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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 (922)	10/21/1998 7:11:00 PM
From: Freedom Fighter	Respond to of 1722

Tootsie Roll Update - V.I.W. I sold my shares of Tootsie Roll yesterday at $42. I purchased the shares in July of 1997. The profit was a little over 85% in slightly more than 1 year. There is nothing wrong with company. It has been modestly overpriced for awhile now but I was willing to hold it because I had no other investment ideas for the proceeds and I thought it was a good takeover target for someone big. That does not seem as likely now so I used the recent Fed liquidity rally to cash the ticket. It remains a company that I would love to own. Just at a more sensible price. However, I would like to add that I think it is less overvalued than most companies. Wayne Crimi Value Investor Workshop members.aol.com

To: porcupine --''''> who wrote (922)	10/22/1998 8:18:00 PM
From: porcupine --''''>	Respond to of 1722

Timid Japanese Bank Bailout Just Might Do the Job -- NYTimes ECONOMIC SCENE -- October 22, 1998 By MICHAEL M. WEINSTEIN The law that the Japanese Parliament recently passed to rescue broken-down banks commits several blunders. It does not require insolvent banks to close. It does not require banks to disclose losses. It does not require wobbly banks that accept taxpayer money to lend to creditworthy borrowers -- the primary purpose of a bailout. The obvious prediction is that Japan will remain credit-starved, dragging down other economies in Asia and beyond. But the prediction may be wrong. The law takes the important step of injecting public money into failing banks. Despite its flaws, the measure might pry open clogged credit lines and channel money to companies in need of a fresh start. As Adam Posen of the Institute for International Economics, author of a new book on the Japanese economy, says, "The bill will succeed despite itself." Japan's banks are buried in bad loans and confront an economy that has slipped into recession. Thus they are loath to lend even to reliable customers. But if banks do not lend, companies cannot invest, and the economy cannot grow. The crisis has been worsened by an accounting system that allows banks to mask losses. Fanciful financial reports have scared away investors and creditors. Worse, the phantom bookkeeping pretends that borrowers can repay impossibly large loans. Japan needs its banks to wipe bad loans from their books so borrowers can start afresh. To that end, the law creates three pots of public money totaling about $500 billion, more than 10 percent of Japan's annual output. The United States' savings and loan bailout in the 1980s cost about 2 percent or 3 percent of output. The first pot, about $150 billion, will pay off depositors at banks that close. Their assets will be transferred to a government agency for resale to private investors, much the way Resolution Trust Corp. worked in the United States. The second pot, also around $150 billion, will be used to nationalize insolvent banks that the government decides to keep open. The government will run these banks until private owners take over, mirroring the way the Roosevelt administration handled the 1930s banking crisis. The third, most controversial pot has no U.S. parallel. It will pump about $200 billion into private banks that the government deems shaky but solvent. In return, the government will get stock. The idea is that the taxpayer money will build up the banks' capital so they can resume lending. Daniel Tarullo, formerly President Clinton's top adviser on international economic policy, is not convinced the plan will work. "There is no clear mechanism for moving the $500 billion out the door of government and into banks," he says. "Banks have to ask for assistance. But by asking for assistance, the bank managers identify themselves as incompetent, invoke intrusive government monitoring and put their jobs in jeopardy. That is hardly an incentive to play along." Critics ask why the government should bail out supposedly solvent banks. Besides, nothing in the law forces banks that take public money to write down loans to feasible levels. Tarullo points out that the ruling party has a history of letting banks serving agriculture and construction -- its core supporters -- do as they want. The legislation is vague, critics point out, relying on bureaucrats to fill in the blanks. That might have worked well when the finance and other ministries were all-powerful. But now they are largely discredited, and the ability of the bureaucrats to discipline private markets is dubious. The threat is that insolvent banks, operating under the cover of a bogus accounting system and a compliant government, will limp along, draining resources from productive parts of the economy. Tarullo paints a picture of continued drift. Perhaps, Posen says, Japan's recent past is not prologue. Yes, the parliament should have forced banks that take public money to write down old loans and use the cash to issue new loans. But, he says, there are good reasons to believe all this will happen anyway. He argues that the discipline of international capital markets, which have largely shut off Japan's banks, will force banks to take the government bailout. On Wednesday, three major Japanese banks were reported to be preparing applications. Posen also predicts that these banks will be forced by public pressure and new political forces to pass along cash to worthy borrowers. He points out that the law was not written according to Japanese custom by bureaucrats in the Finance Ministry but was drafted, at the request of cabinet officials, by a younger generation of Parliament leaders. U.S. officials have been clamoring for the Japanese to clean up their bank mess -- no matter how. The bailout passed by the Parliament will waste lots of taxpayer money. It will not dispense justice. It will not by itself turn the Japanese economy around -- fiscal measures will also be needed. But by throwing serious money into locked credit lines, the law does take an essential step toward ending Japan's immediate crisis. For now, that might be all the world needs. Copyright 1998 The New York Times Company