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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (346)	5/22/1998 12:44:00 AM
From: porcupine --''''>	Respond to of 1722

U.S. Treasuries slip, talk Fed sells for customer NEW YORK, May 21 (Reuters) - Prices of U.S. Treasuries fell on Thursday afternoon amid talk the Federal Reserve had sold Treasuries on behalf of a customer, possibly the Bank of Japan, dealers said. A spokesman for the Fed declined to comment. Various talk circulated among dealers, including rumors the U.S. central bank had sold bills, short coupons or both on behalf of the Bank of Japan (BOJ), traders said. Some speculated the BoJ was replenishing its supply of dollars as part of efforts to defend the Japanese yen. ''The rumor has been rampant since one o'clock,'' said a trader of short-term Treasuries at a primary dealership. A bill trader at another dealership said he heard the Fed had sold $1.0 billion each of three-month and six-month bills. Last month, the BoJ spent $21 billion to prop up the yen, according to data released by the bank. It reportedly sold about $12 billion of U.S. T-bills on April 13 in order to rebuild reserves, according to U.S. dealers. At 1435 EDT/1835 GMT, the benchmark 30-year Treasury bond was off 17/32 at 102-22/32 to yield 5.93 percent. Two-year notes were off 3/32 at par to yield 5.62 percent. And three-month bill rates had backed up seven basis points to 5.21 percent.

To: porcupine --''''> who wrote (346)	5/22/1998 12:53:00 AM
From: porcupine --''''>	Respond to of 1722

Wayne on rising healthcare costs: ------- Forwarded Message Follows ------- From: WCrimi <WCrimi@aol.com> Date: Thu, 21 May 1998 22:44:04 EDT To: gadr@nyct.net Subject: Re: Rising Labor Costs: Are Declining Profits or Rising If health care insurance rates rise faster than than they have because the providers of such are not profitable enough at current rates, those increased costs will be subtracted from somewhere. Since profits margins are at all time highs by virtually every measurement (some would argue "in part" due to the temporary benefits of switching workers to managed care) it is unlikely that the cost will be easily passed on in aggregate. Most likely it will reduce profit margins. That is IF health care costs are truly rising more rapidly. Assuming they are, it does seem likely that health insurance rates will be rising more rapidly based on recent evidence. Several companies in the business have reported disasterous results recently. They specifically blamed it on rising costs and have already petitioned regulators for increases. Assuming regulators aren't complete morons and health care companies are not full of it (2 very big ifs) increases are on the way. The owners of the capital of the health care companies will insist on returns that are in line with the cost of equity of those companies. Essentially if insurance rates do rise more rapidly because health care costs are rising more rapidly, whatever income is transferred from non-health insurance companies to health insurance companies is subtracted from profits of non-insurance companies. If of course, the non insurance companies can offset it with other savings without cutting workers, there would be no squeeze. My only thought would be if they could then they would have made those cuts already I would think. If they layoff people, they are then losing customers in aggregate. The growth of which is one of the keys to this business cycle. It will be interesting to see how this plays out. In my mind, profits are already being squeezed in several key industries anyway, the details of which I really don't care about since none of my companies fall into the categories that I thought were and have proved to be vulnerable.

To: porcupine --''''> who wrote (346)	5/22/1998 12:58:00 AM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

Wayne on Productivity: From: WCrimi <WCrimi@aol.com> Date: Thu, 21 May 1998 23:04:42 EDT To: gadr@nyct.net Subject: Productivity Reynolds, This is a question. In my view what the productivity number really is, is basically irrelevant to the values because whatever it is, it is already reflected in the current income steams and their growth. That is what I am concerned with and what investment bankers use to value businesses etc... I did see an interesting comment about it though. The annualized GDP growth rate has been about 3% or a little less for this business cycle. Let us assume that economic growth essentially equals productivity gains plus new workers. (give or take) This cycle has seen one of the most dramatic increases in workers in history with the unemployment rate falling to decade lows. Yet GDP growth is way below years past and corporate profit growth is only slightly above nominal GDP growth despite falling borrowing costs, overstated earnings, and more rapid growth overseas in aggregate. How can productivity be really high then? It must be relatively close to govt. stats indicate. If the true productivity levels were really high, then GDP growth would be atronomical. Yet even if somewhat mismeasured it is nowhere near past decades. Again, this has nothing to do with the values. Only the income streams etc., matter. But it is an interesting observation.

To: porcupine --''''> who wrote (346)	5/22/1998 3:34:00 AM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

The "Unreal" Economy. > >This excess of money is not yet leaking into what economists > >call the U.S.'s "real" economy. (Is anyone else troubled by > >the implication that the financial markets are the "unreal" > >economy?) > This distinction is used by virtually everyone to > separate goods and services > from financial assets even though they are all part > of the whole. "Unreal" is > not really what was implied or appropriate. No one > I know ever used it in that way. It is no different from > > separating goods from services. I meant it ironically. Nevertheless, it does bring to mind the contrast between "real" and "nominal". And, I wonder to what extent, historically, this nomenclatural distinction became more pronounced after we left the gold standard.

To: porcupine --''''> who wrote (346)	5/22/1998 5:06:00 PM
From: Anton Posch	Respond to of 1722

Wow. Thanks for your response. There is much to digest in there. A random observation: My practice has a lot of Boeing employees, both blue and white collar. The scuttlebutt I hear is that the machinists are preparing for a strike this fall, the main issue being a rumored company plan to shift more health care costs directly onto workers, in the form of higher copays or making workers pay a portion of insurance costs. Up to this point the local Boeing unions have been able to retain somewhat more "clout" than has been the case elsewhere. It remains to be seen whether this will continue, but I'd be interested to see how this factors into your analysis.

To: porcupine --''''> who wrote (346)	6/19/1998 3:30:00 AM
From: porcupine --''''>	Respond to of 1722

<< As we have written elsewhere, cost cutting in corporate America is no longer a temporary response to a business downturn ..... the cost cutting at AT&T ... is not yet near an end. On the contrary, rising wages notwithstanding, it has only just begun. >> "More AT&t managers leaving than expected" NEW YORK, June 3 (Reuters) - AT&T Corp. said Wednesday that thousands more managers than it expected are accepting its sweetened buyout offer, putting its plan to slash its workforce by 18,000 jobs over two years a full year ahead of schedule. The No. 1 U.S. long distance phone company said in a news release that since January about 14,000 managers have accepted the offer of a 20-percent pension boost and expanded post-severance benefits in exchange for leaving AT&T voluntarily. When it announced its latest job-cutting program five months ago, AT&T had estimated that between 10,000 and 11,000 managers would volunteer for the plan. The program also called for further reductions of between 5,000 and 7,000 management and non-management jobs through attrition and layoffs. The plan is a key element in AT&T's effort to cut its selling, general and administrative (SG&A) expenses from 29 percent --among the highest in the industry -- to 22 percent by the end of next year. This year AT&T had expected to cut $1.6 billion in SG&A costs, of which it had budgeted $700 million to come from the job reductions. With the higher-than-expected number of departures, AT&T said it now would have to adjust those estimates, although it had no immediate projection. AT&T also said the $800 million to $1.2 billion charge it had expected to record in the second quarter in connection with the workforce reduction would be higher than first announced because that projection had been based on expectations of 10,000 managers accepting the offer. It continues, however, to expect the charge to be offset by higher savings, and AT&T reaffirmed that it expects its earnings per share for the year range between $3.25 and $3.35.

To: porcupine --''''> who wrote (346)	6/19/1998 3:45:00 AM
From: porcupine --''''>	Read Replies (2) \| Respond to of 1722

<< ...It seems to us that it boils down to: Which of the 3, consumers, workers, or owners, has the weakest hand in this particular card game? ... >> "US Supreme Court allows GM to cut retiree benefits" WASHINGTON, June 8 (Reuters) - The Supreme Court on Monday sided with General Motors Corp. in a long legal battle on whether the automaker violated federal law in reducing health care benefits to some of its retirees. The justices declined to review a U.S. appeals court ruling in January that rejected the claims brought in a class-action lawsuit filed in 1989 involving 84,000 retirees. The lawsuit challenged GM's decision to reduce some benefits and to require retirees to "co-pay" a share of health care costs. Retirees now pay up to $5,000 annually for out-of-pocket expenses, according to their lawyers. The former GM employees alleged that the company promised them full health care benefits while they were working, but cut the benefits after they retired. The suit alleged that GM had violated the federal Employee Retirement Income Security Act of 1974. The appeals court ruled that retirees were told they were entitled to full health insurance coverage at no cost throughout retirement but were also told the pension and health care plan's terms were subject to change. Raymond Fay, a lawyer for the retirees, asked the Supreme Court to hear the case, saying it presented legal issues "of recurring national importance" concerning the vesting of welfare benefits in retirement. The high court sided with GM, denying the appeal without comment or dissent. GM said the appeals court ruling applied settled law to the facts of the case, and that Supreme Court review was not warranted. ((James Vicini, Washington newsroom, +1 202 898-8397, fax +1 202 898-8383, washington.economic.newsroom@reuters.com))