Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!americast.com!usa-post Newsgroups: usa-today.invest From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: invest Mon, Jun 15 1992 Date: Mon, 15 Jun 92 05:41:48 EDT Message-ID: 06-15 0000 DECISIONLINE: Personal Investing USA TODAY Update June 15, 1992 Source: USA TODAY:Gannett National Information Network CPI NEWS HELPS STOCKS TO GAIN: The stock market weathered some selling to post a modest advance Friday in response to better-than-expected news on inflation. The Dow Jones average of 30 industrials rose 2.85 points to 3354.36, cutting its loss for the week to 44.33 points. The Labor Department reported the Consumer Price Index edged up 0.1% in May, in contrast to analysts' expectations of a 0.3% gain. INFLATION EXPECTED TO STAY LOW: If May's slight 0.1% rise in consumer prices is any indication, inflation is staying low and might even slip in the next 12 months or so, economists say. Record books show that after the past five recessions, inflation either fell sharply or stayed near its recession low for a year or more. After the '81-'82 recession, inflation was stuck near its recession-low 3.8% for three years. (For more, see special Inflation package below.) VALUE MERCHANTS TAKES BASHING: Value Merchants has been on the skids since investor Ilia Lekach disclosed last week that he heads a group that bought 5%, or 364,600 shares, of the retailer of close-out merchandise for about $6.1 million. Prices ranged from $14 7:8 to $17 3:8. Thursday, Value Merchants plunged 4 to $12 3:4 after reporting a big first-quarter loss of $3.6 million. Friday's close: $11 1:2, down 1 1:4. ANALYST RATES STOCK A BUY: Analyst Gary Jacobson of Kidder, Peabody says Value Merchants, which sold last year at $42 1:4, "is still a viable, profitable concept." His earnings numbers: $1.40 a share for the year ending Jan. 31, vs. $1.33 a year earlier and $2 next year. "You've got to step up to the plate and buy," he says. "No pun intended, but there's still lots of value." PERFUMANIA ON THE DECLINE: Some investors are worried about Perfumania, a discount retailer and wholesaler of perfumes. Its stock ran up on great expectations sparked by management's well-publicized goal to open a national chain of 500 discount perfume stores over the next 5 1:2 years with annual revenue of $400 million. It went public in December at $8 and shot up to $25 5:8. Friday's close: $15 1:4, down 3 1:4. ADVISER HAS BULL STORY: Richard Eakle, who runs Eakle Associates, an investment-adviser and money-management firm with assets of $30 million, says "it's time to get back in" the stock market. Eakle is up about 13% this year, he says, following a '91 gain of 51.6%. "Everything seems to be falling into place for a good upswing," he says. His outlook: A 3575 Dow between July and October, vs. a Friday close of 3354.36. NYSE, AMEX TALK NEW HQ: J.P. Morgan & Co. confirmed Friday it has presented a proposal to unite the New York and American stock exchanges under one roof. The bank has held talks between the exchanges as well as the city and state on a site in downtown Manhattan, according to Morgan spokesman Richard Mahoney. The new building would be across the street from the NYSE's current home. GOLD, SILVER UP: Gold and silver prices advanced worldwide Friday. On the Commodity Exchange, gold bullion for current delivery settled at $342.90 a troy ounce, up $2.40. Republic National Bank said gold added $2.50 to close at $342.50. Gold rose in London and Zurich. On the Comex, silver bullion for current delivery settled at $4.121 a troy ounce, up from $4.098. The metal rose in London. SPECIAL PACKAGE ON INFLATION: INFLATION RISE IDENTICAL TO '91: "Inflation looks really, really good right now," says Michael Penzer, economist at Bank of America, "and it could stay that way for the first year, maybe the first two years, of the recovery." Friday, the Labor Department said prices barely rose in May. So far this year they have risen at a modest 3% annual rate. That's nearly identical to the 3.1% gain for all of 1991. INFLATION SEEN STAYING NEAR 3%: Most economists expect inflation to stay around 3% the rest of this year. Friday's report lent support to statements by Fed Chairman Alan Chairman Alan Greenspan and other Federal Reserve officials that a recovering economy will not push inflation higher. Jittery bond investors have pushed up long-term interest rates this year as a hedge against the inflation they expect. LABOR COSTS STAYING LOW: The major reason inflation typically is tame in the early stages of a recovery: Labor costs stay low, easing the pressure to raise prices. Already, there is evidence labor costs are in check. In May, average hourly earnings were up just 2.5% from May 1991. The May jobless rate: 7.5%, an eight-year high. The rate where labor costs might start to rise is about 5.5%. COMPETITION HOLDING INFLATION: It could be two years or more, economists say, before unemployment falls enough to put upward pressure on labor costs. Another reason inflation should be low is unique to this recovery - stiff price competition from foreign firms. Also keeping inflation in check: The Fed would quickly push up interest rates - to slow the economy - if stronger growth put pressure on inflation. (End of package.) DOW JONES OPENS ON UPSWING: The Dow Jones average of 30 industrials opens Monday at 3354.36 after closing up 2.85 points Friday. The New York Stock Exchange composite opens at 225.51, up 0.41. The American Stock Exchange market value opens at 391.32, up 1.42. The NASDAQ OTC composite opens at 569.52, up 1.84. 24-HOUR TELEPHONE INFORMATION: USA TODAY Money Hot Line. 95 cents a minute. 1-900-555-5555. Personal Investing Editor: William Snoddy. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM