Marketplace: News Archives

Tuesday, October 17, 2000
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It's Tuesday, October 17, 2000. I'm David Brancaccio

"Hep cats" on Wall Street like to call this "Super Tuesday." It's day for the market pundits to stop their guessing and for a very long list of companies to come clean with their actual profit and loss statements for the quarter that ended. Attracting a lot of the attention today is the performance of banks and brokerages, as Marketplace's Michelle Brier reports.

Brier: Super Tuesday didn't quite live up to its name for companies like Banc One, which reported a 37 percent slump in its third quarter profits. Or regional banker key Corp, where profits fell 55 percent. But some financial companies had plenty to cheer. Citigroup, the nation's largest banker by assets, beat analyst expectations with profits up about twenty percent. FleetBoston said its profits were up ten percent and Wells Fargo hit a record, with profits increasing by 11 percent. The larger the bank the better the report?

Bush: I'm not sure bigger is better but diversified is better.

Brier: Nancy Bush is Senior Banking Analyst with Prudential Securities.

Bush: Looking at my results today by far the best was FleetBoston. Now FleetBoston is - gosh, I hate to say it - with 200 billion dollars, a smallish bank. Sound ridiculous, but they are very well diversifed with an earnings stream that is one of the best in the business. We saw capital go down for them but at the same time credit card is doing well, Latin America is doing well so there were things that filled in the holes.

Brier: And how about Merrill Lynch? Earning at the number one US brokerage jumped 53 percent, thanks largely to fees paid by investors. Hugh Johnson, Chief Investment Strategist at First Albany, says Merrill can trace its success to three factors..

Johnson: Even though the stock market was down in Sept it was up in August and trading volume was up and that's good for brokers. Second, they took a lot of companies public, helped raise money for companies resulting in hefty fees and they did well with that. And another thing they did was limit losses in their trading accounts.

Brier: Limiting losses will be especially crucial for all financial companies next quarter, when the current stock market losses are likely to show up and get counted. In New York I'm Michelle Brier for Marketplace.

We go on about the personal finance revolution of the past twenty years, but it turns out that many Americans leave their money parked in the savings accounts with the worst rates of return. According to a new estimate, there's about a trillion dollars living in suspended animation (when you factor in inflation). The Consumer Federation of America believes Americans are losing as much as 50-billion dollars a year by not keeping an eye on this stuff. Marketplace's John Dimsdale has the story.

Dimsdale: The Consumer Federation is on a crusade to reverse the record low savings rate in this country. One way, is to transfer that trillion dollars now in passbook savings, statement savings and money market savings accounts ... earning one and a half or two percent ... into higher yielding certificates of deposit, US savings bonds or Internet-based savings accounts ... all of which are federally insured ... and return from three to five percent more interest every year. Consumer Federation executive director Stephen Brobeck says people are more likely to set aside savings if they think they can get a better return.

Brobeck: If consumers shifted hundreds of billions of dollars into higher yielding accounts, it would cost our financial institutions more money. On the other hand, consumers would end up saving more money and there would be an additional incentive to save because the research shows people don't save because they don't think they can earn more than two percent.

Dimsdale: For Americans who are losing interest, Brobeck says U.S. savings bonds are frequently the most cost effective place to park savings.

Brobeck: The best deal in the financial marketplace, for moderate and middle income households, of which they are unaware, are series I savings bonds which can be purchased for as little fifty dollars ... which earn over seven percent ... which are exempt from state and local taxes ... and which are essentially liquid after the first six months.

Dimsdale: That means savers have access to the money in their savings bonds after six months. For those who worry about being able to tap into the funds during the six months, Brobeck recommends gradually transferring money into the bonds ... so that not all of it is out of reach at the same time. In Washington, I'm John Dimsdale for Marketplace.

The biggest public pension fund in the country is kicking the habit. The California Public Employees' Retirement System has voted to sell the tobacco stocks in its biggest portfolios.about 525 million dollars worth. Marketplace's Sarah Gardner reports.

Gardner: CalPERS isn't the first public pension fund to do this.the teachers' retirement system in California voted to dump ITS tobacco stocks in June. And at least six states and several big cities have sold off tobacco investments as well. The CalPERS decision was controversial---it passed by only a few votes and the naysayers complained about the "slippery slope" of divestiture. What next, a ban on investments in alcohol, handguns and rap?, the critics asked. Today board member and California state treasurer Phil Angelides defended the divestiture in terms of the bottom line, not political correctness.

Angelides: "In Phillip Morris alone, from the high's in the 1998 time period, CALPERS has lost over 200 million dollars in that one stock alone. So the losses have been in the hundreds of millions of dollars."

Gardner: Angelides said given all the lawsuits and regulation facing tobacco companies, it was the right financial decision for California's public employees and retirees. The tobacco companies had no immediate comment and RJ Reynolds spokesman begged off, saying his company "never comments on the buying OR selling of its stock." I'm Sarah Gardner for Marketplace.

And, I dunno, is this news? Salomon Smith Barney Consulting surveyed 134 investment managers and asked which Presidential candidate would be best for the financial markets. 68 percent said the Texas governor. 13 percent said the Vice President. And no we're not ignoring the Reform or Green party candidates….neither of those guys received a single vote from the Wall Street hot shots, although nearly a fifth said none of the candidates would have a positive impact on markets.

And that's the top of our news for Tuesday, October 17, 2000. Today the Dow Jones Industrial Average fell 149 points that one and a half percent. As of this moment its trading less than 90 points above the 10-thousand level. The Nasdaq Composite FELL 2 and a third percent. Details when we do the numbers.

This is Marketplace. I'm David Brancaccio.

For several hours this morning, it wasn't clear whether the Presidential debate, set for tonight in St. Louis, would go forward. Some in both the Bush and Gore camps felt it inappropriate, in the wake of the death of Missouri's governor Mel Carnahan-killed in a plane crash last night. This morning, it was decided the debate must go on-preceded by a moment of silence. Whether the candidates' remarks tonight will have much on an impact on the outcome of the November elections is an open question. But it already appears George W. Bush could pay a price for a few choice words he offered in last week's debate. From Moscow, Anya Ardayeva explains:

Ardayeva: During last week's televised campaign debate, Gov. George W. Bush claimed some of the money lent to Russia by the IMF had ended up in Victor Chernomyrdin's pockets. This money allegedly came from 4.8 billion dollars in loans made in the summer of 1998, several months after Mr. Chernomyrdin was sacked as a Prime Minister. The Former Russian Premier fiercely denies the accusations.

Chernomyrdin: Every once in a while, different people want to damage my reputation, he said The temptation to use my name and therefore, damage Russia's interests seems to be quite big.

Ardayeva: Mr. Chernomyrdin demanded a public apology-or else he will defend his honor in court. He also called Governor George W. Bush's remarks irresponsible.

Chernomyrdin: The candidate must know that insulting words towards Russian politicians. Bush knows that for the sake of his ambitions he is putting at risk the future of relations between Russia and the US, two nuclear superpowers with a special responsibility for world security.

Ardayeva: Bush accused Chernomyrdin, of making the personal fortune while he was head of the Russian gas monopoly, and scheming IMF funds.. The IMF has repeatedly denied that any of its money was misused by the Russians. In Moscow, I'm Anna Ardayeva, for Marketplace.

With less than two weeks under his belt as leader of Yugoslavia, the new President visited Montenegro today---well out of earshot of growing consumer complaints back in Belgrade. From the Marketplace Foreign Desk, Julie Small reports on how recent political change is heating up prices in the Serbian capital.

Small: In Belgrade, the bread is rising. The revolution that removed former President Slobodan Milosovic's also removed long standing price controls on basic foods and energy. Allies of the newly installed President Vojislav Kostunica are accusing Milosevic supporters of inflating prices to create discontent. Alex Todorovic, who reports for the Christian Science Monitor from Belgrade, says the price instability is just a bump in the road to reform.

Todorovic: The entire economy is simply in a transition period, it's not a market economy yet, nor is it a state controlled economy as it has been. A new government has to be formed both at the republic and federal level and with no government in place there's simply no regulations, and people are doing what they want

Small: Transportation costs and the price of bread, meat and vegetables have doubled in the the last week. Cooking oil, a Serbian staple, also shot up 300 percent. In a country where the average salary is $40 per month, and unemployment is unofficially set at 50-percnet, the price increases could have severe consequences. Pensioners and people who depend on government subsidies wonder how they will make it through the winter. This is Julie Small for Marketplace

In Zimbabwe today, there were also riots over soaring food prices. President Robert Mugabe deployed paramilitary forces to crush the protests. Andrew Meldrum of The Economist says the protests were triggered after a series of government price hikes on essentials.

Meldrum: What is the final straw is the realization that Zimbabwe is in a period of 60% inflation. Even after you have price hikes on this or that, there's still going to be another one on bread and another one on transport and another one on electricity charges, and people are getting the feeling that it's just never going to stop.

But its more than just prices fueling these protests. According to Meldrum, the demonstrations are also aimed at Mugabe. Recently Mugabe demanded that white farmers surrender their lands to blacks, including many inexperienced in farming. Many Zimbabweans also accuse Mugabe of sacrificing the country's economic stability for his own political gain.

Meldrum: People say they are going to keep on demonstrating until he goes. They were furious. They hate Robert Mugabe because of what he has done to the Zimbabwean economy. They said, we don't want land, we don't care about whites, which are things that Robert Mugabe has gone on about. They said we want jobs, we want to stop the fall in our standard of living. You don't usually see rock-throwers being able to articulate economic considerations so well.

Andrew Meldrum writes for the Economist magazine in London.