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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 (709)	9/1/1998 12:42:00 AM
From: porcupine --''''>	Read Replies (2) \| Respond to of 1722

Stephen Roach: "Is Global Collapse at Hand?" By STEPHEN S. ROACH -- September 1, 1998 There can be little doubt that world financial markets are now in full-blown crisis. With yet another black Monday taking the Dow down 513 points yesterday, a sense of despair and desperation has set in. Global currency contagion has run rampant, from Thailand to Russia and all too many points in between. The International Monetary Fund seems to be out of bullets. Investors are stripping risk from their portfolios. Is there a way out? Resolving the crisis depends on why the market started to plunge in the first place. Did inherent flaws in the world economy cause the crisis? If so, a collapse of global activity could certainly be in the offing, leading to an outbreak of global deflation. Or was this crisis simply caused by a panic among investors and the inherent instability of financial markets? Put another way, are countries now completely insolvent, or are they just suffering from a temporary lack of funds? Worldwide deflation can't happen without a collapse in worldwide demand. For example, in the early 1930's world production and trade fell by 5 percent to 10 percent annually. Such a collapse is highly unlikely today. World gross domestic product is likely to increase by 2.3 percent in 1998, even with the crises in Asia and Russia. In the full-blown global recessions of the past, gross domestic product usually increased only about 1.5 percent a year. In other words, markets around the world may be crashing, but the global economy is probably not. That suggests that the market's reaction to fears of global depression and deflation are overblown. Indeed, before the steep market declines of the last several days, there were signs of healing in Asia. International financing positions as measured through the balance of payments went from deficit to surplus -- having the effect of transforming these countries from borrowers to lenders in world financial markers. Foreign companies were beginning to buy Asian enterprises at significantly reduced prices, thereby providing capital to previously bankrupt businesses. But given the events of the past several days, these market-driven solutions are no longer enough. Fear and panic in financial markets sometimes take on lives of their own, and that is now the risk. Under these circumstances, the United States and other leading industrial countries, as well as the International Monetary Fund and the World Bank, should take action that restores investor confidence. The time for a coordinated international response may now be at hand. Such an effort will need to include two important ingredients. First, all major central banks except Japan's must reduce interest rates. In return for being relieved of this responsibility, Japan would have to accelerate its financial reforms. Second, the I.M.F. must rethink its "rescue tactics." Specifically, it must relax its fiscal austerity requirements -- for instance, the mandate that governments cut spending -- and recognize that it is time to put banking reform on hold because it denies the expansion of credit to borrowers at precisely the time they need it. In short, central banks and the I.M.F. both need to focus squarely on crisis containment and put tangential considerations aside. Financial markets would probably respond quite favorably. In Japan and Russia, however, the impact on the financial markets would be more limited. That's because both countries suffer from more fundamental structural problems -- Japan's credit crunch and Russia's inability to collect tax revenue -- and thus require more radical solutions. Indeed, a world in crisis requires many of us to think the unthinkable. For example, I had long felt that the Federal Reserve's next move should be to raise interest rates; now I believe it should reduce rates to stem the crisis. But the Fed cannot be expected to do the job alone. This must truly be an international effort. There are risks in this approach. Lower interest rates would only boost domestic demand in an already rapidly growing and fully employed American economy, thereby setting the stage for a prompt policy reversal once the crisis subsides. Such an outcome, of course, is strikingly reminiscent of the Fed's policy whipsaw in the aftermath of the crash of 1987, when interest rates were reduced by three-quarters of a point and then raised by three points the following year. It certainly wouldn't be the first time history repeated itself. Stephen S. Roach is chief economist and director of global economics for Morgan Stanley Dean Witter. Copyright 1998 The New York Times Company

To: porcupine --''''> who wrote (709)	9/2/1998 10:18:00 AM
From: porcupine --''''>	Respond to of 1722

Boeing replaces commercial aircraft head 02:38 PM ET 09/01/98 SEATTLE, Sept 1 (Reuters) - Boeing Co., which has been struggling to overcome bottlenecks on its jet production lines, on Tuesday picked a new chief for its underperforming commercial airplane unit and said it was restructuring other operations. The company named Senior Vice President Alan Mulally, formerly president of its Information, Space & Defense Systems unit, to replace Ron Woodard as president of the Boeing Commercial Airplane Group. Boeing said the management change was part of its effort to boost profit margins. "Our expectations are that commercial airplane operations produce significant, double-digit operating margins," Boeing said. "We concluded there must be significant changes in the composition of the management team at this time." Until recently, Boeing executives have been reluctant to cede market share, resulting in aggressive discounting and promises to boost production that could not be met. Seattle-based Boeing has reported some $3 billion in excess production costs. "Investors were screaming for a sacrificial lamb, someone to take the blame, and to show they are serious in trying to turn around operations and generate cash," said Morgan Stanley Dean Witter analyst Pierre Chao, who reiterated his strong buy rating on Boeing's stock. He said, and a company spokeswoman confirmed, that Boeing has even changed how it pays bonuses to sales staff as part of the effort to boost profit margins. The company said its goal is a net profit margin of 7 percent. Boeing's loss of an exclusive supply deal to British Airways Plc last month was seen as a move away from an emphasis on market share, making margins a higher priority. Boeing's stock was at $33 Tuesday morning, up from Monday's close of $30.94 but about half the value of its July 1997 peak price. On Monday, the aerospace giant announced a buyback of 15 percent of its shares. Boeing also said on Tuesday it was changing the structure of its other business groups. "The company now has a total of four business groups where before there were three," a spokeswoman said. The Information, Space & Defense Systems unit was replaced with a Space and Communications unit and a Military Aircraft and Missile Systems Group. The Commercial Airplane Group and a Shared Services division remain. Kevin Degeeter, a defense analyst at Paine Webber, said the firm had raised its rating on Boeing's stock to attractive from neutral. "The stock has underperformed. Production seems to be a lot cleaner," he said. "Before, there were parts of airplanes lying around." ((--New York Newsdesk (212) 859-1700))

To: porcupine --''''> who wrote (709)	9/2/1998 10:33:00 AM
From: porcupine --''''>	Read Replies (3) \| Respond to of 1722

IBM ships first copper computer chips, sees wide use By Eric Auchard NEW YORK, Aug 31 (Reuters) - The world's first commercial computer chips wired with copper instead of aluminum will begin shipping on Tuesday according to IBM , which plans to market the faster, more efficient chips for use in a wide range of computers and consumer electronics. The world's largest computer maker said it would begin shipping its first copper-based microprocessors, including a PowerPC 740/750 model operating at 400 megahertz. The chips are designed for use in both desktop and mobile computers. Industry analysts said Apple Computer Inc would use IBM's new Power PC microprocessors as the basis for computers yet to be announced. Apple did not immediately return calls seeking comment on its plans. IBM has been engaged in a decade-long industry race to create the first generation of copper-wired semiconductors, which can deliver improved performance and reduced power consumption compared to existing aluminum-wired chips. As engineers have packed more performance onto smaller devices, they have drawn closer to size and speed limits imposed by aluminum wires. "IBM is first into the market with any kind of credible copper manufacturing technology," said Dan Hutcheson, president of VLSI Research, a Silicon Valley semiconductor market research firm. However, Hutcheson noted that several semiconductor rivals were working to develop copper-based chips of their own, including Japan's Hitachi Ltd. <6501.T> and U.S. microprocessor giant Intel Corp. IBM said it also planned on Tuesday to outline its plans to incorporate copper chip technology into its flagship mainframe computer, minicomputer and workstation lines. It said it planned prototype machines for later this year, with production-ready systems due in 1999. IBM also said it planned to broaden the use of copper in the computer market by using its semiconductor foundries to produce copper chips for other companies. The company said it planned to offer Complementary Metal Oxide Semiconductors (CMOS) with transistors as small as 0.18 microns. It said prototypes were due in the second quarter of 1999, with commercial production slated for the first quarter of 2000. In addition, IBM also will announce on Tuesday the availability of the fastest embedded processor on the market, a 400 megahertz PowerPC chip. Embedded processors are used to control the functions of a variety of equipment including printers, network routers and an emerging class of consumer electronics such as digital cameras, cellular phones and digital cable TV set-top receivers. While designers consider aluminum easier to work with than copper, aluminum is a relatively poor conductor of electricity. As a result, in extremely small configurations, it cannot deliver sufficient power to the transistors. Scientists looked to copper, a superior conductor, as a potential savior but until recently it remained an elusive one because it was difficult to work with in small dimensions and could corrupt the silicon transistors in a chip. IBM said its new Power PC microprocessors are a demonstration of the potential for copper technology to increase performance of existing chips. It said the PowerPC 750 chip was created as a standard aluminum design operating at up to 300 megahertz. By applying IBM's copper manufacturing process to what is essentially the same chip, the company said it can now produce semiconductors featuring speeds of at least 400 megahertz -- a 33-percent speed improvement for the same chip. ((-- New York bureau 212-859-1840))