced a microcassette dictation recorder half the size of standard cassette devices.
Blocked by patent protection from following suit, Dictaphone decided to go a step further and cut the cassette in half again -- down to the length of a paperclip.
By 1979, designers and engineers at Dictaphone, a Pitney Bowes subsidiary, had produced a working model of a "picocassette" recorder.
By 1982, however, the patent status of the Lanier microcassette had changed, permitting Dictaphone to develop its own competitive micro system, which it did.
Marketing and sales departments then urged abandonment of the pico project.
But others said pico should proceed.
Both were right.
Dictaphone went ahead and introduced the pico in 1985, but it hasn't sold well.
To date, says Emil Jachmann, a Dictaphone vice president, it has "broken even or shown a small loss."
Nevertheless, the device has been successful in other ways.
It helped Dictaphone attract better engineers, and it provided new technology for other company products.
The picocassette recorder also helped transform the company's reputation from follower to leading-edge innovator.
"It gave me great pride to see the inventor of the microcassette in Japan look at the pico and shake his head and say `unbelievable,'" says Mr. Jachmann.
Dictaphone's picocassette recorder is one of 13 case studies in the TRIAD Design Project, sponsored by the Design Management Institute of Boston and Harvard Business School.
The studies are on exhibit at Harvard this month and will travel to Chicago's Institute of Design and the University of California at Berkeley.
A Rake's Progress Means Branching Out
ONE DAY Carl Barrett of Mobile, Ala., was raking some sycamore leaves, but the rake kept riding up over the piles.
The harder he tried to push them into large piles, the closer he came to breaking the rake and straining his back.
So Mr. Barrett, then vice president of the Alabama Steamship Association, took a steel-toothed garden rake and taped it to the underside of a leaf rake about nine inches up.
His crude device worked: The lower teeth gathered the leaves into a pile, while the higher, harder teeth moved the top of the pile.
Now incorporated into a polypropylene rake, the four-inch prongs, or "wonderbars," also are supposed to aid in picking up leaves.
One customer, Donald Blaggs of Mobile, says the Barrett Rake allowed him to do his lawn in 2 1/2 hours, two hours less than usual.
But other rake makers have their doubts.
Richard Mason, president of Ames Co. in Parkersburg, W. Va., says the Barrett rake "makes sense," but it would be "tough" to explain to consumers.
John Stoner, marketing director for True Temper Corp., a subsidiary of Black & Decker, says people don't want to move a leaf pile.
"They either pick it up," he says, "or they start pulling from a fresh direction."
Odds and Ends
NO MORE STUBBED toes or bruised shins, promises Geste Corp. of Goshen, Ind., the designer of a bed support to replace traditional frames.
Four tubular steel "Bedfellows," each roughly in the shape of a "W," are attached to the bottom of the box spring in a recessed position. . . .
Nearly half of U.S. consumers say they'll pay up to 5% more for packaging that can be recycled or is biodegradable, according to a survey commissioned by the Michael Peters Group, a design consultant.
The Pentagon is a haunted house.
Living there for six years was really scary.
The ghosts of the past are everywhere: They are kept at bay only by feeding them vast quantities of our defense budget.
Some can be bought off relatively cheaply.
During the Korean War, Gen. Douglas MacArthur demanded and got, in addition to his U.N. command in Korea, his own naval command in Japan, NavforJapan.
Those obsolete operations cost less than $2 billion a year, and keep Mac's ghost quiet.
That's about all it costs to appease Adm. Erich Raeder's ghost.
In 1941, Raeder and the German navy threatened to attack the Panama Canal, so we created the Southern Command in Panama.
The Southern Command has grown even bigger since the war because Raeder's ghost sometimes runs through the E ring dressed like Gen. Noriega.
The Command's huge bureaucracy is needed to analyze whether leaders of coups against Gen. Noriega meet the War Powers Act's six points, Cap Weinberger's seven points, the Intelligence Committee's 32 points and Woodrow Wilson's 14 points necessary to justify U.S. support.
So far no one has.
The ghost of the Soviet brigade discovered in Cuba back in the '70s costs just a few hundred million: the price of the Caribbean Command in Key West that President Carter created in 1980.
The brigade hasn't been heard from since, but we keep the staff around just in case.
George Marshall's ghost is much more difficult to keep happy.
We keep a lot of shrines to him around the Pentagon: statues, busts, relics and such.
The Army headquarters on the third deck of the Pentagon used to burn a lot of incense to him, but the Navy headquarters on the fourth deck made them stop it.
You see, Marshall had this thing about the Navy and the Marines -- he wanted to make them part of the Army but Secretary of the Navy James Forrestal blocked him.
Now his ghost won't let up till it's done.
To keep him quiet we invent a new unified command every year or so run by the Army or the Air Force and put more of the Navy and Marines under it.
But we still hear him moaning at night because the Navy has a few ships left, and to satisfy him the Navy's sea lift forces were given to a new Air Force bureaucracy in Illinois, its space operations to another command in Colorado, the frogmen to a new Army bureaucracy in Fort Bragg, and the Navy's Indian Ocean and Persian Gulf forces to an Army bureaucracy in Florida.
Which brings up the worst and meanest ghost of all -- the ghost of the shah of Iran.
When the shah died, President Carter was so scared that the shah's ghost would blame him for shoving him out to make way for the ayatollah that he declared the Carter Doctrine.
Mr. Carter said he would go to war to stop anyone from trying to grab Iran.
But that ghost wouldn't settle for words, he wanted money and people -- lots.
So Mr. Carter formed three new Army divisions and gave them to a new bureaucracy in Tampa called the Rapid Deployment Force.
But that ghost wasn't fooled; he knew the RDF was neither rapid nor deployable nor a force -- even though it cost $8 billion or $10 billion a year.
After Mr. Carter was defeated in 1980, the shah's ghost claimed the credit and then went after President Reagan and Cap Weinberger.
I saw what he did to them firsthand.
It made my shoelaces dance with terror.
Why, he used to lay in wait for Cap; suddenly he'd leap from behind some statue of Marshall onto Cap's chest and grab him by the throat and choke him till he coughed up an additional $2 billion or so.
Cap added four more divisions to the Army, two active and two reserve; two carrier groups to the Navy; a division -- equivalent to the Marines; and the C-5B, KC-10, C-17 and a thousand tactical aircraft to the Air Force.
He bought $4 billion in prepositioning ships and $7 billion in ammo and equipment to fill them, and parked them at a new $6 billion base at Diego Garcia in the middle of the Indian Ocean.
He dedicated all these new forces to the Persian Gulf.
One night both Marshall's ghost and the shah's ghost together caught Cap and threw him to the ground.
Before they let him go he added a thousand bureaucrats to the RDF in Tampa and renamed it Central Command.
He gave those bureaucrats charge of all naval operations in the Persian Gulf and Indian Ocean.
Marshall figured it would be good training for those soldiers -- someday maybe they would get the whole Navy.
They had fun moving the carriers around, but it turned out that they had forgotten all about mine sweepers.
But the shah still kept leaping out at Cap, so Cap bought a hundred merchant ships more and $7 billion of loading barges, ramps, etc., in order that those seven new Army divisions and three Marine brigades could unload from all those new ships and aircraft and go to war in the Zagros mountains.
Then suddenly Ike's ghost came to visit and said, "What the hell are you doing planning for a land war in Asia 12,000 miles away?
We'd get our asses kicked."
Lucky for Cap, Ike was easygoing and soon went away, while the shah -- he kept coming back.
So the U.S. found itself paying about $2 billion in baksheesh to various Arab potentates for basing rights around the Indian Ocean.
We had great success in Somalia.
But then it turned out that President Siad Barrah was not at all a nice person and the Navy pointed out that the base he promised us in Berbera had silted up about a hundred years ago and anyway was 1,244 miles from the mouth of the Gulf.
(But who's counting.)
Still, Berbera was the best we could get, so we stay in bed with President Barrah.
All these reports about him committing genocide are probably exaggerated anyway.
But wouldn't you know, now that we are spending jillions of dollars, and have built those new divisions and new air wings, and have positioned all these ships and supplies to fight the Russians in Iran, the Russians seem to have lost interest in the whole subject.
Meanwhile, Congress is cutting huge chunks out of the rest of the defense budget.
Predictably, some Navy guys said: "Do we still need to keep all 18 Army divisions on active duty and all those extra land-based aircraft without bases and all those Army guys playing admiral in Tampa?
Couldn't we save $20 billion or $30 billion a year by shifting that stuff to the reserves?
And why not save the costs of a thousand bureaucrats by abolishing Central Command and putting responsibility for Gulf naval operations back where it belongs, afloat with the task force commander in the Gulf?
And where were all our handsomely paid Indian Ocean allies last year when our convoys were being attacked?"
Questions like that really stir up Marshall's ghost.
He appeared late one night in the bedroom of the new defense secretary, Dick Cheney.
Marshall came clanking in like Marley's ghost dragging those chains of brigades and air wings and links with Arab despots.
He wouldn't leave until Mr. Cheney promised to do whatever the Pentagon systems analysts told him.
So next day Mr. Cheney went out and did just that: He canceled the 600-ship Navy and cut back one carrier and 20 frigates.
Then he canceled production of the Navy's most important carrier aircraft, the F-14 and the A-6.
On the other hand, Mr. Cheney retained all those new land forces.
Marshall's ghost is satisfied for now, but he'll be back.
What with Halloween coming and bigger defense cuts looming, more and more Pentagon bureaucrats are crawling under their desks.
They know that they can hold off the ghosts only a little while longer by cutting carriers and ships.
Then the whole thing will start to collapse, just as it did in the 1970s, and the ghosts and banshees will be howling through the place turning people's hair white.
Gives me the willies just thinking about it.
Mr. Lehman, a Reagan Navy secretary, is a managing director of PaineWebber.
The metal and marble lobby of CenTrust Bank's headquarters is grander than your average savings and loan.
For one thing, there is an old master on the wall -- "Samuel Anointing David," a big baroque canvas painted by Mattia Preti, a 17th-century Neapolitan.
At the moment, however, the painting is a nagging reminder of the problems that have engulfed CenTrust and its flamboyant chairman and chief executive, David L. Paul.
In an international buying spree that began barely two years ago, Mr. Paul amassed a collection of about 30 pre-18th-century works, including the Preti, at a total cost of $28 million.
By midnight Oct. 6, all of the paintings were supposed to have been sold off, under orders from Florida's comptroller, whose office regulates the state's S&Ls.
CenTrust didn't meet the deadline.
The collection was at the heart of a grandiose plan Mr. Paul had in which the art was to do double duty -- as an investment for CenTrust and as decoration for the S&L's new office tower, designed by I.M. Pei.
The rub is that the $28 million was plucked from the funds of this federally insured institution even as CenTrust was losing money hand over fist.
Mr. Paul had no right to buy art for the S&L in the first place -- it isn't on the comptroller's "permissible" list -- without seeking a special dispensation, which he did not do.
Besides that, some of the paintings that were to grace the walls of CenTrust actually ended up hanging in the chairman's estate on La Gorce Isle off Miami Beach.
Last spring, the comptroller's office called a halt to Mr. Paul's fling, giving him six months to sell the paintings.
The acquisitions, officials said in a letter to Mr. Paul, were "unsafe, unsound and unauthorized."
So far, Mr. Paul has unloaded but three of his masterpieces, he won't say to whom.
The comptroller's office says it is "monitoring the situation."
Though the agency could remove Mr. Paul, it has no current intention to do that.
"It's not like selling Chevrolets," Mr. Paul says, as he takes a drag on a goldbanded St. Moritz cigarette.
"The last six months has established the quality of the collection.
There's no fire sale here."
Despite Mr. Paul's characteristic hauteur, the 50-year-old, chain-smoking dynamo is finding that getting CenTrust -- Florida's largest thrift institution -- out of its riskiest investments is much tougher than getting into them had been.
Paintings are just part of the picture.
Although Mr. Paul has pared a $1.35 billion junk-bond portfolio to less than $900 million since April, the high-yield debt market has plummeted.
Divesting itself of what is left, as is required of all thrift institutions by July 1994 under the new federal S&L bailout law, may well prove difficult.
And CenTrust has other problems.
Late last week federal regulators ordered the thrift institution to stop paying dividends on its preferred stock -- a move that suggests deep concern about an institution.
Mr. Paul has a plan to bring in $150 million by selling off 63 of CenTrust's 71 branches, but it has yet to be approved by regulators.
It is Mr. Paul's art venture, however, that has drawn the most attention from investors and regulators, not to mention galleries throughout the world.
Embittered shareholders (some of whom are suing) say the chairman and his collection epitomize the excesses of speculation that set off the national S&L crisis.
(CenTrust shares have fallen sharply in price from a high of $15.125 in 1986 to close yesterday at $2.875.)
Gallery directors, meanwhile, say Mr. Paul and others of his ilk have left an indelible mark on the art world -- and not for the better.
Collectors don't say "It's a van Gogh" anymore, laments Harry Brooks, the president of Wildenstein & Co., a New York gallery.
"They say, `Johnny Payson got $53 million for his, so certainly $10 million isn't too much for mine.'
The great collectors we depended on, such as Paul Mellon or Norton Simon, have stopped buying, and the new buyers are brilliant men who made money in the stock market or in takeovers and rushed into collecting. . . ."
Mr. Payson, an art dealer and collector, sold Vincent van Gogh's "Irises" at a Sotheby's auction in November 1987 to Australian businessman Alan Bond.
(Trouble is, Mr. Bond has yet to pay up, and until he does, Sotheby's has the painting under lock and key.)
When Mr. Paul moved in on the art market, he let it be known that virtually no piece was too costly to be considered by CenTrust.
He established his reputation as a freespender in January last year at Sotheby's auction of the Linda and Gerald Guterman collection in New York.
There, on one of his first shopping trips, Mr. Paul picked up several paintings at stunning prices.
He paid $2.2 million, for instance, for a still life by Jan Jansz. den Uyl that was expected to fetch perhaps $700,000.
The price paid was a record for the artist.
(Some 64% of items offered at the Guterman auction were sold, at an average price of $343,333.
The rest were withdrawn for lack of acceptable bids.)
Afterward, Mr. Paul is said by Mr. Guterman to have phoned Mr. Guterman, the New York developer selling the collection, and gloated.
"He says he `stole them,'" recalls Mr. Guterman.
"And he tells me, `If you want to see your paintings, you'll have to come to my house in Florida.'"
Mr. Paul denies phoning and gloating.
"It's just not true," he says.
Mr. Paul quickly became more aggressive in his collecting, with the help of George Wachter, a Sotheby's expert in old masters whom he met at an exhibition of the Guterman items.
Mr. Wachter, who became his principal adviser, searched galleries in London, Paris and Monaco.
And, according to one dealer, Mr. Wachter had a penchant for introducing Mr. Paul with the phrase: "He can buy anything."
Nicholas Hall, the president of the Colnaghi U.S.A. Ltd. gallery in New York, sold Mr. Paul "Abraham and Sarah in the Wilderness" by Giovanni Battista Tiepolo.
Mr. Hall says Mr. Paul "was known to spend a lot of money.
People were interested in seeing him, but it was recognized that the route was through Sotheby's and particularly George Wachter."
Mr. Paul thus developed a close, symbiotic relationship with Sotheby's.
Mr. Paul was eager to assemble a collection for the headquarters CenTrust has been moving into for the greater part of a year.
Sotheby's, the auction house founded in London 1744 and now under the umbrella of Sotheby's Holdings Inc., was hoping to stir up interest in old masters as it strove to build its U.S. business.
European dealers continued to dominate the action in old masters, which Sotheby's North America had lately been touting in this country.
For several months, there was optimism all around.
Last October, Mr. Paul paid out $12 million of CenTrust's cash -- plus a $1.2 million commission -- for "Portrait of a Man as Mars."
The painting, attributed to Flemish artist Peter Paul Rubens, was purchased privately through Sotheby's, not at auction.
In March 1989, just 15 months into his campaign, Mr. Paul was named by Art & Antiques magazine as one of the top 100 individual collectors in the U.S.
"An unknown quantity to most of the art world, Paul is no stranger to lavish spending," the magazine said, noting that he doesn't stop at paint on canvas but also spends big on art you can eat.
"He recently bid $30,000 at a Paris charity auction for a dinner cooked by six of the world's great chefs, but the final party cost closer to $100,000."
(Mr. Paul says it wasn't that high.)
The art collection might have come to rival the Medicis' had the Florida comptroller's office not got wind of Mr. Paul's aesthetic adventure.
In its letter to him, dated March 2 and shared with reporters, Alex Hager, the chief of the thrift-institution bureau in the comptroller's office, expressed puzzlement that the S&L could be so profligate when it had reported losses of more than $13 million in its two preceding quarters.
The state gave CenTrust 30 days to sell the Rubens.
The comptroller's office eventually extended the deadline to six months but broadened its demands, ordering that the "book value of the collection {be} reduced to zero."
In other words: Get rid of all the pictures.
The state obliquely noted that unsafe banking practices are grounds for removing an officer or director and closed with the admonition to Mr. Paul: "Govern yourself accordingly."
The state agency was particularly vexed to learn that the Rubens and a half-dozen other paintings listed among the bank's "furniture and fixtures," were actually hanging in the chairman's house.
Mr. Paul says that at one point he did indeed have eight or nine of the paintings at home and that the rest were in storage at Sotheby's.
He explains that he was "merely storing the paintings at home -- with some display -- because of the special dehumidified environment" required for their safekeeping, until CenTrust's new building was ready for them.
Still, the incident was embarrassing.
It came on the heels of a number of local newspaper articles suggesting that Mr. Paul has benefited handsomely from his association with CenTrust.
For instance, he got a $3 million loan from the S&L, negotiated at a below-market rate.
He owns 43% of CenTrust's shares.
Adding to Mr. Paul's problems, dealers (some with vested interests) insist that he, relying rather too heavily on Sotheby's advice, paid much too much for several pieces in the CenTrust collection.
The $12 million lavished on the Rubens, for example, was a record price for the artist and maybe twice its value, given a dispute among scholars about its provenance.
David Tunick, the president of David Tunick Inc., a New York gallery, says scholars question the authenticity of the Rubens.
It may have been painted instead by a Rubens associate.
"The feeling among many experts on the commercial side is that the price paid at the time was excessive in any event," Mr. Tunick says.
"It sounds like with the Rubens he got absolutely taken to the cleaners."
Victor Wiener, the executive director of the Appraisers Association of America, agrees that Mr. Paul paid very dearly for the Rubens and adds that getting rid of it any time soon for a similar sum would be quite a feat.
"It's not beyond credibility the Rubens will someday be worth $12 million, but whether it could be sold for that amount tomorrow remains to be seen."
Still, predicting is tricky.
"I'm forever dumbfounded by what I see making these high prices."
Jonathan H. Kress, the son of the painting's former owner, Mrs. Rush Kress, dismisses the price talk as "sour grapes."
Dealers contemptuous of the purchase price, he says, were themselves interested in buying the Rubens but lost out.
Mr. Paul, for his part, defends the Rubens price, saying a lot of the experts have never seen the thing itself.
"Most of them weren't even born the last time the painting was displayed publicly," he says.
Art prices are skyrocketing, but a good deal of legerdemain is involved in compiling statistics on sales.
Salomon Brothers Inc., the investment-banking firm, in its annual tally of investment returns, reported that old masters appreciated 51% in the year ended June 1, the greatest return of any of 13 assets it tracked.
(Impressionist and modern paintings, not tracked by Salomon, are ranked even higher at 74% by Sotheby's.)
Salomon, moreover, gets its data on art appreciation from Sotheby's, whose prices go up with clients like Mr. Paul in its thrall.
The percentages omit from consideration the many paintings that go begging at auction.
Art indexes track winners, not losers.
But art that has fallen sharply in value is rarely put up for sale.
Also, at any of Sotheby's auctions of old masters, roughly one-third to one-fifth of what is offered doesn't sell at any price.
It's not that there aren't any bids, but the bids don't meet the minimum "reserve" prices set by the sellers.
In January, the Preti painting that now hangs at CenTrust was expected to bring no more than $700,000 at auction until Mr. Paul came along with his $1.15 million.
Mr. Hall of the Colnaghi gallery says $1.15 million "would have been an impossible price for anyone to ask for a Preti four years ago."
But from his vantage point, it isn't that Mr. Paul, a customer of his too, overpaid for the work, "a gargantuan painting by an artist who is not a household word."
(The painting is 10 feet wide, seven feet high.)
Rather, "It just shows things have changed."
Mr. Paul boasts that he spotted bargains in old masters just before they took an upward turn.
"They went up 51% last year, and they'll do it again this year," he declares.
"They were a sleeper.
Everybody was out buying Monets."
Sotheby's vice president Diana Levitt says the auction house has been "assisting" Mr. Paul in selling the paintings.
And while Sotheby's chief rivals in the art world, private art dealers, "won't be happy to hear it," she adds, "a number of {the artworks} have already been sold, and at a substantial profit."
Mr. Paul claims to have sold three paintings, at more than a 10% profit.
That isn't 51%, and the claim isn't documented.
He furthermore denies that he relied too heavily on Sotheby's or Mr. Wachter.
Mr. Paul says he had not one but four advisers and that he never bid impulsively.
After all, he had the counsel of "curators from the most reputable museums in the world."
He says he expects to sell the collection -- including the controversial Rubens -- "carefully and prudently, just as it was put together."
But in art-world parlance, Mr. Paul's holdings are "burnt."
That is, he is being compelled to put them on the market too soon, and has already gotten offers that are less than he paid for some of the art works.
"After a few years, you can argue there has been natural appreciation," says Susan Theran, the publisher of Leonard's Annual Price Index of Art Auctions.
But quick turnover in artwork is "like pawning your jewelry -- you end up with 50%.
People hold out and try to get a bargain."
Sotheby's defends itself and Mr. Paul in the matter.
Mr. Wachter says Mr. Paul was a quick study who worked intensely and bought the best pictures available at the moment.
"On occasion, he paid a high price," Mr. Wachter concedes, but he says those who bid less and dropped out were dealers who would then have marked up the paintings to resell them at a profit to collectors.
Naomi Bernhard Levinson, a fine-arts appraiser at Bernhard Associates in San Francisco, considers it "definite conflict of interest for an auction house to both advise a client on purchases and to set price estimates on the paintings to be purchased."
Sotheby's, she says, is "wearing both hats."
"I can't see why there would be a conflict of interest," says Sotheby's Ms. Levitt.
"Estimates are based on the previous price of similar works sold at auction and current market conditions, and are not affected by any knowledge of who the potential buyer could be."
Frequently, clients express interest in paintings but don't end up bidding, she adds, "so we don't know who the potential buyer will be."
Mr. Paul, in selling off his paintings, is seeking at least a 15% return on the bank's investment, so as to prove that the venture was sound.
Mr. Paul says that he has feelers out over much of the globe and that potential buyers from as far away as Japan and Italy have examined the collection.
Because of the pressure on CenTrust to sell, dealers and collectors have been trying to get the paintings at bargain-basement prices.
But so far, Mr. Paul and his advisers are holding fast.
One dealer, Martin Zimet of French & Co. in New York, says he "would have loved to buy" a Jan Davids de Heem painting from the bank.
"I tried to steal the picture -- to buy it attractively -- and {Sotheby's} wouldn't do it.
They were protecting his interests."
Meanwhile, Mr. Paul and CenTrust executives are getting squeamish about opulence.
Mr. Paul has been characterized as "the Great Gatsby or something," complains Karen E. Brinkman, an executive vice president of CenTrust.
The media, she says, have distorted his personal life.
Mr. Paul nods in agreement.
"I don't think I have a life style that is, frankly, so flamboyant," he says.
But at just that moment, he is interrupted in his office by a servant in tuxedo who pours coffee from silver into a cup of china and dabs the brim with linen.
Mr. Paul says, yes, the ceiling in his executive suite is gold-leaf inlay.
The offices are done in hardwood and oriental rugs, leatherbound books and, of course, a $12 million Rubens.
But he implores that the splendor be played down.
"Don't say it's a gold ceiling.
Just say the offices are tastefully appointed," he says.
"Otherwise, the regulators will take it for decadence, and nowadays everything's got to be pristine."
Figures don't include taxes or transaction costs.
Companies listed below reported quarterly profit substantially different from the average of analysts' estimates.
The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share.
Estimated and actual results involving losses are omitted.
The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days.
Otherwise, actual profit is compared with the 300-day estimate.
{During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.}
CREATIVE ACCOUNTING, mostly by conglomerates, forced CPAs to change their way of setting standards to be followed by corporations reporting financial results, standards that had become all too flexible.
The new Financial Accounting Standards Board (FASB) was created in 1972 to replace the Accounting Principles Board of the American Institute of Certified Public Accountants.
All of the former board's members were CPAs, provoking conflict-of-interest criticism because they were writing rules while handling clients' books at the same time.
The new board's seven-member structure kept four CPAs, but the others were from industry and academia.
Francis M. Wheat, a former Securities and Exchange Commission member, headed the panel that had studied the issues for a year and proposed the FASB on March 30, 1972.
The former board had produced "21 opinions and 1,000 critics" in its 12-year life, its chairman had conceded.
The climate was right for the new FASB.
In the late 1960s some CPAs failed to correct such abuses as clients picking permissive rules that hyped earnings and stock prices.
And in November 1970 Congress had passed a special act to overrule one board rule.
Also, James Needham, an SEC commissioner, in April 1972 had warned that the industry might face a "federal agency writing accounting rules" if they rejected the FASB idea.
Keepers of the books, dubbed "figure filberts," loathed the threat.
The FASB had its initial meeting on March 28, 1973.
On Dec. 13, 1973, it issued its first rule; it required companies to disclose foreign currency translations in U.S. dollars.
The FASB since then has issued 102 rules, and some still rile industry.
Since late 1987, for example, it has put off a rule dealing with deferred income taxes because of the continuing controversy over the issue.
Amcast Industrial Corp. said it plans to repurchase 500,000 shares, or about 7% of its shares outstanding, in open market transactions.
The metal products concern currently has 7.2 million common shares outstanding.
Amcast previously had said it planned to repurchase shares, but didn't disclose when or how many shares it intended to buy back.
The company named Dillon Read & Co. as its exclusive agent for the stock buy-back program.
A seat on the Chicago Board of Trade was sold for $390,000, down $5,000 from the previous sale last Tuesday.
Seats currently are quoted at $353,500 bid, $405,000 asked.
The record price for a full membership on the exchange is $550,000, set Aug. 31, 1987.
An associate member seat was sold for $228,000, up $8,000 from the previous sale Oct. 4.
Associate member seats currently are quoted at $225,000 bid, $256,000 asked.
The record price for associate membership is $275,000, set Aug. 30, 1988.
CAE Industries Ltd. said its Link Flight Simulation division was awarded a contract by the U.S. Army for two helicopter simulators, which the company valued at as much as 37 million Canadian dollars (US$31.5 million).
CAE said the fixed price for the first of the AH-64 Apache combat mission simulators is C$19 million.
It is scheduled for delivery in late 1991.
The price of the second simulator ranges between C$16.4 million and C$18 million, CAE said, depending on when the Army exercises its option.
CAE is a Toronto-based maker of commercial and military aircraft simulators and training equipment.
Helionetics Inc. said it agreed to team with a unit of Minneapolis-based Honeywell Inc. to provide power amplifiers for a new military sonar system being proposed by Honeywell.
Total value of the contract could be $100 million, Helionetics said, and work on the project would be about evenly divided.
As previously reported, Helionetics emerged from Chapter 11 bankruptcy-law protection in February.
This Los Angeles company and its Union Federal Savings Bank subsidiary said more than 99% of their 7 1/4% convertible subordinated debentures due 2011 were tendered for conversion into UnionFed common stock.
The conversion increased total equity capital by about $38.5 million to a total of $156.8 million.
Union Federal, a federally insured savings bank, has $2.4 billion in assets.
David D. Lung was appointed president and chief operating officer of this maker of building materials for manufactured homes and recreational vehicles.
As president, Mr. Lung, 42 years old, succeeds his father, Mervin D. Lung, 66, who founded the company in 1959.
Mervin Lung remains chairman and chief executive officer.
David Lung has been with Patrick since 1970, and has served as vice president for administration and purchasing since 1987.
General Dynamics Services Co., a unit of General Dynamics Corp., won a $48.2 million Army contract to establish maintenance facilities for tracked vehicles in Pakistan.
Grumman Corp. was given a $15 million Navy contract for aircraft-electronics improvements.
Hughes Aircraft Co., a unit of General Motors Corp., got a $10.3 million Air Force contract for airborne-radar equipment.
Reynolds Metals Co. said third-quarter net income dropped nearly 10% to $123.7 million, or $2.10 a share, from $137.2 million, or $2.56 a share, a year earlier.
The latest earnings reflect an increase of about 5.5 million in common shares outstanding.
Revenue rose 3% to $1.52 billion from $1.48 billion.
Reynolds is the third big aluminum company since Friday to report disappointing earnings.
The No. 1 domestic aluminum producer, Aluminum Co. of America, Friday said its earnings fell 3.2% to $219 million, or $2.46 a share.
And Alcan Aluminium Ltd. yesterday reported net income slid 30% to $180 million, or 77 cents a share, from $258 million, or $1.07 a share.
Analysts on average had been expecting about $2.70 for Alcoa and $1 for Alcan.
"It's a good indication that level of profitability has peaked for the industry," says Vahid Fathi, metals analyst with Prescott, Ball & Turben Inc., who had estimated Reynolds would earn about $2.35 a share.
The nation's No. 2 aluminum company said earnings were hurt by lower prices for certain fabricated aluminum products, which typically follow price fluctuations of primary ingots.
The base metal price has dropped 30.3% from a year earlier to 78 cents a pound.
Much of the price decline has been blamed on a slowing economy and the third quarter is typically the industry's slowest period.
But William O. Bourke, chairman and chief executive officer, said the ingot price "appears to have bottomed out."
He said shipments are continuing at a "healthy" pace and the company has no excess inventory.
Aluminum shipments of 329,600 metric tons were nearly equal to the year-earlier period, the company said.
Nevertheless, the company said that in the latest quarter there were increased material and labor costs, including a new employee profit-sharing plan.
In composite trading on the New York Stock Exchange, Reynolds closed at $55.375, up $1.25.
No strikeout, but certainly no home run.
That's how the stock-picking game is shaping up for the months ahead, according to money managers and a few brokers.
Yesterday's 88-point recovery from Friday's megadrop in the Dow Jones industrials had many brokerage houses proclaiming that stocks are a good bargain again.
But quite a few money managers aren't buying it.
Weakening corporate earnings, they say, are no prescription for a bull market.
"The stock market ain't going to do much of anything" for a while, says John Neff of Wellington Management, who runs the $8.3 billion Windsor Fund.
He suspects that Friday's market decline may have a second leg, perhaps a 10% to 15% drop later on.
Mr. Neff says the stock market has lost some powerful driving forces, namely earnings growth and the "LBO sweepstakes" -- buy-out fever that induced investors to bid up whole groups of stocks, such as media and airlines.
After sitting with 20% of his fund in cash before Friday's sell-off, Mr. Neff says he bought "a narrow list of stocks" yesterday.
With flat corporate profits on the horizon for 1990, money managers say price-earnings multiples that look cheap today might go on being cheap for a long time.
"This is not a grossly overvalued market, but it's not cheap either," says George Collins, president of the mutual fund company T. Rowe Price Associates in Baltimore.
According to Institutional Brokers Estimate System, Wall Street market strategists see only a 2.4% jump in company profits in 1990 -- unlike in 1987, when profits a year out looked good (they did soar 36% in 1988).
Bulls say the market is an incredible bargain, priced at only about 12 times estimated 1989 earnings for stocks in the Standard & Poor's 500 index.
Before the 1987 crash, the P/E was more than 20.
The common view, says Abby Cohen, strategist for Drexel Burnham Lambert, is that there will be "mild economic growth, modest profit expansion, and things are going to be hunky-dory.
Our view is that we may see a profit decline."
Some think investors should sell into rallies.
The market "is going to wind down," says Gerald W. Perritt, a Chicago money manager.
"Things are a little less overpriced" after Friday's jolt in the market.
He expects stocks to decline an additional 5% to 30%, with the Dow perhaps bottoming out between 2000 and 2100 "between now and June."
After Friday's decline, Mr. Perritt's firm ran statistical tests on 100 high-quality stocks, using old-fashioned value criteria devised by Benjamin Graham, an analyst and author in the 1930s and 1940s who is widely considered to be the father of modern securities analysis.
He found 85 still overvalued and 15 fairly valued.
Nicholas Parks, a New York money manager, expects the market to decline about 15%.
"I've been two-thirds in cash since July, and I continue to think that having a defensive position is appropriate," he says.
Companies that piled on debt in leveraged buy-outs during the past two years "will continue to surface as business problems."
"Generalizations about value aren't useful," says New York money manager John LeFrere of Delta Capital Management.
For instance, he says, International Business Machines and Unisys might look cheap, but investors might continue to do better with stocks like Walt Disney, Procter & Gamble and Coca-Cola, strong performers in recent years.
Money manager Robert Ross, head of Duncan Ross Associates Ltd. in Vancouver, British Columbia, says stocks would have to fall 15% to 20% before they are competitive with less risky investment alternatives.
Fredric Russell, a money manager in Tulsa, Okla., says Friday's cave-in "is going to have more of a permanent impact on the psyche of many investors than Wall Street would want to admit."
There are still bulls out there.
"I still think we will have a 3000 Dow, whether it's six months or 12 months from now I don't know," says David Dreman, managing partner of Dreman Value Management in New York.
"We're doing a little buying" in some stocks "that have really been smashed down."
Many brokerage house officials also are optimistic.
Yesterday, Goldman Sachs, Merrill Lynch and Dean Witter all increased the proportion of assets they recommend investors commit to stocks.
Dean Witter now recommends 85%, Goldman 65% and Merrill Lynch 50%.
Some investors say Friday's sell-off was a good thing, because it deflated a lot of crazy takeover speculation.
"It was a healthy cleansing," says Michael Holland, who runs Salomon Brothers Asset Management in New York.
From here out, these investors see a return to old-fashioned investing, based on a company's ability to show profit growth.
"The fundamentals are pretty strong," Mr. Dreman says.
"I don't see this as a bear market at all.
It's a recognition that there was much too much fluff in the LBO market."
Friday's big fall was "just a blunder by the stock market," says John Connolly, chief strategist for Dean Witter.
"It was an overreaction to an event {the failure of a management and union group to get bank financing for a takeover of UAL} that doesn't mean that much to lots of stocks."
Many investors have nagging worries, however.
Newspapers are full of headlines about companies defaulting on their debts and banks writing off real estate loans.
That hurts investors' confidence in the economy and stocks.
Not even all the brokerage firms see clear sailing ahead.
"Disappointing profits are likely to get worse in the next two quarters," says Mary Farrell, a market strategist at PaineWebber.
She thinks the market could drop about 10% in the next few months, then recover and go higher.
Companies with steady earnings growth could do well, she says, while others with high debt or poor earnings could see their shares decline far more than 10%.
The turmoil on Wall Street may benefit some retailers attempting to lead leveraged buy-outs of their specialty and department-store chains, investment bankers and retailers said.
Managers at five chains have said in recent weeks that they intend to bid for their companies.
The chains include Bloomingdale's, owned by Campeau Corp., Toronto; Saks Fifth Avenue and Marshall Field's, owned by B.A.T Industries PLC, London; and B. Altman & Co. and Sakowitz Inc., owned by Hooker Corp., which is now being managed by a court-appointed provisional liquidator.
Hooker is based in Sydney, Australia.
The combination of so many chains available for sale, the recent failures of such retailing LBO's as Miller & Rhoads Inc. and declining investor confidence will drive down prices, retailing observers said.
"The pricing will become more realistic, which should help management," said Bruce Rosenthal, a New York investment banker with Nathan S. Jonas & Co.
"Investors aren't going to be throwing money at any of the proposed LBOs, but doing deals on the basis of ridiculous assumptions never made sense, either."
Earlier this year, bankers and other investors were willing to provide financing because they assumed there would be major gains in both profitability and sales, Mr. Rosenthal added.
Those days are over now, he believes.
"Competition from third parties who have cash and are prepared to buy has always existed and will continue," added Mr. Rosenthal.
"But when prices were crazy, it was even harder to do an LBO.
Bankers believed in the greater-fool theory that says somebody else is always willing to pay more.
This is no longer true today."
At Saks Fifth Avenue, Paul Leblang, senior vice president, marketing, agreed that lower prices will help his management team in their proposed LBO.
"Having to take on less debt would certainly be an advantage," said Mr. Leblang.
"It would also help us in our search for equity partners.
To make an LBO work, now we are going to need more than just junk bonds.
" None believe the proposed management LBOs will be easy to complete, especially at B. Altman & Co., which is under Chapter 11 bankruptcy protection.
Not only could the Wall Street gyrations damp Christmas sales if consumers lose confidence in the economy, but potential junk-bond buyers are sure to demand even stronger covenants and greater management equity participation.
Further, many institutions today holding troubled retailers' debt securities will be reticent to consider additional retailing investments.
"It's called bad money driving out good money," said one retailing observer.
"Institutions that usually buy retail paper have to be more concerned."
However, the lower prices these retail chains are now expected to bring should make it easier for managers to raise the necessary capital and pay back the resulting debt.
In addition, the fall selling season has generally been a good one, especially for those retailers dependent on apparel sales for the majority of their revenues.
"What's encouraging about this is that retail chains will be sold on the basis of their sales and earnings, not liquidation values," said Joseph E. Brooks, chairman and chief executive officer of Ann Taylor Inc., a specialty chain.
"Retailers who had good track records of producing profits will have a better chance to buy back their companies."
Still, most retailing observers expect that all the proposed retailing LBOs will depend partly on the sale of junk bonds, a market already in tumult, in part because of concerns associated with bonds issued by the Federated and Allied units of Campeau.
"Prices for retail chains are lower today than they were last week, which will help management," said Gilbert Harrison, chairman of Financo Inc., an investment-banking firm specializing in retailing acquisitions.
"But the hurdle of financing still has to be resolved.
Potential bondholders will either look for greater equity participation on behalf of management, or insist the equity component of the deals be substantially greater than in the past.
Sony Corp. won a pretrial order blocking U.S. sales of Justin Products Inc.'s "My Own" line of portable audio players for children.
Judge John E. Sprizzo issued the order in Manhattan federal court, where Sony has accused the tiny company of illegally knocking off the "My First Sony" line.
The judge held that the combination of colors used for the Sony products is distinctive and subject to protection under New York state law, rather than federal law.
The legal fight was the subject of a Wall Street Journal story yesterday.
Justin's attorney, Charles E. Baxley, said Justin would ask an appeals court to set aside the order temporarily, pending an expedited appeal.
He also repeated Justin's denial of Sony's charges.
"Their likelihood of reversing us is very slim," said Lewis H. Eslinger, Sony's attorney, who said he doubts Justin will go ahead with a trial.
CONTINENTAL MORTGAGE & EQUITY TRUST said it will resume dividend payments with a 10-cent-a-share payout on Nov. 6 to shares of record Oct. 25.
The Dallas real estate investment trust last paid a dividend on Dec. 31, 1987, when shareholders received $1 a share.
Despite continuing troubles with problem assets and nonperforming loans, the trust said it expects to be able to maintain or increase the rate of distributions because of operations of joint-venture properties.
A federal appeals court struck down a natural-gas regulation that had prevented pipeline companies from passing to customers part of $1 billion in costs from controversial "take-or-pay" contracts.
The court, in a 3-0 ruling, threw out a deadline set by the Federal Energy Regulatory Commission for settling old contract disputes over gas that the pipeline companies reserved but didn't use.
FERC's regulation had given pipelines until March 31, 1989, to pass on to customers as much as 50% of the costs of buying out their broken contracts, which were made with producers when gas prices were high and supplies short.
A majority of old contracts were renegotiated by the deadline and settled at steep discounts.
But pipeline companies estimate they still face $2.4 billion in liabilities from unresolved disputes, including $1 billion they fear they won't be able to pass on to customers.
According to industry lawyers, the ruling gives pipeline companies an important second chance to resolve remaining disputes and take advantage of the cost-sharing mechanism.
The court left open whether FERC could reimpose a new deadline later.
The court, agreeing with pipeline companies, found the March 31 deadline was "arbitrary and capricious" and "highly prejudicial to the bargaining power of pipelines" that were forced to negotiate settlement of the old take-or-pay contracts to meet the deadline.
A report last month by the Interstate Natural Gas Association of America found that pipelines' settlement costs had jumped in the three months before the deadline to 39 cents on the dollar, from 22 cents on the dollar in 1988.
The court ordered FERC to justify within 60 days not only its cost-sharing deadline, but other major elements of its proposed regulation for introducing more competition into natural-gas transportation.
The court also questioned a crediting mechanism that could be used to resolve take-or-pay liabilities.
The complex regulation, known in the industry as Order 500, has been hotly contested by all sides, including natural-gas producers, pipelines, local distribution companies and consumers.
The court's decision would allow FERC to change some of its provisions, but ensures it will be reviewed again quickly by the court.
MEDUSA Corp. said it voluntarily prepaid $7 million on its original $75 million term loan, bringing the total debt reduction for the year to $18 million.
After the payment, the Cleveland company owes $57 million on the loan.
The cement producer said the payment was made from excess cash flow.
NATIONAL INCOME REALTY TRUST said it will resume dividend payments with a 12-cent-a-share dividend to be paid Nov. 6 to shares of record Oct. 25.
The mortgage and equity real estate investment trust last paid a dividend on Aug. 1, 1988, when holders received 75 cents a share.
Despite continuing troubles with problem properties and nonperforming loans, the Dallas trust said it has rebuilt reserves, abandoned properties with little potential and experienced improved operating results from joint ventures.
MLX Corp. said it reached a preliminary agreement with senior lenders to its refrigeration and air-conditioning group to restructure the $188.5 million of credit facilities the lenders provide to the group.
MLX, which also makes aircraft and heavy-duty truck parts, said the debt was accumulated during its acquisition of nine businesses that make up the group, the biggest portion of which was related to the 1986 purchase of a Hillman Co. unit.
Among other things, the restructured facilities will substantially reduce the group's required amortization of the term loan portion of the credit facilities through September 1992, MLX said.
Certain details of the restructured facilities remain to be negotiated.
The agreement is subject to completion of a definitive amendment and appropriate approvals.
William P. Panny, MLX chairman and chief executive, said the pact "will provide MLX with the additional time and flexibility necessary to complete the restructuring of the company's capital structure."
MLX has filed a registration statement with the Securities and Exchange Commission covering a proposed offering of $120 million in long-term senior subordinated notes and warrants.
Dow Jones & Co. said it acquired a 15% interest in DataTimes Corp., a subsidiary of Oklahoma Publishing Co., Oklahoma City, that provides electronic research services.
Terms weren't disclosed.
Customers of either DataTimes or Dow Jones News/Retrieval are able to access the information on both services.
Dow Jones is the publisher of The Wall Street Journal.
Flowers Industries Inc. said it will report a charge of eight cents to 10 cents a share for its fiscal first quarter, ended Sept. 23, from the sale of two bakeries, in High Point, N.C., and Gadsden, Ala.
The convenience-food company said it sold the bakeries to Mills Family Bakery for an undisclosed amount.
It said the sales were part of a 1983 Federal Trade Commission Consent Order.
A year earlier, Flowers had fiscal first-quarter net income of $8 million, or 23 cents a share, on revenue of $170.4 million.
Raw-steel production by the nation's mills decreased 0.8% last week to 1,828,000 tons from 1,843,000 tons the previous week, the American Iron and Steel Institute said.
Last week's output rose 1.4% from the 1,802,000 tons produced a year earlier.
The industry used 82.2% of its capability last week, compared with 82.8% the previous week and 84% a year ago.
The capability utilization rate is a calculation designed to indicate at what percent of its production capability the industry is operating in a given week.
Selwyn B. Kossuth was named executive director of the commission, effective early November.
Mr. Kossuth, 52 years old, succeeds Ermanno Pascutto, 36, who resigned to join Hong Kong's Securities and Futures Commission.
Mr. Kossuth was vice president and director, corporate finance, of Nesbitt Thomson Deacon Inc., a Toronto investment dealer.
Dun & Bradstreet Corp.'s Market Data Retrieval unit said it acquired School and College Construction Reports service from Intelligence for Education Inc.
Terms weren't disclosed.
The service supplies weekly reports on school and college construction plans.
Market Data Retrieval is a compiler of educational information and provides related services.
Closely held Intelligence in Education, of Larchmont, N.Y., is an educational publisher and consultant.
A battle is raging in Venice over plans to have the 1,200-year-old Italian city be the site for a universal exposition in 2000.
The plans include a subway system, a congress center, floating trees, fanciful fountains -- and as many as 60,000 additional tourists a day.
Expo enthusiasts argue that holding the fair would attract businesses, create jobs and help renovate abandoned sections of town.
But opponents fear overcrowding.
"This city already has too many tourists, and it can't hold them all," says Pierluigi Beggiato, the president of the Venice hoteliers association.
About 40 Italian businesses, including Fiat S.p.A. and Ing. C. Olivetti & Co., have formed a consortium to lobby for holding the expo in Venice.
Three gambling casinos have opened in Poland.
The three establishments -- two in Warsaw and one in Krakow -- accept only foreign currency and are joint ventures between Polish firms and Western companies.
Not all Poles are pleased.
"What do we want casinos for when we haven't got anything in the shops?" one housewife asked.
But Bogdan Gumkowski, who runs the casino at Warsaw's Marriott Hotel, said the ventures would help Poland service its $39 billion foreign debt by pouring dollars into the state firms in the joint ventures -- the LOT airline and Orbis tourist organization.
Algeria plans to increase natural-gas sales to Europe and the U.S.
According to the Middle East Economic Survey, the North African nation is holding talks with Italy for adding a fourth pipe to a section of the Trans-Mediterranean pipeline, expanding capacity by up to six billion cubic meters a year from 12.5 billion.
Algeria also wants to build a pipeline through Morocco and across the Strait of Gibraltar to supply Spain, France and West Germany with up to 15 billion cubic meters a year by the late 1990s.
South Africa's National Union of Mineworkers agreed to suspend the strike by diamond workers and resume negotiations with De Beers Consolidated Mines Ltd. over their wage dispute, De Beers said.
It also said the union had agreed to meet the company for further talks tomorrow.
The strike at five De Beers mines began last Thursday, with 9,500 out of a total 10,000 NUM members employed on De Beers mines participating, according to the union, while De Beers said there were 7,800 participants.
The union has demanded a 37.6% increase in the minimum wage while De Beers's final offer was an increase of 17%.
A 35-nation environmental conference opened in Sofia, Bulgaria.
The gathering is expected to focus on curbing the fouling of rivers and lakes, limiting damage from industrial accidents and improving the handling of harmful chemicals.
West German Environment Minister Klaus Toepfer said Bonn is convinced of the need for cooperation, "especially with our neighbors in the East, because we are directly affected by their ecological progress or lack of it."
The U.S. and Canada joined every European country except Albania at the meeting.
The Swedish publishers of a new Estonian-language newspaper rushed an extra edition across the Baltic on Oct. 10 after the first run sold out in one day.
Editor Hasse Olsson said plans had called for 7,000 copies of the monthly Are Paev (Business Paper) to be sold at newsstands and an additional 3,000 promotion issues to be sent by direct mail.
He said 13,000 more copies were sent to Estonia because of strong sales.
The Swedish publishing company Bonniers owns 51% of Are Paev, and the Estonian management company Minor owns 49%.
Angel Gurria, Mexico's top debt negotiator, said the country's creditor banks are responding positively to Mexico's debt-reduction package.
Mr. Gurria's optimism contrasts with some bankers' views that the deal may require a lot of arm twisting by the U.S. Treasury in order to succeed.
Mr. Gurria, Mexico's under-secretary of the ministry of finance, met yesterday with European bankers in London, at the half-way point on a so-called road show to market the package around the world.
An increasing number of banks appear to be considering the option under the deal whereby they can swap their Mexican loans for 30-year bonds with a face value discounted by 35%, Mr. Gurria said.
The other two options consist of swapping loans for bonds with 6.25% interest rates, or providing fresh loans.
The accord, which covers $52.7 billion of Mexico's medium- and long-term debt, is expected to go into effect in early
China's top film actress, Liu Xiaoqing, paid $4,555 in back taxes and fines in Shandong province, the People's Daily reported.
The amount is equal to about 30 years earnings for the average peasant, who makes $145 a year. . . .
China will spend $9.45 million for urgent maintenance on Tibet's Potala Palace, former home of the Dalai Lama, the China News Service said.
The Dalai Lama, who was just awarded the Nobel Peace Prize, lives in exile in India.
George W. Koch, 63 years old, president and chief executive officer of Grocery Manufacturers of America Inc., was elected a director of this maker of spices, seasonings and specialty foods, succeeding Erskin N. White Jr., 65, who resigned.
American Business Computer Corp. said it privately placed 1,035,000 common shares at $2.50 a share.
The placement was made through Gray Seifert Securities, New York, to institutional investors.
Proceeds will be used to commercialize recently patented technology and support the company's international expansion.
The company develops and markets products for the food service industry.
THE R.H. MACY & CO. department-store chain isn't for sale.
In yesterday's edition, it was incorrectly included with a list of New York chains up for sale.
Korean car exports have slid about 40% so far this year, but auto makers here aren't panicking.
They are enjoying domestic sales that are more than making up for lost overseas sales.
South Korean consumers are expected to buy almost 500,000 passenger cars this year, up 60% from 1988.
In fact, some auto executives suggest that slackened demand for their cars in the U.S. and Canada is a blessing; otherwise they wouldn't be able to keep up with demand in the more profitable local market.
"We are very lucky to easily change an export loss to domestic plus," says Hong Tu Pyo, managing director of domestic marketing for Hyundai Motor Co.
As it is, waiting lists of a month aren't unusual for popular models.
Demand is so strong that all of the domestic makers -- Hyundai, Kia Motors Corp., Daewoo Motor Co. and even upstart SsangYong Motor Co. -- plan to build more factories.
Industry analysts predict that by 1995, South Korea will be building three million cars a year -- about half of that for export.
It's an optimistic move in a industry already facing world-wide overcapacity.
But South Korean auto makers are confident that the export market will bounce back and that demand in Korea will stay strong.
Currently only one in 38 South Koreans owns a car, up from one in 200 a decade ago.
"In the year 2000 it will be one car per family.
At that point domestic sales will slow down," says Kim Yoon Kwon, director of marketing for Daewoo Motor.
The reason for the tremendous demand is simple: South Koreans suddenly have a lot more money.
"We never thought we'd own a car," says Kwang Ok Kyong, who just bought a Daewoo LeMans on a five-year loan.
She and her husband started a small printing business and need the car for work as well as for weekend jaunts.
Pay raises of 60% over the past three years have given many South Koreans the money to enjoy the things they were supplying the rest of the world.
The success of newcomer SsangYong Motor shows the strength of the auto market and its growing diversity.
A part of the construction-oriented conglomerate SsangYong Group, it took over the dying Dong-A Motor Co. in 1986.
SsangYong began making variations of the Jeep-like "Korando" vehicle.
(Dong-A had had a technology agreement with Jeep maker American Motors Corp., now a part of Chrysler Corp.)
The most popular style is the stretched "Family," which resembles a Ford Bronco or Chevy Blazer.
The four-wheel-drive vehicles start at $15,000; a Family can cost over $25,000.
SsangYong, which has only about 3% of the domestic market, will sell about 18,000 of its models this year, twice as many as last year.
It sees sales rising 45% to 26,000 units next year.
The company plans to expand plant capacity 50% by 1991.
By then it also hopes to begin producing a passenger car based on the Volvo 240 and selling for about $20,000.
Hyundai and Daewoo seem unconcerned about the SsangYong threat, but Kia, the scrappy No.3 auto maker, is selling four-wheel-drive vehicles through its Asia unit.
It plans to sell 1,700 units in 1989.
Kia, the only Korean car maker that has seen its overseas sales grow in 1989, aims at Korea's common man.
Its advantage has been the peppy little Pride, sold as the Ford Festiva in the U.S.
At 3.8 million won, or $5,700, the econobox is the lowest-priced car in South Korea.
Along with two larger models, the company claims 18% of the domestic market.
Ford Motor Co. and Japan's Mazda Motor Corp. have equity interests in Kia.
Kia is the most aggressive of the Korean Big Three in offering financing.
Loans for as long as five years make the cars very accessible, with monthly payments as low as 80,000 won, or $120.
Daewoo Motor, a 50-50 joint venture with General Motors Corp. and the Daewoo Group conglomerate, is the only auto maker that appears to be hurting.
Shipments of its Lemans to GM's Pontiac division are off about 65% from a year ago, versus a 44% decline for Hyundai and an 18% increase for Kia.
Moreover, Daewoo's domestic sales have grown half as fast as sales of its rivals.
The big problem for Daewoo, which holds about 21% of the market, is the long series of labor disruptions it suffered this year.
But Daewoo is expanding too.
In fact, a sister company, Daewoo Shipbuilding and Heavy Machinery, plans to build 240,000 minicars by the mid-1990s.
Hyundai, the Korean market leader with a 58% share, also plans to jump into minicars at the same time.
It has a similar project for 200,000 cars a year.
Kia is reportedly also considering such a plan.
Even giant Samsung Group is rumored in the Korean press to be considering getting into the auto-making business; a company spokesman had no comment.
Robert P. Bulseco, 44 years old, was named president and chief administrative officer of this regional commercial bank.
Both posts had been vacant.
Robert Robie, 51, was named to the new positions of vice chairman and chief credit officer.
Many skittish mutual fund investors picked up the phone yesterday, but decided not to cash in their chips after all.
As the stock market bounced back, withdrawals of money from stock funds amounted to a mere trickle compared with Black Monday, when investors dumped $2.3 billion, or about 2% of stock-fund assets.
Fidelity Investments, the nation's largest fund company, said phone volume was more than double its typical level, but still half that of Oct. 19, 1987.
Net outflows from Fidelity's stock funds stood at less than $300 million, or below 15% of the $2 billion cash position of the firm's stock portfolios.
Much of the money was switched into the firm's money market funds.
Outflows since the close of trading Friday remain below one-third their level of two years ago, Fidelity said.
Other mutual fund companies reported even lighter withdrawal requests.
And some investors at Fidelity and elsewhere even began buying stock funds during the day.
"Two years ago, there was a lot of redemption activity and trouble with people getting through on the phone," said Kathryn McGrath, head of the investment management division of the Securities and Exchange Commission.
This time, "We don't have that at all."
Of course, the relative calm could be jolted if the market plunges again.
And any strong surge in redemptions could force some funds to dump stocks to raise cash, as some did during Black Monday.
But funds generally are better prepared this time around.
As a group, their cash position of 10.2% of assets in August -- the latest figure available -- is 14% higher than two years earlier.
Many fund managers have boosted their cash levels in recent weeks.
The biggest flurry of investor activity came early in the day.
Vanguard Group Inc. saw heavy exchanges from stock funds into money market funds after the telephone lines opened at 8:30 a.m.
"In the first hour, the real nervous folks came along," a spokesman said.
"But the horrendous pace of call volume in the first half-hour slowed considerably."
At Scudder, Stevens & Clark Inc., phone calls came in at 40% more than the normal pace through early afternoon.
Most of that increase came in the first hour after the phone lines opened at 8 a.m.
As stocks rose, in fact, some investors changed course and reversed their sell orders.
Many funds allow investors to void orders before the close of trading.
At Scudder and at the smaller Ivy funds group in Hingham, Mass., for instance, some shareholders called early in the morning to switch money from stock funds to money market funds, but later called back to reverse the switches.
Because mutual fund trades don't take effect until the market close -- in this case, at 4 p.m. -- these shareholders effectively stayed put.
At Fidelity's office in downtown Boston, Gerald Sherman walked in shortly after 7:30 a.m. and placed an order to switch his retirement accounts out of three stock funds and into a money market fund.
But by 3:15 p.m., with the market comfortably ahead for the day, Mr. Sherman was preparing to undo his switch.
"It's a nice feeling to know that things stabilized," said Mr. Sherman, the 51-year-old co-owner of a discount department store.
But some investors continued to switch out of high-risk, high-yield junk funds despite yesterday's rebound from that market's recent price declines.
Shareholders have been steadily bailing out of several big junk funds the past several weeks as the $200 billion market was jolted by a cash crunch at Campeau Corp. and steadily declining prices.
Much of the money has been switched into money market funds, fund executives say.
Instead of selling bonds to meet redemptions, however, some funds have borrowed from banks to meet withdrawal requests.
This avoids knocking down prices further.
The $1.1 billion T. Rowe Price High Yield Fund was among the funds that borrowed during the Campeau crisis, says George J. Collins, president of T. Rowe Price Associates Inc.
That way, Mr. Collins says, "We didn't have to sell securities in a sloppy market."
When the market stabilized, he added, the firm sold the bonds and quickly paid the loans back.
Tom Herman contributed to this article.
Amcore Financial Inc. said it agreed to acquire Central of Illinois Inc. in a stock swap.
Shareholders of Central, a bank holding company based in Sterling, Ill., will receive Amcore stock equal to 10 times Central's 1989 earnings, Amcore said.
For the first nine months of 1989, Central earned $2 million.
Amcore, also a bank holding company, has assets of $1.06 billion.
Central's assets are $240 million.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)
SOFT CONTACT LENSES WON federal blessing on March 18, 1971, and quickly became eye openers for their makers.
The Food and Drug Administration that day said Bausch & Lomb could start selling them in the U.S.
The cornflake-size product was more comfortable and less prone to falling out than hard contact lenses, which had been around since 1939.
Bausch & Lomb sold the softies under a sublicense from National Patent Development, which had gained the rights from the Czechoslovakia Academy of Sciences.
Otto Wichterle, a Czech, invented them in 1962.
The plastic lens wraps itself over the cornea, absorbing eye moisture while permitting oxygen to pass through.
But the new lens became the eye of a storm.
In September 1971 California officials seized "bootlegged" lenses -- made by unlicensed companies -- after some showed traces of bacteria.
In October doctors were debating the product's safety, some claiming it caused infections.
And there were Senate hearings on the questions in July 1972.
The product overcame the bad publicity and kept evolving.
The early soft lenses, which cost $300 a set, were expected to last for a year.
In 1983 "extended wear" versions, designed to be worn for 30 days at a time, wree offered.
Eighteen months ago a "disposable" seven-day model bowed; a year's supply costs about $500.
Last month the FDA and Contact Lens Institute cautioned users that serious eye infections could result from wearing lenses more than seven days at a stretch.
Today 20 million of the 25 million Americans using contact lenses are using the soft type.
Including the accesory eye care products, contacts account for $2 billion in annual retail sales.
Although Bausch remains the leader among the six majors, Johnson & Johnson, with its new disposables, is coming on fast.
The roller-coaster stock market is making life tougher for small companies trying to raise money.
In the wake of Friday's plunge and yesterday's rebound, some companies are already postponing deals, and others wish they could.
As in other jittery times, many small businesses expect a particularly rough time raising funds as investors shun risky deals, seeking safety in bigger companies.
Even if stock prices fully recover from Friday's sharp decline, the unsettled conditions will frighten many investors.
"The implication of an unsettled situation is that the thing could drop dramatically," says Henry Linsert Jr., chairman of Martek Corp., a four-year-old biotechnology company that is planning a private placement of stock.
"The more variables that indicate risk, the more the investor is going to drive a hard bargain."
Earlier this month, Staples Inc., a Newton, Mass., office-supplies discounter, said it would accelerate expansion plans nationwide and offer more of its stock to the public.
At the time, its shares were selling above their initial offering price of $19, and bankers believed Staples would sell new stock without a hitch.
But with the company's shares standing at $15 yesterday, a new offering seems unlikely, company officials say.
Business, however, continues to be "robust," and the stock market hasn't affected the concern's expansion plans, says Todd Krasnow, a senior executive.
Other companies figure they can't avoid the market.
"We have capital requirements," says Mr. Linsert, "so we have to go ahead" with a planned $1.5 billion private placement.
Unless the market goes right back up, he says, "it may take us six to nine months to find the money, instead of three."
And the Columbia, Md., company may have to settle for a lower price, he adds.
Life is particularly nerve-racking for companies that had planned to go public this week.
Hand-holding is becoming an investment-banking job requirement.
Robertson, Stephens & Co., a San Francisco investment banking concern, has a client that looked forward to making its initial public offering yesterday.
Officers of the company, a health-care concern, "were very discouraged on Friday and felt they shouldn't go public; we felt they should," says Sanford Robertson, partner in the banking concern.
As the market dropped Friday, Robertson Stephens slashed the value of the offering by 7%.
Yesterday, when similar securities rebounded, it bumped the valuation up again.
As of late yesterday, the IPO was still on.
For many, the situation is especially discouraging because the market for IPOs was showing signs of strengthening after several years of weakness.
"We were just beginning to look at the increase in IPOs, seeing the light at the end of the tunnel," says Frank Kline Jr., partner in Lambda Funds, a Beverly Hills, Calif., venture capital concern.
"But the tunnel's just gotten longer."
Companies planning to go public "are definitely taking a second look," says Allen Hadhazy, senior analyst at the Institute for Econometric Research, Fort Lauderdale, Fla., which publishes the New Issues newsletter on IPOs.
He calculates that the recent market slide translated into a 5% to 7% reduction in IPO proceeds to companies.
Many companies are hesitating.
Exabyte Corp. had been planning to sell 10% of its stock this week in an IPO that would raise up to $28.5 million.
But now, Peter Behrendt, president, says, "We're making decisions on a day-to-day basis."
Debt-free and profitable, the Boulder, Colo., computer-products concern could borrow funds if it decides against an IPO now, he says.
KnowledgeWare Inc., an Atlanta computer-software concern, says it is still planning to go ahead with its IPO this week or next -- unless conditions change.
"It's a wait-and-see situation right now," says Terry McGowan, president.
Delayed financings also would affect the operations of many companies.
Sierra Tucson Cos., a Tucson, Ariz., operator of addiction-treatment centers, has a planned doubling of capacity riding on an IPO scheduled for next week.
William O'Donnell, president, says he still thinks the IPO will succeed.
If it doesn't, he says, the company would have to change its expansion timetable.
But the market turmoil could be partially beneficial for some small businesses.
In a sagging market, the Federal Reserve System "might flood the market with funds, and that should bring interest rates down," says Leonard T. Anctil, vice president of the Bank of New England, Boston.
James G. Zafris, president of Danvers Savings Bank, Danvers, Mass., says the market turmoil "is an absolute non-event for small business."
For small companies, he says, interest rates are far more important than what happens on stock exchanges.
Mr. Zafris thinks rates are heading down, helping small companies.
Peter Drake, biotechnology analyst for Vector Securities International, Chicago, thinks market uncertainty may encourage small companies to form more strategic alliances with big corporations.
Partly because the 1987 market crash made it harder for them to find financing, many high-technology concerns have made such alliances recently.
Some even see a silver lining in the dark clouds.
Alan Wells, president of Bollinger, Wells, Lett & Co., a New York merger specialist, thinks panicky investors may lose their enthusiasm for leveraged buy-out and giant takeover deals.
Instead, they could turn to investing in smaller deals involving smaller companies, he says.
And William E. Wetzel Jr., a University of New Hampshire management professor and director of Venture Capital Network Inc., says the market's gyrations will underline the investors' lack of control in big stock investments.
This will add to the appeal of small business, he says, where investors often have a degree of influence.
Bay Financial Corp., hurt by high debts and deteriorating real estate investments, reported a wider loss for the fourth quarter and said it might be forced to seek a bankruptcy-court reorganization if it can't renegotiate its borrowings.
Bay said a "substantial part" of its debt outstanding is in default as a result of inability to sell certain properties quickly and lower-than-expected prices for sales made.
The company said its real estate portfolio is "highly leveraged," while about two-thirds of its investments aren't income-producing.
Thus it is coming up short on a big bet that quick sales at higher prices would enable it to keep up with mortgage and other debt payments.
According to its latest annual report, about a quarter of the company's holdings are in Massachusetts, in the midst of a real-estate slump.
The company said it had a net loss in its fourth quarter ended June 30 of $36.2 million, or $9.33 a share, on revenue of $13.1 million.
A year earlier, the company had a loss of $10.8 million, or $3.04 a share, on revenue of $10.8 million.
For the year, it had a net loss of $62 million, or $15.97 a share, on revenue of $44.3 million.
In the previous year, it had a loss of $22.5 million, or $6.52 a share, on revenue of $41.1 million.
Although it is having serious cash-flow problems, Bay said the fair-market value of its holdings, minus debt, was equal to $6.02 a share at June 30 based on a recent appraisal.
Book value per share, which is based on investments at cost, was a negative $6.69 a share.
A year earlier, fair-market value per share was $26.02 and book value was $9.43 a share.
Annualized interest rates on certain investments as reported by the Federal Reserve Board on a weekly-average basis: 1989 and Wednesday October 4, 1989.
c-Yields, adjusted for constant maturity.
TRW Inc. reported a 12% decline in third-quarter net income, but the company said that excluding unusual gains in both quarters, operating profit rose 16%.
The electronics, automotive and aerospace concern said third-quarter net was $60 million, or 98 cents a share, down from $68 million, or $1.11 a share, a year earlier.
Share earnings are reported on a fully diluted basis, by company tradition.
Results for the 1988 quarter included a gain of $1.05 a share from sale of the Reda Pump and Oilwell Cable units, partly offset by a charge of 69 cents a share for recall of faulty truck steering systems.
The latest quarter included a gain of 11 cents a share as a partial reversal of the recall charge, because the reserve established last year exceeded the actual recall costs.
Sales for the quarter rose 8.3% to $1.79 billion, from $1.65 billion, with all three major product groups reporting gains.
The company said aerospace and defense sales were up 2% for the quarter to $802 million, and operating profit climbed 6% to $61 million, mainly because of improved program performance in spacecraft and advanced-technology contracts.
Automotive sales jumped 16% to $791 million, mainly because of higher sales of air bags and other passenger restraint systems, TRW said.
The group had an operating profit of $65 million, against a loss of $13 million a year earlier.
However, excluding the year-earlier charge for recall of steering gear, operating profit in the latest quarter declined 14%, reflecting higher start-up and product development expenses in passenger-restraint systems.
Materials and production costs also rose, TRW said.
The information systems segment had a 44% jump sales to $196 million.
An acquisition accounted for half the sales rise, TRW said.
Operating profit rose threefold to $18 million, from $6 million.
For the nine months, TRW's net was $199 million, or $3.22 a share, down 3% from $205 million, or $3.33 a share, a year earlier.
Sales rose 2.9% to $5.42 billion, from $5.27 billion.
a tragicomic monologue by an idealistic, not unheroic, though sadly self-deceived English butler in his sixties -- proceeds as if the realistic English novel of manners, like Britannia herself, still ruled the waves.
In fact, Kazuo Ishiguro's "The Remains of the Day" (Knopf, 245 pages, $18.95) is both an homage to traditional English forms and a dramatic critique of them.
It implies that the British Empire was rooted in its subjects' minds, manners and morals, and argues, tacitly, that its self-destructive flaws were embodied in the defensive snobbery, willful blindness, role-playing and especially the locutions of its domestic servants.
As the narrator Stevens, the solitary butler of Darlington Hall, mulls over such hallowed terms as "greatness," "dignity," "service" and "loyalty," we see how pious cant subverts the soul.
Stevens's dutiful conflation of the public and private realms -- like his beloved master's -- destroys all it was designed to preserve.
Such armor crushes the soldier.
The mask cuts to the quick.
It's 1956, the year the Suez crisis marked the final end of Empire.
As he stands on a hill at the beginning of a six-day motor expedition from Oxfordshire to Cornwall, where a former housekeeper resides, perhaps the victim of an unhappy 20-year marriage, perhaps (he hopes with more fervor than he will ever acknowledge) not disinclined to return to domestic service, Stevens surveys the view and thereby provides a self-portrait, a credo and the author's metaphor for the aesthetic of the novel we're reading:
"We call this land of ours Great Britain, and there may be those who believe this a somewhat immodest practice.
Yet I would venture that the landscape of our country alone would justify the use of this lofty adjective. . . .
It is the very lack of obvious drama or spectacle that sets the beauty of our land apart.
What is pertinent is the calmness of that beauty, its sense of restraint.
It is as though the land knows of its own beauty, of its own greatness, and feels no need to shout it.
In comparison, the sorts of sights offered in such places as Africa and America, though undoubtedly very exciting, would, I am sure, strike the objective viewer as inferior on account of their unseemly demonstrativeness."
An effusive landscape?
An ill-mannered mountain?
But let Stevens continue in his unwitting comic manner (his conscious efforts at "banter" always fail -- most comically): "This whole question is very akin to the question that has caused much debate in our profession over the years: what is a `great' butler?"
His answer is one "possessed of a dignity in keeping with his position."
Such dignity "has to do crucially with a butler's ability not to abandon the professional being he inhabits."
He "will not be shaken out by external events, however surprising, alarming or vexing. . . .
Continentals are unable to be butlers because they are as a breed incapable of the emotional restraint which only the English race are capable of."
Despite his racial advantage, to be a great butler is a heroic calling; one's pantry is "not unlike general's headquarters during a battle."
If, for example, in the midst of a great social occasion (such as an international conference on revising the Versailles Treaty in 1923), one's 72-yearold father, himself a great butler once, should happen to die of a stroke, one must continue to serve the port: "Please don't think me unduly improper in not ascending to see my father in his deceased condition just at this moment.
You see, I know my father would have wished me to carry on just now."
It is this kind of dignity and restraint that allows Stevens to declare: "For all its sad associations, whenever I recall that evening today, I find I do so with a large sense of triumph."
We note the imperial public word used to deny private rage and sorrow.
That Stevens himself is not grotesque or repellent, but funny and sad and enlightening, is entirely the author's triumph.
Mr. Ishiguro's ability to create a fallible narrative voice that permits him to explore such intertwining domestic, cultural and political themes was abundantly clear in his previous novel, "An Artist of the Floating World," set in Japan after the war.
Now shifting his scene from the country he left at five to the England he has lived in for nearly 30 years, he has fashioned a novel in the mode of Henry James and E.M. Forster.
With great aplomb he considers not only filial devotion and (utterly repressed) sexual love, but British anti-Semitism, the gentry's impatience with democracy and support of Hitler, and the moral problematics of loyalty: "It is, in practice, simply not possible to adopt such a critical attitude towards an employer and at the same time provide good service. . . .
`This employer embodies all that I find noble and admirable.
I will hereafter devote myself to serving him.
' This is loyalty intelligently bestowed."
In the end, after meeting with the former housekeeper, Stevens sits by the seashore at dusk, thinking of her and of his employer, and declares "I trusted.
I trusted in his lordship's wisdom. . . .
I can't even say I made my own mistakes.
Really -- one has to ask oneself -- what dignity is there in that?"
The loyal servant has come full circle.
What is greatness?
What is dignity?
We understand such rueful wisdom must be retrospective: The owl of Minerva only spreads her wings at dusk.
But as "The Remains of the Day" so eloquently demonstrates with quiet virtuosity, such wisdom can be movingly embodied in art.
Mr. Locke teaches English and comparative literature at Columbia University.
UGI Corp. said its AmeriGas subsidiary completed the previously announced sale of its air separation plant and related assets in Waukesha, Wis., to AGA Gas Inc., Cleveland.
The price wasn't disclosed.
The transaction is part of UGI's continuing program to shed AmeriGas's industrial gas interests and expand the subsidiary's propane business.
Since June, AmeriGas has netted more than $100 million from industrial gas divestitures and reinvested more than $50 million to acquire three propane distributors.
UGI is a gas and electric utility and distributes propane nationally through its AmeriGas subsidiary.
Stanislav Ovcharenko, who represents the Soviet airline Aeroflot here, has some visions that are wild even by the current standards of perestroika.
In his office overlooking the runway of Shannon Airport, Mr. Ovcharenko enthusiastically throws out what he calls "just ideas":
First, he suggests, GPA Group Ltd., the international aircraft leasing company based in Ireland, could lease some of its Boeing jetliners to the Soviet airline.
Then Aer Lingus, the Irish flag carrier, could teach Aeroflot pilots to fly the Boeings, and the fleet could be based here at Shannon Airport.
That's not all, he says.
Aer Rianta, the Irish airport authority, could build a cargo terminal in the Soviet Union.
Aeroflot could lease some of its cargo planes to Aer Lingus, through GPA, for a joint-venture cargo airline.
And then there is his notion of an Irish-Soviet charter airline to ferry Armenians to Los Angeles via Shannon.
Have the freedoms of glasnost gone to Mr. Ovcharenko's head?
Hardly.
The Irish-Soviet aviation connection is alive and well here at Shannon Airport.
GPA is indeed talking about leasing Western planes to Aeroflot and even about buying Soviet-built Tupolev 204s.
Aer Lingus is in discussions with the Soviet carrier about a cargo venture and other possibilities.
Aer Rianta already has so many ventures with Aeroflot that its chief executive is studying Russian.
Unlikely as it may seem, tiny, politically neutral Ireland has penetrated the mighty Soviet airline bureaucracy.
And as Aeroflot struggles to boost its service standards, upgrade its fleet and pursue commercial opportunities, the Irish aviation industry seems poised to benefit.
"Irish and Soviet people are similar," says Mr. Ovcharenko.
"They look the same.
They're very friendly."
Moreover, he says, Irish companies are small but spunky.
"We have to study their experience very well," he says.
"We must find any way to get business."
The two groups have been working together since the late 1970s, long before Soviet joint ventures were the rage in the West.
Aeroflot carried about 125 million passengers last year, and Shannon Airport, the airline's largest transit airport outside the Soviet Union, saw 1,400 Aeroflot flights and 250,000 passengers pass through.
An apartment complex down the road is the crew-rest and staging area for more than 130 Aeroflot pilots and flight attendants.
The airport's biggest supplier of aircraft fuel is the Soviet Union.
Tankers from the Latvian port of Ventspils each year unload 25 million gallons of fuel into a special tank farm at the airport.
What Aeroflot doesn't pour into its own gas-guzzling Ilyushins is bartered to the airport authority, which resells it to 11 Western carriers including Air France, Trans World Airlines and Pakistan International Airlines.
Aeroflot thus pays its landing fees, ground-handling and catering bills with fuel, preserving its hard currency.
That isn't all.
Last year, the Irish airport authority, in a joint venture with Aeroflot, opened four hard-currency duty-free shops at Moscow's Sheremetyevo Airport.
Aer Rianta now manages duty-free sales on all Aeroflot international flights out of Moscow.
Duty-free shops in Leningrad's Pulkova Airport opened in July, and hard-currency shops in Leningrad hotels and on the Soviet-Finnish frontier are coming soon.
Aer Rianta is talking about similar joint ventures in Tashkent and in Sochi, a Black Sea resort, and even has a computer-assembly project cooking with the Georgian city of Tbilisi.
Aeroflot's international fleet of 285 planes is being repainted and refurbished at Shannon Airport.
Thanks to a new air-traffic agreement and the ability of Irish travel agents to issue Aeroflot tickets, tourists here are taking advantage of Aeroflot's reasonable prices to board flights in Shannon for holidays in Havana, Kingston and Mexico City.
The round-trip fare to Havana is 410 Irish punts ($578).
Jamaica costs 504 punts.
A formal blessing of sorts was bestowed on this friendship in April when Mikhail and Raisa Gorbachev stopped here for talks with Irish Prime Minister Charles Haughey.
New trade accords were signed.
It all started with geography.
When it opened in 1939, Shannon was the first landfall in Europe for thirsty airplanes flying from North America.
Advances in aircraft fuel efficiency over the years made a Shannon stop unnecessary for most Western air fleets, but Aeroflot still flies inefficient Ilyushins that can't make it from Moscow to Managua on one hop.
As a result, Ireland didn't spurn the Soviets after they shot down a Korean Air Lines jetliner over the Sea of Japan in 1983, though it suspended direct Moscow-Shannon flights for two months.
In fact, Aer Lingus started ferrying Russians from Shannon to New York when Washington stripped Aeroflot of its U.S. landing rights.
Today, Aer Rianta is making a heap of money from its Soviet friendship.
And, with those contacts in place, it could be relatively simple to add Aer Lingus and GPA to the team.
Then, perhaps, Mr. Ovcharenko's ideas wouldn't sound like so much blarney.
Britain's industrial production rose 1.5% in August from July and was up 0.9% from August 1988, according to provisional data from the Central Statistical Office.
Output in the energy sector, which can vary greatly with swings in the oil market, rose 3.8% in August from May but was down 7.1% from a year earlier.
The latest figures compare with July's 4.5% month-to-month rise and 11.3% year-to-year fall.
When Nucor Corp. begins shipping steel from the world's first thin-slab plant this month, it will begin testing the competitive mettle of its giant competitors.
The new technology, which creates a very thin piece of steel, radically reduces the costs of making flat-rolled sheets.
An ebullient Kenneth Iverson, Nucor's chairman, says the company's plant eventually will make a ton of steel in 1.5 man hours, compared with four to six man hours at a conventional mill.
"We've had the Russians and Chinese, and people from India visiting us," Mr. Iverson beams.
"Everyone in the world is watching us very closely."
Especially his neighbors, the major U.S. steelmakers.
Already, USX Corp. and Armco Inc. are studying Nucor's technology to see if they can adopt it.
Says the chief executive officer of a major Midwest steel company: "It's damn worrisome."
The once-staid steel industry is about to be turned topsy-turvy by a 1990s technology revolution.
New, efficient and sophisticated processes make it easier for smaller, less cash-rich companies to make steel at a fraction of what Big Steel paid decades ago.
It also enables minimills finally to get a toehold in the flat-rolled steel market -- the major steelmakers' largest, most prized, and until now, untouchable, market.
But such thin-slab technology is only the beginning.
Eager engineers espouse direct-steelmaking and direct casting, which by the end of the 1990s will enable production without coke ovens and blast furnaces.
Those massive structures, while posing cost and environmental headaches, effectively locked out all but deep-pocketed giants from steelmaking.
"There's a revolution ahead of us that will ultimately change the way we market and distribute steel," says William Dennis, vice president, manufacturing and technology, for the American Iron Ore and Steel Institute.
It isn't that major steelmakers have blithely ignored high technology.
In fact, they've spent billions of dollars to boost the percentage of continously cast steel to 60.9% in 1988, from 39.6% five years before.
Moreover, their balance sheets are rich with diversity, their old plants shuttered, and work forces lean.
But that won't suffice.
"It's no longer enough to beat the guy down the street.
You have to beat everyone around the world," says Mr. Dennis.
He wants to see steelmakers more involved in computers and artificial intelligence.
The problem: They're saddled with huge plants that require costly maintenance.
And try plying new dollars free in a market that is softening, hurt by a strong dollar and concerned about overcapacity -- the industry's Darth Vadar.
"The technology revolution is going to be very threatening to established producers," says Peter Marcus, an analyst with PaineWebber Inc.
"They've got too much invested in the old stuff and they can't get their workers to be flexible."
No one expects minimills to eclipse major integrated steelmakers, who remain the undisputed kings of highest-quality steel used for autos and refrigerators.
Nucor's plant in Crawfordsville, Ind., ultimately will produce only one million tons annually, a drop in the 40-million-ton-a-year flat-rolled steel bucket, and it will be years before such plants can compete in the high-profit market.
Still, flat-rolled is the steel industry's bread and butter, representing about half of the 80 million tons of steel expected to be shipped this year.
Moreover, the process isn't without its headaches.
Because all operations are connected, one equipment failure forces a complete plant shutdown.
On some days, the Nucor plant doesn't produce anything.
"At this point, the minimill capacity won't make a great dent in the integrated market, but it does challenge them to develop new markets," says James McCall, vice president, materials, at Battelle, a technology and management-research giant based in Columbus, Ohio.
Indeed, with demand for steel not growing fast enough to absorb capacity, steelmakers will have to change the way they do business.
In the past, says Armco's chief economist John Corey, steelmakers made a product and set it out on the loading dock.
"We said: `We've got a product: if you want it, you can buy it,'" he says, adding: "Now we're figuring out what people need, and are going back to make it."
Armco's sales representatives visit the General Motors Corp.'s Fairfax assembly plant in Kansas City, Mo., two or three days a week.
When they determined that GM needed parts more quickly, Armco convinced a steel service center to build a processing plant nearby so shipments could be delivered within 15 minutes.
Cementing such relationships with major clients -- car and appliance makers -- is a means of survival, especially when those key clients are relying on a smaller pool of producers and flirting with plastic and aluminum makers.
For example, when Detroit began talking about plastic-bodied cars, the American Iron and Steel Institute began a major lobbying effort to show auto makers how they could use steel more efficiently by simply redesigning how a car door is assembled.
But steelmakers must also find new markets.
After letting aluminum-makers take the recycling lead, a group of the nation's largest steelmakers started a recycling institute to promote steel cans to an environmentally conscious nation.
Battelle's Mr. McCall thinks steelmakers should concentrate more on construction.
Weirton Steel Corp., Weirton, W. Va., for example, is touting to homeowners fashionable steel doors, with leaded glass inserts, as a secure and energy-efficient alternative to wooden or aluminum ones.
Other steelmakers envision steel roofs covering suburbia.
Still others are looking at overseas markets.
USX is funneling drilling pipe to steel-hungry Soviet Union.
This year, the nation's largest steelmaker reactivated its overseas sales operation.
Producers also are trying to differentiate by concentrating on higher-profit output, such as coated and electrogalvanized products, which remain beyond the reach of minimills.
Almost all capital-improvement programs announced by major steelmakers within the past year involve building electrogalvanizing lines, used to produce steel for such products as household appliances and car doors.
But unfortunately, that segment is much smaller than the bread-and-butter flat-rolled steel.
"It's like everyone climbing out of the QE II and getting into a lifeboat," says John Jacobson, an analyst with AUS Consultants.
"After a while, someone has to go over the side."
Although he doesn't expect any bankruptcies, he does see more plants being sold or closed.
Robert Crandall, with the Brookings Institute, agrees.
"Unless there is an enormous rate of economic growth or a further drop in the dollar, it's unlikely that consumption of U.S. produced steel will grow sufficiently to offset the growth of minimills."
Not to mention the incursion of imports.
Japanese and European steelmakers, which have led the recent technology developments, are anxiously awaiting the lifting of trade restraints in 1992.
Moreover, the U.S. can expect more competition from low-cost producing Pacific Rim and Latin American countries.
A Taiwanese steelmaker recently announced plans to build a Nucor-like plant.
"People think of the steel business as an old and mundane smokestack business," says Mr. Iverson.
"They're dead wrong."
*USX, LTV, Bethlehem, Inland, Armco, National Steel
**Projected
Polaroid Corp.'s patent-infringement damages case against Eastman Kodak Co., one of the highest stakes corporate trials ever, is getting scant attention on Wall Street.
After 78 days of mind-numbing testimony in federal court in Boston, the trial is being all but ignored by analysts and patent attorneys.
Most have read the pre-trial documents, however, and estimate Kodak will be ordered to pay $1 billion to $1.5 billion for infringing on seven Polaroid patents.
That may be the largest patent award ever, but it is well below the $12 billion Polaroid seeks.
The highest patent damage award to date was in 1986, when Smith International Inc. was ordered to pay $205 million to Baker Hughes Inc. for infringing on a patent on an oil drilling bit seal.
The two companies later agreed to settle for $95 million.
Few analysts think it is worth their time to slog through the Polaroid trial testimony.
"It's like panning for gold outside of Grand Central Station.
You might find something, but the chances are low," said Michael Ellman, an analyst at Wertheim Schroder & Co.
And Eugene Glazer, an analyst at Dean Witter Reynolds Inc., said: "If you hired an attorney to be there all the time and give you a (prediction) of the eventual award, I would be willing to bet that he would be off" by a lot.
A 75-day trial in the early 1980s determined that Kodak, based in Rochester, N.Y., infringed on patents of Polaroid, of Cambridge, Mass.
The main issues remaining are how to calculate damages and whether the infringement was "willful and deliberate."
If so, the damages could be tripled.
Two analysts who have read the transcripts, David Nelson of Shearson Lehman Hutton Inc. and Calvert D. Crary, a litigation analyst at Labe, Simpson & Co., think Judge A. David Mazzone will decide in Kodak's favor on the "willful and deliberate" issue.
Mr. Crary said testimony by Kodak's patent counsel, Francis T. Carr of Kenyon & Kenyon, showed that "he worked with Kodak continuously from the outset of the project" in an effort to avoid infringement.
"Carr told Kodak on many occasions to avoid various features because of Polaroid's patent positions," and Kodak followed his advice in every instance, Mr. Crary said.
But Irving Kayton, a patent expert at George Mason University School of Law who is familiar with the case, said the fact that seven patents were infringed "suggests that infringement was willful.
It's difficult to be that consistently wrong."
Observers also wonder whether Judge Mazzone will use the lost-profits method of determining damages, which Polaroid favors because it would result in a larger award, or the reasonable royalty method.
Polaroid claims it could have manufactured and sold all the instant cameras and film sold by Kodak if Kodak hadn't entered the market.
Moreover, Polaroid contends it could have sold them at a higher price -- and thus made higher profits -- because it wouldn't have been forced to match Kodak's lower prices.
Each side has called a Harvard Business School professor to testify on that issue.
Kodak hired Robert Buzzell and Polaroid brought in Robert J. Dolan.
"There's nothing that says that people at Harvard Business school have to agree with each other," said Mr. Buzzell.
Testimony is expected to continue until early December.
A decision isn't expected until some time next year.
International Business Machines Corp. said earnings tumbled 30% in the third quarter, even a bit further than expected, rendering the outlook doubtful for the next few quarters.
The main reason was a delay in shipment of new high-end disk drives, a business that accounts for some 10% of IBM's $60 billion of annual revenue.
IBM, which telegraphed the poor results three weeks ago, also cited an increase in its leasing business, which tends to lock in business long-term but cut revenue in the near term.
In addition, IBM noted that the stronger dollar has cut the value of overseas revenue and earnings when they are translated into dollars.
Earnings fell to $877 million, or $1.51 a share, somewhat below securities analysts' revised expectations of around $1.60 a share.
That compared with the year-earlier $1.25 billion, or $2.10 a share -- which was inflated by a 15-cents-a-share gain from the sale of some MCI Communications Corp. stock and by an unspecified amount from a payment by Fujitsu Ltd. relating to a software dispute.
Revenue climbed 4.3% to $14.31 billion from $13.71 billion.
IBM, Armonk, N.Y., remained upbeat.
The computer giant, whose U.S. results have been dismal for years, noted that revenue rose again in the U.S. in the third quarter, following an increase in the second period.
The company said in a statement that "demand for IBM products and services continues to be good world-wide.
We do not see anything in the fundamentals of our business that would cause us to change our strategy of investing for profitable growth."
Securities analysts, however, remained downbeat.
"I think 1990 will be another mediocre year," said Steve Milunovich of First Boston.
Jay Stevens of Dean Witter actually cut his per-share earnings estimate to $9 from $9.50 for 1989 and to $9.50 from $10.35 in 1990 because he decided sales would be even weaker than he had expected.
Both estimates would mark declines from the 1988 net of $5.81 billion, or $9.80 a share, which itself was well below the record IBM set in 1984.
Mr. Stevens said he kept a "buy/hold" recommendation on the stock only because "all the damage has been done."
He said the stock hasn't traded below 1 1/2 times book value over the past 10 years, which at the moment computes to a stock price of $100.
The stock closed yesterday at $103 a share, up just $1 in composite trading on the New York Stock Exchange as the market surged.
Analysts worry that the disk-drive and leasing problems will last at least through the first quarter.
"A key part of the question is, how soon does this disk-drive come and how soon does production ramp up?" said Steve Cohen at SoundView Financial Group.
"And the input I've had from customers is that it still could be a while."
On leasing, Bob Djurdjevic at Annex Research said he thinks IBM has hurt itself unnecessarily.
He said IBM has priced its leases aggressively, thinking that would help win business.
But he said IBM would have won the business anyway as a sale to a third party that would have then leased the equipment to the customer.
He said IBM has not only hurt its short-term revenue outlook but has also been losing money on its leases.
Bob Bardagy, executive vice president of marketing at Comdisco Inc., a huge leasing firm, said: "To put it mildly, IBM Credit has been doing some of the worst economic deals of any leasing company we have ever seen."
IBM is expected to get a boost soon when it announces some new versions of its mainframes.
But the basic technology in the line is almost five years old, which means it is long in the tooth, and competitors are rolling out strong products of their own.
IBM is gaining momentum in the personal-computer market, and is expected to introduce some impressive workstations early next year.
But it's hard to squeeze much profit out of the personal-computer business these days, and the workstation market, while important, is too small to rely on for much growth.
The disk drives will doubtless sell well when they finally become available.
But the AS/400, IBM's highly successful minicomputer line, is losing its momentum, and some analysts said sales could even decline in the fourth quarter.
In addition, IBM's growth in software in the third quarter was just 8.8%, well below historical levels even when adjusted to reflect last year's payment from Fujitsu and the stronger dollar.
And expenses, up 7.9% in the quarter, have stayed stubbornly high.
In the nine months, IBM earned $3.17 billion, or $5.43 a share, down 8.4% from the year-earlier $3.46 billion, or $5.83 a share.
Revenue increased 6.5% to $42.25 billion from $39.68 billion.
PepsiCo Inc.'s chairman said he is "more than comfortable with" analysts' estimates that third-quarter earnings rose to at least 98 cents to $1 a share from 91 cents the year earlier.
D. Wayne Calloway, also chief executive officer of the company, indicated that he expects analysts to raise their forecasts for 1989 after the company releases its earnings today.
So far, analysts have said they are looking for $3.30 to $3.35 a share.
After today's announcement, that range could increase to $3.35 to $3.40 a share.
The official said he also would be comfortable with that new range.
In 1988, the soft-drink giant earned $2.90 a share.
Results for 1989 will include about 40 cents a share from the dilutive effects of snack-food and bottling company acquisitions.
In composite trading on the New York Stock Exchange, the company closed yesterday at $57.125 a share, up $3.125.
The company said third-quarter sales are expected to increase 25% from $3.12 billion of last year's third quarter.
Domestic soft-drink bottler case sales are estimated to have risen only 1% in the third quarter -- well below the 4% to 5% growth of recent years -- but about in line with the rest of the soft-drink industry.
Mr. Calloway blamed the slower volume on rainier weather, a dearth of new products in the industry and -- to a much lesser extent -- pricing.
PepsiCo said its soft-drink prices were about 2% higher in the quarter.
Mr. Calloway also noted that soft-drink volume rose a hefty 9% in last year's third quarter, making the comparison more difficult.
International soft-drink volume was up about 6%.
Snack-food tonnage increased a strong 7% in the third quarter, while domestic profit increased in double digits, Mr. Calloway said.
Excluding the British snack-food business acquired in July, snack-food international tonnage jumped 40%, with sales strong in Spain, Mexico and Brazil.
Total snack-food profit rose 30%.
Led by Pizza Hut and Taco Bell, restaurant earnings increased about 25% in the third quarter on a 22% sales increase.
Same-store sales for Pizza Hut rose about 13%, while Taco Bell's increased 22%, as the chain continues to benefit from its price-value strategy.
Taco Bell has turned around declining customer counts by permanently lowering the price of its tacos.
Same store-sales for Kentucky Fried Chicken, which has struggled with increased competition in the fast-food chicken market and a lack of new products, rose only 1%.
The operation, which has been slow to respond to consumers' shifting tastes away from fried foods, has been developing a grilled-chicken product that may be introduced nationally at the end of next year.
The new product has performed well in a market test in Las Vegas, Nev., Mr. Calloway said.
After a four-year, $7.7 billion acquisition binge that brought a major soft-drink company, soda bottlers, a fast-food chain and an overseas snack-food giant to Pepsi, Mr. Calloway said he doesn't expect any major acquisition in the next year or so.
But, "You never can tell," he added, "you have to take advantage of opportunities.
President Bush chose Martin Allday, a longtime friend from Texas, to be chairman of the Federal Energy Regulatory Commission.
Mr. Allday would succeed Martha Hesse, who is resigning.
The White House said Ms. Hesse, a Chicago businesswoman who previously held posts at the Energy Department and FERC, is leaving to become a vice president of First Chicago Corp.
Mr. Allday, an attorney in Midland, Texas, has been solicitor at the Interior Department.
He met Mr. Bush in the 1950s, when the president was a young oil man in Midland and Mr. Allday was a lawyer for an oil firm.
The FERC is a five-member commission that regulates billions of dollars of interstate wholesale energy transactions.
Mr. Allday's appointment is subject to confirmation by the Senate.
Administration officials said a date for Ms. Hesse's departure hasn't been set.
CALIFORNIA REAL ESTATE INVESTMENT Corp. said its directors declared a dividend of five cents per Class A common stock payable Nov. 6 to stock of record Oct. 16.
The dividend represents the balance of its regular quarterly payout of 10 cents a share, of which half was paid July 17 in a final distribution prior to its merger with B.B. Real Estate Investment Corp., also in July.
The company said it hopes to resume its schedule of regular quarterly dividends at the end of this year.
Hydro-Quebec said it notified Central Maine Power Co. it will cancel a $4 billion contract to supply electricity to the Maine utility.
The provincially owned utility said it is tearing up the deal because "the contract's objectives can't be fulfilled."
Hydro-Quebec said Maine regulators' refusal to approve the contract earlier this year halted work on transmission lines and stopped negotiations for resale of electricity carried through Maine to other utilities.
"It would now be physically impossible to begin deliveries in 1992," a Hydro-Quebec official said.
The contract was to run from 1992 to 2020.
Under the contract Hydro-Quebec was to supply 400 megawatts of power to Central Maine Power starting in 1992, 600 megawatts starting in 1995 and 900 megawatts starting in
Hydro-Quebec said Maine regulators' refusal to approve the contract means Central Maine Power has lost its place in line.
"We won't sign any new contracts {with deliveries} beginning earlier than 2000," the Hydro-Quebec official said.
He said Hydro-Quebec already has some "customers in mind" for the power that was to be delivered to Maine.
"Nothing has happened since we signed the contract to undermine our conviction that Hydro-Quebec was the lowest-cost, most environmentally acceptable choice for meeting a part of our customers' energy needs through the year 2020," said Central Maine senior vice president Donald F. Kelly.
Central Maine said it is evaluating "many energy options" to make up for the lost future power, including new energy generation and management proposals from New England, and possibly new Canadian purchases.
CHICAGO - Options traders were among the big victims of Friday's plunging stock market, including one small firm that required an emergency $50 million bailout.
While Monday's rebounding markets helped other investors recoup losses, many options customers and professional traders in stock-index options and the options on takeover stocks were left with multimillion-dollar losses, traders here and in New York said.
Options traders were hurt worse than others on Friday because of the highly volatile nature of options, which often rise or fall in value several times the amount of the price change in the individual stock or index of stocks on which they are based.
Thus, options traders Friday were stuck with losses that also were several times larger than those suffered by many stock traders in New York.
Jeffrey Miller of Miller Tabak Hirsch & Co. said that given the high degree of leverage in the options market, it is "very easy for these guys to get wiped out.
That may just be the nature of these highly leveraged little creatures."
An options contract gives the holder the right to buy (call) or sell (put) a specific amount of stock, or in this case the value of a stock index, based on a predetermined price within a given time period.
Options traders who, in return for a small fee, or premium, had previously sold put options on stocks or stock indexes were forced on Friday to buy those contracts back at the previously agreed prices, which were substantially above those in the market as it was falling.
They then had no choice in many cases but to sell the contracts at prevailing prices -- in most cases at a substantial loss.
The latest round of losses is likely to be a serious blow to the Chicago Board Options Exchange, which has never fully recovered from the aftershock of Black Monday, when investors fled the market because of huge losses.
Making matters worse was the fact that late Friday afternoon the CBOE halted stock-index options trading in step with the Chicago Mercantile Exchange's halt in stock-index futures.
But while the Merc reopened a half hour later, the CBOE remained closed, leaving many options traders unable to make trades that might have reduced the losses.
CBOE Chairman Alger "Duke" Chapman, said that, unlike the futures market, the options exchange has to open in a rotation that allows each different options series to trade.
Exchange officials reasoned that they wouldn't have been able to make such a rotation with the time remaining Friday afternoon, and with the stock-index futures on the verge of closing for a second and final time, the CBOE reasoned that its best course was to remain closed.
The damage was so bad at Fossett Corp., an options trading firm here, that it was forced to transfer its accounts to First Options of Chicago, a unit of Continental Bank Corp., as a result of options trading losses.
Fosset so far is the only member of a financial exchange to be forced to be taken over by another firm as a result of Friday's rout.
Fossett still had several million dollars in capital left after Friday's close of trading, but not enough that regulators, worried about another potential market plunge yesterday, would let it reopen for trading, options exchange officials said.
Thus, in an unprecedented arrangement underscoring the seriousness of the transfer, the CBOE, the American Stock Exchange and the Options Clearing Corp., as well as the firm's owner, Stephen Fossett, put up a total of $50 million to guarantee the customer positions being transferred to the bank holding company subsidiary in case the market plunged again yesterday.
S. Waite Rawls III, vice chairman of Continental Bank, First Options' parent company, said the firm took on about 160 accounts formerly held by Fossett, almost all of them belonging to professional floor traders.
"Steve and his firm were still worth a lot of money," Mr. Rawls said.
"A package of credit support was put together -- including the assets of Steve and his firm."
The bailout was cobbled together over the weekend, with officials from the Federal Reserve Board, Securities and Exchange Commission, Comptroller of the Currency and Treasury as well as the options exchanges.
"It was great to have the luxury of time," Mr. Rawls said.
At one point, an options industry official had to talk the Federal Reserve Bank of Chicago's night watchman into giving him the home phone number of Silas Keene, Chicago Fed president.
First Options didn't have to put any money into the bailout.
Yesterday's rally in the stock, futures and options markets led CBOE and Amex officials to conclude that the $50 million in guarantees almost certainly won't need to be tapped by First Options.
The Fossett firm had some losses and liquidity problems during the October 1987 crash as well, Mr. Rawls said.
A federal official said that Continental Bank worked with securities and banking regulators over the weekend to fashion the Fossett bailout, but that conditions weren't dictated by those agencies.
"It was their business decision," the official said.
Officials at Options Clearing Corp., which processes all options trades for U.S. exchanges, said that the $50 million guarantee was unprecedented, but was necessary to help insure the integrity of the options markets.
"It was an extraordinary situation that needed extraordinary steps," said Paul Stevens, OCC president and chief operating officer.
Mr. Stevens declined to give the specific contributions to the $50 million guarantee from each participant.
But CBOE and Amex officials said that Options Clearing Corp. contributed $20 million to the guarantee, the CBOE put up $8 million, the Amex added $4 million and $18 million came from Mr. Fossett's own assets.
Mr. Fossett couldn't be reached to comment.
Debora Foster takes off her necklace, settles herself on a padded chair and gently leans forward.
With a jazz-piano tape playing softly in the background, the soothing hands of Sabina Vidunas begin to work on Ms. Foster's neck and shoulders.
"It's like an oasis in this room," Ms. Foster purrs.
The room in question is the directors' lounge of H.J. Heinz Co., 60 floors above the bustle of Pittsburgh.
There, amid oil paintings and marble tables, massages are administered every Wednesday.
"On days that I'm really busy," says Ms. Foster, who works in public relations for the company, "it seems decadent to take time off for a massage."
Although such sessions may never replace coffee breaks, on-site massage, as it is known in the trade, is certainly infiltrating corporate America.
In some companies middle managers sneak massage therapists into the office, fearful that upper-level executives won't approve.
Ms. Foster's indulgence is nothing like the oily, hour-long rubfests enjoyed by spa visitors.
Nor does it at all resemble (despite what some executives think) the more intimate variety offered at specialty parlors in bad parts of town.
On the contrary, office rubdowns usually take place in dimly lighted conference rooms, where stressed-out employees relax in specially designed chairs, fully clothed.
The massages last 15 minutes and typically cost about $10.
Some companies, including Heinz, even pay part of the fee.
Ms. Vidunas has been seeing some 15 clients a visit since the program was started at Heinz last year.
Anthony J.F. O'Reilly, the company's chairman, swears by her firm touch, saying regular massages are a balm for his old football injuries.
Massage advocates say that kneading the head, shoulders, neck and back can go a long way toward easing tension and improving morale.
They also insist that touching is a basic need, as powerful as the need for food or sleep, and that the office is as good a place as any to do it.
"The blood flows to your head, you feel lightheaded and you don't feel tension around the head or neck," says Minnie Morey, an operations supervisor at the Social Security office in Grand Rapids, Mich., where massages began last month.
"When you leave the room after your massage, people say you look like you're glowing."
Adds Candice Ohlman, the 35-year-old masseuse who plies her trade in the Grand Rapids office, "They fall in love with my hands."
Not everyone, however, is at ease with office massage.
Three years ago, the Internal Revenue Service's office in San Jose, Calif., opened its doors to on-site massage.
And even though employees paid the bill, taxpayers grumbled.
"Sometimes, with the release of stress, you hear `oohs' and `ahs' coming out of the room," explains Morgan Banks, the agency's health specialist.
"And you can't have taxpayers coming into an audit hearing `oohs' and `ahs.'"
Last month, the complaints intensified and the massages ended.
"Now we're looking for a room with thicker walls," Ms. Banks says.
Massage also has an image problem to contend with.
Some masseurs have tried to get around this by calling themselves "bodyworkers" and describing their office visits as "reinvigoration breaks."
But massage, no matter how chaste, is still associated in many minds with seedy fronts for prostitution, and that makes some executives nervous.
Last year, the research and development division of Weyerhaeuser Co., the large wood-products concern, invited a masseuse to its Tacoma, Wash., offices.
Phil Harms, a software engineer, was an eager customer.
"You build up a lot of tension working at a terminal all day," he says.
But after about eight months, the vice president of the division, Ed Soule, learned about the sessions and brought them to a halt.
Mr. Soule says his only beef was that the massages were being given in a company conference room; the department's supervised health facility would have been fine.
"In my view, {massages} should be managed with an appropriate mixture of males and females around," he says.
Given such attitudes, some corporate masseurs prefer to go about their business quietly.
Russell Borner of Park Ridge, N.J., says he has been working for the past year at a huge chemical and manufacturing concern in New York -- unbeknownst to the company's executives.
He visits the same department every two or three weeks.
His massage chair is kept in a closet, and a secretary escorts him past security.
"This is common with a lot of large companies," says Mr. Borner, who worked for American Telephone & Telegraph Co. for 23 years before choosing his current trade.
Managers, he contends, "are afraid how they're going to look in the eyes of their peers.
My vision is to change human consciousness towards touch.
My attitude is: Let's come out of the closet."
Occasionally, all that's needed is a little coaxing.
Elisa Byler, a St. Louis masseuse, won over officials at Emerson Electric Co., a maker of electrical and electronic equipment, by providing documents and other articles trumpeting the therapeutic benefits of massage.
She notes that she also stresses professionalism during her weekly visits.
"I pull my hair back, wear a little makeup and look corporate," says Ms. Byler, who has been visiting Emerson since January.
"If I go in there as I normally dress, they'd ask, `Who is this hippie?'"
The self-proclaimed father of on-site massage is David Palmer, a 41-year-old San Francisco masseur whose mission is to save the touch-starved masses.
To help do this, Mr. Palmer developed a portable massage chair three years ago that he hopes will bring "structured touching" into mainstream America.
"The culture is not ready to take off its clothes, lie down and be touched for an hour for $45," he says.
"The idea is to keep the clothes on and to keep people seated.
The chair is a way to package massage."
Sitting in one of Mr. Palmer's chairs, which cost $425 and have since been copied by others, is a bit like straddling a recliner.
Customers lean forward, rest their knees on side supports and bury their face in padding on the back of the chair.
(Ms. Ohlman, the Grand Rapids masseuse, says she has heard the odd-looking contraption compared to something out of the Spanish Inquisition.)
Mr. Palmer, who serves as president of the On-Site Massage Association and writes an industry newsletter, says some 4,000 practitioners -- out of about 50,000 certified masseurs across the country -- now use massage chairs in the workplace, as well as on street corners, in airports and malls, and at conventions and other gatherings where weary people can be found.
Scot MacInnis, a masseur in Boulder, Colo., had a scary experience while massaging a man in a natural-foods supermarket as part of a store promotion.
Three minutes into the massage, the man curled up, began shaking and turned red.
Paramedics were called.
A week later, the man told Mr. MacInnis he had suffered a mild heart attack unrelated to the massage.
"It was a powerful point in my career," says the 31-year-old Mr. MacInnis, who has since taken out a $1 million liability policy for his business.
"But he pulled through, and after the ambulance left, there were still six people in line waiting for a massage.
The next woman was older, and I was afraid to touch her.
But it's like falling off a horse and getting back on."
Despite the number of fans that office massage has won, some purists look down on it, arguing that naked, full-body rubs are the only way to go.
Linda Aldridge, who does full-body work in Pittsburgh, says that while on-site massage is better than nothing, tired workers should realize it is only the tip of the iceberg.
"Whole areas of their bodies are neglected," she says, adding that clothes ruin the experience.
"There's nothing like skin to skin.
In what is believed to be the first cancellation of a loan to China since the June 4 killings in Beijing, an international bank syndicate has terminated a $55 million credit for a Shanghai property project.
The syndicate, led by Schroders Asia Ltd., agreed last November to provide the loan to Asia Development Corp., a U.S. property developer.
But several weeks ago, in the wake of the Beijing killings, the loan was canceled, according to bankers and executives close to the project.
Asia Development and Schroders declined to comment on the move.
Lenders had doubts about the project even before June 4, but the harsh crackdown, which caused many businesses to reassess their China transactions, "gave the banks the out they wanted," says an official close to the Shanghai venture.
The decision to cancel the loan exemplifies the tough attitude bankers have taken toward China since June 4.
While some commercial lending has resumed, international lenders remain nervous about China's economic troubles and foreign debt -- $40 billion at the end of 1988.
Many loans are being renegotiated, especially those tied to the hotel sector, which has been hit hard by a post-June 4 tourism slump.
Many bankers view property-sector loans as particularly risky.
The canceled Shanghai loan leaves Asia Development, a small concern, saddled with a half-completed 32-story apartment building and heavy debts.
The company owes $11 million to the Shui On Group, the project's Hong Kong contractor, and a significant, though unspecified, amount in legal fees to Coudert Brothers, a U.S. law firm, the sources say.
The project, known as Lotus Mansion, has been mired in controversy.
When the loan agreement was announced, it was hailed as one of the first Western-style financing transactions ever used in China.
Unlike most loans to China, there was no Chinese guarantor.
Instead, the banks secured a promise from state-owned Bank of Communications that it would lend Asia Development the entire $55 million at maturity to finance repayment of the original borrowing.
The loan was to have matured in just two to three years, as soon as construction was completed.
But in a letter sent in August to Asia Development, Schroders said the loan was terminated because the developer had failed to deliver adequate financial data and pay certain fees to the loan-management committee on time, according to officials close to the project.
Creditors involved in the project contend, however, that the termination actually had nothing to do with these technical violations.
Instead, the creditors say, the loan fell victim to nervousness about China's political turmoil, as well as to concern about the loan's security.
The bank syndicate is made up mostly of European banks, but it includes China's state-owned Citic Industrial Bank.
The 11 banks in the syndicate sustained no monetary losses because none of the credit facility had been drawn down.
K mart Corp. agreed to acquire Pace Membership Warehouse Inc. for $23 a share, or $322 million, in a move to expand its presence in the rapidly growing warehouse-club business.
The proposed merger comes as K mart's profit is declining and sales at its core discount stores are rising more slowly than at such competitors as Wal-Mart Stores Inc.
K mart, based in Troy, Mich., recently said net income would fall for the third consecutive quarter, after a 16% drop in the first half of its current fiscal year.
"The membership warehouse-club concept has great potential," the company's chairman, Joseph E. Antonini, said in a statement.
Warehouse clubs typically carry general merchandise and food products, which they sell for close to wholesale prices in no-frills stores.
Shoppers, many of whom operate small businesses, pay annual membership fees, which provide an income base for the stores.
K mart tested the warehouse-club sector last year with its acquisition of a 51% interest in Makro Inc.
But the Makro chain, which operates as a joint venture between K mart and SHV Holdings N.V. of the Netherlands, has only six stores and annual sales that one analyst estimated at about $300 million.
Six-year-old Pace, based in Aurora, Colo., operates 41 warehouse-club stores.
The company had losses for several years before turning profitable in fiscal 1988.
In the year ended Jan. 31, Pace rang up profit of $9.4 million, or 72 cents a share, after a tax-loss carry-forward, on sales of $1.3 billion, and analysts expect its results to continue to improve.
"The company turned the corner fairly recently in profitability," said Margo McGlade of PaineWebber Inc., who had been forecasting a 46% jump in Pace's net income from operations this year and another 42% increase next year.
"Warehouse productivity is really beginning to take off."
But some analysts contend K mart has agreed to pay too much for Pace.
"Even if you look at it as a turnaround situation, it's expensive," said Wayne Hood of Prudential-Bache Securities Inc.
"In my opinion, you would only pay that kind of price if you were getting a premier player in the industry."
Ms. McGlade of PaineWebber raised a more fundamental question about the deal.
"If K mart can't get its act together in discounting, why is it spending time worrying about other growing markets?"
She said, "I would say K mart's number one job is to address its market-share loss {in discount stores}, which longer-term will lead to improved profit margins.
At that point, perhaps diversification would be appropriate."
But K mart's Mr. Antonini is intent on pushing the company into new retail businesses.
For instance, K mart is opening big food and general merchandise stores, called hypermarkets, and warehouse-type stores specializing in office products and sporting goods.
It also operates Waldenbooks, Pay Less Drug Stores and Builders Square home improvement stores.
In composite trading on the New York Stock Exchange, K mart closed yesterday at $36 a share, up 12.5 cents.
Pace rose $2.625 to close at $22.125 a share in national over-the-counter trading.
A K mart spokesman said the acquisition would be financed with short-term borrowings.
Under terms of the agreement, a K mart subsidiary will soon make a tender offer for Pace shares.
Among the conditions of the offer is that Pace shareholders tender a majority of the company's shares outstanding.
The companies said Pace would ill continue to operate under its present management.
G. William Ryan, president of Post-Newsweek Stations, was named chief executive officer of the unit of this media company, effective Jan. 1.
He will succeed Joel Chaseman, who will remain a vice president of the company and continue to represent Post-Newsweek stations in several industry organizations, the company said.
literally.
Traders nervously watching their Quotron electronic-data machines yesterday morning were stunned to see the Dow Jones Industrial Average plummet 99 points in seconds.
A minute later it soared 128 points, then zoomed back down 113 points, 69 below Friday's close.
"It was crazy," said Neil Weisman, general partner of Chilmark Capital Corp.
"It was like flying without a pilot in the front of the plane."
But those who said "This can't be happening" were right.
The Quotrons were wrong.
Quotron Systems Inc., a Citicorp unit, blamed the 30-minute foul-up on "a timing problem in our software" caused by the enormous early volume -- about 145 million shares in the first hour of New York Stock Exchange trading.
The prices of the individual stocks that make up the average were correct, Quotron said, but the average was wrong.
Meanwhile, there was an awful lot of confusion.
At about 10:40 a.m. on the over-the-counter trading desk at a major brokerage firm, a veteran trader who buys and sells some of the most active stocks looked at a senior official and asked, "What's going on?
Is the market up or down?"
At the time, Quotron was reporting that the industrial average was down 70 points.
In fact, it was up 24.
Holly Stark, a vice president who heads the trading desk at Dillon Read Capital Corp., said that once she figured out the Quotron numbers were wrong, she called brokers to tell them.
"It's been kind of annoying, to say the least," she said.
To confuse matters further, when UAL Corp. stock finally opened on the New York Stock Exchange at 11:08 a.m., the price was listed at $324.75 a share, up about $45 from Friday; in fact, its true price was $224.75, down $55.
That was the New York Stock Exchange's blooper.
A spokesman cited a "technical error" and declined to elaborate.
And there were other blunders.
When the market opened at 9:30 a.m. EST, a reporter for the Reuters newswire miscalculated the industrial average's drop as a 4% decline when it really was down 0.7%.
"It was a case of human error, which we found almost immediately and corrected," a spokesman for Reuter in New York said.
Meanwhile, some currency traders at West German banks in Frankfurt said they sold dollars on the news and had to buy them back later at higher prices.
But it was the Quotron problems that had lingering effects.
Dillon Read's Ms. Stark said in early afternoon that she was still viewing prices and other data as subject to verification, and she said portfolio managers continued to question the numbers they saw on the screen.
It was the second time in less than a week that Quotron has had problems calculating the industrial average.
At the start of trading last Wednesday, the average appeared to plunge more than 200 points.
Actually, it was down only a few points at the time.
Quotron said that snafu, which lasted nine minutes, resulted from a failure to adjust for a 4-for-1 stock split at Philip Morris Cos.
A Quotron spokeswoman said recent software changes may have contributed to yesterday's problems.
She said Quotron switched to a backup system until the problems were corrected.
"Today of all days," she lamented.
"The eyes of the world were watching us.
Steven F. Kaplan was named a senior vice president of this graphics equipment company.
He retains his current positions as chief strategic officer of AM International and president of AM Ventures.
Houston attorney Dale Friend, representing a plaintiff in a damage suit, says he has negotiated a settlement that will strike a blow for his client.
Literally.
It turns out Mr. Friend's client, Machelle Parks of Cincinnati, didn't like the way defense attorney Tom Alexander acted during the legal proceedings.
So she has agreed to forgo monetary damages against Mr. Alexander's client in return for the right to punch the attorney.
Ms. Parks's mother also gets to cuff Mr. Alexander.
So does Mr. Friend and his law partner, Nick Nichols.
The bizarre arrangement grows out of Mr. Alexander's representation of Derr Construction Co., one of several defendants in a wrongful death lawsuit brought by Ms. Parks, the widow of a construction worker killed in January 1987 while working on a new Houston convention center.
Last month, Mr. Friend says, Mr. Alexander's associate agreed that Derr would pay $50,000 as part of an overall settlement.
But Mr. Alexander scuttled the deal at the last minute, angering the plaintiff's side.
"I never agreed to it," Mr. Alexander says, adding that "it's not necessary to pay these nuisance settlements."
When Ms. Parks and her mother heard about what had happened, Mr. Friend says, they volunteered that they would like to give Mr. Alexander a good walloping.
Mr. Friend says he passed that along to his adversary, and soon they were talking about the ground rules under which Derr could keep its money and the plaintiffs could take a shot at Mr. Alexander.
Although time and place have yet to be determined, some details are in place.
Mr. Friend says he agreed to strike Mr. Alexander above the belt.
Ms. Parks and her mother indicated they want to "catch him unawares from behind," he says.
Mr. Alexander, for his part, insisted that the punchers can't assign their pummeling rights to anyone else, can't use a blunt instrument and can't take a running start.
Mr. Alexander says he regards the agreement, which hasn't been submitted to a judge, as something of a joke.
However, he acknowledges they "have the option of taking a swat at me if they really want to."
Mr. Friend says his side is "dead serious."
Although they don't contemplate delivering any disabling blows, he says that Mr. Alexander will be asked to sign a release from liability, just in case.
After two years of drought, it rained money in the stock-index futures markets yesterday.
As financial markets rebounded, trading volume in the Chicago Mercantile Exchange's huge Standard & Poor's 500 stock-index futures pit soared, reaching near-record levels for the first time since October 1987.
The sudden influx of liquidity enabled several traders to reap six-figure windfalls in a matter of minutes as prices soared, traders said.
"Guys were minting money in there today," said John Legittino, a futures broker for Elders Futures Inc. in Chicago.
The S&P 500 futures contract, which moves in fractions of an index point under normal conditions, jumped two to three points in seconds early yesterday after an initial downturn, then moved strongly higher the rest of the day.
Each index point represents a $500 profit for each S&P 500 contract held.
For the first time since the 1987 crash, traders said that they were able to trade several hundred S&P 500 contracts at a time in a highly liquid market.
Many institutions and individual investors have shied away from stock-index futures, blaming them for speeding the stock market crash on Black Monday two years ago.
Since the crash, many futures traders haven't assumed large positions for fear that the S&P 500 market, with much of its customer order flow missing, would dry up if prices turned against them.
More than 400 traders jammed the S&P 500 futures pit to await the opening bell.
Traders were shouting bids and offers a full five minutes before the start of trading at 8:30 am
The contract fell five points at the open to 323.85, the maximum opening move allowed under safeguards adopted by the Merc to stem a market slide.
But several traders quickly stepped up and bid for contracts, driving prices sharply higher.
The market hovered near Friday's closing price of 328.85 for about a half hour, moving several index points higher or lower in seconds, then broke higher and didn't look back.
The S&P 500 contract that expires in December closed up a record 15.65 points on volume of nearly 80,000 contracts.
"Traders five feet from each other were making bids and offers that were a full point apart," said one S&P 500 broker.
"You could buy at the bid and sell at the offer and make a fortune," he marveled.
Several of Wall Street's largest securities firms, including Salomon Brothers Inc. and PaineWebber Inc., were also large buyers, traders said.
Salomon Brothers was among the largest sellers of stock-index futures last week, traders said.
Brokerage firms as a rule don't comment on their market activity.
Unlike the week following Black Monday two years ago, individual traders in the S&P 500 pit were also being uncharacteristically circumspect about their one-day profits.
"With the FBI around here, bragging rights are a thing of the past," said one trader, referring to the federal investigation of futures trading that so far has resulted in 46 indictments lodged against individuals on the Merc and the Chicago Board of Trade.
The market for $200 billion of high-yield junk bonds regained some of its footing as the Dow Jones Industrial Average rebounded from Friday's plunge.
But the junk recovery, led by the bellwether RJR Holdings bonds, was precarious.
No trading existed for the vast majority of junk bonds, securities industry officials said.
On Friday, trading in practically every issue ground to a halt as potential buyers fled and brokerage firms were unwilling to provide bid and offer prices for most issues.
"Nothing traded on Friday, and people weren't really sure where the market should have opened" yesterday, said Raymond Minella, co-head of merchant banking at Merrill Lynch & Co.
"But we had a fairly active day yesterday."
At Drexel Burnham Lambert Inc., the leading underwriter of junk bonds, "I was prepared to be in a very bad mood tonight," said David Feinman, a junk bond trader.
"Now, I feel maybe there's a little bit of euphoria."
But before the stock market rebounded from a sharp early sell-off yesterday, he said, "You couldn't buy {junk bonds} and you couldn't give them away."
Yesterday's rally was led by RJR Holdings 13 3/4% bonds, which initially tumbled three points, or $30 for each $1,000 face amount, to 96 1/4 before rebounding to 99 3/4.
Bonds issued by Kroger, Duracell, Safeway and American Standard also showed big gains, recovering almost all their losses from Friday and early yesterday.
But traders said the junk bond market increasingly is separating into a top-tier group, in which trades can be executed easily, and a larger group of lower-quality bonds in which liquidity -- or the ability to trade without too much difficulty -- has steadily deteriorated this year.
"Liquidity hasn't returned to the vast middle ground of the market," said Mr. Minella of Merrill.
"The deadbeats are still deadbeats," said Mr. Feinman of Drexel.
Analysts are concerned that much of the high-yield market will remain treacherous for investors.
Paul Asquith, associate professor at the Massachusetts Institute of Technology's Sloan School of Management, citing a pattern of junk-bond default rates that are low in the early years after issuance and rise later, says, "We're now in a period where we're starting to see defaults from the big issue years of 1984 to 1986."
Mark Bachmann, a senior vice president at Standard & Poor's Corp., confirms that there is "increasing concern about the future liquidity of the junk bond market."
"Junk bonds are a highly stratified market," said Lewis Glucksman, vice chairman of Smith Barney, Harris Upham & Co.
"There's a whole bunch of stuff that's money good and a whole bunch of stuff that's not so good."
Analysts at Standard & Poor's say junk bond offerings by "tightly stretched" issuers seem to be growing.
Almost $8 billion of junk bonds that are considered untradeable include issues from SCI TV, Gillette Holdings (not related to Gillette Co.), Interco, Seaman Furniture, Allied Stores, Federated Department Stores, National Gypsum, M.D.C. Holdings, Micropolis, Leaseway Transportation and Price Communications.
"You could still have some very bad times ahead," said Mr. Bachmann.
"It's possible to have a 10% default rate in one year, because we're already seeing big problems in the midst of a pretty strong economy.
I'm certainly not comfortable saying we've seen the bottom."
But yesterday's rally among "good" junk was a badly needed tonic for the market.
Many issues "bounced off the floor," Mr. Minella said, and benchmark junk issues "recovered all of their losses" from Friday and early yesterday.
In contrast, he says, "The stock market gained back only about half what it lost Friday, and the {government} bond market lost about half what it gained Friday."
Traders said yesterday's rally was fueled by insurance companies looking for bargains after a drastic slide in prices the past month.
In addition, mutual funds didn't appear to be major sellers of high-yield securities as was expected.
"Sometimes a shakeout is healthy," said Drexel's Mr. Feinman.
"People will learn to be more circumspect.
If they do good credit analysis, they will avoid the hand grenades.
I think the market is in good shape.
Should you really own stocks?
That's a question a lot of people are asking, following the stock market's stunning display of volatility.
Whipsawed financially and emotionally by Friday's heartstopping 190-point drop in the Dow Jones Industrial Average and yesterday's 88-point rebound, they're wondering if an individual has any business being in the market.
The answer, say academic researchers, money managers and investment specialists, is yes -- as long as you approach the stock market as an investor.
But, they say, people shouldn't try to be traders, who buy and sell in an effort to ride the latest economic trend or catch the next hot stock.
The case for owning stocks over the long-term is compelling.
"If you look at 75 years worth of investment history -- including the Great Depression and every bear market since -- stocks have outperformed almost everything an individual could have owned by a long shot," says Barry Berlin, vice president at First Wachovia Capital Management.
A dollar invested in the stock market in 1926 would have grown to $473.29 by the end of last June, according to Laurence Siegel, managing director at Ibbotson Associates Inc.
But a dollar invested in long-term bonds in 1926 would have grown to only $16.56, and a dollar put in Treasury bills would equal a meager $9.29.
The longer the time period, the less risk there is of losing money in the stock market.
Over time, the odds increasingly favor the investor with a diversified portfolio.
For instance, Ken Gregory, a San Francisco money manager, calculates that if an investor holds a basket of stocks that tracks the Standard & Poor's 500-stock index, the chance of losing money is 3% to 4% over a 10-year period, compared with 15% over three years and 30% over one year.
"If you don't need the money for 10 years, there's a clear-cut case for sticking to a steady core of stocks," Mr. Gregory says.
Stock-market investments also help balance the other assets an individual owns, says John Blankenship Jr., president of the Institute of Certified Financial Planners.
Stocks have a place in an investors' portfolio along with real estate, bonds, international securities and cash, he says.
There are some important caveats: Before investing in stocks, individuals should have at least three to six months of living expenses set aside in the bank, most investment advisers say.
Individuals also should focus on building equity in a home, which provides some protection against inflation, as well as a nest-egg that can be cashed in late in life to help cover the cost of retirement living.
People also shouldn't invest money in stocks that they'll need in the near future -- for example, for college tuition payments or retirement expenses.
"You may have to sell your stocks at a time when the market takes a plunge," says Mr. Blankenship, a Del Mar, Calif. financial planner.
But once the basics are covered, "then I would start to invest, even if it's as little as $1,000," says Michael Lipper, president of Lipper Analytical Services Inc.
He says individuals should consider not just stocks, but other long-term investments, such as high-quality bonds.
Despite the strong case for stocks, however, most pros warn that individuals shouldn't try to profit from short-term developments.
"It's very difficult to do," says Donald Holt, a market strategist for Wedbush Morgan Securities, a Los Angeles brokerage firm.
"Our markets move so fast and they are so volatile, there's no way the average investor can compete with the pros."
Individual investors face high transaction costs of moving in and out of the market.
The cost of executing stock orders varies from brokerage to brokerage and with the size of the order, but 2% of the order's value is an average, says Stephen Boesel, manager of T. Rowe Price's Growth and Income mutual fund.
And assuming their first investment is successful, investors will have to pay taxes on their gains.
That can reduce returns by a third or more, once local taxes are included, Mr. Lipper says.
After that, individual traders face the risk that the new investment they choose won't perform well -- so their trading costs could be sustained for nothing.
"It's very tough for most individuals to out-trade the mutual funds or the market," says Mr. Lipper.
"You should really think twice if you think you can out-smart the system."
Then, too, many individual investors lack the sturdy emotional makeup professionals say is needed to plunge in and out of the market.
So what's the best way to buy stocks?
"Unless an individual has a minimum of between $50,000 and $100,000 to invest in stocks, he's still better off in mutual funds than in individual stocks, in terms of getting enough attention from a competent broker," says Mr. Lipper.
Still, he adds, "I could see owning both, given that individuals often have an advantage over big investors in spotting special situations based on their own insights," he adds.
George Douglas, first vice president at Drexel Burnham Lambert Inc., says that individuals have a particular edge now in "small to medium-size niche companies with exciting earnings prospects" -- a traditional stomping ground for small investors.
This growth sector, which usually carries a price/earnings multiple about twice that of the Standard & Poor's 500, happens to include some of the market's most attractive bargains right now.
"It's now selling at a multiple about even with the market," says Mr. Douglas.
Moreover, Mr. Douglas sees a revival of institutional interest in smaller growth stocks that could boost the performance of these stocks in the medium term.
Many big Wall Street brokerage firms who eliminated their research effort in stocks of emerging growth companies a few years ago are now resuming coverage of this area, he notes.
"We're seeing a real turnaround in interest in small growth stocks," he says.
The pros strenuously advise individuals to stay away from the latest investment fad.
They say that's especially important this late in the growth phase of the economic cycle, when there's no robust bull market to bail investors out of their mistakes.
Friday's correction presents "a pretty good buying opportunity, but let's not speculate at this point in the business cycle," says Carmine Grigoli, chief equity portfolio strategist at First Boston Corp.
"Buy stocks on weakness for their long-term fundamentals," he says.
In the long run, investment advisers say, most investors will be better off using the dollar-cost averaging method of buying stocks.
In this method, a person invests a regular amount every month or quarter into the stock market whether the market is up or down.
That cuts the risk, Mr. Gregory, the San Francisco money manager, points out.
"When the market is low, you are buying more shares, and when it's high, you're buying fewer shares," he says.
Otherwise, if you put all your money in at one time, by sheer bad luck, you might pick a terrible time, and have to wait three years to get even, Mr. Gregory says.
A disciplined program will work the best, Mr. Boesel says.
"One of the hardest things to do is to buy stocks when the market is down," he says.
"But that's just the time when you should be buying them."
Compound annual returns, including price changes and income from interest and dividends
*Actual performance, not annualized
Source: Ibbotson Associates Inc.
The following issues were recently filed with the Securities and Exchange Commission: Gehl Co., initial public offering of two million shares of common stock, of which 1,450,635 shares are being offered by the company and 549,365 shares by holders, via Blunt, Ellis & Loewi Inc. and Robert W. Baird & Co.
Giant Industries Inc., initial public offering of 3,111,000 common shares, of which 2,425,000 will be sold by the company, and the rest by holders, via Shearson Lehman Hutton Inc. and Hanifen, Imhoff Inc.
Inefficient-Market Fund Inc., initial offering of five million common shares, via Smith Barney, Harris Upham & Co.
Jason Overseas Ltd., initial offering of four million common shares, of which 3.2 million will be sold in the U.S., and the balance outside the U.S., via Smith Barney, Harris Upham & Co. and Mabon, Nugent & Co.
Donald Trump, who faced rising doubt about his bid for American Airlines parent AMR Corp. even before a United Airlines buy-out came apart Friday, withdrew his $7.54 billion offer.
Separately, bankers representing the group trying to buy United's parent UAL Corp. met with other banks about reviving that purchase at a lower price, possibly around $250 a share, or $5.65 billion.
But a lower bid could face rejection by the UAL board.
Mr. Trump, who vowed Wednesday to "go forward" with the bid, said he was dropping it "in light of the recent change in market conditions."
He said he might now sell his AMR stake, buy more shares, or make another offer at a lower price.
The Manhattan real-estate developer acted after the UAL buyers failed to obtain financing for their earlier $300-a-share bid, which sparked a selling panic among that snowballed into a 190-point drop Friday in the Dow Jones Industrial Average.
News about UAL and AMR, whose shares never reopened after trading was halted Friday for the UAL announcement, sent both stocks nosediving in composite trading on the New York Stock Exchange.
UAL tumbled $56.875 to $222.875 on volume of 2.3 million shares, and AMR declined by $22.125 to $76.50 as 4.7 million shares changed hands.
Together, the two stocks wreaked havoc among takeover stock traders, and caused a 7.3% drop in the Dow Jones Transportation Average, second in size only to the stock-market crash of Oct. 19, 1987.
Some said Friday's market debacle had given Mr. Trump an excuse to bail out of an offer that showed signs of stalling even before problems emerged with the UAL deal.
After reaching an intraday high of $107.50 the day Mr. Trump disclosed his bid Oct. 5, AMR's stock had retreated as low as $97.75 last week.
Some takeover stock traders had been betting against Mr. Trump because he has a record of disclosing stakes in companies that are potential takeover targets, then selling at a profit without making a bid.
"He still hasn't proven his mettle as a big-league take-out artist," said airline analyst Kevin Murphy of Morgan Stanley & Co.
"He's done this thing where he'll buy a little bit of a company and then trade out of it.
He's written this book, `The Art of the Deal.'
Why doesn't he just follow through on one of these things?"
Mr. Trump withdrew his bid before the AMR board, which is due to meet tomorrow, ever formally considered it.
AMR had weighed a wide range of possible responses, from flat rejection to recapitalizations and leveraged buy-outs that might have included either employees, a friendlier buyer such as Texas billionaire Robert Bass, or both.
AMR had also sought to foil Mr. Trump in Congress by lobbying for legislation that would have bolstered the authority of the Transportation Department to reject airline buy-outs.
Yesterday, Mr. Trump tried to put the blame for the collapse of the UAL deal on Congress, saying it was rushing through a bill to protect AMR executives.
"I believe that the perception that legislation in this area may be hastily approved contributed to the collapse of the UAL transaction, and the resulting disruption in the financial markets experienced this past Friday," Mr. Trump wrote members of Congress.
AMR declined to comment, and Mr. Trump didn't respond to requests for interviews.
Mr. Trump never said how much AMR stock he had bought, only that his holdings were "substantial."
However, he only received federal clearance to buy more than $15 million of the stock on Sept. 20, when the price rose $2 a share to $78.50.
Between then and his bid on Oct. 5, the price fluctuated between $75.625 and $87.375.
In an attempt to persuade investors that his bid wasn't just "a stock play," Mr. Trump promised last week to notify the market before selling any shares.
AMR was trading at around $84 yesterday before his withdrawal announcement, then immediately fell to about $76.
Assuming that he paid a rough average price of $80 a share, and assuming he didn't sell before his announcement reached the market, Mr. Trump could be sitting with a modest loss with the stock at $76.50.
Some analysts said AMR Chairman Robert Crandall might seize the opportunity presented by the stock price drop to protect the nation's largest airline with a defensive transaction, such as the sale of stock to a friendly holder or company employees.
However, other knowledgeable observers said they believed Mr. Crandall and the AMR board might well decide to tough it out without taking any extra steps.
Some analysts said they believed Mr. Trump, whose towering ego had been viewed by some as a reason to believe he wouldn't back out, might come back with a lower bid.
Ray Neidl of Dillon Read & Co. said Mr. Trump "is stepping back and waiting for the dust to settle.
I'm sure he still wants AMR."
But others remained skeptical.
"I was never sure Donald Trump really wanted to take AMR," said John Mattis, a bond analyst with Shearson Lehman Hutton Inc.
"What happened with United was a gracious way for him to bow out."
Mr. Trump never obtained financing for his bid.
That skepticism would leave him with an even greater credibility problem should he return that would handicap him in any effort to oust the board in a proxy fight.
Meanwhile, Citicorp and Chase Manhattan Corp., the two lead lenders on the UAL buy-out, met with other banks yesterday to determine if they would be willing to finance the buy-out at a lower price.
Officials familiar with the talks said Citicorp had discussed lowering the offer to $250 a share, but said that price was a talking point and that no decision has been made.
At $250 a share, the group would have to borrow about $6.1 billion from banks.
The first UAL deal unraveled after Citibank and Chase couldn't raise $7.2 billion.
Citibank and Chase had agreed to commit $3 billion, and said they were "highly confident" of raising another $4.2 billion.
Together, Citicorp and Chase received $8 million in fees to raise the rest of the financing.
But other banks balked at the low interest rate and banking fees the UAL group was willing to pay them.
Officials familiar with the bank talks said the UAL buy-out group -- UAL pilots, management, and British Airways PLC -- is now willing to pay higher bank fees and interest, but isn't likely to boost its $965 million equity contribution.
Nor is the group likely to come forward with a revised offer within the next 48 hours despite the hopes of many traders.
The group's advisers want to make certain they have firm bank commitments the second time around.
Even if the buy-out group is able to obtain financing, the transaction still faces obstacles.
UAL's board could reject the new price as too low, especially since there aren't any competing bids.
Los Angeles investor Marvin Davis, whose $275-a-share offer was rejected by UAL's board, hasn't shown signs of pursuing a $300-a-share back-up bid he made last month.
In addition, the coalition of labor and management, longtime enemies who joined forces only under the threat of Mr. Davis's bid, could break apart now.
The group's resilience gets its first test today when 30 top pilot union leaders convene outside Chicago in a previously scheduled meeting.
Union Chairman F.C. (Rick) Dubinsky faces the tough task of explaining why banks refused to finance a buy-out the members approved overwhelmingly last week.
The pilot union is vowing to pursue an acquisition whatever the board decides.
But if the board rejects a reduced bid and decides to explore other alternatives, it could transform what has been a harmonious process into an adversarial one.
The pilots could play hardball by noting they are crucial to any sale or restructuring because they can refuse to fly the airplanes.
If they were to insist on a low bid of, say $200 a share, the board mightn't be able to obtain a higher offer from other bidders because banks might hesitate to finance a transaction the pilots oppose.
Also, because UAL Chairman Stephen Wolf and other UAL executives have joined the pilots' bid, the board might be forced to exclude him from its deliberations in order to be fair to other bidders.
That could cost him the chance to influence the outcome and perhaps join the winning bidder.
Influential members of the House Ways and Means Committee introduced legislation that would restrict how the new savings-and-loan bailout agency can raise capital, creating another potential obstacle to the government's sale of sick thrifts.
The bill, whose backers include Chairman Dan Rostenkowski (D., Ill.), would prevent the Resolution Trust Corp. from raising temporary working capital by having an RTC-owned bank or thrift issue debt that wouldn't be counted on the federal budget.
The bill intends to restrict the RTC to Treasury borrowings only, unless the agency receives specific congressional authorization.
"Such agency `self-help' borrowing is unauthorized and expensive, far more expensive than direct Treasury borrowing," said Rep. Fortney Stark (D., Calif.), the bill's chief sponsor.
The complex financing plan in the S&L bailout law includes raising $30 billion from debt issued by the newly created RTC.
This financing system was created in the new law in order to keep the bailout spending from swelling the budget deficit.
Another $20 billion would be raised through Treasury bonds, which pay lower interest rates.
But the RTC also requires "working" capital to maintain the bad assets of thrifts that are sold, until the assets can be sold separately.
That debt would be paid off as the assets are sold, leaving the total spending for the bailout at $50 billion, or $166 billion including interest over 10 years.
"It's a problem that clearly has to be resolved," said David Cooke, executive director of the RTC.
The agency has already spent roughly $19 billion selling 34 insolvent S&Ls, and it is likely to sell or merge 600 by the time the bailout concludes.
Absent other working capital, he said, the RTC would be forced to delay other thrift resolutions until cash could be raised by selling the bad assets.
"We would have to wait until we have collected on those assets before we can move forward," he said.
The complicated language in the huge new law has muddied the fight.
The law does allow the RTC to borrow from the Treasury up to $5 billion at any time.
Moreover, it says the RTC's total obligations may not exceed $50 billion, but that figure is derived after including notes and other debt, and subtracting from it the market value of the assets the RTC holds.
But Congress didn't anticipate or intend more public debt, say opponents of the RTC's working-capital plan, and Rep. Charles Schumer (D., N.Y.) said the RTC Oversight Board has been remiss in not keeping Congress informed.
"That secrecy leads to a proposal like the one from Ways and Means, which seems to me sort of draconian," he said.
"The RTC is going to have to pay a price of prior consultation on the Hill if they want that kind of flexibility."
The Ways and Means Committee will hold a hearing on the bill next Tuesday.
We're about to see if advertising works.
Hard on the heels of Friday's 190-point stock-market plunge and the uncertainty that's followed, a few big brokerage firms are rolling out new ads trumpeting a familiar message: Keep on investing, the market's just fine.
Their mission is to keep clients from fleeing the market, as individual investors did in droves after the crash in October
Just days after the 1987 crash, major brokerage firms rushed out ads to calm investors.
This time around, they're moving even faster.
PaineWebber Inc. filmed a new television commercial at 4 p.m. EDT yesterday and had it on the air by last night.
Fidelity Investments placed new ads in newspapers yesterday, and wrote another new ad appearing today.
Shearson Lehman Hutton Inc. by yesterday afternoon had already written new TV ads.
It considered running them during tomorrow night's World Series broadcast but decided not to when the market recovered yesterday.
Other brokerage firms, including Merrill Lynch & Co., were plotting out potential new ad strategies.
The brokerage firms learned a lesson the last time around, when frightened investors flooded the phone lines and fled the market in a panic.
This time, the firms were ready.
Fidelity, for example, prepared ads several months ago in case of a market plunge.
When the market went into its free fall Friday afternoon, the investment firm ordered full pages in the Monday editions of half a dozen newspapers.
The ads touted Fidelity's automated 800-number beneath the huge headline, "Fidelity Is Ready For Your Call."
A Fidelity spokesman says the 800-line, which already was operating but which many clients didn't know about, received about double the usual volume of calls over the weekend.
"A lot of investor confidence comes from the fact that they can speak to us," he says.
"To maintain that dialogue is absolutely crucial.
It would have been too late to think about on Friday.
We had to think about it ahead of time."
Today's Fidelity ad goes a step further, encouraging investors to stay in the market or even to plunge in with Fidelity.
Underneath the headline "Diversification," it counsels, "Based on the events of the past week, all investors need to know their portfolios are balanced to help protect them against the market's volatility."
It goes on to plug a few diversified Fidelity funds by name.
PaineWebber also was able to gear up quickly thanks to the 1987 crash.
In the aftermath of the 1987 debacle, the brokerage firm began taping commercials in-house, ultimately getting its timing down fast enough to tape a commercial after the market closed and rush it on the air that night.
It also negotiated an arrangement with Cable News Network under which CNN would agree to air its last-minute creations.
The new PaineWebber commercial, created with ad agency Saatchi & Saatchi Co., features Mary Farrell, one of the firm's most visible investment strategists, sounding particularly bullish.
Taped just as the market closed yesterday, it offers Ms. Farrell advising, "We view the market here as going through a relatively normal cycle. . . .
We continue to feel that the stock market is still the place to be for long-term appreciation."
The spot was scheduled to appear three times on CNN last night.
PaineWebber considered an even harder sell, recommending specific stocks.
Instead, it settled on just urging the clients who are its lifeline to keep that money in the market.
"We're saying the worst thing that anyone can do is to see the market go down and dump everything, which just drives the prices down further," says John Lampe, PaineWebber's director of advertising.
"If you owned it and liked it Friday, the true value hasn't changed."
He adds, "This isn't 1987 revisited."
With the market fluctuating and then closing up more than 88 points yesterday, investment firms had to constantly revise their approach.
At Shearson Lehman, executives created potential new commercials Friday night and throughout the weekend, then had to regroup yesterday afternoon.
The plan had been to make one of Shearson's easy-to-film, black-and-white "Where We Stand" commercials, which have been running occasionally in response to news events since 1985.
The ad would have run during the World Series tomorrow, replacing the debut commercial of Shearson's new ad campaign, "Leadership by Example."
But in a meeting after the market closed yesterday, Shearson executives decided not to go ahead with the stock-market ad.
"We don't think at this point anything needs to be said.
The market seems to be straightening out; we're taking a wait-and-see attitude," says Cathleen B. Stewart, executive vice president of marketing.
In any case, the brokerage firms are clearly moving faster to create new ads than they did in the fall of 1987.
But it remains to be seen whether their ads will be any more effective.
In 1987, despite a barrage of ads from most of the major investment firms, individuals ran from the market en masse.
Now the firms must try their hardest to prove that advertising can work this time around.
Ad Notes. . . .
ARNOLD ADVERTISING:
Edward Eskandarian, former chairman of Della Femina, McNamee WCRS/Boston, reached an agreement in principle to acquire a majority stake in Arnold Advertising, a small Boston shop.
Terms weren't disclosed.
Mr. Eskandarian, who resigned his Della Femina post in September, becomes chairman and chief executive of Arnold.
John Verret, the agency's president and chief executive, will retain the title of president.
Separately, McDonald's Corp., Oak Brook, Ill., named Arnold to handle its estimated $4 million cooperative ad account for the Hartford, Conn., area.
That account had been handled by Della Femina, McNamee WCRS.
EDUCATION ADS:
A 142-page ad supplement to Business Week's special "Corporate Elite" issue calls on business leaders to use their clout to help solve the nation's education crisis.
The supplement, the largest ever for the magazine, includes ads from 52 corporate advertisers and kicks off a two-year Business Week initiative on education.
The magazine will distribute 10% of the gross revenues from the supplement as grants to innovative teachers.
You know what the law of averages is, don't you?
It's what 1) explains why we are like, well, ourselves rather than Bo Jackson; 2) cautions that it's possible to drown in a lake that averages two feet deep; and 3) predicts that 10,000 monkeys placed before 10,000 pianos would produce 1,118 publishable rock 'n' roll tunes.
Baseball, that game of the long haul, is the quintessential sport of the mean, and the mean ol' law caught up with the San Francisco Giants in the World Series last weekend.
The team that dumped runs by the bushel on the Chicago Cubs in the National League playoffs was held to just one in two games by the home-team Oakland A's, the gang that had been done unto similarly by the Los Angeles Dodgers and Orel Hershiser in last year's tournament.
Morever, much of the damage was accomplished by A's who had some catching up to do.
In game two, on a cool Sunday evening in this land of perpetual autumn, a lot of the catching up was done by the A's catcher, Terry Steinbach.
He hit a 2-0 pitch from Rick Reuschel into the left-field stands in inning four to stretch his team's lead from 2-1 to a decisive 5-1, where it stayed.
So what if Steinbach had struck just seven home runs in 130 regular-season games, and batted in the seventh position of the A's lineup.
"If you get your pitch, and take a good swing, anything can happen," he later remarked.
On Saturday night, quite a few of the boys in green and gold salted away successes to salve the pain of past and, no doubt, future droughts.
Mark McGwire, the big, red-haired Oakland first baseman, had three hits in four at bats, two more than he'd had in the five-game Dodger series in which he'd gone 1-for-17.
The A-men batting Nos. 6 through 9, a.k.a. the "bottom of the order," got seven of their team's 11 hits and scored four of its runs in a 5-0 decision.
Right-hander Dave Stewart held the Giants to five hits to account for the zero on the other side of the Saturday ledger.
That he was the A's winningest pitcher during its American League campaign with a 21-9 mark, plus two wins over Toronto in the playoffs, indicates he may have some evening up coming, but with the way his split-fingered fastball is behaving, that might not be this week.
The same goes for Mike Moore, another veteran who overcame early struggles to permit the Giants but a run and four hits in seven innings in Sunday's contest.
"Every guy they put out there had a better split-finger than the guy before," marveled Giant manager Roger Craig.
He's an ex-hurler who's one of the leading gurus of the fashionable delivery, which looks like a fastball until it dives beneath the lunging bat.
The upshot of the downshoot is that the A's go into San Francisco's Candlestick Park tonight up two games to none in the best-of-seven fest.
The stat to reckon with here says that about three of four clubs (29 of 39) that took 2-0 Series leads went on to win it all.
That's not an average to soothe Giant rooters.
One might think that the home fans in this Series of the Subway Called BART (that's a better name for a public conveyance than "Desire," don't you think?) would have been ecstatic over the proceedings, but they observe them in relative calm.
Partisans of the two combatants sat side by side in the 49,000-plus seats of Oakland Coliseum, and while they cheered their favorites and booed the opposition, hostilities advanced no further, at least as far as I could see.
A few folks even showed up wearing caps bearing the colors and emblems of both teams.
"I'm for the Giants today, but only because they lost yesterday.
I love 'em both.
The only thing I'm rooting for is for the Series to go seven games," said David Williams, a Sacramento septuagenarian, at the Coliseum before Sunday's go.
The above represents a triumph of either apathy or civility.
I choose to believe it's the latter, although it probably springs from the fact that just about everyone out here, including the A's and Giants, is originally from somewhere else.
Suffice it to say that if this were a New York Yankees-Mets series, or one between the Chicago Cubs and White Sox (hey, it's possible), you'd need uniformed police in every other seat to separate opposing fans, and only the suicidal would bifurcate their bonnets.
Anyway, the A's gave you a lot of heroes to root for.
In the opening game, besides Steinbach and Stewart, there was Walt Weiss, a twiggy-looking, second-year shortstop who had lost a couple months of the season to knee surgery.
He was flawless afield (ditto in game two), moved a runner along in the A's three-run second inning, and homered for his team's final tally.
Such is his reputation among the East Bay Bashers that when he hit his first career home run last season, the fan who caught it agreed to turn the ball over to him in return for an autograph.
Not his autograph; power-hitter McGwire's.
An A's co-hero of the second game was Rickey Henderson, who exemplifies the hot side of the hot-cold equation.
He smoked Toronto in the playoffs with six hits, seven walks and eight stolen bases in 22 at bats, and continued that by going 3-for-3 at the plate Sunday, along with walking, stealing a base and scoring a run.
"When you're in the groove, you see every ball tremendously," he lectured.
The cold guys in the set were Will Clark, Kevin Mitchell and Matt Williams, the Giants' 3-4-5 hitters.
They combined for 25 hits, six home runs and 24 runs batted in in the five games against the Cubs.
They went a collective 5-for-24 here, with zero homers and ribbies.
It's that last set of numbers, as much as anything else, that gives the Giants hope in the Series games to come.
"I believe in the law of averages," declared San Francisco batting coach Dusty Baker after game two.
"I'd rather see a so-so hitter who's hot come up for the other side than a good hitter who's cold."
But the old Dodger slugger wisely offered no prediction about when good times would return to his side.
"When it goes, you never know when you'll get it back," he said.
"That's baseball.
NCR Corp. reported a 10% drop in third-quarter net income, citing intense competition that caused its gross profit margins to dip.
Net income for the quarter fell to $93.1 million from $103.1 million, roughly what analysts had expected.
But per-share profit dropped only 2% to $1.23 a share from $1.26 a share, as the company continued its stock buy-back plan.
Average shares outstanding dropped to 75.8 million from 82.1 million.
Revenue fell 1% to $1.39 billion from $1.41 billion.
The computer maker, which sells more than half its goods outside the U.S., also said the negative effect of a stronger U.S. dollar will "adversely affect" its fourth-quarter performance and "make it difficult" to better 1988 results.
NCR said revenue declined both in the U.S. and overseas, reflecting a world-wide softening of the computer markets.
The company, however, said orders in the U.S. showed "good gains" during the latest quarter.
Analysts estimate those gains at 12% to 13%, a good part of it coming from large orders placed by a few of NCR's major customers.
In addition to a general slowing of the computer industry, NCR, which sells automated teller machines and computerized cash registers, is also affected by the retail and financial sectors, "areas of the economy that have generally not been robust," notes Sanjiv G. Hingorani, an analyst for Salomon Brothers Inc.
These factors, combined with a strong dollar, should negatively affect the current quarter's results, NCR said.
In the year-earlier fourth quarter, NCR had profit of $149.6 million, or $1.85 a share, on revenue of $1.8 billion.
Mr. Hingorani said he lowered his full-year estimates for 1989 to $5.35 a share from $5.50 a share.
Revenue projections were slashed to $6.03 billion from $6.20 billion.
Last year, NCR had net income of $439.3 million, or $5.33 a share, on $5.99 billion in revenue.
For the nine months, the company's earnings fell 9% to $264.6 million, or $3.40 a share, from $289.7 million, or $3.49 a share.
Revenues declined 1% to $4.17 billion from $4.19 billion.
In New York Stock Exchange composite trading yesterday, NCR shares fell 75 cents to close at $57.
Concerning your Sept. 19 article "Wall Street Firms Link Analysts' Pay to Performance," I'm delighted that Wall Street is finally tuning in to the hard, cold facts of the real working world.
If the firms are serious, however, why limit the practice to the poor, maligned analysts whose ability to see into the future is fragile at best?
Why not extend the same harsh standards to the sales force, and pay brokers a base salary with annual bonus based on how much money they made for their clients during the year?
That should stop a lot of account-churning, and produce a stock market driven only by professional concern, careful thought and good sense.
Now, wouldn't that be a novelty.
Phyllis Kyle Stephenson Newport News, Va.
Steve Clark, a Shearson Lehman Hutton Inc. trader, reported for work at 5 a.m., two and a half hours before the usual Monday morning strategy meeting.
At Jefferies & Co., J. Francis Palamara didn't reach the office until 5:30 a.m., but then he had been up most of the night at home.
"I had calls all night long from the States," he said.
"I was woken up every hour -- 1:30, 2:30, 3:30, 4:30.
People are looking for possible opportunities to buy, but nobody wants to stick their chin out."
For many of London's securities traders, it was a day that started nervously in the small hours.
By lunchtime, the selling was at near-panic fever.
But as the day ended in a frantic Wall Street-inspired rally, the City breathed a sigh of relief.
So it went yesterday in the trading rooms of London's financial district.
In the wake of Wall Street's plunge last Friday, the London market was considered especially vulnerable.
And before the opening of trading here yesterday, all eyes were on early trading in Tokyo for a clue as to how widespread the fallout might be.
By the time trading officially got under way at 9 a.m., the news from Asia was in.
And it left mixed signals for London.
Tokyo stocks closed off a significant but less-than-alarming 1.8% on thin volume; Hong Kong stocks declined 6.5% in orderly trading.
At Jefferies' trading room on Finsbury Circus, a stately circle at the edge of the financial district, desktop computer screens displayed the London market's major barometer -- the Financial Times-Stock Exchange 100 Share Index.
Red figures on the screens indicated falling stocks; blue figures, rising stocks.
Right away, the reds outnumbered the blues, 80 to 20, as the index opened at 2076.8, off 157.1 points, or 7%.
"I see concern, but I don't see any panic," said Mr. Palamara, a big, good-humored New York native who runs the 15-trader office.
The Jefferies office, a branch of the Los Angeles-based firm, played it conservatively, seeking to avoid risk.
"This is not the sort of market to have a big position in," said David Smith, who heads trading in all non-U.S. stocks.
"We tend to run a very tight book."
Jefferies spent most of its energies in the morning trying to match buyers and sellers, and there weren't many buyers.
"All the takeover stocks -- Scottish & Newcastle, B.A.T, DRG -- are getting pretty well pasted this morning," Mr. Smith said.
Seconds later, a 7,500-share "sell" order for Scottish & Newcastle came in.
For the third time in 15 minutes, a trader next to Mr. Smith left the no-smoking area to have a cigarette.
On the screens, only two forlorn blue figures remained, but the index had recovered a few points and was off about 140.
"Because Tokyo didn't collapse, let's pick up a little stock," Mr. Smith said.
He targeted 7,500 shares of Reuters and punched a button to call up on his screen other dealers' price quotes.
The vivid yellow figures showed the best price at 845 pence, ($13.27) and Mr. Smith's traders started putting out feelers.
But the market sensed a serious buyer on a day dominated by selling, and the quotes immediately jumped to 850 pence.
"When I want to buy, they run from you -- they keep changing their prices," Mr. Smith said.
"It's very frustrating."
He temporarily abandoned his search for the Reuters shares.
By this time, it was 4:30 a.m. in New York, and Mr. Smith fielded a call from a New York customer wanting an opinion on the British stock market, which had been having troubles of its own even before Friday's New York market break.
"Fundamentally dangerous. . . ," Mr. Smith said, almost in a whisper, ". . . .fundamentally weak . . . fairly vulnerable still . . . extremely dangerously poised . . .
we're in for a lot of turbulence. . . ."
He was right.
By midday, the London market was in full retreat.
"It's falling like a stone," said Danny Linger, a pit trader who was standing outside the London International Financial Futures Exchange.
Only half the usual lunchtime crowd gathered at the tony Corney & Barrow wine bar on Old Broad Street nearby.
Conversation was subdued as most patrons watched the latest market statistics on television.
At 12:49 p.m., the index hit its low, 2029.7, off 204.2 points.
"France opened the limit down, off at least 10% if you could calculate the index, which you couldn't," Mr. Clark, the Shearson trader, said early in the afternoon.
"Spain is down 10% and suspended, Sweden's down 8%, Norway 11%.
This market has been very badly damaged."
As 2:30 p.m. -- Wall Street's opening time -- neared, Shearson traders and salesmen traded bets on how low the New York market would open.
In the center of the trading floor, chief trader Roger Streeter and two colleagues scrambled for the telephones as soon as the New York market opened -- plummeting more than 60 points in the first few minutes.
They saw an opportunity created by the sell-off.
As Wall Street traders dumped American Depositary Receipts in Jaguar PLC, Mr. Streeter and trader Sam Ruiz bought them to resell in the U.K.
Investors here still expect Ford Motor Co. or General Motors Corp. to bid for Jaguar.
Suddenly, after about 45 minutes, the U.S. markets rallied.
"The MMI has gone better," shouted one trader at about 3:15 London time, as the U.S. Major Markets Index contract suddenly indicated a turnabout.
As Wall Street strengthened, the London trading room went wild.
Traders shouted as their screens posted an ever-narrowing loss on Wall Street.
Then, nine minutes later, Wall Street suddenly rebounded to a gain on the day.
"Rally! Rally! Rally!" shouted Shearson trader Andy Rosen, selling more Jaguar shares.
"This is panic buying!"
As the London market rallied, some wondered whether the weekend of worrying and jitters had been worth it.
The London index closed at 2163.4, its high for the day, off 70.5, or about 3.3%.
Ambassador Paul Nitze's statement (Notable & Quotable, Sept. 20), "If you have a million people working for you, every bad thing that has one chance in a million of going wrong will go wrong at least once a year," is a pretty negative way of looking at things.
Isn't it just as fair to say that if you have a million people working for you, every good thing that has one chance in a million of going right will go right at least once a year?
Don't be such a pessimist, Mr. Ambassador.
Frank Tremdine
The House Aviation Subcommittee approved a bill that would give the transportation secretary authority to review and approve leveraged buy-outs of major U.S. airlines.
The collapsed plan to acquire UAL Corp., parent of United Airlines, spurred quick action on the legislation, introduced Wednesday and approved by the subcommittee on a voice vote yesterday.
The bill is expected to be taken up by the Public Works and Transportation Committee tomorrow, and a floor vote by next week will be urged.
The measure drew criticism from the Bush administration and a parting shot from financier Donald Trump, who yesterday withdrew his takeover bid for AMR Corp., the parent of American Airlines.
In a letter to subcommittee Chairman James Oberstar (D., Minn.), Mr. Trump criticized the bill as an explicit effort to thwart his bid for AMR, and said it contributed to the collapse of the deal.
Elaine Chao, deputy transportation secretary, also sent a letter to express the administration's opposition to the bill "in its present form."
Rep. Oberstar brushed off Mr. Trump's allegations as an "excuse for his own deal failing."
He also said the fact that the other letter hadn't come from Transportation Secretary Samuel Skinner indicated there is "wiggle room" in the administration's position.
Mr. Oberstar and other committee members repeatedly stressed that the legislation wasn't a response to any particular market situation.
But they cited the UAL and AMR examples as reasons to move quickly to enact this legislation.
Aides both in the House and Senate said the withdrawal of the Trump bid for AMR isn't likely to deflate efforts to push the legislation.
"It's still on the fast track and we still want to do it," said one Senate aide.
The bill is aimed at addressing the concern that an airline might sacrifice costly safety measures to pay off the debt incurred in a leveraged buy-out.
Currently, the transportation secretary doesn't have clearly established authority to block mergers, but can take the drastic step of revoking the operating certificate of any carrier the official considers unfit.
Supporters of the legislation view the bill as an effort to add stability and certainty to the airline-acquisition process, and to preserve the safety and fitness of the industry.
In general, the bill would give the Transportation Department a 30-day review period before 15% or more of the voting stock of a major U.S. air carrier could be acquired.
It also would require the acquiring party to notify the transportation secretary and to provide all information relevant to determining the intent of the acquisition.
The bill would allow the secretary to reject a buy-out if sufficient information hasn't been provided, or if the buy-out is likely to weaken the carrier financially, result in a substantial reduction in size of the airline through disposal of assets, or give control to a foreign interest.
If more information is needed, the secretary would have authority to extend the review period 20 days.
All the witnesses, both congressmen and industry experts, expressed support for the bill in order to prevent profiteers from cashing in on airline profits at the expense of safe, cost-effective service.
But several committee members disapproved, some backing Mr. Trump's claim that the threat of regulation caused the failure of the UAL deal and the stock-market plunge.
One of the major concerns expressed by the dissenters was that large airlines would be prohibited from divesting themselves of smaller entities and producing independent spin-off companies.
In a possible prelude to the resumption of talks between Boeing Co. and striking Machinists union members, a federal mediator said representatives of the two sides will meet with him tomorrow.
"It could be a long meeting or it could be a short one," said Doug Hammond, the mediator, who called the agreement to meet a first step toward a resumption of negotiations.
"We're encouraged that talks are scheduled again but beyond that, we have made no expression of expectations," a Boeing spokesman said.
The Machinists union has rejected a three-year contract offer that would have provided a 10% wage increase over the life of the pact, plus some bonuses.
Currently, average pay for machinists is $13.39 an hour, Boeing said.
Now in its 13th day, the strike has idled about 55,000 machinists and has started to delay delivery of some jetliners.
With a strike fund of about $100 million, the union had said it was prepared for a long strike.
After the third week on strike, union members will begin receiving $100 a week from the fund.
Work at Boeing continues with supervisors and other non-striking personnel manning the lines.
And at the company's Wichita, Kan., plant, about 2,400 of the 11,700 machinists still are working, Boeing said.
Under Kansas right-to-work laws, contracts cannot require workers to be union members.
Boeing has declined to say how many employees are working at its giant Renton, Wash., plant.
Union officials couldn't be reached for comment.
DPC Acquisition Partners, a hostile suitor for Dataproducts Corp., said it intends to launch a tender offer for the computer printer maker's common stock.
DPC, a group led by the New York investment firm Crescott Inc., also said it plans to file preliminary materials with the Securities and Exchange Commission regarding a shareholder solicitation to oust Dataproducts' board.
DPC holds a 7.8% stake in Dataproducts and made a $15-a-share bid for the company in May, but Dataproducts management considered the $283.7 million proposal unacceptable.
A DPC spokesman declined to elaborate on the group's new plan.
In American Stock Exchange composite trading yesterday, Dataproducts shares jumped 62.5 cents to close at $9.375.
Dataproducts, which had been seeking a buyer for several months, announced a restructuring plan in September and took itself off the auction block.
The company's restructuring includes plans to split into three sectors, to phase out domestic printer manufacturing operations and to sell its New England subsidiary.
As part of the plan, Dataproducts announced a pact to sell $63 million of its real estate holdings to Trizec Properties Inc., a unit of Canada's Trizec Corp.
Jack Davis, Dataproducts' president, chairman and chief executive officer, said the company "is at a loss to understand DPC's intentions."
He called today's announcement "opportunistic and disruptive" and said the company intends to proceed with its restructuring.
Share prices plummeted across Europe yesterday in response to Friday's New York sell-off, but some issues staged a late comeback after Wall Street opened without another rout.
European investors have further reason for optimism today, after the U.S. rebound.
The Frankfurt Stock Exchange, which closed before the New York exchanges opened, was the hardest hit of the major European markets, with the DAX Index dropping 12.8%.
In London, prices plummeted in early trading and were off as much as 9% before coming back strong after the New York opening to close down only 3.2%.
West German Economics Minister Helmut Haussmann said, "In my view, the stock market will stabilize relatively quickly.
There may be one or other psychological or technical reactions, but they aren't based on fundamentals.
The economy of West Germany and the EC {European Community} is highly stable."
Paris, which has been the center of speculation fever in recent weeks, also was hard hit.
Share prices fell in Milan, Amsterdam, Zurich, Madrid and Stockholm.
Prices in Brussels, where a computer breakdown disrupted trading, also tumbled.
Following is a breakdown of major market activity:
FRANKFURT:
One of the sharpest declines came in the financial center of Europe's strongest economy.
The DAX Index of 30 West German blue chips plunged 12.8%, a one-day record, wiping out the summer's gains.
The index closed at 1385.72, down 203.56 points.
By comparison, two years ago on Black Monday, the new index would have dropped 9.4%, according to a projection by the exchange.
Investors may have reacted so strongly to Friday's U.S. stock market loss because they had vivid memories of the Frankfurt exchange's losing 35% of its value in the 1987 crash and its wake.
This time, however, many small investors may have been hurt by acting so swiftly.
"They all went in the wrong direction," said Andreas Insam, an investment adviser for the Bank in Liechtenstein's Frankfurt branch.
He said he told clients to buy selected West German blue chips after they fell by about 10%.
After the opening was delayed 30 minutes because of the crush of sell orders, Frankfurt's normal two-hour trading session was extended 75 minutes to handle the heavy volume.
"The beginning was chaotic," said Nigel Longley, a broker for Commerzbank AG.
"It took three-quarters of an hour before enough prices could be worked out to get a reading on the market."
Institutional investors and bankers, many of whom spent the night before in their offices watching Far Eastern markets, were cautiously optimistic after the mild 1.8% decline in Tokyo stock prices.
"Everybody was still confident, including most institutional investors.
That is why everybody was a little surprised by the storm of sell orders from small private investors," said Norbert Braeuer, a senior trader for Hessische Landesbank.
Some big institutions, including banks, began picking up lower-priced shares late yesterday, but most investors wanted to see what would happen in New York before acting.
But even if Wall Street continues to stabilize, analysts here say the latest blow to investor confidence could inhibit a swift recovery for the Frankfurt exchange, which already was showing signs of weakness after the DAX had slipped from a 1989 high of 1657.61 on Sept. 8.
Some of West Germany's bluest chips took some of the biggest hits.
A 16.3% drop for Mannesmann AG and Dresdner Bank AG's 9.6% decline were especially problematic for their respective boards, whose plans for major rights issues in November could now be in jeopardy.
Dresdner Bank last month said it hoped to raise 1.2 billion marks ($642.2 million) by issuing four million shares at 300 marks each.
Yet yesterday's market cropped Dresdner's share price by 33 marks to 309 marks a share, leaving little incentive for investors to subscribe to the standing price unless the market recovers quickly.
LONDON:
Headed toward a record drop at midday, the London stock market recouped two-thirds of its losses in the wake of New York's early rally.
The Financial Times-Stock Exchange 100 Share Index closed off 70.5 points, at 2163.4, its high for the day, after having plunged 204.2 points at 12:49 p.m.
It was big institutions such as Norwich Union Insurance Group, Scottish Amicable Investment Managers and Standard Life Assurance Co. that spearheaded the rally.
Attracted by low prices and encouraged by New York's performance, they scooped up equities across the board.
Volume was 959.3 million shares, more than triple recent levels.
PARIS:
Late buying gave the Paris Bourse a parachute after its free fall early in the day.
The CAC General Index ended down 5.4% at 523.6, a drop of 29.6 points from Friday.
"There was a volatility in the market that I have never seen before," said Michel Vigier, a partner in brokerage firm Cholet Dupont.
"When Wall Street turned around shortly after the opening, there was panic buying in Paris."
Brokers said that as the news spread that Wall Street was moving up, traders who had called to place sell orders changed their line in mid-conversation, ordering buys instead.
Trading was driven primarily by small investors and speculators, with large institutions waiting on the sidelines until late in the day.
When Wall Street turned, however, the big boys entered the market, looking for bargains.
J.P. Morgan & Co. swung to a loss in the third quarter, while NCNB Corp. reported net income more than doubled, and Security Pacific Corp. net rose 10%.
J.P. Morgan & Co.
J.P. Morgan, as expected, posted a $1.82 billion net loss for the quarter, reflecting the New York bank's decision last month to add $2 billion to reserves for losses on loans to less-developed countries.
The reserve addition placed the parent of Morgan Guaranty Trust Co. among a few major U.S. banks that have covered nearly all their medium and long-term portfolios to less-developed countries with reserves.
The latest quarter's loss equals $9.92 a share.
In the year-earlier quarter, Morgan earned $233.6 million, or $1.25 a share.
George M. Salem, analyst at Prudential-Bache Securities Inc., called the results "mildly disappointing."
Excluding the $2 billion provision and allowing for the taxes Morgan paid, earnings were about 65 cents a share, Mr. Salem said.
In New York Stock Exchange composite trading yesterday, Morgan climbed $1.50 a share to $44.125.
Net interest income sank 27% in the quarter to $254 million from $347 million.
The interest rate on short-term funds, which banks borrow to finance longer-term loans to customers, was "sharply higher," Morgan said.
Morgan received $2 million of interest payments on its medium and long-term Brazilian loans; had they been accruing interest, net interest income would have been $35 million higher in the quarter, Morgan said.
Such loans to Argentina also remain classified as non-accruing, costing the bank $10 million of interest income in the third period.
Income from sources other than interest climbed 12% to $414 million, reflecting higher corporate-finance and other fees and gains on sales of investment securities.
"These increases were partly offset by lower trading-related" income, the bank said.
Non-interest expenses grew 16% to $496 million.
NCNB Corp.
NCNB Corp.'s net income more than doubled in the period, largely because of continued strong performance by the bank's Texas operations.
The Charlotte, N.C., company said earnings rose to $143.6 million, or $1.45 a share, from $58.9 million, or 69 cents a share, a year earlier.
The latest quarter included a gain of $56.1 million, or 59 cents a share, related to the purchase of the remaining 51% of NCNB Texas National Bank from the Federal Deposit Insurance Corp.
The strong performance, however, contrasted with an unexpectedly large increase in the size of NCNB's problem loans, particularly in the Southeast.
In the third quarter, nonperforming assets jumped to $474.1 million, or 1.43% of net loans and leases, from $232.8 million, or 1.13% in the second quarter.
Nonperformers totaled $230.8 million, or 1.27% in the year-ago third quarter.
Included in the increase in the most recent quarter is a $33 million loan, which NCNB said it "expects to be fully repaid, with no loss, early in the fourth quarter."
The deterioration in credit quality offset strong loan growth of 17% in NCNB's Southeast operations, as well as a 28% growth in deposits resulting from an aggressive marketing campaign.
The higher rates paid on deposits also helped squeeze NCNB's net interest margin in the Southeast to 3.38% from 3.80% a year earlier.
In Big Board composite trading yesterday, NCNB jumped $3.50 a share, to $51.
Results were released after the market closed.
NCNB Texas National, formed from the remnants of of the failed First RepublicBank Corp. of Dallas, contributed $76.9 million to NCNB's bottom line in the third quarter.
NCNB said its third-quarter results reflect 100% of earnings of the Texas operation since Aug. 1.
NCNB raised some $1.9 billion in new capital during the quarter to complete the NCNB Texas purchase, and to acquire several small failed thrifts to fill out its regional franchise.
Last week, the banking company said it purchased both Freedom Savings & Loan Association, Tampa, Fla., and University Federal Savings Association of San Antonio, Texas, for $169.4 million.
In the first nine months, NCNB's net income climbed 65% to $310.9 million, or $3.30 a share, from $188.2 million, or $2.22 a share, a year earlier.
Security Pacific Corp.
Security Pacific's earnings growth slowed in the third quarter, but the Los Angeles bank holding company was still able to post a 10% increase in net income because of robust growth in residential real-estate and consumer loans.
Net rose to $185.1 million, or $1.55 a share, from $167.9 million, or $1.47 a share, a year earlier.
The company said the gain resulted mainly from a $54 million increase in net interest income, reflecting a 33% increase in real estate loans (mainly residential), and a 19% rise in consumer loans.
These high-yielding loans in effect replaced some low-yielding assets such as inter-bank loans, which were allowed to decrease.
As a result, Security Pacific's net interest margin fell only 13 basis points, a more mild decrease than some major banks outside California, which have been reporting more sluggish earnings.
Security Pacific shares closed at $44.625, down 37.5 cents, in Big Board composite trading.
The earnings represent a 0.89% return on assets for Security Pacific, and an 18.9% return on equity.
The loan growth offset continuing real-estate loan losses in the depressed Arizona market.
Security Pacific reported a 33% increase in net credit losses for the quarter, to $109 million from $81.9 million in the year-ago period.
Nonperforming loans grew slightly to $1.75 billion at Sept. 30, from $1.7 billion a year ago.
Security Pacific's loan-loss provision was down 22%, or $30.4 million, because it added to its foreign-debt reserve the year before.
Non-interest income fell 6% in the quarter, mainly because of an unusual gain a year earlier from the sale of Hong Kong banking operations.
Non-interest expense grew only 4% in the period.
For the nine months, net rose 17% to $548.9 million, or $4.67 a share, from $469.4 million, or $4.13 a share, a year earlier.
LIN Broadcasting Corp. said it won't take a position on a revised tender offer by McCaw Cellular Communications Inc. to buy LIN and has asked for clarification of the offer.
The new offer, which seeks 50.3% of the cellular and broadcasting concern, is for $125 a share for 22 million LIN shares.
McCaw's revised tender offer would require McCaw to begin an auction process in July 1994 that would buy out remaining holders at a per-share price roughly equivalent to what a third party might then have to pay for all of LIN.
LIN is asking McCaw to clarify its tender offer, which challenges an agreement between BellSouth Corp. and LIN to merge their cellular-telephone businesses.
BellSouth has notified LIN that it would "shortly respond to the McCaw proposal in as full and effective a manner as is warranted."
The LIN board said holders may be misled by the provision in the McCaw proposal that "guarantees" private market value after five years for the remaining shares.
McCaw has "no obligation to purchase and the definition of private market value is uncertain," the LIN board said.
The board added that McCaw would be able to control LIN's operations and could, "therefore, operate LIN in a manner which could diminish its private market value and attractiveness to a third-party purchaser in five years."
In national over-the-counter trading, LIN closed at $104.75, down $2.75.
A group of institutional investors in Telerate Inc. said that Dow Jones & Co.'s $18-a-share offer for the electronic financial information services company is "grossly inadequate."
In a letter filed with the Securities and Exchange Commission, the group, which holds about 4.5 million Telerate shares, or about 4.7% of the shares outstanding, said " . . . at present none of us believes an offer for less than $25 per share would be fair and some believe that $25 is too low."
The letter was dated Oct. 6.
In composite trading on the New York Stock Exchange, Telerate shares closed yesterday at $18.875, down 75 cents a share.
Dow Jones, publisher of The Wall Street Journal, has launched an $18-a-share, or $576 million, tender offer to acquire the remaining Telerate shares outstanding; Dow Jones owns 67% of Telerate.
Telerate has rejected the offer, which expires Nov. 3.
The group includes Putnam Cos. and various affiliates based in Boston; Wells Fargo Bank, San Francisco; the California Public Employees Retirement System, Sacramento, Calif., and T. Rowe Price Associates Inc., Baltimore.
Among other issues, the group's letter said it has "concerns as to whether Dow Jones's offer meets the applicable requirements of procedural fairness."
A spokesman for Dow Jones said he hadn't seen the group's filing, but added, "obviously Dow Jones disagrees with their conclusions.
Our offer is to buy any and all shares tendered at $18 a share.
U.S. Trade Representative Carla Hills said the first dispute-settlement panel set up under the U.S.-Canadian "free trade" agreement has ruled that Canada's restrictions on exports of Pacific salmon and herring violate the accord.
Mrs. Hills said the U.S. and Canada have until Nov. 13 to resolve the dispute.
If a solution isn't reached by then, she said, the U.S. would have the right to suspend some trade concessions to Canada equivalent in value to the losses suffered by U.S. fish-processing companies in Alaska and the Pacific Northwest.
However, in Ottawa, Canadian Trade Minister John Crosbie said the dispute-settlement panel accepted the "legitimacy of Canada's position on the use of these landing requirements to conserve and manage these important fisheries."
Questioned about the seeming contradiction in the U.S. and Canadian government views of the panel's report, an aide for Mrs. Hills said the panel had clearly ruled that the Canadian trade restrictions "are illegal."
The U.S. trade representative declined to put a dollar estimate on the losses resulting from the Canadian export restrictions.
Canada initially had an export prohibition that was replaced by regulations requiring that such fish had to be brought ashore in British Columbia by commercial fishermen prior to export.
This action was defended by the Canadian government on conservation grounds.
Mrs. Hills said yesterday that the dispute-settlement panel rejected this Canadian government argument.
"We fully expect that Canada will comply with the panel's ruling" that the "landing requirement" also must be ended, she said.
Earlier, an international panel set up under the rules of the General Agreement on Tariffs and Trade in Geneva determined that the original Canadian fish-export restrictions violated GATT rules.
Mrs. Hills said the U.S. won't accept any delays after Nov. 13 because U.S. fish-processing firms enter into contracts in the fall to purchase the next season's catch.
She said the Canadian restrictions must be removed before such contracts are concluded.
Idle Thought
To spend a carefree, idle day, When duty calls, to pay no heed, To while the precious hours away -- Character is what you need.
-- May Richstone.
Telecussed
The guy who throws an intercept 'Cause his receiver slips Should somehow be advised that we At home can read his lips.
-- Dick Emmons.
BancOklahoma Corp. said it completed a restructuring agreement previously agreed to by the Federal Deposit Insurance Corp., creditor banks and subordinated debenture holders.
The plan would permit the bank holding company to retire its bank and debenture obligations through exchanges of cash and equity.
The FDIC, which in 1986 provided $130 million in open-bank assistance to BancOklahoma's Bank of Oklahoma, Tulsa, unit will continue to maintain $90 million in preferred stock in the Tulsa bank unit.
In exchange for the other $40 million, the FDIC will receive additional warrants entitling it to buy 60% of BancOklahoma's common stock outstanding, up from the 55% option the FDIC received under terms of the 1986 capital infusion.
In exchange for the $76 million they are owed, creditor banks will receive 3.9 million shares of BancOklahoma common stock and the proceeds from the future sales of four subsidiary banks to private buyers, the bank holding company said.
Also under the agreement, debenture holders will get one million shares of common stock in exchange for $7.7 million in debentures and holders of BancOklahoma's series A preferred stock will receive 1.25 shares of common stock for every share of preferred they own, the company said.
Bear Stearns's chief economist, Lawrence Kudlow, in the Sept. 29 issue of the firm's Global Spectator:
Were it true that a weak currency paves the way for trade surpluses, then presumably Argentina would be the center of today's global economy.
BSN Corp. said it will begin an offer tomorrow to exchange up to one million of its common shares and all of its $16.6 million in 7 3/4% convertible debentures due 2001 for a package of new debt and common stock warrants.
Under terms of the offer, the sporting goods maker will swap $9 face amount of 9 1/4% subordinated notes due 1996 and one warrant for each common share.
Each warrant allows the holder to buy one BSN share for $10.75 a share at any time over the next seven years.
BSN currently has 4.6 million common shares outstanding.
BSN also is offering $850 face amount of new notes and 64 common-stock warrants for each $1,000 face amount of its convertible debt outstanding.
The company said it can redeem the warrants at its option for $1 each.
The offer isn't contingent on a certain amount of debt or stock being exchanged.
BSN said it is making the offer to shrink its capital and increase shareholder value.
If all the bondholders and holders of one million common shares accept the offer, BSN will increase its debt by $9 million, but it also will recognize a $2 million gain from retiring the old debt, said Michael J. Blumenfeld, president.
"We have sufficient cash flow to handle that," he said.
The offers are scheduled to expire in mid to late November.
Merrill Lynch & Co.'s net income dropped 37%, while Bear Stearns Cos. posted a 7.5% gain in net, and PaineWebber Group Inc.'s profit fell, but would have risen without a special gain a year ago.
At Merrill Lynch, third-period net was $41 million, or 34 cents a share, down from $65.6 million, or 58 cents a share, a year ago.
Total revenue reached $2.83 billion, up 10% from $2.57 billion.
The firm's drop in net reflected weaker revenue in transactions for its own account -- a decline of 19% to $314.6 million on reduced revenue from trading fixed-income securities.
Investment banking revenue fell 22% to $296.6 million on fewer equity and municipal underwritings.
Merrill Lynch's commission revenue grew 21%, however, to $462.8 million, on higher share prices and volume and on strong sales of mutual funds.
Revenue derived from interest and dividends jumped 30% to $1.4 billion.
Asset-management fee revenue grew 12% to $151 million.
The brokerage also reported a loss of $2.2 million from the discontinued operations and disposal of its Fine Homes International Limited Partnership real-estate subsidiary.
Bear Stearns said net in the first quarter ended Sept. 29 reached $22.1 million, or 23 cents a share, from $20.5 million, or 20 cents a share, in the year-earlier quarter.
Gross revenue rose 21% to $580.4 million from $478.9 million.
Profit from trading for its own account dropped, the securities firm said.
Investment banking revenue climbed 25%, while commission revenue advanced 31% on a stronger retail market.
Bear Stearns is the holding company for Bear, Stearns & Co., the investment banking and brokerage firm.
In New York Stock Exchange composite trading yesterday, Bear Stearns shares closed at $13.625, down 25 cents.
Separately, PaineWebber posted net income for the third quarter of $16.8 million, or 41 cents a share, reflecting a "broad-based improvement" in the company's core businesses.
Retail profit surged, but the company said it was only a "modest contributor" to third-quarter results.
A year ago, net at the New York investment banking firm was $20.9 million, or 50 cents a share, including a special pretax gain of $46.3 million from the sale of the company's interest in National Car Rental Systems Inc.
Revenue was $444.9 million, including net interest, down slightly from $450.7 million.
In Big Board composite trading yesterday, PaineWebber closed at $18.50, up 75 cents.
Seafirst Corp. said it signed an agreement with builder Martin Selig to purchase its headquarters building, the Columbia Seafirst Center, for $354 million.
Purchase of the 76-story structure is subject to execution of a definitive agreement, approval by the boards of Seafirst and its parent company BankAmerica Corp., and approval by regulators.
The market upheaval apparently hasn't triggered any cash crunch -- yet.
Individual investors, investment firms and arbitragers who speculate in the stocks of takeover candidates can suffer liquidity and payment problems when stocks dive; those investors often borrow heavily to buy their holdings and use the stocks as collateral for loans.
But several large banks said yesterday they detected no signs of unusual demand for credit that would signal such difficulties.
"We're seeing nothing out of the ordinary," said one official at a Top 10 bank.
"That's good news, because we all swim in this water."
Added another executive at a big bank: "We were all a little goosey over the weekend trying to forecast what would happen {Monday}, but it's been very quiet.
Now, as for tomorrow, hell, who knows?
What happened Friday shows that financial markets are not yet sufficiently coordinated to handle another meltdown in prices.
No fiddling with systems and procedures will ever prevent markets from suffering a panic wave of selling.
But markets can operate with greater or lesser efficiency.
After the 1987 plunge, markets agreed that it would be wise to halt trading whenever panic conditions arose.
The New York Stock Exchange adopted two specific circuit breakers: If the Dow Jones index falls 250 points in a day, the exchange will halt trading for one hour; if the decline hits 400 points, the exchange will close for an additional two hours.
The rationale is that an interruption of trading will allow investors to reconsider their strategies, calm sellers and lead buyers to enter the market at indicated new price levels.
It is impossible to know whether that theory is realistic.
A temporary cessation of trading may indeed discourage a selling panic from feeding on itself.
But there is also the possibility that shutting down markets will intensify fears and cause an even more abrupt slide in prices.
What happened Friday was the worst of all worlds.
The futures exchanges followed their own pre-set circuit breakers and shut down at about 3 p.m. for 30 minutes, after the Standard & Poor's 500 stock index had fallen 12 points, or about 100 points on the Dow Jones index.
Options markets stopped trading in many securities.
The New York Stock Exchange, under its own rules, remained open.
With nowhere else to go, sellers, and particularly program traders, focused all their selling on the New York Stock Exchange.
As liquidity on that market weakened, prices fell sharply.
Had the futures and options markets been open, additional liquidity would have been provided and the decline, most probably, would have been less intense.
At 3:30, after intense telephone negotiations between the trading markets and Washington, the futures exchanges reopened.
Futures trading, however, was halted altogether at 3:45, after the futures markets had dropped an additional 30 points, which is the daily limit for price declines.
At this point, the options markets also shut down and once more left all sales to be handled by the New York Stock Exchange.
It is time to recognize that the New York Stock Exchange, the futures markets and the options markets, though physically separate, have actually become so closely intertwined as to constitute one market effectively.
Traders can vary their strategies and execute their orders in any one of them.
It therefore makes no sense for each market to adopt different circuit breakers.
To achieve maximum liquidity and minimize price volatility, either all markets should be open to trading or none.
Synchronized circuit breakers would not have halted the slide in prices on Friday, but they probably would have made for smoother, less volatile executions.
It's time for the exchanges and the Securities and Exchange Commission to agree on joint conditions for halting trading or staying open.
Let's not have one market shut down for 30 minutes when the Dow declines 100 points and another shut down for an hour after a 250-point decline.
The need for hurried last-minute telephone negotiations among market officials will disappear once rules are in place that synchronize circuit breakers in all markets.
The new circuit breakers, if they are to be applied at all, will require that futures and options trading continue as long as the New York Stock Exchange remains open.
The rules should be established by agreement of the officials of all affected exchanges acting under the oversight and with the approval of the government regulatory agencies.
Should the SEC and the Commodities Futures Trading Commission (which, with the SEC, regulates the Chicago stock-index markets) be unable to agree, the issue may have to be resolved by decision of the Treasury secretary.
In many ways, our financial markets are better prepared today to handle a decline than they were two years ago.
The New York Stock Exchange now has the capacity to handle a volume of nearly a billion shares a day.
Telephone service has been improved for customers trying to reach their brokers, and specialists -- who I believe should stay, despite the urgings of some post-crash critics -- have larger capital positions.
(Of course, specialists' actions alone can never prevent a major crack in stock prices.
Witness the fact that trading in some stocks closed early Friday and opened late Monday because of an excess of sell orders.)
But the task of improving market performance remains unfinished.
Mr. Freund, former chief economist of the New York Stock Exchange, is a professor of economics at Pace University's business school in New York.
A UNIFIED EUROPE poses labor problems and prospects for U.S. firms.
The "social dimension" -- worker concerns -- of the European Community's plan to open its internal borders in 1992 could set the effort "off the rails" if not done reasonably, says General Electric senior vice president Frank Doyle.
U.S. companies wanting to expand in Europe face "tough pressure" from unions in nations such as West Germany, which play a big consulting role in management decisions, he says.
FMC Corp. and Baxter International say unions also won't like plant relocations and needed restructuring, which means layoffs.
Many employers have already begun moving to southern countries such as Spain and Italy, where wages are low and unions are weaker; demand for trained labor and managers will rise there, FMC says.
Pfizer, Fluor and GE see big "EC 92" pluses: a push for job training and ease in moving and finding workers.
CLUBBING A FAN wasn't the Baltimore Orioles' fault.
So said a federal judge, in a case involving two players for the minor league Bluefield, Va., Orioles, a Baltimore farm team.
The players were heckled by a patron during a July 4, 1988, game with the Martinsville Phillies.
Like its parent that year, "Bluefield was not having a good year," the judge said.
After the game ("Bluefield lost, 9-8, stranding three runners in . . . the ninth," he noted), trouble began.
More taunting in the parking lot, the players said, led to a fight.
The fan said he was punched and kicked by one player and that the other broke his jaw with a baseball bat.
The judge dismissed the fan's suit against the team, however, ruling the Orioles innocent of negligent hiring, and not responsible for a fight that was outside the players' employment.
PROPOSALS ARISE for coping with the shortage of nurses.
An Association of Academic Health Centers report urges freeing nurses from duties that don't require special skills.
It also recommends better retirement and day-care benefits, and basing pay on education, experience and nurses' demanding work schedules.
But it opposes an American Medical Association proposal for creating a "registered care technologist," as "potentially divisive"; it says the job would entail an unwanted new doctor's "bedside" extension.
Over a third of 618 hospitals surveyed by consultant Hewitt Associates use a "clinical ladder," basing advancement on performance and education.
Many also use recruiting bonuses, tuition reimbursement, loan repayment or child-care help.
Some give lump-sum incentives.
MRA Staffing Systems signs up nurses for paid travel, promising annual income up to $50,000 and free or subsidized housing.
TREATING EMPLOYEES with respect is crucial for managers, says consultant Hay Group after surveys of a million workers.
It's in their top five "work values."
Fully 80% of employees who say their bosses treat them with respect, but only a third of those who don't feel respected say they're satisfied with where they work.
SPRUCING UP THE DIGS: About 200 employees of the Maryland Department of Economic and Employment Development for four months painted walls, polished and carpeted floors, bought plants, cleaned windows and blinds, and hung pictures at the agency's Baltimore office.
The 3,000 hours of work will save the state $55,000.
CURBING WAGE BOOSTS will get high priority again in 1990 collective bargaining, a Bureau of National Affairs survey of 250 companies with pacts expiring next year indicates.
Despite labor-shortage warnings, 80% aim for first-year wage increases of under 4%; and 77% say they'd try to replace workers, if struck, or would consider it.
TEMPORARY WORKERS have good educations, the National Association of Temporary Services says; its survey of 2,508 such employees shows 82% with more than a high-school education, and 31% with college degrees.
About 12% have retired from a full-time job, while 54% were asked to stay on full time.
HOME-SALE LOSSES rise, but they're often covered by employers.
But they search for ways to limit the damage.
A third of 439 companies surveyed by the Employee Relocation Council report a rise in 1988 sales losses over 1987.
About 72% reimburse for all or some losses.
Since 1984, more companies give sales-loss aid, as many real-estate values depreciated, the council says.
RJR Nabisco pays up to $30,000 of losses, including improvements.
Goodrich won't ensure loss coverage, but will prevent a "catastrophic loss"; it has given some employees the full purchase price when values fell from concern over dangers posed by a disposal site.
Federal Express, Dow Chemical, Ford and National City Corp. will buy the home or let the worker sell to an outside firm, but usually won't cover a loss.
Since 1984, firms offering prepurchase house appraisals, to deter overpaying, rose to 40% of those the council polled, from 28%.
THE CHECKOFF: The National Academy of Engineering gives two inventors of the semiconductor microchip a $350,000 achievement award. . . .
Now, that's reactionary: Letter Carriers union president Vincent Sombrotto accuses Philadelphia postmaster Charles James of "12th century . . . oppressive management tactics.
Yesterday was, in the words of New York Stock Exchange Chairman John J. Phelan Jr., just your "reasonably normal, 400 million-share, up 88-points day."
When it was all over and stocks had staged a huge recovery, Big Board officials were self-congratulatory about how well the day had gone.
They said the exchange's trading procedures, personnel, equipment and links with other exchanges couldn't have performed better.
"We had no operating problems at all," Mr. Phelan said after the market closed.
"All the things that we set up to slow down the process, to let people know that the market was in an extreme position, worked extremely well."
Prices for the 416.3 million shares that changed hands during the session were carried on the exchange's trading tape with barely a delay, officials said.
While reaching blockbuster proportions yesterday, the volume was still well within the 600 million-share capacity that the exchange has said it can handle daily since beefing up its computers after the October 1987 crash.
The so-called circuit breakers devised by the Big Board and the Chicago Mercantile Exchange to quell free falls in stock and futures prices weren't triggered yesterday because the markets were higher for most of the day.
Despite traders' complaints, Mr. Phelan said the links with the Chicago futures market worked as planned in Friday's rout to provide a cooling-off period.
Of greater help, the Big Board chairman said, was the "natural circuit breaker" of the weekend, that provided a breathing period that "brought rationality back to the market.
Chicken Chains Ruffled By Loss of Customers
FAST-FOOD chicken chains, faced with a worsening business slump, are struggling to hatch some new marketing strategies.
The Crest Report, which tracks consumer purchases, says customer traffic at chicken restaurants fell 10% in the second quarter, while the overall fast-food customer count was down 2%.
Chicken business is off largely because of more competition from grocery-store convenience food, home-delivered pizza and other takeout fare, says a spokesman for the report, a publication of NPD Group, a market research firm in Port Washington, N.Y.
The loss of more customers is the latest in a string of problems.
Church's Fried Chicken Inc. and Popeye's Famous Fried Chicken Inc., which have merged, are still troubled by overlapping restaurant locations.
Chicken chains also are feeling more pressure from McDonald's Corp., which introduced its McChicken sandwich this year and recently tested the sale of individual pieces of chicken.
New management at Kentucky Fried Chicken, a unit of PepsiCo Inc., has fought back with new medium and large chicken sandwiches for the lunch crowd.
And the chain is testing products that aren't fried, such as "char-grilled" chicken, to try to win health-conscious consumers.
Kentucky Fried Chicken also is testing home-delivery of chicken, which could be a hit with stay-at-home diners.
But some fast-food industry analysts say problems with keeping chicken warm and fresh must be solved first.
A Kentucky Fried Chicken spokesman, however, disputed the notion that the delivery service experienced problems in some markets where testing has been discontinued.
He says the test is continuing in Chicago, Columbus, Ohio, and a few other cities.
The advertising industry is buzzing with rumors that Kentucky Fried Chicken will drop Young & Rubicam and seek a new ad agency.
But the company declines to comment.
Emanuel Goldman, a PaineWebber Inc. analyst, predicts Kentucky Fried Chicken will post an 11% drop in 1989 net income.
"They've been laggard," he says, "but they'll have to become more aggressive."
Reluctant Advertisers Try Soft-Sell Spots
CALL IT un-advertising.
Pittsburgh consultant David Bear is selling a soft approach to clients who want exposure yet shun pushy ads.
His ploy: 60-second radio spots that offer helpful hints.
The only plug for the sponsor is a brief mention at the end of the spot.
The messages resemble the Business Traveler, a daily dose of travel tips developed by Mr. Bear and sponsored by travel agencies in several major cities.
New un-advertisers include Burt Hill Kosar Rittlemann Associates, a Butler, Pa., architectural firm.
Its radio series features such spots as "Floodlights: Evening Wear for Urban Structures" and "Building a Place to Park."
A harder sell, says John Kosar, the firm's president, would "detract from the profession."
Hospitals have signed up to use the messages to promote fundraisers, and Equitable Gas Co. is considering the format to offer energy tips to consumers.
But such spots can be too soft.
"There's always a risk of lost messages," says John Fitzgerald, chairman of Ketchum Advertising USA, which created similar radio spots for Pittsburgh National Bank.
"It's a question of how much credibility you gain for the possible loss of recognition."
Retailer Sees Pitfalls In Environmental Push
HERE'S a retailer that's getting tough in the push for environmentally safe packaging and products.
Big Bear Supermarkets Inc., a grocery chain based in San Diego, plans to display shelf cards and distribute pamphlets recommending products deemed safe for the environment.
The choices will be based on research by the San Diego Environmental Health Coalition and will include products like Murphy's Oil Soap and other noncorrosive cleaners.
But the chain is quickly realizing the pitfalls of such endorsements.
For example, it recommends nonchlorinated dishwasher detergent and puts Sunlight on its environmentally safe list.
That doesn't thrill Procter & Gamble Co., maker of Cascade dishwasher detergent.
A company spokesman questioned the validity of the list, noting that chlorine is present in all major dishwasher detergents.
In fact, Lever Bros. confirms that its Sunlight brand does contain chlorine bleach, even though it isn't listed on the label for the powder version.
Thomas G. Dahlen, Big Bear's executive vice president, said the chain is still reviewing its product list to avoid such problems.
"Our intent is to promote the best alternative," he says.
"And it's important that we be accurate."
But in the end, customers' wishes are what will prevail.
Big Bear doesn't care for disposable diapers, which aren't biodegradable.
Yet parents demand them.
Says Mr. Dahlen, "We'll still be forced to sell items we might not philosophically agree with."
Odds and Ends
NEATNESS does count -- at least in the grocery store.
A study by Safeway's Scanner Marketing Research shows soap sales climbed 5% when bars were neatly stacked on shelves instead of dumped in a wire basket. . . .
Which celebrity endorsers are most believable?
For the third year in a row, consumers voted Bill Cosby first and James Garner second in persuasiveness as spokesmen in TV commercials, according to Video Storyboard Tests, New York.
Michael J. Fox replaced Bruce Willis in third place; Cher placed fourth for the second time.
Health and Human Services Secretary Louis Sullivan has chosen Antonia Novello to be the next surgeon general, Bush administration officials said.
If she is nominated by President Bush and confirmed by the Senate, Dr. Novello would succeed C. Everett Koop, who rattled liberals and conservatives alike with his outspoken views on a range of health issues.
Dr. Novello, an expert on pediatric kidney diseases, is deputy director of the National Institute of Child Health and Human Development.
She has also served on several task forces on acquired immune deficiency syndrome.
Dr. Novello's office said she wouldn't talk with reporters, and it refused to release any information about her.
The newsletter Medicine & Health, which first disclosed her selection by Dr. Sullivan, said she is 44 years old and she studied at the University of Puerto Rico School of Medicine.
The continuing series of HUD scandals is a sadly predictable result of pork-barrel politics.
Nevertheless, lobbies such as the National Association of Home Builders (NAHB) continue to pressure Capitol Hill for more special-interest spending.
Kent Colton, NAHB executive vice president, argues that the U.S. faces a multifaceted housing crisis -- reduced affordability of homes for first-time buyers, increased homelessness, and lower apartment construction rates -- that will be "very difficult" to solve "without expanded federal resources."
There's nothing unusual about business groups pushing for more government spending.
But the NAHB was created in 1943 out of an organization that made its name fighting a Roosevelt administration proposal to take over all defense housing production.
Through the years the association has been an active member of the taxpayer's coalition, pushing for such initiatives as the balanced-budget amendment.
Yet on matters close to, er, home . . .
"The HUD budget has dropped by more than 70% since 1980," argues Mr. Colton.
"We've taken more than our fair share.
I wouldn't have a problem if other programs had taken a similar hit."
But NAHB support for subsidies is not related to the current housing crunch; over the years the NAHB has backed a host of public programs.
It once pushed for a national housing production goal set by the federal government and has regularly advanced anti-recession housing measures.
Moreover, explains one HUD official, the NAHB remains susceptible to internal pressure from members that specialize in subsidized production.
The association is pushing an extensive and expensive wish-list, which would substantially boost spending above the current level of more than $15 billion annually.
It would like to peg the ceiling on Federal Housing Administration mortgage guarantees to 95% of the median price in a particular market, instead of limiting it to $101,250; reduce (or even eliminate) FHA down-payment requirements and increase the availability of variable-rate mortgages; expand the Veterans Affairs Department loan guarantee program; provide "adequate" funding for the Farmers Home Administration (FmHA); increase federal funding and tax incentives for the construction of low-income and rental housing, including $4 billion in block grants to states and localities; and "fully fund" the McKinney Act, a $656 million potpourri for the homeless.
Direct federal subsidies for housing construction have proved intolerably expensive in the past, and inevitably are twisted to the benefit of well-connected developers and lobbyists, as demonstrated by the ongoing HUD scandal, or congressmen.
Indirect subsidies, through the FHA, for instance, are little better.
Though Mr. Colton says expanding FHA lending would result in "no cost to the government," the mere diversion of funds from other parts of the economy and from other forms of housing (such as low-income) to the single-family home market would result in a major expense.
More important, housing programs run by HUD, the VA, and FmHA are awash in red ink.
The FHA alone lost $4.2 billion in fiscal 1988; the government's equity in the agency, essentially its reserve fund, fell to minus $2.9 billion.
The federal government has had to pump in $2.28 billion into the VA housing program since 1984 to keep the fund afloat and the VA requested an additional $120 million for the fiscal year just ended.
All told, the federal government already guarantees more than $900 billion of mortgages.
In its nicely produced publication "Where Will Our Children Live?" the NAHB does acknowledge that "of course, the full measure of housing affordability cannot be provided by the federal government."
It points to the pernicious impact of local government regulation, particularly zoning and building fees, which pushes the price of housing out of the reach of low- and middle-income people.
But while the NAHB has suggested actions that states and localities should take to reduce regulatory barriers, the association has proposed no activist legislative program -- comparable to, say, its detailed request for more federal subsidies -- to eliminate counterproductive controls.
The association, a majority of whose 156,000 members build fewer than 25 units a year, is like many other business lobbies.
Explains Sheila MacDonald of the National Taxpayers Union: "It treads in two worlds.
The builders like the subsidies, but at the same time they tend to be fiscal conservatives in terms of major issues, such as the balanced-budget amendment."
Unfortunately, the organization's desire for pork tends to override its commitment to overall fiscal responsibility.
Two years ago when the NAHB lobbied for the $19 billion omnibus housing bill, the organization "basically dropped out of the taxpayers' coalition," says Ms. MacDonald.
As Mr. Colton of the NAHB acknowledges: "Government is not going to solve the problem. . . .
The real key is to have the economy working and interest rates down."
More money for HUD will increase the deficit and destabilize the economy; more money to municipalities that are wrecking their local housing markets will further insulate them from the destructive effects of their policies.
Is this what the home builders want?
Mr. Bandow is a Cato Institute fellow.
(See related story: "And Bills to Make Wishes Come True" -- WSJ Oct. 17, 1989.
In an attempt to give new momentum to European Community plans for a single currency, EC government leaders are likely to agree to set a date for starting formal talks on amending the EC's founding Treaty of Rome.
According to diplomatic sources in Brussels, most EC leaders agree that talks should begin in the second half of 1990, and will make a declaration on that during a summit meeting in Strasbourg, France, on Dec. 8 and 9.
The only strong opposition to changing the EC treaty comes from British Prime Minister Margaret Thatcher, who is opposed to creating a single EC currency.
But the process of convening the intergovernmental conference doesn't require unanimity.
Setting a date to start treaty negotiations has no legal significance in itself, but could be viewed as an important psychological push.
French President Francois Mitterrand fought to set a date for the conference during the EC summit in Madrid last June, but the move was scuttled because of opposition by Mrs. Thatcher and West German Chancellor Helmut Kohl.
Diplomatic sources said Mr. Kohl may now agree to set a date for the conference to make it clear that West Germany is still committed to EC unity.
The latest crewcut in the equities markets reminds me of the joke T. Boone Pickens tells about the guy who was run over by the parade.
When asked "What went wrong?" the unfortunate victim replied, "It was a combination of things."
And so it was on Gray Friday.
The grand marshal of this parade would appear to have been excess leverage.
Even if that is so, however, it's probably the case that no barriers should have been erected to stop the procession before the end of the rout(e).
The ceremonies began Friday afternoon when word spread that the UAL buy-out was collapsing.
Although the union-bidder expects to patch together a substitute offer, consisting of less cash, the failure to get cash from Japanese and American banks confirmed a growing fear among arbitragers that the pageant of high-leverage takeover deals is ending.
Lots of other entries made up the parade, of course -- notably a surprisingly large increase in producer prices, signalling Federal Reserve tightness; and the Bush administration's (temporary?) defeat in trying to lower the capital-gains tax.
As usual, few favorable reviews were heard for that ever-present marching band of program traders, although most serious studies suggest they only play the music that others write.
What really spooked the crowds along Wall Street, however, was the sudden concern that, whatever the reason, the pool of debt capital is drying up.
Gray Friday reflects a panic mainly by the takeover arbitragers, rather than the small investor, as their highly margined investments in the "deal" stocks are jeopardized by the unexpected drying up of the lubricant for deal financing.
Deal stocks led the market down as they absorbed the heaviest losses.
UAL, which triggered the slide, opened Monday at $224, down about 20% from Thursday's close.
AMR opened Monday at $80, down nearly 20% from Thursday's close.
(Both took further hits yesterday.)
Hilton lost 20% on Friday; Paramount lost almost 11%.
A careful look reveals that where deal financing has been secured, the target's stock price was not affected on Friday.
The multibillion-dollar prospects, where the bidder must line up a consortium of banks and/or issue billions in high-yield debt, were where the damage was concentrated.
The market for so-called junk bonds has been setting the stage for Friday's dramatic march for several weeks.
The growing financial difficulties of recent high-leverage restructurings or takeovers, such as Resorts International, Integrated Resources, and Campeau's retailing empire, have cast a pall over the entire market for high-yield securities.
Investors have reacted by ignoring recent efforts to float junk bonds by Ohio Mattress and by forcing Ramada to postpone indefinitely its planned junk-bond sale and restructuring.
As a result, high-yield mutual funds have declined across the board and the many firms planning to sell $11 billion in junk bonds before year-end are experiencing anxious times.
These are all market excesses (putting aside the artificial boosts that the tax code gives to debt over equity), and what we've seen is the market reining them in.
Of course, Washington hadn't been silent in the days leading up to the debacle, and its tendency to meddle in the leverage equation remains a troublesome prospect, but those preliminary steps shouldn't distract us from the basic market fundamentalism that was at work on Friday.
If it is correct to find that concerns over corporate debt and LBOs caused Gray Friday, what are the implications for policy makers?
After all, the stock market's response to the collapse of the UAL deal might be taken to confirm the anti-debt direction of regulators.
Is this a case where private markets are approving of Washington's bashing of Wall Street?
Absolutely not.
To the extent that Friday's sell-off reflected a sudden reappraisal of the excesses of leverage, the message is that Wall Street and the private markets are fully capable of imposing the appropriate incentives and sanctions on corporate behavior.
The national economic interests are much better served allowing the private interests of bankers and investors be the ultimate judges of the investment quality of various LBO deals and leveraged restructurings.
The recent difficulties in the junk-bond markets and the scarcity of bank capital for recent deals underscores the wisdom of letting the free markets operate.
If takeover premiums become excessive, if LBO dealmakers become too aggressive, then the private market will recognize these problems more quickly and accurately than will policy makers, and the markets will move with lightning speed to impose appropriate sanctions.
Yes, the broader exchanges got caught up in the spiral, but they rode the tiger up all year.
Not surprisingly, he sometimes bites.
The arbitragers and takeover initiatiors got killed on Gray Friday, while the besieged managers of prospective targets cheered lustily.
If you identify with the besieged managers, you must concede that speedy and effective relief from the excesses of the takeover market is more likely to come from the marketplace than from Washington.
If you side with the arbitragers and raiders, you clearly have more to fear from private investors than from regulators, although the Delaware courts should never be underestimated.
The truth is, Washington understands politics better than economics.
Although the average citizen is probably not harmed too much from Washington's rhetorical war against Wall Street regarding excessive financial leveraging, actual legislation would probably impose considerable harm.
Any such attempt to distinguish "good debt" from "bad debt," or to draw the line at a particular industry, such as the airlines, is likely to blunt the spur that the proper amount of leverage provides both to equity markets and economic efficiency in general.
Far better for policy makers to concentrate on the war against drugs, Panama and the deficit, all of them parades that seem never to end.
Mr. Jarrell, former top economist at the Securities and Exchange Commission, teaches at the University of Rochester's Simon Business School.
Tokyo share prices rebounded Tuesday morning, with the Nikkei index of 225 selected stocks rising 618.69 points to close the morning session at 35087.38.
The index slid 647.33 points, or 1.8%, on Monday.
In the first 25 minutes of Tuesday's trading the Nikkei index soared 664.83 points, to 35133.83.
By 10 a.m. Tokyo time, the index was up 435.11 points, to 34903.80 as investors hailed New York's overnight rally.
Monday's slide came in a relatively calm session that didn't provide much direction for other markets.
Shares also closed sharply lower across Europe, particularly in Frankfurt, although London and a few other markets recovered some ground after stocks began to rebound in New York.
Other Asian and Pacific markets had sharper losses than Tokyo, but the selling wave stopped short of precipitating another market crash.
All eyes were on Tokyo at the opening because it was the first major market to trade since Friday's 190.58-point plunge on Wall Street.
But rather than set the tone for other markets, Japan's major institutional investors chose to remain on the sidelines.
Still, despite the sudden reappearance of stock-market turbulence, managers of Japanese investment funds said they weren't planning to unload U.S. or European equities.
"We didn't trade much today, as our policy now is to wait and see," said a fund manager at Taisho Life Insurance Co.
"We would like to wait and see until trading goes around through Europe and New York."
The institutions appeared confident that Japanese regulators would step in to ensure orderly trading if necessary, and there was considerable speculation during the day that the Finance Ministry was working behind the scenes to do just that.
But in the absence of panicky trading, its presence was never overtly felt.
At the close, the Nikkei average of 225 stocks stood at 34468.69, down 647.33 points, or 1.8%.
The broader Tokyo Stock Price Index sank 45.66, or 1.7%, to 2600.88.
The day's decline was generally in line with analysts' weekend predictions.
Declining issues swamped advancers, 941-105.
But volume was thin at 526.2 million shares, compared with 574.7 million Friday.
The market opened sharply lower, with the Nikkei average down nearly 600 after 20 minutes.
A midmorning rebound brought it back to show a gain of about 200 at the end of the morning session, but the rally failed in the afternoon, and the market closed near the day's low.
The smaller stocks in the Tokyo market's second section also posted their biggest decline of the year.
The Tokyo Stock Exchange index for the second section fell 100.96, or 2.7%, to 3655.40.
Many investors, trying to outperform the market's major indexes, have flocked to these small issues in recent weeks.
Japanese investors and traders expressed relief that the Tokyo market didn't fall more sharply.
But its performance did bear some resemblance to events of two years ago, during the October 1987 global stock market crash.
On Oct. 16, 1987 -- the Friday before the Black Monday crash -- the New York market dropped 4.6%, and Tokyo followed on Monday with a 2.4% drop.
This time, Wall Street's plunge of 6.9% Friday was followed by yesterday's 1.8% loss in Tokyo.
Two years ago, Tokyo's biggest fall came the day after New York's 22.6% Black Monday plunge, when the Nikkei average fell 14.9%.
Thus, market participants yesterday were looking ahead nervously to Wall Street's opening.
But in New York yesterday, the Dow Jones Industrial Average surged 88.12 to close at 2657.38 on heavy volume of 416,290,000 shares, although declining issues still outnumbered advancing ones on the broad market.
Nobuto Yasuda, a director at Yamaichi Investment Trust & Management Co., called yesterday's session "a good scenario" for Japan.
"Now we are looking for the time to place buy orders," he said.
"For us institutional investors, the chance for buying has come."
Isao Ushikubo, general manager of the investment research department at Toyo Trust & Banking Co., also was optimistic.
He described Friday's plunge in the U.S. as a "fleeting" event resulting in part from excessive merger and acquisition activity.
"Unless there is a panic, this is the best time to buy, as was the case two years ago," he said.
"Those shares which had posted gains on M&A speculation were dashed with cold water, but as far as major stocks are concerned, there isn't much impact."
Other fund managers were similarly sanguine.
"We have no plans to adjust our asset allocation in foreign equities," said Masato Murakami, chief portfolio manager in the pension fund management department at Yasuda Trust & Banking Co.
He said Friday's Wall Street decline was "well within the range of volatility" that Yasuda Trust plans for when it charts its overseas investment strategy.
Among other Asian and Pacific markets, Malaysia and Singapore had the biggest losses, with the Kuala Lumpur composite index in Malaysia falling 11.5% and Singapore's Straits Times Industrial Index down 10%.
Major indexes declined more than 8% in Australia and New Zealand and 6.5% in Hong Kong.
Bangkok, Manila, Seoul, Taipei and Jakarta escaped with slightly smaller losses.
Brokers and fund managers said the region's markets were reacting to Friday's Wall Street plunge even though that decline was due to local factors such as failed corporate buy-outs and a deteriorating junk-bond market.
"It's pure psychology," said William Au Yeung, an account executive for Drexel Burnham Lambert (HK) Ltd. in Hong Kong.
"Markets in this region aren't so geared to leveraged buy-outs, and their economies generally are in good shape, but there's no doubt that Asia is still following America's lead."
Several analysts said Malaysia and Singapore had the biggest losses because they are relatively open to rapid cash flows.
Hong Kong is the region's next most open market, but many foreign investors have been staying away from it since it plunged in June amid political turmoil in China.
"Singapore took the hit because when people want to get out, they tend to go where the liquidity is," said Elizabeth Hambrecht, a regional analyst with Baring Securities (Hong Kong) Ltd.
She pointed out that even after Monday's 10% decline, the Straits Times index is up 24% this year, so investors who bailed out generally did so profitably.
Similarly, Kuala Lumpur's composite index yesterday ended 27.5% above its 1988 close.
In Hong Kong, the Hang Seng Index fell 180.60 to finish at 2601.70.
Trading was heavy at about one billion shares, compared with 473.9 million Friday.
But the session was orderly, in contrast to the market's four-day closure after the 1987 crash.
Richard Chenevix-Trench, a director at Hong Kong-based Baring International Fund Managers Ltd., said the market probably hasn't hit bottom yet but is close.
"If New York doesn't collapse, I see maybe another 5% on the downside, not counting the risk of bad news out of China," he said.
In Australia, Sydney's All Ordinaries index closed at 1601.5, down 8.1%, its biggest drop since October 1987.
But volume rose only to 162 million shares from 143 million Friday.
Nestor Hinzack, an analyst at brokerage firm Burdett, Buckeridge & Young Ltd., described the market's performance as "sheep-like" as investors fled to bluechip Australian stocks and shunned entrepreneurial companies they perceived as having any takeover premium built into the price.
London's Financial Times-Stock Exchange 100-share index, the most closely watched market barometer, ended at its intraday high of 2163.4, down 70.5, or 3.2%.
At its low, shortly before Wall Street opened, it was off more than 130 points.
The Financial Times 30-share index closed 79.3 points lower at 1738.7.
Volume more than doubled to 959.3 million shares from 457.7 million Friday.
Prices on the Frankfurt Stock Exchange tumbled in heavy trading.
The decline in the German Stock Index of 203.56 points, or 12.8%, to 1385.72 was the Frankfurt market's steepest fall ever.
Retail investors dumped holdings on a massive scale, pushing some blue-chip shares down as much as 20%.
Analysts cited memories of two years ago, when many small investors held on to their shares after the October crash but the West German market continued to decline steeply for the next three months.
Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.
To make them directly comparable, each index is based on the close of 1969 equaling 100.
The percentage change is since year-end.
Frank Lloyd Wright is reported to have said once that if you tipped the world on its side, everything loose would end up in California.
We've always thought that Mr. Wright underestimated California's vitality, but maybe the state's la-la factions are starting to overwhelm the forces that made it such a significant place.
What else is one to make of the whacky save-the-earth initiative just proposed by several major environmental groups and organized by the state's attorney general?
If passed by the voters, the recently announced initiative would phase out major pesticides, reduce carbon dioxide emissions by 40%, ban new offshore drilling, ban chemicals thought to deplete the ozone layer, and create a new state environmental officer armed with a $40 million budget to sue any firm or agency he thinks is being too dirty.
The initiative is based largely on the wish-lists of the green lobby: the Sierra Club, the League of Conservation Voters, the Natural Resources Defense Council, the National Toxics Campaign and the Citizens for a Better Environment.
Interestingly, the Environmental Defense Fund is having nothing to do with this one.
Not only Californians but all Americans would pay if this thing passed.
The initiative bars the sale of any crops in California that don't meet the initiative's standards.
Kansas wheat farmers and Florida fruit growers would have to adjust or give up the California market.
In other words, California is presuming to take control of the nation's farm policy.
As usual the green lobby's proposal is disconnected from scientific reality.
Consider the greenhouse-effect provision.
The proposed initiative would mandate a reduction of carbon dioxide of 40%.
Even if one buys into the whole greenhouse theory, it is inconceivable that reductions in a single state could have any impact on what is billed as a global problem.
But if rational science and economics have nothing to do with the new environment initiative, what is going on?
The first place to look under these circumstances is at the ways in which the sponsors themselves will benefit.
The key here is the ambition of state Attorney General John Van de Kamp.
He's running for governor.
Mr. Van de Kamp is the one who collected the plans from the various radical environmental groups and cobbled them into a single unwieldy initiative to be placed on the ballot for election on Nov. 6, 1990.
That's also the day of the gubernatorial election.
The initiative seems to have been crafted to include all the hot issues that set off the wealthy Hollywood weepers who donate money.
And it allows Mr. Van de Kamp to get around campaign spending limits.
He can spend the legal maximum for his campaign; all the spending for the Van de Kamp initiative (on which there are no limits) is gravy.
This initiative is being labeled The Big Green, but maybe it should be called The Big Greenback.
(The Republican candidate, Sen. Pete Wilson, is playing the initiative fundraising game too, sponsoring his own crime initiative.)
While it is possible that the Big Green initiative will be ruled unconstitutional, it is of course conceivable that in modern California it could slide through.
This is the state that recently passed the Prop. 65 anti-toxic initiative.
If this new proposal ever does become law, the green lobby will benefit directly.
The initiative creates a free floating state environmental officer to sue companies or government agencies that do things he doesn't like.
That means the NRDC and such groups no longer would have to spend as much money on litigation; taxpayers would bear the cost.
Mr. Van de Kamp and his allies may be hoping that the environment is such a mom and apple-pie issue among certain segments of California's population now that almost any collection of anti-scientific, anti-pocketbook nonsense can pass under its rubric.
Of course the state's liberals are not yet a nation unto themselves.
George Bush, for example, may decide that he doesn't want to be the President who lost control of interstate commerce to an attorney general from California.
And some other segments of California's political and media culture may yet start to point out that the initiative would impose significant costs on the state's less affluent citizens in the form of higher food prices and lost jobs.
This grandiose initiative will help California define itself for the futureeither as a state still tethered to economic and scientific reality, or as one being led to wherever its la-la activists want to take it.
First, there was a death watch.
Then exhilaration.
Spurred by waves of large-scale buying in blue-chip stocks, the Dow Jones Industrial Average rallied yesterday and erased about a half of Friday's 190.58-point plunge, gaining 88.12 to 2657.38.
It was the fourth-biggest advance for the average of 30 blue chips, on frenetic New York Stock Exchange volume of 416,290,000 shares -- the highest since the days after the 1987 crash.
While the advance cheered investors who feared a 1987-style crash would occur yesterday, it was strictly a big-stock rally fed by huge buying by bargain-hunting institutions and program traders.
A troubling sign: Declining stocks on the Big Board outnumbered advancers, 975 to 749, and the over-the-counter market that includes many smaller stocks suffered aftershocks of Friday's late Big Board plunge.
The Nasdaq OTC index closed down 6.31 to 460.98.
Meanwhile, in a divergence in two of the market's most important indicators, the Dow industrials' sister average, the 20-stock Dow Jones Transportation Average, tumbled 102.06 to 1304.23 -- its second-worst decline next to the 164.78-point fall during the 1987 crash.
Transports plunged on takeover disappointments in two airline stocks, UAL and AMR, which each fell more than 20% when they reopened for trading yesterday after being suspended Friday afternoon.
UAL, the takeover stock at the center of Friday's 190.58-point market plunge, fell 56 7/8 to 222 7/8 on nearly 2.3 million shares.
Overall, "this is a pleasant rally but it's very selective," said Arthur Cashin Jr., a veteran PaineWebber Inc. trader at the Big Board.
"Everyone was a little concerned about the general narrowness of the rally and failure of the OTC market to get into plus territory.
It's just a strange feeling.
I don't think anyone left the place whistling Dixie."
The rally gave credence, at least for now, to the pre-trading declaration of Big Board Chairman John J. Phelan Jr. that Friday's market debacle was "an abnormal condition, and not a disaster."
But to traders, it looked like disaster on the 9:30 a.m. opening bell.
The Dow Jones Industrial Average opened down 1.64 shortly after 9:30.
But most of the 30 blue-chip stocks in the average, including Eastman Kodak and General Motors, couldn't trade because of the heavy backlog of sell orders left over from Friday's late-afternoon rout.
At 9:45, Procter & Gamble -- one of the most important Dow bellwethers of late -- opened down 2 3/4 to 117.
The Dow dropped to a quick 27-point loss, and to many traders it looked as if stocks were headed for yet another big tumble.
More stocks opened over the ensuing half hour, as the 49 Big Board specialist firms in charge of keeping the market orderly groped to find buy orders from major brokerage firms to match the selling flood.
Then, to make matters worse, computerized sell programs kicked in, hammering stocks into steeper losses.
There was heavy stock-index arbitrage, as traders sold big baskets of stock and bought stock-index futures to profit from the price discrepancies between the two markets.
This was a hangover from Friday, when Standard & Poor's 500-stock index futures had closed at a sharp discount to stocks.
The onslaught of the program selling dashed any hopes that some of the big program trading firms would hold off until the market stabilized.
They didn't.
The Dow accelerated its slide, losing 63.52 in the first 40 minutes of trading.
With program traders seemingly in charge, buyers backed away from the market and watched stocks fall.
Then at 10:15 the Dow suddenly started to rebound, and when it shot upward it did so even faster than the early-morning fall.
And this time, it wasn't just the program traders who were responsible.
All the selling had pushed stocks to such cheap values that big investment banks and major money management firms started buying stocks heavily.
The program traders were in there, too, of course.
But according to one trader, the programmers "didn't look as dominant on the upside as on the downside because there was {also} a lot of bargain-hunting" by institutions.
Roland M. Machold, director of the New Jersey Division of Investment, which oversees $29 billion in investments, said the "first thing we did was to double our orders" yesterday morning.
"With the market down like this, we'll probably take another $50 million and put it in" the market.
Trading in Walt Disney Co. particularly caught traders' eyes.
According to Big Board officials, Disney had one of the biggest sell-order imbalances on Friday; it was one of the seven stocks that couldn't finish trading that day.
The stock opened late at 114 1/2, down 8 1/2.
But then it shot upward 7 1/2 as Goldman, Sachs & Co. stepped in and bought, traders said.
However, Disney specialist Robert Fagenson said: "I would be surprised if Goldman represented 4% of the opening volume."
Around Wall Street, trading desks were relieved that they could at least play the market yesterday, in contrast to Friday's gridlock.
At Donaldson, Lufkin & Jenrette Inc., head equity trader Dudley Eppel said: "I think the opening was constructive.
It was orderly.
We put some orders together.
There wasn't a lot of panic selling, either domestically or internationally. . . .
Not like Friday where they just took {the market} apart."
Still, the market hadn't yet crossed into positive territory, and traders were glum.
But in another dramatic burst, the Dow tacked on 42 points in five minutes, and at 10:25 the index showed a gain of 5.74.
On the Big Board floor and on trading desks, traders yelped their approval.
Grinned Griffith Peck, a trader in Shearson Lehman Hutton Inc.'s OTC department: "I tell you, this market acts healthy."
Around him, scores of traders seemed to get a burst of energy; their boss broke out bottles of Perrier water to cool them off.
Among Big Board specialists, the cry was "Pull your offers" -- meaning that specialists soon expected to get higher prices for their shares.
"It was bedlam on the upside," said one Big Board specialist.
But not everybody was making money.
The carnage on the Chicago Board Options Exchange, the nation's major options market, was heavy after the trading in S&P 100 stock-index options was halted Friday.
Many market makers in the S&P 100 index options contract had bullish positions Friday, and when the shutdown came they were frozen with huge losses.
Over the weekend, clearing firms told the Chicago market makers to get out of their positions at any cost Monday morning.
"They were absolutely killed, slaughtered," said one Chicago-based options trader.
Some traders said that the closely watched Major Market Index, whose 20 stocks mimic the Dow industrials, didn't lead yesterday's big rally.
James Gallagher, a partner at specialist Fowler & Rosenau, said, "The difference between today and two years ago" -- "Terrible Tuesday," Oct. 20, 1987 -- "is that then we needed a savior to go into the Major Market Index, spend $2 million and get the program rally started.
This time {institutions} saw the programs coming and backed away and backed away.
Then when the market was at a technical level to buy, they came in with a vengeance."
However, according to one analyst, the timing of Major Market Index futures buying just before the turnaround was similar to that of Terrible Tuesday.
"Futures were pulling the stock market higher," said Donald Selkin, head of stock-index futures research at Prudential-Bache Securities Inc.
Although the Big Board's specialist firms struggled through another highly volatile trading session, their performance yesterday was better than during Friday's late-afternoon chaos, according to traders and brokers who work with them.
Specialists were criticized for their inability to maintain orderly markets during the Friday plunge.
But yesterday, even with halts in such major blue-chip stocks as Merck, "we expected (the halts) and it wasn't too bad," said Donaldson's Mr. Eppel, who had been critical of the specialists' performance on Friday.
According to a Big Board official, while many stocks opened late, there were subsequent trading halts in only three issues -- AMR, Merck and Valero Energy.
Merck is one of the most important stocks in the Major Market Index.
No sector of the market has been spared during the past two days' gyrations.
Yet from the Dow industrials' high on Oct. 9 through Friday's plunge, relatively good performances have been turned in by real-estate, utilities, precious metals and life insurance stocks.
And yesterday, the top performing industry group was oil field equipment issues.
For example, Halliburton jumped 3 1/4 to 38, Schlumberger rose 2 1/2 to 43 1/4 and Baker Hughes rose 1 1/8 to 22.
Because of the UAL and AMR tumbles, airlines were the weakest sector of the market yesterday.
Philip Morris was the Big Board's most active issue, rising 2 1/4 to 43 1/4 on nearly eight million shares.
Among other major issues, Coca-Cola Co. closed up 2 at 66 3/4 on 1.7 million shares and American Telephone & Telegraph rose 3 1/4 to 43 on nearly 7.8 million shares.
Shares of International Business Machines, which reported earnings yesterday, finished at 103, up 1, after slipping below 100 during Friday's session for the first time in five years.
Shares of three brokerage firms rose after they reported earnings.
Merrill Lynch added 1 3/4 to 28, PaineWebber rose 3/4 to 18 1/2 and Bear Stearns rose 3/8 to 14 1/4.
Federal National Mortgage Association, a recently hot stock, climbed 4 to 124 on nearly 1.6 million shares.
At a news conference after the close of trading yesterday, the Big Board's Mr. Phelan and other exchange officials praised the performance of their computers and personnel.
Mr. Phelan said that program trading strategies weren't responsible for triggering Friday's decline despite a jump in the use of the computer-driven strategies in recent months.
Some 24 million of the more than 100 million shares traded in the final 90 minutes of Friday's session, when the plunge in stock prices was concentrated, were program-related, he said.
Program trades make up 10% of the exchange's volume on an average day, but despite the increase Friday, it was "certainly not something you would say precipitated the market decline," Mr. Phelan said.
Mr. Phelan expressed relief that the market rebounded yesterday.
"Obviously, every time we get this kind of reaction, it's going to make everybody nervous, including me," he said.
He said that exchange officials had conversations with Wall Street firms throughout the weekend and that "all the participants behaved very, very responsibly today."
Meanwhile, Peter DaPuzzo, Shearson's head of retail equity trading, praised institutional investors in the OTC market, who were heavy buyers of the Nasdaq's biggest technology issues yesterday amid a flood of selling by other investors.
"The institutions can't be criticized for their behavior," Mr. DaPuzzo said in an interview.
"It was the opposite of what happened on Oct. 19.
They used their judgment.
They didn't panic during the first round of selling this morning.
Instead, they bought on weakness and sold into the strength, which kept the market orderly.
Maybe they learned from experience."
Mr. Phelan said the performance of specialists during Friday's plunge was admirable, because out of 1,640 Big Board common stocks traded during the day only seven were closed and weren't reopened before the close.
"They did an excellent job," Mr. Phelan said of the specialists.
Wall Street traders on Friday had complained about the trading suspensions.
James A. White and Sonja Steptoe contributed to this article.
West Germany's Green Party joined its ideological soulmates Jeremy Rifkin and the Christic Institute in the legal battle to ground the Atlantis shuttle and its plutonium-powered Galileo probe to Jupiter.
The anti-defense Greens wanted a Washington federal appeals court to block today's scheduled liftoff long enough for them to ask the World Court to "order" a permanent cancellation of the $1.5 billion flight.
A three-judge appeals panel yesterday refused to comply, though liberal Judge Pat Wald went out of her way to deny that this was a "frivolous" case.
Of course it was.
NASA should now sue for fines against all three politico-plaintiffs, foreign and domestic, for bringing this mischievous case.
A House-Senate conference approved a permanent smoking ban on all domestic airline routes within the continental U.S. and on all flights of six hours or less to Alaska and Hawaii.
The restrictions would cover all but a small percentage of domestic air traffic, and represent a major expansion of the current smoking ban on flights of two hours or less.
The exemption allowed on longer flights to Alaska and Hawaii appears to be largely a face-saving concession for the traditionally powerful tobacco industry, which has found itself increasingly isolated in the face of public pressure in recent years.
By a 6-4 margin, House negotiators initially rejected last night a Senate provision covering all domestic flights.
But the six-hour compromise was soon agreed to in subsequent discussions.
As a practical matter, flights from the West Coast to Hawaii would be covered as they are under the time limit, but the language would exempt longer routes beginning, for example, in Chicago or on the East Coast.
Within the Senate, the ban has had aggressive support from Sen. Frank Lautenberg (D., N.J.), who has used his position as a Senate Appropriations subcommittee chairman to garner votes for the initiative.
The measure is attached to the more than $26 billion fiscal 1990 transportation bill within Mr. Lautenberg's jurisdiction, and the final compromise is laced with more than $205 million in road projects earmarked by members as well as funds sought by major airports, including Denver.
From the outset, the tobacco industry has been uncertain as to what strategy to follow.
But the industry retains support in the House leadership through the influence of grower states, such as North Carolina.
Majority Whip William Gray owes a political debt to Southern agriculture lawmakers for his rise in the House, and the Philadelphia Democrat used his position in the conference to salvage the exemption from a total ban.
Although the smoking provision has attracted the most public interest, the underlying bill was the subject of behind-the-scenes lobbying because of its impact on air transportation and the more mundane, but politically important, projects of members.
In a stark lesson in the power of the appropriations committees, the House deliberately killed a handful of projects backed by lawmakers in Florida, Illinois and Pennsylvania who had voted against the panel leadership on the House floor.
"Anybody can vote as they want," said Rep. William Lehman (D., Fla.), head of the House conferees.
"But if you make a request, you should support the committee."
Within the Federal Aviation Administration, the final bill promises to increase spending for facilities and equipment by more than 20% from last year, and total operations would rise to $3.84 billion -- a 12% boost.
The facilities account includes $40 million for Denver's ambitious new airport, and the competition for these funds created shifting alliances between urban lawmakers representing established airports in Philadelphia and Michigan and the major carriers to Denver, United and Continental.
Leery of the costs -- and, critics say, competition -- the airlines have sought to gain leverage over the city of Denver.
Texas Air Corp., which owns Continental, and the Air Transport Association were prominent in the lobbying.
The industry sought to impose conditions that would have delayed funds for the project until Denver and the airlines had agreed to leases for 50% of the gates.
But this was rejected in favor of much looser language directing the Transportation Department to review the costs of the first phase, expected to cost about $2 billion.
Though smaller in total dollars, the conference agreed to preserve an estimated $30.6 million in controversial subsidies to carriers serving rural or isolated airports.
The sum is more than double what the House had approved for the program, but the list of qualified airports would be cut by 22 under new distance requirements and limits on the level of subsidy.
Congress previously cut six airports this year.
The impact of the changes is to eliminate many of the most excessive cases where the government has been paying more than $200 for each passenger in subsidies.
Among rail and highway accounts, the agreement provides $615 million for Amtrak, including $85 million for capital improvements.
And federal-formula grants for mass transit would be effectively frozen at $1.625 billion, or $20 million more than last fiscal year.
Enjoying several blockbuster movie hits including "Batman," Los Angeles-based Guber-Peters Entertainment Co. reported earnings for the first quarter ended Aug. 31 of $5.8 million, or 50 cents a share, compared with a year-earlier loss.
Sony Corp., which has offered to acquire the movie-production company, is seeking to free its top executives, Peter Guber and Jon Peters, from an exclusive agreement with Time Warner Inc.'s Warner Communications Inc. so they can run Columbia Pictures Entertainment Inc.
Sony two weeks ago agreed to acquire Columbia for $3.4 billion, or $27 a share.
Warner sued Sony and Guber-Peters late last week; Sony and Guber-Peters have countersued, charging Warner with attempting to interfere in Sony's acquisition of the two companies.
Guber-Peters's net income in the latest quarter compared with a net loss of $6.9 million, or 62 cents a share, in the year-earlier period.
The company said revenue rose 138%, to $10.9 million from $4.6 million, reflecting the success of its movies "Gorillas in the Mist" and "Rainman," as well as the box-office smash "Batman.
A group including Jon M. Huntsman of Salt Lake City, said it boosted its stake in Aristech Chemical Corp. to 8.36% of the the common shares outstanding.
As previously reported, Huntsman Holdings Corp., owned by Jon M. Huntsman and other members of his family, proposed that Banstar Corp., an affiliate of Huntsman Holdings, acquire Aristech in a friendly transaction for $25-a-share in cash, or $817.5 million.
In a filing with the Securities and Exchange Commission, the Huntsman group said it controls 2,720,675 Aristech common shares, including 306,000 shares bought from Aug. 21 to Oct. 13 for $20 to $20.875 per share.
Officials at Aristech, based in Pittsburgh, declined comment.
Congress has been critical of the Bush administration for not sending enough aid to Poland, so it is getting ready to send its own version of a CARE package.
Last month, the Senate voted to send a delegation of congressional staffers to Poland to assist its legislature, the Sejm, in democratic procedures.
Senator Pete Domenici calls this effort "the first gift of democracy."
The Poles might do better to view it as a Trojan Horse.
It is the vast shadow government of 15,000 congressional staffers that helps create such legislative atrocities as the 1,376 page, 13-pound reconciliation bill that claimed to be the budget of the United States.
Maybe after the staffers explain their work to the Poles, they'd be willing to come back and do the same for the American people.
Waterford Wedgwood PLC, a financially troubled Irish maker of fine crystal and Wedgwood china, reported that its pretax loss for the first six months widened to 10.6 million Irish punts ($14.9 million) from 5.8 million Irish punts a year earlier.
The results for the half were worse than market expectations, which suggested an interim loss of around 10 million Irish punts.
In a sharply weaker London market yesterday, Waterford shares were down 15 pence at 50 pence (79 cents).
The company reported a loss after taxation and minority interests of 14 million Irish punts, compared with a loss of 9.3 million Irish punts for the year-earlier period.
There weren't any extraordinary items.
Sales for the total group rose 27% to 168.1 million Irish punts compared with 132.6 million Irish punts a year ago.
Waterford has decided against paying an interim dividend.
Waterford said the appointment of a new management team and the signing of a comprehensive labor agreement are expected to enhance the company's long-term prospects.
The sudden "flight to quality" that triggered Friday's explosive bond-market rally was reversed yesterday in a "flight from quality" rout.
The setback, in which Treasury bond prices plummeted, reflected a rebound in the stock market and profit-taking.
"It was a pretty wild day.
Our markets were closely tied to the stock market," said Joel Kazis, manager of trading at Smith Barney, Harris Upham & Co.
"Friday's flight to quality was no longer needed once the stock market found its legs," he said.
Some fixed-income investors had expected a further drop in stock prices after the nearly 200-point drop in the Dow Jones Industrial Average on Friday.
That caused investors to flee stocks and buy high-quality Treasury bonds, which are safer than other types of securities.
But when stocks began to climb instead, prices of Treasury bonds declined.
Contributing to the selling pressure were dispatches by several investment firms advising clients to boost their stock holdings and reduce the size of their cash or bond portfolios.
Among the firms were Merrill Lynch & Co. and Dean Witter Reynolds Inc.
The bond market seemed to ignore evidence that the Federal Reserve eased credit conditions slightly by allowing the federal funds rate to drift as low as 8 1/2%.
The closely watched rate on federal funds, or overnight loans between banks, slid to about 8 3/4% last week, down from its perceived target level of about 9%.
The rate is considered an early signal of changes in Fed policy.
Traders said yesterday's modest easing didn't stir much enthusiasm because it had been widely expected.
In fact, some economists contend that the latest easing started last week.
Others note that some investors were disappointed because they had expected a more aggressive easing.
The Treasury's benchmark 30-year bond, ended about 1 3/4 points lower, or down about $17.50 for each $1,000 face amount.
The reversal was even more evident among shorter-term Treasury securities.
After Treasury bill rates plummeted as much as 0.70 percentage point on Friday, they gave back three-fourths of that amount yesterday.
The bond-equivalent yield on three-month Treasury bills, for example, was quoted late yesterday at 7.72%, compared with 7.16% Friday.
Investment-grade corporate bonds, mortgage-backed securities and municipal bonds also fell.
But prices of junk bonds, which were battered Friday in near standstill trading, rebounded to post small gains after a volatile trading session.
Junk bonds opened as much as four points lower but staged a modest comeback as stock prices firmed.
Some traders said the high-yield market was helped by active institutional buying.
In particular, they said, firms such as First Boston Corp. and Drexel Burnham Lambert Inc. began making a market in junk issues early in the session when prices hit severely depressed levels.
"I think the willingness of securities companies to make markets for high-yield issues improved the sentiment for junk bonds," said John Lonski, an economist at Moody's Investors Service Inc.
U.S. Treasury bonds were higher in overnight trading in Japan, which opened at about 7:30 p.m. EDT.
The benchmark 30-year bond, for example rose one point in early Japanese trading in reaction to a quick 600-point drop in the Tokyo stock market.
But as Japanese stocks rebounded, Treasurys retreated and ended just modestly higher.
Many U.S. trading operations, wanting to keep a watchful eye on Japanese trading as an indication of where U.S. trading would begin, were fully staffed during the Tokyo trading session.
"Most of the action was during the night session," said Michael Moore, trading manager at Continental Bank.
Jay Goldinger, who often trades overnight for Capital Insight Inc., Beverly Hills, Calif., said trading in Tokyo was "very active" but highly volatile.
"We went down 3/4 point in 10 minutes right before lunch, then after lunch we went up 3/4 point in 12 minutes," he said.
In Tokyo, trading is halted during lunchtime.
Tokyo's market turned out to be a bad bellwether for U.S. trading.
When the market opened here, bonds prices fell as the stock market regained strength.
The bond market's focus on stock activity was so strong yesterday that it overshadowed today's slate of economic data, which includes the government's report on August U.S. merchandise trade and September industrial production.
Industrial production is expected to have declined 0.2%, according to a consensus of economists surveyed by Dow Jones Capital Markets Report.
The August trade deficit is expected to have widened to $9.1 billion from $7.58 billion in July.
A widening of that magnitude, said one New York trader, is "not a favorable number. . . .
It could do damage to us."
Meanwhile, agency supply is expected to weigh heavily on the market today when the Federal Home Loan Bank prices a $2.3 billion offering of one-year, three-year, five-year and 10-year maturities.
Tomorrow, the Resolution Funding Corp. will provide details of its first bond issue, which is expected to total between $4 billion and $6 billion and carry a maturity greater than 20 years.
Resolution Funding is a division of Resolution Trust Corp., the new federal agency created to bail out the nation's troubled thrifts.
And this week the Tennessee Valley Authority plans to price a $3 billion offering, its first public debt borrowing in 15 years.
"There's lots of supply," the New York trader said.
"We have a couple or three tough weeks coming."
Treasury Securities
Prices of Treasury bonds tumbled in moderate to active trading.
The benchmark 30-year Treasury bond was quoted late at a price of 101 19/32, compared with a closing price of 103 12/32 Friday.
The yield on the benchmark issue rose to 7.97% from 7.82%.
The latest 10-year notes were quoted late at 100 3/32 for a yield of 7.97%, compared with 101 9/32 to yield 7.84%.
Short-term interest rates fell yesterday at the government's weekly Treasury bill auction.
The average discount rate on new three-month Treasury bills was 7.37%, the lowest since the average of 7.36% at the auction on Oct. 17, 1988.
The average discount rate was 7.42% on new six-month bills, the lowest since the average of 7.35% at the auction on July 31, 1989.
Here are auction details:
Rates are determined by the difference between the purchase price and face value.
Thus, higher bidding narrows the investor's return while lower bidding widens it.
The percentage rates are calculated on a 360-day year, while the coupon-equivalent yield is based on a 365-day year.
Both issues are dated Oct. 19.
The 13-week bills mature Jan. 18, 1990, and the 26-week bills mature April 19, 1990.
Corporate Issues
Investment-grade corporate bonds ended one to 1 1/2 point lower.
There were no new issues.
Foreign Bonds
Foreign bonds surged as the dollar weakened against most major currencies.
Among benchmark issues: -- Japan's No. 111 4.6% bond due 1998 ended on brokers screens at 96.15, up 1.17 point.
The yield was 5.245%.
-- West Germany's 6 3/4% issue due June 1999 ended at 98.30, up 0.91 point to yield 6.99%.
-- Britain's 11 3/4% bond due 2003/2007 ended 1 1/8 higher at 111 19/32 to yield 10.12%, while the 11 3/4% notes due 1991 rose 21/32 to 98 26/32 to yield 12.74%.
Mortgage-Backed Securities
Mortgage securities gave up most of Friday's gains as active issues ended 24/32 to 30/32 point lower.
Dealers said morning activity was hectic as prices dropped in response to gains in the stock market and losses in Treasury securities, but trading slowed to moderate levels in the afternoon.
Government National Mortgage Association 9% securities for November delivery were quoted late yesterday at 98 4/32, down 30/32 from Friday; 9 1/2% securities were down 27/32 at 100 5/32; and 10% securities were at 102 2/32, off 24/32.
Federal Home Loan Mortgage Corp. 9% securities were at 97 1/4, down 3/4.
On Friday, mortgage issues gained as much as 1 5/32.
Late yesterday Ginnie Mae 9% securities were yielding 9.39% to a 12-year average life assumption, as the spread above the Treasury 10-year note narrowed 0.01 percentage point to 1.42.
Traders said there were some busy dealings in Freddie Mac and Federal National Mortgage Association securities because underwriters from last week's heavy slate of real estate mortgage investment conduit issues moved to gather collateral for new deals.
Offsetting the Remic-related purchases were continued heavy sales by mortgage originators, which are producing increased amounts of fixed-rate mortgage-backed issues with lower rates.
There was no new-issue activity in the derivative market.
Municipals
Rebounding stocks and weaker Treasury prices drove municipal bonds 1/4 to 3/4 point lower in late dealings.
The session losses left municipal dollar bonds close to where they were before the 190.58-point drop in the Dow Jones Industrial Average Friday prompted a capital markets rally.
Trading was hectic during the morning, with players trying to gauge whether equities would continue Friday's free fall or stabilize after a brief spot of weakness.
Tax-exempts started the session flat to a touch higher on anticipation of further stock market erosion, but bond prices rapidly turned south as it became more clear that a repeat of the October 1987 crash wasn't at hand.
Professionals dominated municipal trading throughout the session.
Traders said retail investors seemed to be hugging the sidelines until a measure of volatility is wrung out of the market.
New Jersey Turnpike Authority's 7.20% issue of 2018 was off 3/4 at 98 1/2 bid, yielding 7.32%, up 0.07 percentage point from late Friday.
Florida Board of Education's 7 1/4% issue of 2023 was 5/8 point weaker at 99 1/2 bid.
The 7 1/8% issue of Triborough Bridge and Tunnel Authority of New York, due 2019, was off 5/8 at 98 1/8 bid.
And Fairfax County, Va., Water Authority's 7 1/4% issue of 2027 was down 3/4 at 99 7/8 bid.
Serial bond yields were up about 0.05 percentage point.
BMA Corp., Kansas City, Mo., said it's weighing "strategic alternatives," for its Business Men's Assurance Co. unit, and is contacting possible buyers of the life and health insurance operation.
A BMA spokesman said "runaway medical costs" have made health insurance "a significant challenge," and margins also have been pinched by changes in the mix of life-insurance products consumers now demand.
The Business Men's Assurance unit represented about $288 million of the company's $488 million in 1988 revenue, and the unit's operating income was about $10 million, said the spokesman.
BMA's investment banker, Alex. Brown & Sons Inc., has been authorized to contact possible buyers for the unit.
Laidlaw Transportation Ltd. said it raised its stake in ADT Ltd. of Bermuda to 29.4% from 28%.
A spokesman for Laidlaw declined to disclose the price the Toronto transportation and waste services concern paid for the additional shares, which he said were acquired "over the last couple of weeks."
The spokesman said Laidlaw wouldn't increase its stake in ADT beyond 30% "without a great deal of thought" because of British takeover regulations that require a company acquiring more than 30% to extend an offer to the rest of the company's shareholders.
ADT, a security services and auctions company, trades on London's Stock Exchange.
Laidlaw is 47%-controlled by Canadian Pacific Ltd., a Montreal transportation, resources and industrial holding concern.
Nintendo Co., a Japanese maker of video games, electronic information systems and playing cards, posted a 23% unconsolidated surge in pretax profit to 61.41 billion yen ($429 million) from 50 billion yen ($349.9 million) for the fiscal year ended Aug. 31.
Sales surged 40% to 250.17 billion yen from 178.61 billion.
Net income rose 11% to 29.62 billion yen from 26.68 billion.
Pershare net fell to 423.3 yen from 457.7 yen because of expenses and capital adjustments.
Without detailing specific product breakdowns, Nintendo credited its bullish upsurge in sales -- including advanced computer games and television entertainment systems -- to surging "leisure-oriented" sales in foreign markets.
Export sales for leisure items alone, for instance, totaled 184.74 billion yen in the 12 months, up from 106.06 billion in the previous fiscal year.
Domestic leisure sales, however, were lower.
Hertz Corp. of Park Ridge, N.J., said it retained Merrill Lynch Capital Markets to sell its Hertz Equipment Rental Corp. unit.
"There is no pressing need to sell the unit, but we are doing it so we can concentrate on our core business, renting automobiles in the U.S. and abroad," said William Slider, Hertz's executive vice president.
"We are only going to sell at the right price."
Hertz Equipment had operating profit before depreciation of $90 million on revenue of $150 million in 1988.
The closely held Hertz Corp. had annual revenue of close to $2 billion in 1988, of which $1.7 billion was contributed by its Hertz Rent A Car operations world-wide.
Hertz Equipment is a major supplier of rental equipment in the U.S., France, Spain and the U.K.
It supplies commercial and industrial equipment including earth-moving, aerial, compaction and electrical equipment, compressors, cranes, forklifts and trucks.
Interspec Inc. reported a net loss of $2.4 million for the fiscal third quarter ended Aug. 31.
It said the loss resulted from startup and introduction costs related to a new medical ultrasound equipment system.
In the year-earlier quarter, the company reported net income of $955,000, or 15 cents a share.
The manufacturer of ultrasound diagnostic systems, based in Ambler, Pa., reported a nine-month net loss of $2.43 million compared with net income of $2.71 million, or 44 cents a share, for the nine-month period a year earlier.
In over-the-counter trading, Interspec fell 37.5 cents to $4.25.
Allegheny Ludlum Corp. expects to report third-quarter net of about $34 million, or $1.50 a share, down from $38.4 million, or $1.70 a share, a year earlier, Richard P. Simmons, chairman and chief executive officer, told institutional investors in New York.
Sales for the Pittsburgh-based producer of specialty steels and other materials fell to about $265 million in the third quarter from $320.5 million a year earlier, he said.
He said the third-quarter estimate indicates profit for the nine months of $4.65 a share, "almost equal to the full-year 1988 earnings" of $108.6 million, or $4.81 a share.
In the first nine months of 1988, net was $85 million, or $3.76 a share.
Mr. Simmons said the third-quarter results reflect continued improvements in productivity and operating margins.
He said capital spending next year will rise to about $45 million from about $35 million this year.
U.S. Banknote Co. said it again extended the expiration date of its $7-a-share tender offer for International Banknote Co. to Nov. 15.
U.S. Banknote said it is in negotiations to sell "certain facilities," which it didn't name, to a third party, and it needs the extension to try to reach a definitive agreement on the sale.
U.S. Banknote said it believes the sale, if completed, apparently would satisfy antitrust issues raised by the U.S. Justice Department about U.S. Banknote's offer to buy International Banknote.
Both of the New York-based companies print stock certificates and currency.
U.S. Banknote said "there can be no assurance" a sale agreement would be concluded.
It also said the tender offer would probably have to be extended further to complete financing arrangements.
U.S. Banknote said Citibank extended the expiration date of its commitment for senior secured financing to Nov. 15.
The offer, made June 1, has been extended several times.
Closely held U.S. Banknote offered the $7 a share, or $126 million, for as many as 14.9 million shares, or 78.6%, of International Banknote's shares outstanding.
U.S. Banknote said that as of Oct. 13, 16.1 million shares, or about 84.3% of the fully diluted shares outstanding, had been tendered.
Gitano Group Inc. said it agreed to buy 50% of Regatta Sport Ltd., a closely held apparel maker, with the assumption of $3 million of contingent debt.
Under the terms of the contract, New York-based Gitano has the option to acquire the remaining 50% of Regatta, a maker of men's and women's clothes sold primarily in department stores, under certain conditions.
That 50% is now held by Clifford Parker, Regatta's president and chief executive officer, who will continue to manage Regatta's operations under Gitano.
In 1989, Regatta will have sales "in excess of $10 million" and will show a profit, Mr. Parker said.
Gitano, which makes budget-priced apparel sold mainly through mass merchandisers like K mart and Wal-Mart, said the Regatta acquisition will enhance its strategy to expand into department stores.
This fall, Gitano began manufacturing moderately priced clothes aimed at department stores under the Gloria Vanderbilt trademark, which Gitano recently acquired.
Enron Corp., Houston, said the sale of preference units of its newly formed Enron NGL Partners L.P. master limited partnership subsidiary will result in an undetermined gain in the fourth quarter.
In the year-ago quarter, the natural gas concern had net income of $25.2 million, or 34 cents a share, on revenue of about $1.46 billion.
Those results included a $2.7 million charge related to the retirement of debt.
In a related move, Enron said it increased the number of the partnership's units it will offer to 6,930,000 from 5,500,000.
The old and revised numbers both include over-allotment provisions.
Enron said each unit will be priced in the $19-to-$21 range and will represent about 80% of the partnership equity.
Net proceeds from the offering are expected to be close to $200 million.
Goldman, Sachs & Co., and Drexel Burnham Lambert Inc. are lead underwriters.
Arthur M. Goldberg said he extended his unsolicited tender offer of $32 a share tender offer, or $154.3 million, for Di Giorgio Corp. to Nov. 1.
DIG Acquisition Corp., the New Jersey investor's acquisition vehicle, said that as of the close of business yesterday, 560,839 shares had been tendered.
Including the stake DIG already held, DIG holds a total of about 25% of Di Giorgio's shares on a fully diluted basis.
The offer, which also includes common and preferred stock purchase rights, was to expire last night at midnight.
The new expiration date is the date on which DIG's financing commitments, which total about $240 million, are to expire.
DIG is a unit of DIG Holding Corp., a unit of Rose Partners L.P.
Mr. Goldberg is the sole general partner in Rose Partners.
In August, Di Giorgio, a San Francisco food products and building materials marketing and distribution company, rejected Mr. Goldberg's offer as inadequate.
In New York Stock Exchange composite trading yesterday, Di Giorgio closed at $31.50 a share, down $1.75.
What doesn't belong here?
A. manual typewriters, B. black-and-white snapshots, C. radio adventure shows.
If you guessed black-and-white snapshots, you're right.
After years of fading into the background, two-tone photography is coming back.
Trendy magazine advertisements feature stark black-and-white photos of Hollywood celebrities pitching jeans, shoes and liquor.
Portrait studios accustomed to shooting only in color report a rush to black-and-white portrait orders.
And black-and-white photography classes are crowded with students.
What's happening in photography mirrors the popularity of black and white in fashion, home furnishings and cinematography.
On Seventh Avenue, designers have been advancing the monochrome look with clothing collections done entirely in black and white.
And classic black-and-white movies are enjoying a comeback on videocassette tapes, spurred, in part, by the backlash against colorization of old films.
"The pendulum is swinging back to black and white," says Richard DeMoulin, the general manager of Eastman Kodak Co.'s professional photography division.
Until two years ago, sales of black-and-white film had been declining steadily since the 1960s.
But last year, buoyed by increased use in advertising and other commercial applications, sales increased 5%, and they are expected to jump at least that much again this year.
Photographic companies are scrambling to tap the resurging market, reviving some black-and-white product lines and developing new ones.
At Kodak, which largely ignored the market for years, black-and-white film sales now account for nearly 15% of the company's $3 billion in film and paper sales annually, up from 10% three years ago.
The Rochester, N.Y., photographic giant recently began marketing T-Max 3200, one of the fastest and most sensitive monochrome films.
Aimed at commercial photographers, the film can be used in very low light without sacrificing quality, says Donald Franz of Photofinishing Newsletter.
Also trying to snare a portion of the $2 billion-a-year industry is Agfa Corp., a unit of Bayer AG.
Agfa recently signed Olympic gold medalist Florence Griffith-Joyner to endorse a new line of black-and-white paper that's geared to consumers and will compete directly with Kodak's papers.
Slated for market by the end of the year, the paper "could have been introduced a long time ago but the market wasn't there then," says an Agfa spokesman.
The biggest beneficiary of the black-and-white revival is likely to be International Paper Co.'s Ilford division, known in the industry for its premium products.
Sales of Ilford's four varieties of black-and-white film this year are outpacing growth in the overall market, although the company won't say by exactly how much.
"We hope the trend lasts," says Laurie DiCara, Ilford's marketing communications director.
Why all the interest?
For baby boomers who grew up being photographed in color, black and white seems eye-catching and exotic.
"It has an archival, almost nostalgic quality to it," says Owen B. Butler, the chairman of the applied photography department at Rochester Institute of Technology.
"You can shift out of reality with black and white," he adds.
Such features have been especially attractive to professional photographers and marketing executives, who have been steadily increasing their use of black and white in advertising.
Processing of black-and-white commercial film jumped 24% last year to 18.7 million rolls.
Consider Gap Inc., whose latest ad campaign features black-and-white shots of Hollywood stars, artists and other well-known personalities modeling the retailer's jeans and T-shirts.
Richard Crisman, the account manager for the campaign, says Gap didn't intentionally choose black and white to distinguish its ads from the color spreads of competitors.
"We wanted to highlight the individual, not the environment," he says, "and black and white allows you to do that better than color."
The campaign won a Cleo award as this year's best ad by a specialty retailer.
Even food products and automobiles, which have long depended on color, are making the switch.
Companies "feel black and white will convey a stronger statement," says Marc L. Hauser, a Chicago photographer who is working on a black-and-white print ad for Stouffer Food Corp.'s Lean Cuisine.
Other companies that are currently using two-tone ads include American Express Co. and Epson America Inc.
Portrait studios have also latched onto the trend.
Using black and white, "we can make housewives look like stars," says John Perrin.
His On-Broadway Photography studio in Portland, Ore., doubled its business last year and, he says, is booked solid for the next five.
One customer, Dayna Brunsdon, says she spurned a color portrait for black and white because "it's more dramatic.
I show it to my friends, and they all say 'wow.'
It isn't ordinary like color."
Still, most consumers aren't plunking black-and-white film into their cameras to take family snapshots.
One big obstacle is that few drugstores develop the film anymore.
Typically, it must be mailed to a handful of processors and may take a week or more to be processed and returned.
Black-and-white film costs consumers a little less than color film, and processing costs the same.
But for photofinishers, developing costs for black-and-white film are higher.
Some companies are starting to tackle that problem.
Ilford, for example, recently introduced a black-and-white film that can be processed quickly by color labs.
Intent on wooing customers, the company is also increasing its sponsorship of black-and-white photography classes.
Similarly, Agfa is sponsoring scores of photography contests at high schools and colleges, offering free black-and-white film and paper as prizes.
And Kodak is distributing an instructional video to processors on how to develop its monochrome film more efficiently.
Other companies are introducing related products.
Charles Beseler Co., a leading maker of photographic enlargers, introduced last month a complete darkroom starter kit targeted at teen-agers who want to process their own black-and-white photographs.
The kit, which has a suggested retail price of $250 and has already become a bestseller, was introduced after retailers noticed numerous requests from parents for children's photography equipment.
"It seems computers as hobbies have waned," says Ian Brightman, Beseler's chairman and chief executive officer.
But some industry observers believe the resurgence of black and white is only a fad.
They cite the emergence of still electronic photography, more newspapers turning to color on their pages and measurable improvements in the quality of color prints.
"Black and white hasn't made the same quantum leaps in technological development as color," says Mr. Butler of the Rochester Institute.
"The color print today is far superior to prints of 10 years ago.
You can't say the same with black and white."
But when Popular Photography, a leading magazine for photographers, selected 15 of the greatest photos ever made for its latest issue celebrating photography's 150th anniversary, all were black and white.
"It's got a classic spirit and carries over emotionally," says Alfred DeBat of Professional Photographers of America.
"That's the appeal.
McClatchy Newspapers Inc. said improvements in advertising and subscription revenue led to a 21% gain in third-quarter profit to $8.8 million, or 31 cents a share, from $7.2 million, or 25 cents a share.
Sales rose more than 7% to $94.9 million from $88.3 million.
The Sacramento, Calif., company also attributed improved performance to a lower effective tax rate and higher interest income.
For the nine months, the newspaper chain had almost a 23% increase in profit to $23.6 million, or 83 cents a share, from $19.2 million, or 68 cents a share.
Sales grew almost 7% to $279.1 million from $261.3 million.
McClatchy publishes the Sacramento (Calif.) Bee and Tacoma (Wash.) News Tribune, and other papers in Western states.
In composite trading on the New York Stock Exchange, the company closed at $25.25 a share, down 25 cents.
Agip S.p.A. and Societe National Elf Aquitaine, the state oil companies of Italy and France, respectively, submitted an offer to buy Gatoil Suisse S.A.
The price wasn't disclosed.
A spokesman for Gatoil said that the Swiss oil concern was examining the offer, submitted last Friday, along with two other offers, also submitted last week.
Those two offers were private and the spokesman refused to identify the bidding companies.
The spokesman further said that at least two more offers are expected from other companies within two weeks.
Gatoil Suisse owns an oil refinery in Switzerland with a capacity of 70,000 barrels a day, along with a network of gasoline retailing outlets.
While Friday's plunging stock market prompted new fears about the economy's prospects, a little-known indicator that has faithfully foreshadowed the economy's ups and downs by exceptionally long lead times points to a sustained rise in overall business activity.
The barometer, developed by analysts at Columbia University's Center for International Business Cycle Research here, reached a record high of 223.0 in August, the latest month available, and the Columbia researchers estimate that it has moved even higher since then.
The latest reading of 223.0 was up from 222.3 in July and 215.3 as recently as March.
The August rise marked the fifth straight monthly gain for the indicator, which uses the 1967 average as a base of 100.
In contrast, the Commerce Department's widely followed index of leading indicators, while up in August, has fallen repeatedly since reaching a high early this year.
Its ragged behavior through much of 1989 has prompted some forecasters to anticipate the start of a new recession perhaps before year's end.
But the far stronger showing of the Columbia index "makes a recession any time soon highly unlikely," says Geoffrey H. Moore, the director of the Columbia facility.
A leading authority on the business cycle, Mr. Moore also is a member of the Business Cycle Dating Group, the panel of private economists that decides for the government when expansions and recessions begin and end.
The group normally convenes only when a change in the economy's general course seems likely.
"No meeting is scheduled because the expansion shows no sign of going off the tracks," Mr. Moore reports.
Based largely on the recent strength in their index, called the long leading indicator, the Columbia analysts foresee uninterrupted economic growth through the rest of this year and next year as well.
They expect a 2.6% rise in 1990 in the gross national product, after adjustment for inflation.
Underlying this optimism is the index's longstanding ability to signal recessions or recoveries, as the case may be, by substantially greater periods than the Commerce Department's index of leading indicators.
Over the full post-World War II era, the Columbia index, on the average, has entered sustained declines 14 months before the onset of recessions and turned up eight months before recoveries.
The comparable lead times for the Commerce index, whose components include the stock market, are far shorter -- 10 months before recessions and only three months before recoveries.
The Columbia economists also have reconstructed how the long leading index would have behaved, had it existed, in 1929, before the stock market crash in October that ushered in the Great Depression.
The indicator reached a peak in January 1929 and then fell steadily up to and through the crash.
"It was an entirely different pattern from what we're seeing now," Mr. Moore says.
A major source of the recent strength in the long leading indicator has been the performance of the Dow Jones corporate bond-price index, which is not a part of the Commerce index.
In August, the bond measure was at its highest monthly average since early 1987.
It also rose last Friday, while the stock market sagged.
Other components of the long leading indicator include a ratio of prices to unit labor costs in manufacturing industries, the M2 version of the money supply, adjusted for inflation, and the volume of new home-building permits.
Notably absent from the Columbia index is the stock market, which Mr. Moore says "is simply no longer such a good indicator of the economy's long-range prospects, though it still is useful for anticipating some short-run twists and turns."
As recently as 1975, the stock market -- as reflected in the Standard & Poor's index of 500 common stocks -- was rated by the National Bureau of Economic Research as the best of the 12 leading indicators that then made up the Commerce index.
It was assigned a mark of 80 out of a possible 100, compared with scores ranging as low as 69 for the other components.
The stock market has lost some precursory power, analysts at the Columbia center claim, because of the growing impact of international developments.
"Stocks have become more sensitive to factors not directly tied to the domestic economy," Mr. Moore says, citing the exchange rate for the dollar on currency markets, the foreign-trade balance and inflows of foreign capital.
He also feels that the rise of such computer-based practices as program trading has diminished the stock market's relevancy to the economic outlook.
BSN S.A., a leading French food group, said it agreed to acquire Birkel G.m.b.H., a West German pasta maker.
The value of the acquisition wasn't disclosed.
The move is in line with BSN's strategy of gradually building its share of the European pasta market through external growth.
BSN will initially acquire a 15% interest in Birkel, a closely held concern.
The French group has an agreement giving it the right to buy all the shares outstanding, and this could be completed within a few months, a BSN spokeswoman said.
The takeover was submitted for approval by the West German cartel office, BSN said.
Birkel is West Germany's second-biggest producer of pasta, with sales of 250 million marks ($133.4 million) in 1988.
It has 750 workers at three production units in southwest Germany, and is that nation's leading producer of pasta sauces.
The acquisition strengthens BSN's position in the European pasta market.
The French group currently ranks second after Barilla Group of Italy, whose sales are chiefly in the Italian market.
Moody's Investors Service Inc. said it reduced its rating on $281 million of senior and subordinated debt of this thrift holding company, to C from Ca, saying it believes bondholders will recover only "negligible principal."
The agency said it confirmed American Continental's preferred stock rating at C.
American Continental's thrift unit, Los Angeles-based Lincoln Savings & Loan Association, is in receivership and the parent company has filed for protection from creditor lawsuits under Chapter 11 of the federal Bankruptcy Code.
CENTRUST SAVINGS BANK (Miami) --
Moody's Investors Service Inc. downgraded its ratings on the subordinated debt of CenTrust to Caa from B-3.
The rating agency also reduced the ratings for long-term deposits to B-3 from Ba-3 and for preferred stock to Ca from Caa.
The rating agency said about $85 million in securities was affected.
The downgrades were prompted, Moody's said, by the continuing turmoil in the junk bond market and the suspension of dividends on CenTrust's preferred stock.
Moody's also said it believed the proposed sale of 63 CenTrust branches to Great Western Bank could, if completed, endanger the thrift's funding and market position.
THE STOCK MARKET AVOIDED a repeat of Black Monday as prices recovered from an early slide, spurred by bargain-hunting institutions and program traders.
The Dow Jones industrials closed up 88.12 points, at 2657.38, the fourth-biggest gain ever, after being down as much as 63.52 points in the morning.
The rally erased about half of Friday's 190.58-point plunge, but analysts are cautious about the market's outlook.
The dollar also rebounded, while bond prices plummeted and Treasury bill rates soared.
Junk bonds also recovered somewhat, though trading remained stalled.
Gold also rose.
Tokyo stock prices bounced back in early trading Tuesday following a 1.8% plunge on Monday.
The dollar also moved higher in Tokyo.
Donald Trump withdrew his $7.54 billion offer for American Air, citing the "recent change in market conditions."
AMR slid $22.125, to $76.50.
Also, a UAL group tried to get financing for a lower bid, possibly $250 a share.
UAL fell $56.875, to $222.875.
Leveraged buy-outs of airlines would be subject to approval by the transportation secretary under a bill passed by a House subcommittee.
IBM's earnings tumbled 30% in the third quarter, slightly more than expected.
The computer giant partly cited a stronger dollar and a delay in shipping a new high-end disk drive.
Analysts are downbeat about IBM's outlook for the next few quarters.
U.S. auto makers plan to decrease car production 10.4% in the fourth quarter, with virtually all the decline coming from the Big Three.
Output at Japanese-owned and managed plants in the U.S. is due to rise 42%.
Budget director Darman said he won't give federal agencies much leeway in coping with Gramm-Rudman spending cuts, which took effect yesterday.
Darman hopes to prod Congress to finish a deficit plan.
The S&L bailout agency would be restricted by a new bill in how it raises capital.
The Ways and Means plan would create another possible obstacle to selling sick thrifts.
A natural gas rule was struck down by a federal appeals court.
The regulation had prevented pipeline firms from passing part of $1 billion in costs along to customers.
The Supreme Court agreed to decide whether a federal court may dismantle a merger that has won regulatory approval but been ruled anticompetitive in a private suit.
Merrill Lynch's profit slid 37% in the third quarter.
Bear Stearns posted a 7.5% gain, while PaineWebber had a decline due to a year-ago gain.
Blue Arrow of Britain plans to return to the name Manpower and take a big write-off.
The moves may help the firm solidify its dominance of the U.S. temporary-help market.
J.P. Morgan posted a $1.82 billion loss for the third quarter, reflecting a big addition to loan-loss reserves.
NCNB's profit more than doubled.
K mart agreed to acquire Pace Membership Warehouse for $322 million, expanding its presence in the growing wholesale-store business.
Markets --
Stocks: Volume 416,290,000 shares.
Dow Jones industrials 2657.38, up 88.12; transportation 1304.23, off 102.06; utilities 214.73, up 2.77.
Bonds: Shearson Lehman Hutton Treasury index 3393.51, off
Commodities: Dow Jones futures index 129.72, off 0.15; spot index 130.16, up 0.91.
Dollar: 141.85 yen, off 0.25; 1.8685 marks, off 0.0055.
Monday, October 16, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE: 10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS: 8 3/4% high, 8 1/2% low, 8 5/8% near closing bid, 8 3/4% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE: 7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY: 9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.:8.30% 5 to 44 days; 8.20% 45 to 59 days; 8% 60 to 89 days; 7.875% 90 to 119 days; 7.75% 120 to 149 days; 7.625% 150 to 179 days; 7.375% 180 to 270 days.
COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000:8.40% 30 days; 8.33% 60 days; 8.26% 90 days.
CERTIFICATES OF DEPOSIT: 8.05% one month; 8.02% two months; 8% three months; 7.98% six months; 7.95% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market:8.40% one month; 8.40% three months; 8.40% six months.
BANKERS ACCEPTANCES: 8.40% 30 days; 8.35% 60 days; 8.27% 90 days; 8.20% 120 days; 8.15% 150 days; 8.02% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS: 8 5/8% to 8 1/2% one month; 8 5/8% to 8 1/2% two months; 8 9/16% to 8 7/16% three months; 8 1/2% to 8 3/8% four months; 8 1/2% to 8 3/8% five months; 8 1/2% to 8 3/8% six months.
LONDON INTERBANK OFFERED RATES (LIBOR): 8 1/2% one month; 8 1/2% three months; 8 7/16% six months; 8 3/8% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES: Canada 13.50%; Germany 8.50%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS: Results of the Monday, October 16, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.37%, 13 weeks; 7.42%, 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days.
9.83%, standard conventional fixedrate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par).9.82%, standard conventional fixed rate-mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST: 8.49%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Intel Corp. said it reached an agreement with Alliant Computer Systems Corp. to develop software standards for Intel's i860 microprocessor.
The i860, introduced earlier this year, is Intel's entry in the crowded market for reduced instruction set computing, or RISC, computers.
Intel, based in Santa Clara, Calif., is the market leader for traditional microprocessors with its 8086 family that forms the heart of IBM-compatible personal computers.
Under the agreement, Intel will invest $3 million to acquire a 4% stake in Alliant, a maker of minisupercomputers for scientists and engineers.
Alliant, based in Littleton, Mass., will license its parallel-computing technologies to Intel, providing users a way to let many i860 microprocessors in a single computer work on a problem simultaneously.
Alliant said it plans to use the microprocessor in future products.
It declined to discuss its plans for upgrading its current product line.
Omnicare Inc., which intends to expand its position in the medical and dental markets, said it acquired a cotton and gauze products division from closely held Sterile Products Corp. for $8.2 million.
Omnicare said it expects the division to add "substantial sales volume and to make a positive contribution to our earnings in 1990 and beyond."
In 1988 the Cincinnati company earned $3.1 million, or 32 cents a share, on revenue of $148.5 million.
Omnicare said the division operates under the trade name ACCO and supplies the medical and dental markets.
The business, based in St. Louis, had sales of more than $14 million in the fiscal year ended March 31, Omnicare said.
Burmah Oil PLC, a British independent oil and specialty chemicals marketing concern, said SHV Holdings N.V. of the Netherlands has built up a 6.7% stake in the company.
James Alexander, a Burmah spokesman, said SHV had previously owned "a little under 5%" of Burmah for about two years.
The Dutch company hadn't notified Burmah of its reason for increasing the stake, he said.
SHV, which last year merged its North Sea oil and gas operations with those of Calor Group PLC, has been pegged by speculators as a possible suitor for Burmah Oil in recent weeks.
SHV also owns 40% of Calor.
Burmah, which owns the Castrol brand of lubricant oils, reported a 17% rise in net income to #43.5 million ($68.3 million) in the first half.
J.P. Industries Inc. said it signed a definitive agreement to sell its Builders' Hardware Group to closely held Nalcor Inc. of Beverly Hills, Calif.
Terms weren't disclosed, but a J.P. Industries spokesman said the amount J.P. Industries will get for the group is "a little better than expected by the marketplace, and the marketplace had been expecting $25 million to $30 million."
The group consists of Weslock Corp. and JPI Modern Inc.
J.P. Industries, which is based in Ann Arbor, Mich., said the sale completes a previously announced program to divest itself of its hardware and plumbing supplies operations.
The company's remaining business is the manufacture and sale of engine and transmissions products for industrial and transportation applications.
Citing a $3.1 million provision for doubtful accounts, Dallas-based National Heritage Inc. posted a loss for its fourth quarter ended June 30.
A unit of troubled Southmark Corp., the operator of nursing homes and retirement centers said it sustained a net loss of $1.6 million, or nine cents a share, compared with net income of $1.3 million, or eight cents a share, a year earlier.
Operating revenue rose 13% to $22.2 million from $19.7 million in the year-earlier quarter.
The company said the $3.1 million reserve was created to reflect doubt about the collectability of receivables owed to National Heritage by some of the real estate partnerships it manages.
The company also said expenses incurred by the previous board and management in the recent contest for control were recognized primarily in the first quarter ended Sept. 30.
National Heritage stock fell 12.5 cents yesterday to close at $1.375 a share in New York Stock Exchange composite trading.
United Biscuits (Holdings) PLC, a British food producer, announced the creation of a European group to bring together its trading interests in the region.
The new group will comprise all of United Biscuit's manufacturing and marketing operations in the food sector apart from those based in the U.S.
United Biscuits said the combined group, which will include businesses such as McVities biscuits and Terry's confectionery, will have annual sales of more than #1.5 billion ($2.35 billion) and trading profit of more than #160 million ($251 million).
"The new structure will enable United Biscuits to focus clearly upon opportunities for planned growth during the 1990s," said Bob Clarke, deputy chairman and group chief executive.
Last month, United Biscuits agreed to sell its entire restaurant operations to Grand Metropolitan PLC for #180 million.
An American journalist now is standing trial in Namibia.
This is the place that world opinion has been celebrating over in the expectation that it's going to hold an election.
The most likely winner will be the Marxist-dominated SWAPO rebels.
The U.S. journalist's "crime" was writing that the head of the commission charged with overseeing the election's fairness, Bryan O'Linn, was openly sympathetic to SWAPO.
Shortly after that, Mr. O'Linn had Scott Stanley arrested and his passport confiscated.
Mr. Stanley is on trial over charges that he violated a proclamation, issued by the South African administrator general earlier this year, which made it a crime punishable by two years in prison for any person to "insult, disparate or belittle" the election commission.
The Stanley affair doesn't bode well for the future of democracy or freedom of anything in Namibia when SWAPO starts running the government.
To the extent Mr. Stanley has done anything wrong, it may be that he is out of step with the consensus of world intellectuals that the Namibian guerrillas were above all else the victims of suppression by neighboring South Africa.
SWAPO has enjoyed favorable Western media treatment ever since the U.N. General Assembly declared it the "sole, authentic representative" of Namibia's people in
Last year, the U.S. brokered a peace settlement to remove Cuba's "Afrika Korps" from Angola and hold "free and fair" elections that would end South Africa's control of Namibia.
The elections are set for Nov. 7.
In July, Mr. Stanley, editor of American Press International, a Washington D.C.-based conservative wire service, visited Namibia to report on the U.N.-monitored election campaign.
He interviewed Mr. O'Linn, head of a commission charged with investigating electoral intimidation, and reported that Mr. O'Linn was openly sympathetic to SWAPO and indeed had defended its leaders in court.
After Mr. Stanley's article was published in two Namibian newspapers, Mr. O'Linn had criminal charges brought against their editors, publisher and lawyer.
Mr. Stanley was arrested and charged along with the others when he returned to Namibia this month.
Both the State Department and the Lawyers Committee for Freedom of the Press have protested Mr. Stanley's detention.
Mr. Stanley's arrest is the latest in a series of incidents that threaten to derail Namibia's elections.
Both South African and SWAPO extremists are intimidating voters.
The U.S. is in the habit of arranging peace settlements and then washing its hands over the tragic results.
It now has the chance to redress that record in Namibia.
State and the human-rights community should insist that Mr. Stanley and his fellow defendants be released and that the United Nation's monitors make certain that Mr. O'Linn's commission investigates election complaints from all sides.
Commodity futures prices generally reflected the stability of the stock market following its plunge Friday.
Yesterday, the stock market's influence at first created nervousness.
Later, however, it became more of an undercurrent than a dominating force as individual markets reacted more to their own factors.
Gold, the traditional haven in times of financial crisis, continued its inverse lockstep with the dollar, rising early in the day as the currency fell, and then giving up some of its gains as the dollar recovered.
Copper and crude oil reacted sharply to the concern that a crash yesterday could have a potentially devastating effect on the economy.
Copper fell and showed little rebound through the day as one of the major supply problems that had been supporting prices appeared to be solved.
Crude oil declined early, but as the stock market retained early gains, it, too, became stronger, ending with a small net loss.
Trading in cotton and sugar was nervous and showed small declines.
In Chicago, grain and soybean prices rose slightly.
Livestock and meat prices, however, dropped on concern that a financial crisis would cut consumption of beef and pork.
In commodity markets yesterday: PRECIOUS METALS: Futures prices were moderately higher as gold gave up some of its early gains and platinum behaved independently, first falling and then later rising.
Silver performed quietly.
The spot October gold price rose $4 to $367.30 an ounce.
The more active December delivery gold settled with a gain of $3.90 an ounce at $371.20, after trading as high as $374.
December silver was up 2.3 cents an ounce at $5.163.
Platinum behaved more like an industrial metal, easing early on concern over a possible weaker economy, but recovering later, as the stock market strengthened.
Gold was nowhere the spectacular performer it was two years ago on Black Monday.
For one thing, last Friday, precious metals markets closed before the stock market went into its late-in-the-day nose dive, so it couldn't react to it.
Back on Friday, Oct. 16, l987, the stock market declined during the day, and gold prices surged as the stock market fell.
The October 1987 contract that day rose as much as $8.70 to as high as $471.60, and the more deferred positions, due to mature as late as March 1989, rose as much as $9.60.
On Black Monday, Oct. 19, 1987, the October contract tacked on further gains, rising to as high as $491.50 for a gain of almost $20 on top of the Friday advances, before giving up almost $10 of that at the close.
Yesterday's October gain of $4 was miniscule compared with that.
One analyst, Peter Cardillo of Josephthal & Co., New York, said the gold market already had some good price-supporting technical factors that would have caused prices to rise, with or without the stock market.
"What the stock market did was cause the rise to take place earlier than it would have happened," said Mr. Cardillo.
There's a good chance that gold will retain its gains and rise further, he said.
He expects a drop in interest rates, which would help gold by keeping the dollar from rising.
Finally, according to Mr. Cardillo, the impact of the strong dollar should be reflected in reduced exports in the August merchandise trade deficit, when the figures are released today.
This would be damaging to the dollar and supportive for gold, he said.
ENERGY:
Worried that Friday's 190-point stock market plunge might be a harbinger of things to come for the economy, petroleum futures traders called a halt to the recent string of increases in crude oil futures prices.
The U.S. benchmark crude, West Texas Intermediate, closed at $20.59 a barrel for November delivery, down 30 cents.
Some analysts said crude was due for a correction anyhow, following several days of significant gains.
But most market observers agreed that Friday's stock market drop is what dampened spirits in the petroleum pits yesterday.
Until yesterday, futures prices had been headed up on expectations that world oil demand will continue to be strong.
The Organization of Petroleum Exporting Countries increased its production ceiling for the fourth quarter based on projections of robust demand.
So any bearish indicator, such as Friday's precipitous drop in the stock market, sends shivers through the oil markets as well.
Indeed, after reacting early in the trading day to Friday's plummet, futures prices firmed up again as traders took note of the stock market's partial recovery yesterday.
COPPER:
Futures prices fell and showed little rebound as one major labor problem that had been underpinning prices appeared to be solved.
The December contract declined 3.05 cents a pound to $1.2745.
Prices were down from the outset of trading on concern that a drop in the stock market might create a weakened economy and a consequent reduction in copper use.
But the recovery in the stock market provided little help for copper as word spread that a three-month strike at the Highland Valley mine in British Columbia was about over, according to an analyst.
Highland Valley is a large Canadian producer and principal supplier to Japan, which recently began seeking copper elsewhere as its inventories shrank.
Last week it was reported that company and union negotiations had overcome the major hurdle, the contracting out of work by the company.
Now, the analyst said, only minor points remain to be cleaned up.
"For all intents and purposes, an agreement appears to have been achieved," he said.
Copper inventories in New York's Commodity Exchange warehouses rose yesterday by 516 tons, to 10,004 tons.
London Metal Exchange copper inventories last week declined 13,575 tons, to 89,300 tons.
The LME stocks decline was about as expected, but the Comex gain wasn't.
However, this was brushed aside by concern over the stock market, the analyst said.
At one point in futures trading, as the stock market firmed, the December contract rose to as high as $1.2965, but it wasn't able to sustain the gain.
"It was simply overbought," he said, and selling by funds that are computer guided helped depress prices.
COTTON:
Futures prices eased, more in reaction to Hurricane Jerry than to any influence of the stock market.
The December contract ended with a loss of 0.22 cent a pound, at 74.48 cents.
Technical considerations following the hurricane, which was a factor in the market Friday, caused prices to decline yesterday, said Ernest Simon, cotton specialist for Prudential-Bache Securities, New York.
Prices rose sharply Friday as the storm approached Texas and Louisiana, which is part of the Mississippi Delta cotton-growing area.
However, after absorbing the potential effect of the hurricane, prices began to slip late Friday, Mr. Simon said.
That selling continued yesterday and kept prices under pressure, he said.
Colder weather is being predicted for the high plains of Texas and the northern states of the Delta during the coming weekend, Mr. Simon said.
That hasn't yet captured traders' attention, he added.
SUGAR:
Futures prices declined.
The March contract was off 0.32 cent a pound at 13.97 cents.
At one point in early trading the March price rose to as high as 14.22 cents when the stock market recovered, but the price then fell back.
A price-depressing factor, one analyst said, was that India, which had been expected to buy around 200,000 tons of sugar in the world market, didn't make any purchases.
India recently bought 200,000 tons and was expected to buy more, the analyst said.
Another analyst thought that India may have pulled back because of the concern over the stock market.
"India may have felt that if there was a severe drop in the stock market and it affected sugar, it could buy at lower prices," said Judith Ganes, analyst for Shearson Lehman Hutton, New York.
At any rate, she added, "India needs the sugar, so it will be in sooner or later to buy it."
FARM PRODUCTS:
The prices of cattle and hog futures contracts dropped sharply because traders speculated that the stock market plunge Friday will linger in the minds of U.S. consumers long enough to prompt them to rein in their spending at the supermarket, which would hurt demand for beef and pork.
The price of the hog contract for October delivery dropped its maximum permissible daily limit of 1.5 cents a pound.
The prices of most grain futures contracts rose slightly yesterday out of relief that the stock market was showing signs of recovering.
Earlier in the session, the prices of several soybean contracts set new lows.
A broad rally began when several major processors began buying futures contracts, apparently to take advantage of the price dip.
Knight-Ridder Inc. said it would report increased earnings per share for the third quarter, contrary to reported analysts' comments that the publishing company's earnings would be down.
A company spokesman said he believed the confusion was caused when James Batten, Knight-Ridder's chairman and chief executive, told New York analysts two weeks ago that Knight-Ridder's earnings per share for the first nine months of 1989 would "be behind a little bit" from like period of
The Knight-Ridder spokesman said the third-quarter earnings that the company plans to report Oct. 24 are expected to be up.
The spokesman said he was "comfortable" with revised analysts' projections that the company would report earnings of between 62 cents and 64 cents a share, compared with the 53 cents a share it reported for the 1988 third quarter.
Knight-Ridder said it agreed with estimates that net income for all of 1989 would be around $2.86 a share, compared with $2.59 a share a year earlier.
In New York Stock Exchange composite trading yesterday, Knight-Ridder closed at $51.75, down 37.5 cents.
DD Acquisition Corp. said it extended its $45-a-share offer for Dunkin' Donuts Inc. to Nov. 1 from yesterday.
The offer has an indicated value of $268 million.
DD Acquisition is a partnership of Unicorp Canada Corp.'s Kingsbridge Capital Group unit and Cara Operations Ltd.
As previously reported, under the terms of a confidentiality agreement with Dunkin' Donuts, the partners agreed to keep their offer open until Nov. 1, and not to acquire any additional shares except through a tender offer expiring on that date.
DD Acquisition said that it already owns 15% of the common shares of the doughnut shop chain and that as of the close of business Friday an additional 11% had been tendered to its offer.
Dunkin' Donuts is based in Randolph, Mass.
Cara Operations, a food services concern, and Unicorp, a holding company with interests in oil and natural gas and financial services, are based in Toronto.
Golden West Financial Corp., riding above the turbulence that has troubled most of the thrift industry, posted a 16% increase of third-quarter earnings to $41.8 millon, or 66 cents a share.
The company earned $36 million, or 57 cents a share, in the year-ago quarter.
Herbert M. Sandler, chairman and chief executive officer of the Oakland, Calif., savings-and-loan holding company, credited the high number of loans added to the company's portfolio over the last 12 months for broadening its earning asset base and improving profit performance.
However, the executive noted that slackening demand for new mortgages depressed new loan originations to $1 billion, 30% below the same period last year.
In savings activity, Mr. Sandler said consumer deposits have enjoyed a steady increase throughout 1989, and topped $11 billion at quarter's end for the first time in the company's history.
Deposit growth amounted to $393 million, more than double the year-ago figure.
Whirlpool Corp., Benton Harbor, Mich., said it has developed a process to recover environmentally harmful chlorofluorocarbons, or CFCs, that previously entered the atmosphere during in-home repair of refrigerators and freezers.
The maker of home appliances said the process, which involves the use of a multilayer plastic bag during repairs to capture the gaseous substance and transport it to a recycling center, is already in use at a number of its service centers, and will be available to all authorized repair centers by spring.
Earlier repairs vented the CFCs out of the home through a hose directly into the atmosphere.
CFCs are widely used as solvents, coolants and fire suppressants.
But their use has been linked to a potentially dangerous depletion of the Earth's ozone layer, and a number of companies are seeking to curtail use, or at least emission, of the substance.
Whirpool said, "We see this process as a small but important step toward eventual elimination of CFC use in appliance manufacture.
Maxus Energy Corp., Dallas, said it discovered a new oil field northeast of its previously discovered Intan Field in the southeast Sumatra area of Indonesia.
Maxus said it didn't run a production test on the three discovery wells it drilled in the field, which is about 1.6 miles from the Intan Field, because the wells are similar to others drilled at its Intan and Widuri fields.
However, Maxus said it believes the reserves in the field are about 10 million barrels of oil.
The Intan Field has estimated reserves of 50 million barrels and the Widuri Field has estimated reserves of 225 million barrels.
Maxus, an independent oil and gas concern, is the operator and owns a 56% interest in the new field, called Northeast Intan.
Other interests are owned by BP Petroleum Development (SES) Ltd., C. Itoh Energy Co. Ltd., Deminex Sumatra OEL G.m.b.H., Hispanoil (Sumatra) Production Ltd., Hudbay Oil (Indonesia) Ltd., Inpex Sumatra Co. Ltd., Lasmo Sumatra Ltd., Sunda Shell, TCR Sumat A.G. and Warrior Oil Co.
The production-sharing contract area is held with Pertamina, the Indonesian state oil company.
Environmental Systems Co. said it is restating its results to reduce its reported net income for the first nine months of its fiscal year after discovering it took tax credits that already had been taken last year.
The Little Rock, Ark., hazardous-waste services company said the restatement will reduce its net for the nine months ended July 31 to $2.5 million, or 17 cents a share, from $3.7 million, or 26 cents a share.
Net for the third quarter, restated, is $1.6 million, or 10 cents a share.
The company previously reported net of $2.3 million, or 15 cents a share.
The company said that for financial reporting purposes last year it took tax credits that will be recognized for tax purposes this year.
But because of confusion, it took those credits again in reporting its results through the first nine months.
Jack W. Forrest, Environmental Systems president and chief executive officer, said the change increases the company's effective tax rate to about 35% from 20%.
Memotec Data Inc. said it signed a definitive merger agreement with ISI Systems Inc. under which Memotec will acquire ISI for $20 (U.S.) a share, or about $130 million, in cash and securities.
In American Stock Exchange composite trading, ISI closed up $3.125 at $18.625.
In Montreal Exchange trading, Memotec closed unchanged at 10.625 Canadian dollars (US$9.05).
Memotec said under the agreement, ISI, a Braintree, Mass., provider of computer software and services to the insurance industry, will merge with a U.S. unit of Memotec created for that purpose.
Memotec is a Montreal-based maker of telecommunications products and provider of telecommunications and computer services.
Memotec said the agreement calls for it to make a $20-a-share cash tender offer for all shares outstanding of ISI.
But it said Charles Johnston, ISI chairman and president, agreed to sell his 60% stake in ISI to Memotec upon completion of the tender offer for a combination of cash, Memotec stock and debentures.
Memotec said the tender offer is conditioned on, among other things, holders tendering at least 15% of the shares outstanding, other than the shares held by Mr. Johnston.
ISI said its board has instructed management to accept inquiries from any others interested in making a bid.
ISI said it can withdraw from the merger agreement with Memotec if a better bid surfaces.
CMS Energy Corp., Jackson, Mich., said it has resumed the purchase of its common stock under a program approved by its directors in 1987.
At the time of the original announcement, CMS said its board authorized the purchase of as many as five million of its shares.
A spokesman said 2.6 million shares have been purchased since then.
The company said it will buy additional shares "from time to time in the open market or in private transactions at prevailing market prices."
In composite trading on the New York Stock Exchange, CMS Energy closed at $34.375 a share, down 62.5 cents, from the closing price of $37.375 a share on Thursday, before Friday's plunge.
The utility company currently has about 82.1 million shares outstanding.
Morgan Stanley & Co. will act as the exclusive broker for the repurchase.
Hughes Aircraft Co., a unit of General Motors Corp., said it agreed to purchase the Electro-Optics Technology division of Perkin-Elmer Corp.
Terms of the agreement weren't disclosed.
But for the fiscal year ended July 31, 1988, the most recent period for which results were broken out, the Perkin-Elmer unit accounted for more than half the $145 million in sales recorded by the company's government systems sector.
Perkin-Elmer, which is based in Norwalk, Conn., said the sale of the Danbury, Conn., unit is consistent with its restructuring strategy announced in April.
In addition to making electro-optical systems, the unit also makes laser warning receivers.
These are used aboard military helicopters to warn pilots that a laser weapon has been focused on them.
Hughes of Los Angeles said the PerkinElmer unit's work complements efforts by its Electro-Optical and Data Systems group, which makes infrared sensors, military lasers and night vision equipment.
Hughes said it expects the sale to close by year end.
The Communications Workers of America ratified a new regional contract and all but one of the local agreements with Bell Atlantic Corp.
CWA's New Jersey Commercial local, which represents about 2,500 service representatives and marketing employees, rejected the tentative agreement.
Both the union and the regional telephone company said they were working together to resolve differences.
The new three-year contracts, which replace ones that expired Aug. 5, cover 41,000 Bell Atlantic employees.
The ratification follows a 23-day strike against the Philadelphia-based company.
Meanwhile, CWA and International Brotherhood of Electrical Workers members remain on strike against Nynex Corp., the New York-based regional phone company.
The unions and the company last week agreed to mediation.
The CWA represents 40,000 Nynex workers and the IBEW represents 20,000 workers.
For the moment, at least, euphoria has replaced anxiety on Wall Street.
The Dow Jones Industrial Average jumped sharply yesterday to close at 2657.38, panic didn't sweep the world's markets, and investors large and small seemed to accept Friday's dizzying 190-point plunge as a sharp correction, not a calamity.
Many went bargain-hunting.
Among those sighing with relief was John H. Gutfreund, chairman of Salomon Brothers, who took to the firm's trading floor to monitor yesterday's events.
As the rally gained strength at 3:15 p.m., he smiled broadly, brandished his unlit cigar and slapped Stanley Shopkorn, his top stock trader, on the back.
At first, it seemed as if history might repeat itself.
As trading opened yesterday morning on the Big Board, stocks of many of the nation's biggest companies couldn't open for trading because a wave of sell orders was overwhelming buyers.
By 10:10, the Dow Industrials were off 63.52 points, and the stock of UAL Corp., whose troubles had kicked off Friday's plunge, still hadn't opened.
But then, as quickly as the Dow had fallen, it began to turn around.
It ended with a gain of 88.12 points.
By the market's close, volume on the New York exchange totaled more than 416 million, the fourth highest on record.
The Big Board handled the huge volume without any obvious strain, in sharp contrast to Black Monday of 1987.
But the rally was largely confined to the blue-chip stocks, which had been hard hit during Friday's selling frenzy.
Overall, more Big Board stocks lost money than gained.
And many arbitragers, already reeling from Friday's collapse of the UAL deal, were further hurt yesterday when a proposed takeover of AMR Corp., the parent of American Airlines, collapsed.
Indeed, the Dow Jones Transportation Average plunged 102.06 points, its second-worst drop in history.
World-wide, trading was generally manageable.
The Frankfurt stock exchange was hardest hit of the major markets, with blue chips there falling 12.8%.
In London, a midday rally left the market's major index off 3.2%, and Tokyo's leading stock index fell only 1.8% in surprisingly lackluster trading.
Other, more thinly traded Asian markets were hit harder than Tokyo's, but there were no free-fall declines.
Investors big and small say they learned valuable lessons since the 1987 crash: In this age of computerized trading, huge corrections or runups in a few hours' time must be expected.
What's more, such short-term cataclysms are survivable and are no cause for panic selling.
Stephen Boesel, a major money manager for T. Rowe Price in Baltimore, says, "There was less panic than in 1987: We had been through it once."
In Somerset, Wis., Adrian Sween, who owns a supplier of nursing-home equipment and isn't active in the stock market, agrees.
"I look at it as a ho-hum matter," he says.
Many other factors played a part in yesterday's comeback.
The Federal Reserve signaled its willingness to provide liquidity; the interest rate on its loans to major banks inched downward early in the day.
Foreign stock markets, which kicked off Black Monday with a huge selling spree, began the day off by relatively modest amounts.
The dollar, after falling sharply in overnight trading to 139.10 yen, bounced back strongly to 141.8, thus easing fears that foreigners would unload U.S. stocks.
And the widely disseminated opinion among most market experts that a crash wasn't in store also helped calm investors.
Many major institutions, for example, came into work yesterday ready to buy some of the blue chips they felt had been sharply undervalued on Friday.
Still, amid all the backslapping and signs of relief over yesterday's events, some market professionals cautioned that there is nothing present in the current market system to prevent another dizzying drop such as Friday's.
"There is too much complacency," says money manager Barry Schrager.
Computers have increasingly connected securities markets world-wide, so that a buying or selling wave in one market is often passed around the globe.
So investors everywhere nervously eyed yesterday's opening in Tokyo, where the Nikkei average of 225 blue-chip stocks got off to a rocky start.
The average plunged some 600 points, or 1.7%, in the first 20 minutes of trading.
But the selling wave had no conviction, and the market first surged upward by 200 points, then drifted lower, closing down 647.
Unlike two years ago, most of Japan's major investors chose to sit this calamity out.
In Merrill Lynch & Co.'s Tokyo trading room, some 40 traders and assistants sat quietly, with few orders to process.
Clients "are all staying out" of the market, one Merrill trader says.
The relative calm in Tokyo proved little comfort to markets opening up in Europe.
Frankfurt's opening was delayed a half hour because of a crush of sell orders.
"The beginning was chaotic," says Nigel Longley, a broker for Commerzbank
In London, the view from the trading floor of an American securities firm, Jefferies & Co., also was troubling.
A computer screen displaying 100 blue-chip stocks colors each one red when its price is falling.
The screen was a sea of red.
"I see concern, but I don't see panic," says J. Francis Palamara, a New Yorker who runs the 15-trader office.
London's blue-chip stock index turned up just before 8 a.m. New York time, sending an encouraging message to Wall Street.
When trading opened in New York at 9:30 a.m. EDT, stocks fell sharply -- as expected.
Futures markets in Chicago had opened at a level suggesting the Dow would fall by about 60 points.
With sell orders piled up from Friday, about half the stocks in the Dow couldn't open on time.
By 9:45, the industrial average had dropped 27 points.
By 10 a.m., it was down 49.
Ten minutes later, the Dow hit bottom-down 63.52 points, another 2.5%.
But shortly before then, some of Wall Street's sharpest traders say, they sensed a turn.
"The first thing that caught my eye that was encouraging was Treasury bonds were off," says Austin George, head of stock trading at T. Rowe Price.
"It meant that people weren't running pell-mell to the safety of bonds."
Shortly after 10 a.m., the Major Market Index, a Chicago Board of Trade futures contract of 20 stocks designed to mimic the DJIA, exploded upward.
Stock traders were buoyed -- because an upturn in the MMI had also started the recovery in stocks on the Tuesday following Black Monday.
"The MMI has gone better," shouted a trader in the London office of Shearson Lehman Hutton.
Shearson's London trading room went wild.
Traders shouted out as their Reuters, Quotron and Telerate screens posted an ever-narrowing loss on Wall Street.
Then, nine minutes later, Wall Street suddenly rebounded to a gain on the day.
"Rally, rally, rally," shouted Shearson's Andy Rosen.
"This is panic buying."
Major blue-chip stocks like Philip Morris, General Motors and Proctor & Gamble led the rally.
Japanese were said to be heavy buyers.
German and Dutch investors reportedly loaded up on Kellogg Co.
Then, traders say, corporations with share buy-back programs kicked into high gear, triggering gains in, among other issues, Alcan Aluminium and McDonald's.
Walt Disney Co., which had one of the biggest sell-order imbalances on Friday and was one of seven stocks that halted trading and never reopened that day, opened yesterday late at 114.5, down 8.5.
But then it suddenly burst upward 7.5 as Goldman, Sachs & Co. stepped in and bought almost every share offer, traders said.
By 10:25, the Dow had turned up for the day, prompting cheers on trading desks and exchange floors.
Among Big Board specialists, the cry was "Pull your offers" -- meaning that specialists soon expected to get higher prices for their shares.
"It was bedlam on the upside," said one Big Board specialist.
"What we had was a real, old-fashioned rally."
This technical strength spurred buying from Wall Street's "black boxes," computer programs designed to trigger large stock purchases during bullish periods.
Typical, perhaps, was Batterymarch's Dean LeBaron.
Mr. LeBaron, who manages $10 billion, says, "We turned the trading system on, and it did whatever it was programmed to do."
Asked what stocks the computer bought, the money manager says, "I don't know."
Not everybody was making money.
The carnage on the Chicago Board Options Exchange, the nation's major options market, was heavy after the trading in S&P 100 stock-index options was halted Friday.
Many market makers in the S&P 100 index options contract had bullish positions Friday, and when the shutdown came they were frozen with huge losses.
Over the weekend, clearing firms told the Chicago market makers to get out of their positions at any cost Monday morning.
"They were absolutely killed, slaughtered," said one Chicago-based options trader.
Meanwhile, a test of the stock market's rally came at about 2 p.m., with the Dow at 2600, up 31 points on the day.
Charles Clough, a strategist at Merrill Lynch, says bargain hunting had explained the Dow's strength up to that point and that many market professionals were anticipating a drop in the Dow.
Moreover, the announcement that real estate magnate and sometime raider Donald Trump was withdrawing his offer for AMR Corp. might have been expected to rattle traders.
Instead, the rally only paused for about 25 minutes and then steamed forward as institutions resumed buying.
The market closed minutes after reaching its high for the day of
Across the country, many people took yesterday's events in stride, while remaining generally uneasy about the stock market in general.
Says James Norman, the mayor of Ava, Mo.: "I don't invest in stocks.
I much prefer money I can put my hands on."
While Mayor Norman found the market's performance Monday reassuring, he says, he remains uneasy.
"We have half the experts saying one thing and half the other" about the course of the economy.
Ralph Holzfaster, a farmer and farm-supply store operator in Ogallala, Neb., says of the last few days events, "If anything good comes out of this, it might be that it puts some of these LBOs on the skids."
Says Gordon Fines, a money manager at IDS Financial Services in Minneapolis, "You're on a roller coaster, and that may last.
The public is still cautious.
Skipper's Inc., Bellevue, Wash., said it signed a definitive merger agreement for a National Pizza Corp. unit to acquire the 90.6% of Skipper's Inc. it doesn't own for $11.50 a share, or about $28.1 million.
NP Acquisition Co., a National Pizza unit, plans to begin a tender offer for Skipper's on Friday, conditioned on at least two-thirds of Skipper's shares being tendered.
Pittsburg, Kan.-based National Pizza said the transaction will be financed under its revolving credit agreement.
In national over-the-counter trading, Skipper's shares rose 50 cents to $11.
Skipper's said the merger will help finance remodeling and future growth.
Skipper's previously turned down a $10-a-share proposal from National Pizza and Pizza Hut Inc. questioned whether the purchase would violate National Pizza's franchise agreements.
National Pizza said it settled its dispute with Pizza Hut, allowing it to make the purchase.
Also, Skipper's results began to turn around, permitting a higher offer, National Pizza said.
For the 12 weeks ended Sept. 3, Skipper's had net income of $361,000, or 13 cents a share, compared with a net loss a year earlier.
Revenue was $19.9 million.
EAST GERMANS RALLIED as officials reportedly sought Honecker's ouster.
In what was considered the largest protest in the Communist state's 40-year history, at least 120,000 demonstrators marched through the southern city of Leipzig to press demands for democratic freedoms, opposition activists said.
Police didn't intervene.
Meanwhile, as the first of more than 1,300 East Germans trying to flee to the West through Poland renounced their citizenship, a West German newspaper reported that regional Communist officials demanded the dismissal of hard-line leader Honecker.
Secretary of State Baker, in a foreign policy speech, called for the reunification of Germany, saying it was the "legitimate right" of the German people.
Gorbachev blamed the Soviet Union's press for contributing to the nation's mounting problems.
At a meeting Friday, the Kremlin leader complained about recent articles that raised the possiblity of civil unrest, and accused the media of fueling panic buying of goods by publishing stories about impending shortages.
House-Senate conferees approved a permanent smoking ban on domestic airline routes within the continental U.S. and on flights of less than six hours to Alaska and Hawaii.
The curbs would cover all but a small percentage of flights, and represent an expansion of the current ban on flights of less than two hours.
E. Robert Wallach was sentenced by a U.S. judge in New York to six years in prison and fined $250,000 for his racketeering conviction in the Wedtech scandal.
Wallach, an associate of ex-Attorney General Meese, was found guilty in August of taking $425,000 in illegal payoffs from the now-defunct defense contractor.
NASA resumed the countdown for today's launch of the space shuttle Atlantis, and a federal appeals court in Washington dismissed a lawsuit by anti-nuclear groups to delay the flight because the plutonium-powered Galileo space probe was aboard.
The space agency said it didn't expect weather or protesters to block the liftoff.
The Bush administration is preparing to extend a ban on federal financing of research using fetal tissue, government sources said.
A temporary prohibition was imposed in March 1988.
While anti-abortion groups are opposed to such research, scientists have said transplanting such tissue could be effective in treating diabetes.
Delegates from 91 nations endorsed a ban on world ivory trade in an attempt to rescue the endangered elephant from extinction.
Five African nations, however, said they would continue selling the valuable tusks.
Mubarak held reconciliation talks with Gadhafi at the Egyptian resort of Mersa Metruh.
It was the Libyan leader's first trip to Egypt in 16 years.
They announced a reduction in formalities for travel, but didn't show any real signs of resuming full diplomatic ties.
The Egyptian president said he would visit Libya today to resume the talks.
Seoul and Pyongyang reached a tentative agreement to allow visits between families on the divided Korean peninsula.
Such family reunions would be the second since 1945.
Differences remained between the North and South Korean governments, however, over conditions for the exchanges.
Freed black nationalists resumed political activity in South Africa and vowed to fight against apartheid, raising fears of a possible white backlash.
The nation's main white opposition party warned that the government's release Sunday of eight black political prisoners risked bringing chaos and eventual black Marxist rule to the nation.
The White House said Bush is "fully satisfied" with CIA Director Webster and the intelligence agency's performance during the Oct. 3 failed coup in Panama.
The Washington Post reported that unidentified senior administration officials were frustrated with Webster's low-profile activities during the insurrection and wanted him replaced.
Poland's legislature approved limits on automatic wage increases without special provisions for food price rises.
The vote was considered a test of the Solidarity-led government's resolve to proceed with a harsh economic-restructuring program.
Norway's King Olav V installed a three-party non-Socialist government as Gro Harlem Brundtland's three-year-old Labor regime relinquished power.
The 19-member cabinet is led by Prime Minister Jan Syse, who acknowledged a "difficult situation" since the coalition controls only 62 seats in Oslo's 165-member legislature.
El Salvador's government opened a new round of talks with the country's leftist rebels in an effort to end a decade-long civil war.
A spokesman said the guerrillas would present a cease-fire proposal during the negotiations in Costa Rica that includes constitutional and economic changes.
The State Department said there was a "possibility" that some Nicaraguan rebels were selling their U.S.-supplied arms to Salvadoran guerrillas, but insisted it wasn't an organized effort.
Separately, Secretary of State Baker complained about a U.N. aide who last week told the Contras to disband as part of a regional peace accord.
Died: Cornel Wilde, 74, actor and director, in Los Angeles, of leukemia. . . .
Danilo Kis, 54, Yugoslav-born novelist and essayist, Sunday, in Paris, of cancer.
British retail sales volume rose a provisional 0.4% in September from August and was up 2.2% from September 1988, the Department of Trade and Industry said.
For the three months ended in September, retail sales volume was down 0.5% from the previous three months and up 1.2% from a year earlier.
Chicago investor William Farley agreed to sell three divisions of Cluett Peabody & Co. for about $600 million to Bidermann S.A., a closely held clothing maker based in Paris.
Shortly after completing the $1.56 billion acquisition of West Point-Pepperell Inc. in April, Mr. Farley's holding company, Farley Inc., said it was considering the sale of Cluett, a leading shirt maker and one of West Point-Pepperell's biggest units.
Included in the sale are Cluett units that make men's shirts under the Arrow name, socks under the Gold Toe name and menswear through the Schoeneman division.
The companies said the agreement is subject to Bidermann's receipt of financing and to regulatory and other approvals.
They said the sale is expected to be concluded by the end of November.
Mr. Farley said the sale of three of Cluett's four main divisions plus other "anticipated" West Point-Pepperell asset sales by December, should bring in a total of about $700 million.
He didn't elaborate on other asset sales being considered.
Mr. Farley followed a similar pattern when he acquired Northwest Industries Inc. and then sold much of its assets.
But he kept Fruit of the Loom Inc., the underwear maker that he still controls and serves as chairman and chief executive.
Cluett was an independent company until West Point-Pepperell acquired it for $375 million in cash and stock in 1986.
In the fiscal year ended Sept. 30, 1988, Cluett had operating profit of $37 million on sales of $757 million.
Bidermann sells clothes under various labels, including Yves Saint Laurent and Bill Robinson for men and Ralph Lauren for women.
A spokesman said the company had sales of $400 million in 1988.
In New York Stock Exchange composite trading, West Point-Pepperell fell 25 cents to $53.875.
Britain's Blue Arrow PLC intends to change its name to Manpower PLC and write off a chunk of the nearly $1.2 billion in good will realized in the takeover of U.S.-based Manpower Inc.
Blue Arrow Chairman Mitchell Fromstein said in an interview that the two steps may be a prelude to reincorporating the world's biggest employment-services group in the U.S.
Mr. Fromstein disclosed the planned steps, expected within a few months, as Blue Arrow posted a 2.5% drop in its third-quarter pretax earnings.
The name change and good will write-off could help solidify Blue Arrow's dominance of the U.S. temporary-help market and give it a more American image as U.S. investors turn jittery about foreign stocks after Friday's market plunge.
U.S. holders now own more than 60% of Blue Arrow compared with 9% last January.
"In the U.S. market, the recognition of the Manpower name is infinitely stronger than Blue Arrow," Mr. Fromstein said.
The moves also could erase shareholders' perception of Blue Arrow as a company in turmoil.
"It further reinforces the concept that Blue Arrow is a thing of the past," said Doug Arthur, an analyst at Kidder Peabody & Co. in New York.
The proposed changes "all make a lot of sense to me," he added.
In a widely publicized boardroom coup, Mr. Fromstein ousted Antony Berry as Blue Arrow chief executive in January, a month after Mr. Berry had forced Mr. Fromstein out as the $1 million-a-year chief of Milwaukee-based Manpower.
Mr. Fromstein solidified his control in April by taking over from Mr. Berry as chairman.
But the Blue Arrow tumult isn't over yet, as the British government is investigating a disputed #25 million ($39.4 million) loan which Mr. Fromstein has said was made under Mr. Berry's direction.
Blue Arrow was able to pull off the $1.34 billion takeover of Manpower in 1987 largely because different British and American accounting standards produce higher reported earnings for British companies.
Under British rules, Blue Arrow was able to write off at once the $1.15 billion in good will arising from the purchase.
As a U.S.-based company, Blue Arrow would have to amortize the good will over as many as 40 years, creating a continuing drag on reported earnings.
Good will is the excess of cost of an acquired firm, operating unit or assets over the current or fair market value of those assets.
But with so many shares now held in the U.S., Blue Arrow reports its earnings two ways, based on both U.K. and U.S. accounting standards.
"Our balance sheets look like they came from Alice's wonderland," Mr. Fromstein said.
The British version shows "a handful of pounds of net worth" following the 1987 write-off of good will, while the American version reflects "$1 billion of net worth because almost none of {the good will} has been written off."
Mr. Fromstein said he hopes to eradicate some of the good will left on Blue Arrow's U.S. books in one fell swoop, but wouldn't specify how much.
People close to Blue Arrow suggested the write-down would represent a sizable chunk, with executives claiming prior management overstated the extent of Manpower's good will.
That move, along with the return to the Manpower name, could bolster the company's prospects during possibly difficult times for temporary help.
The number of U.S. temporary workers fell about 1% in the 12 months ending Aug. 31, after sliding nearly 3.5% in July, said Kidder Peabody's Mr. Arthur.
Blue Arrow blamed the pretax profit drop in the quarter ended July 31 partly on slower earnings growth of non-Manpower units in Britain.
Overall, pretax profit slid to #18.49 million in the quarter from #18.98 million a year earlier.
Richard G. Sim, the man credited with transforming Applied Power Inc. from an underachiever into a feisty player in the global market for hydraulic tools, hopes to guide a similar turnaround at the company's latest acquisition, Barry Wright Corp.
The 45-year-old former General Electric Co. executive figures it will be easier this time.
But analysts, while applauding the acquisition, say Applied's chief executive faces a tough challenge in integrating the two companies.
Barry Wright, acquired by Applied for $147 million, makes computer-room equipment and vibration-control systems.
The Watertown, Mass., company's sales have been dormant and its profits have dropped.
Last year's earnings of $1.3 million, including $815,000 from a restructuring gain, were far below the year-earlier $8.4 million.
Besides spurring Barry Wright's sales, which were $201.7 million in 1988, Mr. Sim must pare its costs and product line.
"The question is how long it's going to take Barry Wright to make a contribution," says F. John Mirek, an analyst at Blunt Ellis Loewi in Milwaukee.
The answer will help determine whether Applied continues to reach the ambitious goals set by Mr. Sim.
The Butler, Wis., manufacturer went public at $15.75 a share in August 1987, and Mr. Sim's goal then was a $29 per-share price by 1992.
Strong earnings growth helped achieve that price far ahead of schedule, in August 1988.
The stock has since softened, trading around $25 a share last week and closing yesterday at $23.00 in national over-the-counter trading.
But Mr. Sim has set a fresh target of $50 a share by the end of
Reaching that goal, says Robert T. Foote, Applied's chief financial officer, will require "efficient reinvestment" of cash by Applied and continuation of its healthy 19% rate of return on operating capital.
In Barry Wright, Mr. Sim sees a situation "very similar" to the one he faced when he joined Applied as president and chief operating officer in 1985.
Applied, then a closely held company, was stagnating under the management of its controlling family.
While profitable, it "wasn't growing and wasn't providing a satisfactory return on invested capital," he says.
Mr. Sim is confident that the drive to dominate certain niche markets will work at Barry Wright as it has at Applied.
He also professes an "evangelical" fervor to develop a corporate culture that rewards managers who produce and where decision-making is shared.
Mr. Sim considers the new unit's operations "fundamentally sound" and adds that Barry Wright has been fairly successful in moving into markets that haven't interested larger competitors.
"With a little patience, these businesses will perform very satisfactorily," Mr. Sim says.
Within about six months, "things will be moving in the right direction," he predicts.
Mr. Sim figures it will be easier to turn Barry Wright around since he's now in the driver's seat.
When he came to Applied, "I didn't have the power to execute as I do today," he says.
He was named chief executive officer of Applied in 1986 and became chairman last November.
At Applied, Mr. Sim set growth as his first objective.
He took the company public in an offering that netted Applied about $12.6 million, which helped launch the company's acquisition program.
Sales climbed to an estimated $245 million in fiscal 1989, ended Aug. 31, from $99.9 million in fiscal 1985.
The company expects that earnings, which have marched steadily upward in recent years, reached about $20.8 million, or $1.58 a share, in the fiscal year just ended, up from $15.2 million in fiscal 1988 and $3.9 million in 1985.
No, it wasn't Black Monday.
But while the New York Stock Exchange didn't fall apart Friday as the Dow Jones Industrial Average plunged 190.58 points -- most of it in the final hour -- it barely managed to stay this side of chaos.
Some "circuit breakers" installed after the October 1987 crash failed their first test, traders say, unable to cool the selling panic in both stocks and futures.
The 49 stock specialist firms on the Big Board floor -- the buyers and sellers of last resort who were criticized after the 1987 crash -- once again couldn't handle the selling pressure.
Big investment banks refused to step up to the plate to support the beleaguered floor traders by buying big blocks of stock, traders say.
Heavy selling of Standard & Poor's 500-stock index futures in Chicago relentlessly beat stocks downward.
Seven Big Board stocks -- UAL, AMR, BankAmerica, Walt Disney, Capital Cities/ABC, Philip Morris and Pacific Telesis Group -- stopped trading and never resumed.
The finger-pointing has already begun.
"The equity market was illiquid.
Once again {the specialists} were not able to handle the imbalances on the floor of the New York Stock Exchange," said Christopher Pedersen, senior vice president at Twenty-First Securities Corp.
Countered James Maguire, chairman of specialists Henderson Brothers Inc.: "It is easy to say the specialist isn't doing his job.
When the dollar is in a free-fall, even central banks can't stop it.
Speculators are calling for a degree of liquidity that is not there in the market."
Many money managers and some traders had already left their offices early Friday afternoon on a warm autumn day -- because the stock market was so quiet.
Then in a lightning plunge, the Dow Jones industrials in barely an hour surrendered about a third of their gains this year, chalking up a 190.58-point, or 6.9%, loss on the day in gargantuan trading volume.
Final-hour trading accelerated to 108.1 million shares, a record for the Big Board.
At the end of the day, 251.2 million shares were traded.
The Dow Jones industrials closed at 2569.26.
The Dow's decline was second in point terms only to the 508-point Black Monday crash that occurred Oct. 19, 1987.
In percentage terms, however, the Dow's dive was the 12th-worst ever and the sharpest since the market fell 156.83, or 8%, a week after Black Monday.
The Dow fell 22.6% on Black Monday.
Shares of UAL, the parent of United Airlines, were extremely active all day Friday, reacting to news and rumors about the proposed $6.79 billion buy-out of the airline by an employee-management group.
Wall Street's takeover-stock speculators, or "risk arbitragers," had placed unusually large bets that a takeover would succeed and UAL stock would rise.
At 2:43 p.m. EDT, came the sickening news: The Big Board was halting trading in UAL, "pending news."
On the exchange floor, "as soon as UAL stopped trading, we braced for a panic," said one top floor trader.
Several traders could be seen shaking their heads when the news flashed.
For weeks, the market had been nervous about takeovers, after Campeau Corp.'s cash crunch spurred concern about the prospects for future highly leveraged takeovers.
And 10 minutes after the UAL trading halt came news that the UAL group couldn't get financing for its bid.
At this point, the Dow was down about 35 points.
The market crumbled.
Arbitragers couldn't dump their UAL stock -- but they rid themselves of nearly every "rumor" stock they had.
For example, their selling caused trading halts to be declared in USAir Group, which closed down 3 7/8 to 41 1/2, Delta Air Lines, which fell 7 3/4 to 69 1/4, and Philips Industries, which sank 3 to 21 1/2.
These stocks eventually reopened.
But as panic spread, speculators began to sell blue-chip stocks such as Philip Morris and International Business Machines to offset their losses.
When trading was halted in Philip Morris, the stock was trading at 41, down 3 3/8, while IBM closed 5 5/8 lower at 102.
Selling snowballed because of waves of automatic "stop-loss" orders, which are triggered by computer when prices fall to certain levels.
Most of the stock selling pressure came from Wall Street professionals, including computer-guided program traders.
Traders said most of their major institutional investors, on the other hand, sat tight.
Now, at 3:07, one of the market's post-crash "reforms" took hold as the S&P 500 futures contract had plunged 12 points, equivalent to around a 100-point drop in the Dow industrials.
Under an agreement signed by the Big Board and the Chicago Mercantile Exchange, trading was temporarily halted in Chicago.
After the trading halt in the S&P 500 pit in Chicago, waves of selling continued to hit stocks themselves on the Big Board, and specialists continued to notch prices down.
As a result, the link between the futures and stock markets ripped apart.
Without the guidepost of stock-index futures -- the barometer of where traders think the overall stock market is headed -- many traders were afraid to trust stock prices quoted on the Big Board.
The futures halt was even assailed by Big Board floor traders.
"It screwed things up," said one major specialist.
This confusion effectively halted one form of program trading, stock index arbitrage, that closely links the futures and stock markets, and has been blamed by some for the market's big swings.
(In a stock-index arbitrage sell program, traders buy or sell big baskets of stocks and offset the trade in futures to lock in a price difference.)
"When the airline information came through, it cracked every model we had for the marketplace," said a managing director at one of the largest program-trading firms.
"We didn't even get a chance to do the programs we wanted to do."
But stocks kept falling.
The Dow industrials were down 55 points at 3 p.m. before the futures-trading halt.
At 3:30 p.m., at the end of the "cooling off" period, the average was down 114.76 points.
Meanwhile, during the the S&P trading halt, S&P futures sell orders began piling up, while stocks in New York kept falling sharply.
Big Board Chairman John J. Phelan said yesterday the circuit breaker "worked well mechanically.
I just think it's nonproductive at this point to get into a debate if index arbitrage would have helped or hurt things."
Under another post-crash system, Big Board President Richard Grasso (Mr. Phelan was flying to Bangkok as the market was falling) was talking on an "inter-exchange hot line" to the other exchanges, the Securities and Exchange Commission and the Federal Reserve Board.
He camped out at a high-tech nerve center on the floor of the Big Board, where he could watch updates on prices and pending stock orders.
At about 3:30 p.m. EDT, S&P futures resumed trading, and for a brief time the futures and stock markets started to come back in line.
Buyers stepped in to the futures pit.
But the build-up of S&P futures sell orders weighed on the market, and the link with stocks began to fray again.
At about 3:45, the S&P market careened to still another limit, of 30 points down, and trading was locked again.
Futures traders say the S&P was signaling that the Dow could fall as much as 200 points.
During this time, small investors began ringing their brokers, wondering whether another crash had begun.
At Prudential-Bache Securities Inc., which is trying to cater to small investors, some demoralized brokers thought this would be the final confidence-crusher.
That's when George L. Ball, chairman of the Prudential Insurance Co. of America unit, took to the internal intercom system to declare that the plunge was only "mechanical."
"I have a hunch that this particular decline today is something `more ado about less.'
It would be my inclination to advise clients not to sell, to look for an opportunity to buy," Mr. Ball told the brokers.
At Merrill Lynch & Co., the nation's biggest brokerage firm, a news release was prepared headlined "Merrill Lynch Comments on Market Drop."
The release cautioned that "there are significant differences between the current environment and that of October 1987" and that there are still "attractive investment opportunities" in the stock market.
However, Jeffrey B. Lane, president of Shearson Lehman Hutton Inc., said that Friday's plunge is "going to set back" relations with customers, "because it reinforces the concern of volatility.
And I think a lot of people will harp on program trading.
It's going to bring the debate right back to the forefront."
As the Dow average ground to its final 190.58 loss Friday, the S&P pit stayed locked at its 30-point trading limit.
Jeffrey Yass of program trader Susquehanna Investment Group said 2,000 S&P contracts were for sale on the close, the equivalent of $330 million in stock.
But there were no buyers.
While Friday's debacle involved mainly professional traders rather than investors, it left the market vulnerable to continued selling this morning, traders said.
Stock-index futures contracts settled at much lower prices than indexes of the stock market itself.
At those levels, stocks are set up to be hammered by index arbitragers, who lock in profits by buying futures when futures prices fall, and simultaneously sell off stocks.
But nobody knows at what level the futures and stocks will open today.
The de-linkage between the stock and futures markets Friday will undoubtedly cause renewed debate about whether Wall Street is properly prepared for another crash situation.
The Big Board's Mr. Grasso said, "Our systemic performance was good."
But the exchange will "look at the performance of all specialists in all stocks.
Obviously we'll take a close look at any situation in which we think the dealer-community obligations weren't met," he said.
(See related story: "Fed Ready to Inject Big Funds" -- WSJ Oct. 16, 1989)
But specialists complain privately that just as in the 1987 crash, the "upstairs" firms -- big investment banks that support the market by trading big blocks of stock -- stayed on the sidelines during Friday's blood-letting.
Mr. Phelan said, "It will take another day or two" to analyze who was buying and selling Friday.
Concerning your Sept. 21 page-one article on Prince Charles and the leeches: It's a few hundred years since England has been a kingdom.
It's now the United Kingdom of Great Britain and Northern Ireland, comprising Wales, Northern Ireland, Scotland, and . . . oh yes, England, too.
Just thought you'd like to know.
George Morton
Ports of Call Inc. reached agreements to sell its remaining seven aircraft to buyers that weren't disclosed.
The agreements bring to a total of nine the number of planes the travel company has sold this year as part of a restructuring.
The company said a portion of the $32 million realized from the sales will be used to repay its bank debt and other obligations resulting from the currently suspended air-charter operations.
Earlier the company announced it would sell its aging fleet of Boeing Co. 707s because of increasing maintenance costs.
A consortium of private investors operating as LJH Funding Co. said it has made a $409 million cash bid for most of L.J. Hooker Corp.'s real-estate and shopping-center holdings.
The $409 million bid includes the assumption of an estimated $300 million in secured liabilities on those properties, according to those making the bid.
The group is led by Jay Shidler, chief executive officer of Shidler Investment Corp. in Honolulu, and A. Boyd Simpson, chief executive of the Atlanta-based Simpson Organization Inc.
Mr. Shidler's company specializes in commercial real-estate investment and claims to have $1 billion in assets; Mr. Simpson is a developer and a former senior executive of L.J. Hooker.
"The assets are good, but they require more money and management" than can be provided in L.J. Hooker's current situation, said Mr. Simpson in an interview. "
Hooker's philosophy was to build and sell.
We want to build and hold."
L.J. Hooker, based in Atlanta, is operating with protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code.
Its parent company, Hooker Corp. of Sydney, Australia, is currently being managed by a court-appointed provisional liquidator.
Sanford Sigoloff, chief executive of L.J. Hooker, said yesterday in a statement that he has not yet seen the bid but that he would review it and bring it to the attention of the creditors committee.
The $409 million bid is estimated by Mr. Simpson as representing 75% of the value of all Hooker real-estate holdings in the U.S.
Not included in the bid are Bonwit Teller or B. Altman & Co., L.J. Hooker's department-store chains.
The offer covers the massive 1.8 million-square-foot Forest Fair Mall in Cincinnati, the 800,000 square-foot Richland Fashion Mall in Columbia, S.C., and the 700,000 square-foot Thornton Town Center mall in Thornton, Colo.
The Thornton mall opened Sept. 19 with a Bigg's hypermarket as its anchor; the Columbia mall is expected to open Nov. 15.
Other Hooker properties included are a 20-story office tower in midtown Atlanta, expected to be completed next February; vacant land sites in Florida and Ohio; L.J. Hooker International, the commercial real-estate brokerage company that once did business as Merrill Lynch Commercial Real Estate, plus other shopping centers.
The consortium was put together by Hoare Govett, the London-based investment banking company that is a subsidiary of Security Pacific Corp.
"We don't anticipate any problems in raising the funding for the bid," said Allan Campbell, the head of mergers and acquisitions at Hoare Govett, in an interview.
Hoare Govett is acting as the consortium's investment bankers.
According to people familiar with the consortium, the bid was code-named Project Klute, a reference to the film "Klute" in which a prostitute played by actress Jane Fonda is saved from a psychotic businessman by a police officer named John Klute.
L.J. Hooker was a small home-building company based in Atlanta in 1979 when Mr. Simpson was hired to push it into commercial development.
The company grew modestly until 1986, when a majority position in Hooker Corp. was acquired by Australian developer George Herscu, currently Hooker's chairman.
Mr. Herscu proceeded to launch an ambitious, but ill-fated, $1 billion acquisition binge that included Bonwit Teller and B. Altman & Co., as well as majority positions in Merksamer Jewelers, a Sacramento chain; Sakowitz Inc., the Houston-based retailer, and Parisian Inc., the Southeast department-store chain.
Eventually Mr. Simpson and Mr. Herscu had a falling out over the direction of the company, and Mr. Simpson said he resigned in 1988.
Since then, Hooker Corp. has sold its interest in the Parisian chain back to Parisian's management and is currently attempting to sell the B. Altman & Co. chain.
In addition, Robert Sakowitz, chief executive of the Sakowitz chain, is seeking funds to buy out the Hooker interest in his company.
The Merksamer chain is currently being offered for sale by First Boston Corp.
Reached in Honolulu, Mr. Shidler said that he believes the various Hooker malls can become profitable with new management.
"These aren't mature assets, but they have the potential to be so," said Mr. Shidler.
"Managed properly, and with a long-term outlook, these can become investment-grade quality properties.
Canadian steel-ingot production totaled 291,890 metric tons in the week ended Oct. 7, up 14.8% from the preceding week's total of 254,280 tons, Statistics Canada, a federal agency, said.
The week's total was up 6.2% from 274,963 tons a year earlier.
The year-to-date total was 12,006,883 tons, up 7.8% from 11,141,711 tons a year earlier.
The Treasury plans to raise $175 million in new cash Thursday by selling about $9.75 billion of 52-week bills and redeeming $9.58 billion of maturing bills.
The bills will be dated Oct. 26 and will mature Oct. 25, 1990.
They will be available in minimum denominations of $10,000.
Bids must be received by 1 p.m. EDT Thursday at the Treasury or at Federal Reserve banks or branches.
As small investors peppered their mutual funds with phone calls over the weekend, big fund managers said they have a strong defense against any wave of withdrawals: cash.
Unlike the weekend before Black Monday, the funds weren't swamped with heavy withdrawal requests.
And many fund managers have built up cash levels and say they will be buying stock this week.
At Fidelity Investments, the nation's largest fund company, telephone volume was up sharply, but it was still at just half the level of the weekend preceding Black Monday in 1987.
The Boston firm said stock-fund redemptions were running at less than one-third the level two years ago.
As of yesterday afternoon, the redemptions represented less than 15% of the total cash position of about $2 billion of Fidelity's stock funds.
"Two years ago there were massive redemption levels over the weekend and a lot of fear around," said C. Bruce Johnstone, who runs Fidelity Investments' $5 billion Equity-Income Fund.
"This feels more like a one-shot deal.
People aren't panicking."
The test may come today.
Friday's stock market sell-off came too late for many investors to act.
Some shareholders have held off until today because any fund exchanges made after Friday's close would take place at today's closing prices.
Stock fund redemptions during the 1987 debacle didn't begin to snowball until after the market opened on Black Monday.
But fund managers say they're ready.
Many have raised cash levels, which act as a buffer against steep market declines.
Mario Gabelli, for instance, holds cash positions well above 20% in several of his funds.
Windsor Fund's John Neff and Mutual Series' Michael Price said they had raised their cash levels to more than 20% and 30%, respectively, this year.
Even Peter Lynch, manager of Fidelity's $12.7 billion Magellan Fund, the nation's largest stock fund, built up cash to 7% or $850 million.
One reason is that after two years of monthly net redemptions, the fund posted net inflows of money from investors in August and September.
"I've let the money build up," Mr. Lynch said, who added that he has had trouble finding stocks he likes.
Not all funds have raised cash levels, of course.
As a group, stock funds held 10.2% of assets in cash as of August, the latest figures available from the Investment Company Institute.
That was modestly higher than the 8.8% and 9.2% levels in August and September of 1987.
Also, persistent redemptions would force some fund managers to dump stocks to raise cash.
But a strong level of investor withdrawals is much more unlikely this time around, fund managers said.
A major reason is that investors already have sharply scaled back their purchases of stock funds since Black Monday.
Stock-fund sales have rebounded in recent months, but monthly net purchases are still running at less than half 1987 levels.
"There's not nearly as much froth," said John Bogle, chairman of Vanguard Group Inc., a big Valley Forge, Pa., fund company.
Many fund managers argue that now's the time to buy.
Vincent Bajakian, manager of the $1.8 billion Wellington Fund, added to his positions in Bristol-Myers Squibb, Woolworth and Dun & Bradstreet Friday.
And today he'll be looking to buy drug stocks like Eli Lilly, Pfizer and American Home Products whose dividend yields have been bolstered by stock declines.
Fidelity's Mr. Lynch, for his part, snapped up Southern Co. shares Friday after the stock got hammered.
If the market drops further today, he said he'll be buying blue chips such as Bristol-Myers and Kellogg.
"If they croak stocks like that," he said, it presents an opportunity that is "the kind of thing you dream about."
Major mutual-fund groups said phone calls were arriving at twice the normal weekend pace yesterday.
But most investors were seeking share prices and other information.
Trading volume was only modestly higher than normal.
Still, fund groups aren't taking any chances.
They hope to avoid the jammed phone lines and other snags that infuriated some fund investors in October 1987.
Fidelity on Saturday opened its 54 walk-in investor centers across the country.
The centers normally are closed through the weekend.
In addition, East Coast centers will open at 7:30 EDT this morning, instead of the normal 8:30.
T. Rowe Price Associates Inc. increased its staff of phone representatives to handle investor requests.
The Baltimore-based group noted that some investors moved money from stock funds to money-market funds.
But most investors seemed to be "in an information mode rather than in a transaction mode," said Steven Norwitz, a vice president.
And Vanguard, among other groups, said it was adding more phone representatives today to help investors get through.
In an unusual move, several funds moved to calm investors with recordings on their toll-free phone lines.
"We view {Friday's} market decline as offering us a buying opportunity as long-term investors," a recording at Gabelli & Co. funds said over the weekend.
The Janus Group had a similar recording for investors.
Several fund managers expect a rough market this morning before prices stabilize.
Some early selling is likely to stem from investors and portfolio managers who want to lock in this year's fat profits.
Stock funds have averaged a staggering gain of 25% through September, according to Lipper Analytical Services Inc.
Elaine Garzarelli, who runs Shearson Lehman Hutton Inc.'s $335 million Sector Analysis Portfolio, predicts the market will open down at least 50 points on technical factors and "some panic selling."
But she expects prices to rebound soon and is telling investors she expects the stock market won't decline more than 10% to 15% from recent highs.
"This is not a major crash," she said.
Nevertheless, Ms. Garzarelli said she was swamped with phone calls over the weekend from nervous shareholders.
"Half of them are really scared and want to sell," she said, "but I'm trying to talk them out of it."
She added, "If they all were bullish, I'd really be upset."
The backdrop to Friday's slide was markedly different from that of the October 1987 crash, fund managers argue.
Two years ago, unlike today, the dollar was weak, interest rates were rising and the market was very overvalued, they say.
"From the investors' standpoint, institutions and individuals learned a painful lesson . . . by selling at the lows" on Black Monday, said Stephen Boesel, manager of the $580 million T. Rowe Price Growth and Income Fund.
This time, "I don't think we'll get a panic reaction.
Newport Corp. said it expects to report fiscal-first-quarter earnings of between 15 cents and 19 cents a share, somewhat below analysts' estimates of 19 cents to 23 cents.
The maker of scientific instruments and laser parts said orders fell below expectations in recent months.
A spokesman added that sales in the current quarter will about equal the yearearlier quarter's figure, when Newport reported net income of $1.7 million, or 21 cents a share, on $14.1 million in sales.
Ripples from the strike by 55,000 Machinists union members against Boeing Co. reached air carriers Friday as America West Airlines announced it will postpone its new service out of Houston because of delays in receiving aircraft from the Seattle jet maker.
Peter Otradovec, vice president for planning at the Phoenix, Ariz., carrier, said in an interview that the work stoppage at Boeing, now entering its 13th day, "has caused some turmoil in our scheduling" and that more than 500 passengers who were booked to fly out of Houston on America West would now be put on other airlines.
Mr. Otradovec said Boeing told America West that the 757 it was supposed to get this Thursday wouldn't be delivered until Nov. 7 -- the day after the airline had been planning to initiate service at Houston with four daily flights, including three nonstops to Phoenix and one nonstop to Las Vegas.
Now, those routes aren't expected to begin until Jan.
Boeing is also supposed to send to America West another 757 twin-engine aircraft as well as a 737 by year's end.
Those, too, are almost certain to arrive late.
At this point, no other America West flights -- including its new service at San Antonio, Texas; Newark, N.J.; and Palmdale, Calif. -- have been affected by the delays in Boeing deliveries.
Nevertheless, the company's reaction underscores the domino effect that a huge manufacturer such as Boeing can have on other parts of the economy.
It also is sure to help the machinists put added pressure on the company.
"I just don't feel that the company can really stand or would want a prolonged walkout," Tom Baker, president of Machinists' District 751, said in an interview yesterday.
"I don't think their customers would like it very much."
America West, though, is a smaller airline and therefore more affected by the delayed delivery of a single plane than many of its competitors would be.
"I figure that American and United probably have such a hard time counting all the planes in their fleets, they might not miss one at all," Mr. Otradovec said.
Indeed, a random check Friday didn't seem to indicate that the strike was having much of an effect on other airline operations.
Southwest Airlines has a Boeing 737-300 set for delivery at the end of this month and expects to have the plane on time.
"It's so close to completion, Boeing's told us there won't be a problem," said a Southwest spokesman.
A spokesman for AMR Corp. said Boeing has assured American Airlines it will deliver a 757 on time later this month.
American is preparing to take delivery of another 757 in early December and 20 more next year and isn't anticipating any changes in that timetable.
In Seattle, a Boeing spokesman explained that the company has been in constant communication with all of its customers and that it was impossible to predict what further disruptions might be triggered by the strike.
Meanwhile, supervisors and non-striking employees have been trying to finish some 40 aircraft -- mostly 747 and 767 jumbo jets at the company's Everett, Wash., plant -- that were all but completed before the walkout.
As of Friday, four had been delivered and a fifth plane, a 747-400, was supposed to be flown out over the weekend to Air China.
No date has yet been set to get back to the bargaining table.
"We want to make sure they know what they want before they come back," said Doug Hammond, the federal mediator who has been in contact with both sides since the strike began.
The investment community, for one, has been anticipating a speedy resolution.
Though Boeing's stock price was battered along with the rest of the market Friday, it actually has risen over the last two weeks on the strength of new orders.
"The market has taken two views: that the labor situation will get settled in the short term and that things look very rosy for Boeing in the long term," said Howard Rubel, an analyst at Cyrus J. Lawrence Inc.
Boeing's shares fell $4 Friday to close at $57.375 in composite trading on the New York Stock Exchange.
But Mr. Baker said he thinks the earliest a pact could be struck would be the end of this month, hinting that the company and union may resume negotiations as early as this week.
Still, he said, it's possible that the strike could last considerably longer.
"I wouldn't expect an immediate resolution to anything."
Last week, Boeing Chairman Frank Shrontz sent striking workers a letter, saying that "to my knowledge, Boeing's offer represents the best overall three-year contract of any major U.S. industrial firm in recent history."
But Mr. Baker called the letter -- and the company's offer of a 10% wage increase over the life of the pact, plus bonuses -- "very weak."
He added that the company miscalculated the union's resolve and the workers' disgust with being forced to work many hours overtime.
In separate developments: -- Talks have broken off between Machinists representatives at Lockheed Corp. and the Calabasas, Calif., aerospace company.
The union is continuing to work through its expired contract, however.
It had planned a strike vote for next Sunday, but that has been pushed back indefinitely.
-- United Auto Workers Local 1069, which represents 3,000 workers at Boeing's helicopter unit in Delaware County, Pa., said it agreed to extend its contract on a day-by-day basis, with a 10-day notification to cancel, while it continues bargaining.
The accord expired yesterday.
-- And Boeing on Friday said it received an order from Martinair Holland for four model 767-300 wide-body jetliners valued at a total of about $326 million.
The planes, long range versions of the medium-haul twin-jet, will be delivered with Pratt & Whitney PW4060 engines.
Pratt & Whitney is a unit of United Technologies Inc.
Martinair Holland is based in Amsterdam.
A Boeing spokeswoman said a delivery date for the planes is still being worked out "for a variety of reasons, but not because of the strike."
Bridget O'Brian contributed to this article.
Atco Ltd. said its utilities arm is considering building new electric power plants, some valued at more than one billion Canadian dollars (US$851 million), in Great Britain and elsewhere.
C.S. Richardson, Atco's senior vice president, finance, said its 50.1%-owned Canadian Utilities Ltd. unit is reviewing cogeneration projects in eastern Canada, and conventional electric power generating plants elsewhere, including Britain, where the British government plans to allow limited competition in electrical generation from private-sector suppliers as part of its privatization program.
"The projects are big.
They can be C$1 billion plus," Mr. Richardson said.
"But we wouldn't go into them alone," and Canadian Utilities' equity stake would be small, he said.
"Ideally, we'd like to be the operator {of the project} and a modest equity investor.
Our long suit is our proven ability to operate" power plants, he said.
Mr. Richardson wouldn't offer specifics regarding Atco's proposed British project, but he said it would compete for customers with two huge British power generating companies that would be formed under the country's plan to privatize its massive water and electric utilities.
Britain's government plans to raise about #20 billion ($31.05 billion) from the sale of most of its giant water and electric utilities, beginning next month.
The planned electric utility sale, scheduled for next year, is alone expected to raise #13 billion, making it the world's largest public offering.
Under terms of the plan, independent generators would be able to compete for 15% of customers until 1994, and for another 10% between 1994 and 1998.
Canadian Utilities had 1988 revenue of C$1.16 billion, mainly from its natural gas and electric utility businesses in Alberta, where the company serves about 800,000 customers.
"There seems to be a move around the world to deregulate the generation of electricity," Mr. Richardson said, and Canadian Utilities hopes to capitalize on it.
"This is a real thrust on our utility side," he said, adding that Canadian Utilities is also mulling projects in underdeveloped countries, though he would be specific.
Canadian Utilities isn't alone in exploring power generation opportunities in Britain, in anticipation of the privatization program.
"We're certainly looking at some power generating projects in England," said Bruce Stram, vice president, corporate strategy and corporate planning, with Enron Corp., Houston, a big natural gas producer and pipeline operator.
Mr. Stram said Enron is considering building gas-fired power plants in the U.K. capable of producing about 500 megawatts of power at a cost of about $300 million to $400 million.
PSE Inc. said it expects to report third earnings of $1.3 million to $1.7 million, or 14 cents to 18 cents a share.
In the year-ago quarter, the designer and operator of cogeneration and waste heat recovery plants had net income of $326,000, or four cents a share, on revenue of about $41.4 million.
The company said the improvement is related to additional cogeneration facilities that have been put into operation.
CONCORDE trans-Atlantic flights are $2,400 to Paris and $3,200 to London.
In a Centennial Journal article Oct. 5, the fares were reversed.
Diamond Shamrock Offshore Partners said it had discovered gas offshore Louisiana.
The well flowed at a rate of 2.016 million cubic feet of gas a day through a 16 64-inch opening at depths between 5,782 and 5,824 feet.
Diamond Shamrock is the operator, with a 100% interest in the well.
Diamond Shamrock Offshore's stock rose 12.5 cents Friday to close at $8.25 in New York Stock Exchange composite trading.
Kaufman & Broad Home Corp. said it formed a $53.4 million limited partnership subsidiary to buy land in California suitable for residential development.
The partnership, Kaufman & Broad Land Development Venture Limited Partnership, is a 50-50 joint venture with a trust created by institutional clients of Heitman Advisory Corp., a unit of Heitman Financial Corp., a real estate advisory, management and development company with offices in Chicago and Beverly Hills, Calif.
Kaufman & Broad, a home building company, declined to identify the institutional investors.
The land to be purchased by the joint venture hasn't yet received zoning and other approvals required for development, and part of Kaufman & Broad's job will be to obtain such approvals.
The partnership runs the risk that it may not get the approvals for development, but in return, it can buy land at wholesale rather than retail prices, which can result in sizable savings, said Bruce Karatz, president and chief executive officer of Kaufman & Broad.
"There are really very few companies that have adequate capital to buy properties in a raw state for cash.
Typically, developers option property, and then once they get the administrative approvals, they buy it," said Mr. Karatz, adding that he believes the joint venture is the first of its kind.
"We usually operate in that conservative manner."
By setting up the joint venture, Kaufman & Broad can take the more aggressive approach of buying raw land, while avoiding the negative impacts to its own balance sheet, Mr. Karatz said.
The company is putting up only 10% of the capital, although it is responsible for providing management, planning and processing services to the joint venture.
"This is one of the best ways to assure a pipeline of land to fuel our growth at a minimum risk to our company," Mr. Karatz said.
When the price of plastics took off in 1987, Quantum Chemical Corp. went along for the ride.
The timing of Quantum's chief executive officer, John Hoyt Stookey, appeared to be nothing less than inspired, because he had just increased Quantum's reliance on plastics.
The company outpaced much of the chemical industry as annual profit grew fivefold in two years.
Mr. Stookey said of the boom, "It's going to last a whole lot longer than anybody thinks."
But now prices have nose-dived and Quantum's profit is plummeting.
Some securities analysts are looking for no better than break-even results from the company for the third quarter, compared with year-earlier profit of $99.8 million, or $3.92 a share, on sales of $724.4 million.
The stock, having lost nearly a quarter of its value since Sept. 1, closed at $34.375 share, down $1.125, in New York Stock Exchange composite trading Friday.
To a degree, Quantum represents the new times that have arrived for producers of the so-called commodity plastics that pervade modern life.
Having just passed through one of the most profitable periods in their history, these producers now see their prices eroding.
Pricing cycles, to be sure, are nothing new for plastics producers.
And the financial decline of some looks steep only in comparison with the heady period that is just behind them.
"We were all wonderful heroes last year," says an executive at one of Quantum's competitors.
"Now we're at the bottom of the heap."
At Quantum, which is based in New York, the trouble is magnified by the company's heavy dependence on plastics.
Once known as National Distillers & Chemical Corp., the company exited the wine and spirits business and plowed more of its resources into plastics after Mr. Stookey took the chief executive's job in 1986.
Mr. Stookey, 59 years old, declined to be interviewed for this article, but he has consistently argued that over the long haul -- across both the peaks and the troughs of the plastics market -- Quantum will prosper through its new direction.
Quantum's lot is mostly tied to polyethylene resin, used to make garbage bags, milk jugs, housewares, toys and meat packaging, among other items.
In the U.S. polyethylene market, Quantum has claimed the largest share, about 20%.
But its competitors -- including Dow Chemical Co., Union Carbide Corp. and several oil giants -- have much broader business interests and so are better cushioned against price swings.
When the price of polyethylene moves a mere penny a pound, Quantum's annual profit fluctuates by about 85 cents a share, provided no other variables are changing.
In recent months the price of polyethylene, even more than that of other commodity plastics, has taken a dive.
Benchmark grades, which still sold for as much as 50 cents a pound last spring, have skidded to between 35 cents and 40 cents.
Meanwhile, the price of ethylene, the chemical building block of polyethylene, hasn't dropped nearly so fast.
That discrepancy hurts Quantum badly, because its own plants cover only about half of its ethylene needs.
By many accounts, an early hint of a price rout in the making came at the start of this year.
China, which had been putting in huge orders for polyethylene, abruptly halted them.
Calculating that excess polyethylene would soon be sloshing around the world, other buyers then bet that prices had peaked and so began to draw down inventories rather than order new product.
Kenneth Mitchell, director of Dow's polyethylene business, says producers were surprised to learn how much inventories had swelled throughout the distribution chain as prices spiraled up.
"People were even hoarding bags," he says.
Now producers hope prices have hit bottom.
They recently announced increases of a few cents a pound to take effect in the next several weeks.
No one knows, however, whether the new posted prices will stick once producers and customers start to haggle.
One doubter is George Krug, a chemical-industry analyst at Oppenheimer & Co. and a bear on plastics stocks.
Noting others' estimates of when price increases can be sustained, he remarks, "Some say October.
Some say November.
I say 1992."
He argues that efforts to firm up prices will be undermined by producers' plans to expand production capacity.
A quick turnaround is crucial to Quantum because its cash requirements remain heavy.
The company is trying to carry out a three-year, $1.3 billion plant-expansion program started this year.
At the same time, its annual payments on long-term debt will more than double from a year ago to about $240 million, largely because of debt taken on to pay a $50-a-share special dividend earlier this year.
Quantum described the payout at the time as a way for it to share the bonanza with its holders, because its stock price wasn't reflecting the huge profit increases.
Some analysts saw the payment as an effort also to dispel takeover speculation.
Whether a cash crunch might eventually force the company to cut its quarterly dividend, raised 36% to 75 cents a share only a year ago, has become a topic of intense speculation on Wall Street since Mr. Stookey deflected dividend questions in a Sept. 29 meeting with analysts.
Some viewed his response -- that company directors review the dividend regularly -- as nothing more than the standard line from executives.
But others came away thinking he had given something less than his usual straight-from-the-shoulder performance.
In any case, on the day of the meeting, Quantum's shares slid $2.625 to $36.625 in Big Board trading.
On top of everything else, Quantum confronts a disaster at its plant in Morris, Ill.
After an explosion idled the plant in June, the company progressed in September to within 12 hours of completing the drawn-out process of restarting it.
Then a second explosion occurred.
Two workers died and six remain in the hospital.
This human toll adds the most painful dimension yet to the sudden change in Quantum's fortunes.
Until this year, the company had been steadily lowering its accident rate and picking up trade-group safety awards.
A prolonged production halt at the plant could introduce another imponderable into Quantum's financial future.
When a plant has just been running flat out to meet demand, calculating lost profit and thus claims under business-interruption insurance is straightforward.
But the numbers become trickier -- and subject to dickering between insured and insurer -- when demand is shifting.
"You say you could have sold X percent of this product and Y percent of that," recalls Theodore Semegran, an analyst at Shearson Lehman Hutton who went through this exercise during his former career as a chemical engineer.
"And then you still have to negotiate."
Quantum hopes the Morris plant, where limited production got under way last week, will resume full operation by year's end.
The plant usually accounts for 20% to 25% of Quantum's polyethylene production and 50% of its ethylene production.
Not everything looks grim for Quantum.
The plant expansion should strengthen the company's sway in the polyethylene business, where market share is often taken through sheer capacity.
By lifting ethylene production, the expansion will also lower the company's raw material costs.
Quantum is also tightening its grip on its one large business outside chemicals, propane marketing.
Through a venture with its investment banker, First Boston Corp., Quantum completed in August an acquisition of Petrolane Inc. in a transaction valued at $1.18 billion.
Petrolane is the second-largest propane distributor in the U.S.
The largest, Suburban Propane, was already owned by Quantum.
Still, Quantum has a crisis to get past right now.
Some analysts speculate the weakening stock may yet attract a suitor.
The name surfacing in rumors is British Petroleum Co., which is looking to expand its polyethylene business in the U.S.
Asked about a bid for Quantum, a BP spokesman says, "We pretty much have a policy of not commenting on rumors, and I think that falls in that category.
RJR Nabisco Inc. is disbanding its division responsible for buying network advertising time, just a month after moving 11 of the group's 14 employees to New York from Atlanta.
A spokesman for the New York-based food and tobacco giant, taken private earlier this year in a $25 billion leveraged buy-out by Kohlberg Kravis Roberts & Co., confirmed that it is shutting down the RJR Nabisco Broadcast unit, and dismissing its 14 employees, in a move to save money.
The spokesman said RJR is discussing its network-buying plans with its two main advertising firms, FCB/Leber Katz and McCann Erickson.
"We found with the size of our media purchases that an ad agency could do just as good a job at significantly lower cost," said the spokesman, who declined to specify how much RJR spends on network television time.
An executive close to the company said RJR is spending about $140 million on network television time this year, down from roughly $200 million last year.
The spokesman said the broadcast unit will be disbanded Dec. 1, and the move won't affect RJR's print, radio and spot-television buying practices.
The broadcast group had been based in New York until a year ago, when RJR's previous management moved it to Atlanta, the company's headquarters before this summer.
One employee with the group said RJR moved 11 employees of the group back to New York in September because "there was supposed to be a future."
He said the company hired three more buyers for the unit within the past two weeks, wooing them from jobs with advertising agencies.
The RJR spokesman said the company moved the 11 employees to New York last month because the group had then been in the midst of purchasing ad time for the networks' upcoming season.
"The studies {on closing the unit} couldn't be completed until now," he said.
The group's president, Peter Chrisanthopoulos, wasn't in his office Friday afternoon to comment.
The U.S., which is finalizing its steel-import quotas, is allocating a larger share of its steel market to developing and newly industrialized countries which have relatively unsubsidized steel industries.
Meanwhile, the U.S. has negotiated a significant cut in Japan's steel quota, and made only a minor increase to the steel allotment for the European Community.
Brazil, similar to Mexico and South Korea, is expected to negotiate a somewhat bigger share of the U.S. market than it had under the previous five-year steel quotas, which expired Sept. 30.
Brazil and Venezuela are the only two countries that haven't completed steel talks with the U.S. for the year ending Oct. 1, 1990.
In recent years, U.S. steelmakers have supplied about 80% of the 100 million tons of steel used annually by the nation.
Of the remaining 20% needed, the steel-quota negotiations allocate about 15% to foreign suppliers, with the difference supplied mainly by Canada -- which isn't included in the quota program.
Other countries that don't have formal steel quotas with the U.S., such as Taiwan, Sweden and Argentina, also have supplied steel.
Some of these countries have in recent years made informal agreements with the U.S. that are similar to quotas.
The Bush administration earlier this year said it would extend steel quotas, known as voluntary restraint agreements, until March 31, 1992.
It also said it would use that two-and-a-half year period to work toward an international consensus on freeing up the international steel trade, which has been notoriously managed, subsidized and protected by governments.
The U.S. termed its plan, a "trade liberalization program," despite the fact that it is merely an extension.
Mexico, which was one of the first countries to conclude its steel talks with the U.S., virtually doubled its quota to 0.95% of the U.S. steel market from 0.48% under the previous quotas.
South Korea, which had 1.9% under the previous quotas, is set to get a small increase to about 1.95%.
That increase rises to slightly more than 2% of the U.S. market if a joint Korean-U.S. steel project is included.
Meanwhile, Brazil is expected to increase its allowance from the 1.43% share it has had in recent years.
The EC and Japan -- the U.S.'s largest steel suppliers -- haven't been filling their quotas to the full extent.
The EC steel industry, which has been coping with strong European demand, has been supplying about 5% of the U.S. market compared with recent quotas of about 6.7%.
Japan has been shipping steel to total about 4.5% of the U.S. market compared with a quota of 5.9%.
In the recent talks, the EC had its quota increased about 300,000 tons, to 7% of the U.S. market from 6.7% in 1988.
But its quota has been as high as 6.9% in 1984.
Japan, however, has agreed to cut its quota to about 5% from 5.9% previously.
Japan, the EC, Brazil, Mexico and South Korea provide about 80% of the steel imported to the U.S. under the quota program.
The balance is supplied by a host of smaller exporters, such as Australia and Venezuela.
The U.S. had about an extra 2% of the domestic steel market to give to foreign suppliers in its quota talks.
That was essentially made up of a 1% increase in the overall quota program and 1% from cutting Japan's allowance.
Negotiators from the White House trade office will repeat these quota negotiations next year when they will have another 1% of the U.S. steel market to allocate.
These optional 1%-a-year increases to the steel quota program are built into the Bush administration's steel-quota program to give its negotiators leverage with foreign steel suppliers to try to get them to withdraw subsidies and protectionism from their own steel industries.
Elcotel Inc. expects fiscal second-quarter earnings to trail 1988 results, but anticipates that several new products will lead to a "much stronger" performance in its second half.
Elcotel, a telecommunications company, had net income of $272,000, or five cents a share, in its year-earlier second quarter, ended Sept. 30.
Revenue totaled $5 million.
George Pierce, chairman and chief executive officer, said in an interview that earnings in the most recent quarter will be about two cents a share on revenue of just under $4 million.
The lower results, Mr. Pierce said, reflect a 12-month decline in industry sales of privately owned pay telephones, Elcotel's primary business.
Although Mr. Pierce expects that line of business to strengthen in the next year, he said Elcotel will also benefit from moving into other areas.
Foremost among those is the company's entrance into the public facsimile business, Mr. Pierce said.
Within the next year, Elcotel expects to place 10,000 fax machines, made by Minolta in Japan, in hotels, municipal buildings, drugstores and other public settings around the country.
Elcotel will provide a credit-card reader for the machines to collect, store and forward billing data.
Mr. Pierce said Elcotel should realize a minimum of $10 of recurring net earnings for each machine each month.
Elcotel has also developed an automatic call processor that will make further use of the company's system for automating and handling credit-card calls and collect calls.
Automatic call processors will provide that system for virtually any telephone, Mr. Pierce said, not just phones produced by Elcotel.
The company will also be producing a new line of convenience telephones, which don't accept coins, for use in hotel lobbies, office lobbies, hospitality lounges and similar settings.
Mr. Pierce estimated that the processors and convenience phones would produce about $5 of recurring net earnings for each machine each month.
Britain's retail price index rose 0.7% in September from August and was up 7.6% for the year, the Central Statistical Office said.
Quest Medical Inc. said it adopted a shareholders' rights plan in which rights to purchase shares of common stock will be distributed as a dividend to shareholders of record as of Oct. 23.
The company said the plan wasn't adopted in response to any known offers for Quest, a maker and marketer of hospital products.
The rights allow shareholders to purchase Quest stock at a discount if any person or group acquires more than 15% of the company's common stock or announces a tender offer.
Measuring cups may soon be replaced by tablespoons in the laundry room.
Procter & Gamble Co. plans to begin testing next month a superconcentrated detergent that will require only a few spoonfuls per washload.
The move stems from lessons learned in Japan where local competitors have had phenomenal success with concentrated soapsuds.
It also marks P&G's growing concern that its Japanese rivals, such as Kao Corp., may bring their superconcentrates to the U.S.
The Cincinnati consumer-products giant got clobbered two years ago in Japan when Kao introduced a powerful detergent, called Attack, which quickly won a 30% stake in the Japanese markets.
"They don't want to get caught again," says one industry watcher.
Retailers in Phoenix, Ariz., say P&G's new powdered detergent -- to be called Cheer with Color Guard -- will be on shelves in that market by early November.
A P&G spokeswoman confirmed that shipments to Phoenix started late last month.
She said the company will study results from this market before expanding to others.
Superconcentrates aren't entirely new for P&G.
The company introduced a superconcentrated Lemon Cheer in Japan after watching the success of Attack.
When Attack hit the shelves in 1987, P&G's share of the Japanese market fell to about 8% from more than 20%.
With the help of Lemon Cheer, P&G's share is now estimated to be 12%.
While the Japanese have embraced the compact packaging and convenience of concentrated products, the true test for P&G will be in the $4 billion U.S. detergent market, where growth is slow and liquids have gained prominence over powders.
The company may have chosen to market the product under the Cheer name since it's already expanded its best-selling Tide into 16 different varieties, including this year's big hit, Tide with Bleach.
With superconcentrates, however, it isn't always easy to persuade consumers that less is more; many people tend to dump too much detergent into the washing machine, believing that it takes a cup of powder to really clean the laundry.
In the early 1980s, P&G tried to launch here a concentrated detergent under the Ariel brand name that it markets in Europe.
But the product, which wasn't as concentrated as the new Cheer, bombed in a market test in Denver and was dropped.
P&G and others also have tried repeatedly to hook consumers on detergent and fabric softener combinations in pouches, but they haven't sold well, despite the convenience.
But P&G contends the new Cheer is a unique formula that also offers an ingredient that prevents colors from fading.
And retailers are expected to embrace the product, in part because it will take up less shelf space.
"When shelf space was cheap, bigger was better," says Hugh Zurkuhlen, an analyst at Salomon Bros.
But with so many brands vying for space, that's no longer the case.
If the new Cheer sells well, the trend toward smaller packaging is likely to accelerate as competitors follow with their own superconcentrates.
Then retailers "will probably push the {less-established} brands out altogether," he says.
Competition is bound to get tougher if Kao introduces a product like Attack in the U.S.
To be sure, Kao wouldn't have an easy time taking U.S. market share away from the mighty P&G, which has about 23% of the market.
Kao officials previously have said they are interested in selling detergents in the U.S., but so far the company has focused on acquisitions, such as last year's purchase of Andrew Jergens Co., a Cincinnati hand-lotion maker.
It also has a product-testing facility in California.
Some believe P&G's interest in a superconcentrated detergent goes beyond the concern for the Japanese.
"This is something P&G would do with or without Kao," says Mr. Zurkuhlen.
With economic tension between the U.S. and Japan worsening, many Japanese had feared last week's visit from U.S. Trade Representative Carla Hills.
They expected a new barrage of demands that Japan do something quickly to reduce its trade surplus with the U.S.
Instead, they got a discussion of the need for the U.S. and Japan to work together and of the importance of the long-term view.
Mrs. Hills' first trip to Japan as America's chief trade negotiator had a completely different tone from last month's visit by Commerce Secretary Robert A. Mosbacher.
Mr. Mosbacher called for concrete results by next spring in negotiations over fundamental Japanese business practices that supposedly inhibit free trade.
He said such results should be "measurable in dollars and cents" in reducing the U.S. trade deficit with Japan.
But Mrs. Hills, speaking at a breakfast meeting of the American Chamber of Commerce in Japan on Saturday, stressed that the objective "is not to get definitive action by spring or summer, it is rather to have a blueprint for action."
She added that she expected "perhaps to have a down payment . . . some small step to convince the American people and the Japanese people that we're moving in earnest."
How such remarks translate into policy won't become clear for months.
American and Japanese officials offered several theories for the difference in approach betwen Mr. Mosbacher and Mrs. Hills.
Many called it simply a contrast in styles.
But some saw it as a classic negotiating tactic.
Others said the Bush administration may feel the rhetoric on both sides is getting out of hand.
And some said it reflected the growing debate in Washington over pursuing free trade with Japan versus some kind of managed trade.
Asked to compare her visit to Mr. Mosbacher's, Mrs. Hills replied: "I didn't hear every word he spoke, but as a general proposition, I think we have a very consistent trade strategy in the Bush administration."
Yet more than one American official who sat in with her during three days of talks with Japanese officials said her tone often was surprisingly "conciliatory."
"I think my line has been very consistent," Mrs. Hills said at a news conference Saturday afternoon.
"I am painted sometimes as ferocious, perhaps because I have a ferocious list of statutes to implement.
I don't feel very ferocious.
I don't feel either hard or soft.
I feel committed to the program of opening markets and expanding trade."
When she met the local press for the first time on Friday, Mrs. Hills firmly reiterated the need for progress in removing barriers to trade in forest products, satellites and supercomputers, three areas targeted under the Super 301 provision of the 1988 trade bill.
She highlighted exclusionary business practices that the U.S. government has identified.
But her main thrust was to promote the importance of world-wide free trade and open competition.
She said the trade imbalance was mainly due to macroeconomic factors and shouldn't be tackled by setting quantitative targets.
At her news conference for Japanese reporters, one economics journalist summed up the Japanese sense of relief.
"My impression was that you would be a scary old lady," he said, drawing a few nervous chuckles from his colleagues.
"But I am relieved to see that you are beautiful and gentle and intelligent and a person of integrity."
Mrs. Hills' remarks did raise questions, at least among some U.S. officials, about what exactly her stance is on U.S. access to the Japanese semiconductor market.
The U.S. share of the Japanese market has been stuck around 10% for years.
Many Americans have interpreted a 1986 agreement as assuring U.S. companies a 20% share by 1991, but the Japanese have denied making any such promise.
At one of her news conferences, Mrs. Hills said, "I believe we can do much better than 20%."
But she stressed, "I am against managed trade.
I will not enter into an agreement that stipulates to a percentage of the market.
Traditional Industries Inc. said it expects to report a net loss for the fourth quarter that ended June 30 and is seeking new financing.
The seller of photographic products and services said it is considering a number of financing alternatives, including seeking increases in its credit lines.
Traditional declined to estimate the amount of the loss and wouldn't say if it expects to show a profit for the year.
In the year ended June 30, 1988, Traditional reported net income of $4.9 million, or $1.21 a share.
The company didn't break out its fourth-quarter results.
In the latest nine months net income was $4.7 million, or $1.31 a share, on revenue of $44.3 million.
Separately, the company said it would file a delayed fiscal-year report with the Securities and Exchange Commission "within approximately 45 days."
It said the delay resulted from difficulties in resolving its accounting of a settlement with the Federal Trade Commission.
Under an agreement filed in federal court in August to settle FTC objections to some Traditional sales practices, Traditional said it would establish a $250,000 trust fund to provide refunds to certain customers.
Information International Inc. said it was sued by a buyer of its computerized newspaper-publishing system, alleging that the company failed to correct deficiencies in the system.
A spokesman for Information International said the lawsuit by two units of Morris Communications Corp. seeks restitution of the system's about $3 million purchase price and cancellation of a software license provided by the Morris units to Information International for alleged failure to pay royalties.
Information International said it believes that the complaints, filed in federal court in Georgia, are without merit.
Closely held Morris Communications is based in Augusta, Ga.
The units that filed the suit are Southeastern Newspapers Corp. and Florida Publishing Co.
Syms Corp. completed the sale of its A. Sulka & Co. subsidiary, a men's luxury haberdashery, to Luxco Investments.
Terms weren't disclosed.
As Syms's "core business of off-price retailing grows, a small subsidiary that is operationally unrelated becomes a difficult distraction," said Marcy Syms, president of the parent, in a statement.
A spokeswoman said Sulka operates a total of seven stores in the U.S. and overseas.
Syms operates 25 off-price apparel stores in the U.S.
The oil industry's middling profits could persist through the rest of the year.
Major oil companies in the next few days are expected to report much less robust earnings than they did for the third quarter a year ago, largely reflecting deteriorating chemical prices and gasoline profitability.
The gasoline picture may improve this quarter, but chemicals are likely to remain weak, industry executives and analysts say, reducing chances that profits could equal their year-earlier performance.
The industry is "seeing a softening somewhat in volume and certainly in price in petrochemicals," Glenn Cox, president of Phillips Petroleum Co., said in an interview.
"That change will obviously impact third and fourth quarter earnings" for the industry in general, he added.
He didn't forecast Phillips's results.
But securities analysts say Phillips will be among the companies hard-hit by weak chemical prices and will probably post a drop in third-quarter earnings.
So, too, many analysts predict, will Exxon Corp., Chevron Corp. and Amoco Corp.
Typical is what happened to the price of ethylene, a major commodity chemical produced in vast amounts by many oil companies.
It has plunged 13% since July to around 26 cents a pound.
A year ago ethylene sold for 33 cents, peaking at about 34 cents last December.
A big reason for the chemical price retreat is overexpansion.
Beginning in mid-1987, prices began accelerating as a growing U.S. economy and the weak dollar spurred demand.
Companies added capacity furiously.
Now, greatly increased supplies are on the market, while the dollar is stronger, and domestic economic growth is slower.
Third-quarter profits from gasoline were weaker.
"Refining margins were so good in the third quarter of last year and generally not very good this year," said William Randol, a securities analyst at First Boston Corp.
Oil company refineries ran flat out to prepare for a robust holiday driving season in July and August that didn't materialize.
The excess supply pushed gasoline prices down in that period.
In addition, crude oil prices were up some from a year earlier, further pressuring profitability.
Refiners say margins picked up in September, and many industry officials believe gasoline profits will rebound this quarter, though still not to the level of 1988's fourth quarter.
During the 1988 second half, many companies posted record gasoline and chemical profits.
Crude oil production may turn out to be the most surprising element of companies' earnings this year.
Prices -- averaging roughly $2 a barrel higher in the third quarter than a year earlier -- have stayed well above most companies' expectations.
Demand has been much stronger than anticipated, and it typically accelerates in the fourth quarter.
"We could see higher oil prices this year," said Bryan Jacoboski, an analyst at PaineWebber Inc.
That will translate into sharply higher production profits, particularly compared with last year when oil prices steadily fell to below $13 a barrel in the fourth quarter.
While oil prices have been better than expected, natural gas prices have been worse.
In the third quarter, they averaged about 5% less than they were in 1988.
The main reason remains weather.
Last summer was notable for a heat wave and drought that caused utilities to burn more natural gas to feed increased electrical demand from air conditioning use.
This summer, on the other hand, had milder weather than usual.
"We've been very disappointed in the performance of natural gas prices," said Mr. Cox, Phillips's president.
"The lagging gas price is not going to assist fourth quarter performance as many had expected."
Going into the fourth quarter, natural gas prices are anywhere from 8% to 17% lower than a year earlier.
For instance, natural gas currently produced along the Gulf Coast is selling on the spot market for around $1.47 a thousand cubic feet, down 13% from $1.69 a thousand cubic feet a year ago.
The Bush administration, trying to blunt growing demands from Western Europe for a relaxation of controls on exports to the Soviet bloc, is questioning whether Italy's Ing. C. Olivetti & Co. supplied militarily valuable technology to the Soviets.
Most of the Western European members of Coordinating Committee on Multilateral Export Controls, the unofficial forum through which the U.S. and its allies align their export-control policies, are expected to argue for more liberal export rules at a meeting to be held in Paris Oct. 25 and 26.
They plan to press specifically for a relaxation of rules governing exports of machine tools, computers and other high-technology products.
But the Bush administration says it wants to see evidence that all Cocom members are complying fully with existing export-control procedures before it will support further liberalization.
To make its point, it is challenging the Italian government to explain reports that Olivetti may have supplied the Soviet Union with sophisticated computer-driven devices that could be used to build parts for combat aircraft.
The London Sunday Times, which first reported the U.S. concerns, cited a U.S. intelligence report as the source of the allegations that Olivetti exported $25 million in "embargoed, state-of-the-art, flexible manufacturing systems to the Soviet aviation industry."
Olivetti reportedly began shipping these tools in 1984.
A State Department spokesman acknowledged that the U.S. is discussing the allegations with the Italian government and Cocom, but declined to confirm any details.
Italian President Francesco Cossiga promised a quick investigation into whether Olivetti broke Cocom rules.
President Bush called his attention to the matter during the Italian leader's visit here last week.
Olivetti has denied that it violated Cocom rules, asserting that the reported shipments were properly licensed by the Italian authorities.
Although the legality of these sales is still an open question, the disclosure couldn't be better timed to support the position of export-control hawks in the Pentagon and the intelligence community.
"It seems to me that a story like this breaks just before every important Cocom meeting," said a Washington lobbyist for a number of U.S. computer companies.
The Bush administration has sent conflicting signals about its export-control policies, reflecting unhealed divisions among several competing agencies.
Last summer, Mr. Bush moved the administration in the direction of gradual liberalization when he told a North Atlantic Treaty Organization meeting that he would allow some exceptions to the Cocom embargo of strategic goods.
But more recently, the Pentagon and the Commerce Department openly feuded over the extent to which Cocom should liberalize exports of personal computers to the bloc.
However, these agencies generally agree that the West should be cautious about any further liberalization.
"There's no evidence that the Soviet program to (illegally) acquire Western technology has diminished," said a State Department spokesman.
Salomon Brothers International Ltd., a British subsidiary of Salomon Inc., announced it will issue warrants on shares of Hong Kong Telecommunications Ltd.
The move closely follows a similar offer by Salomon of warrants for shares of Hongkong & Shanghai Banking Corp.
Under the latest offer, HK$62.5 million (US$8 million) of three-year warrants will be issued in London, each giving buyers the right to buy one Hong Kong Telecommunications share at a price to be determined Friday.
The 50 million warrants will be priced at HK$1.25 each and are expected to carry a premium to the share price of about 26%.
In trading on the Stock Exchange of Hong Kong, the shares closed Wednesday at HK$4.80 each.
At this price, the shares would have to rise above HK$6.05 for subscribers to Salomon's issue to profitably convert their warrants.
While Hong Kong companies have in the past issued warrants on their own shares, Salomon's warrants are the first here to be issued by a third party.
Salomon will "cover" the warrants by buying sufficient shares, or options to purchase shares, to cover its entire position.
Bankers said warrants for Hong Kong stocks are attractive because they give foreign investors, wary of volatility in the colony's stock market, an opportunity to buy shares without taking too great a risk.
The Hong Kong Telecommunications warrants should be attractive to buyers in Europe, the bankers added, because the group is one of a handful of blue-chip stocks on the Hong Kong market that has international appeal.
Financial Corp. of Santa Barbara filed suit against former stock speculator Ivan F. Boesky and Drexel Burnham Lambert Inc., charging they defrauded the thrift by concealing their relationship when persuading it to buy $284 million in high-yield, high-risk junk bonds.
In a suit filed in federal court Thursday, the S&L alleged that a "disproportionate number" of the bonds it purchased in 1984 declined in value.
Financial Corp. purchased the bonds, the suit alleged, after Mr. Boesky and Drexel negotiated an agreement for Vagabond Hotels to purchase a 51% stake in the thrift for about $34 million.
Vagabond Hotels was controlled by Mr. Boesky, who currently is serving a prison term for securities violations.
Officials at Drexel said they hadn't seen the suit and thus couldn't comment.
In addition to $33 million compensatory damages, the suit seeks $100 million in punitive damages.
Also named in the suit is Ivan F. Boesky Corp. and Northview Corp., the successor company to Vagabonds Hotels.
Northview officials couldn't be located.
Financial Corp. said it agreed to buy the bonds after a representative of Ivan F. Boesky Corp. visited it in November 1983 and said Financial Corp. could improve its financial condition by purchasing the bonds.
Shortly before the visit, Mr. Boesky and Drexel representives had met with Financial Corp. officials and had signed a letter of intent to acquire the 51% stake in the company.
However, the agreement was canceled in June 1984.
Financial Corp. purchased the bonds in at least 70 different transactions in 1984 and since then has realized $11 million in losses on them, the company said.
Ideal Basic Industries Inc. said its directors reached an agreement in principle calling for HOFI North America Inc. to combine its North American cement holdings with Ideal in a transaction that will leave Ideal's minority shareholders with 12.8% of the combined company.
HOFI, the North American holding company of Swiss concern Holderbank Financiere Glaris Ltd., previously proposed combining its 100% stake in St. Lawrence Cement Inc. and its 60% stake in Dundee Cement Co. with its 67% stake in Ideal.
But HOFI's first offer would have given Ideal's other shareholders about 10% of the combined company.
Ideal's directors rejected that offer, although they said they endorsed the merger proposal.
Under the agreement, HOFI will own 87.2% of the combined company.
Ideal's current operations will represent about 39.2% of the combined company.
The transaction is subject to a definitive agreement and approval by Ideal shareholders.
Ideal said it expects to complete the transaction early next year.
While corn and soybean prices have slumped well below their drought-induced peaks of 1988, wheat prices remain stubbornly high.
And they're likely to stay that way for months to come, analysts say.
For one thing, even with many farmers planting more winter wheat this year than last, tight wheat supplies are likely to support prices well into 1990, the analysts say.
And if rain doesn't fall soon across many of the Great Plains' wheat-growing areas, yields in the crop now being planted could be reduced, further squeezing supplies.
Also supporting prices are expectations that the Soviet Union will place substantial buying orders over the next few months.
By next May 31, stocks of U.S. wheat to be carried over into the next season -- before the winter wheat now being planted is harvested -- are projected to drop to 443 million bushels.
That would be the lowest level since the early 1970s.
Stocks were 698 million bushels on May 31 of this year.
In response to dwindling domestic supplies, Agriculture Secretary Clayton Yeutter last month said the U.S. government would slightly increase the number of acres farmers can plant in wheat for next year and still qualify for federal support payments.
The government estimates that the new plan will boost production next year by about 66 million bushels.
It now estimates production for next year at just under 2.6 billion bushels, compared with this year's estimated 2.04 billion and a drought-stunted 1.81 billion in 1988.
But the full effect on prices of the winter wheat now being planted won't be felt until the second half of next year.
Until then, limited stocks are likely to keep prices near the $4-a-bushel level, analysts say.
On the Chicago Board of Trade Friday, wheat for December delivery settled at $4.0675 a bushel, unchanged.
In theory at least, tight supplies next spring could leave the wheat futures market susceptible to a supply-demand squeeze, said Daniel Basse, a futures analyst with AgResource Co. in Chicago.
Such a situation can wreak havoc, as was shown by the emergency that developed in soybean futures trading this summer on the Chicago Board of Trade.
In July, the CBOT ordered Ferruzzi Finanziaria S.p.A. to liquidate futures positions equal to about 23 million bushels of soybeans.
The exchange said it feared that some members wouldn't be able to find enough soybeans to deliver and would have to default on their contractual obligation to the Italian conglomerate, which had refused requests to reduce its holdings.
Ferruzzi has denied it was trying to manipulate the soybean futures market.
Unseasonably hot, dry weather across large portions of the Great Plains and in wheat-growing areas in Washington and Oregon is threatening to reduce the yield from this season's winter wheat crop, said Conrad Leslie, a futures analyst and head of Leslie Analytical in Chicago.
For example, in the Oklahoma panhandle, 40% or more of the topsoil is short of moisture.
That figure climbs to about 47% in wheat-growing portions of Kansas, he said.
The Soviet Union hasn't given any clear indication of its wheat purchase plans, but many analysts expect Moscow to place sizable orders for U.S. wheat in the next few months, further supporting prices.
"Wheat prices will increasingly pivot off of Soviet demand" in coming weeks, predicted Richard Feltes, vice president, research, for Refco Inc. in Chicago.
Looking ahead to other commodity markets this week:
Orange Juice Traders will be watching to see how long and how far the price decline that began Friday will go.
Late Thursday, after the close of trading, the market received what would normally have been a bullish U.S. Department of Agriculture estimate of the 1989-90 Florida orange crop.
It was near the low range of estimates, at 130 million 90-pound boxes, compared with 146.6 million boxes last season.
However, as expected, Brazil waited for the crop estimate to come out and then cut the export price of its juice concentrate to about $1.34 a pound from around $1.55.
Friday's consequent selling of futures contracts erased whatever supportive effect the U.S. report might have had and sent the November orange juice contract down as much as 6.55 cents a pound at one time.
It settled with a loss of 4.95 cents at $1.3210 a pound.
Brazilian juice, after a delay caused by drought at the start of its crop season, is beginning to arrive in the U.S. in large quantities.
Brazil wants to stimulate demand for its product, which is going to be in plentiful supply.
The price cut, one analyst said, appeared to be aimed even more at Europe, where consumption of Brazilian juice has fallen.
It's a dollar-priced product, and the strong dollar has made it more expensive in Europe, the analyst said.
New York futures prices have dropped significantly from more than $2 a pound at midyear.
Barring a cold snap or other crop problems in the growing areas, downward pressure on prices is likely to continue into January, when harvesting and processing of oranges in Florida reach their peak, the analyst said.
Energy
Although some analysts look for profit-taking in the wake of Friday's leap in crude oil prices, last week's rally is generally expected to continue this week.
"I would continue to look for a stable crude market, at least in futures" trading, said William Hinton, an energy futures broker with Stotler & Co.
Friday capped a week of steadily rising crude oil prices in both futures and spot markets.
On the New York Mercantile Exchange, West Texas Intermediate crude for November delivery finished at $20.89 a barrel, up 42 cents on the day.
On European markets, meanwhile, spot prices of North Sea crudes were up 35 to 75 cents a barrel.
"This market still wants to go higher," said Nauman Barakat, a first vice president at Shearson Lehman Hutton Inc.
He predicted that the November contract will reach $21.50 a barrel or more on the New York Mercantile Exchange.
There has been little news to account for such buoyancy in the oil markets.
Analysts generally cite a lack of bearish developments as well as rumors of a possible tightening of supplies of some fuels and crudes.
There also are recurring reports that the Soviet Union is having difficulties with its oil exports and that Nigeria has about reached its production limit and can't produce as much as it could sell.
Many traders foresee a tightening of near-term supplies, particularly of high-quality crudes such as those produced in the North Sea and in Nigeria.
If a hostile predator emerges for Saatchi & Saatchi Co., co-founders Charles and Maurice Saatchi will lead a management buy-out attempt, an official close to the company said.
Financing for any takeover attempt may be problematic in the wake of Friday's stock-market sell-off in New York and turmoil in the junk-bond market.
But the beleaguered British advertising and consulting giant, which last week named a new chief executive officer to replace Maurice Saatchi, has been the subject of intense takeover speculation for weeks.
Last week, Saatchi's largest shareholder, Southeastern Asset Management, said it had been approached by one or more third parties interested in a possible restructuring.
And Carl Spielvogel, chief executive officer of Saatchi's big Backer Spielvogel Bates advertising unit, said he had offered to lead a management buy-out of the company, but was rebuffed by Charles Saatchi.
Mr. Spielvogel said he wouldn't launch a hostile bid.
The executive close to Saatchi & Saatchi said that "if a bidder came up with a ludicrously high offer, a crazy offer which Saatchi knew it couldn't beat, it would have no choice but to recommend it to shareholders.
But {otherwise} it would undoubtedly come back" with an offer by management.
The executive said any buy-out would be led by the current board, whose chairman is Maurice Saatchi and whose strategic guiding force is believed to be Charles Saatchi.
Mr. Spielvogel isn't part of the board, nor are any of the other heads of Saatchi's big U.S.-based ad agencies.
The executive didn't name any price, but securities analysts have said Saatchi would fetch upward of $1.3 billion.
The executive denied speculation that Saatchi was bringing in the new chief executive officer only to clean up the company financially so that the brothers could lead a buy-back.
That speculation abounded Friday as industry executives analyzed the appointment of the new chief executive, Robert Louis-Dreyfus, who joins Saatchi and becomes a member of its board on Jan. 1.
Mr. Louis-Dreyfus, formerly chief executive of the pharmaceutical research firm IMS International Inc., has a reputation as a savvy financial manager, and will be charged largely with repairing Saatchi's poor financial state.
Asked about the speculation that Mr. Louis-Dreyfus has been hired to pave the way for a buy-out by the brothers, the executive replied, "That isn't the reason Dreyfus has been brought in.
He was brought in to turn around the company."
Separately, several Saatchi agency clients said they believe the company's management shakeup will have little affect on them.
"It hasn't had any impact on us, nor do we expect it to," said a spokeswoman for Miller Brewing Co., a major client of Backer Spielvogel.
John Lampe, director of advertising at PaineWebber Inc., a Saatchi & Saatchi Advertising client, said: "We have no problem with the announcement, because we don't know what change it's going to bring about.
We aren't going to change agencies because of a change in London."
Executives at Backer Spielvogel client Avis Inc., as well as at Saatchi client Philips Lighting Co., also said they saw no effect.
Executives at Prudential-Bache Securities Inc., a Backer Spielvogel client that is reviewing its account, declined comment.
Mr. Spielvogel had said that Prudential-Bache was prepared to finance either a management buy-out and restructuring, or a buy-out of Backer Spielvogel alone, led by him.
Ad Notes. . . .
NEW ACCOUNT:
California's Glendale Federal Bank awarded its $12 million to $15 million account to the Los Angeles office of Omnicom Group's BBDO agency.
The account was previously handled by Davis, Ball & Colombatto Advertising Inc., a Los Angeles agency.
ACCOUNT REVIEW:
Royal Crown Cola Co. has ended its relationship with the Boston office of Hill, Holliday, Connors, Cosmopulos.
The account had billed about $6 million in 1988, according to Leading National Advertisers.
NOT-GUILTY PLEA:
As expected, Young & Rubicam Inc. along with two senior executives and a former employee, pleaded not guilty in federal court in New Haven, Conn., to conspiracy and racketeering charges.
The government has charged that they bribed Jamaican officials to win the Jamaica Tourist Board ad account in 1981.
A spokesman for the U.S. Attorney's office said extradition proceedings are "just beginning" for the other two defendants in the case, Eric Anthony Abrahams, former Jamaican tourism minister, and Jamaican businessman Arnold Foote Jr.
KOREAN AGENCY:
The Samsung Group and Bozell Inc. agreed to establish a joint venture advertising agency in South Korea.
Bozell Cheil Corp., as the new agency will be called, will be based in Seoul and is 70% owned by Samsung and 30% owned by Bozell.
Samsung already owns Korea First Advertising Co., that country's largest agency.
Bozell joins Backer Spielvogel Bates and Ogilvy Group as U.S. agencies with interests in Korean agencies.
Citing a payment from a supplier and strong sales of certain data-storage products, Maxtor Corp. said earnings and revenue jumped in its second quarter ended Sept. 24.
The maker of computer-data-storage products said net income rose to $4.8 million, or 23 cents a share, from year-earlier net of $1.1 million, or five cents a share.
Revenue soared to $117 million from $81.5 million.
Maxtor said its results were boosted by $2 million in payments received from a supplier, for a certain line of products that Maxtor isn't going to sell anymore.
Maxtor said effects from discontinuing the line may have a positive effect on future earnings and revenue.
A spokeswoman wouldn't elaborate, but the company said the discontinued product has never been a major source of revenue or profit.
Operationally, Maxtor benefited from robust sales of products that store data for high-end personal computers and computer workstations.
In the fiscal first half, net was $7 million, or 34 cents a share, up from the year-earlier $3.1 million, or 15 cents a share.
Revenue rose to $225.5 million from $161.8 million.
Robert G. Walden, 62 years old, was elected a director of this provider of advanced technology systems and services, increasing the board to eight members.
He retired as senior vice president, finance and administration, and chief financial officer of the company Oct. 1.
Southmark Corp. said that it filed part of its 10-K report with the Securities and Exchange Commission, but that the filing doesn't include its audited financial statements and related information.
The real estate and thrift concern, operating under bankruptcy-law proceedings, said it told the SEC it couldn't provide financial statements by the end of its first extension "without unreasonable burden or expense."
The company asked for a 15-day extension Sept. 30, when the financial reports were due.
Southmark said it plans to amend its 10K to provide financial results as soon as its audit is completed.
Alan Seelenfreund, 52 years old, was named chairman of this processor of prescription claims, succeeding Thomas W. Field Jr., 55, who resigned last month.
Mr. Field also had been chairman of McKesson Corp., resigning that post after a dispute with the board over corporate strategy.
Mr. Seelenfreund is executive vice president and chief financial officer of McKesson and will continue in those roles.
PCS also named Rex R. Malson, 57, executive vice president at McKesson, as a director, filling the seat vacated by Mr. Field.
Messrs. Malson and Seelenfreund are directors of McKesson, which has an 86% stake in PCS.
MedChem Products Inc. said a U.S. District Court in Boston ruled that a challenge by MedChem to the validity of a U.S. patent held by Pharmacia Inc. was "without merit."
Pharmacia, based in Upsala, Sweden, had charged in a lawsuit against MedChem that MedChem's AMVISC product line infringes on the Pharmacia patent.
The patent is related to hyaluronic acid, a rooster-comb extract used in eye surgery.
In its lawsuit, Pharmacia is seeking unspecified damages and a preliminary injunction to block MedChem from selling the AMVISC products.
A MedChem spokesman said the products contribute about a third of MedChem's sales and 10% to 20% of its earnings.
In the year ended Aug. 31, 1988, MedChem earned $2.9 million, or 72 cents a share, on sales of $17.4 million.
MedChem said the court's ruling was issued as part of a "first-phase trial" in the patent-infringement proceedings and concerns only one of its defenses in the case.
It said it is considering "all of its options in light of the decision, including a possible appeal."
The medical-products company added that it plans to "assert its other defenses" against Pharmacia's lawsuit, including the claim that it hasn't infringed on Pharmacia's patent.
MedChem said that the court scheduled a conference for next Monday -- to set a date for proceedings on Pharmacia's motion for a preliminary injunction.
Newspaper publishers are reporting mixed third-quarter results, aided by favorable newsprint prices and hampered by flat or declining advertising linage, especially in the Northeast.
Adding to unsteadiness in the industry, seasonal retail ad spending patterns in newspapers have been upset by shifts in ownership and general hardships within the retail industry.
In New York, the Bonwit Teller and B. Altman & Co. department stores have filed for protection from creditors under Chapter 11 of the federal Bankruptcy Code, while the R.H. Macy & Co., Bloomingdale's and Saks Fifth Avenue department-store chains are for sale.
Many papers throughout the country are also faced with a slowdown in classified-ad spending, a booming category for newspapers in recent years.
Until recently, industry analysts believed decreases in retail ad spending had bottomed out and would in fact increase in this year's third and fourth quarters.
All bets are off, analysts say, because of the shifting ownership of the retail chains.
"Improved paper prices will help offset weakness in linage, but the retailers' problems have affected the amount of ad linage they usually run," said Edward J. Atorino, industry analyst for Salomon Brothers Inc.
"Retailers are just in disarray."
For instance, Gannett Co. posted an 11% gain in net income, as total ad pages dropped at USA Today, but advertising revenue rose because of a higher circulation rate base and increased rates.
Gannett's 83 daily and 35 non-daily newspapers reported a 3% increase in advertising and circulation revenue.
Total advertising linage was "modestly" lower as classified-ad volume increased, while there was "softer demand" for retail and national ad linage, said John Curley, Gannett's chief executive officer.
At USA Today, ad pages totaled 785 for the quarter, down 9.2% from the 1988 period, which was helped by increased ad spending from the Summer Olympics.
While USA Today's total paid ad pages for the year to date totaled 2,735, a decrease of 4% from last year, the paper's ad revenue increased 8% in the quarter and 13% in the nine months.
In the nine months, Gannett's net rose 9.5% to $270 million, or $1.68 a share, from $247 million, or $1.52 a share.
Revenue gained 6% to $2.55 billion from $2.4 billion.
At Dow Jones & Co., third-quarter net income fell 9.9% from the year-earlier period.
Net fell to $28.8 million, or 29 cents a share, from $32 million, or 33 cents a share.
The year-earlier period included a one-time gain of $3.5 million, or four cents a share.
Revenue gained 5.3% to $404.1 million from $383.8 million.
The drop in profit reflected, in part, continued softness in financial advertising at The Wall Street Journal and Barron's magazine.
Ad linage at the Journal fell 6.1% in the third quarter.
Affiliated Publications Inc. reversed a year-earlier third quarter net loss.
The publisher of the Boston Globe reported net of $8.5 million, or 12 cents a share, compared with a loss of $26.5 million, or 38 cents a share, for the third quarter in 1988.
William O. Taylor, the parent's chairman and chief executive officer, said earnings continued to be hurt by softness in ad volume at the Boston newspaper.
Third-quarter profit estimates for several companies are being strongly affected by the price of newsprint, which in the last two years has had several price increases.
After a supply crunch caused prices to rise 14% since 1986 to $650 a metric ton, analysts are encouraged, because they don't expect a price increase for the rest of this year.
Companies with daily newspapers in the Northeast will need the stable newsprint prices to ease damage from weak ad linage.
Mr. Atorino at Salomon Brothers said he estimates that Times Mirror Co.'s earnings were down for the third quarter, because of soft advertising levels at its Long Island Newsday and Hartford Courant newspapers.
Trouble on the East Coast was likely offset by improved ad linage at the Los Angeles Times, which this week also unveiled a redesign.
New York Times Co. is expected to report lower earnings for the third quarter because of continued weak advertising levels at its flagship New York Times and deep discounting of newsprint at its affiliate, Forest Products Group.
"Times Co.'s regional daily newspapers are holding up well, but there is little sign that things will improve in the New York market," said Alan Kassan, an analyst with Shearson Lehman Hutton.
Washington Post Co. is expected to report improved earnings, largely because of increased cable revenue and publishing revenue helped by an improved retail market in the Washington area.
According to analysts, profits were also helped by successful cost-cutting measures at Newsweek.
The news-weekly has faced heightened competition from rival Time magazine and a relatively flat magazine advertising market.
Knight-Ridder Inc. is faced with continued uncertainty over the pending joint operating agreement between its Detroit Free Press and Gannett's Detroit News, and has told analysts that earnings were down in the third quarter.
However, analysts point to positive advertising spending at several of its major daily newspapers, such as the Miami Herald and San Jose Mercury News.
"The Miami market is coming back strong after a tough couple of years" when Knight-Ridder "was starting up a Hispanic edition and circulation was falling," said Bruce Thorp, an analyst for Provident National Bank.
General Motors Corp., in a series of moves that angered union officials in the U.S. and Canada, has signaled that as many as five North American assembly plants may not survive the mid-1990s as the corporation struggles to cut its excess vehicle-making capacity.
In announcements to workers late last week, GM effectively signed death notices for two full-sized van assembly plants, and cast serious doubt on the futures of three U.S. car factories.
GM is under intense pressure to close factories that became unprofitable as the giant auto maker's U.S. market share skidded during the past decade.
The company, currently using about 80% of its North American vehicle capacity, has vowed it will run at 100% of capacity by 1992.
Just a month ago, GM announced it would make an aging assembly plant in Lakewood, Ga., the eighth U.S. assembly facility to close since 1987.
Now, GM appears to be stepping up the pace of its factory consolidation to get in shape for the 1990s.
One reason is mounting competition from new Japanese car plants in the U.S. that are pouring out more than one million vehicles a year at costs lower than GM can match.
Another is that United Auto Workers union officials have signaled they want tighter no-layoff provisions in the new Big Three national contract that will be negotiated next year.
GM officials want to get their strategy to reduce capacity and the work force in place before those talks begin.
The problem, however, is that GM's moves are coming at a time when UAW leaders are trying to silence dissidents who charge the union is too passive in the face of GM layoffs.
Against that backdrop, UAW Vice President Stephen P. Yokich, who recently became head of the union's GM department, issued a statement Friday blasting GM's "flagrant insensitivity" toward union members.
The auto maker's decision to let word of the latest shutdowns and product reassignments trickle out in separate communiques to the affected plants showed "disarray" and an "inability or unwillingness to provide consistent information," Mr. Yokich said.
GM officials told workers late last week of the following moves: Production of full-sized vans will be consolidated into a single plant in Flint, Mich.
That means two plants -- one in Scarborough, Ontario, and the other in Lordstown, Ohio -- probably will be shut down after the end of 1991.
The shutdowns will idle about 3,000 Canadian assembly workers and about 2,500 workers in Ohio.
Robert White, Canadian Auto Workers union president, used the impending Scarborough shutdown to criticize the U.S.-Canada free trade agreement and its champion, Prime Minister Brian Mulroney.
But Canadian auto workers may benefit from a separate GM move that affects three U.S. car plants and one in Quebec.
Workers at plants in Van Nuys, Calif., Oklahoma City and Pontiac, Mich., were told their facilities are no longer being considered to build the next generation of the Pontiac Firebird and Chevrolet Camaro muscle cars.
GM is studying whether it can build the new Camaro-Firebird profitably at a plant in St. Therese, Quebec, company and union officials said.
That announcement left union officials in Van Nuys and Oklahoma City uncertain about their futures.
The Van Nuys plant, which employs about 3,000 workers, doesn't have a product to build after 1993.
Jerry Shrieves, UAW local president, said the facility was asked to draw up plans to continue working as a "flex plant," which could build several different types of products on short notice to satisfy demand.
At the Oklahoma City plant, which employs about 6,000 workers building the eight-year-old A-body mid-sized cars, Steve Featherston, UAW local vice president, said the plant has no new product lined up, and "none of us knows" when the A-body cars will die.
He said he believes GM has plans to keep building A-body cars into the mid-1990s.
At Pontiac, however, the Camaro-Firebird decision appears to erase UAW hopes that GM would reopen the shuttered assembly plant that last built the plastic-bodied, two-seater Pontiac Fiero model.
The Fiero plant was viewed as a model of union-management cooperation at GM before slow sales of the Fiero forced the company to close the factory last year.
Union officials have taken a beating politically as a result.
Dissident UAW members have used the Fiero plant as a symbol of labor-management cooperation's failure.
Institut Merieux S.A. of France said the Canadian government raised an obstacle to its proposed acquisition of Connaught BioSciences Inc. for 942 million Canadian dollars (US$801.6 million).
Merieux said the government's minister of industry, science and technology told it that he wasn't convinced that the purchase is likely to be of "net benefit" to Canada.
Canadian investment rules require that big foreign takeovers meet that standard.
The French company said the government gave it 30 days in which to submit information to further support its takeover plan.
Both Merieux and Connaught are biotechnology research and vaccine manufacturing concerns.
The government's action was unusual.
Alan Nymark, executive vice president of Investment Canada, which oversees foreign takeovers, said it marked the first time in its four-year history that the agency has made an adverse net-benefit decision about the acquisition of a publicly traded company.
He said it has reached the same conclusions about some attempts to buy closely held concerns, but eventually allowed those acquisitions to proceed.
"This isn't a change in government policy; this provision has been used before," said Jodi Redmond, press secretary for Harvie Andre, Canada's minister of industry, science and technology.
Mr. Andre issued the ruling based on a recommendation by Investment Canada.
Spokesmen for Merieux and Connaught said they hadn't been informed of specific areas of concern by either the government or Investment Canada, but added they hope to have more information early this week.
Investment Canada declined to comment on the reasons for the government decision.
Viren Mehta, a partner with Mehta & Isaly, a New York-based pharmaceutical industry research firm, said the government's ruling wasn't unexpected.
"This has become a very politicized deal, concerning Canada's only large, world-class bio-research or pharmaceutical company," Mr. Mehta said.
Mr. Mehta said the move that could allow the transaction to go ahead as planned could be an out-of-court settlement of Connaught's dispute with the University of Toronto.
The University is seeking to block the acquisition of Connaught by foreign interests, citing concerns about the amount of research that would be done in Canada.
The university is considering a settlement proposal made by Connaught.
While neither side will disclose its contents, Mr. Mehta expects it to contain more specific guarantees on research and development spending levels in Canada than Merieux offered to Investment Canada.
Some analysts, such as Murray Grossner of Toronto-based Richardson Greenshields Inc., believe the government ruling leaves the door open for other bidders, such as Switzerland's Ciba-Geigy and Chiron Corp. of Emeryville, Calif.
Officials for the two concerns, which are bidding C$30 a share for Connaught, couldn't be reached for comment.
French state-owned Rhone-Poulenc S.A. holds 51% of Merieux.
Weatherford International Inc. said it canceled plans for a preferred-stock swap but may resume payment of dividends on the stock, and added that it expects to publicly offer about 10 million common shares.
The company said it planned to offer an undetermined number of common shares in exchange for the 585,000 shares of its preferred stock outstanding.
The exchange ratio was never established.
Weatherford said market conditions led to the cancellation of the planned exchange.
The energy-services concern said, however, that in January 1990, it may resume payments of dividends on the preferred stock.
Weatherford suspended its preferred-dividend payment in October 1985 and said it hasn't any plans to catch up on dividends in arrears about $6 million, but will do so some time in the future.
Additionally, the company said it filed with the Securities and Exchange Commission for the proposed offering of 10 million shares of common stock, expected to be offered in November.
The company said Salomon Brothers Inc. and Howard, Weil, Labouisse, Friedrichs Inc., underwriters for the offering, were granted an option to buy as much as an additional 1.5 million shares to cover over-allotments.
Proceeds will be used to eliminate and restructure bank debt.
Weatherford currently has approximately 11.1 million common shares outstanding.
Earnings for most of the nation's major pharmaceutical makers are believed to have moved ahead briskly in the third quarter, as companies with newer, big-selling prescription drugs fared especially well.
For the third consecutive quarter, however, most of the companies' revenues were battered by adverse foreign-currency translations as a result of the strong dollar abroad.
Analysts said that Merck & Co., Eli Lilly & Co., Warner-Lambert Co. and the Squibb Corp. unit of Bristol-Myers Squibb Co. all benefited from strong sales of relatively new, higher-priced medicines that provide wide profit margins.
Less robust earnings at Pfizer Inc. and Upjohn Co. were attributed to those companies' older products, many of which face stiffening competition from generic drugs and other medicines.
Joseph Riccardo, an analyst with Bear, Stearns & Co., said that over the past few years most drug makers have shed their slow-growing businesses and instituted other cost savings, such as consolidating manufacturing plants and administrative staffs.
As a result, "major new products are having significant impact, even on a company with very large revenues," Mr. Riccardo said.
Analysts said profit for the dozen or so big drug makers, as a group, is estimated to have climbed between 11% and 14%.
While that's not spectacular, Neil Sweig, an analyst with Prudential Bache, said that the rate of growth will "look especially good as compared to other companies if the economy turns downward."
Mr. Sweig estimated that Merck's profit for the quarter rose by about 22%, propelled by sales of its line-up of fast-growing prescription drugs, including its anti-cholesterol drug, Mevacor; a high blood pressure medicine, Vasotec; Primaxin, an antibiotic, and Pepcid, an anti-ulcer medication.
Profit climbed even though Merck's sales were reduced by "one to three percentage points" as a result of the strong dollar, Mr. Sweig said.
In the third quarter of 1988, Merck earned $311.8 million, or 79 cents a share.
In Rahway, N.J., a Merck spokesman said the company doesn't make earnings projections.
Mr. Sweig said he estimated that Lilly's earnings for the quarter jumped about 20%, largely because of the performance of its new anti-depressant Prozac.
The drug, introduced last year, is expected to generate sales of about $300 million this year.
"It's turning out to be a real blockbuster," Mr. Sweig said.
In last year's third quarter, Lilly earned $171.4 million, or $1.20 a share.
In Indianapolis, Lilly declined comment.
Several analysts said they expected Warner-Lambert's profit also to increase by more than 20% from $87.7 million, or $1.25 a share, it reported in the like period last year.
The company is praised by analysts for sharply lowering its costs in recent years and shedding numerous companies with low profit margins.
The company's lean operation, analysts said, allowed sharp-rising sales from its cholesterol drug, Lopid, to power earnings growth.
Lopid sales are expected to be about $300 million this year, up from $190 million in 1988.
In Morris Plains, N.J., a spokesman for the company said the analysts' projections are "in the ballpark."
Squibb's profit, estimated by analysts to be about 18% above the $123 million, or $1.25 a share, it earned in the third quarter of 1988, was the result of especially strong sales of its Capoten drug for treating high blood pressure and other heart disease.
The company was officially merged with Bristol-Myers Co. earlier this month.
Bristol-Myers declined to comment.
Mr. Riccardo of Bear Stearns said that Schering-Plough Corp.'s expected profit rise of about 18% to 20%, and Bristol-Meyers's expected profit increase of about 13% are largely because "those companies are really managed well."
ScheringPlough earned $94.4 million, or 84 cents a share, while Bristol-Myers earned $232.3 million, or 81 cents a share, in the like period a year earlier.
In Madison, N.J., a spokesman for Schering-Plough said the company has "no problems" with the average estimate by a analysts that third-quarter earnings per share rose by about 19%, to $1.
The company expects to achieve the 20% increase in full-year earnings per share, as it projected in the spring, the spokesman said.
Meanwhile, analysts said Pfizer's recent string of lackluster quarterly performances continued, as earnings in the quarter were expected to decline by about 5%.
Sales of Pfizer's important drugs, Feldene for treating arthritis, and Procardia, a heart medicine, have shrunk because of increased competition.
"The (strong) dollar hurt Pfizer a lot, too," Mr. Sweig said.
In the third quarter last year, Pfizer earned $216.8 million, or $1.29 a share.
In New York, the company declined comment.
Analysts said they expected Upjohn's profit to be flat or rise by only about 2% to 4% as compared with $89.6 million, or 49 cents a share, it earned a year ago.
Upjohn's biggest-selling drugs are Xanax, a tranquilizer, and Halcion, a sedative.
Sales of both drugs have been hurt by new state laws restricting the prescriptions of certain tranquilizing medicines and adverse publicity about the excessive use of the drugs.
Also, the company's hair-growing drug, Rogaine, is selling well -- at about $125 million for the year, but the company's profit from the drug has been reduced by Upjohn's expensive print and television campaigns for advertising, analysts said.
In Kalamazoo, Mich., Upjohn declined comment.
Amid a crowd of crashing stocks, Relational Technology Inc.'s stock fell particularly hard Friday, dropping 23% because its problems were compounded by disclosure of an unexpected loss for its fiscal first quarter.
The database software company said it expects a $2 million net loss for the fiscal first quarter ended Sept. 30.
It said analysts had been expecting a small profit for the period.
Revenue is expected to be "up modestly" from the $26.5 million reported a year ago.
Relational Technology reported net income of $1.5 million, or 12 cents a share, in the year-earlier period.
"While our international operations showed strong growth, our domestic business was substantially below expectations," said Paul Newton, president and chief executive officer.
A spokesman said the company's first quarter is historically soft, and computer companies in general are experiencing slower sales.
Mr. Newton said he accepted the resignation of Thomas Wilson, vice president of corporate sales, and that his marketing responsibilities have been reassigned.
The company said Mr. Wilson's resignation wasn't related to the sales shortfall.
Relational Technology went public in May 1988 at $14 a share.
It fell $1.875 a share Friday, to $6.25, a new low, in over-the-counter trading.
Its high for the past year was $16.375 a share.
In the previous quarter, the company earned $4.5 million, or 37 cents a share, on sales of $47.2 million.
The Bronx has a wonderful botanical garden, a great zoo, its own charming Little Italy (on Arthur Avenue) and, of course, the Yankees.
However, most people, having been subjected to news footage of the devastated South Bronx, look at the borough the way Tom Wolfe's Sherman McCoy did in "Bonfire of the Vanities" -- as a wrong turn into hell.
But Laura Cunningham's Bronx, her childhood Bronx of the '50s, is something else altogether.
In a lovely, novelistic memoir, "Sleeping Arrangements" (Knopf, 195 pages, $18.95), she remembers an exotic playground, peopled mainly by Jewish eccentrics and the occasional Catholic (real oddballs like her sexpot friend, the hell-kitten Diana, age five).
Ms. Cunningham, a novelist and playwright, has a vivid and dramatically outsized sense of recall.
She transforms her "Bronx of the emotions, a place where the flats of mediocrity are only relieved by steep descents into hysteria" into the "Babylonian Bronx," a world simmering with sex and death and intrigue.
In the Babylonian Bronx, Jewish working-class people lived in drab, Soviet-style buildings "glamorized" with names like AnaMor Towers (after owners Anna and Morris Snezak), whose lobbies and hallways were decorated with murals of ancient Syrians and Greeks, friezes of Pompeii.
For Ms. Cunningham the architectural discombobulation matched the discrepancy she felt living in the AnaMor Towers as a little girl: ". . . outwardly ordinary, inwardly ornate, owing all inspiration to heathen cultures."
Sharp-witted and funny but never mean, she's a memorialist a bit like Truman Capote, if he'd been Jewish and female and less bitchy.
Little Lily, as Ms. Cunningham calls herself in the book, really wasn't ordinary.
She was raised, for the first eight years, by her mother, Rosie, whom she remembers as a loving liar, who realigned history to explain why Lily's father didn't live with them.
Rosie reinvented this man, who may or may not have known about his child, as a war hero for Lily's benefit.
Rosie died young and Lily has remembered her as a romantic figure, who didn't interfere much with her child's education on the streets.
The games Bronx children played (holding kids down and stripping them, for example) seem tame by today's crack standards, but Ms. Cunningham makes it all sound like a great adventure.
"Without official knowledge of sex or death, we flirted with both," she writes.
She analyzed families by their sleeping arrangements.
Her friend Susan, whose parents kept reminding her she was unwanted, slept on a narrow bed wedged into her parents' bedroom, as though she were a temporary visitor.
Her friend Diana's father was a professional thief; they didn't seem to have any bedrooms at all.
Maybe Lily became so obsessed with where people slept and how because her own arrangements kept shifting.
When Rosie died, her uncles moved in -- and let her make the sleeping and other household arrangements.
They painted the apartment orange, pink and white, according to her instructions.
With loving detail she recalls her Uncle Gabe, an Orthodox Jew and song lyricist (who rhymed river with liver in a love song); and Uncle Len, a mysterious part-time investigator who looked like Lincoln and carried a change of clothing in a Manila envelope, like an "undercover President on a good-will mission."
They came by their strangeness honestly.
Lily's grandmother, no cookie baker, excised the heads of disliked relatives from the family album, and lugged around her perennial work-in-progress, "Philosophy for Women."
The book loses some momentum toward the end, when Lily becomes more preoccupied with dating boys and less with her delightfully weird family.
For the most part, though, there's much pleasure in her saucy, poignant probe into the mysteries of the Babylonian Bronx.
The Bronx also figures in Bruce Jay Friedman's latest novel, which flashes back to the New York of the '50s.
But both the past and present worlds of "The Current Climate" (Atlantic Monthly Press, 200 pages, $18.95) feel cramped and static.
For his sixth novel, Mr. Friedman tried to resuscitate the protagonist of his 1972 work, "About Harry Towns."
Harry is now a 57-year-old writer, whose continuing flirtation with drugs and marginal types in Hollywood and New York seems quaintly out-of-synch.
Harry fondly remembers the "old" days of the early '70s, when people like his friend Travis would take a psychiatrist on a date to analyze what Travis was doing wrong.
"An L.A. solution," explains Mr. Friedman.
Line by line Mr. Friedman's weary cynicism can be amusing, especially when he's riffing on the Hollywood social scheme -- the way people size each other up, immediately canceling the desperate ones who merely almost made it.
Harry has avoided all that by living in a Long Island suburb with his wife, who's so addicted to soap operas and mystery novels she barely seems to notice when her husband disappears for drug-seeking forays into Manhattan.
But it doesn't take too many lines to figure Harry out.
He's a bore.
Gulf Resources & Chemical Corp. said it agreed to pay $1.5 million as part of an accord with the Environmental Protection Agency regarding an environmental cleanup of a defunct smelter the company formerly operated in Idaho.
In 1984 the EPA notified Gulf Resources, which was a part-owner of the smelter, that it was potentially liable for sharing cleanup costs at the site under the federal Superfund program.
The 21-square-mile area is contaminated with lead, zinc and other metals.
Gulf Resources earlier this year proposed a reorganization plan that would make it a unit of a Bermuda concern, potentially exempting it from liability for the smelter's cleanup costs.
The company said that as part of its agreement with the EPA, it "made certain voluntary undertakings with respect to intercorporate transactions entered into after the reorganization."
The company, which issued a statement on the agreement late Friday, said that $1 million of the payment was previously provided for in its financial statements and that $500,000 will be recognized in its 1989 third-quarter statement.
The agreement and consent decree are subject to court approval, the company said.
Gulf Resources added that it "will seek to recover equitable contribution from others for both the amount of the settlement and any other liabilities it may incur under the Superfund law."
Under the agreement, Gulf must give the U.S. government 45 days' advance written notice before issuing any dividends on common stock.
The company's net worth cannot fall below $185 million after the dividends are issued.
"The terms of that agreement only become effective the date of Gulf's reorganization, which we anticipate will occur sometime in early 1990," said Lawrence R. Mehl, Gulf's general counsel.
In addition, Gulf must give the government 20 days' advance written notice of any loans exceeding $50 million that are made to the Bermuda-based holding company.
Gulf's net worth after those transaction must be at least $150 million.
Separately, the company said it expects to hold a special meeting for shareholders in early 1990 to vote on its proposed reorganization.
Many of the nation's highest-ranking executives saluted Friday's market plunge as an overdue comeuppance for speculators and takeover players.
Assuming that the market doesn't head into a bottomless free fall, some executives think Friday's action could prove a harbinger of good news -- as a sign that the leveraged buy-out and takeover frenzy of recent years may be abating.
"This is a reaction to artificial LBO valuations, rather than to any fundamentals," said John Young, chairman of Hewlett-Packard Co., whose shares dropped $3.125 to $48.125.
"If we get rid of a lot of that nonsense, it will be a big plus."
A few of the executives here for the fall meeting of the Business Council, a group that meets to discuss national issues, were only too happy to personalize their criticism.
"People wish the government would do something about leveraged buy-outs, do something about takeovers, do something about Donald Trump," said Rand Araskog, chairman of ITT Corp., whose stock dropped $3.375.
"Where's the leadership?
Where's the guy who can say: `Enough is enough'"?
The executives were remarkably unperturbed by the plunge even though it lopped billions of dollars off the value of their companies -- and millions off their personal fortunes.
"I'm not going to worry about one day's decline," said Kenneth Olsen, Digital Equipment Corp. president, who was leisurely strolling through the bright orange and yellow leaves of the mountains here after his company's shares plunged $5.75 to close at $86.50.
"I didn't bother calling anybody; I didn't even turn on TV."
"There hasn't been any fundamental change in the economy," added John Smale, whose Procter & Gamble Co. took an $8.75 slide to close at $120.75.
"The fact that this happened two years ago and there was a recovery gives people some comfort that this won't be a problem."
Of course, established corporate managements often tend to applaud the setbacks of stock speculators and takeover artists.
Indeed, one chief executive who was downright delighted by Friday's events was Robert Crandall, chairman of AMR Corp., the parent of American Airlines and the target of a takeover offer by Mr. Trump.
Asked whether Friday's action could help him avoid being Trumped by the New York real estate magnate, Mr. Crandall smiled broadly and said: "No comment."
On Friday morning, before the market's sell-off, the business leaders issued a report predicting the economy would grow at roughly an inflation-adjusted 2% annual rate, through next year, then accelerate anew in 1991.
Of the 19 economists who worked on the Business Council forecast, only two projected periods of decline in the nation's output over the next two years, and in "both instances the declines are too modest to warrant the phrase recession," said Lewis Preston, chairman of J.P. Morgan & Co. and vice chairman of the Business Council.
The real estate slump that's pushing down the price of New York office space and housing is also affecting the city's retail real estate market.
In Manhattan, once-desirable store sites sit vacant and newly constructed space has been slow to fill.
Retail real estate brokers say tenants are reluctant to sign leases because of uncertainty about the local economy, turmoil in their own industries and a belief that rents have not yet hit bottom.
"There is an unbelievable amount of space available," says Faith Consolo, senior vice president at Garrick-Aug Associates Store Leasing Inc.
There are about 2,000 stores for rent, up from a more typical range of 1,200 to 1,500.
"This further confuses retailers," she says.
"They wonder should they sign a lease if prices are still coming down?
Is this the wrong time to open a store?
Who is going to be in the space next door?"
In addition, Ms. Consolo says, tenants usually can negotiate to pay rents that are about one-quarter lower than landlords' initial asking price.
A handful of hot retail locations, such as the 57th Street and Madison and Fifth Avenue areas, have been able to sustain what many see as astronomical rents.
And, in some neighborhoods, rents have merely hit a plateau.
But on average, Manhattan retail rents have dropped 10% to 15% in the past six months alone, experts say.
That follows a more subtle decline in the prior six months, after Manhattan rents had run up rapidly since 1986.
The same factors limiting demand for office space have affected retailing.
"As businesses contract or depart, the number of employees who might use retail services shrinks," says Edward A. Friedman, senior vice president of Helmsley Spear Inc.
He says financial problems plaguing electronics, fur and furniture companies -- key categories in the local retail economy -- have further deflated the market.
Hardest hit are what he calls "secondary" sites that primarily serve neighborhood residents.
In these locations, Mr. Friedman says, "Retailers are increasingly cautious about expanding and rents have remained steady or in some cases have declined."
Weakness in the restaurant industry, which is leaving retail space vacant, exacerbates the problem for landlords.
It is also no comfort to landlords and small New York retailers when the future of larger department stores, which anchor retail neighborhoods, are in doubt.
Hooker Corp., parent of Bonwit Teller and B. Altman's, is mired in bankruptcy proceedings and Bloomingdale's is for sale by its owner, Campeau Corp.
The trend toward lower rents may seem surprising given that some communities in New York are bemoaning the loss of favorite local businesses to high rents.
But, despite the recent softening, for many of these retailers there's still been too big a jump from the rental rates of the late 1970s, when their leases were signed.
Certainly, the recent drop in prices doesn't mean Manhattan comes cheap.
New York retail rents still run well above the going rate in other U.S. cities.
Madison and Fifth Avenues and East 57th Street can command rents of up to $500 a square foot, and $250 is not uncommon.
The thriving 34th Street area offers rents of about $100 a square foot, as do up-and-coming locations along lower Fifth Avenue.
By contrast, rentals in the best retail locations in Boston, San Francisco and Chicago rarely top $100 a square foot.
And rents on Beverly Hills' Rodeo Drive generally don't exceed about $125 a square foot.
The New York Stock Exchange said two securities will begin trading this week.
Precision Castparts Corp., Portland, Ore., will begin trading with the symbol PCP.
It makes investment castings and has traded over-the-counter.
Royal Bank of Scotland Group PLC, an Edinburgh, Scotland, financial services company, will list American depositary shares, representing preferred shares, with the symbol RBSPr.
It will continue to trade on the International Stock Exchange, London.
The American Stock Exchange listed shares of two companies.
AIM Telephones Inc., a Parsippany, N.J., telecommunications equipment supply company, started trading with the symbol AIM.
It had traded over-the-counter.
Columbia Laboratories Inc., Miami, began trading with the symbol COB.
The pharmaceuticals maker had traded over-the-counter.
The National Market System of the Nasdaq over-the-counter market listed shares of one company.
Employee Benefit Plans Inc., a Minneapolis health-care services company, was listed with the symbol EBPI.
When Justice William Brennan marks the start of his 34th year on the Supreme Court today, the occasion will differ sharply from previous anniversaries of his tenure.
For the first time, the 83-year-old justice finds his influence almost exclusively in dissent, rather than as a force in the high court's majority.
This role reversal holds true, as well, for his three liberal and moderate allies, Justices Thurgood Marshall, Harry Blackmun and John Stevens.
But are these four players, three of them in their 80s, ready to assume a different role after 88 years, collectively, of service on the high court?
Every indication is that the four are prepared to accept this new role, and the frustrations that go with it, but in different ways.
Justices Brennan and Stevens appear philosophical about it; Justices Marshall and Blackmun appear fighting mad.
The four justices are no newcomers to dissent, often joining forces in the past decade to criticize the court's conservative drift.
But always, in years past, they have bucked the trend and have been able to pick up a fifth vote to eke out a number of major victories in civil rights and liberties cases.
Now, however, as the court's new five-member conservative majority continues to solidify, victories for the liberals are rare.
The change is most dramatic for Justice Brennan, the last survivor of the mid-1960s liberal majority under Chief Justice Earl Warren.
In the seven Supreme Court terms from the fall of 1962 through the spring of 1967, the height of the Warren Court's power, Justice Brennan cast only 25 dissenting votes in 555 cases decided by the court.
Last term alone he cast 52 dissenting votes in 133 decisions, with the contentious flag-burning ruling as his only big victory.
But Justice Brennan foresaw his new role, strongly defending the importance of dissents in a 1985 speech.
"Each time the court revisits an issue, the justices will be forced by a dissent to reconsider the fundamental questions and to rethink the result," he said.
Moreover, in recent months he has said that when he was on the winning side in the 1960s, he knew that the tables might turn in the future.
He has said that he now knows how Justice John Harlan felt, a reference to the late conservative justice who was the most frequent dissenter from the Warren Court's opinions.
Associates of 81-year-old Justice Marshall say he was "depressed" about the court's direction last spring, but is feisty about his role and determined to speak out against the court's cutbacks in civil rights.
"We could sweep it under the rug and hide it, but I'm not going to do it," he said in a speech last month.
He, like Justice Brennan, considers dissents highly important for the future, a point that hasn't escaped legal scholars.
Harvard Law School Professor Laurence Tribe says there is a "generation-skipping" flavor to current dissents.
The dissenters in the Warren Court, he says, appeared to be writing for the short-term, suggesting that the court's direction might change soon.
"Brennan and Marshall are speaking in their dissents to a more distant future," he says.
Justice Blackmun, who will turn 81 next month, also seems feisty about his new role.
Associates say he takes some defeats more personally than his colleagues, especially attempts to curtail the right to abortion first recognized in his 1973 opinion, Roe vs. Wade.
Friends and associates who saw Justice Blackmun during the summer said he was no more discouraged about the court than in recent years.
And his outlook improved after successful cataract surgery in August.
But his level of frustration showed in a recent, impassioned speech to a group of hundreds of lawyers in Chicago.
He concluded his remarks by quoting, emotionally and at some length, according to those present, the late Martin Luther King's famous "I Have a Dream" speech from the 1963 March on Washington.
Justice Stevens, 69, is probably the most philosophical of the dissenters about his role, in part because he may be the least liberal of the four, but also because he enjoys the intellectual challenge of arguing with the majority more than the others.
If the role these four dissenters are assuming is a familiar one in modern Supreme Court history, it also differs in an important way from recent history, court watchers say.
"The dissenters of the Warren Court were often defending a legal legacy that they inherited," says Prof. A.E. Dick Howard of the University of Virginia Law School, "but the dissenters today are defending a legacy that they created.
The government sold the deposits of four savings-and-loan institutions, in its first wave of sales of big, sick thrifts, but low bids prevented the sale of a fifth.
The four S&Ls were sold to large banks, as was the case with most of the 28 previous transactions initiated by the Resolution Trust Corp. since it was created in the S&L bailout legislation two months ago.
Two of the four big thrifts were sold to NCNB Corp., Charlotte, N.C., which has aggressively expanded its markets, particularly in Texas and Florida.
A Canadian bank bought another thrift, in the first RTC transaction with a foreign bank.
Under these deals, the RTC sells just the deposits and the healthy assets.
These "clean-bank" transactions leave the bulk of bad assets, mostly real estate, with the government, to be sold later.
In these four, for instance, the RTC is stuck with $4.51 billion in bad assets.
Acquirers paid premiums ranging from 1.5% to 3.7% for the deposits and branch systems, roughly in line with what analysts were expecting.
The buyers will also be locked into deposit rates for just two weeks, as has been the case with previous deals.
After that, the buyers may repudiate the rates paid by the former thrifts.
But it's uncertain whether these institutions will take those steps.
NCNB, for example, has been one of the highest rate payers in the Texas market, and in Florida, rates are especially sensitive in retirement communities.
The RTC had previously targeted five thrifts for quick sales in order to spend cash by certain budgetary deadlines, but the delays illustrate the tough chore facing the agency.
"These thrifts are beached whales," said Bert Ely, an industry consultant based in Alexandria, Va.
For example, the delay in selling People's Heritage Savings, Salina, Kan., with $1.7 billion in assets, has forced the RTC to consider selling off the thrift branch-by-branch, instead of as a whole institution.
NCNB continued its foray into the Florida and Texas markets.
NCNB will acquire University Federal Savings Association, Houston, which had assets of $2.8 billion.
NCNB Texas National Bank will pay the RTC a premium of $129 million for $3.5 billion in deposits.
As a measure of the depths to which the Texas real estate market has sunk, the RTC will pay $3.8 billion to NCNB to take $750 million of bad assets.
NCNB also acquired Freedom Savings & Loan Association, Tampa, Fla., which had total assets of $900 million.
NCNB will pay the RTC a premium of $40.4 million for $1.1 billion in deposits.
NCNB will also acquire $266 million of Freedom's assets from the RTC, which will require $875 million in assistance.
Meridian Bancorp Inc., Reading, Pa., will acquire Hill Financial Savings Association, Red Hill, Pa., which had $2.3 billion in assets.
Meridian will pay a premium of $30.5 million to assume $2 billion in deposits.
It will also purchase $845 million of the thrift's assets, with $1.9 billion in RTC assistance.
In the first RTC transaction with a foreign buyer, Royal Trustco Ltd., Toronto, will acquire Pacific Savings Bank, Costa Mesa, Calif., which had $949 million in assets.
Royal Trustco will pay the RTC $25 million to assume $989 million in deposits.
It will also purchase $473 million in assets, and receive $550 million in assistance from the RTC.
The following issues were recently filed with the Securities and Exchange Commission:
American Cyanamid Co., offering of 1,250,000 common shares, via Merrill Lynch Capital Markets.
Limited Inc., offering of up to $300 million of debt securities and warrants.
Nuveen California Performance Plus Municipal Fund Inc., initial offering of five million common shares, via Alex. Brown & Sons Inc., John Nuveen & Co., Prudential-Bache Capital Funding, and Bateman Eichler, Hill Richards.
PacifiCare Health Systems Inc., proposed offering of 1.5 million common shares, of which 700,000 shares will be offered by PacifiCare and 800,000 shares by UniHealth America Inc.(PacifiCare's 71%), via Dillon, Read & Co. Inc., Goldman, Sachs & Co. and Dean Witter Reynolds Inc.
Pricor Inc., offering of one million new shares of common stock and 300,000 shares by holders, via Drexel Burnham Lambert Inc. and J.C. Bradford & Co.
Trans World Airlines Inc., offering of $150 million senior notes, via Drexel Burnham.
Time magazine, in a move to reduce the costs of wooing new subscribers, is lowering its circulation guarantee to advertisers for the second consecutive year, increasing its subscription rates and cutting back on merchandise giveaways.
In an announcement to its staff last week, executives at Time Warner Inc.'s weekly magazine said Time will "dramatically de-emphasize" its use of electronic giveaways such as telephones in television subscription drives; cut the circulation it guarantees advertisers by 300,000, to four million; and increase the cost of its annual subscription rate by about $4 to $55.
In a related development, the news-weekly, for the fourth year in a row, said it won't increase its advertising rates in 1990; a full, four-color page in the magazine costs about $120,000.
However, because the guaranteed circulation base is being lowered, ad rates will be effectively 7.5% higher per subscriber, according to Richard Heinemann, Time associate publisher.
Time is following the course of some other mass-circulation magazines that in recent years have challenged the publishing myth that maintaining artificially high, and expensive, circulations is the way to draw advertisers.
In recent years, Reader's Digest, New York Times Co.'s McCall's, and most recently News Corp.'s TV Guide, have cut their massive circulation rate bases to eliminate marginal circulation and hold down rates for advertisers.
Deep discounts in subscriptions and offers of free clock radios and watches have become accepted forms of attracting new subscribers in the hyper-competitive world of magazine news-weeklies.
But Time, as part of the more cost-conscious Time Warner, wants to wean itself away from expensive gimmicks.
Besides, Time executives think selling a news magazine with a clock radio is tacky.
"Giveaways just give people the wrong image," said Mr. Heinemann.
"That perception takes the focus off the magazine."
Time magazine executives predictably paint the circulation cut as a show of strength and actually a benefit to advertisers.
"What we are doing is screening out the readers who are only casually related to the magazine and don't really read it," said Mr. Heinemann.
"We are trying to create quality and involvement."
However, Time executives used the same explanation when in October 1988 the magazine cut its guaranteed circulation from 4.6 million to 4.3 million.
And Time's paid circulation, according to Audit Bureau of Circulations, dropped 7.3% to 4,393,237 in the six months ended June 30, 1989.
Still, Time's move is being received well, once again.
"It's terrific for advertisers to know the reader will be paying more," said Michael Drexler, national media director at Bozell Inc. ad agency.
"A few drops in circulation are of no consequence.
It's not a show of weakness; they are improving the quality of circulation while insuring their profits."
Mr. Heinemann said the changes represent a new focus in the magazine industry: a magazine's net revenue per subscriber, or the actual revenue from subscribers after discounts and the cost of premiums have been stripped away.
"The question is how much are we getting from each reader," said Mr. Heinemann.
Time's rivals news-weeklies, Washington Post Co.'s Newsweek and U.S. News & World Report, are less reliant on electronic giveaways, and in recent years both have been increasing their circulation rate bases.
Both magazines are expected to announce their ad rates and circulation levels for 1990 within a month.
When the news broke of an attempted coup in Panama two weeks ago, Sen. Christopher Dodd called the State Department for a briefing.
"They said, `follow CNN,'" he told reporters.
That shows how far Ted Turner's Cable News Network has come since its birth nine years ago, when it was considered the laughingstock of television news.
It is bigger, faster and more profitable than the news divisions of any of the three major broadcast networks.
Its niche as the "network of record" during major crises draws elite audiences around the world.
But for all its success, CNN has hit a plateau.
Although viewership soars when big news breaks, it ebbs during periods of calm.
CNN executives worry that the network's punchy but repetitive news format may be getting stale and won't keep viewers coming back as the alternatives multiply for news and information on cable-TV.
"Just the fact we're on 24 hours is no longer bulletin," says Ed Turner, CNN's executive vice president, news gathering (and no relation to Ted Turner).
"You can't live on that."
So CNN, a unit of Atlanta-based Turner Broadcasting System Inc., is trying to reposition itself as a primary channel, or what people in the television industry call a "top of mind" network.
Tonight, to kick off the effort, CNN will premiere its first prime-time newscast in years, an hourlong show at 6 p.m. Eastern time to air head-to-head against the network newscasts.
The show will be co-anchored by Bernard Shaw and Catherine Crier, a 34-year-old former Texas judge and campus beauty queen who has never held a job in television or journalism.
The new show is perhaps the boldest in a number of steps the network is taking to build audience loyalty by shifting away from its current format toward more full-length "signature" programming with recognizable stars.
To distinguish itself, CNN is also expanding international coverage and adding a second global-news program.
It is paying higher salaries -- after years of scrimping -- to lure and keep experienced staffers.
And it is embarking on an expensive gamble to break major stories with a large investigative-reporting team.
"The next stage is to get beyond the opinion leaders who use us as a point of reference to become a point of reference at ordinary dinner tables," says Jon Petrovich, executive vice president of Headline News, CNN's sister network.
But that won't be easy.
Networks, like other consumer products, develop images in peoples' minds that aren't easy to change.
It also takes money that CNN has been reluctant to spend to make programs and hire talent that viewers will tune in specially to see.
And the cable-TV operators -- CNN's distributors and part owners -- like things just the way they are.
The repositioning bid is aimed at CNN's unsteady viewership -- and what may happen to it as the cable-TV news market grows more competitive.
Already, CNN is facing stronger competition from Financial News Network Inc. and General Electric Co.'s Consumer News and Business Channel, both of which are likely to pursue more general news in the future.
In addition, many cable-TV systems themselves are airing more local and regional news programs produced by local broadcast stations.
CNN wants to change its viewers' habits.
Its watchers are, on the whole, a disloyal group of channel-zapping "grazers" and news junkies, who spend an average of just 26 minutes a day watching CNN, according to audience research.
That's less than one-third the time that viewers watch the major broadcast networks.
The brief attention viewers give CNN could put it at a disadvantage as ratings data, and advertising, become more important to cable-TV channels.
CNN's viewer habits have been molded by its format.
Its strategy in the past has been to serve as a TV wire service.
It focused on building up its news bureaus around the world, so as events took place it could go live quicker and longer than other networks.
It filled its daily schedule with newscasts called "Daybreak," "Daywatch," "Newsday," and "Newsnight," but the shows varied little in content, personality or look.
Now, the push is on for more-distinctive shows.
"Our goal is to create more programs with an individual identity," says Paul Amos, CNN executive vice president for programming.
Accordingly, CNN is adding a world-affairs show in the morning because surveys show its global-news hour in the afternoon is among its most "differentiated" programs in viewers' minds, says Mr. Amos.
And it is exploring other original programs, similar to its "Larry King Live" and "Crossfire" talk shows, which executives hope will keep people tuned in.
Then there's "The World Today," the prime-time newscast featuring Mr. Shaw and Ms. Crier.
Until now, CNN has featured its Hollywood gossip show during the key evening period.
But 70% of the cable-television-equipped households that watch news do so between 6:30 p.m. and 7 p.m., the network discovered, so CNN wants in.
Mr. Amos says the Shaw-Crier team will probably do two live interviews a day, with most of the program, at least for now, appearing similar to CNN's other newcasts.
Some in the industry are skeptical.
"I find it hard to conceive of people switching over to CNN for what, at least in the public's mind, is the same news," says Reuven Frank, the former two-time president of NBC News and creator of the Huntley-Brinkley Report.
The evening news is also slated as CNN's stage for its big push into investigative journalism.
In August, the network hired award-winning producer Pamela Hill, the former head of news specials at ABC.
She's assembling a staff of about 35 investigative reporters who will produce weekly, in-depth segments, with an eye toward breaking big stories.
CNN executives hope the headlines created by such scoops will generate excitement for its "branded" programs, in the way "60 Minutes" did so well for CBS.
That's such a departure from the past that many in the industry are skeptical CNN will follow through with its investigative commitment, especially after it sees the cost of producing in-depth pieces.
"They've never shown any inclination to spend money on production," says Michael Mosettig, a senior producer with MacNeil-Lehrer NewsHour, who notes that CNN is indispensable to his job.
The network's salaries have always ranged far below industry standards, resulting in a less-experienced work force.
CNN recently gave most employees raises of as much as 15%, but they're still drastically underpaid compared with the networks.
Says Mr. Mosettig: "CNN is my wire service; they're on top of everything.
But to improve, they've really got to make the investment in people."
In any case, cable-TV-system operators have reason to fear any tinkering with CNN's format.
They market cable-TV on the very grazing opportunities CNN seeks to discourage.
"We would obviously be upset if those kinds of services evolved into more general-interest, long-format programming," says Robert Stengel, senior vice president, programming, of Continental Cablevision Inc., which holds a 2% stake in Turner Broadcasting.
The Second U.S. Circuit Court of Appeals opinion in the Arcadian Phosphate case did not repudiate the position Pennzoil Co. took in its dispute with Texaco, contrary to your Sept. 8 article "Court Backs Texaco's View in Pennzoil Case -- Too Late."
The fundamental rule of contract law applied to both cases was that courts will not enforce agreements to which the parties did not intend to be bound.
In the Pennzoil/Texaco litigation, the courts found Pennzoil and Getty Oil intended to be bound; in Arcadian Phosphates they found there was no intention to be bound.
Admittedly, the principle in the cases is the same.
But the outcome of a legal dispute almost always turns on the facts.
And the facts, as found by the various courts in these two lawsuits, were different.
When you suggest otherwise, you leave the realm of reporting and enter the orbit of speculation.
Charles F. Vihon
Valley Federal Savings & Loan Association said Imperial Corp. of America withdrew from regulators its application to buy five Valley Federal branches, leaving the transaction in limbo.
The broken purchase appears as additional evidence of trouble at Imperial Corp., whose spokesman said the company withdrew its application from the federal Office of Thrift Supervision because of an informal notice that Imperial's thrift unit failed to meet Community Reinvestment Act requirements.
The Community Reinvestment Act requires savings and loan associations to lend money in amounts related to areas where deposits are received.
The transaction, announced in August, included about $146 million in deposits at the five outlets in California's San Joaquin Valley.
Terms weren't disclosed, but Valley Federal had said it expected to post a modest pretax gain and to save about $2 million in operating costs annually.
Valley Federal said Friday that it is considering whether to seek another buyer for the branches or to pursue the transaction with Imperial Corp., which said it is attempting to meet Community Reinvestment Act requirements.
Valley Federal, with assets of $3.3 billion, is based in Van Nuys.
Imperial Corp., based in San Diego, is the parent of Imperial Savings & Loan.
In the first six months of the year it posted a net loss of $33.1 million.
Call it the "we're too broke to fight" defense.
Lawyers for dozens of insolvent savings and loan associations are trying a new tack in their efforts to defuse suits filed by borrowers, developers and creditors.
The thrifts' lawyers claim that the suits, numbering 700 to 1,000 in Texas alone, should be dismissed as moot because neither the S&Ls nor the extinct Federal Savings and Loan Insurance Corp. has the money to pay judgments.
Though the argument may have a common-sense ring to it, even the S&L lawyers concede there's little precedent to back their position.
Still, one federal appeals court has signaled it's willing to entertain the notion, and the lawyers have renewed their arguments in Texas and eight other states where the defense is permitted under state law.
The dismissal of the pending suits could go a long way toward clearing court dockets in Texas and reducing the FSLIC's massive legal bills, which topped $73 million last year.
The S&L lawyers were encouraged last month by an appellate-court ruling in two cases brought against defunct Sunbelt Savings & Loan Association of Dallas by the developers of the Valley Ranch, best known as the training center for the Dallas Cowboys football team.
Sunbelt foreclosed on the ranch.
Sunbelt and the FSLIC argued to the Fifth U.S. Circuit Court of Appeals "that there will never be any assets with which to satisfy a judgment against Sunbelt Savings nor any means to collect from any other party, including FSLIC."
"If true," the court wrote, "this contention would justify dismissal of these actions on prudential grounds."
But the court said it lacked enough financial information about Sunbelt and the FSLIC and sent the cases back to federal district court in Dallas.
Charles Haworth, a lawyer for Sunbelt, says he plans to file a brief this week urging the district judge to dismiss the suits, because Sunbelt's liabilities exceeded its assets by about $2 billion when federal regulators closed it in August 1988.
"This institution is just brain dead," says Mr. Haworth, a partner in the Dallas office of Andrews & Kurth, a Houston law firm.
But a lawyer for Triland Investment Group, the developer of Valley Ranch, dismisses such arguments as a "defense du jour."
Attorney Richard Jackson of Dallas says a judgment for Triland could be satisfied in ways other than a monetary award, including the reversal of Sunbelt's foreclosure on Valley Ranch.
"We're asking the court for a number of things he can grant in addition to the thrill of victory," he says.
"We'd take the Valley Ranch free and clear as a booby prize.
Kenneth J. Thygerson, who was named president of this thrift holding company in August, resigned, citing personal reasons.
Mr. Thygerson said he had planned to travel between the job in Denver and his San Diego home, but has found the commute too difficult to continue.
A new president wasn't named.
SOUTH AFRICA FREED the ANC's Sisulu and seven other political prisoners.
Thousands of supporters, many brandishing flags of the outlawed African National Congress, gave the anti-apartheid activists a tumultuous reception upon their return to black townships across the country.
Most of those freed had spent at least 25 years in prison.
The 77-year-old Sisulu, sentenced to life in 1964 along with black nationalist Nelson Mandela for plotting to overthrow the government, said equality for blacks in South Africa was in reach.
The releases, announced last week by President de Klerk, were viewed as Pretoria's tacit legalization of the ANC.
Mandela, considered the most prominent leader of the ANC, remains in prison.
But his release within the next few months is widely expected.
The Soviet Union reported that thousands of tons of goods needed to ease widespread shortages across the nation were piled up at ports and rail depots, and food shipments were rotting because of a lack of people and equipment to move the cargo.
Strikes and mismanagement were cited, and Premier Ryzhkov warned of "tough measures."
Bush indicated there might be "room for flexibility" in a bill to allow federal funding of abortions for poor women who are vicitims of rape and incest.
He reiterated his opposition to such funding, but expressed hope of a compromise.
The president, at a news conference Friday, also renewed a call for the ouster of Panama's Noriega.
The White House said minors haven't any right to abortion without the consent of their parents.
The administration's policy was stated in a friend-of-the-court brief urging the Supreme Court to give states more leeway to restrict abortions.
Ten of the nation's governors, meanwhile, called on the justices to reject efforts to limit abortions.
The Justice Department announced that the FBI has been given the authority to seize U.S. fugitives overseas without the permission of foreign governments.
Secretary of State Baker emphasized Friday that the new policy wouldn't be invoked by the Bush administration without full consideration of foreign-policy implications.
NASA pronounced the space shuttle Atlantis ready for launch tomorrow following a five-day postponement of the flight because of a faulty engine computer.
The device was replaced.
The spacecraft's five astronauts are to dispatch the Galileo space probe on an exploration mission to Jupiter.
South Korea's President Roh traveled to the U.S. for a five-day visit that is expected to focus on ties between Washington and Seoul.
Roh, who is facing calls for the reduction of U.S. military forces in South Korea, is to meet with Bush tomorrow and is to address a joint session of Congress on Wednesday.
China's Communist leadership voted to purge the party of "hostile and anti-party elements" and wealthy private businessmen, whom they called exploiters.
The decision, reported by the official Xinhua News Agency, indicated that the crackdown prompted by student-led pro-democracy protests in June is intensifying.
Hundreds of East Germans flocked to Bonn's Embassy in Warsaw, bringing to more than 1,200 the number of emigres expected to flee to the West beginning today.
More than 2,100 others escaped to West Germany through Hungary over the Weekend.
In Leipzig, activists vowed to continue street protests to demand internal change.
Zaire's President Mobutu met in southern France with Angolan rebel leader Savimbi and a senior U.S. envoy in a bid to revive an accord to end Angola's civil war.
Details of the talks, described by a Zairean official as "very delicate," weren't disclosed.
PLO leader Arafat insisted on guarantees that any elections in the Israeli-occupied territories would be impartial.
He made his remarks to a PLO gathering in Baghdad.
In the occupied lands, underground leaders of the Arab uprising rejected a U.S. plan to arrange Israeli-Palestinian talks as Shamir opposed holding such discussions in Cairo.
Lebanese Christian lawmakers presented to Arab mediators at talks in Saudi Arabia proposals for a new timetable for the withdrawal of Syria's forces from Lebanon.
A plan currently under study gives Damascus two years to pull back to eastern Lebanon, starting from the time Beirut's legislature increases political power for Moslems.
Hurricane Jerry threatened to combine with the highest tides of the year to swamp the Texas-Louisiana coast.
Thousands of residents of low-lying areas were ordered to evacuate as the storm headed north in the Gulf of Mexico with 80 mph winds.
A group of Arby's franchisees said they formed an association to oppose Miami Beach financier Victor Posner's control of the restaurant chain.
The decision is the latest move in an escalating battle between the franchisees and Mr. Posner that began in August.
At the time, a group called R.B. Partners Ltd., consisting of eight of Arby's largest franchisees, offered more than $200 million to buy Arby's Inc., which is part of DWG Corp.
DWG is a holding company controlled by Mr. Posner.
One week later, Leonard H. Roberts, president and chief executive officer of Arby's, was fired in a dispute with Mr. Posner.
Friday, 42 franchisees announced the formation of an association -- called A.P. Association Inc. -- to "preserve the integrity of the Arby's system."
The franchisees, owners or operators of 1,000 of the 1,900 franchised Arby's in the U.S., said: "We have concluded that continued control of Arby's by Victor Posner is totally unacceptable to us, because it is extremely likely to cause irreparable damage to the Arby's system.
We support all efforts to remove Victor Posner from control of Arby's Inc. and the Arby's system."
The group said it would consider, among other things, withholding royalty payments and initiating a class-action lawsuit seeking court approval for the withholdings.
In Florida, Renee Mottram, a senior vice president at DWG, responded: "We don't think any individual or group should disrupt a winning system or illegally interfere with existing contractual relationships for their own self-serving motives.
September's steep rise in producer prices shows that inflation still persists, and the pessimism over interest rates caused by the new price data contributed to the stock market's plunge Friday.
After falling for three consecutive months, the producer price index for finished goods shot up 0.9% last month, the Labor Department reported Friday, as energy prices jumped after tumbling through the summer.
Although the report, which was released before the stock market opened, didn't trigger the 190.58-point drop in the Dow Jones Industrial Average, analysts said it did play a role in the market's decline.
Analysts immediately viewed the price data, the grimmest inflation news in months, as evidence that the Federal Reserve was unlikely to allow interest rates to fall as many investors had hoped.
Further fueling the belief that pressures in the economy were sufficient to keep the Fed from easing credit, the Commerce Department reported Friday that retail sales grew 0.5% in September, to $145.21 billion.
That rise came on top of a 0.7% gain in August, and suggested there is still healthy consumer demand in the economy.
"I think the Friday report, combined with the actions of the Fed, weakened the belief that there was going to be an imminent easing of monetary policy," said Robert Dederick, chief economist at Northern Trust Co. in Chicago.
But economists were divided over the extent of the inflation threat signaled by the new numbers.
"The overall 0.9% increase is serious in itself, but what is even worse is that excluding food and energy, the producer price index still increased by 0.7%," said Gordon Richards, an economist at the National Association of Manufacturers.
But Sung Won Sohn, chief economist at Norwest Corp. in Minneapolis, blamed rising energy prices and the annual autumn increase in car prices for most of the September jump.
"I would say this is not bad news; this is a blip," he said.
"The core rate is not really out of line."
All year, energy prices have skewed the producer price index, which measures changes in the prices producers receive for goods.
Inflation unquestionably has fallen back from its torrid pace last winter, when a steep run-up in world oil prices sent the index surging at double-digit annual rates.
Energy prices then plummeted through the summer, causing the index to decline for three consecutive months.
Overall, the index has climbed at a 5.1% compound annual rate since the start of the year, the Labor Department said.
While far more restrained than the pace at the beginning of the year, that is still a steeper rise than the 4.0% increase for all of 1988.
Moreover, this year's good inflation news may have ended last month, when energy prices zoomed up 6.5% after plunging 7.3% in August.
Some analysts expect oil prices to remain relatively stable in the months ahead, leaving the future pace of inflation uncertain.
Analysts had expected that the climb in oil prices last month would lead to a substantial rise in the producer price index, but the 0.9% climb was higher than most anticipated.
"I think the resurgence {in inflation} is going to continue for a few months," said John Mueller, chief economist at Bell Mueller Cannon, a Washington economic forecasting firm.
He predicted that inflation will moderate next year, saying that credit conditions are fairly tight world-wide.
But Dirk Van Dongen, president of the National Association of Wholesaler-Distributors, said that last month's rise "isn't as bad an omen" as the 0.9% figure suggests.
"If you examine the data carefully, the increase is concentrated in energy and motor vehicle prices, rather than being a broad-based advance in the prices of consumer and industrial goods," he explained.
Passenger car prices jumped 3.8% in September, after climbing 0.5% in August and declining in the late spring and summer.
Many analysts said the September increase was a one-time event, coming as dealers introduced their 1990 models.
Although all the price data were adjusted for normal seasonal fluctuations, car prices rose beyond the customary autumn increase.
Prices for capital equipment rose a hefty 1.1% in September, while prices for home electronic equipment fell 1.1%.
Food prices declined 0.6%, after climbing 0.3% in August.
Meanwhile, the retail sales report showed that car sales rose 0.8% in September to $32.82 billion.
But at least part of the increase could have come from higher prices, analysts said.
Sales at general merchandise stores rose 1.7% after declining 0.6% in August, while sales of building materials fell 1.8% after rising 1.7%.
Producer prices for intermediate goods grew 0.4% in September, after dropping for three consecutive months.
Prices for crude goods, an array of raw materials, jumped 1.1% after declining 1.9% in August and edging up 0.2% in July.
Here are the Labor Department's producer price indexes (1982=100) for September, before seasonal adjustment, and the percentage changes from September, 1988.
CityFed Financial Corp. said it expects to report a loss of at least $125 million to $150 million for the third quarter.
In the year-earlier period, CityFed had net income of $485,000, but no per-share earnings.
CityFed's president and chief executive officer, John Atherton, said the loss stems from several factors.
He said nonperforming assets rose to slightly more than $700 million from $516 million between June and September.
Approximately 85% of the total consisted of nonperforming commercial real estate assets.
Accordingly, CityFed estimated that it will provide between $85 million and $110 million for credit losses in the third quarter.
CityFed added that significant additional loan-loss provisions may be required by federal regulators as part of the current annual examination of City Federal Savings Bank, CityFed's primary subsidiary, based in Somerset, N.J.
City Federal operates 105 banking offices in New Jersey and Florida.
Mr. Atherton said CityFed will also mark its portfolio of high-yield corporate bonds to market as a result of federal legislation requiring that savings institutions divest themselves of such bonds.
That action, CityFed said, will result in a charge against third-quarter results of approximately $30 million.
CityFed also said it expects to shed its remaining mortgage loan origination operations outside its principal markets in New Jersey and Florida and, as a result, is taking a charge for discontinued operations.
All these actions, Mr. Atherton said, will result in a loss of $125 million to $150 million for the third quarter.
He added, however: "Depending on the resolution of certain accounting issues relating to mortgages servicing and the outcome of the annual examination of City Federal currently in progress with respect to the appropriate level of loan loss reserves, the total loss for the quarter could significantly exceed this range.
CenTrust Savings Bank said federal thrift regulators ordered it to suspend dividend payments on its two classes of preferred stock, indicating that regulators' concerns about the troubled institution have heightened.
In a statement, Miami-based CenTrust said the regulators cited the thrift's operating losses and "apparent losses" in its junk-bond portfolio in ordering the suspension of the dividends.
Regulators also ordered CenTrust to stop buying back the preferred stock.
David L. Paul, chairman and chief executive officer, criticized the federal Office of Thrift Supervision, which issued the directive, saying it was "inappropriate" and based on "insufficient" reasons.
He said the thrift will try to get regulators to reverse the decision.
The suspension of a preferred stock dividend is a serious step that signals that regulators have deep concerns about an institution's health.
In March, regulators labeled CenTrust a "troubled institution," largely because of its big junk-bond holdings and its operating losses.
In the same month, the Office of Thrift Supervision ordered the institution to stop paying common stock dividends until its operations were on track.
For the nine months ended June 30, CenTrust had a net loss of $21.3 million, compared with year-earlier net income of $52.8 million.
CenTrust, which is Florida's largest thrift, holds one of the largest junk-bond portfolios of any thrift in the nation.
Since April, it has pared its high-yield bond holdings to about $890 million from $1.35 billion.
Mr. Paul said only about $150 million of the current holdings are tradeable securities registered with the Securities and Exchange Commission.
The remainder, he said, are commercial loan participations, or private placements, that aren't filed with the SEC and don't have a ready market.
CenTrust and regulators have been in a dispute over market valuations for the junk bonds.
The Office of Thrift Supervision has been hounding CenTrust to provide current market values for its holdings, but CenTrust has said it can't easily obtain such values because of the relative illiquidity of the bonds and lack of a ready market.
Regulators have become increasingly antsy about CenTrust's and other thrifts' junk-bond holdings in light of the recent federal thrift bailout legislation and the recent deep decline in the junk-bond market.
The legislation requires thrifts to divest themselves of junk bonds in the new, somber regulatory climate.
In American Stock Exchange composite trading Friday, CenTrust common shares closed at $3, down 12.5 cents.
In a statement Friday, Mr. Paul challenged the regulators' decision, saying the thrift's operating losses and "apparent" junk-bond losses "have been substantially offset by gains in other activities of the bank."
He also said substantial reserves have been set aside for possible losses from the junk bonds.
In the third quarter, for instance, CenTrust added $22.5 million to its general reserves.
Mr. Paul said the regulators should instead move ahead with approving CenTrust's request to sell 63 of its 71 branches to Great Western Bank, a unit of Great Western Financial Corp. based in Beverly Hills, Calif.
The branch sale is the centerpiece of CenTrust's strategy to transform itself into a traditional S&L from a high-flying institution that relied heavily on securities trading for profits, according to Mr. Paul.
Most analysts and thrift executives had expected a decision on the proposed transaction, which was announced in July, long before now.
Many interpret the delay as an indication that regulators are skeptical about the proposal.
Branches and deposits can be sold at a premium in the event federal regulators take over an institution.
CenTrust, however, touts the branch sale, saying it would bring in $150 million and reduce the thrift's assets to $6.7 billion from $9 billion.
It said the sale would give it positive tangible capital of $82 million, or about 1.2% of assets, from a negative $33 million as of Sept. 30, thus bringing CenTrust close to regulatory standards.
CenTrust said the branch sale would also reduce the company's large amount of good will by about $180 million.
Critics, however, say the branch sale will make CenTrust more dependent than ever on brokered deposits and junk bonds.
Mr. Paul counters that he intends to further pare the size of CenTrust by not renewing more than $1 billion of brokered certificates of deposit when they come due.
The thrift is also working to unload its junk-bond portfolio by continuing to sell off the bonds, and it plans to eventually place some of them in a separate affiliate, as required under the new thrift law.
On a recent Saturday night, in the midst of West Germany's most popular prime-time show, a contestant bet the host that she could name any of 100 different cheeses after just one nibble, while blindfolded.
The woman won the bet.
But perhaps even more remarkable, the three-hour-show, "Wetten Dass" (Make a Bet), regularly wins the top slot in the country's TV ratings, sometimes drawing as many as 50% of West German households.
As the 1992 economic integration approaches, Europe's cultural curators have taken to the ramparts against American "cultural imperialism," threatening to impose quotas against such pop invaders as "Dallas," "Miami Vice" and "L.A. Law."
But much of what the Europeans want to protect seems every bit as cheesy as what they are trying to keep out.
The most militant opposition to American TV imports has come from French television and movie producers, who have demanded quotas ensuring that a full 60% of Europe's TV shows be produced in Europe.
So far, the French have failed to win enough broad-based support to prevail.
A glance through the television listings and a few twists of the European television dial suggest one reason why.
While there are some popular action and drama series, few boast the high culture and classy production values one might expect.
More European air time is filled with low-budget game shows, variety hours, movies and talk shows, many of which are authorized knock-offs of their American counterparts.
One of France's most popular Saturday night programs features semi-celebrities seeking out their grammar-school classmates for on-air reunions.
A Flemish game show has as its host a Belgian pretending to be Italian.
One of Italy's favorite shows, "Fantastico," a tepid variety show, is so popular that viewers clamored to buy a chocolate product, "Cacao Fantastico," whose praises were sung each week by dancing showgirls -- even though the product didn't exist.
Topping the cheese stunt, on another typical evening of fun on "Wetten Dass," a contestant won a bet with the show's host, Thomas Gottschalk, that he could identify 300 German dialects over the telephone.
A celebrity guest, U.S. Ambassador to West Germany Richard Burt, also won a bet that someone could pile up $150 worth of quarters on a slanted coin.
Mr. Burt nonetheless paid the penalty as if he had lost, agreeing to spend a day with West German Foreign Minister Hans-Dietrich Genscher frying and selling their combined weight in potato pancakes.
If this seems like pretty weak stuff around which to raise the protectionist barriers, it may be because these shows need all the protection they can get.
European programs usually target only their own local audience, and often only a small portion of that.
Mega-hits in Germany or Italy rarely make it even to France or Great Britain, and almost never show up on U.S. screens.
Attempts to produce "pan-European" programs have generally resulted in disappointment.
One annual co-production, the three-hour-long "Eurovision Song Contest," featuring soft-rock songs from each of 20 European countries, has been described as the world's most boring TV show.
Another, "Jeux Sans Frontieres," where villagers from assorted European countries make fools of themselves performing pointless tasks, is a hit in France.
A U.S.-made imitation under the title "Almost Anything Goes" flopped fast.
For the most part, what's made here stays here, and for good reason.
The cream of the British crop, the literary dramas that are shown on U.S. public television as "Masterpiece Theater," make up a relatively small part of British air time.
Most British programming is more of an acquired taste.
There is, for instance, "One Man and His Dog," a herding contest among sheep dogs.
Also riveting to the British are hours of dart-throwing championships, even more hours of lawn bowling contests and still more hours of snooker marathons.
European drama has had better, though still mixed, fortunes.
The most popular such shows focus on narrow national concerns.
A French knock-off of "Dallas," called "Chateauvallon" and set in a French vineyard, had a good run in France, which ended after the female lead was injured in a real-life auto accident.
"Schwarzwaldklinik," (Black Forest Clinic), a kind of German "St. Elsewhere" set in a health spa, is popular in Germany, and has spread into France.
Italy's most popular series is a drama called "La Piovra," or "The Octopus," which chronicles the fight of an idealistic young investigator in Palermo against the Mafia.
It was front-page news in Italy earlier this year when the fictional inspector was gunned down in the series.
Spain's most popular mini-series this year was "Juncal," the story of an aging bullfighter.
"The trend is pretty well established now that local programs are the most popular, with American programs second," says Brian Wenham, a former director of programs for the British Broadcasting Corp.
"Given a choice, everybody will watch a home-produced show."
But frequently there isn't much choice.
Thus, Europe has begun the recent crusade to produce more worthy shows of its own, programs with broader appeal.
"We've basically got to start from scratch, to train writers and producers to make shows that other people will want to see," concedes Colin Young, head of Britain's National Film Theatre School.
While some in the U.S. contend that advertising is the bane of television, here many believe that its absence is to blame for the European TV industry's sluggish development.
Until recently, national governments in Europe controlled most of the air time and allowed little or no advertising.
Since production costs were guaranteed, it didn't matter that a program couldn't be sold abroad or put into syndication, as most American programs are.
But not much money was spent on the shows, either, a situation that encouraged cheap-to-make talk and game shows, while discouraging expensive-to-produce dramas.
Now, however, commercial channels are coming to most European countries, and at the same time, satellite and cable technology is spreading rapidly.
Just last week, Greece authorized two commercial channels for the first time; Spain earlier began to allow commercial television alongside its state channels.
The result is a new and huge appetite for programming.
But perhaps to the consternation of those calling for quotas, most of this void is likely to be filled with the cheapest and most plentiful programming now available -- reruns -- usually of shows made in the U.S.
Sky Channel, a British-based venture of Australian-American press tycoon Rupert Murdoch, offers what must be a baffling cultural mix to most of its audience.
The financially struggling station offers programs obviously made available cheaply from its boss's other ventures.
In a Madrid hotel room recently, a viewer caught the end of a badly acted series about a fishing boat on Australia's Great Barrier Reef, only to be urged by the British announcer to "stay tuned for the further adventures of Skippy the Kangaroo."
Lisa Grishaw-Mueller in Bonn, Laura Colby in Milan, Tim Carrington in London and Carlta Vitzhum in Madrid contributed to this article.
British Aerospace PLC and France's Thomson-CSF S.A. said they are nearing an agreement to merge their guided-missile divisions, greatly expanding collaboration between the two defense contractors.
The 50-50 joint venture, which may be dubbed Eurodynamics, would have combined annual sales of at least #1.4 billion ($2.17 billion) and would be among the world's largest missile makers.
After two years of talks, plans for the venture are sufficiently advanced for the companies to seek French and British government clearance.
The companies hope for a final agreement by year-end.
The venture would strengthen the rapidly growing ties between the two companies, and help make them a leading force in European defense contracting.
In recent months, a string of cross-border mergers and joint ventures have reshaped the once-balkanized world of European arms manufacture.
Already, British Aerospace and French government-controlled Thomson-CSF collaborate on a British missile contract and on an air-traffic control radar system.
Just last week they announced they may make a joint bid to buy Ferranti International Signal PLC, a smaller British defense contractor rocked by alleged accounting fraud at a U.S. unit.
The sudden romance of British Aerospace and Thomson-CSF -- traditionally bitter competitors for Middle East and Third World weapons contracts -- is stirring controversy in Western Europe's defense industry.
Most threatened by closer British Aerospace-Thomson ties would be their respective national rivals, including Matra S.A. in France and Britain's General Electric Co. PLC.
But neither Matra nor GEC -- unrelated to Stamford, Conn.-based General Electric Co. -- are sitting quietly by as their competitors join forces.
Yesterday, a source close to GEC confirmed that his company may join the Ferranti fight, as part of a possible consortium that would bid against British Aerospace and Thomson-CSF.
Companies with which GEC has had talks about a possible joint Ferranti bid include Matra, Britain's Dowty Group PLC, West Germany's Daimler-Benz AG, and France's Dassault group.
But it may be weeks before GEC and its potential partners decide whether to bid, the source indicated.
GEC plans first to study Ferranti's financial accounts, which auditors recently said included #215 million in fictitious contracts at a U.S. unit, International Signal & Control Group, with which Ferranti merged last year.
Also, any GEC bid might be blocked by British antitrust regulators; Ferranti is GEC's main competitor on several key defense-electronics contracts, and its purchase by GEC may heighten British Defense Ministry worries about concentration in the country's defense industry.
A consortium bid, however, would diminish GEC's direct role in Ferranti and might consequently appease ministry officials.
A British Aerospace spokeswoman appeared unperturbed by the prospect of a fight with GEC for Ferranti: "Competition is the name of the game," she said.
At least one potential GEC partner, Matra, insists it isn't interested in Ferranti.
"We have nothing to say about this affair, which doesn't concern us," a Matra official said Sunday.
The missile venture, the British Aerospace spokeswoman said, is a needed response to the "new environment" in defense contracting.
For both Thomson and British Aerospace, earnings in their home markets have come under pressure from increasingly tight-fisted defense ministries; and Middle East sales, a traditional mainstay for both companies' exports, have been hurt by five years of weak oil prices.
The venture's importance for Thomson is great.
Thomson feels the future of its defense business depends on building cooperation with other Europeans.
The European defense industry is consolidating; for instance, West Germany's Siemens AG recently joined GEC in a takeover of Britain's Plessey Co., and Daimler-Benz agreed to buy Messerschmitt-Boelkow Blohm G.m.b.H.
In missiles, Thomson is already overshadowed by British Aerospace and by its home rival, France's Aerospatiale S.A.; to better compete, Thomson officials say, they need a partnership.
To justify 50-50 ownership of the planned venture, Thomson would make a cash payment to British Aerospace.
Annual revenue of British Aerospace's missile business is about #950 million, a Thomson spokesman said.
British Aerospace's chief missile products include its 17-year-old family of Rapier surface-to-air missiles.
Thomson missile products, with about half British Aerospace's annual revenue, include the Crotale surface-to-air missile family.
Interprovincial Pipe Line Co. said it will delay a proposed two-step, 830 million Canadian-dollar (US$705.6 million) expansion of its system because Canada's output of crude oil is shrinking.
Interprovincial, Canada's biggest oil pipeline operator and a major transporter of crude to the U.S., said revised industry forecasts indicate that Canadian oil output will total about 1.64 million barrels a day by 1991, 8% lower than a previous estimate.
Canadian crude production averaged about 1.69 million barrels a day during 1989's first half, about 1% below the 1988 level.
"The capability of existing fields to deliver oil is dropping," and oil exploration activity is also down dramatically, as many producers shift their emphasis to natural gas, said Ronald Watkins, vice president for government and industry relations with Interprovincial's parent, Interhome Energy Inc.
Mr. Watkins said volume on Interprovincial's system is down about 2% since January and is expected to fall further, making expansion unnecessary until perhaps the mid-1990s.
"There has been a swing of the pendulum back to the gas side," he said.
Many of Canada's oil and gas producers say the outlook for natural gas is better than it is for oil, and have shifted their exploration and development budgets accordingly.
The number of active drilling rigs in Canada is down 30% from a year ago, and the number of completed oil wells is "down more than that, due to the increasing focus on gas exploration," said Robert Feick, manager of crude oil with Calgary's Independent Petroleum Association of Canada, an industry group.
Mr. Watkins said the main reason for the production decline is shrinking output of light crude from mature, conventional fields in western Canada.
Interprovincial transports about 75% of all crude produced in western Canada, and almost 60% of Interprovincial's total volume consists of light crude.
Nearly all of the crude oil that Canada exports to the U.S. is transported on Interprovincial's system, whose main line runs from Edmonton to major U.S. and Canadian cities in the Great Lakes region, including Chicago, Buffalo, Toronto and Montreal.
Canada's current oil exports to the U.S. total about 600,000 barrels a day, or about 9.1% of net U.S. crude imports, said John Lichtblau, president of the New York-based Petroleum Industry Research Foundation.
That ranks Canada as the fourth-largest source of imported crude, behind Saudi Arabia, Nigeria and Mexico.
Mr. Lichtblau said Canada's declining crude output, combined with the fast-shrinking output of U.S. crude, will help intensify U.S. reliance on oil from overseas, particularly the Middle East.
"It's very much a growing concern.
But when something is inevitable, you learn to live with it," he said.
Mr. Lichtblau stressed that the delay of Interprovincial's proposed expansion won't by itself increase U.S. dependence on offshore crude, however, since Canadian imports are limited in any case by Canada's falling output.
Under terms of its proposed two-step expansion, which would have required regulatory approval, Interprovincial intended to add 200,000 barrels a day of additional capacity to its system, beginning with a modest expansion by 1991.
The system currently has a capacity of 1.55 million barrels a day.
Inland Steel Industries Inc. expects to report that third-quarter earnings dropped more than 50% from the previous quarter as a result of reduced sales volume and increased costs.
In the second quarter, the steelmaker had net income of $45.3 million or $1.25 a share, including a pretax charge of $17 million related to the settlement of a suit, on sales of $1.11 billion.
The company said normal seasonal softness and lost orders caused by prolonged labor talks reduced shipments by 200,000 tons in the latest quarter, compared with the second quarter.
At the same time, the integrated-steel business was hurt by continued increases in materials costs and repair and maintenance expenses, as well as higher labor costs under its new contract.
The service-center business was hurt by reduced margins and start-up costs associated with its Joseph T. Ryerson & Son unit.
The company said it is beginning to see some shipping-rate improvements in both the intergrated-steel and steel-service-center segments, which should result in improved results for the fourth quarter.
Inland said its third-quarter results will be announced later this week.
In the year-earlier third quarter, when the industry was in the midst of a boom, the company had net of $61 million, or $1.70 a share, on sales of $1.02 billion.
Predicting the financial results of computer firms has been a tough job lately.
Take Microsoft Corp., the largest maker of personal computer software and generally considered an industry bellwether.
In July, the company stunned Wall Street with the prediction that growth in the personal computer business overall would be only 10% in 1990, a modest increase when compared with the sizzling expansion of years past.
Investors -- taking this as a sign that a broad industry slump was in the offing -- reacted by selling the company's stock, which lost $3.25 that day to close at $52 in national over-the-counter trading.
But that was all of three months ago.
Last week, Microsoft said it expects revenue for its first quarter ended Sept. 30 to increase 34%.
The announcement caused the company's stock to surge $6.50 to close at $75.50 a share.
Microsoft's surprising strength is one example of the difficulty facing investors looking for reassurances about the financial health of the computer firms.
"It's hard to know what to expect at this point," said Peter Rogers, an analyst at Robertson Stephens & Co.
"The industry defies characterization."
To illustrate, Mr. Rogers said that of the 14 computer-related firms he follows, half will report for their most recent quarter earnings below last year's results, and half above those results.
Among those companies expected to have a down quarter are Hewlett-Packard Co., Amdahl Corp. and Sun Microsystems Inc., generally solid performers in the past.
International Business Machines Corp. also is expected to report disappointing results.
Apple Computer Inc., meanwhile, is expected to show improved earnings for the period ended Sept.
Another contradictory message comes from Businessland Inc., a computer retailer.
In July, the company reported that booming sales of new personal computers from Apple and IBM had resulted in net income more than doubling for its fourth quarter ended June 30 to $7.4 million, or 23 cents a share.
This month, however, Businessland warned investors that results for its first quarter ended Sept. 30 hadn't met expectations.
The company said it expects earnings of 14 to 17 cents a share, down from 25 cents a share in the year-earlier period.
While the earnings picture confuses, observers say the major forces expected to shape the industry in the coming year are clearer.
Companies will continue to war over standards.
In computer publishing, a battle over typefaces is hurting Adobe Systems Inc., which sells software that controls the image produced by printers and displays.
Until recently, Adobe had a lock on the market for image software, but last month Apple, Adobe's biggest customer, and Microsoft rebelled.
Now the two firms are collaborating on an alternative to Adobe's approach, and analysts say they are likely to carry IBM, the biggest seller of personal computers, along with them.
The short-term outlook for Adobe's business, however, appears strong.
The company is beginning to ship a new software program that's being heralded as a boon for owners of low-end printers sold by Apple.
The program is aimed at improving the quality of printed material.
John Warnock, Adobe's chief executive officer, said the Mountain View, Calif., company has been receiving 1,000 calls a day about the product since it was demonstrated at a computer publishing conference several weeks ago.
Meanwhile, competition between various operating systems, which control the basic functions of a computer, spells trouble for software firms generally.
"It creates uncertainty and usually slows down sales," said Russ Crabs, an analyst at Soundview Financial Group.
Mr. Crabs said this probably is behind the expected weak performance of Aldus Corp., maker of a widely used computer publishing program.
He expects Aldus to report earnings of 21 cents a share on revenues of $19.5 million for its third quarter, compared with earnings of 30 cents a share on revenue of 20.4 million in the year-earlier period.
Aldus officials couldn't be reached for comment.
On the other hand, the battle of the bus is expected to grow increasingly irrelevant.
A bus is the data highway within a computer.
IBM is backing one type of bus called microchannel, while the nine other leading computer makers, including H-P and Compaq Computer Corp., have chosen another method.
"Users don't care about the bus," said Daniel Benton, an analyst at Goldman, Sachs & Co.
He said Apple's family of Macintosh computers, for instance, uses four different buses "and no one seems to mind."
The gap between winners and laggards will grow.
In personal computers, Apple, Compaq and IBM are expected to tighten their hold on their business.
At the same time, second-tier firms will continue to lose ground.
Some lagging competitors even may leave the personal computer business altogether.
Wyse Technology, for instance, is considered a candidate to sell its troubled operation.
"Wyse has done well establishing a distribution business, but they haven't delivered products that sell," said Kimball Brown, an analyst at Prudential-Bache Securities.
Mr. Brown estimates Wyse, whose terminals business is strong, will report a loss of 12 cents a share for its quarter ended Sept.
Personal-computer makers will continue to eat away at the business of more traditional computer firms.
Ever-more powerful desk-top computers, designed with one or more microprocessors as their "brains," are expected to increasingly take on functions carried out by more expensive minicomputers and mainframes.
"The guys that make traditional hardware are really being obsoleted by microprocessor-based machines," said Mr. Benton.
As a result of this trend, longtime powerhouses H-P, IBM and Digital Equipment Corp. are scrambling to counterattack with microprocessor-based systems of their own.
But they will have to act quickly.
Mr. Benton expects Compaq to unveil a family of high-end personal computers later this year that are powerful enough to serve as the hub for communications within large networks of desk-top machines.
A raft of new computer companies also has targeted this "server" market.
Population Drain Ends For Midwestern States
IOWA IS MAKING a comeback.
So are Indiana, Ohio and Michigan.
The population of all four states is on the upswing, according to new Census Bureau estimates, following declines throughout the early 1980s.
The gains, to be sure, are rather small.
Iowa, for instance, saw its population grow by 11,000 people, or 0.4%, between 1987 and 1988, the Census Bureau says.
Still, even that modest increase is good news for a state that hadn't grown at all since 1981.
Between 1987 and 1988, North Dakota was the only state in the Midwest to lose population, a loss of 4,000 people.
Six of the 12 midwestern states have been growing steadily since 1980 -- Illinois, Kansas, Minnesota, Missouri, South Dakota and Wisconsin.
The Northeast has been holding its own in the population race.
Seven of nine states have grown each year since 1980, including New York, which lost 4% of its population during the 1970s.
And although Pennsylvania and Massachusetts suffered slight declines earlier in the decade, they are growing again.
At the same time, several states in the South and West have had their own population turnaround.
Seven states that grew in the early 1980s are now losing population -- West Virginia, Mississippi, Louisiana, Oklahoma, Montana, Wyoming and Alaska.
Overall, though, the South and West still outpace the Northeast and Midwest, and fast-growing states like Florida and California ensure that the pattern will continue.
But the growth gap between the Sun Belt and other regions has clearly started narrowing.
More Elderly Maintain Their Independence
THANKS TO modern medicine, more couples are growing old together.
And even after losing a spouse, more of the elderly are staying independent.
A new Census Bureau study of the noninstitutionalized population shows that 64% of people aged 65 to 74 were living with a spouse in 1988, up from 59% in 1970.
This doesn't mean they're less likely to live alone, however.
That share has remained at about 24% since 1970.
What has changed is that more of the young elderly are living with spouses rather than with other relatives, such as children.
In 1988, 10% of those aged 65 to 74 lived with relatives other than spouses, down from 15% in 1970.
As people get even older, many become widowed.
But even among those aged 75 and older, the share living with a spouse rose slightly, to 40% in 1988 from 38% in 1970.
Like their younger counterparts, the older elderly are less likely to live with other relatives.
Only 17% of those aged 75 and older lived with relatives other than spouses in 1988, down from 26% in 1970.
The likelihood of living alone beyond the age of 75 has increased to 40% from 32%.
More people are remaining independent longer presumably because they are better off physically and financially.
Careers Count Most For the Well-to-Do
MANY AFFLUENT people place personal success and money above family.
At least that's what a survey by Ernst & Young and Yankelovich, Clancy, Shulman indicates.
Two-thirds of respondents said they strongly felt the need to be successful in their jobs, while fewer than half said they strongly felt the need to spend more time with their families.
Being successful in careers and spending the money they make are top priorities for this group.
Unlike most studies of the affluent market, this survey excluded the super-rich.
Average household income for the sample was $194,000, and average net assets were reported as $775,000.
The goal was to learn about one of today's fastest-growing income groups, the upper-middle class.
Although they represent only 2% of the population, they control nearly one-third of discretionary income.
Across the board, these consumers value quality, buy what they like rather than just what they need, and appreciate products that are distinctive.
Despite their considerable incomes and assets, 40% of the respondents in the study don't feel financially secure, and one-fourth don't feel that they have made it.
Twenty percent don't even feel they are financially well off.
Many of the affluent aren't comfortable with themselves, either.
About 40% don't feel they're more able than others.
While twothirds feel some guilt about being affluent, only 25% give $2,500 or more to charity each year.
Thirty-five percent attend religious services regularly; at the same time, 60% feel that in life one sometimes has to compromise one's principles.
Odds and Ends
THE NUMBER of women and minorities who hold jobs in top management in the nation's largest banks has more than doubled since 1978.
The American Bankers Association says that women make up 47% of officials and managers in the top 50 banks, up from 33% in 1978.
The share of minorities in those positions has risen to 16% from 12%. . . .
Per-capita personal income in the U.S. grew faster than inflation last year, according to the Bureau of Economic Analysis.
The amount of income divvied up for each man, woman and child was $16,489 in 1988, up 6.6% from $15,472 in 1987.
Per capita personal income ranged from $11,116 in Mississippi to $23,059 in Connecticut. . . .
There are 13.1 million students in college this fall, up 2% from 1988, the National Center for Education Statistics estimates.
About 54% are women, and 44% are part-time students.
This small Dallas suburb's got trouble.
Trouble with a capital T and that rhymes with P and that stands for pool.
More than 30 years ago, Prof. Harold Hill, the con man in Meredith Willson's "The Music Man," warned the citizens of River City, Iowa, against the game.
Now kindred spirits on Addison's town council have barred the town's fanciest hotel, the Grand Kempinski, from installing three free pool tables in its new lounge.
Mayor Lynn Spruill and two members of the council said they were worried about setting a precedent that would permit pool halls along Addison's main street.
And the mayor, in an admonition that bears a rhythmic resemblance to Prof. Hill's, warned that "alcohol leads to betting, which leads to fights."
The council's action is yet another blow to a sport that its fans claim has been maligned unjustly for years.
"Obviously they're not in touch with what's going on," says Tom Manske, vice president of the National Pocket Billiards Association.
Pool is hot in New York and Chicago, he insists, where "upscale, suit-and-tie places" are adding tables.
With today's tougher drunk driving laws, he adds, "people don't want to just sit around and drink."
Besides, rowdy behavior seems unlikely at the Grand Kempinski, where rooms average $200 a night and the cheap mixed drinks go for $3.50 a pop.
At the lounge, manager Elizabeth Dyer won't admit patrons in jeans, T-shirts or tennis shoes.
But a majority of the Addison council didn't buy those arguments.
Introducing pool, argued Councilwoman Riley Reinker, would be "dangerous.
It would open a can of worms."
Addison is no stranger to cans of worms, either.
After its previous mayor committed suicide last year, an investigation disclosed that town officials regularly voted on their own projects, gave special favors to developer friends and dipped into the town's coffers for trips and retreats.
The revelations embarrassed town officials, although they argued that the problems weren't as severe as the media suggested.
Now comes the pool flap.
"I think there's some people worried about something pretty ridiculous," Councilman John Nolan says.
"I thought this was all taken care of in `The Music Man.
The only thing Robert Goldberg could praise about CBS's new show "Island Son" (Leisure & Arts, Sept. 25) was the local color; unfortunately neither he nor the producers of the show have done their homework.
For instance: "Haole" (white) is not the ultimate insult; "Mainland haole" is.
Richard Chamberlain dresses as a "Mainland haole," tucking in a Hawaiian shirt and rolling up its long sleeves.
And the local expression for brother is "brah," not "bruddah."
And even if a nurse would wear flowers in her hair while on duty, if she were engaged she would know to wear them behind her left, not right, ear.
Sorry, the show does not even have the one redeeming quality of genuine local color.
Anita Davis
Of all the ethnic tensions in America, which is the most troublesome right now?
A good bet would be the tension between blacks and Jews in New York City.
Or so it must seem to Jackie Mason, the veteran Jewish comedian appearing in a new ABC sitcom airing on Tuesday nights (9:30-10 p.m. EDT).
Not only is Mr. Mason the star of "Chicken Soup," he's also the inheritor of a comedic tradition dating back to "Duck Soup," and he's currently a man in hot water.
Here, in neutral language, is the gist of Mr. Mason's remarks, quoted first in the Village Voice while he was a paid spokesman for the Rudolph Giuliani mayoral campaign, and then in Newsweek after he and the campaign parted company.
Mr. Mason said that many Jewish voters feel guilty toward blacks, so they support black candidates uncritically.
He said that many black voters feel bitter about racial discrimination, so they, too, support black candidates uncritically.
He said that Jews have contributed more to black causes over the years than vice versa.
Of course, Mr. Mason did not use neutral language.
As a practitioner of ethnic humor from the old days on the Borscht Belt, live television and the nightclub circuit, Mr. Mason instinctively reached for the vernacular.
He said Jews were "sick with complexes"; and he called David Dinkins, Mr. Giuliani's black opponent, "a fancy shvartze with a mustache."
If Mr. Mason had used less derogatory language to articulate his amateur analysis of the voting behavior of his fellow New Yorkers, would the water be quite so hot?
It probably would, because few or none of the people upset by Mr. Mason's remarks have bothered to distinguish between the substance of his comments and the fact that he used insulting language.
In addition, some of Mr. Mason's critics have implied that his type of ethnic humor is itself a form of racism.
For example, the New York state counsel for the NAACP said that Mr. Mason is "like a dinosaur.
People are fast leaving the place where he is stuck."
These critics fail to distinguish between the type of ethnic humor that aims at disparaging another group, such as "Polish jokes"; and the type that is double-edged, aiming inward as well as outward.
The latter typically is the humor of the underdog, and it was perfected by both blacks and Jews on the minstrel and vaudeville stage as a means of mocking their white and gentile audiences along with themselves.
In the hands of a zealot like Lenny Bruce, this double-edged blade could cut both the self and the audience to ribbons.
But wielded by a pro like Jackie Mason, it is a constructive form of mischief.
Why constructive?
Because despite all the media prattle about comedy and politics not mixing, they are similar in one respect: Both can serve as mechanisms for easing tensions and facilitating the co-existence of groups in conflict.
That's why it's dangerous to have well-intentioned thought police, on college campuses and elsewhere, taboo all critical mention of group differences.
As Elizabeth Kristol wrote in the New York Times just before the Mason donnybrook, "Perhaps intolerance would not boil over with such intensity if honest differences were allowed to simmer."
The question is, if group conflicts still exist (as undeniably they do), and if Mr. Mason's type of ethnic humor is passe, then what other means do we have for letting off steam?
Don't say the TV sitcom, because that happens to be a genre that, in its desperate need to attract everybody and offend nobody, resembles politics more than it does comedy.
It is true that the best sitcoms do allow group differences to simmer: yuppies vs. blue-collar Bostonians in "Cheers"; children vs. adults in "The Cosby Show."
But these are not the differences that make headlines.
In "Chicken Soup," Mr. Mason plays Jackie, a Jewish bachelor courting Maddie (Lynn Redgrave), an Irish widow and mother of three, against the wishes of his mother (Rita Karin) and her brother Michael (Brandon Maggart).
It's worth noting that both disapproving relatives are immigrants.
At least, they both speak with strong accents, as do Jackie and Maddie.
It couldn't be more obvious that "Chicken Soup" is being made from an old recipe.
And a safe one -- imagine if the romance in question were between an Orthodox Jew and a member of the Nation of Islam.
Back in the 1920s, the play and movie versions of "Abie's Irish Rose" made the theme of courtship between the assimilated offspring of Jewish and Irish immigrants so popular that its author, Anne Nichols, lost a plagiarism suit on the grounds that the plot has entered the public domain.
And it has remained there, as evidenced by its reappearance in a 1972 CBS sitcom called "Bridget Loves Bernie," whose sole distinction was that it led to the real-life marriage of Meredith Baxter and David Birney.
Clearly, the question with "Chicken Soup" is not whether the pot will boil over, but whether it will simmer at all.
So far, the bubbles have been few and far between.
Part of the problem is the tendency of all sitcoms, ever since the didactic days of Norman Lear, to preach about social issues.
To some extent, this tendency emerges whenever the show tries to enlighten us about ethnic stereotypes by reversing them.
For instance, Michael dislikes Jackie not because he's a shrewd Jewish businessman, but because he quits his well-paying job as a salesman in order to become a social worker.
Even more problematic is the incompatibility between sitcom preachiness and Mr. Mason's comic persona.
The best moments in the show occur at the beginning and the end (and occasionally in the middle), when Mr. Mason slips into his standup mode and starts meting out that old-fashioned Jewish mischief to other people as well as to himself.
But too often, these routines lack spark because this sitcom, like all sitcoms, is timid about confronting Mr. Mason's stock in trade-ethnic differences.
I'm not suggesting that the producers start putting together episodes about topics like the Catholic-Jewish dispute over the Carmelite convent at Auschwitz.
That issue, like racial tensions in New York City, will have to cool down, not heat up, before it can simmer.
But I am suggesting that they stop requiring Mr. Mason to interrupt his classic shtik with some line about "caring for other people" that would sound shmaltzy on the lips of Miss America.
At your age, Jackie, you ought to know that you can't make soup without turning up the flame.
The official White House reaction to a plunge in stock prices has a 60-year history of calm, right up through Friday.
Treasury Secretary Nicholas Brady said in a statement Friday that the stock-market decline "doesn't signal any fundamental change in the condition of the economy."
"The economy," he added, "remains well-balanced and the outlook is for continued moderate growth."
Sound familiar?
Here's what Ronald Reagan said after the 1987 crash: "The underlying economy remains sound.
There is nothing wrong with the economy . . . all the indices are up."
Heard that before?
After the 1929 crash, Herbert Hoover said: "The fundamental business of the country . . . is on a sound and prosperous basis.
James Robinson, 57 years old, was elected president and chief executive officer of this maker of magnetic recording heads for disk drives.
He has been president and chief executive officer of Amperex Electronics Corp., a division of North American Philips Corp., itself a subsidiary of N.V. Philips of the Netherlands.
Charles J. Lawson Jr., 68, who had been acting chief executive since June 14, will continue as chairman.
The former president and chief executive, Eric W. Markrud, resigned in June.
The Senate's decision to approve a bare-bones deficit-reduction bill without a capital-gains tax cut still leaves open the possibility of enacting a gains tax reduction this year.
Late Friday night, the Senate voted 87-7 to approve an estimated $13.5 billion measure that had been stripped of hundreds of provisions that would have widened, rather than narrowed, the federal budget deficit.
Lawmakers drastically streamlined the bill to blunt criticism that it was bloated with special-interest tax breaks and spending increases.
"We're putting a deficit-reduction bill back in the category of being a deficit-reduction bill," said Senate Budget Committee Chairman James Sasser (D., Tenn.).
But Senate supporters of the trimmer legislation said that other bills would soon be moving through Congress that could carry some of the measures that had been cast aside, including a capital-gains tax cut.
In addition, the companion deficit-reduction bill already passed by the House includes a capital-gains provision.
House-Senate negotiations are likely to begin at midweek and last for a while.
"No one can predict exactly what will happen on the House side," said Senate Minority Leader Robert Dole (R., Kan.).
But, he added, "I believe Republicans and Democrats will work together to get capital-gains reform this year."
White House Budget Director Richard Darman told reporters yesterday that the administration wouldn't push to keep the capital-gains cut in the final version of the bill.
"We don't need this as a way to get capital gains," he said.
House Budget Committee Chairman Leon Panetta (D., Calif.) said in an interview, "If that's the signal that comes from the White House, that will help a great deal."
The Senate's decision was a setback for President Bush and will make approval of a capital-gains tax cut less certain this year.
Opponents of the cut are playing hardball.
Senate Majority Leader George Mitchell (D., Maine) said he was "confident" that any House-Senate agreement on the deficit-reduction legislation wouldn't include a capital-gains tax cut.
And a senior aide to the House Ways and Means Committee, where tax legislation originates, said there aren't any "plans to produce another tax bill that could carry a gains tax cut this year."
One obvious place to attach a capital-gains tax cut, and perhaps other popular items stripped from the deficit-reduction bill, is the legislation to raise the federal borrowing limit.
Such legislation must be enacted by the end of the month.
The Senate bill was pared back in an attempt to speed deficit-reduction through Congress.
Because the legislation hasn't been completed, President Bush has until midnight tonight to enact across-the-board spending cuts mandated by the Gramm-Rudman deficit-reduction law.
Senators hope that the need to avoid those cuts will pressure the House to agree to the streamlined bill.
The House appears reluctant to join the senators.
A key is whether House Republicans are willing to acquiesce to their Senate colleagues' decision to drop many pet provisions.
"Although I am encouraged by the Senate action," said Chairman Dan Rostenkowski (D., Ill.) of the House Ways and Means Committee, "it is uncertain whether a clean bill can be achieved in the upcoming conference with the Senate."
Another big question hovering over the debate is what President Bush thinks.
He has been resisting a stripped-down bill without a guaranteed vote on his capital-gains tax cut.
But Republican senators saw no way to overcome a procedural hurdle and garner the 60 votes needed to win the capital-gains issue on the floor, so they went ahead with the streamlined bill.
The Senate bill was stripped of many popular, though revenue-losing, provisions, a number of which are included in the House-passed bill.
These include a child-care initiative and extensions of soon-to-expire tax breaks for low-income housing and research-and-development expenditures.
Also missing from the Senate bill is the House's repeal of a law, called Section 89, that compels companies to give rank-and-file workers comparable health benefits to top paid executives.
One high-profile provision that was originally in the Senate bill but was cut out because it lost money was the proposal by Chairman Lloyd Bentsen (D., Texas) of the Senate Finance Committee to expand the deduction for individual retirement accounts.
Mr. Bentsen said he hopes the Senate will consider that measure soon.
To the delight of some doctors, the bill dropped a plan passed by the Finance Committee that would have overhauled the entire physician-reimbursement system under Medicare.
To the detriment of many low-income people, efforts to boost Medicaid funding, especially in rural areas, also were stricken.
Asked why senators were giving up so much, New Mexico Sen. Pete Domenici, the ranking Republican on the Senate Budget Committee, said, "We're looking like idiots.
Things had just gone too far."
Sen. Dole said that the move required sacrifice by every senator.
It worked, others said, because there were no exceptions: all revenue-losing provisions were stricken.
The Senate also dropped a plan by its Finance Committee that would have increased the income threshold beyond which senior citizens have their Social Security benefits reduced.
In addition, the bill dropped a plan to make permanent a 3% excise tax on long-distance telephone calls.
It no longer includes a plan that would have repealed what remains of the completed-contract method of accounting, which is used by military contractors to reduce their tax burden.
It also drops a provision that would have permitted corporations to use excess pension funds to pay health benefits for current retirees.
Also stricken was a fivefold increase in the maximum Occupational Safety and Health Administration penalties, which would have raised $65 million in fiscal 1990.
A provision that would have made the Social Security Administration an independent agency was excised.
The approval of the Senate bill was especially sweet for Sen. Mitchell, who had proposed the streamlining.
Mr. Mitchell's relations with Budget Director Darman, who pushed for a capital-gains cut to be added to the measure, have been strained since Mr. Darman chose to bypass the Maine Democrat and deal with other lawmakers earlier this year during a dispute over drug funding in the fiscal 1989 supplemental spending bill.
The deficit reduction bill contains $5.3 billion in tax increases in fiscal 1990, and $26 billion over five years.
The revenue-raising provisions, which affect mostly corporations, would:
-- Prevent companies that have made leveraged buy-outs from getting federal tax refunds resulting from losses caused by interest payments on debt issued to finance the buy-outs, effective Aug. 2, 1989.
-- Require mutual funds to include in their taxable income dividends paid to them on the date that the dividends are declared rather than received, effective the day after the tax bill is enacted.
-- Close a loophole regarding employee stock ownership plans, effective June 6, 1989, that has been exploited by investment bankers in corporate takeovers.
The measure repeals a 50% exclusion given to banks on the interest from loans used to acquire securities for an ESOP, if the ESOP owns less than 30% of the employer's stock.
-- Curb junk bonds by ending tax benefits for certain securities, such as zero-coupon bonds, that postpone cash interest payments.
-- Raise $851 million by suspending for one year an automatic reduction in airport and airway taxes.
-- Speed up the collection of the payroll tax from large companies, effective August 1990.
-- Impose a tax on ozone-depleting chemicals, such as those used in air conditioners and in Styrofoam, beginning at $1.10 a pound starting next year.
-- Withhold income taxes from the paychecks of certain farm workers currently exempt from withholding.
-- Change the collection of gasoline excise taxes to weekly from semimonthly, effective next year.
-- Restrict the ability of real estate owners to escape taxes by swapping one piece of property for another instead of selling it for cash.
-- Increase to $6 a person from $3 the international air-passenger departure tax, and impose a $3-a-person tax on international departures by commercial ships.
The measure also includes spending cuts and increases in federal fees.
Among its provisions:
-- Reduction of Medicare spending in fiscal 1990 by some $2.8 billion, in part by curbing increases in reimbursements to physicians.
The plan would impose a brief freeze on physician fees next year.
-- Removal of the U.S. Postal Service's operating budget from the federal budget, reducing the deficit by $1.77 billion.
A similar provision is in the House version.
-- Authority for the Federal Aviation Administration to raise $239 million by charging fees for commercial airline-landing rights at New York's LaGuardia and John F. Kennedy International Airports, O'Hare International Airport in Chicago and National Airport in Washington.
-- Increases in Nuclear Regulatory Commission fees totaling $54 million.
-- Direction to the U.S. Coast Guard to collect $50 million from users of Coast Guard services.
-- Raising an additional $43 million by increasing existing Federal Communications Commission fees and penalties and establishing new fees for amateur radio operators, ship stations and mobile radio facilities.
John E. Yang contributed to this article.
In response to your overly optimistic, outdated piece on how long unemployment lasts (People Patterns, Sept. 20): I am in the communications field, above entry level.
I was laid off in August 1988, and after a thorough and exhausting job search, was hired in August 1989.
My unemployment insurance ran out before I found a job; I found cutbacks and layoffs in many companies.
The statistics quoted by the "new" Census Bureau report (garnered from 1984 to 1986) are out of date, certainly as an average for the Northeast, and possibly for the rest of the country.
I think what bothered me most about the piece was that there seemed to be an underlying attitude to tell your readers all is well -- if you're getting laid off don't worry, and if you're unemployed, it's a seller's market.
To top it off, you captioned the graph showing the average number of months in a job search as "Time Off."
Are you kidding?
Looking for a job was one of the most anxious periods of my life -- and is for most people.
Your paper needs a serious reality check.
Reva Levin
Cambridge, Mass.
BULL HN INFORMATION SYSTEMS Inc. is a U.S. majority-owned unit of Cie. des Machines Bull.
In Friday's edition, the name of the unit was misstated.
Moody's Investors Service said it reduced its rating on $165 million of subordinated debt of this Beverly Hills, Calif., thrift, citing turmoil in the market for low-grade, high-yield securities.
The agency said it reduced its rating on the thrift's subordinated debt to B-2 from Ba-2 and will keep the debt under review for possible further downgrade.
Columbia Savings is a major holder of so-called junk bonds.
New federal legislation requires that all thrifts divest themselves of such speculative securities over a period of years.
Columbia Savings officials weren't available for comment on the downgrade.
FRANKLIN SAVINGS ASSOCIATION (Ottawa, Kan.) --
Moody's Investors Service Inc. said it downgraded its rating to B-2 from Ba-3 on less than $20 million of this thrift's senior subordinated notes.
The rating concern said Franklin's "troubled diversification record in the securities business" was one reason for the downgrade, citing the troubles at its L.F. Rothschild subsidiary and the possible sale of other subsidiaries.
"They perhaps had concern that we were getting out of all these," said Franklin President Duane H. Hall.
"I think it was a little premature on their part.
Just when it seemed safe to go back into stocks, Wall Street suffered another severe attack of nerves.
Does this signal another Black Monday is coming?
Or is this an extraordinary buying opportunity, just like Oct. 19, 1987, eventually turned out to be?
Here's what several leading market experts and money managers say about Friday's action, what happens next and what investors should do.
Joseph Granville.
"I'm the only one who said there would be an October massacre, all through late August and September," says Mr. Granville, once a widely followed market guru and still a well-known newsletter writer.
"Everyone will tell you that this time is different from 1987," he says.
"Well, in some ways it is different, but technically it is just the same.
If you're a technician, you obey the signals.
Right now they're telling me to get the hell out and stay out.
I see no major support until 2200.
I see a possibility of going to 2200 this month."
Mr. Granville says he wouldn't even think of buying until at least 600 to 700 stocks have hit 52-week lows; about 100 stocks hit new lows Friday.
"Most people," he says, "have no idea what a massacre pattern looks like."
Elaine Garzarelli.
A quantitative analyst with Shearson Lehman Hutton Inc., Ms. Garzarelli had warned clients to take their money out of the market before the 1987 crash.
Friday's big drop, she says, "was not a crash.
This was an October massacre" like those that occurred in 1978 and 1979.
Now, as in those two years, her stock market indicators are positive.
So she thinks the damage will be short-lived and contained.
"Those corrections lasted one to four weeks and took the market 10%-12% down," she says.
"This is exactly the same thing, as far as I'm concerned."
Thus, she says, if the Dow Jones Industrial Average dropped below 2450, "It would just be a fluke.
My advice is to buy."
As she calculates it, the average stock now sells for about 12.5 times companies' earnings.
She says that ratio could climb to 14.5, given current interest rates, and still be within the range of "fair value."
Ned Davis.
Friday's fall marks the start of a bear market, says Mr. Davis, president of Ned Davis Research Inc.
But Mr. Davis, whose views are widely respected by money managers, says he expects no 1987-style crash.
"There was a unique combination in 1987," he says.
"Margin debt was at a record high.
There was tremendous public enthusiasm for stock mutual funds.
The main thing was portfolio insurance," a mechanical trading system intended to protect an investor against losses. "
A hundred billion dollars in stock was subject" to it.
In 1987, such selling contributed to a snowball effect.
Today could even be an up day, Mr. Davis says, if major brokerage firms agree to refrain from program trading.
Over the next several months, though, he says things look bad.
"I think the market will be heading down into November," he says.
"We will probably have a year-end rally, and then go down again.
Sort of a two-step bear market."
He expects the downturn to carry the Dow Jones Industrial Average down to around 2000 sometime next year.
"That would be a normal bear market," he says.
"I guess that's my forecast."
Leon G. Cooperman.
"I don't think the market is going through another October '87.
I don't think that's the case at all," says Mr. Cooperman, a partner at Goldman, Sachs & Co. and chairman of Goldman Sachs Asset Management.
Mr. Cooperman sees this as a good time to pick up bargains, but he doesn't think there's any need to rush.
"I expect the market to open weaker Monday, but then it should find some stability."
He ticks off several major differences between now and two years ago.
Unlike 1987, interest rates have been falling this year.
Unlike 1987, the dollar has been strong.
And unlike 1987, the economy doesn't appear to be in any danger of overheating.
But the economy's slower growth this year also means the outlook for corporate profits "isn't good," he says.
"So it's a very mixed bag."
Thus, he concludes, "This is not a good environment to be fully invested" in stocks.
"If I had come into Friday on margin or with very little cash in the portfolios, I would not do any buying.
But we came into Friday with a conservative portfolio, so I would look to do some modest buying" on behalf of clients. "
We're going to look for some of the better-known companies that got clocked" Friday.
John Kenneth Galbraith.
"This is the latest manifestation of the capacity of the financial community for recurrent insanity," says Mr. Galbraith, an economist.
"I see this as a reaction to the whole junk bond explosion," he says.
"The explosion of junk bonds and takeovers has lodged a lot of insecure securities in the hands of investors and loaded the corporations that are the objects of takeovers or feared takeovers with huge amounts of debt rather than equity.
This has both made investors uneasy and the corporations more vulnerable."
Nevertheless, he says a depression doesn't appear likely.
"There is more resiliency in the economy at large than we commonly suppose," he says.
"It takes more error now to have a major depression than back in the Thirties -- much as the financial community and the government may try."
Mario Gabelli.
New York money manager Mario Gabelli, an expert at spotting takeover candidates, says that takeovers aren't totally gone.
"Companies are still going to buy companies around the world," he says.
Examples are "Ford looking at Jaguar, BellSouth looking at LIN Broadcasting."
These sorts of takeovers don't require junk bonds or big bank loans to finance them, so Mr. Gabelli figures they will continue.
"The market was up 35% since {President} Bush took office," Mr. Gabelli says, so a correction was to be expected.
He thinks another crash is "unlikely," and says he was "nibbling at" selected stocks during Friday's plunge.
"Stocks that were thrown out just on an emotional basis are a great opportunity {this} week for guys like me," he says.
Jim Rogers.
"It seems to me that this is the pin that has finally pricked the balloon," says Mr. Rogers, a professor of finance at Columbia University and former co-manager of one of the most successful hedge funds in history, Quantum Fund.
He sees "economic problems, financial problems" ahead for the U.S., with a fairly strong possibility of a recession.
"Friday you couldn't sell dollars," he says.
Dealers "would give you a quote, but then refuse to make the trade."
If the dollar stays weak, he says, that will add to inflationary pressures in the U.S. and make it hard for the Federal Reserve Board to ease interest rates very much.
Mr. Rogers won't decide what to do today until he sees how the London and Tokyo markets go.
He recommends that investors sell takeover-related stocks, but hang on to some other stocks -- especially utilities, which often do well during periods of economic weakness.
Frank Curzio.
Many people now claim to have predicted the 1987 crash.
Queens newsletter writer Francis X. Curzio actually did it: He stated in writing in September 1987 that the Dow Jones Industrial Average was likely to decline about 500 points the following month.
Mr. Curzio says what happens now will depend a good deal on the Federal Reserve Board.
If it promptly cuts the discount rate it charges on loans to banks, he says, "That could quiet things down."
If not, "We could go to 2200 very soon."
Frank W. Terrizzi.
Stock prices "would still have to go down some additional amount before we become positive on stocks," says Mr. Terrizzi, president and managing director of Renaissance Investment Management Inc. in Cincinnati.
Renaissance, which manages about $1.8 billion, drew stiff criticism from many clients earlier this year because it pulled entirely out of stocks at the beginning of the year and thus missed a strong rally.
Renaissance is keeping its money entirely in cash equivalents, primarily U.S. Treasury bills.
"T-bills probably are the right place to be," he says.
Regarding the Oct. 3 letter to the editor from Rep. Tom Lantos, chairman of the House Subcommittee on Employment and Housing, alleging:
1. That your Sept. 28 editorial "Kangaroo Committees" was factually inaccurate and deliberately misleading.
I thought your editorial was factually accurate and deliberately elucidative.
2. That Mr. Lantos supported the rights of the witnesses to take the Fifth Amendment.
Yes, he did.
As I watched him on C-Span, I heard him speak those lovely words about the Bill of Rights, which he quotes from the transcript of the hearings.
He did repeat those nice platitudes several times as an indication of his support for the Constitution.
He used about 56 words defending the witnesses' constitutional rights.
Unfortunately, by my rough guess, he used better than 5,000 words heaping scorn on the witnesses for exercising the Fifth.
He sandwiched his praise of constitutional meat between large loaves of bilious commentary.
As your editorial rightly pointed out, Samuel Pierce, former HUD secretary, and Lance Wilson, Mr. Pierce's former aide, "are currently being held up to scorn for taking the Fifth Amendment.
" That certainly is not the supposed "distorted reading" indicated by Mr. Lantos.
3. That his "committee does not deal with any possible criminal activity at HUD.
My colleagues and I fully realize we are not a court . . . etc."
Absolute rubbish.
By any "reasonable man" criterion, Mr. Lantos and his colleagues have a whole bunch of people tried and convicted.
Apparently, their verdict is in.
Right now they're pursuing evidence.
That's not a bad way to proceed, just somewhat different from standard American practice.
How was that practice referred to when I was in school?
Ah, yes, something called a Star Chamber.
Of course, Mr. Lantos doth protest that his subcommittee simply seeks information for legislative change.
No doubt that's partially true.
Everything that Mr. Lantos says in his letter is partially true.
He's right about his subcommittee's responsibilities when it comes to obtaining information from prior HUD officials.
But if his explanation of motivation is true, why is his investigation so oriented as to identify criminal activity?
Why not simply questions designed to identify sources and causes of waste and inefficiency?
Such as, what happened when Congress wanted to know about $400 toilet seats or whatever they supposedly cost?
No, Mr. Lantos's complaints simply won't wash.
4. That the Journal defends "the sleaze, fraud, waste, embezzlement, influence-peddling and abuse of the public that took place while Mr. Pierce was secretary of HUD," etc. and so forth.
No, to my mind, the Journal did not "defend sleaze, fraud, waste, embezzlement, influence-peddling and abuse of the public trust . . ."
it defended appropriate constitutional safeguards and practical common sense.
The problem, which the Journal so rightly pointed out in a number of articles, is not the likes of Mr. Lantos, who after all is really a bit player on the stage, but the attempt by Congress to enhance itself into a quasi-parliamentary/judicial body.
(Of course, we've also got a judiciary that seeks the same objective.)
The system is the problem, not an individual member.
Individuals can always have their hands slapped.
It's when such slapping doesn't occur that we've got trouble.
I do not by any means defend HUD management.
But I think the kind of congressional investigation that has been pursued is a far greater danger to American notions of liberty and freedom than any incompetency (and, yes, maybe criminality) within HUD could possibly generate.
The last time I saw a similar congressional hearing was when "Tail Gunner Joe" McCarthy did his work.
Raymond Weber
Parsippany, N.J.
I disagree with the statement by Mr. Lantos that one should not draw an adverse inference against former HUD officials who assert their Fifth Amendment privilege against self-incrimination in congressional hearings.
The Fifth Amendment states in relevant part that no person "shall be compelled, in any criminal case, to be a witness against himself."
This privilege against self-incrimination precludes the drawing of an adverse inference against a criminal defendant who chooses not to testify.
Thus, in a criminal case, a prosecutor cannot comment on a defendant's failure to testify nor can the defendant be compelled to take the stand as a witness, thus forcing him to "take the Fifth."
The privilege, however, has been limited in accordance with its plain language to protect the defendant in criminal matters only.
The Supreme Court and some states have specifically recognized that "the Fifth Amendment does not preclude the inference where the privilege is claimed by a party to a civil cause."
Baxter v. Palmingiano, 425 U.S. 308 (1976).
Thus, in a civil case, a defendant may be called as a witness, he may be forced to testify or take the Fifth, and his taking of the Fifth may permit the drawing of an adverse inference against him in the civil matter.
He may take the Fifth in a civil matter only if he has a good faith and justifiable belief that his testimony may subject him to criminal prosecution.
Allowing the defendant to take the Fifth in a civil matter is not based on a constitutional right to refuse to testify where one's testimony harms him in the civil matter, but because the testimony in the civil matter could be unconstitutionally used against him in a subsequent criminal prosecution.
Absent the risk of such prosecution, a court may order the defendant to testify.
Thus, when Mr. Pierce asserted the Fifth in a noncriminal proceeding, particularly after presumably receiving extensive advice from legal counsel, one must conclude that he held a good-faith, justifiable belief that his testimony could be used against him in a subsequent criminal prosecution.
The subcommittee, Congress and the American public have every right to draw the adverse inference and to concur with Mr. Pierce's own belief that his testimony could help convict him of a crime.
Drawing the adverse inference in a noncriminal congressional hearing does not offend the Fifth Amendment shield against self-incrimination.
Clark S. Spalsbury Jr.
Estes Park, Colo.
It was Friday the 13th, and the stock market plummeted nearly 200 points.
Just a coincidence?
Or is triskaidekaphobia -- fear of the number 13 -- justified?
In academia, a so-called Friday the 13th effect has been set up and shot down by different professors.
Robert Kolb and Ricardo Rodriguez, professors of finance at the University of Miami, found evidence that the market is spooked by Friday the 13th.
But their study, which spanned the 1962-85 period, has since been shown to be jinxed by an unlucky choice of data.
In the '70s, the market took falls nine times in a row on Friday the you-know-what.
But the date tends to be a plus, not a minus, for stocks, according to Yale Hirsch, a collector of stock market lore.
Another study found that the 82 Fridays the 13th in the 1940-1987 period had higher than average returns -- higher even than Fridays in general, which tend to be strong days for stock prices.
On the only other Friday the 13th this year, the Dow Jones Industrial Average rose about four points.
Professor Kolb says the original study, titled Friday the 13th, Part VII, was published tongue-in-cheek.
In a similar vein, he adds that the anniversary of the 1987 crash and Saturday's full moon could have played a part, too, in Friday's market activity.
reminiscent of those during the 1987 crash -- that as stock prices plummeted and trading activity escalated, some phone calls to market makers in over-the-counter stocks went unanswered.
"We couldn't get dealers to answer their phones," said Robert King, senior vice president of OTC trading at Robinson-Humphrey Co. in Atlanta.
"It was {like} the Friday before Black Monday" two years ago.
Whether unanswered phone calls had any effect or not, Nasdaq stocks sank far less than those on the New York and American exchanges.
Nonetheless, the Nasdaq Composite Index suffered its biggest point decline of the year and its sixth worst ever, diving 14.90, or 3%, to 467.29.
Ten points of the drop occurred during the last 45 minutes of trading.
By comparison, the New York Stock Exchange Composite tumbled 5.8% Friday and the American Stock Exchange Composite fell 4%.
On Oct. 16, 1987, the Nasdaq Composite fell 16.18 points, or 3.8%, followed by its devastating 46.12-point, or 11% slide, three days later.
Nasdaq volume Friday totaled 167.7 million shares, which was only the fifth busiest day so far this year.
The single-day record of 288 million shares was set on Oct. 21,
"There wasn't a lot of volume because it was just impossible to get stock moved," said E.E. "Buzzy" Geduld, president of Herzog, Heine, Geduld, a New York company that makes markets in thousands of OTC issues.
Most of the complaints about unanswered phone calls came from regional brokers rather than individual investors.
Mr. King of Robinson-Humphrey and others were quick to add that they believe the problem stemmed more from traders' inability to handle the volume of calls, rather than a deliberate attempt to avoid making trades.
The subject is a sore one for Nasdaq and its market-making companies, which were widely criticized two years ago following complaints from investors who couldn't reach their brokers or trade in the chaos of the crash.
Peter DaPuzzo, head of retail equity trading at Shearson Lehman Hutton, declared: "It was the last hour of trading on a Friday.
There were too many phones ringing and too many things happening to expect market makers to be as efficient as robots.
It wasn't intentional, we were all busy."
James Tarantino, head of OTC trading at Hambrecht & Quist in San Francisco, said, "It was just like two years ago.
Everybody was trying to do the same thing at the same time."
Jeremiah Mullins, the OTC trading chief at Dean Witter Reynolds in New York, said proudly that his company executed every order it received by the close of trading.
But, he added, "you can only take one call at a time."
Market makers keep supplies of stock on hand to maintain orderly trading when imbalances occur.
On days like Friday, that means they must buy shares from sellers when no one else is willing to.
When selling is so frenzied, prices fall steeply and fast.
Two years ago, faced with the possibility of heavy losses on the stocks in their inventories, market makers themselves began dumping shares, exacerbating the slide in OTC stock prices.
On Friday, some market makers were selling again, traders said.
But, with profits sagging on Wall Street since the crash, companies have kept smaller share stockpiles on hand.
Mr. Tarantino of Hambrecht & Quist said some prices fell without trades taking place, as market makers kept dropping the prices at which they would buy shares.
"Everyone was hitting everyone else's bid," he said.
So, while OTC companies incurred losses on Friday, trading officials said the damage wasn't as bad as it was in 1987.
"Two years ago we were carrying huge inventories and that was the big culprit.
I don't know of anyone carrying big inventories now," said Mr. King of Robinson-Humphrey.
Tony Cecin, head of equity trading at Piper, Jaffray & Hopwood in Minneapolis, said that Piper Jaffray actually made money on Friday.
It helped that his inventory is a third smaller now than it was two years ago, he said.
Joseph Hardiman, president of the National Association of Securities Dealers, which oversees the Nasdaq computerized trading system, said that despite the rush of selling, he never considered the situation an "emergency."
"The pace of trading was orderly," he said.
Nasdaq's Small Order Execution System "worked beautifully," as did the automated system for larger trades, according to Mr. Hardiman.
Nevertheless, the shock of another steep plunge in stock prices undoubtedly will shake many investors' confidence.
In the past, the OTC market thrived on a firm base of small-investor participation.
Because Nasdaq's trading volume hasn't returned to pre-crash levels, traders and OTC market officials hope the damage won't be permanent.
But they are worried.
"We were just starting to get the public's confidence back," lamented Mr. Mullins of Dean Witter.
More troubling is the prospect that the overall collapse in stock prices could permanently erode the base of small-investor support the OTC market was struggling to rebuild in the wake of the October 1987 crash.
Mr. Cecin of Piper Jaffray says some action from government policy makers would allay investor fears.
It won't take much more to "scare the hell out of retail investors," he says.
The sellers on Friday came from all corners of the OTC market -- big and small institutional investors, as well as individual investors and market makers.
But grateful traders said the sell orders generally ranged from 20,000 shares to 50,000 shares, compared with blocks of 500,000 shares or more two years ago.
Shearson's Mr. DaPuzzo said retail investors nervously sold stock Friday and never returned to bargain-hunt.
Institutional investors, which had been selling stock throughout last week to lock in handsome gains made through the third quarter, were calmer.
"We had a good amount of selling from institutions, but not as much panic," Mr. DaPuzzo said.
"If they couldn't sell, some of them put the shares back on the shelf."
In addition, he said, some bigger institutional investors placed bids to buy some OTC stocks whose prices were beaten down.
In addition, Mr. DaPuzzo said computer-guided program selling of OTC stocks in the Russell Index of 2000 small stocks and the Standard & Poor's 500-stock Index sent occasional "waves " through the market.
Nasdaq's biggest stocks were hammered.
The Nasdaq 100 Index of the largest nonfinancial issues, including the big OTC technology issues, tumbled 4.2%, or 19.76, to 449.33.
The Nasdaq Financial Index of giant insurance and banking stocks dropped 2%, or 9.31, to 462.98.
The OTC market has only a handful of takeover-related stocks.
But they fell sharply.
McCaw Cellular Communications, for instance, has offered to buy LIN Broadcasting as well as Metromedia's New York City cellular telephone interests, and in a separate transaction, sell certain McCaw properties to Contel Cellular.
McCaw lost 8%, or 3 1/2, to 40.
LIN Broadcasting, dropped 5 1/2, or 5%, to 107 1/2.
The turnover in both issues was roughly normal.
On a day when negative takeover-related news didn't sit well with investors, Commercial Intertech, a maker of engineered metal parts, said Haas & Partners advised it that it doesn't plan to pursue its previously reported $27.50-a-share bid to buy the company.
Commercial Intertech plummeted 6 to 26.
The issues of companies with ties to the junk bond market also tumbled Friday.
On the OTC market, First Executive, a big buyer of the high-risk, high-yield issues, slid 2 to 12 1/4.
Among other OTC issues, Intel, dropped 2 1/8 to 33 7/8; Laidlaw Transportation lost 1 1/8 to 19 1/2; the American depositary receipts of Jaguar were off 1/4 to 10 1/4; MCI Communications slipped 2 1/4 to 43 1/2; Apple Computer fell 3 to 45 3/4 and Nike dropped 2 1/4 to 66 3/4.
Friday, October 13, 1989
The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.
PRIME RATE:
10 1/2%.
The base rate on corporate loans at large U.S. money center commercial banks.
FEDERAL FUNDS:
8 13/16% high, 8 1/2% low, 8 5/8% near closing bid, 8 3/4% offered.
Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
Source: Fulton Prebon (U.S.A.) Inc.
DISCOUNT RATE:
7%.
The charge on loans to depository institutions by the New York Federal Reserve Bank.
CALL MONEY:
9 3/4% to 10%.
The charge on loans to brokers on stock exchange collateral.
COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.:
8.60% 30 to 44 days; 8.55% 45 to 59 days; 8.375% 60 to 79 days; 8.50% 80 to 89 days; 8.25% 90 to 119 days; 8.125% 120 to 149 days; 8% 150 to 179 days; 7.625% 180 to 270 days.
COMMERCIAL PAPER:
High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000:
8.65% 30 days; 8.55% 60 days; 8.55% 90 days.
CERTIFICATES OF DEPOSIT:
8.15% one month; 8.15% two months; 8.13% three months; 8.11% six months; 8.08% one year.
Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
The minimum unit is $100,000.
Typical rates in the secondary market:
8.65% one month; 8.65% three months; 8.55% six months.
BANKERS ACCEPTANCES:
8.52% 30 days; 8.37% 60 days; 8.15% 90 days; 7.98% 120 days; 7.92% 150 days; 7.80% 180 days.
Negotiable, bank-backed business credit instruments typically financing an import order.
LONDON LATE EURODOLLARS:
8 13/16% to 8 11/16% one month; 8 13/16% to 8 11/16% two months; 8 13/16% to 8 11/16% three months; 8 3/4% to 8 5/8% four months; 8 11/16% to 8 9/16% five months; 8 5/8% to 8 1/2% six months.
LONDON INTERBANK OFFERED RATES (LIBOR):
8 3/4% one month; 8 3/4% three months; 8 9/16% six months; 8 9/16% one year.
The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.
FOREIGN PRIME RATES:
Canada 13.50%; Germany 8.50%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
These rate indications aren't directly comparable; lending practices vary widely by location.
TREASURY BILLS:
Results of the Tuesday, October 10, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million:
7.63% 13 weeks; 7.60% 26 weeks.
FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac):
Posted yields on 30-year mortgage commitments for delivery within 30 days.
9.91%, standard conventional fixedrate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae):
Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par)
9.86%, standard conventional fixed-rate mortgages; 8.85%, 6/2 rate capped one-year adjustable rate mortgages.
Source: Telerate Systems Inc.
MERRILL LYNCH READY ASSETS TRUST:
8.33%.
Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Pension funds, insurers and other behemoths of the investing world said they began scooping up stocks during Friday's market rout.
And they plan to buy more today.
Rightly or wrongly, many giant institutional investors appear to be fighting the latest war by applying the lesson they learned in the October 1987 crash: Buying at the bottom pays off.
To be sure, big investors might put away their checkbooks in a hurry if stocks open sharply lower today.
They could still panic and bail out of the market.
But their 1987 performance indicates that they won't abandon stocks unless conditions get far worse.
"Last time, we got rewarded for going out and buying stocks when the panic was the worst," said John W. Rogers, president of Chicago-based Ariel Capital Management Inc., which manages $1.1 billion of stocks.
Mr. Rogers spent half his cash on hand Friday for "our favorite stocks that have fallen apart."
He expects to invest the rest if the market weakens further.
Denver-based portfolio manager James Craig wasn't daunted when Friday's rout shaved $40 million from the value of the $752 million Janus Fund he oversees.
"I waited to make sure all the program trades had kicked through," he said.
Then he jumped into the market:
"I spent $30 million in the last half-hour."
Other money managers also opened their wallets.
"I was buying at the close (Friday) and I'll be buying again because I know we're getting good value," said Frederick A. Moran, president of Moran Asset Management Inc., Greenwich, Conn.
"There is no justification on the fundamental level for this crash."
Unlike mutual funds, which can be forced to sell stockholdings when investors rush to withdraw money, big investors such as pension funds and insurance companies can decide to ride out market storms without jettisoning stock.
Most often, they do just that, because stocks have proved to be the best-performing long-term investment, attracting about $1 trillion from pension funds alone.
"If you bought after the crash, you did very very well off the bottom," said Stephen B. Timbers, chief investment officer of Chicago-based Kemper Financial Services Inc.
The $56 billion California Public Employees Retirement System, for one, added $1 billion to its stock portfolio two years ago.
"The last crash taught institutional investors that they have to be long-term holders, and that they can't react to short-term events, good or bad," said Stephen L. Nesbitt, senior vice president for the pension consultants Wilshire Associates in Santa Monica, Calif.
"Those that pulled out (of stocks) regretted it," he said, "so I doubt you'll see any significant changes" in institutional portfolios as a result of Friday's decline.
Stocks, as measured by the Standard & Poor's 500-stock index, have been stellar performers this year, rising 27.97% before Friday's plunge, excluding dividends.
Even Friday's slump leaves investors ahead more than 20%, well above the annual average for stocks over several decades.
"You could go down 400 points and still have a good year in the market," said James D. Awad, president of New York-based BMI Capital Corp.
Mr. Awad, however, worries that the market "could go down 800 or 900 points in the next few days.
It can happen before you can turn around."
He said he discerns many parallels with 1987, including the emphasis on takeover stocks and the re-emergence of computerized program trading.
"The only thing you don't have," he said, "is the `portfolio insurance' phenomenon overlaid on the rest."
Most institutional investors have abandoned the portfolio insurance hedging technique, which is widely thought to have worsened the 1987 crash.
Not really insurance, this tactic was designed to soften the blow of declining stock prices and generate an offsetting profit by selling waves of S&P futures contracts.
In its severest test, the $60 billion of portfolio insurance in effect in the 1987 crash didn't work, as stock buyers disappeared and stock and futures prices became disconnected.
Even without portfolio insurance, market conditions were grim Friday, money managers said.
Neil Weisman, whose New York-based Chilmark Capital Partners had converted 85% of its $220 million investment pool to cash in recent months, said he was besieged by Wall Street firms Friday asking him to take stock off their hands.
"We got calls from big block houses asking us if we want to make bids on anything," said Mr. Weisman, who, happy with his returns on investments chalked up earlier, declined the offers.
Mr. Weisman predicts stocks will appear to stabilize in the next few days before declining again, trapping more investors.
"I think it will be a rigor mortis rally," he said.
Meanwhile, Friday brought a reprieve for money managers whose investment styles had put them at odds with the market rally.
Especially gleeful were the short sellers, who have been pounded by this year's market climb.
The shorts sell borrowed shares, hoping to profit by replacing them later at a lower price.
The nation's largest short-selling operation is Feshbach Brothers, Palo Alto, Calif., which said last May that its short positions had shown losses of 10% for the year up to that point.
All that now has changed.
"We're ahead for the year because of Friday," said the firm's Kurt Feshbach.
"We're not making a killing, but we had a good day.
Food and Drug Administration spokesman Jeff Nesbit said the agency has turned over evidence in a criminal investigation concerning Vitarine Pharmaceuticals Inc. to the U.S. Attorney's office in Baltimore.
Neither Vitarine nor any of the Springfield Gardens, N.Y., company's officials or employees have been charged with any crimes.
Vitarine won approval to market a version of a blood pressure medicine but acknowledged that it substituted a SmithKline Beecham PLC product as its own in tests.
Mr. Nesbit also said the FDA has asked Bolar Pharmaceutical Co. to recall at the retail level its urinary tract antibiotic.
But so far the company hasn't complied with that request, the spokesman said.
Bolar, the subject of a criminal investigation by the FDA and the Inspector General's office of the Health and Human Services Department, only agreed to recall two strengths of its version of Macrodantin "as far down as direct customers, mostly wholesalers," Mr. Nesbit said.
Bolar, of Copiague, N.Y., earlier began a voluntary recall of both its 100 milligram and 50 milligram versions of the drug.
The FDA has said it presented evidence it uncovered to the company indicating that Bolar substituted the brand-name product for its own to gain government approval to sell generic versions of Macrodantin.
Bolar has denied that it switched the brand-name product for its own in such testing.
The West German retailer ASKO Deutsche Kaufhaus AG plans to challenge the legality of a widely employed anti-takeover defense of companies in the Netherlands.
The eventual court decision could become a landmark in Dutch corporate law because the lawsuit ASKO plans to file would be the first to challenge the entire principle and practice of companies issuing voting preferred shares to management-controlled trusts to dilute voting power of common stockholders.
Up to now only specific aspects of these defenses have been challenged, though unsuccessfully, ASKO's Dutch lawyers noted.
Should the courts uphold the validity of this type of defense, ASKO will then ask the court to overturn such a vote-diluting maneuver recently deployed by Koninklijke Ahold NV.
ASKO says the Dutch-based international food retailer hadn't reasonable grounds to issue preferred stock to a friendly trust and thus dilute the worth and voting power of ASKO and other shareholders.
Speaking through its Dutch lawyers, ASKO also disclosed it holds a 15% stake in Ahold.
It was previously thought ASKO held a 13.6% stake that was accumulated since July.
A spokesman for Ahold said his company is confident of its own position and the propriety of the preferred-share issue.
He termed ASKO's legal actions as "unproductive" to international cooperation among European retailers.
Chase Manhattan Bank Chairman Willard Butcher is a conservative banker and a loyal Republican, but on Friday morning he had few kind words for President Bush's economic policy-making.
"There are some very significant issues out there, such as the fiscal deficit, the trade deficit, our relations with Japan, that have to be the subject of major initiatives," he said in an interview.
"I'd like to see that initiative, and I haven't.
There isn't a big shot, an agenda."
A few hours later, the stock market dropped 190 points.
Politicians tried to finger each other for the blame, although many analysts doubt that Washington was singly responsible for Wall Street's woes.
But Mr. Butcher's comments make one thing clear: Some on Wall Street wonder if anyone is in charge of economic policy.
Consider this:
-- By 11:59 p.m. tonight, President Bush must order $16 billion of automatic, across-the-board cuts in government spending to comply with the Gramm-Rudman budget law.
The cuts are necessary because Congress and the administration have failed to reach agreement on a deficit-cutting bill.
"We simply don't have strong leadership to try to reduce the deficit and make tough choices," House Budget Committee Chairman Leon Panetta (D., Calif.) said yesterday on NBC News's "Meet the Press."
-- For the last two weeks, the Bush administration and the Federal Reserve have been engaged in a semi-public battle over international economic policy.
The administration has been trying to push the dollar lower; the Fed has been resisting.
"One of the things that continues to worry me is this monetary warfare between the Treasury Department and the Federal Reserve Board," said Lawrence Kudlow, a Bear, Stearns & Co. economist, on ABC's "This Week."
-- The administration has sent out confusing signals about its response to a recent spate of airline takeovers.
Last month, Transportation Secretary Sam Skinner forced Northwest Airlines to reduce a stake held by KLM Royal Dutch Airlines.
But he has since run into opposition from the Treasury and the White House over that decision.
And he has kept mum on how his decision might affect a bid for United Airlines, which includes a big stake by British Airways PLC.
Some analysts say uncertainty about Washington's anti-takeover policy was one reason that financing for the United Airlines takeover fell through -- the event that triggered the market drop.
In many ways, the backdrop to Friday's stock decline is eerily similar to that of October 1987's 508-point crash.
Then, as now, the budget debate was behind schedule and automatic spending cuts were within days of taking hold.
The Treasury was locked in a battle over international economic policy, although at that time it was with West German officials rather than the Federal Reserve.
And concern about official actions aimed at takeovers -- then by the tax-writing House Ways and Means Committee rather than the Transportation Department -- were making markets nervous.
The 1987 crash brought the Reagan administration and Democratic lawmakers to the table for the first budget summit, resulting in a two-year plan to reduce the deficit by more than $76 billion -- even though the deficit actually rose by nearly $12 billion during that period.
But, barring further drops in the market this week, a similar outcome doesn't seem likely this year.
Lawmakers and administration officials agree that Friday's drop, by itself, isn't enough to force both sides back to the table to try to reach a deficit-reduction agreement that would be more serious and more far-reaching than last spring's gimmick-ridden plan, which still isn't fully implemented.
One of the biggest reasons that new talks aren't likely to come about is that, as everyone learned in 1987, the economy and the market can survive a one-day 508-point tumble.
"Everybody thought we were looking at a repetition of 1929, that we were looking at a recession," Rep. Panetta said yesterday in an interview.
"That did not happen.
They learned they could survive it without much problem."
But administration officials privately agree with Mr. Panetta, who said a precipitous drop this week "is going to force the president and Congress to take a much harder look at fiscal policy."
In that case, there will be plenty of blame to go around.
"There is an underlying concern on the part of the American people -- and there should be-that the administration has not gone far enough in cutting this deficit and that Congress has been unwilling to cut what the administration asked us to cut," said Senate Finance Committee Chairman Lloyd Bentsen (D., Texas).
Nevertheless, it clearly will take more than Friday's 190-point decline to overcome the bitter feelings that have developed between lawmakers and White House Budget Director Richard Darman over the capital-gains fight.
Hill Democrats are particularly angry over Mr. Bush's claim that the capital-gains cut was part of April's budget accord and his insistence on combining it with the deficit-reduction legislation.
"There is no prospect of any so-called grand compromise or deal next year because the administration simply didn't live up to this year's deal," Senate Majority Leader George Mitchell (D., Maine) said yesterday on CBS News's "Face the Nation."
During last week's maneuverings on the deficit-cutting bill and the capital-gains issue, there were signs that Senate Republicans and the administration were at odds.
At the very moment that Senate Republicans were negotiating a deal to exclude capital gains from the deficit-reduction legislation, White House spokesman Marlin Fitzwater told reporters that it was the president's policy to include it.
When an agreement was reached to strip capital gains from the legislation, Oregon Sen. Bob Packwood, the ranking GOP member of the tax-writing Senate Finance Committee, hailed it.
Asked if the administration agreed, he curtly replied: "The adminstration will have to speak for itself."
Friday's market tumble could spur action on reconciling the House and Senate versions of the deficit-reduction measure, a process that isn't expected to begin until tomorrow at the soonest.
Senate Republicans expressed the hope that the House would follow the lead of the Senate, which on Friday agreed to drop a variety of spending measures and tax breaks that would have increased the fiscal 1990 deficit.
"The market needs a strong signal that we're serious about deficit reduction, and the best way to do that is for the House of Representatives to strip their bill" of similar provisions, Sen. Warren Rudman (R., N.H.). said yesterday.
The White House Office of Management and Budget, whose calculations determine whether the Gramm-Rudman targets are met, estimated that the House-passed deficit-reduction measure would cut the fiscal 1990 shortfall by $6.2 billion, almost half of the Congressional Budget Office's estimate of $11.0 billion.
Rep. Panetta said that OMB's figure would still be enough to avoid permanent across-the-board cuts, but added: "We're getting very close to the margins here."
No one in Washington was willing to take the blame for provoking Friday's drop in the stock market.
But some players were quick to seize the moment.
Before the sun had set on Friday, Richard Rahn, the supply-side chief economist of the U.S. Chamber of Commerce, issued a statement attributing the drop in stock prices to the Senate decision to postpone action on capital gains.
"Investors, who had been holding assets in anticipation of a more favorable time to sell, were spooked," he said.
"There have been many preposterous reasons advanced to support a capital-gains tax cut," Sen. Mitchell said during his television appearance, "but I suggest that is perhaps more than any of the others.
The following U.S. Treasury, corporate and municipal offerings are tentatively scheduled for sale this week, according to Dow Jones Capital Markets Report:
$15.2 billion of three-month and six-month bills.
Two-year notes, refinancing about $9.6 billion in maturing debt.
$9.75 billion of 52-week bills.
Connecticut Light & Power Co. --
Three million shares of $25 preferred, via competitive bidding.
B&H Crude Carriers Ltd. --
Four million common shares, via Salomon Brothers Inc.
Baldwin Technology Co. --
2.6 million Class A shares, via Smith Barney Harris Upham & Co.
Blockbuster Entertainment Corp. --
$250 million (face amount) Liquid Yield Option Notes, via Merrill Lynch Capital Markets.
Chase Manhattan Corp. --
14 million common shares, via Goldman, Sachs & Co.
Comcast Corp. --
$150 million convertible debentures, via Merrill Lynch.
CSS Industries --
1.3 million common shares, via Merrill Lynch.
Eastern Utilities Associates --
1.5 million common shares, via PaineWebber Inc.
Employee Benefit Plans Inc. --
Two million common shares, via Dean Witter Capital Markets.
Exabyte Corp. --
2,850,000 common shares, via Goldman Sachs.
Knowledgeware Inc. --
2.4 million common shares, via Montgomery Securities.
Oregon --
$100 million of general obligation veterans' tax notes, Series 1989, via competitive bid.
Washington, D.C. --
$200 million of 1990 general obligation tax revenue notes (Series 1990A), via competitive bid.
Virginia Public School Authority --
$55,730,000 of school financing bonds, 1989 Series B (1987 resolution), via competitive bid.
Austin, Texas --
$68,230,000 of various bonds, including $32 million hotel occupancy tax revenue bonds, Series 1989A, and $36.23 million convention center revenue bonds, Series 1989B, via a Morgan Stanley & Co. group.
California Health Facilities Financing Authority --
$144.5 million of Kaiser Permanente revenue bonds, via a PaineWebber group.
Connecticut --
$100 million of general obligation capital appreciation bonds, College Savings Plan, 1989 Series B, via a Prudential-Bache Capital Funding group.
Pennsylvania Higher Education Facilities Authority --
$117 million of revenue bonds for Hahnemann University, Series 1989, via a Merrill Lynch group.
Tennessee Valley Authority --
Three billion of power bonds, via First Boston Corp.
University of Medicine And Dentistry of New Jersey --
$55 million of Series C bonds, via a Prudential-Bache group.
West Virginia Parkways, Economic Development And Tourism Authority --
$143 million of parkway revenue bonds, Series 1989, via a PaineWebber group.
San Antonio, Texas --
$640 million of gas and electric revenue refunding bonds, via a First Boston group.
South Dakota Health & Education Facility Authority --
$51.1 million of Rapid City Regional Hospital bonds, via a Dougherty, Dawkins, Strand & Yost Inc. group.
Small investors matched their big institutional brethren in anxiety over the weekend, but most seemed to be taking a philosophical approach and said they were resigned to riding out the latest storm in the stock market.
"I'm not losing faith in the market," said Boston lawyer Christopher Sullivan as he watched the market plunge on a big screen in front of a brokerage firm.
But he's not so sure about everyone else.
"I think on Monday the small (investors) are going to panic and sell," predicted Mr. Sullivan, whose investments include AMR Corp.'s American Airlines unit and several mutual funds.
"And I think institutions are going to come in and buy . . .
I'm going to hold on.
If I sell now, I'll take a big loss."
Some evinced an optimism that had been rewarded when they didn't flee the market in 1987.
"Oh, I bet it'll be up 50 points on Monday," said Lucy Crump, a 78-year-old retired housewife in Lexington, Ky.
Mrs. Crump said her Ashwood Investment Club's portfolio lost about one-third of its value following the Black Monday crash, "but no one got discouraged, and we gained that back -- and more."
At the annual congress of the National Association of Investors Corp. at the Hyatt Regency hotel in Minneapolis, the scene was calm.
Some 500 investors representing investor clubs from around the U.S. were attending when the market started to slide Friday.
But Robert Showalter, an official of the association, said no special bulletins or emergency meetings of the investors' clubs are planned.
In fact, some of the association's members -- long-term, buy-and-hold investors -- welcomed the drop in prices.
"We hope to take advantage of it," said John Snyder, a member of a Los Angeles investors' club.
He has four stocks in mind to buy if the prices drop to the level he wants.
Not everyone is reacting so calmly, however, and many wonder about the long-term implications of what is widely viewed as the cause of Friday's slide, reluctance by banks to provide financing for a buy-out of UAL Corp., parent of United Airlines.
Marc Perkins, a Tampa, Fla., investment banker, said the market drop is one of "a tremendous number of signs that the leveraged take-out era is ending.
There's no question that there's a general distaste for leverage among lenders.
" Mr. Perkins believes, however, that the market could be stabilized if California investor Marvin Davis steps back in to the United bidding with an offer of $275 a share.
Sara Albert, a 34-year-old Dallas law student, says she's generally skittish about the stock market and the takeover activity that seems to fuel it.
"I have this feeling that it's built on sand," she says, that the market rises "but there's no foundation to it."
She and her husband pulled most of their investments out of the market after the 1987 crash, although she still owns some Texaco stock.
Partly because of concern about the economy and partly because she recently quit her job as a legal assistant to go to school, "I think at this point we want to be a lot more liquid."
Others wonder how many more of these shocks the small investor can stand.
"We all assumed October '87 was a one-time shot," said San Francisco attorney David Greenberg.
"We told the little guy it could only happen once in a lifetime, come on back.
Now it's happening again."
Mr. Greenberg got out just before the 1987 crash and, to his regret, never went back even as the market soared.
This time he's ready to buy in "when the panic wears off."
Still, he adds: "We can't have this kind of thing happen very often.
When the little guy gets frightened, the big guys hurt badly.
Merrill Lynch can't survive without the little guy."
Small investors have tiptoed back into the market following Black Monday, but mostly through mutual funds.
Discount brokerage customers "have been in the market somewhat but not whole hog like they were two years ago," says Leslie Quick Jr., chairman of the Quick & Reilly discount brokerage firm.
Hugo Quackenbush, senior vice president at Charles Scwhab Corp., says Schwab customers "have been neutral to cautious recently about stocks."
Individual investors are still angry about program trading, Mr. Quackenbush says.
Avner Arbel, a Cornell University finance professor, says government regulators will have to more closely control program trading to "win back the confidence of the small investor."
But it's not only the stock market that has some small investors worried.
Alan Helfman, general sales manager of a Chrysler dealership in Houston, said he and his mother have some joint stock investments, but the overall economy is his chief worry.
"These high rollers took a big bath today," he said in his showroom, which is within a few miles of the multi-million dollar homes of some of Houston's richest citizens.
"And I can tell you that a high roller isn't going to come in tomorrow and buy a Chrysler TC by Maserati."
And, finally, there were the gloaters.
"I got out in 1987.
Everything," said Pascal Antori, an Akron, Ohio, plumbing contractor who was visiting Chicago and stopped by Fidelity Investments' LaSalle Street office.
"I just stopped by to see how much I would have lost."
Would Mr. Antori ever get back in?
"Are you kidding!
When it comes to money: Once bitten, 2,000 times shy.
The crowded field for notebook-sized computers is about to become a lot more crowded.
Compaq Computer Corp.'s long-awaited entry today into the notebook field is expected to put immediate heat on others in the market, especially Zenith Electronics Corp., the current market leader, and on a swarm of promising start-ups.
Compaq's series of notebooks extends a trend toward downsizing in the personal computer market.
One manufacturer already has produced a clipboard-sized computer called a notepad, and two others have introduced even smaller "palmtops."
But those machines are still considered novelties, with keyboards only a munchkin could love and screens to match.
Compaq's notebooks, by contrast, may be the first in their weight class not to skimp on features found in much bigger machines.
Analysts say they're faster and carry more memory than anything else of their size on the market -- and they're priced aggressively at $2,400 to $5,000.
All of this comes in a machine that weighs only six pounds and fits comfortably into most briefcases.
In recent months, Compaq's competition, including Zenith, Toshiba Corp., Tandy Corp. and NEC Corp. all have introduced portables that weigh approximately the same and that are called notebooks -- perhaps misleadingly.
One analyst, noting that most such machines are about two inches thick, takes exception to the name.
"This isn't quite a notebook -- I call it a phonebook," he says.
That can't be said of the $2,400 notepad computer introduced a few weeks ago by GRiD Systems Corp., a unit of Tandy.
Instead of a keyboard, it features a writing surface, an electronic pen and the ability to "read" block printing.
At 4 1/2 pounds, it may be too ambitiously named, but it nevertheless opens up the kind of marketing possibilities that make analysts froth.
Palmtops aren't far behind.
Atari Corp.'s Portfolio, introduced in Europe two months ago and in the U.S. in early September, weighs less than a pound, costs a mere $400 and runs on three AA batteries, yet has the power to run some spreadsheets and word processing programs.
Some critics, however, say its ability to run commonplace programs is restricted by a limited memory.
Poquet Computer Corp., meanwhile, has introduced a much more sophisticated palmtop that can run Lotus 1-2-3 and other sophisticated software programs, but costs five times as much.
At stake is what Mike Swavely, Compaq's president of North America operations, calls "the Holy Grail of the computer industry" -- the search for "a real computer in a package so small you can take it everywhere."
The market is so new, nobody knows yet how big it can be.
"I've had a lot of people trying to sell me services to find out how big it is," says Tom Humphries, director of marketing for GRiD.
"Whether it's $5 billion or $3.5 billion, it doesn't matter.
It's huge."
Consider the growth of portables, which now comprise 12% of all personal computer sales.
Laptops -- generally anything under 15 pounds -- have become the fastest-growing personal computer segment, with sales doubling this year.
Responding to that demand, however, has led to a variety of compromises.
Making computers smaller often means sacrificing memory.
It also has precluded use of the faster, more powerful microprocessors found in increasing numbers of desktop machines.
Size and weight considerations also have limited screen displays.
The competitive sniping can get pretty petty at times.
A Poquet spokesman, for example, criticizes the Atari Portfolio because it requires three batteries while the Poquet needs only two.
Both palmtops are dismissed by notebook makers, who argue that they're too small -- a problem Poquet also encountered in focus groups, admits Gerry Purdy, director of marketing.
Poquet, trying to avoid the "gadget" label, responded with the tag line, "The Poquet PC -- a Very Big Computer."
Despite the sniping, few question the inevitability of the move to small machines that don't make compromises.
Toward that end, experts say the real battle will take place between center-stage players like Toshiba, Zenith and now Compaq.
Compaq's new machines are considered a direct threat to start-up firms like Dynabook Inc., which introduced in June a computer that, like Compaq's, uses an Intel 286 microprocessor and has a hard disk drive.
But the Dynabook product is twice as heavy and costs more than Compaq's.
Compaq's announcement also spells trouble for Zenith, which last year had 28% of the U.S. laptop market but recently agreed to sell its computer business to Cie. des Machines Bull, the French government-owned computer maker.
Zenith holders will vote in December on the proposed $635 million sale, a price that could slip because it is pegged to Zenith's share and sales.
Compaq is already taking aim at Zenith's market share.
Rod Canion, Compaq's president and chief executive officer, notes pointedly that Zenith's $2,000 MinisPort uses an "unconventional" two-inch floppy disk, whereas Compaq's new machines use the more common 3 1/2-inch disk.
John P. Frank, president of Zenith Data Systems, simply shrugs off such criticism, noting that 3 1/2-inch floppies were also "unconventional" when they first replaced five-inch disks.
"We don't look at it as not being a standard, we look at it as a new standard," he argues.
Analysts don't see it that way.
"I can't imagine that you'll talk to anyone who won't tell you this is dynamite for Compaq and a stopper for everyone else," says Gene Talsky, president of Professional Marketing Management Inc.
Adds Bill Lempesis, senior industry analyst for DataQuest, a high-technology market research firm: "We basically think that these are very hot products.
The problem Compaq is going to have is that they won't be able to make enough of them."
Compaq's machines include the 3 1/2-inch floppy disk drive, a backlit screen that is only 1/4-inch thick and an internal expansion slot for a modem -- in other words, almost all the capabilities of a typical office machine.
Others undoubtedly will follow, but most analysts believe Compaq has at least a six-month lead on the competition.
Toshiba's line of portables, for example, features the T-1000, which is in the same weight class but is much slower and has less memory, and the T-1600, which also uses a 286 microprocessor, but which weighs almost twice as much and is three times the size.
A third model, marketed in Japan, may hit the U.S. by the end of the first quarter of 1990, but by then, analysts say, Compaq will have established itself as one of three major players.
What about Big Blue?
International Business Machines Corp., analysts say, has been burned twice in trying to enter the laptop market and shows no signs of trying to get into notebooks anytime soon.
Honeywell Inc. and International Business Machines Corp. received Air Force contracts to develop integrated circuits for use in space.
Honeywell's contract totaled $69.7 million, and IBM's $68.8 million.
Boeing Co. received a $46.7 million Air Force contract for developing cable systems for the Minuteman Missile.
General Dynamics Corp. received a $29 million Air Force contract for electronic-warfare training sets.
Grumman Corp. received an $18.1 million Navy contract to upgrade aircraft electronics.
Avco Corp. received an $11.8 million Army contract for helicopter engines.
Sharp increases in the price of fresh produce caused Spain's September consumer price index to shoot up 1.1% from the previous month, pushing the annual rate of inflation to 6.8%, the National Institute of Statistics said Friday.
The monthly increase is the highest recorded in the past four years.
The index, which registered 156.8 at the end of September, has a base of 100 set in 1983 and isn't seasonally adjusted.
Prices have risen 5.9% in the first nine months of the year, outstripping both the initial 3% inflation goal set by the government of Socialist Prime Minister Felipe Gonzalez and the second, revised goal of 5.8%.
Japan's wholesale prices in September rose 3.3% from a year earlier and were up 0.4% from the previous month, the Bank of Japan announced Friday.
The wholesale price index stood at 90.1, compared with a 1985 base of 100.
Plunge?
What plunge?
Twenty-four New York Stock Exchange issues hit 52-week highs during Friday's trading, despite the Dow Jones Industrial Average's 190.58-point plunge.
Stocks of utilities held up relatively better than other market sectors during the sell-off.
And among the issues hitting new highs were Detroit Edison Co. and Niagara Mohawk Power Corp.
Other major issues hitting highs included American Telephone & Telegraph Co., Westinghouse Electric Corp., Exxon Corp. and Cigna Corp., the big insurer.
Of course, many more issues -- 93 -- hit new lows.
These included International Business Machines Corp., which during Friday's session traded below $100 a share for the first time since June 1984.
IBM closed at $102, down $5.625.
Other new lows included Navistar International Corp., Union Carbide Corp. and Bethlehem Steel Corp., all of which are included in the industrial average.
Meanwhile, two initial public offerings braved the cascading market in their maiden day of national over-the-counter trading Friday.
Shares of Rally's Inc., an operator of fast-food restaurants, closed at $17 each, up from its $15 offering price and shares of Employee Benefit Plans Inc., a health-care consultant, closed at $14.125, up from its $12 offering price.
Ford Motor Co. said it acquired 5% of the shares in Jaguar PLC.
Jaguar, the London Stock Exchange and the U.S. Securities and Exchange Commission are being notified of the transactions, the company said.
The U.S. Federal Trade Commission advised Ford last week that it wouldn't raise any objection to the acquisition of as much as 15% of Jaguar shares.
The No. 2 auto maker disclosed last month that it wants to buy as much as 15% of the British luxury-car maker, the maximum allowed under current United Kingdom government restrictions.
General Motors Corp. said it had discussed the possibility of a joint venture with Jaguar before Ford began buying shares.
GM said it still is talking with Jaguar about acquiring a minority interest.
Investors who bought stock with borrowed money -- that is, "on margin" -- may be more worried than most following Friday's market drop.
That's because their brokers can require them to sell some shares or put up more cash to enhance the collateral backing their loans.
In October 1987, these margin calls were thought to have contributed to the downward spiral of the stock market.
Typically, a margin call occurs when the price of a stock falls below 75% of its original value.
If the investor doesn't put up the extra cash to satisfy the call, the brokerage firm may begin liquidating the securities.
But some big brokerage firms said they don't expect major problems as a result of margin calls.
Margin calls since Friday "have been higher than usual, but reasonable," a spokesman for Shearson Lehman Hutton Inc. said.
Merrill Lynch & Co. officials "don't expect {margin calls} to be as big a factor as in 1987" because fewer individual investors are buying stock on margin, a spokesman said.
Hugo Quackenbush, senior vice president at Charles Schwab Corp., the San Francisco-based discount brokerage firm, said he didn't expect any immediate problems with margin calls for Schwab customers.
He said Schwab had increased margin requirements "so customers have more of a cushion."
He added: "We learned a lesson in 1987 about volatility.
Avis Inc., following rival Hertz Corp.'s lead, said it is backing out of frequent-flier programs with three airlines.
The Garden City, N.Y., car-rental company said it won't renew contracts with NWA Inc.'s Northwest Airlines unit, Pan Am Corp.'s Pan American World Airways unit and Midway Airlines at the end of this year.
But it remains involved in programs with AMR Corp.'s American Airlines unit and Delta Air Lines.
Industry estimates put Avis's annual cost of all five programs at between $8 million and $14 million.
A spokesman for Avis wouldn't specify the costs but said the three airlines being dropped account for "far less than half" of the total.
Budget Rent a Car Corp., of Chicago, and National Car Rental Systems Inc., of Minneapolis, both said they had no plans to follow suit.
In fact, Budget indicated it saw some benefit to staying involved in these programs, in which renters earn frequent-flier miles and fliers can get car-rental discounts.
"I cannot see how this news by Hertz and Avis cannot benefit Budget's programs," said Bob Wilson, Budget's vice president, marketing planning.
Northwest and Midway are two of the five airlines with which Budget has agreements.
National also participates in the Northwest frequent-flier program along with four other airlines, including Delta and USAir Group Inc.'s USAir unit.
A month ago, Hertz, of Park Ridge, N.J., said that it would drop its marketing agreements at year end with Delta, America West and Texas Air Corp.'s Continental Airlines and Eastern Airlines, and that pacts with American Airlines, UAL Inc's United Airlines and USAir also would be ended. . . sometime after Dec. 31.
At the time, Hertz said its annual fees to those airlines amounted to $20 million and that the value of redeemed awards topped $15 million.
Analysts and competitors, however, doubt the numbers were that high.
Budget said its frequent-flier costs are "substantially below" Avis's level.
Robert D. Cardillo, Avis vice president of marketing, said, "The proliferation and costs attached to {frequent-flier programs} have significantly diminished their value."
This year has been difficult for both Hertz and Avis, said Charles Finnie, car-rental industry analyst at Alex. Brown & Sons.
"They've been looking to get their costs down, and this is a fairly sensible way to do it," he said.
CBS Inc. is cutting "The Pat Sajak Show" down to one hour from its current 90 minutes.
CBS insisted the move wasn't a setback for the program, which is the network's first entry into the late-night talk show format since 1972.
"I have every intention of making this the best possible show and having it run one hour is the best way to it," said Rod Perth, who was named vice president of late night entertainment in August.
"This will raise the energy level of the show."
CBS will continue to program action-adventure shows to follow the Sajak hour.
But CBS News will extend its four-hour "Nightwatch" by 30 minutes and begin at 1:30 a.m.
The show, despite a promising start, has slipped badly in the weekly ratings as compiled by A.C. Nielsen Co., finishing far below "Tonight" on NBC, a unit of General Electric Co., and "Nightline" on ABC-TV, a unit of Capital Cities/ABC Inc.
Further fractioning the late-night audience is the addition of the "Arsenio Hall Show," syndicated by Paramount Communications Inc.
Tandem Computers Inc., preparing to fight with International Business Machines Corp. for a piece of the mainframe business, said it expects to post higher revenue and earnings for its fiscal fourth quarter ended Sept. 30.
Tandem said it expects to report revenue of about $450 million and earnings of 35 cents to 40 cents a share.
The results, which are in line with analysts' estimates, reflect "a continued improvement in our U.S. business," said James Treybig, Tandem's chief executive officer.
In the year-earlier period, Tandem reported net income of $30.1 million, or 31 cents a share, on revenue of $383.9 million.
Tandem expects to report the full results for the quarter next week.
Analysts have predicted that the Cupertino, Calif., company will report revenue of $430 million to $460 million and earnings of 35 cents to 40 cents a share.
Commenting on the results for the quarter, Mr. Treybig said the strength of the company's domestic business came as "a surprise" to him, noting that sales "in every region of the U.S. exceeded our plan."
The company's U.S. performance was helped by "a record quarter for new customers," he said.
Tandem makes "fault-tolerant" computers -- machines with built-in backup systems -- that run stock exchanges, networks of automatic tellers and other complex computer systems.
Tomorrow the company is scheduled to announce its most powerful computer ever, which for the first time will bring it into direct competition with makers of mainframe computers.
Tandem's new high-end computer is called Cyclone.
Prices for the machine, which can come in various configurations, are $2 million to $10 million.
Analysts expect the new computer to wrest a hefty slice of business away from IBM, the longtime leader in mainframes.
"We believe they could siphon perhaps two to three billion dollars from IBM" over the next few years, said George Weiss, an analyst at the Gartner group.
That will spur Tandem's growth.
"I'd be disappointed if the company grew by less than 20% next year," said John Levinson, an analyst at Goldman, Sachs & Co.
IBM is expected to respond to Tandem's Cyclone by discounting its own mainframes, which analysts say are roughly three times the price of a comparable system from Tandem.
"Obviously IBM can give bigger discounts to users immediately," said Mr. Weiss.
But Mr. Treybig questions whether that will be enough to stop Tandem's first mainframe from taking on some of the functions that large organizations previously sought from Big Blue's machines.
"The answer isn't price reductions, but new systems," he said.
Nevertheless, Tandem faces a variety of challenges, the biggest being that customers generally view the company's computers as complementary to IBM's mainframes.
Even Mr. Treybig is reluctant to abandon this notion, insisting that Tandem's new machines aren't replacements for IBM's mainframes.
"We're after a little bigger niche," he said.
Don't jump yet.
The stock market's swoon may turn out to be good news for the economy.
In one wild hour of trading, the market managed to accomplish what the Bush administration has been trying to do, unsuccessfully, for weeks.
It is forcing the Federal Reserve to ease its grip on credit and it took the wind out of a previously irrepressible dollar.
The resulting decline in interest rates and the value of the dollar could reinvigorate American business -- indeed, the entire economy.
This may sound strangely optimistic.
After all, until a few years ago, the stock market was viewed as a barometer of the national economy.
When it went down, by all tradition, the economy followed.
That has changed, partly because the two years following the worst stock-market plunge in history have been reasonably comfortable.
The 1987 crash was "a false alarm however you view it," says University of Chicago economist Victor Zarnowitz.
The market seems increasingly disconnected from the rest of the nation.
Its spasms can't be traced to fundamental business conditions, nor do they appear to presage major shifts in the economy.
"The market today has a life of its own," John Akers, chairman of International Business Machines Corp., said Saturday.
"There's nothing rational about this kind of action."
Of course, the health of the economy will be threatened if the market continues to dive this week.
Sharply falling stock prices do reduce consumer wealth, damage business confidence and discourage the foreign investors upon whom the U.S. now relies for financial sustenance.
The financial-services industry was battered by the 1987 crash.
What's more, although the stock market is far less overvalued today than two years ago, the U.S. economy is weaker.
Growth is slower.
Profits are softer.
Debt burdens are heavier.
But if the stock market doesn't continue to plummet, the beneficial effects of lower interest rates and a lower dollar may well dominate.
The Fed, which until Friday had been resisting moves to ease credit, is now poised to pour money into the economy if needed to soothe the markets.
Fed officials may protest that this doesn't necessarily mean a fundamental change in their interest-rate policies.
But the experience of the 1987 crash suggests the Fed is likely to bring down short-term interest rates in its effort to calm markets.
Anticipating the Fed's move, money traders lowered a key interest rate known as the Federal Funds rate to 8.625% late Friday, down from 8.820% the day before.
Tiny movements in the rate, which is what banks charge each other for overnight loans, are usually among the few visible tracks that the Fed leaves on the monetary markets.
The dollar also began to decline Friday as the stock market's plunge caused some investors to reassess their desire to invest in the U.S.
Treasury officials have been arguing for months that the dollar's strength was out of whack with economic fundamentals, threatening to extinguish the export boom that has sustained manufacturers for several years.
The market drop has now apparently convinced foreign investors that the Treasury was right about the overpriced dollar.
A modest drop in the dollar -- only a modest one, mind you -- would be welcomed by the U.S.
That wasn't the case in 1987, when the dollar was so weak that some economists and government officials seriously worried that it might collapse, producing panic among foreign investors and diminishing the flow of foreign capital to the U.S.
Another big difference between 1987 and 1989 isn't so comforting.
In the third quarter of 1987, the economy spurted at an inflation-adjusted annual rate of 5.3%.
The consensus among economists is that it grew a much more sluggish 2.3% in the third quarter of 1989, which ended two weeks ago.
The plunge in stock prices "is happening at a time when the economy has already slowed down," says economist Lawrence Chimerine of WEFA Group, a Bala Cynwyd, Pa., forecasting company.
"A lot of pent-up demand is gone."
Consumer spending did drop in the months following Black Monday 1987 -- "but only slightly and for a short period of time," recalls Mr. Zarnowitz, a longtime student of business cycles.
"That was offset by strength elsewhere.
{The effects} were much less severe and less prolonged than some had feared or expected.
" Today, he frets, exports and business investment spending may be insufficient to pick up the slack if stock prices sink this week and if consumers retrench in reaction.
What's more, the corporate borrowing binge hasn't abated in the past two years.
"We've had two more years of significant accumulation of debt . . . just at the time when earnings are being squeezed," Mr. Chimerine notes.
The more a company relies on borrowed money, the greater its sensitivity to an economic slowdown.
A company with a strong balance sheet can withstand an unanticipated storm; a highly leveraged company may end up in bankruptcy court.
The Fed, of course, knows that very well -- hence its readiness to pump credit into the economy this morning.
But, in the process, the Fed risks reigniting inflation.
Even before Friday's events, Harvard University economist Benjamin Friedman was arguing that the Fed won't be able to live up to its tough words on eliminating inflation because of its responsibility to protect fragile financial markets, banks and highly leveraged corporations.
The biggest threat on the economic horizon right now isn't recession, he reasons; it's an outbreak of uncontrolled inflation.
In the end, the 1987 collapse suggested, the economy doesn't move in lockstep with stock prices.
The economy does, however, depend on the confidence of businesses, consumers and foreign investors.
A panic on Wall Street doesn't exactly inspire confidence.
Surveys suggested that consumer confidence was high before Friday.
A 190-point drop isn't likely to make much of a dent; multiply that a few times over, though, and it will.
If the reactions of executives gathered Saturday at Hot Springs, Va., for the Business Council meetings are typical, business leaders weren't overly rattled by Friday's decline.
And if foreign investors become a tad more cautious -- well, the dollar's recent strength suggests that the U.S. can stand it.
On the bottom line, the most comforting fact for the economic outlook is that we've been through this before.
Two years ago, about the only point of comparison was the 1929 crash and the subsequent Depression.
The doomsayers had a receptive audience.
The prosperity that followed Black Monday permits a more optimistic view today.
At the very least, the establishment here is taking comfort from the nation's success in handling the last go-around.
As Sen. Lloyd Bentsen (D., Texas) observed yesterday, "The Fed avoided a meltdown last time.
They are more sophisticated this time.
The chemical industry is expected to report that profits eroded in the third quarter because of skidding prices in the commodity end of the business.
Producers of commodity chemicals, the basic chemicals produced in huge volumes for other manufacturers, have seen sharp inventory cutting by buyers.
Once the chief beneficiaries of the industry's now fading boom, these producers also will be reporting against exceptionally strong performances in the 1988 third quarter.
"For some of these companies, this will be the first quarter with year-to-year negative comparisons," says Leonard Bogner, a chemical industry analyst at Prudential Bache Research.
"This could be the first of five or six down quarters."
Perhaps most prominent, Dow Chemical Co., which as of midyear had racked up eight consecutive record quarters, is expected to report that profit decreased in the latest quarter from a year earlier, if only by a shade.
Though Dow has aggressively diversified into specialty chemicals and pharmaceuticals, the company still has a big stake in polyethylene, which is used in packaging and housewares.
Analysts' third-quarter estimates for the Midland, Mich., company are between $3.20 a share and $3.30 a share, compared with $3.36 a year ago, when profit was $632 million on sales of $4.15 billion.
A Dow spokeswoman declined to comment on the estimates.
At the investment firm of Smith Barney, Harris Upham & Co., the commodity-chemical segment is seen pulling down overall profit for 20 companies representative of the whole industry by 8% to 10%.
"You will find the commodities off more than the others and the diversified companies about even or slightly better," says James Wilbur, a Smith Barney analyst.
First Boston Corp. projects that 10 of the 15 companies it follows will report lower profit.
Most of the 10 have big commodity-chemical operations.
Still, some industry giants are expected to report continuing gains, largely because so much of their business is outside commodity chemicals.
Du Pont Co. is thought to have had steady profit growth in white pigments, fibers and polymers.
Moreover, the Wilmington, Del., company is helped when prices weaken on the commodity chemicals it buys for its own production needs, such as ethylene.
Analysts are divided over whether Du Pont will report much of a gain in the latest quarter from its Conoco Inc. oil company.
The estimates for Du Pont range from $2.25 to $2.45 a share.
In the 1988 third quarter, the company earned $461 million, or $1.91 a share, on sales of $7.99 billion.
Du Pont declined to comment.
Monsanto Co., too, is expected to continue reporting higher profit, even though its sales of crop chemicals were hurt in the latest quarter by drought in northern Europe and the western U.S.
The St. Louis-based company is expected to report again that losses in its G.D. Searle & Co. pharmaceutical business are narrowing.
Searle continued to operate in the red through the first half of the year, but Monsanto has said it expects Searle to post a profit for all of 1989.
Most estimates for Monsanto run between $1.70 and $2 a share.
A year ago, the company posted third-quarter profit of $116 million, or $1.67 a share, on sales of $2.02 billion.
Monsanto declined to comment.
But the commodity-chemical producers are caught on the downside of a pricing cycle.
By some accounts on Wall Street and in the industry, the inventory reductions are near an end, which may presage firmer demand.
But doubters say growing production capacity could keep pressure on prices into the early 1990s.
In the latest quarter, at least, profit is expected to fall sharply.
For Himont Inc., "how far down it is, we don't know," says Leslie Ravitz at Salomon Brothers.
The projections are in the neighborhood of 50 cents a share to 75 cents, compared with a restated $1.65 a share a year earlier, when profit was $107.8 million on sales of $435.5 million.
Himont faces lower prices for its mainstay product, polypropylene, while it goes forward with a heavy capital investment program to bolster its raw material supply and develop new uses for polypropylene, whose markets include the packaging and automobile industries.
The company, based in Wilmington, Del., is 81%-owned by Montedison S.p.A., Milan, which has an offer outstanding for the Himont shares it doesn't already own.
At Quantum Chemical Corp., New York, the trouble is lower prices for polyethylene, higher debt costs and the idling of an important plant due to an explosion.
Some analysts hedge their estimates for Quantum, because it isn't known when the company will book certain one-time charges.
But the estimates range from break-even to 35 cents a share.
In the 1988 third quarter, Quantum earned $99.8 million, or $3.92 a share, on sales of $724.4 million.
Another big polyethylene producer, Union Carbide Corp., is expected to post profit of between $1 a share and $1.25, compared with $1.56 a share a year earlier, when the company earned $213 million on sales of $2.11 billion.
Himont, Quantum and Union Carbide all declined to comment.
The following were among Friday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:
Dow Chemical Co. --
$150 million of 8.55% senior notes due Oct. 15, 2009, priced at par.
The issue, which is puttable back to the company at par on Oct. 15, 1999, was priced at a spread of 50 basis points above the Treasury's 10-year note.
Rated single-A-1 by Moody's Investors Service Inc. and single-A by Standard & Poor's Corp., the non-callable issue will be sold through underwriters led by Merrill Lynch Capital Markets.
Centel Capital Corp. --
$150 million of 9% debentures due Oct. 15, 2019, priced at 99.943 to yield 9.008%.
The non-callable issue, which can be put back to the company in 1999, was priced at 99 basis points above the Treasury's 10-year note.
Rated Baa-1 by Moody's and triple-B-plus by S&P, the issue will be sold through underwriters led by Morgan Stanley & Co.
Federal Home Loan Mortgage Corp. --
$500 million of Remic mortgage securities offered in 13 classes by Prudential-Bache Securities Inc.
The offering, Series 102, backed by Freddie Mac 8 1/2% securities with a weighted average remaining term to maturity of 28.4 years, was priced before the market's afternoon surge.
Among classes for which details were available, yields ranged from 8.78%, or 75 basis points over two-year Treasury securities, to 10.05%, or 200 basis points over 10-year Treasurys.
Federal Home Loan Mortgage Corp. --
$300 million of Remic mortgage securities offered by Citicorp Securities Markets Inc.
The offering, Series 101, is backed by Freddie Mac 9 1/2% securities.
Pricing details weren't immediately available.
Federal Home Loan Mortgage Corp. --
$200 million of stripped mortgage securities underwritten by BT Securities Corp.
The agency's first strips issue, collateralized by Freddie Mac 8% securities pooled into a single security called a Giant, will be divided into interest-only and principal-only securities.
The collateral is being sold by a thrift institution.
The principal-only securities will be repackaged by BT Securities into a Freddie Mac Remic, Series 103, that will have six classes.
The interest-only securities will be sold separately by BT Securities.
The principal-only securities pay the principal from the underlying Freddie Mac 8% securities, while the interest-only securities pay only interest.
Freddie Mac said the principal-only securities were priced at 58 1/4 to yield 8.45%, assuming an average life of eight years and a prepayment of 160% of the PSA model.
The interest-only securities were priced at 35 1/2 to yield 10.72%.
There were no major Eurobond or foreign bond offerings in Europe Friday.
The economy's temperature will be taken from several vantage points this week, with readings on trade, output, housing and inflation.
The most troublesome report may be the August merchandise trade deficit due out tomorrow.
The trade gap is expected to widen to about $9 billion from July's $7.6 billion, according to a survey by MMS International, a unit of McGraw-Hill Inc., New York.
Thursday's report on the September consumer price index is expected to rise, although not as sharply as the 0.9% gain reported Friday in the producer price index.
That gain was being cited as a reason the stock market was down early in Friday's session, before it got started on its reckless 190-point plunge.
Economists are divided as to how much manufacturing strength they expect to see in September reports on industrial production and capacity utilization, also due tomorrow.
Meanwhile, September housing starts, due Wednesday, are thought to have inched upward.
"There's a possibility of a surprise" in the trade report, said Michael Englund, director of research at MMS.
A widening of the deficit, if it were combined with a stubbornly strong dollar, would exacerbate trade problems -- but the dollar weakened Friday as stocks plummeted.
In any event, Mr. Englund and many others say that the easy gains in narrowing the trade gap have already been made.
"Trade is definitely going to be more politically sensitive over the next six or seven months as improvement begins to slow," he said.
Exports are thought to have risen strongly in August, but probably not enough to offset the jump in imports, economists said.
Views on manufacturing strength are split between economists who read September's low level of factory job growth as a sign of a slowdown and those who use the somewhat more comforting total employment figures in their calculations.
The wide range of estimates for the industrial output number underscores the differences: The forecasts run from a drop of 0.5% to an increase of 0.4%, according to MMS.
A rebound in energy prices, which helped push up the producer price index, is expected to do the same in the consumer price report.
The consensus view expects a 0.4% increase in the September CPI after a flat reading in August.
Robert H. Chandross, an economist for Lloyd's Bank in New York, is among those expecting a more moderate gain in the CPI than in prices at the producer level.
"Auto prices had a big effect in the PPI, and at the CPI level they won't," he said.
Food prices are expected to be unchanged, but energy costs jumped as much as 4%, said Gary Ciminero, economist at Fleet/Norstar Financial Group.
He also says he thinks "core inflation," which excludes the volatile food and energy prices, was strong last month.
He expects a gain of as much as 0.5% in core inflation after a summer of far smaller increases.
Housing starts are expected to quicken a bit from August's annual pace of 1,350,000 units.
Economists say an August rebound in permits for multifamily units signaled an increase in September starts, though activity remains fairly modest by historical standards.
Two-Way Street
If the sixty-day plant-closing law's fair, Why should we not then amend the writ To require that all employees give Similar notice before they quit?
-- Rollin S. Trexler.
Candid Comment
When research projects are curtailed due to government funding cuts, are we "caught with our grants down"?
-- C.E. Friedman.
Assuming the stock market doesn't crash again and completely discredit yuppies and trading rooms, American television audiences in a few months may be seeing Britain's concept of both.
"Capital City" is a weekly series that premiered here three weeks ago amid unprecedented hype by its producer, Thames Television.
The early episodes make you long for a rerun of the crash of 1987.
Let's make that 1929, just to be sure.
According to the program's publicity prospectus, "Capital City," set at Shane Longman, a fictional mid-sized securities firm with #500 million capital, "follows the fortunes of a close-knit team of young, high-flying dealers, hired for their particular blend of style, genius and energy.
But with all the money and glamour of high finance come the relentless pressures to do well; pressure to pull off another million before lunch; pressure to anticipate the market by a fraction of a second . . ."
You needn't be a high-powered securities lawyer to realize the prospectus is guilty of less than full disclosure.
The slickly produced series has been criticized by London's financial cognoscenti as inaccurate in detail, but its major weakness is its unrealistic depiction of the characters' professional and private lives.
Turned loose in Shane Longman's trading room, the yuppie dealers do little right.
Judging by the money lost and mistakes made in the early episodes, Shane Longman's capital should be just about exhausted by the final 13th week.
In the opening episode we learn that Michelle, a junior bond trader, has indeed pulled off another million before lunch.
Trouble is, she has lost it just as quickly.
Rather than keep the loss a secret from the outside world, Michelle blabs about it to a sandwich man while ordering lunch over the phone.
Little chance that Shane Longman is going to recoup today.
Traders spend the morning frantically selling bonds, in the belief that the U.S. monthly trade figures will look lousy.
Ah, perfidious Columbia!
The trade figures turn out well, and all those recently unloaded bonds spurt in price.
So much for anticipating the market by a fraction of a second.
And a large slice of the first episode is devoted to efforts to get rid of some nearly worthless Japanese bonds (since when is anything Japanese nearly worthless nowadays?).
Surprisingly, Shane Longman survives the week, only to have a senior executive innocently bumble his way into becoming the target of a criminal insider trading investigation.
Instead of closing ranks to protect the firm's reputation, the executive's internal rivals, led by a loutish American, demand his resignation.
The plot is thwarted when the firm's major stockholder, kelp farming on the other side of the globe, hurries home to support the executive.
But the investigation continues.
If you can swallow the premise that the rewards for such ineptitude are six-figure salaries, you still are left puzzled, because few of the yuppies consume very conspicuously.
In fact, few consume much of anything.
Two share a house almost devoid of furniture.
Michelle lives in a hotel room, and although she drives a canary-colored Porsche, she hasn't time to clean or repair it; the beat-up vehicle can be started only with a huge pair of pliers because the ignition key has broken off in the lock.
And it takes Declan, the obligatory ladies' man of the cast, until the third episode to get past first base with any of his prey.
Perhaps the explanation for these anomalies is that class-conscious Britain isn't ready to come to terms with the wealth created by the Thatcherian free-enterprise regime.
After all, this isn't old money, but new money, and in many cases, young money.
This attitude is clearly illustrated in the treatment of Max, the trading room's most flamboyant character.
Yuppily enough, he lives in a lavishly furnished converted church, wears designer clothes and drives an antique car.
But apparently to make him palatable, even lovable, to the masses, the script inflates pony-tailed Max into an eccentric genius, master of 11 Chinese dialects.
He takes his wash to the laundromat, where he meets a punky French girl who dupes him into providing a home for her pet piranha and then promptly steals his car and dumps it in Dieppe.
In producing and promoting "Capital City," Thames has spent about as much as Shane Longman loses on a good day.
The production costs are a not inconsiderable #8 million ($12.4 million), and would have been much higher had not the cost of the trading floor set been absorbed in the budget of "Dealers," an earlier made-for-TV movie.
Another half million quid went for a volley of full-page advertisements in six major British newspapers and for huge posters in the London subway.
These expenses create a special incentive for "Capital City's" producers to flog it, or a Yank-oriented version of it, in America.
Thames's U.S. marketing agent, Donald Taffner, is preparing to do just that.
He is discreetly hopeful, citing three U.S. comedy series -- "Three's Company," "Too Close for Comfort" and "Check It Out" -- that had British antecedents.
Perhaps without realizing it, Mr. Taffner simultaneously has put his finger on the problem and an ideal solution: "Capital City" should have been a comedy, a worthy sequel to the screwball British "Carry On" movies of the 1960s.
The seeds already are in the script.
The first episode concluded with a marvelously cute scene in which the trading-room crew minded a baby, the casualty of a broken marriage at the firm.
And many in the young cast bear striking resemblances to American TV and movie personalities known for light roles.
Joanna Kanska looks like a young Zsa Zsa Gabor; William Armstrong, who plays Max, could pass for Hans Conreid, and Douglas Hodge (Declan) for James Farentino; Rolf Saxon is a passable Tommy Noonan and Dorian Healy could easily double for Huntz Hall, the blank-faced foil of the Bowery Boys comedies.
So, OK kids, everybody on stage for "Carry On Trading": The cast is frantically searching the office for misplaced Japanese bonds that suddenly have soared in value because Dai-Ichi Kangyo Bank has just bought the White House.
The pressure is too much for Zsa Zsa, who slaps a security guard.
He backflips into a desktop computer terminal, which explodes, covering Huntz Hall's face with microchips.
And all the while, the bonds are in the baby's diaper.
It should run forever.
Mr. Rustin is senior correspondent in the Journal's London bureau.
Axa-Midi Assurances of France gave details of its financing plans for its proposed $4.5 billion acquisition of Farmers Group Inc., in amended filings with insurance regulators in the nine U.S. states where Farmers operates.
The proposed acquisition is part of Sir James Goldsmith's unfriendly takeover attempt for B.A.T Industries PLC, the British tobacco, retailing, paper and financial services concern that is parent of Los Angeles-based Farmers.
In an attempt to appease U.S. regulators' concern over a Goldsmith acquisition of Farmers, Sir James in August agreed to sell Farmers to Axa if he is successful in acquiring B.A.T.
As part of the agreement, Axa agreed to invest $1 billion in Hoylake Investments Ltd., Sir James's acquisition vehicle.
Of the total $5.5 billion to be paid to Hoylake by Axa, about $1 billion will come from available resources of Axa's parent, Axa-Midi Group, $2.25 billion will be in the form of notes issued by Axa, and the remaining $2.25 billion will be in long-term bank loans.
In an interview Thursday, Claude Bebear, chairman and chief executive officer of Axa, said his group has already obtained assurances from a group of banks led by Cie. Financiere de Paribas that they can provide the loan portion of the financing.
The other banking companies in the group are Credit Lyonnais, Societe Generale, BankAmerica Corp. and Citicorp, he said.
Mr. Bebear said Axa-Midi Group has "more than $2.5 billion of non-strategic assets that we can and will sell" to help pay off debt from the acquisition.
He said the assets to be sold would be "non-insurance" assets, including a beer company and a real estate firm, and wouldn't include any pieces of Farmers.
"We won't put any burden on Farmers," he said.
The amended filings also point out that under a new agreement, Hoylake has an absolute obligation to sell Farmers to Axa upon an acquisition of B.A.T.
"We hope that with what we did, the regulators will not need to evaluate Hoylake, and they can directly look at the agreement with us, because Hoylake won't be an owner of Farmers at anytime," Mr. Bebear said.
Any change of control in Farmers needs approval of the insurance commissioners in the nine states where Farmers and its related companies are incorporated.
The amended filings were required because of the new agreement between Axa and Hoylake, and to reflect the extension that Sir James received last month under British takeover rules to complete his proposed acquisition.
Hoylake dropped its initial #13.35 billion ($20.71 billion) takeover bid after it received the extension, but said it would launch a new bid if and when the propsed sale of Farmers to Axa receives regulatory approval.
A spokesman for B.A.T said of the amended filings that, "It would appear that nothing substantive has changed.
The new financing structure is still a very-highly leveraged one, and Axa still plans to take out 75% of Farmers' earnings as dividends to service their debt."
That dividend is almost double the 35% currently taken out of Farmers by B.A.T, the spokesman added.
"It would have severe implications for Farmers' policy holders."
To fend off Sir James's advances, B.A.T has proposed a sweeping restructuring that would pare it to a tobacco and financial services concern.
Dismal sales at General Motors Corp. dragged the U.S. car and truck market down below year-ago levels in early October, the first sales period of the 1990 model year.
The eight major domestic auto makers sold 160,510 North American-made cars in the first 10 days of October, a 12.6% drop from a year earlier.
Domestically built truck sales were down 10.4% to 86,555 pickups, vans and sport utility vehicles.
The heavy use of incentives to clear out 1989 models appears to have taken the steam, at least initially, out of 1990 model sales, which began officially Oct. 1.
This appears particularly true at GM, which had strong sales in August and September but saw its early October car and truck results fall 26.3% from last year's unusually high level.
Overall, sales of all domestic-made vehicles fell 11.9% from a year ago.
Without GM, overall sales for the other U.S. automakers were roughly flat with 1989 results.
Some of the U.S. auto makers have already adopted incentives on many 1990 models, but they may have to broaden their programs to keep sales up.
"We've created a condition where, without incentives, it's a tough market," said Tom Kelly, sales manager for Bill Wink Chevrolet in Dearborn, Mich.
Car sales fell to a seasonally adjusted annual selling rate of 5.8 million vehicles, the lowest since October 1987.
The poor performance contrasts with a robust selling rate of almost eight million last month.
Furthermore, dealers contacted late last week said they couldn't see any immediate impact on sales of Friday's steep market decline.
GM's domestic car sales dropped 24.3% and its domestic trucks were down an even steeper 28.7% from the same period a year ago.
All of the GM divisions except Cadillac showed big declines.
Cadillac posted a 3.2% increase despite new competition from Lexus, the fledging luxury-car division of Toyota Motor Corp.
Lexus sales weren't available; the cars are imported and Toyota reports their sales only at month-end.
The sales drop for the No. 1 car maker may have been caused in part by the end in September of dealer incentives that GM offered in addition to consumer rebates and low-interest financing, a company spokesman said.
Last year, GM had a different program in place that continued rewarding dealers until all the 1989 models had been sold.
Aside from GM, other car makers posted generally mixed results.
Ford Motor Co. had a 1.8% drop in domestic car sales but a 2.4% increase in domestic truck sales.
Chrysler Corp. had a 7.5% drop in car sales, echoing its generally slow performance all year.
However, sales of trucks, including the company's popular minivans, rose 4.3%.
Honda Motor Co.'s sales of domestically built vehicles plunged 21.7% from a year earlier.
Honda's plant in Marysville, Ohio, was gearing up to build 1990 model Accords, a Honda spokesman said.
"We're really confident everything will bounce back to normal," he added.
Separately, Chrysler said firm prices on its 1990-model domestic cars and minivans will rise an average of 5% over comparably equipped 1989 models.
Firm prices were generally in line with the tentative prices announced earlier this fall.
At that time, Chrysler said base prices, which aren't adjusted for equipment changes, would rise between 4% and 9% on most vehicle.
a-Totals include only vehicle sales reported in period.
c-Domestic car
d-Percentage change is greater than 999%.
x-There were 8 selling days in the most recent period and 8 a year earlier.
Percentage differences based on daily sales rate rather than sales volume.
Antonio L. Savoca, 66 years old, was named president and chief executive officer of the Atlantic Research Corp. subsidiary.
Mr. Savoca had been a consultant to the subsidiary's rocket-propulsion operations.
Mr. Savoca succeeds William H. Borten, who resigned to pursue personal interests.
Sequa makes and repairs jet engines.
It also has interests in military electronics and electro-optics, marine transportation and machinery used to make food and beverage cans.
It wasn't so long ago that a radio network funded by the U.S. Congress -- and originally by the Central Intelligence Agency -- was accused by officials here of employing propagandists, imperialists and spies.
Now, the network has opened a news bureau in the Hungarian capital.
Employees held an open house to celebrate and even hung out a sign: "Szabad Europa Radio" -- Radio Free Europe.
"I think this is a victory for the radio," says Barnabas de Bueky, a 55-year-old former Hungarian refugee who works in the Munich, West Germany, headquarters as deputy director of the Hungarian service.
In fact, the network hopes to set up offices in Warsaw and anywhere else in the East Bloc that will have it.
But the rapid changes brought on by glasnost and open borders are altering the network's life in more ways than one.
In fact, Radio Free Europe is in danger of suffering from its success.
While the network currently can operate freely in Budapest, so can others.
In addition, competition for listeners is getting tougher in many ways than when broadcasting here was strictly controlled.
Instead of being denounced as an evil agent of imperialism, Radio Free Europe is more likely to draw the criticism that its programs are too tame, even boring.
"They have a lot to do these days to compete with Hungarian radio," says Andrew Deak, a computer-science student at the Technical University in Budapest.
"The Hungarian {radio} reporters seem better informed and more critical about about what's going on here."
Indeed, Hungary is in the midst of a media explosion.
Boys on busy street corners peddle newspapers of every political stripe.
Newsstands are packed with a colorful array of magazines.
Radio and television are getting livelier and bolder.
The British Broadcasting Corp. and the U.S. State Department's Voice of America broadcast over Hungarian airwaves, though only a few hours a day each in Hungarian.
Australian press magnate Rupert Murdoch has bought 50% stakes in two popular and gossipy Hungarian newspapers, while Britain's Robert Maxwell has let it be known here that he is thinking about similar moves.
But Radio Free Europe doesn't plan to fade away.
With its mission for free speech and the capitalist way, the network's staff says it still has plenty to do -- in Hungary and in the "Great Eastern Beyond."
Radio Free Europe and its sister station for the Soviet Union, Radio Liberty, say they won't cut back their more than 19 hours of daily broadcasts.
They are still an important source of news for 60 million listeners in 23 exotic tongues: from Bulgarian and Belorussian to Kazakh and Kirghiz.
The establishment of its first bureau in Warsaw Pact territory shows the depth of some of the changes in Eastern Europe.
Months before the decision by the Hungarian Communist Party to rename itself Socialist and try to look more appealing to voters, the country's rulers were trying to look more hospitable.
It proved a perfect time for Radio Free Europe to ask for permission to set up office.
Not only did the Hungarian Ministry of Foreign Affairs approve Radio Free Europe's new location, but the Ministry of Telecommunications did something even more amazing: "They found us four phone lines in central Budapest," says Geza Szocs, a Radio Free Europe correspondent who helped organize the Budapest location.
"That is a miracle."
It's a far cry from the previous treatment of the network, which had to overcome jamming of its frequencies and intimidation of local correspondents (who filed reports to the network by phone, secret messengers or letters).
In fact, some of the network's Hungarian listeners say they owe Radio Free Europe loyalty because it was responsible in many ways for keeping hope alive through what one writer here calls the "Dark Ages of the 20th Century."
"During the past four years, many of us have sat up until late at night listening to our radios," says the writer.
"There were some very brave broadcasts."
The listeners, too, had to be brave.
Through much of the post-World War II period, listening to Western broadcasts was a crime in Hungary.
"When we listen to the Europe station, my mother still gets nervous," says a Budapest translator.
"She wants to turn down the volume and close the curtains."
Now, the toughest competition for Radio Free Europe comes during the late-night slot.
Hungarian radio often saves its most politically outspoken broadcasts for around midnight.
Television, which most of the time is considered rather tame, has entered the running with a new program, "The End of the Day," which comes on after 11 p.m.
It is a talk show with opposition leaders and political experts who discuss Hungary's domestic problems as well as foreign affairs.
Those who want to hear even more radical views have to get up at five on Sunday morning for "Sunday Journal," on Hungarian Radio.
The competitive spirit is clearly influencing Radio Free Europe, which is trying to beef up programs.
The Budapest office plans to hire free-lance reporters to cover the latest happenings in Hungarian country towns from Nagykanizsa in the west to Nyiregyhaza in the east.
The Hungarian service has a daily 40-minute news show called Newsreel, with international and domestic news, plus a daily news review of opinions from around the world.
There's also a host of new programs, trying to lighten up on the traditional diet of politics.
A daily 35-minute program called "The March of Time" tries to find interesting tidbits of lighthearted news and gossip from around the world.
There's a program for women and a science show.
And to attract younger listeners, Radio Free Europe intersperses the latest in Western rock groups.
The Pet Shop Boys are big this year in Budapest.
"We are starving for all the news," says Mr. Deak, the student.
"Every moment we want to know everything about the world.
Proposals for government-operated "national service," like influenza, flare up from time to time, depress the resistance of the body politic, run their course, and seem to disappear, only to mutate and afflict public life anew.
The disease metaphor comes to mind, of course, not as an aspersion on the advocates of national service.
Rather, it is born of frustration with having to combat constantly changing strains of a statist idea that one thought had been eliminated in the early 1970s, along with smallpox.
It is back with us again, in the form of legislation to pay volunteers under a "National and Community Service Act," a proposal with a serious shot at congressional passage this fall.
Why does the national-service virus keep coming back?
Perhaps it is because utopian nostalgia evokes both military experience and the social gospel.
If only we could get America's wastrel youth into at least a psychic uniform we might be able to teach self-discipline again and revive the spirit of giving.
A quarter of a century ago national service was promoted as a way of curing the manifest inequities of the draft -- by, of all things, expanding the draft.
Those of us who resisted the idea then suspect today that an obligation of government service for all young people is still the true long-term aim of many national-service backers, despite their protests that present plans contain no coercion.
Choice of the volunteer military in the 1970s seemed to doom national service as much as the draft.
But the virus was kept alive in sociology departments until a couple of years ago, when it again was let loose.
This time it attempted to invade two connected problems, the rising cost of higher education and the rising expense to the federal government of educational grants and loans.
Why not keep and even expand the loans and grants, the advocates reasoned, but require some form of service from each recipient?
Military service, moreover, could be a national-service option.
Thus, undoubtedly it was hoped that the new strain of national service would prove contagious, infecting patriotic conservatives, pay-as-you-go moderates, and idealistic liberals.
The Democratic Leadership Council, a centrist group sponsoring the plan, surely thought it might help the party to attract support, especially among college students and their parents.
A provision allowing grants to be applied to first-home purchases was added to appeal to those who had had enough of schooling.
The DLC plan envisaged "volunteers" planting trees, emptying bedpans, tutoring children, and assisting librarians for $100 a week, tax free, plus medical care.
With a tax-free $10,000 voucher payment at the end of each year, the volunteers would be making a wage comparable to $17,500 a year.
Mind you, most of "the volunteers" would be unskilled 17- to 18-year-olds, some not even high school graduates, and many saving money by living at home.
They would be doing better financially under national service than many taxpayers working at the same kinds of jobs and perhaps supporting families.
As it happened, political resistance developed among educational and minority interests that count on the present education grant system, so the national-service devotees decided to abandon the supposedly crucial principle of "give in order to get."
Opposition to national service from the Pentagon, which wants to protect its own recruitment process, also led to the military-service option being dropped.
Clearly, a new rationale for national service had to be cooked up.
What better place to turn than Sen. Edward Kennedy's Labor Committee, that great stove of government expansionism, where many a stagnant pot of porridge is kept on the back burner until it can be brought forward and presented as nouvelle cuisine?
In this case, the new recipe for national service called for throwing many assorted legislative leftovers into one kettle: a demonstration project for educational aid (particularly satisfying to the DLC and Sen. Sam Nunn), a similar demonstration program for youth conservation (a la Sen. Chris Dodd), a competitive grants program to states to spark youth and senior citizen volunteer projects (a Kennedy specialty), a community service work-study program for students (pleasing to the palate of Sen. Dale Bumpers, among others), plus engorgement of the VISTA volunteer program and the Retired Senior Volunteer, Foster Grandparent, and Senior Companion programs.
Before the menu is printed, the House may add more ingredients, also changing the initial price, now posted at some $330 million.
It is widely known that "too many cooks spoil the broth," but that wisdom does not necessarily reflect the view of the cooks, especially if they are senators.
The "omnibus" bill coming out of Congress may be unwholesome glop, but the assorted chefs are happy and the restaurant is pushing the dish very hard.
The aroma of patronage is in the air.
Is the voluntary sector so weak that it needs such unsolicited assistance?
On the contrary, it is as robust as ever.
According to the Gallup Poll, American adults contribute an average of two hours a week of service, while financial contributions to charity in the 1980s have risen 30% (adjusted for inflation).
Even if government does see various "unmet needs," national service is not the way to meet them.
If we want to support students, we might adopt the idea used in other countries of offering more scholarships based on something called "scholarship," rather than on the government's idea of "service."
Or we might provide a tax credit for working students.
What we do not need to do is start a war, and then try to justify it by creating a GI Bill.
To the extent we lack manpower to staff menial jobs in hospitals, for example, we should raise pay, pursue labor-saving technology, or allow more legal immigration, rather than overpay high school graduates as short-term workers and cause resentment among permanent workers paid lesser amounts to do the same jobs.
Will national service, in the current highly politicized and opportunistic form exert enough appeal to get adopted?
Not necessarily.
Polls show wide, generalized support for some vague concept of service, but the bill now under discussion lacks any passionate public backing.
Nonetheless, Senate Democrats are organizing a roll of supporting "associations," "societies" and "councils," some of which may hope to receive the paid "volunteers."
So far, the president seems ill-disposed to substitute any of the omnibus for his own free-standing proposal to endow a "Points of Light" foundation with $25 million to inform citizens of all ages and exhort them to genuine volunteerism.
However, even this admirable plan could become objectionable if the White House gives in to congressional Democratic pressure to add to the scope of the president's initiative or to involve the independent foundation in "brokering" federal funds for volunteer projects.
There's no need for such concessions.
The omnibus can be defeated, the virus controlled, and real service protected.
National service, the utopian idea, still won't go away then, of course, but the millions of knee-socked youth performing works of "civic content" will be mobilized only in the imagination of their progenitors.
Mr. Chapman is a fellow at the Indianapolis-based Hudson Institute.
This article is adapted from remarks at a Hoover Institution conference on national service, in which Mr. Szanton also participated.
Drug Emporium Inc. said Gary Wilber, 39 years old, who had been president and chief operating officer for the past year, was named chief executive officer of this drugstore chain.
He succeeds his father, Philip T. Wilber, who founded the company and remains chairman.
Robert E. Lyons III, 39, who headed the company's Philadelphia region, was appointed president and chief operating officer, succeeding Gary Wilber.
American Physicians Service Group Inc. said it purchased about 42% of Prime Medical Services Inc. for about $5 million from Texas American Energy Corp.
American Physicians said it also replaced four Texas American representatives on Prime's five-member board.
American provides a variety of financial services to doctors and hospitals.
Prime, based in Bedminster, N.J., provides management services to cardiac rehabilitation clinics and diagnostic imaging centers.
For the year ended June 30, Prime had a net loss of $3 million on sales of $13.8 million.
The inflation-adjusted growth rate for France's gross domestic product for the second quarter was revised upward to 0.8% from the previous three months from the initial estimate of 0.7%, the National Statistics Institute said.
The state agency said the latest revision left the growth rate for the first-quarter compared with the previous three months unchanged at 1.3%.
If the economy continues to expand by 0.8% a quarter for the rest of the year, it would leave GDP growth for all of 1989 at 3%, the institute said.
That would be down from the 3.8% rise posted in 1988.
The Canadian government announced a new, 12-year Canada Savings Bond issue that will yield investors 10.5% in the first year.
The annual interest rate for each of the next 11 years will be set each fall, when details of a new series are released.
Canada Savings Bonds are major government instruments for meeting its financial requirements.
The government has about 41.4 billion Canadian dollars (US$35.2 billion) of such bonds currently outstanding.
Only Canadian residents are permitted to buy Canada Savings Bonds, which may be redeemed any time at face value.
The bonds go on sale Oct. 19.
The debate over National Service has begun again.
After a decade in which more than 50 localities established their own service or conservation corps and dozens of school systems made community service a prerequisite to high-school graduation, the focus has shifted to Washington.
At least 10 bills proposing one or another national program were introduced in Congress this spring.
One, co-sponsored by Sen. Sam Nunn (D., Ga.) and Rep. Dave McCurdy (D., Okla.), would have restricted federal college subsidies to students who had served.
An omnibus bill assembled by Sen. Edward Kennedy (D., Mass.), and including some diluted Nunn-McCurdy provisions along with proposals by fellow Democratic Sens. Claiborne Pell, Barbara Mikulski and Christopher Dodd, has been reported out of the Senate Labor Committee.
It might well win Senate passage.
President Bush has outlined his own Youth Entering Service (YES) plan, though its details remain to be specified.
What is one to think of all this?
Doctrine and special interests govern some responses.
People eager to have youth "pay their dues to society" favor service proposals -- preferably mandatory ones.
So do those who seek a "re-energized concept of citizenship," a concept imposing stern obligations as well as conferring rights.
Then there are instinctive opponents.
To libertarians, mandatory service is an abomination and voluntary systems are illegitimate uses of tax money.
Devotees of the market question the value of the work national service would perform:
If the market won't pay for it, they argue, it can't be worth its cost.
Elements of the left are also reflexively opposed; they see service as a cover for the draft, or fear the regimentation of youth, or want to see rights enlarged, not obligations.
But what about those of us whose views are not predetermined by formula or ideology?
How should we think about national service?
Let's begin by recognizing a main source of confusion -- "national service" has no agreed meaning.
Would service be voluntary or compulsory?
Short or long?
Part-time or full-time?
Paid or unpaid?
Would participants live at home and work nearby or live in barracks and work on public lands?
What kinds of work would they do?
What does "national" mean?
Would the program be run by the federal government, by local governments, or by private voluntary organizations?
And who would serve?
Only males, as with the draft, or both sexes?
Youth only or all ages?
Middle-class people, or poor people, or a genuine cross-section?
Many or few?
Those are not trivial questions, and the label "national service" answers none of them.
Then how should we think about national service?
As a starting point, here are five propositions: 1. Consider the ingredients, not the name.
Ignore "national service" in the abstract; consider specific proposals.
They will differ in crucial ways.
2. "Service" should be service.
As commonly understood, service implies sacrifice.
It involves accepting risk, or giving up income, or deferring a career.
It follows that proposals like Nunn-McCurdy, whose benefits to enrollees are worth some $17,500 a year, do not qualify.
There is a rationale for such bills: Federal subsidies to college students amount to "a GI Bill without the GI"; arguably those benefits should be earned, not given.
But the earnings exceed by 20% the average income of young high-school graduates with full-time jobs.
Why call that service?
3. Encouragement is fine; compulsion is not.
Compelled service is unconstitutional.
It is also unwise and unenforceable.
(Who will throw several hundred thousand refusers in jail each year?)
But through tax policy and in other ways the federal government encourages many kinds of behavior.
It should also encourage service -- preferably by all classes and all ages.
Its encouragement should strengthen and not undercut the strong tradition of volunteering in the U.S., should build on the service programs already in existence, and should honor local convictions about which tasks most need doing.
4. Good programs are not cheap.
Enthusiasts assume that national service would get important work done cheaply: forest fires fought, housing rehabilitated, students tutored, day-care centers staffed.
There is important work to be done, and existing service and conservation corps have shown that even youths who start with few skills can do much of it well -- but not cheaply.
Good service programs require recruitment, screening, training and supervision -- all of high quality.
They involve stipends to participants.
Full-time residential programs also require housing and full-time supervision; they are particularly expensive -- more per participant than a year at Stanford or Yale.
Non-residential programs are cheaper, but good ones still come to some $10,000 a year.
Are they worth that?
Evaluations suggest that good ones are -- especially so if the effects on participants are counted.
But the calculations are challengeable.
5. Underclass youth are a special concern.
Are such expenditures worthwhile, then?
Yes, if targeted.
People of all ages and all classes should be encouraged to serve, but there are many ways for middle-class kids, and their elders, to serve at little public cost.
They can volunteer at any of thousands of non-profit institutions, or participate in service programs required by high schools or encouraged by colleges or employers.
Underclass youth don't have those opportunities.
They are not enrolled in high school or college.
They are unlikely to be employed.
And they have grown up in unprecedentedly grim circumstances, among family structures breaking down, surrounded by self-destructive behaviors and bleak prospects.
But many of them can be quite profoundly reoriented by productive and disciplined service.
Some won't accept the discipline; others drop out for other reasons.
But some whom nothing else is reaching are transformed.
Learning skills, producing something cooperatively, feeling useful, they are no longer dependent -- others now depend on them.
Even if it is cheaper to build playgrounds or paint apartments or plant dune-grass with paid professionals, the effects on the young people providing those services alter the calculation.
Strictly speaking, these youth are not performing service.
They are giving up no income, deferring no careers, incurring no risk.
But they believe themselves to be serving, and they begin to respect themselves (and others), to take control of their lives, to think of the future.
That is a service to the nation.
It is what federal support should try hardest to achieve.
Mr. Szanton, a Carter administration budget official, heads his own Washington-based strategic planning firm.
He is a co-author of "National Service: What Would It Mean?"
(Lexington Books, 1986).
Government officials here and in other countries laid plans through the weekend to head off a Monday market meltdown -- but went out of their way to keep their moves quiet.
Federal Reserve Chairman Alan Greenspan was on the telephones, making it clear to officials in the U.S. and abroad that the Fed was prepared to inject massive amounts of money into the banking system, as it did in October 1987, if the action were needed to prevent a financial crisis.
And at the Treasury, Secretary Nicholas Brady talked with friends and associates on Wall Street while Assistant Secretary David Mullins carefully analyzed data on the Friday market plunge.
But the officials feared that any public announcements would only increase market jitters.
In addition, officials at the Fed and in the Bush administration decided that avoiding overt actions and statements over the weekend would give them more strength and flexibility should Friday's market drop turn into this morning's rout.
"The disadvantage at this point is that anything you do that looks like you are doing too much tends to reinforce a sense of crisis," said one government official, insisting on anonymity.
The Fed's efforts at secrecy were partly foiled Sunday morning, when both the New York Times and the Washington Post carried stories quoting a senior Fed official saying the central bank was prepared to pour cash into the banking system Monday morning.
Fed Chairman Greenspan was surprised by both stories, according to knowledgeable sources, and insisted he hadn't authorized any public comment.
Nevertheless, Fed officials acknowledged the stories were reasonably accurate portrayals of the central bank's game plan.
It is prepared to assume the same role it played in October 1987, providing money to the markets if necessary to keep the financial system afloat.
The Fed provides money to the banking system by buying government securities from financial institutions.
The reticence of federal officials was evident in the appearance Sunday of Budget Director Richard Darman on ABC's "This Week."
"Secretary of the Treasury Brady and Chairman Greenspan and the chairman of the SEC and others have been in close contact.
I'm sure they'll do what's right, what's prudent, what's sensible," he said.
When it was suggested his comment was a "non-answer," Mr. Darman replied: "It is a non-answer.
But, in this context, that's the smart thing to do."
At the Treasury, Secretary Brady issued a statement minimizing the stock market's drop.
"Today's stock market decline doesn't signal any fundamental change in the condition of the economy," he said.
"The economy remains well-balanced, and the outlook is for continued moderate growth."
But administration officials conceded that Friday's drop carried the chance of further declines this week.
"One possibility is that this is a surgical setback, reasonably limited in its breadth, and not a major problem," said one senior administration official, who also asked that he not be named.
"The other is that we see another major disaster, like two years ago.
I think that's less likely."
Nevertheless, Fed Chairman Greenspan and Vice Chairman Manuel Johnson were in their offices Sunday evening, monitoring events as they unfolded in markets around the world.
The action was expected to begin with the opening of the New Zealand foreign exchange markets at 5 p.m. EST -- when stocks there plunged -- and to continue as the trading day began later in the evening in Tokyo and through early this morning in Europe.
Both the Treasury and the Fed planned to keep market rooms operating throughout the night to monitor the developments.
In Tokyo, share prices dropped sharply by 1.7% in early Monday morning trading.
After the initial slide, the market appeared to be turning around but by early afternoon was headed lower.
In the Bush administration, the lead is being taken by Treasury Secretary Brady, Undersecretary Robert Glauber and Assistant Secretary Mullins.
The three men worked together on the so-called Brady Commission, headed by Mr. Brady, which was established after the 1987 crash to examine the market's collapse.
As a result they have extensive knowledge in financial markets, and financial market crises.
Mr. Brady was at the White House Friday afternoon when the stock market's decline began.
He was quickly on the phone with Mr. Mullins, who in turn was talking with the chairmen of the New York and Chicago exchanges.
Later, Mr. Brady phoned Mr. Greenspan, SEC Chairman Richard Breeden and numerous contacts in New York and overseas.
Aides say he continued to work the phones through the weekend.
Administration officials say President Bush was briefed throughout Friday afternoon and evening, even after leaving for Camp David.
He had frequent telephone consultations with Mr. Brady and Michael Boskin, chairman of the counsel of economic advisers.
Government officials tried throughout the weekend to render a business-as-usual appearance in order to avoid any sense of panic.
Treasury Undersecretary David Mulford, for instance, was at a meeting of the Business Council in Hot Springs, Va., when the stock market fell, and remained there through the following day.
And as of last night, Fed Chairman Greenspan hadn't canceled his plans to address the American Bankers Association convention in Washington at 10 a.m. this morning.
Ironically, Mr. Greenspan was scheduled to address the same convention in Dallas on Oct. 20, 1987.
He flew to Dallas on Oct. 19, when the market plummeted 508 points, but then turned around the next morning and returned to Washington without delivering his speech.
Following is a weekly listing of unadited net asset values of publicly traded investment fund shares, reported by the companies as of Friday's close.
Also shown is the closing listed market price or a dealer-to-dealer asked price of each fund's shares, with the percentage of difference.
b-As of Thursday's close.
c-Translated at Commercial Rand exchange rate.
e-In Canadian dollars.
f-As of Wednesday's close.
g-10.06.89 NAV:22.15.
z-Not available.
Put down that phone.
Walk around the room; take two deep breaths.
Resist the urge to call your broker and sell all your stocks.
That's the advice of most investment professionals after Friday's 190-point drop in the Dow Jones Industrial Average.
No one can say for sure what will happen today.
And investment pros are divided on whether stocks will perform well or badly in the next six months.
But they're nearly unanimous on one point: Don't sell into a panic.
Investors who sold everything after the crash of 1987 lived to regret it.
Even after Friday's plunge, the Dow Jones Industrial Average was 48% above where it landed on Oct. 19 two years ago.
Panic selling also was unwise during other big declines in the past.
The crash of 1929 was followed by a substantial recovery before the great Depression and awful bear market of the 1930s began.
The "October massacres" of 1978 and 1979 were scary, but didn't lead to severe or sustained downturns.
Indeed, some pros see Friday's plunge, plus any further damage that might occur early this week, as a chance for bargain hunting.
"There has been a lot of emotional selling that presents a nice buying opportunity if you've got the cash," says Stephen B. Timbers, chief investment officer of Chicago-based Kemper Financial Services Inc.
But most advisers think the immediate course for individual investors should be to stand pat.
"When you see a runaway train," says Steve Janachowski, partner in the San Francisco investment advisory firm Brouwer & Janachowski, "you wait for the train to stop."
Even for people who expect a bear market in coming months -- and a sizable number of money managers and market pundits do -- the advice is: Wait for the market to bounce back, and sell shares gradually during rallies.
The best thing individual investors can do is "just sit tight," says Marshall B. Front, executive vice president and head of investment counseling at Stein Roe & Farnham Inc., a Chicago-based investment counseling firm that manages about $18 billion.
On the one hand, Mr. Front says, it would be misguided to sell into "a classic panic."
On the other hand, it's not necessarily a good time to jump in and buy.
"This is all emotion right now, and when emotion starts to run, it can run further than anyone anticipates," he said.
"So it's more prudent to wait and see how things stabilize."
Roger Ibbotson, professor of finance at Yale University and head of the market information firm Ibbotson Associates Inc., says, "My real advice would be to just ride through it.
Generally, it isn't wise to be in and out" of the stock market.
Mr. Ibbotson thinks that this week is "going to be a roller-coaster week."
But he also thinks it is "a good week to consider buying."
John Snyder, former president of the Los Angeles chapter of the National Association of Investors Corp., an organization of investment clubs and individual investors, says his fellow club members didn't sell in the crash of 1987, and see no reason to sell now.
"We're dedicated long-term investors, not traders," he says.
"We understand panics and euphoria.
And we hope to take advantage of panics and buy stocks when they plunge."
One camp of investment pros sees what happened Friday as an opportunity.
Over the next days and weeks, they say, investors should look for stocks to buy.
Friday's action "was an old-fashioned panic," says Alfred Goldman, director of technical market analysis for A.G. Edwards & Sons in St. Louis.
"Stocks were being thrown out of windows at any price."
His advice: "You ought to be there with a basket catching them."
James Craig, portfolio manager for the Denver-based Janus Fund, which has one of the industry's better track records, started his buying during Friday's plunge.
Stocks such as Hershey Foods Corp., Wal-Mart Stores Inc., American International Group Inc. and Federal National Mortgage Association became such bargains that he couldn't resist them, he says.
And Mr. Craig expects to pick up more shares today.
"It will be chaotic at first, but I would not be buying if I thought we were headed for real trouble," he says.
He argues that stocks are reasonably valued now, and that interest rates are lower now than in the fall of 1987.
Mr. Front of Stein Roe suggests that any buying should "concentrate in stocks that have lagged the market on the up side, or stocks that have been beaten down a lot more than the market in this correction."
His firm favors selected computer, drug and pollution-control stocks.
Other investment pros are more pessimistic.
They say investors should sell stocks -- but not necessarily right away.
Many of them stress that the selling can be orderly, gradual, and done when stock prices are rallying.
On Thursday, William Fleckenstein, a Seattle money manager, used futures contracts in his personal account to place a bet that the broad market averages would decline.
He thinks the underlying inflation rate is around 5% to 6%, far higher than most people suppose.
In the pension accounts he manages, Mr. Fleckenstein has raised cash positions and invested in gold and natural gas stocks, partly as an inflation hedge.
He thinks government officials are terrified to let a recession start when government, corporate and personal debt levels are so high.
So he thinks the government will err on the side of rekindled inflation.
As a result, Mr. Fleckenstein says, "I think the ball game's over," and investors are about to face a bear market.
David M. Jones, vice president at Aubrey G. Lanston & Co., recommends Treasury securities (of up to five years' maturity).
He says the Oct. 6 employment report, showing slower economic growth and a severe weakening in the manufacturing sector, is a warning sign to investors.
One strategy for investors who want to stay in but hedge their bets is to buy "put" options, either on the individual stocks they own or on a broad market index.
A put option gives its holder the right (but not the obligation) to sell a stock (or stock index) for a specified price (the strike price) until the option expires.
Whether this insurance is worthwhile depends on the cost of an option.
The cost, or premium, tends to get fat in times of crisis.
Thus, buying puts after a big market slide can be an expensive way to hedge against risk.
The prices of puts generally didn't soar Friday.
For example, the premium as a percentage of the stock price for certain puts on Eli Lilly & Co. moved up from 3% at Thursday's close to only 3.3% at Friday's close, even though the shares dropped more than $5.50.
But put-option prices may zoom when trading resumes today.
It's hard to generalize about a reasonable price for puts.
But investors should keep in mind, before paying too much, that the average annual return for stock holdings, long-term, is 9% to 10% a year; a return of 15% is considered praiseworthy.
Paying, say, 10% for insurance against losses takes a deep bite out of the return.
James A. White and Tom Herman contributed to this article.
Coldwell Banker Commercial Group said it sold $47 million of common stock to its employees at $10 a share, giving them a total stake of more than 40% in the commercial real estate brokerage firm.
The firm, which was acquired in April from Sears, Roebuck & Co. in a management-led buy-out, had planned to sell up to $56.4 million of stock, or a 50% stake in the company, to its 5,000 employees.
Though the offering didn't sell out, James J. Didion, chairman and chief executive officer, said, "We're pretty proud of the employees' response."
He noted that unlike an employee stock ownership plan, where a company usually borrows money from third party lenders to buy stock that it sets aside to award employees over time, here employees had to fork out their own cash for the stock.
"They came up with their own money instead of borrowed money," Mr. Didion said.
"It's totally different."
He said the offering was designed to create long-term incentives for employees.
"We're in a service business, and in that context, it's vital to have your employees involved in the ownership so they have a stake in the success."
The brokerage firm won't pay a dividend on the stock.
Employees have the right to trade stock among themselves, and the company will establish an internal clearing house for these transactions.
They may also eventually sell the shares to third parties, but the outside investors who own the remaining 60% of Coldwell Banker have the right to first refusal.
Those outside investors in Coldwell Banker include Carlyle Group, a closely held Washington, D.C., merchant banking firm whose co-chairman is Frank Carlucci, former secretary of defense; Frederic V. Malek, senior adviser to Carlyle Group; Mellon Family Trust of Pittsburgh; Westinghouse Credit Corp., the financial services unit of Westinghouse Electric Corp.; Bankers Trust Co., a unit of Bankers Trust New York Corp.; and a group of Japanese investors represented by the investment banking unit of Tokyo-based Sumitomo Bank.
Bankers Trust and Sumitomo financed the $300 million acquisition from Sears Roebuck.
Coldwell Banker also named three outside director nominees for its 17 member board.
The nominees are Gary Wilson, chief financial officer of Walt Disney Co.; James Montgomery, chief executive officer of Great Western Financial Corp.; and Peter Ubberroth, former commissioner of baseball and now a private investor.
The first major event this morning in U.S. stock and futures trading may be a pause at the Chicago Mercantile Exchange.
Under a reform arising from the 1987 crash, trading in the Merc's stock-index futures will break for 10 minutes if the contract opens and stays five points from Friday's close, a move equal to 40 points on the Dow Jones Industrial Average.
The aim of the interruption would be to ease the opening of the New York Stock Exchange, which would be hammered by such a volatile move on the Merc.
That early-morning breather is just one of a number of safeguards adopted after the 1987 crash.
The Big Board also added computer capacity to handle huge surges in trading volume.
Several of those post-crash changes kicked in during Friday's one-hour collapse and worked as expected, even though they didn't prevent a stunning plunge.
But the major "circuit breakers" have yet to be evaluated.
A deeper market plunge today could give them their first test.
A further slide also would resurrect debate over a host of other, more sweeping changes proposed -- but not implemented -- after the last crash.
Most notably, several of the regulatory steps recommended by the Brady Task Force, which analyzed the 1987 crash, would be revived -- especially because that group's chairman is now the Treasury secretary.
The most controversial of the Brady recommendations involved establishing a single overarching regulator to handle crucial cross-market questions, such as setting consistent margin requirements for the stock and futures markets.
But for the moment, attention focuses on the reforms that were put into place, and market regulators and participants said the circuit breakers worked as intended.
Big Board and Merc officials expressed satisfaction with the results of two limits imposed on of the Merc's Standard & Poor's 500 contract, as well as "hot-line" communications among exchanges.
Those pauses -- from 2:07 p.m. to 2:30 p.m. CDT and from 2:45 p.m. until the close of trading a half-hour later -- forced traders to buy and sell contracts at prices at or higher than their frozen levels.
During the first halt, after the S&P index had fallen 12 points, the Big Board's "Sidecar" computer program automatically was triggered.
That system is designed to separate computer-generated program trades from all other trades to help exchange officials resolve order imbalances in individual stocks.
One Merc broker compared the action in the S&P pit during the two freezes to a fire at a well-drilled school.
"You don't want the fire but you know what to do," said Howard Dubnow, an independent floor broker and a Merc governor.
"There was no panic.
The system worked the way we devised it to work."
After reopening for about 15 minutes, the S&P index tumbled to its 30-point limit and the second freeze went into effect.
Traders then spent the last half-hour "watching to see if the Dow would drop 250 points," Mr. Dubnow added, referring to the level at which the stock market itself would have closed for an hour.
One observer estimated that 80% to 90% of the S&P traders "were just standing around watching."
But the 250-point circuit breaker never had to kick in, and freezes on the Chicago Board of Trade's Major Market Index also weren't triggered.
The MMI and the S&P 500 are the two major indexes used by program traders to run their computerized trading strategies.
The programs are considered by many to be a major cause of the 1987 crash.
The process of post-crash reforms began with calls to remake the markets and wound up a year later with a series of rather technical adjustments.
In October 1987, just after the market drop, Washington was awash in talk of sweeping changes in the way the financial markets are structured and regulated.
Over the next year that grand agenda was whittled down to a series of steps to soften big stock drops by interrupting trading to give market players time to pause and reconsider positions.
In addition, limits were placed on computer-driven trading, and steps were taken to better link the stock and futures markets.
Few changes were made in the way the markets are regulated.
At the outset the prime target was program trading, which was much discussed but little understood on Capitol Hill.
There were also calls to strip the stock markets of "derivative" products, such as stock-index futures and options, which Federal Judge Stanley Sporkin, for example, likened to "barnacles attached to the basic market."
And there was much criticism of the New York Stock Exchange's system of having stock trades flow through specialists, or market makers.
When the Brady Task Force's powerful analysis of the crash was released in January 1988, it immediately reshaped the reformers' agenda.
Arguing that the separate financial marketplaces acted as one, and concluding that the crash had "raised the possibility of a full-scale financial system breakdown," the presidential task force called for establishing a super-regulator to oversee the markets, to make margins consistent across markets, to unify clearing systems and to install circuit breakers.
Only the last of those recommendations ever was implemented.
The Reagan White House held the Brady recommendations at arm's length and named a second panel -- the Working Group on the Financial Markets -- to review its analysis and those of other crash studies.
In May 1988, the Working Group, made up of representatives from the Federal Reserve, the Treasury, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, finally endorsed only circuit breakers.
After several more months of arguments among various stock exchanges and futures markets, circuit breakers were set in place, with the most notable suspending trading after 250 and 400 point drops in the Dow Jones Industrial Average.
Privately, some free marketeers dismissed such mechanisms as sops to interventionists.
After all, this free-market argument went, the Dow only dropped more than 250 points once this century.
"Circuit breakers" set to soften big drops:
-- If S&P futures fall 5 points at opening, contract trading pauses for 10 minutes.
-- If Dow Industrials fall 25 points at opening, contract trading pauses for 10 minutes.
-- If S&P futures fall 12 points (equivalent to about 100 points on DJIA), trading is frozen for half hour to that price or higher.
On NYSE program trades are diverted into a separate computer file to determine buy and sell orders.
-- If S&P futures fall 30 points, trading is restricted for an hour to that price or higher.
-- If Dow Industrials fall 250 points, trading on the Big Board halts for an hour.
S&P and MMI contracts also halt.
-- If DJIA drops 400 points, Big Board halts trading for two hours.
Trading in MMI and S&P futures also halted.
Brady Task Force recommendations (Jan. 1988):
-- Establish an overarching regulator for financial markets
-- Unify trade-clearing systems
-- Make margins consistent across stock and futures markets
SEC proposals (May 1988):
-- Require prompt reports of large securities trades.
-- Give SEC authority to monitor risk-taking by affiliates of brokerage firms.
-- Transfer jurisdiction over stock-related futures to SEC from CFTC.
(Opposed by new SEC chairman)
-- Give SEC authority to halt securities trading, (also opposed by new SEC chairman).
Congressional proposal:
-- Create a task force to review current state of the securities markets and securities laws.
Breaking the Soviet government's television monopoly, an independent company has gained rights to show world programming, including American films.
"There must not be a monopoly, there must be freedom of choice for both journalists and viewers," Nikolai I. Lutsenko, the president of the Nika TV company, told the weekly newspaper Nedelya.
The company is already working on its own programming in several provincial cities and hopes to be on the air regularly in about a year, the newspaper said.
Mr. Lutsenko told Nedelya that he recently had been to the U.S. to pick up the rights to show 5,000 U.S. films in the Soviet Union.
Nedelya's article was accompanied by a picture of Mr. Lutsenko interviewing singer John Denver in Colorado.
Even though it will be independent of official television, Nika will have an oversight board that will include members of the Communist youth league.
South Africa's National Union of Mineworkers said that about 10,000 diamond miners struck for higher wages at De Beers Consolidated Mines Ltd.
De Beers said that workers at five of the group's mines were on strike, which it said was peaceful, with orderly picketing occurring at one of the mines.
The deadlock in negotiations occurred with De Beers offering a 17% increase in the minimum-wage category while the union demanded a 37.6% increase in the minimum wage.
Japan's opposition Socialist Party denied that its legislators had been bribed by pinball-parlor owners.
The allegation had been raised in Parliament by the governing Liberal Democratic Party following magazine reports suggesting that money from Japanese-style pinball, called pachinko, had infiltrated politics.
Tsuruo Yamaguchi, secretary general of the Socialist Party, acknowledged that nine party lawmakers had received donations from the pachinko association totaling 8 million yen (about $55,000) but said the donations were legal and none of its members acted to favor the industry.
The World Wide Fund for Nature said that Spain, Argentina, Thailand and Indonesia were doing too little to prevent illegal trade in endangered wildlife across their borders.
A report by the conservation group presented at the U.N.-sponsored Convention on International Trade in Endangered Species in Lausanne accused the four of trading protected species ranging from parakeets to orchids.
Fund official Simon Lyster said world trade in wildlife was estimated to total $5 billion of business annually.
A NATO project to build a frigate for the 1990s was torpedoed by the pull-out of three of its eight participating nations.
Britain, France and Italy announced technical reasons for withdrawing, but some officials pointed to growing reluctance among the allies to commit themselves to big defense spending while East-West disarmament talks show signs of success.
Small wonder that Britain's Labor Party wants credit controls.
A few hours after the party launched its own affinity credit card earlier this month, the Tories raised the nation's base interest rate.
Labor's Visa card is believed to be the first linked to a British political party.
Labor gets 25 pence (39 cents) for every 100 (about $155) that a user charges to the card.
As with other plastic in Britain's high-interest-rate environment, the Labor card, administered by Co-operative Bank, carries a stiff (in this case, 29.8%) annual rate on the unpaid balance.
China's year-long austerity program has achieved some successes in harnessing runaway economic growth and stabilizing prices but has failed to eliminate serious defects in state planning and an alarming drain on state budgets.
The official China Daily said retail prices of non-staple foods haven't risen since last December but acknowledged that huge government subsidies were a main factor in keeping prices down.
The State Statistical Bureau found that more than 1 billion yuan ($270 million) was spent in the first half of the year for pork subsidies.
The newspaper quoted experts as saying the subsidies would cause the difference between prices and real values of commodities to "become very unreasonable" and reduce needed funds for investment in the "already difficult state budget."
The aim of the austerity measures was to slice economic growth, which soared to 20.7% last year, to 8% in 1990.
Economists now predict the growth rate will be about 11.5% for the year.
In a sign of growing official tolerance for religion, Russian Orthodox priests were allowed to celebrate the 400th anniversary of the Moscow patriarchate in the Kremlin's 15th-century Uspensky Cathedral, where czars were crowned. . . .
A 34-foot-tall, $7.7 million statue of Buddha was completed on a hill outside Hong Kong, facing China.
The statue is the brainchild of Sik Chi Wan, director of the Po Lin Monastery, who said: "Hong Kong is such a prosperous place, we also need some kind of religious symbol.
It all seemed innocent enough: Last April, one Steven B. Iken visited Justin Products Inc. here, identified himself as a potential customer and got the word on the little company's new cassette players for children.
"It is almost identical to the Sony product," Mr. Iken remarked, after seeing prototypes and pictures.
Replied a Justin salesman: "Exactly."
The Justin merchandise carried wholesale prices some 40% below those of Sony Corp. of Japan's "My First Sony" line.
The visitor waxed enthusiastic and promised to return.
But instead of a new customer -- part of a hoped-for bonanza from underselling Sony -- Justin got a costly legal morass.
Mr. Iken, it turned out, was a private detective using a hidden tape recorder to gather information for Sony.
His recording later turned up as a court exhibit.
Seeking to keep Justin's "My Own" product line off the U.S. market, Sony last May filed a suit in Manhattan federal court accusing the upstart of trademark infringement, unfair competition and other violations of business law.
Since then, life has changed a lot for 61-year-old Leonard Kaye, Justin's owner.
"I haven't been able to get a decent night's sleep since this has been going on," he says.
"It's the most distracting thing in my life -- I can't even attend to my business."
His company (annual sales: about $25 million) may suffer a costly blow -- losing an estimated 10% of total sales -- if Sony (annual sales: about $16 billion) prevails.
Justin's plight shows what can happen when a tiny company suddenly faces the full legal might of a wrathful multinational.
With considerable irony, the case also shows how completely Japan has turned the tables on U.S. business.
Americans used to complain bitterly about being undersold by look-alike products from Japan.
Now Sony, whose innovative, premium-priced products are among the most admired in consumer electronics, is bitterly complaining about a little U.S. firm with a cheap look-alike produced in China.
"The gist of this is that Justin knocked off the Sony line and Sony wants to stop it," says Lewis H. Eslinger, Sony's attorney, who previously guarded Rubik's Cube.
(Sony itself declines to comment.)
If Sony wins, Mr. Eslinger says, its little rival will have to try to sell the products overseas.
At worst, he adds, "They'd have to grind them all up and throw them away."
Mr. Kaye denies the suit's charges and says his only mistake was taking on Sony in the marketplace.
"I made a similar line and I produced it cheaper," he says.
Today, U.S. Judge John E. Sprizzo is expected to rule on Sony's renewed request for a pre-trial order blocking sale of the disputed products, on which deliveries began in July.
The judge turned down an earlier Sony request for such an order -- a decision upheld on appeal -- but Sony returned with additional evidence and arguments.
Though hoping to settle the case, Justin vows to fight on, if necessary.
But the battle is more than Justin bargained for.
"I had no idea I was getting in so deep," says Mr. Kaye, who founded Justin in 1982.
Mr. Kaye had sold Capetronic Inc., a Taiwan electronics maker, and retired, only to find he was bored.
With Justin, he began selling toys and electronics made mostly in Hong Kong, beginning with Mickey Mouse radios.
The company has grown -- to about 40 employees, from four initially, Mr. Kaye says.
Justin has been profitable since 1986, adds the official, who shares his office with numerous teddy bears, all samples from his line of plush toys.
Like many others, Mr. Kaye took notice in 1987 when Sony, in a classic example of market segmentation, changed the plastic skin and buttons on the famous Walkman line of portable audio equipment and created the My First Sony line for children.
The brightly colored new products looked more like toys than the adult models.
(In court papers, Sony says it has spent more than $3 million to promote the line, with resulting sales of over a million units.)
Sony found a new market niche, but Mr. Kaye figured that its prices left plenty of room for a lower-priced competitor.
His products aren't exact copies of Sony's but strongly resemble them in size, shape and, especially, color.
Sony uses mostly red and blue, with traces of yellow -- and so does Justin, on the theory that kids prefer these colors.
("To be successful, a product can be any color whatsoever, as long as it is fire-engine red," says Charles E. Baxley, Justin's attorney.)
By last winter, Justin was showing prototypes at toy fairs in Hong Kong and New York -- and Sony noticed.
Indeed, concerned that Sony sales personnel were threatening legal action or other retaliation -- such as withholding desirable Sony products -- against Justin's customers, Mr. Baxley fired off a letter to Sony in April.
He himself threatened to take the matter to the Federal Trade Commission or U.S. Justice Department.
But Justin hasn't pursued those charges (which were without merit, according to Mr. Eslinger, the Sony attorney).
Recalls Mr. Baxley: "Our purpose was to influence them to leave us alone.
We never intended taking on Sony -- we don't have the resources."
Sony answered the empty threat with its real suit.
Off and on since then, the companies have skirmished in court.
And Justin, in a news release, says, "Once competitive, Sony now resorts to strong-arm tactics in American courtrooms to carve out and protect niche markets."
Sony's lawyer insists that the company's tactics -- including the use of a private detective posing as a buyer -- are routine in such matters.
He also insists that Sony, no less than others, has a legal right to protect its "trade dress," in this case, mostly the colors that it claims make My First Sony products distinctive.
(Justin claims it began using the same colors on electronic goods for children long before Sony entered the children's market.)
Whatever its merits, Sony's aggressive defense is debilitating for Justin.
It's also costly.
Mr. Kaye says he has paid more than $70,000 in legal fees so far.
Of Sony, Mr. Kaye says: "They know there's no way for them to lose.
They just keep digging me in deeper until I reach the point where I give up and go away."
For now, though, he vows to hang in.
@ Charles H. Tenney II, chairman of Unitil Corp., purchased 34,602 shares, or 4.9%, of Unitil's common, according to a filing with the Securities and Exchange Commission.
The stock was bought on Thursday in a privately negotiated transaction, the filing said.
As previously reported, Unitil, Exeter, N.H., and Fitchburg Gas & Electric Co., Fitchburg, Mass., are targets of unsolicited tender offers from Boston-based Eastern Utilities Associates.
Eastern Utilities has offered $40 a share for Unitil and $36 a share for Fitchburg Gas and has extended both offers to Dec. 4.
Both companies rejected the offers.
Dresdner Bank AG of West Germany has announced a friendly tender offer for control of Banque Internationale de Placements, a French bank whose main shareholder is France's Societe Generale, the Societe de Bourses Francaises said.
The tender offer by West Germany's second-biggest commercial bank is in two stages.
Dresdner is offering to acquire 32.99% of BIP's capital for 1,015 francs ($156.82) a share.
The terms of the offer put a value of 528 million francs ($81.6 million) on the 32.99% shareholding.
The Societe Generale banking group controls 18.2% of the shareholding, while Societe Generale de Belgique S.A. owns 9.69% and Financiere Tradition, a holding company, owns 5.1%.
Mexican investor Joel Rocha Garza said he sold a block of 600,000 shares of Smith Laboratories Inc. common stock to companies affiliated with him.
In a filing with the Securities and Exchange Commission, Mr. Rocha Garza said Biscayne Syndicate Inc., Lahus II Inc., and Lahus III Inc. bought the 600,000 shares on Oct. 11 for $1.4 million, or $2.375 a share.
Mr. Rocha Garza said that he, Clarendon Group Ltd., Biscayne, Lahus II, and Lahus III are all affiliated and hold a combined stake of 1,234,100 shares, or 9.33%.
Mr. Rocha Garza has said he wants to purchase more shares.
In San Diego, Smith Laboratories President Timothy Wollaeger said the transfer of the shares isn't significant.
Investcorp, New York, said it and the management of Sports & Recreation Inc. bought the operator of the 10-store Sports Unlimited chain for some $40 million.
The investment bank becomes majority shareholder in Sports & Recreation, a 10-year-old sporting goods retailer, said Oliver E. Richardson, a member of Investcorp's management committee and a director of the chain.
Sports Unlimited, Tampa, Fla., posted revenue of $59 million for the year ended July 31.
The company is "very profitable" on an operating basis, Mr. Richardson said, but he declined to specify numbers.
In 1982, Sports & Recreation's managers and certain passive investors purchased the company from Brunswick Corp. of Skokie, Ill.
In the latest transaction, management bought out the passive investors' holding, Mr. Richardson said.
Hammond Co., Newport Beach, Calif., said Fidelity National Financial Inc. extended its previous agreement, under which it won't purchase any more of the mortgage banker's common stock, through Oct. 31.
The previous agreement expired Thursday.
Hammond said that its discussions with Fidelity, an Irvine, Calif., title-insurance underwriter, are continuing, but that prospects for a longer-term standstill agreement are uncertain.
Fidelity has increased its stake in Hammond to 23.57% in recent months.
Statements made in Securities and Exchange Commission filings led Hammond to request a standstill agreement.
Giant Group Ltd. said it terminated negotiations for the purchase of Aspen Airways, a Denver-based regional carrier that operates the United Express connector service under contract to UAL Corp.'s United Airlines.
Giant, a Beverly Hills, Calif., collection of companies that is controlled by Hollywood producer Burt Sugarman, didn't give a reason for halting its plan to acquire the airline, and Aspen officials couldn't be reached for comment.
Giant agreed last month to purchase the carrier.
Giant hasn't ever disclosed the proposed price, although Avmark Inc., an Arlington, Va.-based aircraft consulting concern, has valued Aspen's fleet at about $46 million.
The airline would have become the latest in a peculiar blend of Giant companies, which are involved in making cement, recycling newsprint and operating fast-food restaurants.
The state-controlled insurer Assurances Generales de France said it has obtained regulatory approval to increase its stake in the financial holding company Cie. de Navigation Mixte above 10% from the current level of about 8%.
Friday's approval was needed to conform with Bourse rules regarding companies with bank interests and follows a similar approval given Wednesday to Cie. Financiere de Paribas.
Both Paribas and AGF have been increasing their stakes in Navigation Mixte recently for what they have termed "investment purposes," although the issue has been surrounded by takeover speculation in recent weeks.
AGF didn't comment officially on its reasons for seeking the approval, but people close to the group said it was done to make sure the group would have the flexibility to increase its stake in the future, should interesting price opportunities arise.
An AGF official did specify, however, that there was no foundation to recent rumors the group might be acting in concert with Paribas.
Lockheed Aeronautical Systems Co., a unit of Lockheed Corp., said it agreed to join with Aermacchi S.p.A. of Varese, Italy, to propose a new generation of jet trainers for the U.S. Air Force.
The Air Force is looking to buy 540 new primary jet trainers, with a total value of $1.5 billion to $2 billion, between 1994 and 2004.
The aircraft would replace the T-37, made by the Cessna Aircraft Co. unit of General Dynamics Corp., which the Air Force uses to train jet pilots.
Lockheed said the U.S. Navy may also buy an additional 340 trainer aircraft to replace its T34C trainers made by the Beech Aircraft Corp. unit of Raytheon Corp.
Under the agreement with Lockheed, Aermacchi will license Lockheed to build the Aermacchi MB-339 jet tandem-trainer and will supply certain structures.
Lockheed will build additional structures and perform final assembly of the tandem-seat trainer at its Marietta, Ga., plant should the Air Force order the craft.
A Lockheed spokesman in Burbank, Calif., said he wasn't aware of which other companies would be competing for the Air Force contract.
Striking auto workers ended their 19-day occupation of a metal shop at a Peugeot S.A. factory in eastern France Friday as pay talks got under way in the capital.
But the Peugeot breakthrough came as a nationwide dispute by Finance Ministry employees disrupted border checkpoints and threatened the government's ability to pay its bills.
The Peugeot metalworkers began filing out of the shop, which makes auto parts, at the plant in Mulhouse after voting 589 to 193 to abandon the occupation.
Their withdrawal was based on promises by Peugeot to open negotiations in Paris at the same time the last man left the premises.
The strike by customs officers, tax collectors, treasury workers and other civil servants attached to the Ministry of Finance may pose a more serious challenge to the government and the average Frenchman.
Ministry employees complain that they are poorly paid because of a complex job-rating system they say fails to take into account their education and level of technical expertise.
The market for $200 billion of high-risk junk bonds, battered by a succession of defaults and huge price declines this year, practically vanished Friday.
Trading ground to a halt as investors rushed to sell bonds, only to find themselves deserted by potential buyers.
Stunned, they watched brokerage houses mark down price quotations on their junk holdings while being able to execute very few actual trades.
"The junk bond market is in a state of gridlock now -- there are no bids, only offers," says independent investor Martin D. Sass, who manages nearly $4 billion and who recently decided to buy distressed securities for a new fund.
This calamity is "far from over," he says.
Junk's collapse helped stoke the panicky selling of stocks that produced the deepest one-day dive in the Dow Jones Industrial Average since the Oct. 19, 1987, crash.
Simultaneously, it also helped trigger this year's biggest rally in the U.S. government bond market as investors rushed to move capital into the highest-quality securities they could find.
But "an eerie silence pervaded" the junk market Friday as prices tumbled on hundreds of high-yield bonds despite "no active trading," says John Lonski, an economist at Moody's Investors Service Inc.
For example, the price of Southland Corp.'s $500 million of 16 3/4% bonds due 2002 -- sold less than two years ago by Goldman, Sachs & Co. -- plummeted 25% to just 30 cents on the dollar.
But not even Goldman would make a market in the securities of Southland, the owner of the nationwide chain of 7-11 convenience stores that is strapped for cash.
Goldman officials declined to comment.
Junk bonds, which mushroomed from less than $2 billion at the start of this decade, have been declining for months as issuer after issuer sank beneath the weight of hefty interest payments.
The shaky market received its biggest jolt last month from Campeau Corp., which created its U.S. retailing empire with junk financing.
Campeau developed a cash squeeze that caused it to be tardy on some interest payments and to put its prestigious Bloomingdales department-store chain up for sale.
Now, dozens of corporations, including Ethan Allen, TW Services and York International, that are counting on at least $7 billion of scheduled new junk financings to keep their highly leveraged takeovers and buy-outs afloat, may never get the money.
"The music has stopped playing," says Michael Harkins, a principal in the investment firm of Levy Harkins.
"You've either got a chair or you don't."
In Friday's aftermath, says R. Douglas Carleton, a director of high-yield finance at First Boston Corp., "much of the $7 billion forward calendar could be deferred, depending on the hysteria."
In August, First Boston withdrew a $475 million junk offering of Ohio Mattress bonds because potential buyers were "very skittish."
The outlook "looks shaky because we're still waiting" for mutual funds, in particular, to dump some of their junk bond holdings to pay off redemptions by individual investors, says King Penniman, senior vice president at McCarthy, Crisanti & Maffei, an investment arm of Xerox Financial Services.
Indeed, a Moody's index that tracks the net asset values of 24 high-yield mutual funds declined for the 17th consecutive day Friday.
In a stark contrast, the benchmark 30-year Treasury bond climbed more than 2 1/2 points, or about $25 for each $1,000 face amount, to 103 12/32, its biggest gain of the year.
The bond's yield dropped to 7.82%, the lowest since March 31, 1987, according to Technical Data Global Markets Group.
The yield on three-month Treasury bills, considered the safest of all investments, plummeted about 0.7 percentage point to 7.16%, the largest one-day decline since 1982.
The main catalyst for government bond market rally was the 190.58-point drop in the Dow Jones Industrial Average.
"When you get panic in one market, you get flight to quality in the other," said Maria Ramirez, money market economist at Drexel Burnham Lambert Inc.
Nevertheless, the problems of the junk market could prompt the Federal Reserve to ease credit in the months ahead.
"This marks a significant shift in the interest rate outlook," says William Sullivan, director of money market research at Dean Witter Reynolds Inc., New York.
Any sustained credit-easing could be a lift for junk bonds as well as other securities.
Robert Dow, a partner and portfolio manager at Lord, Abbett & Co., which manages $4 billion of high-yield bonds, says he doesn't "think there is any fundamental economic rationale {for the junk bond rout}.
It was herd instinct."
He adds: "The junk market has witnessed some trouble and now some people think that if the equity market gets creamed that means the economy will be terrible and that's bad for junk.
I don't believe that's the case, but I believe that people are running scared.
There is a flight to quality, and the quality is not in equities and not in junk -- it's in Treasurys."
Even as trading in high-yield issues dried up over the past month, corporations sold more than $2 billion of new junk bonds.
For example, a recent $375 million offering of Petrolane Gas Services L.P. bonds sold by First Boston was three times oversubscribed.
A $550 million offering of Turner Broadcasting System Inc. high-yield securities sold last week by Drexel was increased $50 million because of strong demand.
First Boston estimates that in November and December alone, junk bond investors will receive $4.8 billion of coupon interest payments.
"That's a clear indication that there is and will be an undercurrent of basic business going on," says Mr. Carleton of First Boston.
"I don't know how people can say the junk bond market disappeared when there were $1.5 billion of orders for $550 million of junk bonds sold last week by Turner," says Raymond Minella, co-head of merchant banking at Merrill Lynch & Co.
"When the rally comes, insurance companies will be leading it because they have billions to invest and invest they will.
There is plenty of money available from people who want to buy well-structured deals; it's the stuff that's financed on a shoestring that people are wary of."
But such highly leveraged transactions seemed to have multiplied this year, casting a pall over much of the junk market.
Michael McNamara, director of fixed-income research at Kemper Financial Services, says the quality of junk issues has been getting poorer, contributing to the slide in prices.
"Last year we probably bought one out of every three new deals," he says.
"This year, at best, it's in one in every five or six.
And our credit standards haven't changed one iota."
However, Mr. McNamara said the slide in junk is creating "one hell of a buying opportunity" for selective buyers.
For the moment, investors seem more preoccupied with the "bad" junk than the "good" junk.
"The market has been weak since" the announcement of the Campeau cash squeeze and the company's subsequent bailout by Olympia & York, says Mr. Minella of Merrill Lynch.
"That really affected the market in that people started to ask 'What else is in trouble?'"
Well before Campeau, though, there were signs that the junk market was stumbling through one of its worst years ever.
Despite the relatively strong economy, junk bond prices did nothing except go down, hammered by a seemingly endless trail of bad news:
-- In June, two months before it would default on interest payments covering some of its $1.2 billion of speculative debt securities, New York-based Integrated Resources Inc. said it ran out of borrowed money.
-- In July, Southmark Corp., the Dallas-based real estate and financial services company with about $1.3 billion of junk bonds, voluntarily filed for protection under U.S. bankruptcy law.
-- By the end of July, the difference in yield between an index of junk bonds and seven-year Treasury notes widened to more than 5.5 percentage points.
-- In August, Resorts International Inc., which sold more than $500 million of junk bonds, suspended interest payments.
-- In September, just as the cash squeeze hit Campeau, Lomas Financial Corp. defaulted on $145 million of notes and appeared unlikely to pay interest on a total of $1.2 billion of debt securities.
Meantime, regulators are becoming increasingly worried as the rush to leverage shows no signs of abating.
Moody's says the frequency of corporate credit downgrades is the highest this year since 1982.
In addition, there are six times as many troubled banks as there were in the recession of 1981, according to the Federal Deposit Insurance Corp.
"The era of the 1980s is about compound interest and the reaching for it," says James Grant, editor of Grant's Interest Rate Observer, an early critic of the junk bond market.
"What we've begun to see is the damage to businesses of paying exorbitant compound interest.
Businesses were borrowing at interest rates higher than their own earnings.
What we're seeing now is the wrenching readjustment of asset values to a future when speculative-grade debt will be hard to obtain rather than easy."
Friday's Market Activity
Prices of Treasury bonds surged in the biggest rally of the year as investors fled a plummeting stock market.
The benchmark 30-year Treasury bond was quoted 6 p.m. EDT at 103 12/32, compared with 100 27/32 Thursday, up 2 1/2 points.
The yield on the benchmark fell to 7.82%, the lowest since March 31, 1987, according to Technical Data Global Markets Group.
The "flight to quality" began late in the day and followed a precipitous fall in the stock market.
Treasurys opened lower, reacting negatively to news that the producer price index -- a measure of inflation on the wholesale level -- accelerated in September.
Bond prices barely budged until midday.
Many bond market participants will be closely eying the action of the Federal Reserve, which might repeat its October 1987 injection of huge amounts of liquidity to buoy the financial markets and keep the economy from slowing into a recession.
Prices of municipals, investment-grade corporates and mortgage-backed bonds also rose, but lagged behind their Treasury counterparts.
Mortgage securities rose in hectic trading, with most of the activity concentrated in Government National Mortgage Association 9% coupon securities, the most liquid mortgage issue.
The Ginnie Mae November 9% issue ended at 98 25/32, up 7/8 point on the day, to yield about 9.28% to a 12-year average life assumption.
Investment-grade corporate bonds were up about 1/2 to 3/4 point.
But the yield spread between lower-quality, investment-grade issues and higher-quality bonds widened.
And the yields on telephone and utility issues rose relative to other investment-grade bonds in anticipation of this week's $3 billion bond offering by the Tennessee Valley Authority.
Despite rumors that the TVA's long-awaited offering would be postponed because of the debacle in the equity markets, sources in the underwriting syndicate said they expect the issue will be priced as scheduled.
One of the sources said the smaller portions of $750 million each of five-year and 10-year bonds have already been "substantially oversubscribed."
Municipal bonds rose as much as 3/4 point.
Roger Lowenstein contributed to this article.
Friday's 190-point plunge in stocks does not come atop the climate of anxiety that dominated financial markets just prior to their 1987 October crash, and mechanisms have been put in place to keep markets more orderly.
Still, the lesson is about the same: On Friday the 13th, the market was spooked by Washington.
The consensus along the street seems to be that the plunge was triggered by the financing problems of the UAL takeover, and it's certainly true the rout began immediately after the UAL trading halt.
Still, the consensus seems almost as wide that one faltering bid is no reason to write down the value of all U.S. business.
This observation leads us to another piece of news moving on the Dow Jones ticker shortly before the downturn: the success of Senate Democrats in stalling the capital gains tax cut.
The real value of all shares, after all, is directly impacted by the tax on any profits (all the more so given the limits on deductions for losses that show gains are not "ordinary income").
And market expectations clearly have been raised by the capital gains victory in the House last month.
An hour before Friday's plunge, that provision was stripped from the tax bill, leaving it with $5.4 billion in tax increases without a capital gains cut.
There is a great deal to be said, to be sure, for stripping the garbage out of the reconciliation bill.
It would be a good thing if Congress started to decide issues one-by-one on their individual merits without trickery.
For one thing, no one doubts that the capital gains cut would pass on an up-or-down vote.
Since Senate leaders have so far fogged it up with procedural smokescreens, promises of a cleaner bill are suspect.
Especially so since President Bush has been weakened by the Panama fiasco.
To the extent that the UAL troubles contributed to the plunge, they are another instance of Washington's sticky fingers.
As the best opportunities for corporate restructurings are exhausted of course, at some point the market will start to reject them.
But the airlines are scarcely a clear case, given anti-takeover mischief by Secretary of Transportation Skinner, who professes to believe safety will be compromised if KLM and British Airways own interests in companies that fly airplanes.
Worse, Congress has started to jump on the Skinner bandwagon.
James Oberstar, the Minnesota Democrat who chairs the Public Works and Transportation Committee's aviation subcommittee, has put an anti-airline takeover bill on supersonic speed so that it would be passed in time to affect the American and United Air Lines bids.
It would give Mr. Skinner up to 50 days to "review" any bid for 15% or more of the voting stock of any U.S. carrier with revenues of $1 billion or more.
So the UAL deal has problems, and the market loses 190 points.
Congratulations, Mr. Secretary and Mr. Congressman.
In the 1987 crash, remember, the market was shaken by a Danny Rostenkowski proposal to tax takeovers out of existance.
Even more important, in our view, was the Treasury's threat to thrash the dollar.
The Treasury is doing the same thing today; thankfully, the dollar is not under 1987-style pressure.
Also, traders are in better shape today than in 1987 to survive selling binges.
They are better capitalized.
They are in less danger of losing liquidity simply because of tape lags and clearing and settlement delays.
The Fed promises any needed liquidity.
The Big Board's liaison with the Chicago Board of Trade has improved; it will be interesting to learn if "circuit breakers" prove to be a good idea.
In any event, some traders see stocks as underpriced today, unlike 1987.
There is nothing wrong with the market that can't be cured by a little coherence and common sense in Washington.
But on the bearish side, that may be too much to expect.
First Chicago Corp. posted a third-quarter loss of $23.3 million after joining other big banks in further adding to its reserves for losses on foreign loans.
The parent company of First National Bank of Chicago, with $48 billion in assets, said it set aside $200 million to absorb losses on loans and investments in financially troubled countries.
The addition, on top of two big 1987 additions to foreign-loan reserves, brings the reserve to a level equaling 79% of medium-term and long-term loans outstanding to troubled nations.
First Chicago since 1987 has reduced its loans to such nations to $1.7 billion from $3 billion.
Despite this loss, First Chicago said it doesn't need to sell stock to raise capital.
During the quarter, the company realized a pretax gain of $60.4 million from the sale of its First Chicago Investment Advisors unit.
Combined foreign exchange and bond trading profits dipped 24% against last year's third quarter, to $38.2 million from $50.5 million.
Gains from First Chicago's venture capital unit, a big leveraged buy-out investor, rose 32% to $34 million from $25.7 million a year ago.
Interest income and most fee income was strong.
Greece's second bout of general elections this year is slated for Nov. 5.
For those hoping to see a modicum of political normalcy restored -- in view of Greece's eight-year misadventure under autocratic pseudosocialism and subsequent three-month hitch with a conservative-communist coalition government -- there is but one bright sign: The scandals still encircling former Prime Minister Andreas Papandreou and his fallen socialist government are like flies buzzing around a rotting carcass.
In the mid-June round of voting, Greeks gave no clear mandate to any single political party.
The ad interim coalition government that emerged from post-electoral hagglings was, in essence, little more than the ill-conceived offspring of ideological miscegenation: On one side, the center-right New Democracy Party, headed by Constantine Mitsotakis.
On the other, the so-called Coalition of the Left and Progress -- a quaint and rather deceptive title for a merger of the pro-Soviet Communist Party of Greece and its Euro-Communist cousin, the Hellenic Left.
The unifying bond for this left-right mismatch was plain: PASOK (Mr. Papandreou's party) as common political enemy.
The ostensible goal was a mop-up of government corruption, purportedly at all levels, but the main marks were Mr. Papandreou and his closest associates.
In point of fact, this catharsis was overdue by decades.
When reduced to buzzword status in ex parte pledges, however, the notion transmogrified into a promised assault, with targets primarily for political gains, not justice.
With regard to Greece's long-bubbling bank-looting scandal, Mr. Papandreou's principal accuser remains George Koskotas, former owner of the Bank of Crete and self-confessed embezzler, now residing in a jail cell in Salem, Mass., from where he is fighting extradition proceedings that would return him to Greece.
Mr. Koskotas's credibility is, at best, problematic.
He has ample motive to shift the blame, and his testimony has also been found less than forthright on numerous points.
Nevertheless, the New Democracy and Communist parties herald his assertions as proof of PASOK complicity.
Among unanswered questions are whether Mr. Papandreou received $23 million of stolen Bank of Crete funds and an additional $734,000 in bribes, as contended; whether the prime minister ordered state agencies to deposit some $57 million in Mr. Koskotas's bank and then skim off the interest; and, what PASOK's cut was from the $210 million Mr. Koskotas pinched.
Two former ministers were so heavily implicated in the Koskotas affair that PASOK members of Parliament voted to refer them to the special court.
But eluding parliamentary probe was the case of millions of drachmas Mr. Koskotas funneled into New Democracy coffers.
In the end, the investigation produced only circumstantial evidence and "indications" that point to PASOK, not clinching proof.
On another issue, Greeks were told how their national intelligence agency, the EYP, regularly monitored the telephone conversations of prominent figures, including key opposition politicians, journalists and PASOK cabinet members.
Despite convincing arguments, it was never established that Mr. Papandreou personally ordered or directed the wiretaps.
The central weakness of the "scandals" debates was pointed up especially well when discussions focused on arms deals and kickbacks.
The coalition government tried to show that PASOK ministers had received hefty sums for OKing the purchase of F-16 Fighting Falcon and Mirage 2000 combat aircraft, produced by the U.S.based General Dynamics Corp. and France's Avions Marcel Dassault, respectively.
Naturally, neither General Dynamics nor Dassault could be expected to hamper its prospective future dealings by making disclosures of sums paid (or not) to various Greek officials for services rendered.
So it seems that Mr. Mitsotakis and his communist chums may have unwittingly served Mr. Papandreou a moral victory on a platter: PASOK, whether guilty or not, can now traipse the countryside condemning the whole affair as a witch hunt at Mr. Papandreou's expense.
But while verbal high jinks alone won't help PASOK regain power, Mr. Papandreou should never be underestimated.
First came his predictable fusillade: He charged the Coalition of the Left and Progress had sold out its leftist tenets by collaborating in a right-wing plot aimed at ousting PASOK and thwarting the course of socialism in Greece.
Then, to buttress his credibility with the left, he enticed some smaller leftist parties to stand for election under the PASOK banner.
Next, he continued to court the communists -- many of whom feel betrayed by the left-right coalition's birth -- by bringing into PASOK a well-respected Communist Party candidate.
For balance, and in hopes of gaining some disaffected centrist votes, he managed to attract a former New Democracy Party representative and known political enemy of Mr. Mitsotakis.
Thus PASOK heads for the polls not only with diminished scandal-stench, but also with "seals of approval" from representatives of its harshest accusers.
Crucial as these elections are for Greece, pressing issues of state are getting lost in the shuffle.
The country's future NATO participation remains unsure, for instance.
Greece also must revamp major pieces of legislation in preparation for the 1992 targets of heightened Common Market cooperation.
Greece's bilateral relations with the U.S. need attention soon as well.
For one, the current accord concerning U.S. military bases in Greece lapses in May 1990.
Negotiations for a new agreement were frozen before the June elections, but the clock is running.
Another matter of concern is the extradition of Mohammed Rashid, a Palestinian terrorist who is wanted in the U.S. for the 1982 bombing of a Pan American Airways flight.
The Greek courts have decided in favor of extradition in the Rashid case, but the matter awaits final approval from Greece's next justice minister.
The Greeks seem barely aware of the importance of the case as a litmus test of whether Greece will be counted in or out for international efforts to combat terrorism.
That PASOK could win the elections outright is improbable; the Greek press, previously eager to palm off PASOK's line, has turned on Mr. Papandreou with a wild-eyed vengeance.
Yet the possibility of another lash-up government is all too real.
If Mr. Papandreou becomes the major opposition leader, he could hamstring a conservative-led coalition.
Also, he could force new elections early next year by frustrating the procedures for the election of the president of the republic in March.
New Democracy has once again glaringly underestimated the opponent and linked its own prospects to negative reaction against PASOK, forgetting to tend to either program clarity or the rectification of internal squabbles.
As for Mr. Papandreou?
He's not exactly sitting pretty at this stage.
But since he is undoubtedly one of the most proficient bull slingers who ever raked muck, it seems far wiser to view him as sidelined, but certainly not yet eliminated.
Mr. Carpenter, a regional correspondent for National Review, has lived in Athens since 1981.
U.S. OFFICIALS MOVED to head off any repeat of Black Monday today following Friday's plunge in stock prices.
Fed Chairman Greenspan signaled that the central bank was prepared to inject massive amounts of money into the banking system to prevent a financial crisis.
Other U.S. and foreign officials also mapped out plans, though they kept their moves quiet to avoid making the financial markets more jittery.
Friday's sell-off was triggered by the collapse of UAL's buy-out plan and a big rise in producer prices.
The Dow Jones industrials skidded 190.58, to 2569.26.
The junk bond market came to a standstill, while Treasury bonds soared and the dollar fell.
Japanese stocks dropped early Monday, but by late morning were turning around.
The dollar was trading sharply lower in Tokyo.
Prospects for a new UAL buy-out proposal appear bleak.
Many banks refused to back the $6.79 billion transaction, but bankers said it was not from any unwillingness to finance takeovers.
The decision was based solely on problems with the UAL management-pilot plan, they said.
The surge in producer prices in September followed three months of declines, but analysts were divided on whether the 0.9% jump signaled a severe worsening of inflation.
Also, retail sales grew 0.5% last month.
A capital-gains tax cut was removed from the Senate's deficit reduction bill, but proponents still hope to enact the cut this year.
Bush won't press for a capital-gains provision in the final deficit bill when House-Senate conferees meet later this week.
General Motors signaled that up to five North American assembly plants may close by the mid-1990s as it tries to cut excess capacity.
U.S. car and truck sales fell 12.6% in early October, the first sales period of the 1990-model year, dragged down by a sharp decline in GM sales.
Warner and Sony are entangled in a legal battle over movie producers Peter Gruber and Jon Peters.
The fight could set back Sony's plans to enter the U.S. movie business.
Hooker's U.S. unit received a $409 million bid for most of its real-estate and shopping-center assets from an investor group.
The offer doesn't include Bonwit Teller or B. Altman.
The Boeing strike is starting to affect airlines.
America West said Friday it will postpone its new service out of Houston because of delays in receiving aircraft from Boeing.
Saatchi & Saatchi would launch a management buy-out if a hostile suitor emerged, an official said.
British Aerospace and France's Thomson-CSF are nearing a pact to merge guided-missile divisions.
New U.S. steel-import quotas will give a bigger share to developing nations that have relatively unsubsidized steel industries.
Japan's steel quota will be cut significantly.
Four ailing S&Ls were sold off by government regulators, but low bids prevented the sale of a fifth.
Markets --
Stocks: Volume 251,170,000 shares.
Dow Jones industrials 2569.26, off 190.58; transportation 1406.29, off 78.06; utilities 211.96, off 7.29.
Bonds: Shearson Lehman Hutton Treasury index 3421.29, up
Commodities: Dow Jones futures index 129.87, up 0.01; spot index 129.25, up 0.28.
Dollar: 142.10 yen, off 2.07; 1.8740 marks, off 0.0343.
A federal appeals court in San Francisco ruled that shareholders can't hold corporate officials liable for false sales projections on new products if the news media concurrently revealed substantial information about the product's flaws.
The ruling stems from a 1984 suit filed by shareholders of Apple Computer Inc., claiming that company officials misled investors about the expected success of the Lisa computer, introduced in 1983.
Lawyers specializing in shareholder suits said they are concerned that use of the "press defense" by corporations may become popular as a result of the ruling.
According to the suit, Apple officials created public excitement by touting Lisa as an office computer that would revolutionize the workplace and be extremely successful in its first year.
The plaintiffs also alleged that prior to the fanfare, the company circulated internal memos indicating problems with Lisa.
The suit claimed Apple's stock climbed to a high of $63.50 a share on the basis of the company's optimistic forecasts.
But when the company revealed Lisa's poor sales late in 1983, the stock plummeted to a low of $17.37 a share, according to the suit.
The shareholders claimed more than $150 million in losses.
In 1987, the San Francisco district court dismissed the case largely because newspaper reports had sufficiently counterbalanced the company's statements by alerting consumers to Lisa's problems.
Late last month, the appeals court agreed that most of the case should be dismissed.
However, it gave the shareholders the right to pursue a small portion of their claim that pertains to Lisa's disk drive, known as Twiggy.
The court ruled that the news media didn't reveal Twiggy's problems at the time.
Lawyers are worried about the ruling's implication in other shareholder suits but pointed out that the court stressed that the ruling should be regarded as very specific to the Apple case.
"The court was careful to say that the adverse information appeared in the very same articles and received the same attention as the company's statements," said Patrick Grannon, a Los Angeles lawyer at the firm of Greenfield & Chimicles, which wasn't involved in the case.
"The court is saying that the adverse facts have to be transferred to the market with equal intensity and credibility as the statements of corporate insiders."
Shareholders' attorneys at the New York firm of Milberg, Weiss, Bershad, Specthrie & Lerach last week petitioned for a rehearing of the case.
They wrote: "The opinion establishes a new rule of immunity -- that if a wide variety of opinions on a company's business are publicly reported, the company can say anything without fear of securities liability."
NFL ORDERED to pay $5.5 million in legal fees to defunct
The National Football League is considering appealing the ruling stemming from the U.S. Football League's largely unsuccessful antitrust suit against the NFL.
A jury in 1986 agreed with the USFL's claims that the NFL monopolized major league football.
But the jury awarded the USFL only $1 in damages, trebled because of the antitrust claims.
Last week, the U.S. Court of Appeals in New York upheld a $5.5 million award of attorneys fees to the defunct league.
Harvey D. Myerson, of Myerson & Kuhn, then of Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & Casey, was the lead trial lawyer, and his new firm pursued the application appeal.
Douglas R. Pappas of Myerson & Kuhn says about $5.3 million of the award goes directly to the USFL to reimburse it for fees already paid.
Myerson & Kuhn will get about $260,000 for the costs of pressing the application.
The federal appeals court held that the nominal damages and the failure to prove all claims didn't exclude the USFL from being reimbursed.
Antitrust laws provide that injured parties may be reimbursed for lawyers' fees.
But Shepard Goldfein, an attorney for the NFL, says his client will consider asking for another hearing or appealing to the U.S. Supreme Court.
Mr. Goldfein, of Skadden, Arps, Slate, Meagher & Flom in New York, says the ruling is wrong and the fee award is excessive because the USFL lost its major claims, including its contention that the NFL restrained trade through television contracts.
"The USFL was not the prevailing party," Mr. Goldfein insists.
HOUSTON-CALGARY ALLIANCE:
Fulbright & Jaworski of Houston and Fenerty, Robertson, Fraser & Hatch of Calgary, Alberta, are affiliating to help serve their energy-industry clients.
The affiliation is believed to be the first such cross-border arrangement among major law firms.
The firms aren't required to refer work exclusively to each other and remain separate organizations.
But they will work together on energy-, environmental- and fair-trade-related issues and conduct seminars on topics of mutual interest, said Gibson Gayle Jr. of 585-lawyer Fulbright & Jaworski.
In addition, Fulbright & Jaworski's Washington, D.C., office will play a key role as the firms work together on regulatory issues, particularly natural-gas exports, for their clients.
The arrangement, reached after about eight months of negotiations, grew out of 80-lawyer Fenerty Robertson's desire to develop ties with a U.S. firm in light of relaxed trade barriers between the U.S. and Canada, said Francis M. Saville of Fenerty Robertson.
IN WHAT MAY SIGNAL a turnaround for asbestos manufacturers, W.R. Grace & Co. won a 3 1/2-week trial in Pittsburgh over whether it should be required to remove asbestos fireproofing from a local high school.
Mount Lebanon High School, near Pittsburgh, sought $21 million in compensatory damages from Grace, arguing that the asbestos, which can cause respiratory diseases and lung cancer, posed a risk to students.
Grace successfully contended that removing the fire retardant would pose a greater health risk than leaving it alone.
A spokesman for the company said the verdict is thought to be the first in favor of an asbestos manufacturer where the plaintiff was a school and the asbestos in question was used for fireproofing.
FCC COUNSEL JOINS FIRM:
Diane S. Killory will join 500-lawyer Morrison & Foerster as a partner in its Washington, D.C., office in mid-November.
She will help develop the mass-media practice of the San Francisco-based firm's communications group.
Ms. Killory, 35 years old, resigned as Federal Communications Commission general counsel early this month after nearly three years in that post.
She was the first woman to be appointed FCC general counsel.
RICHARD P. MAGURNO, formerly Eastern Airlines' top lawyer, joined the New York law firm of Lord Day & Lord, Barrett Smith as a partner.
Mr. Magurno, 45, spent 17 years at the Miami airline unit of Houston-based Texas Air Corp. and was named general counsel in 1984.
He left the company in 1987.
Mr. Magurno said he will split his time between the 200-lawyer firm's offices in Washington, D.C., and New York, with specialties in aviation and labor law.
Apple Computer Inc. said it will offer cash rebates on several of its machines from Oct. 14 to Dec. 31., as part of a holiday-season sales promotion.
Apple will offer a $150 rebate on its Apple IIGS with any Apple Monitor and disk drive; $200 on the basic Macintosh Plus central processing unit; $250 on the Macintosh SE central processing unit; $250 on the Macintosh SE/30 cpu, and $300 on a Macintosh IIcx with any Apple video card and Apple monitor.
The rebates, as a percentage of the retail cost of the cpu of each system, amount to 6% to 13%.
The company is also offering a free trial of its computers to consumers who qualify for its credit cards or leases.
Matsushita Electric Industrial Co. of Japan and Siemens AG of West Germany announced they have completed a 100 million-mark ($52.2 million) joint venture to produce electronics parts.
In the venture's first fiscal year, Siemens will hold 74.9% of the venture and a Matsushita subsidiary, Matsushita Electronic Components Co., 25.1%.
A basic agreement between the two companies was announced in June.
The new company is to be called Siemens Matsushita Components G.m.b.H.
It will have its headquarters in Munich.
Matsushita's share in the venture will rise to 35% Oct. 1, 1990, and to 50% the following Oct. 1.
Siemens will retain majority voting rights.
The parent companies forecast sales for the venture of around 750 million marks for its first fiscal year, Matsushita said.
Sales are expected to rise to one billion marks after four years.
The company will have production facilities in West Germany, Austria, France and Spain.
Roger Rosenblatt, editor of U.S. News & World Report, resigned Friday from the weekly news magazine.
Mr. Rosenblatt said he resigned because of difficulties with commuting between his home in New York and the magazine's editorial offices in Washington.
"Frankly, I missed my family," said Mr. Rosenblatt.
In Mr. Rosenblatt's tenure, the magazine's advertising pages and circulation have grown significantly.
But at 2.3 million weekly paid circulation, U.S. News still ranks third behind Time Warner Inc.'s Time magazine, with 4.4 million circulation, and Washington Post Co.'s Newsweek, with 3.3 million circulation.
Mortimer B. Zuckerman, chairman and editor in chief, said Mr. Rosenblatt would be succeeded starting today by Michael Ruby, the magazine's executive editor, and Merrill McLoughlin, a senior writer.
Mr. Ruby and Ms. McLoughlin are married to each other.
Mr. Zuckerman said his magazine would maintain its editorial format, which is a mix of analysis and trend stories with service-oriented, how-to articles.
Mr. Rosenblatt, a senior writer at Time magazine before joining U.S. News & World Report, said he had numerous job offers from other magazines while he was editor.
The offers were to work as a writer, not an editor.
He said he will now consider those offers.
Avions Marcel Dassault-Breguet Aviation S.A. said group profit before taxes and contributions to employee profit-sharing soared 97% to 839 million francs ($129.6 million) in the first half of 1989 from 425 million francs a year earlier.
The French aircraft group pointed out, however, that financial results from its sector of industry are frequently erratic because of irregular cash flow from large contracts.
It noted, for example, that group revenue for the first half was 8.734 billion francs, down about 12% from 9.934 billion francs a year earlier.
Still, it said it expects sales for all of 1989 to be on the order of 20 billion francs, reflecting anticipated billings for two large contracts in the second half of the year.
For all of 1988, Dassault had group profit of 428 million francs on revenue of 18.819 billion francs.
The group hasn't yet released earnings figures for the first half of 1989, nor has it made a detailed forecast of its full-year earnings.
Keystone Consolidated Industries Inc. expects to report earnings before extraordinary tax benefits of about $1.5 million, or about 41 cents a share, for the third quarter, compared with a loss last year, said Glenn R. Simmons, chairman and chief executive officer.
After a tax benefit of about $780,000, Keystone expects to report net income of $2.3 million, or about 62 cents a share, Mr. Simmons said.
For third quarter last year, Keystone reported a $1 million loss from continuing operations and a $200,000 loss from discontinued operations, for a net loss of $1.2 million.
Revenue for the latest third quarter was about $70.5 million, up 10% from $63.6 million last year, he said.
Mr. Simmons said the results signal a turnaround for the maker of wire and wire products, which has struggled to remain competitive in the face of lower-priced, imported steel.
A new $46 million steel rod minimill, which got off to a rocky start in early 1988, now is running efficiently and a new management team is more heavily marketing Keystone's products, Mr. Simmons said.
As a result, the company hopes to report net income for the year of about $11.6 million, or about $3.10 to $3.15 a share, compared with a net loss of $24.4 million last year, after a loss from discontinued operations of $18.4 million.
Revenue for 1989 is expected to be about $300 million, up about 21% from $247.3 million in 1988.
For the nine months ended Sept. 30, Keystone expects to report net income of $9.3 milion, or about $2.53 a share, after an extraordinary gain from $3.2 million in tax benefits.
Last year, the company had a net loss of $6.5 million, including a $6.1 million loss from continuing operations and a $400,000 loss from discontinued operations.
Revenue for the nine months is expected to be about $230.5 million, up about 21% from $190.4 million last year.
Mr. Simmons said Keystone's new mill is expected to produce about 585,000 tons of steel rods this year, up from 413,000 tons in 1988.
Production at the mill has exceeded the ability of Keystone's casting operation to supply it, he said, which will force Keystone to purchase billet, or unfinished steel bars, from outside the company during the fourth quarter and next year.
Keystone will have to consider expanding its casting operation, at an estimated cost of $8 million to $10 million, within the next 18 to 24 months, Mr. Simmons said.
Under Robert W. Singer, who was named president and chief operating officer last year, Keystone has expanded its sales force to about 20 people from about 15 and hopes to expand its sales from the middle portion of the country toward the East and West coasts.
"Prior to a year ago, Keystone was an order-taker.
Now I think we have a group of marketing people who are out selling to retailers and wholesalers," Mr. Simmons said.
Still, he said, the 100-year-old company plans to continue its premium-priced strategy for its distinctive brand of red-tipped wire fencing and other products.
The company claims a 40% share of the U.S. field fence business, a 35% share of poultry netting sales and a 30% share of barbed wire sales.
Freeport-McMoRan Inc. said a temporary cessation of operations at its Sunshine Bridge uranium-recovery facility in Donaldsonville, La., will result in slight earnings improvement to both the company and its Freeport-McMoRan Resource Partners Limited Partnership unit.
The company didn't elaborate.
The diversified energy and minerals concern said that a depressed uranium market is responsible for the temporary mothballing of the plant, but that the plant can be reactivated quickly when the market improves.
More than 400,000 pounds of uranium a year have been produced at the facility during the past seven years.
A second uranium-recovery plant at Uncle Sam, La., that produces more than 700,000 pounds of uranium annually, will continue to operate.
Freeport-McMoRan said the shutdown won't affect sales volumes under long-term sales contracts of its Freeport Uranium Recovery Co. unit, but will reduce the amount of product sold on the spot market.
Freeport-McMoRan Resource Partners, as owner of the uranium-recovery technology, receives royalty payments.
Business Week subscribers may hear this week's issue talking back to them.
A four-page ad from Texas Instruments Inc., running in approximately 140,000 issues of the Oct. 20 "Corporate Elite" issue of the McGraw-Hill Inc. publication, contains a speech synthesizer laminated between two of the pages.
Readers who pull off a piece of tape and press a switch will hear a tiny -- but distinctly human-sounding -- voice announce, "I am the talking chip," as it launches into a 15-second discourse on its own attributes.
The talking chip isn't cheap -- the per-ad cost to Texas Instruments is about $4, and that's without adding in Business Week's charge -- but Texas Instruments believes it is a first.
Previous efforts have included musical ads, featuring simple tone-generating chips that play a tune, but the voice synthesizer in this effort is much more sophisticated, with none of the robotic flatness that one hears, for example, when calling telephone directory services.
And for those who miss the message the first time around, not to worry: Three tiny batteries provide enough juice for as many as 650 replays.
Lomas Financial Corp., Dallas, said it will ask a U.S. bankruptcy court to allow it to hire Lazard Freres & Co. to help it sell its leasing unit.
Lomas, assisted by Merrill Lynch Capital Markets, has been trying to sell its Equitable Lomas Leasing Co. for several months, apparently without success.
The real estate and mortgage banking concern had hoped to use proceeds from the sale to reduce its debt.
Without cash from asset sales and unable to reach a new bank-credit agreement, Lomas defaulted on $145 million in notes that became due Sept. 1.
It filed for protection from creditors under Chapter 11 of the federal Bankruptcy Code Sept. 24 to give it additional time to work on a plan to restructure its $1.45 billion in senior debt.
Lomas said Merrill Lynch, which owns bonds and equity in Lomas, couldn't continue as Lomas's investment banker because it is also a creditor.
It said it chose Lazard in part because of Lazard's offices in Europe and Japan, where investors might be interested in a U.S. leasing company.
Canadian Imperial Bank of Commerce said it will increase its loan-loss provisions to cover all its loans to lesser developed countries, except Mexico, resulting in an after-tax charge to 1989 earnings of 300 million Canadian dollars (US$255 million).
Don Bowder, senior vice president and chief accountant, said the bank's strong earnings enable it to be the first major Canadian bank to set aside provisions covering all its C$1.17 billion in non-Mexican LDC debt.
"It eliminates the continuing uncertainty with respect to the ultimate value of the loans," he said.
The bank said about C$525 million will be added to its existing LDC and general loss provisions in its fourth quarter, ending Oct. 31.
Mr. Bowder said the C$300 million charge to earnings would amount to about C$1.34 a share.
The bank's net income for the nine months ended July 31 was C$577 million, or C$3.10 a share.
Mr. Bowder said the bank will restructure its C$604 million of Mexican debt, of which C$255 million is in Mexican notes secured by U.S. government bonds.
The bank has a 45% reserve against the remaining C$349 million of Mexican debt and expects to swap that for other Mexican notes supported by U.S. Treasury zero-coupon bonds.
Mr. Bowder said the bank's experience with LDC debt has been "painful" and this latest move represents the final phase of a program begun seven years ago to reduce its exposure through provisioning, debt sales and debt swaps.
He said the bank will no longer participate in LDC sovereign lending, but will support trade financing and other transactions that meet the bank's standards.
The carnage among takeover stocks Friday doesn't mean the end of mega-mergers but simply marks the start of a less ambitious game, Wall Street's big-time deal makers say.
Suitors from now on are more likely to be expansion-minded companies, rather than raiders or debt-happy financiers.
And they will be launching lower-priced and perhaps fewer deals, now that it's tougher to finance them.
This is an ominous sign for a stock market that lately has been fueled by takeover speculation and bidding wars for companies that put themselves up for sale.
Whenever the 1980s merger boom seems to be stalling, shock waves ripple through the stock market.
"The market is overvalued, not cheap," says Alan Gaines of the New York money-management firm Gaines Berland.
He recently began increasing his cash position to 45% of his portfolio.
"I look at where deals can get done," he says, "and they're not getting done" at current prices.
Lenders are growing increasingly nervous about debt-financed takeovers, investment bankers say.
"You had a week of a deteriorating junk-bond market that ran smack into the news on Friday about what appeared to be happening to the bank debt market," says Steven Rattner, a partner and merger specialist with Lazard Freres & Co.
Trading dried up Friday in the market for high-yield junk bonds, often used to finance takeovers.
It was the latest in a series of setbacks for the junk bond market, where prices began weakening last month after Campeau hit a cash crunch.
And banks appear to be taking an increasingly skeptical view of requests for high-risk takeover loans.
The group trying to buy UAL announced Friday that it couldn't arrange the $7.2 billion in bank loans it needs to buy the parent of United Airlines for $300 a share.
Takeover-stock traders today will be scrambling to learn of any UAL developments, and other takeover stocks are likely to trade in sympathy.
Investment bankers representing the buy-out group and UAL's board spent a frantic weekend trying to hammer out new terms that would be more acceptable to the banks.
After UAL, the stock viewed as most vulnerable is American Airlines' parent AMR, the target of a $120-a-share takeover proposal from New York real estate developer Donald Trump.
Trading in AMR shares was suspended shortly after 3 p.m. EDT Friday and didn't resume.
Before the halt, AMR last traded at 98 5/8.
Late Friday night, the London office of Jefferies & Co., a Los Angeles securities firm, traded AMR shares at prices as low as 80.
Similarly, Delta Air Lines and USAir Group dropped 10.1% and 8.5%, respectively, on Friday and could weaken further.
Over the weeked, however, two developments in other deals indicated that commerical banks and Wall Street firms still are willing to commit billions of dollars to finance takeover bids launched by major companies.
Vitro S.A., a major Mexican glass maker, said yesterday that it agreed to buy Anchor Glass Container in a tender offer for $21.25 a share, sweetened from the original $20-a-share offer Vitro launched two months ago.
On Friday, Anchor shares fell 1 1/4 to close at 18 1/2.
For the broader market, the greatest significance of the Vitro-Anchor deal may be that it was put together late Friday night -- after the market rout -- and involves a $155 million temporary "bridge" loan from Donaldson, Lufkin & Jenrette Securities and a $139 million loan from Security Pacific National Bank.
Moreover, to complete the entire Anchor Glass purchase and refinance existing debt, Donaldson said it is "highly confident" that it will be able to sell $400 million of junk bonds for Vitro, despite the current disarray in the junk bond market.
Donaldson's statement isn't merely an idle boast, because those bonds will have to be sold before Donaldson's bridge loan can be paid back.
Security Pacific, meanwhile, said it expects to arrange $430 million in bank loans for Vitro.
In another takeover battle, a spokesman for McCaw Cellular Communications said yesterday that McCaw has been advised by three commercial banks that they remain "highly confident" they can arrange $4.5 billion of bank loans for McCaw's tender offer for about 45% of LIN Broadcasting, "notwithstanding recent events."
McCaw is offering $125 a share for 22 million LIN shares, thereby challenging LIN's proposal to spin off its television properties, pay shareholders a $20-a-share special dividend and combine its cellular-telephone operations with BellSouth's cellular business.
On Friday, LIN shares were among the few takeover issues that didn't fall much, dropping 5 1/2, or 4.9%, to close at 107 1/2.
Traders and investment bankers said LIN shares weren't hurt much because BellSouth is viewed as a well-financed corporate buyer unlikely to be affected by skittishness among bankers or bond buyers.
Investment bankers interviewed over the weekend see a silver lining for the merger business in the stock-market drop.
Potential bidders for companies "were saying that things were beginning to look expensive," says Mr. Rattner of Lazard.
"Nothing makes things look cheaper than a 200-point drop in the Dow," Mr. Rattner says.
"Just as there are people waiting to become bargain hunters in the stock market, there are people waiting to become bargain hunters in the deal market."
Investment bankers expect most of those bargain hunters to be well-heeled corporations.
"In the past, corporate buyers were often discouraged from making bids because of competition from LBO firms, which were often prepared to outbid" the corporations, says J. Tomilson Hill, head of mergers and acquisitions at Shearson Lehman Hutton.
Now, "corporate buyers should be willing to re-enter the acquisition market because the competition from junkbond-financed buyers has been reduced."
Many takeover stocks plunged Friday, as speculators retained their confidence in corporate buyers but fled from the socalled whisper stocks, the targets of rumored deals.
Columbia Pictures Entertainment, which has agreed to a friendly $27-a-share bid from Sony of Japan, fell only 1/8 to close at 26 5/8.
But several stocks long rumored to be ripe for a takeover or restructuring fell 10% or more.
They include USX, down 11.7%; Upjohn, down 11.1%; Campbell Soup, down 11%; Paramount Communications, off 10.3%; Woolworth, down 10.2%; Delta Air Lines, down 10.1%, and MCA, down 9.7%.
The market -- and investment bankers -- are even less sanguine about companies that have had at least one bid, merger agreement or restructuring plan fall through already.
Given the weakness in both the junk bond market and the stock market, traders fear that these transactions may be revised yet again.
Examples include Kollmorgen, whose agreement to be acquired for $25 a share by Vernitron collapsed last month.
Kollmorgen shares fell nearly 20% on Friday to close at 12 7/8.
Ramada, which first delayed and then shelved a $400 million junk bond sale that was designed to help finance a restructuring, fell 15.6% to close at 9 1/2.
Ramada has said it hopes to propose a new restructuring plan but hasn't indicated when it will do so.
Shares of American Medical International, which agreed last week to accept a lower price from a buy-out group that includes First Boston Corp. and the Pritzker family of Chicago, fell 15.8% on Friday to close at 20.
The buy-out group is offering $26.50 a share for 63 million American Medical shares, down from its offer in July of $28 a share for 68.8 million shares.
But investment bankers say the market may have oversold some takeover-related stocks.
Hilton Hotels, for example, was among the worst-hit issues, falling 20.2% to close at 85, down 21 1/2 on Friday.
Hilton currently is soliciting bids for a sale of part or all of its hotel and casino businesses.
People familiar with Hilton said over the weekend that the depth of the sell-off in Hilton shares was unwarranted because none of the likely buyers would be dependent on junk-bond financing.
However, they conceded that some potential bidders would rely on bank loans and would be hurt if the troubles of the UAL buy-out group signified a general unwillingness among banks to provide credit for debt-financed takeovers.
Hilton officials said they weren't worried about the drop in the company's stock.
William Lebo, Hilton's general counsel, said plans to consider a sale of the company or some of its assets are "on track" for what has been described previously as "a slow and deliberate process."
"I can't believe that any potential buyer for Hilton would be affected by one day's trading," Mr. Lebo said.
But the stock market as a whole, bolstered as it is by takeover speculation, remains vulnerable to any further pullback by takeover financiers, both in the junkbond market and among commercial banks.
For debt-ridden suitors, "the takeover game has been over for some time," says New York money manager Neil Weisman of Chilmark Capital, who has been keeping 85% of his portfolio in cash.
"The market is just waking up to that point."
Pauline Yoshihashi in Los Angeles contributed to this column.
Of all the one-time expenses incurred by a corporation or professional firm, few are larger or longer term than the purchase of real estate or the signing of a commercial lease.
To take full advantage of the financial opportunities in this commitment, however, the corporation or professional firm must do more than negotiate the best purchase price or lease terms.
It must also evaluate the real-estate market in the chosen location from a new perspective.
Specifically, it must understand how real-estate markets overreact to shifts in regional economies and then take advantage of these opportunities.
When a regional economy catches cold, the local real-estate market gets pneumonia.
In other words, real-estate market indicators, such as building permits and leasing activity, plummet much further than a local economy in recession.
This was seen in the late 1960s in Los Angeles and the mid-1970s in New York.
But the reverse is also true: When a region's economy rebounds from a slowdown, these real-estate indicators will rebound far faster than the improving economy.
Why do local real-estate markets overreact to regional economic cycles?
Because real-estate purchases and leases are such major long-term commitments that most companies and individuals make these decisions only when confident of future economic stability and growth.
Metropolitan Detroit was written off economically during the early 1980s, as the domestic auto industry suffered a serious sales depression and adjustment.
Area employment dropped by 13% from its 1979 peak and retail sales were down 14%.
However, the real-estate market was hurt even more.
For example, residential building permits in the trough year of 1982 were off 76% from the 1979 peak level.
Once metropolitan Detroit's economy rallied in the mid-1980s, real estate rebounded.
Building permits, for example, soared a staggering 400% between 1982 and the peak year of 1986.
Where, savvy corporations and professional firms are now asking, are today's opportunities?
Look no further than metropolitan Houston and Denver, two of the most depressed, overbuilt and potentially undervalued real-estate markets in the nation.
Of course, some observers have touted Houston and Denver for the past five years as a counter-cyclical play.
But now appears to be the time to act.
Metropolitan Houston's economy did drop and then flatten in the years after its 1982 peak.
In the mid-1980s, employment was down as much as 5% from the 1982 peak and retail sales were off 13%.
The real-estate market suffered even more severe setbacks.
Office construction dropped 97%.
The vacancy rate soared more than 20% in nearly every product category, and more than 30% of office space was vacant.
To some observers, the empty office buildings of Houston's "see-through skyline" were indicative of a very troubled economy.
As usual, the real-estate market had overreacted.
Actually, the region's economy retained a firm foundation.
Metropolitan Houston's population has held steady over the past six years.
And personal income, after slumping in the mid-1980s, has returned to its 1982 level in real dollar terms.
Today, metropolitan Houston's real-estate market is poised for a significant turnaround.
More than 42,000 jobs were added in metro Houston last year, primarily in biotechnology, petrochemical processing, and the computer industry.
This growth puts Houston in the top five metro areas in the nation last year.
And forecasts project a 2.5% to 3% growth rate in jobs over the next few years -- nearly twice the national average.
Denver is another metropolitan area where the commercial real-estate market has overreacted to the region's economic trends, although Denver has not experienced as severe an economic downturn as Houston.
By some measures, metropolitan Denver's economy has actually improved in the past four years.
Its population has continued to increase since 1983, the peak year of the economic cycle.
Employment is now 4% higher than in 1983.
Buying income in real dollars actually increased 15% between 1983 and 1987 (the most recent year available).
The rates of increase, however, are less than the rapid growth of the boom years, and this has resulted in a loss of confidence in the economy.
In a self-fulfilling prophecy, therefore, the region's real-estate market all but collapsed in recent years.
Housing building permits are down more than 75% from their 1983 peaks.
Although no one can predict when metropolitan Denver's real-estate market will rebound, major public works projects costing several billion dollars are under way or planned -- such as a new convention center, a major beltway encircling the metropolitan area, and a new regional airport.
When Denver's regional economy begins to grow faster -- such a recovery could occur as early as next year -- business and consumer confidence will return, and the resulting explosion of real-estate activity will dwarf the general economic rebound.
What real-estate strategy should one follow in a metropolitan area whose economic health is not as easy to determine as Houston's or Denver's?
Generally, overcapacity in commercial real estate is dropping from its mid-1980s peak, even in such economically healthy metropolitan areas as Washington, New York and Los Angeles.
Vacancy rates in the 15% to 19% range today may easily rise to the low to mid-20% range in a couple of years.
Under these conditions, even a flattening out of economic growth -- "catching cold" -- in the healthy metropolitan areas will create significant opportunities for corporations and professional service firms looking for bargains as the realestate industry catches pneumonia.
Those looking for real-estate bargains in distressed metropolitan areas should lock in leases or buy now; those looking in healthy metropolitan areas should take a short-term (three-year) lease and wait for the bargains ahead.
Mr. Leinberger is managing partner of a real-estate advisory firm based in Beverly Hills, Calif.
Kysor Industrial Corp. said it expects its third-quarter net earnings to be between two cents and four cents a share, compared with 61 cents a share a year ago.
Analysts had been projecting that the company's earnings would be between 25 cents and 30 cents a share.
The year-earlier third-quarter earnings amounted to $4.1 million.
The company said a drop in activity in the powerboat industry reduced sales volume at its two marine-related operations.
Also, the company said its commercial products operation failed to meet forecasts.
Kysor, a maker of heavy-duty truck and commercial refrigeration equipment, said it expects its fourth-quarter earnings to be more closely in line with usual levels, which are between 30 cents and 50 cents a share.
Common Cause asked both the Senate Ethics Committee and the Justice Department to investigate $1 million in political gifts by Arizona businessman Charles Keating to five U.S. senators who interceded with thrift-industry regulators for him.
Mr. Keating is currently the subject of a $1.1 billion federal anti-racketeering lawsuit accusing him of bleeding off assets of a California thrift he controlled, Lincoln Savings & Loan Association, and driving it into insolvency.
Fred Wertheimer -- president of Common Cause, the self-styled citizens lobby -- said Mr. Keating already has conceded attempting to buy influence with the lawmakers -- Democratic Sens. Dennis DeConcini of Arizona, Alan Cranston of California, John Glenn of Ohio and Donald Riegle of Michigan; and GOP Sen. John McCain of Arizona.
Mr. Wertheimer based this on a statement by Mr. Keating that was quoted in a Wall Street Journal story in April: "One question . . . had to do with whether my financial support in any way influenced several political figures to take up my cause.
I want to say in the most forceful way I can: I certainly hope so."
In a highly unusual meeting in Sen. DeConcini's office in April 1987, the five senators asked federal regulators to ease up on Lincoln.
According to notes taken by one of the participants at the meeting, the regulators said Lincoln was gambling dangerously with depositors' federally insured money and was "a ticking time bomb."
Mr. Keating had complained that the regulators were being too zealous.
The notes show that Sen. DeConcini called the Federal Home Loan Bank Board's regulations "grossly unfair," and that Sen. Glenn insisted that Mr. Keating's thrift was "viable and profitable."
For the next two years, the Bank Board, which at the time was the agency responsible for regulating thrifts, failed to act -- even after federal auditors warned in May 1987 that Mr. Keating had caused Lincoln to become insolvent.
Lincoln's parent company, American Continental Corp., entered bankruptcy-law proceedings this April 13, and regulators seized the thrift the next day.
The newly formed Resolution Trust Corp., successor to the Bank Board, filed suit against Mr. Keating and several others on Sept. 15.
Mr. Keating has filed his own suit, alleging that his property was taken illegally.
The cost to taxpayers of Lincoln's collapse has been estimated at as much as $2.5 billion.
Details of the affair have become public gradually over the past two years, mostly as a result of reporting by several newspapers.
In the midst of his 1988 re-election campaign, Sen. Riegle, chairman of the Senate Banking Committee, returned $76,000 in contributions after a Detroit newspaper said that Mr. Keating had gathered the money for him about two weeks before the meeting with regulators.
Sen. DeConcini, after months of fending off intense press criticism, returned $48,000 only last month, shortly after the government formally accused Mr. Keating of defrauding Lincoln.
In addition, Sen. McCain last week disclosed that he belatedly had paid $13,433 to American Continental as reimbursement for trips he and his family took aboard the corporate jet to Mr. Keating's vacation home at Cat Cay, the Bahamas, from 1984 through 1986.
Sen. McCain said he had meant to pay for the trips at the time but that the matter "fell between the cracks."
Mr. Keating, his family members and associates also donated $112,000 to Sen. McCain's congressional campaigns over the years, according to press accounts.
But Sen. McCain says Mr. Keating broke off their friendship abruptly in 1987, because the senator refused to press the thrift executive's case as vigorously as Mr. Keating wanted.
"He became very angry at that, left my office and told a number of people that I was a wimp," Sen. McCain recalls.
In July, California newspapers disclosed that Mr. Keating gave $850,000 in corporate funds to three tax-exempt voter registration organizations in 1987 and 1988 at the behest of Sen. Cranston, who conceded that soliciting the money was "a pretty stupid thing to do politically."
In addition, Sen. Cranston received $47,000 in campaign donations through Mr. Keating, and the California Democratic party received $85,000 in corporate donations for a 1986 get-out-the-vote drive that benefited the senator's re-election campaign that year.
Also in July, Ohio newspapers disclosed $200,000 in corporate donations by Mr. Keating to the National Council on Public Policy, a political committee controlled by Sen. Glenn.
That was in addition to $34,000 in direct campaign donations arranged by Mr. Keating to the Ohio senator.
Mr. Wertheimer said the Senate Ethics Committee should hire a special outside counsel to conduct an investigation, as was done in the case of former House Speaker James Wright.
Wilson Abney, staff director of the ethics panel, wouldn't comment.
Sen. Riegle said he would cooperate with any inquiry, but that his conduct had been "entirely proper."
Sen. McCain said he had been "deeply concerned" at the time of the meeting that it might seem to be improper, but decided it was "entirely appropriate" for him to seek fair treatment for a constituent.
Sen. Glenn said he had already made a complete disclosure of his role in the affair and "I am completely satisfied to let this matter rest in the hands of the Senate Ethics Committee."
Sen. DeConcini said, "When all is said and done, I expect to be fully exonerated."
Sen. Cranston, who had already volunteered his help to the Federal Bureau of Investigation in any investigation of Mr. Keating, portrayed his role in 1987 as prodding regulators to act.
"Why didn't the Bank Board act sooner?" he said.
"That is what Common Cause should ask be investigated.
Trinity Industries Inc. said it reached a preliminary agreement to manufacture 1,000 coal rail cars for Norfolk Southern Corp.
Trinity estimated the value of the pact at more than $40 million.
Trinity said it plans to begin delivery of the rail cars in the first quarter of 1990.
It said the 1,000 rail cars are in addition to the 1,450 coal rail cars presently being produced for Norfolk Southern, a Norfolk, Va.-based railroad concern.
When China opened its doors to foreign investors in 1979, toy makers from Hong Kong were among the first to march in.
Today, with about 75% of the companies' products being made in China, the chairman of the Hong Kong Toys Council, Dennis Ting, has suggested a new sourcing label: "Made in China by Hong Kong Companies."
The toy makers were pushed across the border by rising labor and land costs in the British colony.
But in the wake of the shootings in Beijing on June 4, the Hong Kong toy industry is worrying about its strong dependence on China.
Although the manufacturers stress that production hasn't been affected by China's political turmoil, they are looking for additional sites.
The toy makers, and their foreign buyers, cite uncertainty about China's economic and political policies.
"Nobody wants to have all his eggs in one basket," says David Yeh, chairman and chief executive officer of International Matchbox Group Ltd.
Indeed, Matchbox and other leading Hong Kong toy makers were setting up factories in Southeast Asia, especially in Thailand, long before the massacre.
Their steps were partly prompted by concern over a deterioration of business conditions in southern China.
By diversifying supply sources, the toy makers don't intend to withdraw from China, manufacturers and foreign buyers say.
It wouldn't be easy to duplicate quickly the manufacturing capacity built up in southern China during the past decade.
A supply of cheap labor and the access to Hong Kong's port, airport, banks and support industries, such as printing companies, have made China's Guangdong province a premier manufacturing site.
"South China is the most competitive source of toys in the world," says Henry Hu, executive director of Wah Shing Toys Consolidated Ltd.
Hong Kong trade figures illustrate the toy makers' reliance on factories across the border.
In 1988, exports of domestically produced toys and games fell 19% from 1987, to HK$10.05 billion (US$1.29 billion).
But re-exports, mainly from China, jumped 75%, to HK$15.92 billion.
In 1989's first seven months, domestic exports fell 29%, to HK$3.87 billion, while re-exports rose 56%, to HK$11.28 billion.
Manufacturers say there is no immediate substitute for southern China, where an estimated 120,000 people are employed by the toy industry.
"For the next few years, like it or not, China is going to be the main supplier," says Edmund Young, vice president of Perfecta Enterprises Ltd., one of the first big Hong Kong toy makers to move across the border.
In the meantime, as manufacturers and buyers seek new sites, they are focusing mainly on Southeast Asia.
Several big companies have established manufacturing joint ventures in Thailand, including Matchbox, Wah Shing and Kader Industrial Co., the toy manufacturer headed by Mr. Ting.
Malaysia, the Philippines and Indonesia also are being studied.
With the European Community set to remove its internal trade barriers in 1992, several Hong Kong companies are beginning to consider Spain, Portugal and Greece as possible manufacturing sites.
Worries about China came just as Hong Kong's toy industry was recovering from a 1987 sales slump and bankruptcy filings by two major U.S. companies, Worlds of Wonder Inc. and Coleco Industries Inc.
Hong Kong manufacturers say large debt writeoffs and other financial problems resulting from the 1987 difficulties chastened the local industry, causing it to tighten credit policies and financial management.
The industry regards last year and this year as a period of recovery that will lead to improved results.
Still, they long for a "mega-hit" toy to excite retail sales in the U.S., Hong Kong's biggest market for toys and games.
The closest thing the colony's companies have to a U.S. mega-hit this year is the Teenage Mutant Ninja Turtles series of action figures manufactured by Playmates Holdings Ltd.
Introduced in mid-1988, the 15-centimeter-tall plastic turtles are based on an American comic book and television series.
Paul Kwan, managing director of Playmates, says 10 million Ninja Turtles have been sold, placing the reptilian warriors among the 10 biggest-selling toys in the U.S.
Should sales continue to be strong through the Christmas season, which accounts for about 60% of U.S. retail toy sales, Mr. Kwan said the Ninja Turtles could make 1989 a record sales year for Playmates.
Other Hong Kong manufacturers expect their results to improve only slightly this year from 1988.
Besides the lack of a fast-selling product, they cite the continued dominance of the U.S. market by Nintendo Entertainment System, an expensive video game made by Nintendo Co. of Japan.
Nintendo buyers have little money left to spend on other products.
Many of the toy makers' problems started well before June 4 as a result of overstrained infrastructure and Beijing's austerity programs launched late last year.
Toy makers complain that electricity in Guangdong has been provided only three days a week in recent months, down from five days a week, as the province's rapid industrialization has outstripped its generating capacity.
Manufacturers are upgrading standby power plants.
Bank credit for China investments all but dried up following June 4.
Also, concern exists that the harder-line Beijing leadership will tighten its control of Guangdong, which has been the main laboratory for the open-door policy and economic reforms.
But, toy manufacturers and other industrialists say Beijing will be restrained from tightening controls on export-oriented southern China.
They say China's trade deficit is widening and the country is too short of foreign exchange for it to hamper production in Guangdong.
"The Chinese leaders have to decide whether they want control or whether the want exports," says Mr. Kwan of Playmates.
The Bush administration, urging the Supreme Court to give states more leeway to restrict abortions, said minors haven't any right to abortion without the consent of their parents.
Solicitor General Kenneth Starr argued that the 1973 Supreme Court decision, Roe vs. Wade, recognizing a constitutional right to abortion, was incorrect.
He also argued that the high court was wrong in 1976 to rule that minors have a right to abortion that can't be absolutely vetoed by their parents.
The administration's position was outlined in a friend-of-the-court brief filed in one of three abortion cases the Supreme Court will hear argued and will decide this term.
The administration filed the brief in an appeal involving a Minnesota law that requires that both parents of a minor be notified before she may have an abortion.
The administration urged the justices to adopt a legal standard suggested by Chief Justice William Rehnquist last July when the high court upheld Missouri's abortion restrictions.
Under that standard, which garnered the votes of only three of the nine justices, a state restriction of abortion is constitutional if the state has a "reasonable" justification for adopting it.
That is a much easier standard for a state to satisfy than the Supreme Court's test since 1973, which requires a state to have a "compelling" reason for restricting abortion.
On the provisions of the Minnesota law, the Bush administration said that requiring that both parents be notified is a reasonable regulation, and that there is no need to have an alternative that allows minors to go to court for a judge's permission instead.
The case, Hodgson vs. Minnesota, will be argued Nov. 29.
Aluminum Co. of America, hit hard by the strength of the dollar overseas, said net income for the third quarter dropped 3.2% to $219 million, or $2.46 a share.
The nation's No. 1 aluminum maker earned $226.3 million, or $2.56 a share, a year earlier.
Revenue rose 11% to $2.83 billion from $2.56 billion.
Analysts, who were expecting Alcoa to post around $2.70 to $3 a share, were surprised at the lackluster third-quarter results.
"It's disappointing," said William Siedenburg, an analyst with Smith Barney, Harris Upham & Co.
Much of the earnings decline was led by currency-exchange rate adjustments, which affected the bottom line by $15.3 million, or 17 cents a share, compared with $3.6 million, or four cents a share, the previous year.
Lower prices for aluminum ingots and certain alloy products and a shift in the product mix also contributed to lower earnings, the company said.
"In addition, costs were higher partly due to scheduled plant outages for modernization work," the company said.
Excluding the higher tax rate, which rose two percentage points to 38%, and the negative exchange rate adjustment, the company would have met analysts' expectations, said R. Wayne Atwell, an analyst with Goldman, Sachs & Co.
Noting that the third quarter is usually the aluminum industry's slowest, Mr. Atwell added, "the third quarter is never a bang up period for them anyway."
Nevertheless, the company said shipments were up slightly to 679,000 metric tons from 671,000, buffing the impact of the unexpected earning decline.
The results were announced after the stock market closed.
In New York Stock Exchange composite trading Friday, Alcoa closed at $72 a share, down $4.75, in a sharply lower market.
For 20 years, federal rules have barred the three major television networks from sharing in one of the most lucrative and fastest-growing parts of the television business.
And for six years, NBC, ABC and CBS have negotiated with Hollywood studios in a futile attempt to change that.
But with foreign companies snapping up U.S. movie studios, the networks are pressing their fight harder than ever.
They hope the foreign deals will divide the Hollywood opposition and prod Congress to push for ending federal rules that prohibit the networks from grabbing a piece of rerun sales and owning part of the shows they put on the air.
Even network executives, however, admit privately that victory -- either in Congress or in talks with the studios -- is highly doubtful any time soon.
And so the networks also are pushing for new ways to sidestep the "fin-syn" provisions, known formally as the Financial Interest and Syndication Rules.
That became clear last week with the disclosure that National Broadcasting Co., backed by the deep pockets of parent General Electric Co., had tried to help fund Qintex Australia Ltd.'s now-scuttled $1.5 billion bid for MGM/UA Communications Co.
NBC's interest may revive the deal, which MGM/UA killed last week when the Australian concern had trouble raising cash.
Even if that deal isn't revived, NBC hopes to find another.
"Our doors are open," an NBC spokesman says.
NBC may yet find a way to take a passive, minority interest in a program-maker without violating the rules.
And any NBC effort could prompt CBS Inc. and ABC's parent, Capital Cities/ABC Inc., to look for ways of skirting the fin-syn regulations.
But the networks' push may only aggravate an increasingly bitter rift between them and Hollywood studios.
Both sides are to sit down next month for yet another meeting on how they might agree on reducing fin-syn restraints.
Few people privy to the talks expect the studios to budge.
The networks still are "uninhibited in their authority" over what shows get on the air, charges Motion Picture Association President Jack Valenti, the most vociferous opponent of rescinding the rules.
Studios are "powerless" to get shows in prime-time lineups and keep them there long enough to go into lucrative rerun sales, he contends.
And that's why the rules, for the most part, must stay in place, he says.
Studio executives in on the talks-including officials at Paramount Communications Inc., Fries Entertainment Inc., Warner Communications Inc. and MCA Inc. -- declined to be interviewed.
But Mr. Valenti, who represents the studios, asserts: "The whole production industry, to a man, is on the side of preserving" the rules.
Such proclamations leave network officials all the more doubtful that the studios will bend.
"They don't seem to have an incentive to negotiate," says one network executive.
"And there's no indication that Washington is prepared to address the rules.
That's the problem, isn't it?"
Indeed it is.
Congress has said repeatedly it wants no part of the mess, urging the studios and the networks, which license rights to air shows made by the studios, to work out their own compromise.
But recent developments have made the networks -- and NBC President Robert Wright, in particular -- ever more adamant that the networks must be unshackled to survive.
The latest provocation: Sony Corp.'s plan to acquire Columbia Pictures Entertainment Inc. for $3.4 billion, and to buy independent producer Guber Peters Entertainment Co. for $200 million.
"I wonder what Walter Cronkite will think of the Sony/Columbia Broadcast System Trinitron Evening News with Dan Rather broadcast exclusively from Tokyo," wrote J.B. Holston, an NBC vice president, in a commentary in last week's issue of Broadcasting magazine.
In his article, Mr. Holston, who was in Europe last week and unavailable, complained that the "archaic restraints" in fin-syn rules have "contributed directly to the acquisition of the studios by non-U.S. enterprises.
" (He didn't mention that NBC, in the meantime, was hoping to assist Australia's Qintex in buying
An NBC spokesman counters that Mr. Holston's lament was "entirely consistent" with NBC plans because the U.S. rules would limit NBC's involvement in the Qintex deal so severely as to be "light years away from the type of unrestrained deals available to Sony -- and everyone else except the three networks."
The Big Three's drumbeat for deregulation began intensifying in the summer when the former Time Inc. went ahead with plans to acquire Warner.
Although Time already had a long-term contract to buy movies from Warner, the merger will let Time's largely unregulated pay-cable channel, Home Box Office, own the Warner movies aired on HBO -- a vertical integration that is effectively blocked by fin-syn regulations.
NBC's Mr. Wright led the way in decrying the networks' inability to match a Time-Warner combination.
He spoke up again when the Sony bid for Columbia was announced.
Since NBC's interest in the Qintex bid for MGM/UA was disclosed, Mr. Wright hasn't been available for comment.
With a Qintex deal, NBC would move into uncharted territory -- possibly raising hackles at the studios and in Washington.
"It's never really been tested," says William Lilley III, who as a top CBS executive spent years lobbying to have the rules lifted.
He now runs Policy Communications in Washington, consulting to media companies.
Fin-syn rules don't explicitly block a network from buying a passive, small stake in a company that profits from the rerun syndication networks can't enjoy.
Hence, NBC might be able to take, say, a 5% stake in a company such as MGM/UA.
If the transaction raised objections, the studio's syndication operations could be spun off into a separate firm in which the network doesn't have a direct stake.
But such convolutions would still block the networks from grabbing a big chunk of the riches of syndication.
Under current rules, even when a network fares well with a 100%-owned series -- ABC, for example, made a killing in broadcasting its popular crime/comedy "Moonlighting" -- it isn't allowed to share in the continuing proceeds when the reruns are sold to local stations.
Instead, ABC will have to sell off the rights for a one-time fee.
The networks admit that the chances of getting the relief they want are slim -- for several years at the least.
Six years ago they were tantalizingly close.
The Reagan-era Federal Communications Commission had ruled in favor of killing most of the rules.
Various evidence, including a Brookings Institution study of some 800 series that the networks had aired and had partly owned in the 1960s, showed the networks didn't wield undue control over the studios as had been alleged.
But just eight days before the rules were to die, former President Ronald Reagan, a one-time actor, intervened on behalf of Hollywood.
The FCC effort collapsed.
The networks and studios have bickered ever since.
Network officials involved in the studio talks may hope the foreign influx builds more support in Washington, but that seems unlikely.
In Congress, the issue falters: It's about money, not program quality, and Hollywood has lots of clout given its fund raising for senators and representatives overseeing the issue.
A spokesman for Rep. Edward J. Markey (D-Mass.), who heads a subcommittee that oversees the FCC, says Mr. Markey feels "the world has been forever changed by the Sony-Columbia deal."
But he said Mr. Markey hopes this pushes the networks and studios to work it out on their own.
And at the FCC, meanwhile, new Chairman Alfred C. Sikes has said he wants the two sides to hammer out their own plan.
Recognition Equipment Inc. said it settled a civil action filed against it by the federal government on behalf of the U.S. Postal Service.
The government sued the company in April, seeking $23,000 and other unspecified damages related to an alleged contract-steering scheme.
The suit named the company, former chief executive officer William G. Moore Jr., former vice president Robert W. Reedy and five defendants who weren't part of the company.
The suit charged the defendants with causing Peter E. Voss, an ex-member of the Postal Service board of governors, to accept $23,000 in bribes, kickbacks and gratuities.
Mr. Voss was previously sentenced to four years in prison and fined $11,000 for his role in the scheme.
In the agreement, Recognition agreed to pay the government $20,000 in return for the release of all claims against the company, Mr. Moore and Mr. Reedy.
The five additional defendants weren't parties to the settlement.
A trial on criminal allegations against the company and the same two former executives began Sept. 27 in federal court for the District of Columbia.
They were indicted last October on charges of fraud, theft and conspiracy related to an effort to win $400 million in Postal Service equipment contracts by the maker of data management equipment.
The company and its executives deny the charges.
In a related development, Recognition Equipment said the Postal Service has barred the company from bidding on postal contracts for an additional 120 days.
The Postal Service originally suspended the company Oct. 7, 1988, and has been renewing the ban ever since.
The company said it will continue to pursue a lifting of the suspension.
Intel Corp. reported a 50% drop in third-quarter net income, partly because of a one-time charge for discontinued operations.
The big semiconductor and computer maker, said it had net of $72 million, or 38 cents, down 50% from $142.7 million, or 78 cents a share.
The lower net included a charge of $35 million, equal to 12 cents a share on an after-tax basis, for the cost of abandoning a computer-systems joint venture with Siemens AG of West Germany.
Earning also fell from the year-ago period because of slowing microchip demand.
Sales amounted to $771.4 million, down 1.7% from $784.9 million.
Intel's stock rose in early over-the-counter trading Friday, as investors appeared relieved that the company's income from continuing operations was only slightly below the second quarter's earnings of $99.3 million, or 53 cents a share, and that sales actually exceeded the $747.3 million for the second period.
But Intel later succumbed to the stock market's plunge, closing at $31.75, down $2.125.
In August, Intel warned that third-quarter earnings might be "flat to down" from the previous period's because of slowing sales growth of its 80386 microprocessor, start-up costs associated with a line of computers and costs of preparing for mass shipments of the company's new 80486 chip in the current quarter.
On Friday, Andrew S.Grove, Intel president and chief executive officer, said "Intel's business is strong.
Our bookings improved as the quarter progressed and September was especially good.
For the full quarter, our bookings were higher than the previous quarter, and our book-to-bill ratio exceeded 1.0."
For the nine-month period, Intel reported net of $268.3 million, or $1.43 a share, down 27% from $367.1 million, or $2.05 a share.
Revenue amounted to $2.23 billion, up slightly from $2.15 billion.
Walter Sisulu and the African National Congress came home yesterday.
After 26 years in prison, Mr. Sisulu, the 77-year-old former secretary-general of the liberation movement, was dropped off at his house by a prison services' van just as the sun was coming up.
At the same time, six ANC colleagues, five of whom were arrested with him in 1963 and sentenced to life imprisonment, were reunited with their families at various places around the country.
And as the graying men returned to their homes, the ANC, outlawed in South Africa since 1960 and still considered to be the chief public enemy by the white government, defiantly returned to the streets of the country's black townships.
A huge ANC flag, with black, green and gold stripes, was hoisted over the rickety gate at Mr. Sisulu's modest house, while on the street out front, boys displayed the ANC colors on their shirts, caps and scarves.
At the small four-room home of Elias Motsoaledi, a leading ANC unionist and a former commander in the group's armed wing, Umkhonto we Sizwe, well-wishers stuck little ANC flags in their hair and a man tooted on an antelope horn wrapped in ANC ribbons.
"I am happy to see the spirit of the people," said Mr. Sisulu, looking dapper in a new gray suit.
As the crowd outside his home shouted "ANC, ANC," the old man shot his fists into the air.
"I'm inspired by the mood of the people."
Under the laws of the land, the ANC remains an illegal organization, and its headquarters are still in Lusaka, Zambia.
But the unconditional release of the seven leaders, who once formed the intellectual and organizational core of the ANC, is a de facto unbanning of the movement and the rebirth of its internal wing.
"The government can never put the ANC back into the bottle again," said Cassim Saloojee, a veteran anti-apartheid activist on hand to welcome Mr. Sisulu.
"Things have gone too far for the government to stop them now.
There's no turning back."
There was certainly no stopping the tide of ANC emotion last night, when hundreds of people jammed into the Holy Cross Anglican Church in Soweto for what became the first ANC rally in the country in 30 years.
Deafening chants of "ANC" and "Umkhonto we Sizwe" shook the church as the seven aging men vowed that the ANC would continue its fight against the government and the policies of racial segregation on all fronts, including the armed struggle.
And they called on the government to release Nelson Mandela, the ANC's leading figure, who was jailed with them and remains in prison.
Without him, said Mr. Sisulu, the freeing of the others "is only a half-measure."
President F.W. de Klerk released the ANC men -- along with one of the founding members of the Pan Africanist Congress, a rival liberation group -- as part of his efforts to create a climate of trust and peace in which his government can begin negotiations with black leaders over a new constitution aimed at giving blacks a voice in national government.
But Pretoria may instead be creating a climate for more turmoil and uncertainty in this racially divided country.
As other repressive governments, particularly Poland and the Soviet Union, have recently discovered, initial steps to open up society can create a momentum for radical change that becomes difficult, if not impossible, to control.
As the days go by, the South African government will be ever more hard pressed to justify the continued imprisonment of Mr. Mandela as well as the continued banning of the ANC and enforcement of the state of emergency.
If it doesn't yield on these matters, and eventually begin talking directly to the ANC, the expectations and promise raised by yesterday's releases will turn to disillusionment and unrest.
If it does, the large number of right-wing whites, who oppose any concessions to the black majority, will step up their agitation and threats to take matters into their own hands.
The newly released ANC leaders also will be under enormous pressure.
The government is watching closely to see if their presence in the townships leads to increased anti-government protests and violence; if it does, Pretoria will use this as a reason to keep Mr. Mandela behind bars.
Pretoria hasn't forgotten why they were all sentenced to life imprisonment in the first place: for sabotage and conspiracy to overthrow the government.
In addition, the government is figuring that the releases could create a split between the internal and external wings of the ANC and between the newly freed leaders and those activists who have emerged as leaders inside the country during their imprisonment.
In order to head off any divisions, Mr. Mandela, in a meeting with his colleagues before they were released, instructed them to report to the ANC headquarters in Lusaka as soon as possible.
The men also will be faced with bridging the generation gap between themselves and the country's many militant black youths, the so-called young lions who are anxious to see the old lions in action.
Says Peter Mokaba, president of the South African Youth Congress: "We will be expecting them to act like leaders of the ANC."
They never considered themselves to be anything else.
At last night's rally, they called on their followers to be firm, yet disciplined, in their opposition to apartheid.
"We emphasize discipline because we know that the government is very, very sensitive," said Andrew Mlangeni, another early Umkhonto leader who is now 63.
"We want to see Nelson Mandela and all our comrades out of prison, and if we aren't disciplined we may not see them here with us.