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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Lars who wrote (3714)	3/11/1999 2:13:00 AM
From: Lars	Respond to of 15132

* Millionaire Next Door * How much does JC Penney's top-rated Stafford Executive model weigh? The size 42 regular weighs about three pounds. So, $299 divided by 3 pounds or 48 ounces computes to $99.67 per pound or $6.23 per ounce. It is your choice. Do you wish to be "bespoked" at $666.67 per pound? Or be "Penneyed" at much less?

To: Lars who wrote (3714)	3/11/1999 2:14:00 AM
From: Lars	Read Replies (1) \| Respond to of 15132

* Millionaire Next Door * Rule 3 for becoming wealthy: Make financial independence a priority over the display of high social status.

To: Lars who wrote (3714)	3/11/1999 2:17:00 AM
From: Lars	Respond to of 15132

* Millionaire Next Door * If your goal is to become financially secure, you'll likely attain it. But if your motive is to make money to spend money on the good life, you're never going to make it.

To: Lars who wrote (3714)	3/11/1999 2:22:00 AM
From: Lars	Respond to of 15132

* Financial Times Article * MERRILL LYNCH: Brave new world First the UK, now the world. In 1997 Mercury Asset Management formally published for the first time its views on investment strategy for UK pension fund clients. Now, as Merrill Lynch Mercury Asset Management, it is expected by its new bosses to acquire global institutional business, in four base currencies anyway, including dollars, yen and euro, as well as sterling. One response is the fatter Investment Strategy & Structure, Global Edition. It represents a sturdy defence of the large, multi-purpose investment house in an age of specialists. Mercury now runs about $240bn world-wide, but its core UK pension fund business is under pressure because of poor results against benchmarks. Can it extend the transition from running UK balanced pension funds to becoming a global multi-asset manager? Some changes are obvious enough. For its global audience MAM has added more asset classes. Hedge funds, for instance, are noted for their high returns but there are warnings about survivor bias in the performance figures and the hedge funds' lack of resources compared with those of "a large conventional manager". Low correlation with an expensive stock market might appear a current advantage but investors might wind up buying "noisy cash". The passage of time can also bring new wisdom. In 1997 there was enthusiasm about emerging market equities because of the sheer growth generated by these dynamic economies. But they are now seen as only "often" dynamic, with risks more evident than the rewards. Mercury's basic concept remains one of defining "safe harbour" assets (often bonds) that match an institution's long-term liabilities but which usually give only low returns. In practice, higher returning assets can be substituted as long as clients have a long enough time horizon to accept the short-term risks: a 20 per cent standard deviation of annual returns on equities, for instance. The promotion of equities is less enthusiastic than in the previous edition, though. This may reflect the difference in the global client base, so much more bond-oriented than UK pension funds which typically still have equity exposures of more than 70 per cent. There are also one or two hints that Mercury is worried about the level of future real returns on equities, although it quotes a consensus expectation of between 5 per cent and 7 per cent. The competitive challenges to Mercury are clear from the document, which in itself could be seen as a response to the powerful consultants trying to grab control of the central investment decision-making processes and lock money managers away in tiny specialist boxes. The "balanced versus specialist" debate, observes MAM, is really about the relative ability of investment consultants and investment managers to assemble a talented team. A multi-asset manager, it adds, can add value outside narrow specialist briefs, and for many institutions can provide "a cost effective solution that does not expose the investor to undue risk". As for the passive fund managers that are now soaking up business, Mercury points out that although index-tracking may be cheaper, it is not more prudent. An active manager with an active risk of, say 2.5 per cent, may well add only a tiny increment - perhaps 0.2 per cent - to the overall market risk. The risk/return ratio is therefore potentially high. But it has to admit that the average active manager will probably underperform in the long run. Finally, those benchmarks. Historical returns provide only a very weak guide to future performance, MAM says, even if they are nevertheless widely used. Concepts such as "tracking error" may be useful for checking manager styles but they often have little to do with client financial risk. Yet in a tough world, a couple of bad years for performance can do serious damage, even to the biggest and most lavishly resourced fund management house.

To: Lars who wrote (3714)	3/11/1999 2:25:00 AM
From: Lars	Respond to of 15132

* Financial Times Article: Brazil ** IMF: Unreal remedy The IMF is prescribing masochism for Brazil. Britain, post-ERM, suggests that there is an alternative way to the market's heart On September 16 1992, sterling was released from the exchange rate mechanism of the European monetary system. In the course of that turbulent day, the UK authorities briefly raised the base rate of interest from 10 to 15 per cent in a futile attempt to ward off devaluation. This attempt failed. Once out of the ERM, interest rates fell progressively, to a low of 5.25 per cent in early 1994. For the British economy, this was a turning point. The exchange rate fell sharply at first, but soon stabilised. Inflation remained subdued. Most important, the economy proceeded to stage a strong recovery, with output expanding 2.5 per cent in the year to the third quarter of 1993 and then 4.9 per cent in the year to the third quarter of 1994. So strong a recovery could not have occurred without lower interest rates. It is a happy story. It need not have been. The UK might have been in the hands of the International Monetary Fund. If the IMF had run true to form it would have insisted on higher rates. It is even easy to guess its argument. The UK, the IMF staff would have noted, was a country with a poor record on inflation and a long history of currency depreciation. The fiscal position was also deteriorating swiftly at that time. Now that the exchange rate anchor had failed, the UK had to regain lost market confidence. So what would good Dr Fund have proposed? Higher interest rates. With higher rates, the economy in collapse and the fiscal position worsening, the Lord knows what a mess the UK would have become. A nightmare? Certainly. Inconceivable? Hardly. The IMF's canonical view on interest rates in a currency crisis is clear and brutally simple. By definition, it argues, the country is suffering a loss of confidence. It runs the risk of being caught in an inflation-devaluation death spiral. Moreover, the risk of such a spiral arises almost irrespective of the country's record. Indeed that point is explicitly made in the IMF's assessment of its performance in the Asian crisis.* Higher real interest rates are, argues the IMF, a necessary condition for restoring lost confidence. This view then is why the course of interest rates in Brazil, as shown in the chart, has been so different from that in the UK. High interest rates were used, unsuccessfully, in the foolish (IMF and US-backed) attempt to sustain the Real's dollar peg, this having been Brazil's biggest error. But things grew worse, not better, following the floating of the Real on January 15. Short-term rates were then raised steadily, from 29 per cent in mid-January to around 39 per cent by the beginning of February. They then jumped to 45 per cent on March 4. The panic continued, all the same. Do not forget that until the shock of the devaluation, inflation had been low in Brazil, as the chart also shows. The real interest rates Brazil has suffered have been inconsistent with healthy economic growth. Now they will help generate recession. The latest Brazilian economic memorandum, accompany-ing the agreement with the IMF announced on Monday, suggests the economy will now contract by between 3.5 and 4 per cent this year.** Experience suggests that this preliminary assessment of the results of a devaluation-cum-high-interest rate package will prove too optimistic. J.P. Morgan already forecasts a contraction of 5.5 per cent of gross domestic product in 1999. So Brazil, here comes recession. It is horrifying to think this is the best the economics profession can come up with. For what the IMF is saying (to acclaim from market participants, central banks and ministries of finance around the world) is that the only way for a government to restore market confidence is to demonstrate its willingness to inflict misery on itself and its society. This is, in short, a masochist's route to credibility. It would be unfair to say there is no defence for such a policy. Higher real interest rates do increase people's willingness to hold a currency, other things being equal. But note that the annualised rate of interest required to persuade people to hold a currency expected to depreciate by 1 per cent a day is over 3,800 per cent, not 45 per cent. Note, above all, that the extent to which unsustainable policies can restore credibility is at the least open to question. Why is a high interest rate policy unsustainable in Brazil? An obvious answer is that no government will find it easy to survive a depression. But there is a more direct reason: the fiscal position. It is almost universally agreed that the government's pre-devaluation policies lacked credibility for two reasons: the overvaluation of the Real and consequent external imbalance (with current account deficits running at around 4 per cent of GDP) and the fiscal deficit. Now just the fiscal deficit remains. But at around 50 per cent of GDP, Brazil's public indebtedness is not particularly high. Moreover, the country has a primary fiscal surplus (balance, without interest payments), targeted at 3.1 per cent of GDP for this year. Thus Brazil's fiscal deficit of 8 per cent of GDP last year is entirely explained by interest payments. Its difficulty, however, is that the cost of 70 per cent of its domestic debt is determined by the floating interest rate. According to J.P. Morgan, at an interest rate of 40 per cent and an exchange rate of R$2 to the dollar, the costs of debt service become a horrifying 17 per cent of GDP. So high interest rates are themselves the chief cause of the loss of confidence in domestic monetary stability that they are expected to cure. Worse, if the impact of high interest rates on the economy is bad enough, even the primary budget surplus is likely to disappear, as revenue contracts and spending on goods and services rises. This then is a true vicious circle. Brazil is trying to restore confidence with policies that seem bound first to undermine it. Are there less economically damaging and more effective alternatives? The answer depends on what determines that elusive asset, confidence. If it is true that - for all but the biggest advanced economies - apparently unnecessary suffering is the only route to the market's heart, then there can indeed be no orthodox alternative. Confronted by a market panic and lacking access to sufficient foreign currency resources to halt the downward currency spiral, the country has to embrace the pain. But is this really the best the world can recommend? And, if it is, how long will it be able to sustain the orthodoxy it proclaims?

To: Lars who wrote (3714)	3/11/1999 2:28:00 AM
From: Lars	Read Replies (2) \| Respond to of 15132

* Bloomberg Market Update * Stock Market Update Thu, 11 Mar 1999, 2:21am EST U.S. Stocks Rise to Records as Oil Companies Advance With Crude New York, March 10 (Bloomberg) -- U.S. stocks rose to records as Exxon Corp., Schlumberger Ltd. and other oil companies advanced with the price of crude. DuPont Co. gained on plans to boost its drug, nutrition and agricultural chemicals business. The Dow Jones Industrial Average rose 79.08, or 0.8 percent, to a record 9772.84. The Standard & Poor's 500 Index gained 7.00, or 0.6 percent, to a record 1286.84. The Nasdaq Composite Index climbed 13.07, or 0.6 percent, to 2406.01, still more than 100 points short of its Feb. 1 high of 2510.09. About five stocks rose for every four that fell on the New York Stock Exchange. Oil stocks gained after the world's top producers agreed to meet in Amsterdam this week to discuss cutting production to boost prices. ''The market is hoping there'll be a better supply-demand situation there,'' said Charles Mayer, manager of the Invesco Industrial Income Fund and director of investments for Invesco Funds, which oversees $21 billion in Denver. ''Investors' fear of missing a sustained move is driving these stocks.'' Exxon gained 3 3/16 to 73 1/8 and Schlumberger rose 3 3/16 to 58 1/2. Chevron Corp. jumped 3 5/16 to 83 1/4. Crude climbed 84 cents a barrel to $14.69 on the New York Mercantile Exchange, a five-month high. ''Portfolio managers are all dying to buy oil service'' shares such as Schlumberger and Halliburton Co., said William Brown III, president of W.H. Brown & Co., an oil consulting firm in New York. Production cuts ''would have significant implications for oil stocks.'' The Philadelphia Oil Service Sector Index rose 11 percent to a two-month high. Halliburton rose 4 1/4 to 36 1/2 and Smith International Inc. gained 3 3/4 to 34. The Invesco Industrial Income Fund's core oil holdings include Schlumberger, Halliburton, Unocal Corp., Apache Corp. and Atlantic Richfield Co., Mayer said. DuPont DuPont rose 3 13/16 to 57 3/8, contributing most to the Dow average's gain. The largest U.S. chemicals maker said it will issue a tracking stock for its life sciences business. The company also said it is seeking partners in the pharmaceuticals industry and expects to sign one or more alliances with drug companies this year. J.P. Morgan & Co. rose 2 1/2 to 118 7/8. The company's business has picked up as it puts last year's global market turmoil behind it, and money flow analysis shows that investors are confident of further gains, pouring cash into the stock even when it falls. If the stock continues to gain, the firm could be in a position to acquire a money manager or brokerage. If not, it may have no choice but to put itself up for sale. Just today, Banque Nationale de Paris SA's hostile bid for two French rivals prompted optimism for more industry consolidation. BNP, France's No. 3 bank, offered to buy rivals Societe Generale SA and Paribas SA, which have a friendly merger agreement, in a transaction valued at $37.7 billion. If successful, the combination would be the world's only $1 trillion bank in terms of assets. ''Merger activity continues, as we saw today with the French banks,'' said Miles Berryman, who helps manage 8 billion pounds ($13 billion) at Coutts & Co. in London. ''That's going to be an underlying support for equity markets.'' Citigroup Inc. rose 1 1/2 to 64 after analysts at Morgan Stanley raised their estimates for 1999 and 2000 on the world's largest financial services company, citing continued strength in the brokerages. Citigroup's consumer business should benefit from cost-cutting and improving credit quality in North America and Europe, the analysts said. In composite trading, 171 stocks reached 52-week highs, while 200 fell to lows. Computer Associates Computer Associates International Inc. tumbled 6 to 34. Demand for business software could slow as companies cut back on spending as the year 2000 approaches, said analyst Charles Phillips at Morgan Stanley Dean Witter & Co., who cut his investment rating on Computer Associates to ''neutral'' from ''outperform.'' It was the biggest drop for Computer Associates since July 22, when it warned sales and earnings would be hurt for several quarters by an economic slowdown in Asia. Other business software companies declined. SAP AG, the world's largest maker of business computer software, fell 1 3/8 to 26 after indicating at an analysts' meeting that 1999 first- quarter earnings won't meet expectations because of slumping demand. SAP's warning followed an unexpectedly wide loss last week at Baan NV, Europe's No. 2 business- software maker. Oracle Corp., the No. 1 database software maker, fell 13/16 to 37 15/16. America Online Inc. gained 2 3/4 to 92 7/8, Yahoo! Inc. climbed 6 5/16 to 173 5/8 and Amazon.com Inc. rose 7 3/16 to 137 1/8 after Merrill Lynch & Co. analyst Henry Blodget, who correctly predicted that Amazon.com would reach $400 a share, told the firm's clients to buy the stocks. ''The Internet changes the way we go about our lives,'' said Eric Efron, who helps manage the $869 million USAA Aggressive Growth Fund in San Antonio, Texas. ''I think the long-term prospects are very good.'' Lycos Inc. rose 13 3/4 to 110 after CMGI Inc., the biggest Lycos shareholder, said it hired investment bank Morgan Stanley to find buyers other than USA Networks Inc. for the No. 3 Internet search service. CMGI Chairman David Wetherell, who quit Lycos's board on Monday, said he has begun talks with other potential acquirers. Movers Rural phone company Century Telephone Enterprises Inc. jumped 3 13/16 to 67 1/4. The company will replace Rubbermaid Inc. in the Standard & Poor's 500 Index on a date to be announced. Rubbermaid is merging with Newell Co., which is already a member of the index. Stocks typically rally when they enter the S&P 500 as index-weighted funds buy the stock to track the performance of the index better. Household International Inc. rose 4 to 45 13/16 after the consumer financial services company's board authorized the repurchase of as much as $2 billion of the company's stock. At current prices, that represents about 10 percent of the company's stock outstanding. Northern Telecom Ltd. rose 4 to 62 after the No. 2 North American phone-equipment maker said AT&T Corp. is testing Nortel products that direct voice and data on phone networks, a potential blow to rival Lucent Technologies Inc. AT&T, the No. 1 U.S. phone company, traditionally bought most of its switching gear from Lucent, which it spun off in 1996. Lucent fell 2 5/16 to 106 5/8. Fluor Corp. fell 4 5/16, or 13 percent, to 30 and was the biggest loser in the S&P 500 after the largest U.S. engineering and construction company said yesterday its business is slowing. Goldman, Sachs & Co. analyst Chris Hussey lowered his rating on the company to ''market perform'' from ''market outperform.'' Metro Networks Inc. rose 2 1/8 to 49 5/8. The provider of traffic reporting services said it earned 47 cents a share in the fourth quarter, topping the 42-cent average estimate of four analysts polled by First Call.