Thursday, February 4, 1999
DJIA 9317.12 -49.69 (-0.53%) S&P 500 1255.97 -16.10 (-1.27%) Nasdaq 2447.04 -46.37 (-1.86%) Russell 2000 419.39 -4.35 (-1.03%) 30-Year Bond 98 25/32 -1 5.33 Yield

An Investment Opinion
by Louis Corrigan

New Era: Seeing Past Today's Rumors

Relative quiet ruled early trading on Wall Street this morning after the Federal Reserve's Federal Open Market Committee (FOMC) surprised no one by voting again yesterday to leave interest rates unchanged. Sensing the news vacuum, investors apparently decided to look for reasons to worry and by mid-morning had found one: Will the minutes from the December FOMC meeting, to be released shortly, indicate the Fed has shifted from its neutral stance, established in November, to a bias toward tightening?

The rumor helped trigger a mild sell-off in the highflying Nasdaq, which has looked tired the last few days as the speculative frenzy moved from the top Internet names to the third tier online brokerage firms, like Siebert Financial (Nasdaq: SIEB) and JB Oxford (Nasdaq: JBOH), which could benefit from such online feeding frenzies. With Siebert up $11 5/8 to $61 1/8 and JB up $9 3/8 to $21 3/8, and both having gone parabolic the last few days, some folks must have recalled Fed chairman Greenspan's analogy between Internet stocks and the lottery and thought this was a good time to take profits in other issues.

Of course, this is all market ephemera. A change in the FOMC's bias doesn't in itself mean much, especially since Greenspan must toss the inflation hawks some carrots now and again lest they throw a hissy fit. And a shift to tightening really wouldn't be surprising given Greenspan's own tough talk about the unsustainability of recent economic growth (gross domestic product did rise a stunning 5.6% in the fourth quarter) and the way that numerous Fed officials have talked recently about the need to be vigilant in heading off inflation, as the Wall Street Journal's David Wessel highlighted today.

Yet what Wessel himself downplayed last week in his coverage of Greenspan's comments about the Internet is just how bullish Greenspan is about our economy. The Fed chairman said, "[W]e wouldn't get hype working if there weren't something fundamentally sound under it." Indeed, Greenspan spoke of the "increasing evidence that a significant part of the distribution of goods and services in this country is going to move from conventional channels into some form of Internet system." He noted that because of this fundamental transformation in our economy, "undoubtedly some of these small companies, which have stock prices going through the roof, will succeed and they very well may justify even higher prices."

Though Greenspan is obligated to sound cautious, his bullishness might be most clearly inferred from a Journal editorial yesterday from former Fed governor Wayne Angell. Because of his hawkish past, Angell offers a possible read on Greenspan's own evolving thinking. Under a headline reading "The Bubble Won't Burst," Angell made the surprising and forceful argument for why "we have at last arrived in a new era economy, one in which information technologies and sound money fuel long-term noninflationary growth." Saying that capital spending spurs productivity growth, which keeps inflation in check, Angell argued that the Fed needs to focus on price levels and stop clinging to "the notion of a speed limit on growth." Every boom is not a bubble in the making, said Angell, whose column reads like what Greenspan might say if he could speak freely. Though many commentators are quick to denounce such new era speak as so much nonsense, long-term investors would do well to ponder the kind of world envisioned by Angell and to ignore today's rumors.


Several retail companies moved ahead today on January same-store sales news, traditionally reported en masse on the first Thursday of each month. Home electronics retailer Circuit City Stores (NYSE: CC) took $5/8 to $62 after reporting same-store sales up 8% for the month. Children's apparel retailer Gymboree Corp. (Nasdaq: GYMB) ran ahead $1 1/2 to $10 on an 11% same-store sales boost and casual apparel retailer Paul Harris Stores (Nasdaq: PAUH), which reported an 11% comp sales boost, took $7/16 to $7 5/8.

Norwood, Massachusetts-based chipmaker Analog Devices (NYSE: ADI) ticked up $3/16 to $34 1/16 on news of a partnership with Intel (Nasdaq: INTC) to develop a new DSP core designed to process video, image, voice, and data in communication and computing devices. Plug in this morning's Breakfast With the Fool for a closer look.

Pharmaceutical developer Trimeris Inc. (Nasdaq: TRMS) added $5 to $26 after the company's T-20, a drug that that blocks the entry of HIV into cells, earned "fast track" designation from the FDA, which will speed the review process. For Q4, Trimeris said losses were $0.56 per share, worse than the year-ago $0.45 and a penny below the three-analyst estimate reported by First Call.

Corsair Communications (Nasdaq: CAIR), which provides software and services to the wireless industry, advanced $3/4 to $6 this morning. The company announced a joint marketing agreement with Associated Group Inc. (Nasdaq: AGRPA) subsidiary The Associated Group and said Q4 losses were $0.04 per share, an improvement on losses of $0.86 per share a year ago and analysts' consensus $0.12 loss.

Christian website operator Didax Inc. (Nasdaq: AMEN) was raised $1 1/4 to $11 13/16 after it said National Discount Brokers (NYSE: NDB) will become the first online trading partner on the money channel of its Crosswalk web site.

Brokerage M. H. Meyerson & Co. (Nasdaq: MHMY) continued its recent hot streak, rising $8 11/16 to $16 1/8 on residual enthusiasm over Tuesday's news that it plans to offer online trading by late 1999 at the earliest. Also leaping ahead on the outlook for Internet brokerages are such companies as J.B. Oxford (Nasdaq: JBOH), ahead $9 15/16 to $21 15/16 this morning, and Siebert Financial (Nasdaq: SIEB), up $12 7/8 to $62 3/8.

Flat-rolled carbon steel products firm Rouge Steel Industries (NYSE: ROU) rolled up $9/16 to $11 1/8 after it said it's ready to restart operations after a Monday fire and explosion that halted production. The company also said Q4 EPS was $0.35, ahead of the Street's anticipated $0.20 profit and below the year-ago $0.20 loss.

World Color Press (NYSE: WRC) brightened $1 5/16 to $25 5/8 after Robert Burton, CEO of the print and digital information management firm, said "multiple acquisition efforts appear ready to come to fruition" and the company may double last year's acquisition activity. Q4 EPS of $0.63 beat last year's figure by a dime and market projections by a penny.

Computer, office, and industrial products direct marketer Global Directmail (NYSE: GML) popped up $1/2 to $18 1/8 after acquiring London's privately held computer products and Internet marketer Simply Computers for an undisclosed cash sum. Global's Q4 EPS, at $0.31, beat the analyst consensus of $0.28 and the year-ago $0.34 mark.

Mining company Cyprus Amax Minerals (NYSE: CYM) shone $1 5/16 to $11 1/16 after Morgan Stanley boosted its rating on the company to "strong buy" from "outperform." The brokerage upgraded a total of three copper companies this morning, with Phelps Dodge Corp. (NYSE: PD) moving ahead $3 7/8 to $46 7/8 after earning an upgrade to "outperform" from "neutral," while Asarco Inc. (NYSE: AR) took $15/16 to $14 1/2 on an identical upgrade.

Earnings Announcements

Boston Communications Group
(Nasdaq: BCGI) up $1 3/8 to $10 3/8; Q4 EPS $0.03 vs. loss of $0.08 last year; estimate: $0.01

CompUSA (NYSE: CPU) up $3/4 to $13 7/8; fiscal Q2 EPS: $0.17 vs. $0.36 last year; estimate: $0.16

Timberland Co. (NYSE: TBL) up $7 3/16 to $58 1/2; Q4 EPS $1.80 vs. $1.48 last year; estimate: $1.66


Networking products company 3Com (Nasdaq: COMS) slid $2 9/16 to $34 13/16 after cutting the street prices of its Palm III and PalmPilot Profession Edition personal digital assistants by about 20%.

Brawny paper towels and Dixie paper cups maker Fort James Corp. (NYSE: FJ) was besieged this morning and fell $4 1/2 to $30 3/4 despite reporting Q4 EPS of $0.63, up from last year's $0.48 and a penny above the First Call mean estimate. However, the company said tough year-over-year comparisons and higher marketing expenses due to competition will result in fiscal 1999 earnings flat with last year's results "through at least the first half of the year."

Advanced Micro Devices (NYSE: AMD) tanked $2 7/16 to $18 1/2 after two executives cancelled appearances at a pair of investment conferences today, fueling speculation that the chip maker may be having trouble producing enough of its K6-2 chips to keep up with demand or that it has some other kind of bad news in the hopper. Merrill Lynch analyst Tom Kurlak didn't help matters much with a near-term rating downgrade to "neutral" from "accumulate." Prudential Securities lowered its rating on the company to "hold" from "accumulate."

Financial services firm MONY Group (NYSE: MNY) dropped $2 1/8 to $25 7/8 after The Wall Street Journal reported that the company's Mutual Life Insurance Co. of New York unit is being investigated for possible accounting fraud by the Securities and Exchange Commission. The company said the allegations are "without merit" and were part of an earlier class-action lawsuit against MONY, which was thrown out.

Satellite systems designer Orbital Sciences Corp. (NYSE: ORB) dropped $4 1/8 to $34 5/8 after saying non-cash accounting charges at two of its subsidiaries will result in Q4 EPS below the $0.23 expected by analysts surveyed by First Call.

Enterprise workflow and electronic forms automation company JetForm Corp. (Nasdaq: FORMF) skidded $4 7/8 to $6 3/8 after saying delayed contracts caused by Y2K issue "distractions" on the parts of its clients will result in a fiscal Q3 net loss of $0.36 per share, below the First Call mean earnings estimate of $0.13 per share. The company said it will record an unspecified charge in the quarter for asset impairment and a restructuring.

Healthcare information delivery systems provider IDX Systems Corp. (Nasdaq: IDXC) slumped $3 15/16 to $33 1/16 despite reporting Q4 EPS of $0.34, up from $0.26 last year and a penny ahead of the Zacks mean estimate. However, Dain Rauscher Wessels and Robinson-Humphrey both cut their ratings on IDX this morning.

Pharmaceutical promotions consultant Boron, LePore & Associates (Nasdaq: BLPG) tumbled $13 5/8 to $15 1/8 after reporting Q4 EPS of $0.24, a penny below both last year's results and the Zacks mean estimate. The company also announced that COO Gregory Boron is leaving to "pursue personal interests."

Clinical and management information systems company Cerner Corp. (Nasdaq: CERN) was trounced $7 7/16 to $16 9/16 after posting Q4 EPS of $0.24, which was a penny ahead of the First Call mean estimate. Revenues climbed 36% in the quarter to $95.2 million, but some analysts reportedly believe the firm's growth will slow through the remainder of the year. In response, no less than nine brokerage firms lowered their ratings on the stock this morning.

A quartet of assisted-living companies fell this morning after Dow Jones Newswires reported that BancBoston Robertson Stephens suspended its coverage of the industry on fears that the Senate's Special Committee on Aging may take the companies to task for their pricing policies in an upcoming report. Sunrise Assisted Living (Nasdaq: SNRZ) lost $4 9/16 to $37 1/16, CareMatrix (AMEX: CMD) slid $5 to $19, Balanced Care Corp. (AMEX: BAL) dropped $2 to $4 3/4, and Alternative Living Services (AMEX: ALI) slipped $4 to $21 7/8.


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