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The paper was written by George Akerlof, economist at the UC-Berkeley; George Perry, senior economist at the Council of Economic Advisors during the Kennedy administration who is now at the Brookings Institution; and William Dickens, former member of the Council of Economic Advisors under President Clinton, now also at Brookings. The economists believe a long-term jobless rate of 4.5% would push inflation somewhat above its current rock-bottom levels with consumer prices rising at about 3.4% a year, compared with the 3.1% annual rate recorded so far this year. The authors say that the economy can sustain lower jobless rates now because of the nation's recent bout of low inflation. Conventional wisdom asserts that workers demand higher wages to make up for losses from inflation. But when inflation is low (a term the authors apply even to inflation rates above 3%) the paper argues that workers tend to ignore the price changes as meaningless statistical noise, and thus don't demand higher wages. As a result, companies can avoid having to raise their prices, helping to keep inflation from accelerating further. 'Firms and workers are keenly aware of inflation even when it is low, particularly when inflation for very visible and frequently purchased goods and services, like gasoline, changes significantly,' says Mark Zandi, chief economist with RFA-Dismal Sciences. With salary comparisons and financial information readily available in the media and over the Internet, he adds, 'workers are even more aware of their real wages than in the past. Government numbers crunchers at the CBO and the White House OMB estimate that a jobless rate of 5.2% is the lowest that can be sustained over the long term, an opinion widely shared among private-sector economists. Assuming the size of the labor force remains constant, pushing the jobless rate up to 5.2% would mean that nearly 1.2 million additional Americans would find themselves without work.
According to the Federal Reserve's Flow of Funds data, the net issuance of US corporate equity posted a $43.3 billion annualized pace in 2000's first quarter. In sharp contrast, equity buybacks exceeded gross equity issuance in each of the 22 quarters ended March 2000 at an average annualized rate of $138.1 billion. Unless the funding of stock buybacks subtracts too much from a company's financial flexibility, stock buybacks should enhance equity valuation. In terms of a 4-quarter moving average, net equity buybacks most recently peaked at an unprecedented 3.4% of GDP for the span ended June 1999 and have since descended to the 1.3% of GDP for the year-ended March 2000. Since June 1999, the 4-quarter moving average of net stock buybacks has been trending lower relative to GDP. Not since 1990-1994 have net equity buybacks descended relative to GDP. When net stock buybacks grew relative to GDP during the six years ended 1989, the S&P 500 recorded an average yearly increase of 13.5%. When net equity buybacks then fell relative to GDP during the five years ended 1994, the average annual increase of the S&P 500 dipped to 5.4%. Over the next five years, stock buybacks trended higher relative to GDP and the average annual increase of the S&P 500 jumped up to 26.2%. Interestingly, the latest slide by equity buybacks relative to GDP has been joined by a weaker showing for the S&P 500 stock price index. The S&P 500 would not have advanced at an average annualized rate of 26.2% during the 5 years ended 1999 if average annual net equity buybacks had not reached 1.8% of GDP for the 5 years ended September 1999. During the 5 years ending with 1999, net equity buybacks averaged $143.7 billion per year.
But what happened instead is that the size of retail inventories vaulted, offering customers vastly greater choices, and even more checkouts were installed, which shortened the lines. To provide those services, the stores required even more workers, which meant that measured productivity didn't increase. But it should have. The megastores offer a better product precisely because they have more variety. And as for the shorter checkout lines, one might recall that the paradigmatic picture of a socialist economy is of people standing in line. Related: Caroline Baun, Bloomberg 6-26 I wish some technology aficionado would address the dark side of the productivity miracle, or what it's like to be a consumer trapped in one of those endless, information technology phone menus. The productivity of anyone on the receiving end is shot to hell. If the problem has to be taken care of during regular business hours, the worker's loss of productivity, magnified a thousand times over, will directly affect his firm's. And even if the employee attends to matters on his own time, the experience is so debilitating that he can't do any work afterwards!
For starters, consider GE, the most valuable company in America. The stock weighs in at some $520.6 billion in market capitalization and sells at a p/e multiple of 47.3 times trailing earnings. If GE suddenly traded at its average P/E multiple for the past five years (31.2 times earnings) the stock would lose 34% of its value. That calculates to a possible loss of $177 billion in market value. There are only 10 stocks in America that are worth more than $177 billion. It would be like having Merck or Pfizer disappear without a trace. To explore GAAP vs. GARP, I examined the 300 largest U.S. stocks and estimated what their P/E multiples would be in five years if they lived up to analysts' profit expectations, but the price remained unchanged. The result is worrisome. Now priced at 56.2 times trailing earnings, these 300 large companies account for about 75% of all public equity value in America. Together, they are projected to grow earnings at 20.3% a year over the next five years. As a result, their projected price-earnings multiple, which is the same as a regular P/E, but is based on how much Wall Street thinks a company will make is 22.5 times earnings. Is that reasonable according to GARP? By historical standards, it's still on the high side. The historic average P/E multiple for the S&P 500 is 14 to 15, with a multiple of about 20 in periods of low inflation. To get in line with these averages, earnings will have to grow at the estimated 20.3% a year for five years, inflation will have to remain low and prospects for growth after the next five years will have to remain good. Examining individual stocks provides no reassurance. GE, growing at 15% a year, would still be selling at 23.6 times earnings in 2005. Cisco, now selling at 158 times trailing earnings and expected to grow 32% a year, would end up with a P/E of 39.5. Yahoo, now selling at 491 times trailing earnings and estimated to grow at 51% a year, would be priced at a whopping 62.6 times earnings at the end of five years. Motorola and Dell, on the other hand, would be priced like growth stocks, if they are still growth stocks in five years. In other words, with no disappointments, we could be facing a world in which the value of our largest stocks could be unchanged for five years even as earnings soar. Will it happen? I don't know. But it is a distinct possibility that we could have wonderful corporate growth, higher wages and a flat stock market.
'In the last 32 Fed meetings, we've been right on target for 31 of them.' Wall Street still has high expectations for corporate profits in the second half of the year. The consensus estimate for the S&P 500 calls for earnings gains slowing to about 19% in Q3 and 17% in Q4, still much stronger than the historical average of about 7%, according to First Call Corp. But the outlook for next yearĖs profits depends a lot on what the Fed decides to do next week. Related: Caroline Baun, Bloomberg 6-29 `When growth was uniformly robust, everyone was saying, `Don't worry, there's no pricing power,' says John Youngdahl, an economist at Goldman, Sachs & Co. `Now that inflation has accelerated across the board -- and significantly by some measures -- all market participants talk about is slower growth.' If Youngdahl is correct and the economy picks up steam in the third quarter, `we are setting up for a potentially big upward adjustment in assessments of what will be the endpoint for this tightening cycle,' he says. Related: Caroline Baun, Bloomberg 6-26 `The recent softening in activity is insufficient in both duration and magnitude to force the Fed out of a tightening posture,' says Susan Hering, chief economist at Carr Futures. Which is why most folks believe that the Fed will be back in play by the following meeting on Aug. 22. `If the Fed wants to slow output from 5% to 3%, are employers going to be quick to fire people they've had to beg, steal and coddle for years?'' asks Bob Barbera, chief economist at Hoenig & Co. In 1995, companies shed workers with alacrity to protect profits. `That was then. Now, with the unemployment rate at 4%, I find it hard to believe firms are going to be quick to lay them off. When business slows, it's not going to be good for the stock market.' Related: Janet Stewart, Chicago Tribune 6-25 Every time [since World War II] the Fed has tried to slow the economy by inducing unemployment increases of more than three-tenths of a percentage point, it has produced a recession, according to a study by Goldman, Sachs. Greenspan's trailblazing soft landing of 1995 doesn't count, because it focused on slowing productivity and didn't boost the jobless rate, said Edward McKelvey, Goldman's senior economist who presented the findings in a recent client newsletter. Related: WSJ 6-25 'We expect at least two reversals of popular opinion on the direction of Fed policy and the economy by the end of the third quarter,' cautions Christine Callies, a strategist at Credit Suisse First Boston. Related: WSJ 6-25 Bullish Goldman Sachs investment strategist Abby Joseph Cohen has told clients that economic growth has reached an "inflection point," and is slowing - not enough to cause a recession, but enough to fend off the Fed. Pessimists think the economic data aren't clear enough to persuade the Fed to stop raising rates. Others think Fed officials want an "insurance policy," and will raise rates in June just in case. Why? Because it wants to avoid raising rates in the fall, during the presidential campaign.
It's going to be hard to keep inflation from accelerating, says Henry Willmore, senior economist at Barclays Capital Group. `It's already baked in the cake. Even if we print increases of 0.2% in the core, the year-over-year rate will rise because we are dropping off 0.1% increases' from June and August last year. This [0.2%increases] would put the year-over-year increase in the core CPI at a still-respectable 2.5% at year-end, according to Willmore's calculations. Print a couple of 0.3% or 0.4% increases (possible if owners' equivalent rent catches up with reality) and the core CPI ends the year closer to 3%. The folks who deny inflation has accelerated are in denial.
Despite the recent rise in the rate of unemployment, joblessness should continue to fall. Every other labor-market indicator is screaming that the labor market is extremely tight: unemployment insurance claims, the Help-Wanted Index and the consumer-confidence measure of jobs. Despite the recent decline in retail sales, the consumer's fattening paycheck should soon bring him back to the stores big time. The Commerce Department reported that sales fell 0.3% in May, and with the downward revisions to March and April, inflation-adjusted sales fell at an annual rate of 1.2% over the three-month period. But May sales were still up 5.6% from the like month a year ago. Wage and salary growth was running at an 8.5% annual rate in the first four months of this year, much too strong for us to doubt that we're witnessing a retrenchment period and that the shoppers will soon return for another spree. Based on the most recent data available, sales of new and existing homes were down 5.8% from a year ago in the first four months of this year. But the Mortgage Bankers Association index of mortgage applications has recently surged to a record high, which means sales will likely go gangbusters over the next few months. Housing starts have about matched the pattern of a year ago, and sales of new homes are actually running higher. [Robert Brusca, CNBC 6-18: Housing starts are 2.5% off-peak, new sales are 8.5% off-peak and existing sales are 13% off peak. Permits to construct new housing are 15% off. The National Association of Homebuilders overall index and traffic component (index of visits by prospective homebuyers) are off peak by nearly 20%.] With stronger economies abroad now fueling a surge in US exports, and with state and local governments spending huge chunks of their accumulated surpluses on public works, 2000 should be the 5th year in a row of better than 4% growth in GDP, a streak that has never been surpassed. So whether or not Greenspan truly believes he's finished his work, he'll soon find out there's more to be done. He may well stay his hand at the FOMC meeting scheduled for the end of this month, but by the August 22 conclave, he should find sufficient evidence to warrant yet another 50-basis point hike in the fed-funds rate, from the current 6.5% target to 7%. (He's likely to go as much as half-a-point by August because the next FOMC gathering will be held October 3, too close to the presidential election to do anything so aggressive as hiking fed funds.) Related: John Lonski, Moody's 6-19 Not only do Fed's rate hikes assure some slowing of domestic expenditures, but January-April 2000's imbalance between the annual advances of 10.2% for retail sales and of 6.7% for wage and salary income highlighted the inevitability of a more subdued pace for consumer spending. Consider how during the 5 years ended 1999, wage and salary income's identical 6.7% average annual increase supported a much slower 5.9% average yearly gain for retail sales. For the 12-months ended April 2000, the 6.7% year-over-year increase of wages and salaries trailed the 9.7% advance of retail sales by the deepest shortfall since the 3.1 percentage points of the 12-months ended January 1995. The annual growth rate of retail sales would slump from the 8.2% of the 12-months ended January 1995 to the 4.7% of the 12-months ended January 1996. Helping to curb 1995's pronounced deceleration of retail sales were a remedial plunge by short-and long-term borrowing costs, as well as a rise by the annual growth rate of wages and salaries from 1994's 4.9% to 1995's 5.8%. The opposite of the current imbalance held during the year-ended September 1998, or when the 7.7% advance of wages and salaries led retail sales' 4.4% rise by enough to correctly sense the approach of a consumer spending boom of considerable magnitude. A flatter rise by domestic spending need not imply a slumping economy. True to form, Treasury yields have declined in response to the latest deceleration of retail sales. The more closely fixed-rate private-sector borrowing costs follow Treasury yields lower, the less likely is a ruinous slowing of business activity. The latest decline by fixed-rate borrowing costs could help to limit the unfolding deceleration of household expenditures. If credit worth is sufficient, a great enough decline by private-sector borrowing costs should ward off a protracted slump. Related: WSJ 6-21 One reason cited by various Fed officials for doubting the endurance of the current slowdown is the fact that the second quarter has repeatedly been weak in recent years, only to be followed by an acceleration in the second half. Last year, for example, GDP grew at just a 1.9% annual rate in the April to June period, before surging at nearly a 6% annual rate for the rest of the year. Fed officials also note that accelerating growth in foreign economies could boost demand for US goods even if American consumers continue to cut their spending. The low unemployment rate and surveys showing continued high consumer confidence could also indicate stronger US consumer spending after a spring break.
Just the Facts [Will the rise in oil prices slow the economy?] Time trip back to early 1986, when oil prices plunged to $10 a barrel in April from $30 at the end of 1985. This was hailed as good news for consumers, which was guaranteed to boost US economic growth. It didn't turn out that way. GDP growth slipped to an anemic 1.7% in Q2-86, the weakest quarter from the time the economy emerged from recession in 1982 until it started to falter again in 1989. Considering that the Fed was aggressively lowering interest rates (it dropped the discount rate by 100 basis points in a span of less than two months in March and April 1986) the [stimulus] from cheap oil is certainly suspect. Nothing like hindsight to provide the perfect ex-post explanation. In 1986, it was the oil patch, of course. The plunge in oil prices hurt the regions of the country that were dependent on oil for their revenue. (Caroline Baum, Bloomberg 6-30) One in five U.S. households receives at least 80 television channels, says Statistical Research Inc. (WSJ 6-29) To rank in the top 1% of taxpayers for 1997, you had to report adjusted gross income of at least $250,736. This group paid 33.2% of total individual income taxes for that year, up from 32.3% the prior year, according to David Campbell and Michael Parisi in the Statistics of Income Bulletin. The group also accounted for 17.4% of total adjusted gross income, up from 16%. To rank in the top 5%, your income had to be at least $108,048. This group paid 51.9% of total income taxes, up from 51%, and it earned 31.8% of total AGI, up from 30.4%. The top 50% of taxpayers paid about 96% of all personal income taxes and earned 86% of AGI. The average federal income-tax rate on all taxable returns rose to 15.3%, the highest level since the mid-1980s. Tax-exempt interest was reported on 4.8 million returns for 1998, down 3.3% from the prior year. That included about three million returns reporting adjusted gross income of less than $100,000. Also, about 5.5 million returns for 1998 showed medical-and dental-expense deductions, up 5.8%. The dollar amount surged 10% to $31.7 billion. And 811,857 individual income-tax returns reported moving-expense adjustments for 1998, up 5.7% from the prior year. But the dollar amount fell 4.8% to $1.7 billion. (WSJ 6-28: From the Spring 2000 issue of the IRS's Statistics of Income Bulletin, Publication 1136,Volume 19, Number 4) Twenty years ago, two-thirds of US companies paid dividends. Today, barely one-fifth do. The dividend yield on the S&P 500 today has fallen to little more than 1% - the lowest in 125 years of record-keeping. (Irwin Kellner, CBS MarketWatch 6-27) The Joint Center for Housing Studies of Harvard University 'State of the Nation's Housing' report shows that 59% of homeowners with stock holdings had more equity in their homes than in stocks in 1998. More than 73% of whites owned homes in 1999 compared with less than 47% of blacks. Part of the reason is that the minority population is younger. But even if minorities owned homes at the same rates as whites of similar age and income, their homeownership rates would have been 61% in 1998 vs. 72% for whites - a lag of 11 percentage points. (USA Today 6-27) In Q1, foreign investors purchased a record net $141 billion of US stocks and bonds ($62.7 billion stocks, $45.4 billion corporate bonds and $34.7 billion agency debt and net sales of $1.8 billion of Treasurys), up 54% from Q4-99, according to the Securities Industry Association. The total is up 13% from the previous record of $124.6 billion in the last three months of 1996. Europeans accounted for $93.3 billion of the first-quarter total ($58.8 billion in stocks, $46.8 billion corporate and agency bonds, selling $12.2 billion of Treasurys). The Q1 buying spree was more than enough to cover the period's $102.3 billion deficit in the US current account. US mutual funds purchased roughly $342 billion in US securities. (WSJ 6-27) From cyber-slang article: In the year to date, the Merrill Lynch High Yield Master II Index is off 1.039%. If it continues at that pace, 2000 would be the first year the index has had negative returns since 1994, when it lost 1.034%. Right now, the average spread between high-yield bonds and ten-year Treasuries is about 6%. The spread topped out at 9.81% in December 1990. (WSJ 6-27) 'The cyclicals have three strikes against them,' says Byron Wien, chief domestic strategist at Morgan Stanley Dean Witter. 'The economy is slowing, which means their earnings are going to be under pressure. Unlike tech stocks, the cyclicals can't generate favorable positive earnings surprises for an indefinite period. And because their earnings are cyclical, you want to sell them at some point.' The cyclicals also lack institutional sponsorship these days because growth-stock investors dominate the market and few of them are interested in old-style, economically sensitive groups save the oil-service sector. But 'these stocks are discounting a recession, but I don't think the world is that bad or that the Fed needs to make it that bad,' says Paul Lesutis, a managing director at Brandywine Asset Management. (Barrons 6-26) For the quarter-ended April, US merchandise exports advanced by 12.5% yearly, wherein exports to the Euro-zone gained 4%, while exports to the rest of the world surged higher by 14.2%. US merchandise exports to the emerging market countries advanced by 19.7% annually, as exports to advanced economies increased by 8.7% yearly. For the same quarter-ended April, the 21.8% annual surge by US merchandise imports consisted of a steep 27% increase by imports from emerging market countries (up 16.6% to the Pacific Rim, 16.7% to China, and of 22.8% to Asia's newly industrialized countries) and a 16.6% climb by imports from developed economies. (John Lonski, Moodys 6-26) The stock market may have stepped on the accelerator, but the bond market has shifted into a lower gear amid uncertainty about what the Fed will do this year. Even if the odds favor a less aggressive Fed in the months ahead, it's unlikely they are done tapping the brakes. And thus bond prices are falling. The yield on the benchmark 10-yr note ended Friday at 6.18%, up from 5.96% a week earlier. The 30-yr bond yield jumped to 6.03%, up from 5.87%. To many investors, the bond market's inability to get more mileage out of economic trends is puzzling. Fears that the Fed would tighten another percentage point this year have been allayed by signs that its six rate hikes to date are gaining traction. So, what's holding back the fixed-income arena? Several factors, including higher oil prices, hint the economy isn't weakening as much as hoped and the bond market's rate structure [or yield curve]. (William Pesek, Barrons 6-26) Later this summer, the European Commission is likely to give pension funds in member countries the green light to make cross-border investments. Those funds have $2 trillion in assets. 'As pension funds become funded, instead of pay-as-you-go, we are going to see an increasing shift from bonds to equities' says Michael Levy, head of international equities at Deutsche Asset Management and manager of the Deutsche European Equity fund. 'That is going to happen over the next 5 to 10 years, and is going to generate tremendous demand for stock in Europe. Conservative estimates project institutional demand for European equities to be $11 trillion between now and 2010. The demand will outstrip supply, and there will be more supply.' (NYT 6-25) First Call/Thomson Financial began tracking preannouncements about five years ago. And while some companies preannounce positive earnings surprises, they found a bias toward companies prereporting bad earnings. Over the past five years, 57% of preannouncements have been negative. (WSJ 6-25) The Bank of Japan on Thursday sent a clear message that it is moving closer to lifting its record-low interest rates, which it has kept close to zero for 16 months. Bank of Japan officials believe their so-called zero-interest-rate policy is creating distortions in the economy, among other things by making credit so inexpensive that it discourages companies from restructuring. At a news conference, central bank Deputy Gov. Sakuya Fujiwara said the zero-rate policy "can't last forever" and is only something that was adopted as an "emergency, temporary" measure. (WSJ 6-23) Brazilian investors, reacting enthusiastically to the central bank's surprise decision to cut Brazilian interest rates by a full percentage point, sent the benchmark Bovespa Index soaring 2.4%. The cut brought Brazil's interest rates to 17.5%. The central bank pointed to better than expected inflation numbers when explaining the decision, and many economists believe that Brazil's year-end inflation target of 6% is within reach. Some analysts believe 5% is feasible and that rates could fall to 15% by year end. As rates move toward that level, strategists maintain that local money invested in bonds and other fixed-income securities will shift to the stock market. "This could be the start of a powerful move in Brazilian financial assets," said Jay Pelosky, a global market strategist for Morgan Stanley Dean Witter. Noting that only 8% of Brazilian mutual-fund assets are in stocks, "any shift will be into equities." (WSJ 6-22) Thinking of selling mutual funds and buying stocks? During the past 12 months, 351 stocks have returned more than 200%. Only one US stock fund has done that. But consider this: Of the 5,527 US stock funds Morningstar covers, 16 (less than 1% of the total) lost more than 20% in past 12 months. Of the 7,651 stocks we cover, 2,514 lost more than 20% in past 12 months. That's about 33%. (Sue Stevens, Morningstar 6-22) In the middle 1960s, both the US (25% of GDP) and Europe (28% of GDP) had almost equal tax burdens. Over the next 35 years in the US, total taxes collected increased to 30%of GDP. Now the EU takes about 41% of GDP. In the US, we've had terrific growth along with low unemployment. In Europe, the general economic trend also has been up, but at a much slower rate than in the United States and with unemployment that is currently three times higher. How much the government scoops out of the economic pie has real consequences for us all. (Jim Barlow, Houston Chronicle 6-21) Some 78% of working Americans who are not IRA savers. In a 1995 study by the institute, 3.7% of taxpayers younger than 30 owned an IRA. By age 50, the number was up to 38%, but many of those accounts may be rollovers of 401(k)s. Only 40% of US workers have a job that gives them access to a 401(k). (Todd Mason, FtWorth Star-Telegram 6-21) Japan has gone crazy for cell phones, which also display the time, and one consequence is a decline in wristwatch sales. Citizen Watch Co. says its output last year fell 14% to 292.4 million pieces, due to the phone phenomenon and a weak economy. Silver lining: Citizen makes phone parts. (WSJ 6-22) Some signs are surfacing that the speculation rampant in the Nasdaq market earlier in the year hasn't died out. Margin debt held by New York Stock Exchange member firms - or debt taken on by investors to trade stocks - in May fell only 4% from April's levels though some analysts were predicting declines of as much as 20% as investors pulled in their horns during the market correction. From the peak in March, margin debt is down only a total of 14%, including a roughly 10% decline in April. The percentage of Nasdaq trading by individual investors still stands at about 60%, down only slightly from the market's peak when individual, or retail, investors constituted about 65% of overall Nasdaq volume. (WSJ 6-21) Tax-exempt interest income was reported on about 4.9 million personal income-tax returns for 1997, or only about 4% of the total filed for that year, a new IRS publication says. That was down 1.5% from the prior year. The dollar amount rose 1.7% to $49 billion. (WSJ 6-21) As a result of the expansion of the Earned Income Tax Credit in the late 1980s and early 1990s, as well as other changes in the federal personal income tax, payroll tax liabilities now exceed income tax liabilities for nearly two thirds of families. In 1979, payroll taxes exceeded income taxes for 44% of families. (National Bureau of Research by Andrew Mitrusi of the National Bureau of Economic Research and James Poterba of MIT - WSJ 6-21) Validea objectively assesses the swelling ranks of supposed experts doling out stock picks via the Internet, magazines and other media. Stock selections are culled from about 35 media outlets and the pickers and sources are ranked based on the average performance of their recommendations over periods ranging from a week to a year, going as far back as 1995. (LA Times 6-20) The May unemployment report showed that private industry cut 116,000 jobs, the biggest drop in nine years.The unemployment figures are computed with two surveys: a payroll report in which employers report the number of workers they pay and a door-to-door survey in which residents are asked their employment status. While those figures never match exactly, in May the household survey found a decline of 1 million workers, while payrolls increased 231,000. (USA Today 6-20) The rally over the past couple of weeks has improved the marketĖs technical footing, some analysts believe. The Nasdaq composite now trades above its 200-day moving average. Ralph Acampora of Prudential Securities offered a rosy outlook for stocks based largely on the performance of the NYSE Advance/Decline line. The analyst also notes that the number of stocks reaching new 52-week highs is beginning to outpace the number reaching new 52-week lows. (CNBC 6-20) Wall Street's bankers are devising a collection of strategies to raise funds for their clients while minimizing what is being called "time risk." Time risk refers to the threat that, just as a company completes the rigorous two-month process to prepare for a new stock offering, disarray in financial markets will shut the capital-raising window. One way for already-public companies to get more flexibility is to file with the SEC for a "universal shelf" offering. Once the registration is approved, the company can then issue virtually any kind of security - stock, bond, convertible securities - in as little as 24 hours, or wait until later because the registration is valid for two years. Conventional shelf offerings also have the two-year window, but are usually restricted to one type of security. The flexibility means that if the stock market remains sour while investors regain some appetite for convertible securities, the issuer can adapt its financing strategy accordingly. (WSJ 6-20) From a thread-wound, rubber-covered ball invented in Cleveland in 1898, the modern golf ball evolved into two varieties: three-piece (solid or liquid center, wound rubber and plastic cover) and two-piece (hard bubble-gum plastic interior and plastic cover). With newer blends of plastic for covers and cores, the virtues of the three-piece (softer, more workable feel) and the two-piece (harder, longer) were combined into kind of fusion balls. Appendix III of The Rules of Golf, as maintained by the Royal & Ancient Golf Club in St. Andrews, and the US Golf Association says the ball can't weigh more than 1.62 ounces or be smaller than 1.68 inches in diameter. It limits how far the ball can travel - the guide being a separate USGA test standard of 280 yards when whacked by a mechanical driver traveling at a swing speed of 109 miles an hour. Golfers lose them at a rate (says Callaway Golf) of 4.5 per 18-hole round. (WSJ 6-15) The costs of running employee pension and retirement plans fell last year for many of the nation's largest companies, as the strong stock market continued to swell pension-plan assets. Pension costs for the companies in the S&P 100 index dwindled last year "to a mere $155 million" from $4.9 billion in 1997, according to Jack Ciesielski, whose firm, RG Associates publishes the Analyst's Accounting Observer newsletter. The study is the most comprehensive review to date of the role that pension plans played in corporations' 1999 financial results. The income generated in pension plans was so strong that the plans not only paid for themselves but also helped to boost corporate earnings at 29 companies, up from 20 in 1997. (WSJ 6-6) Almost 65% of fast-food revenue is coming through the drive-tru window. Between 1997 and 2007, sales of meals to be eaten off premises are expected to grow three times faster than on-premise sales, according to Franchise Finance Corp. of America. (WSJ 5-18) Home Page Previous Factoid Top Sites |