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The Daily Tar HeelThursday, February 9, 19893
Experts disagree on reasons for stock market soiree
By SUSAN HOLDSCLAW
The stock market's recent resur
gence has many economic analysts
disagreeing over what has caused the
increase and what its effects may be,
especially in light of the 1987 collapse.
The Dow Jones average of 30
industrial stocks started 1989 with
;five consecutive weeks of gains before
falling 10.18 points Monday to
1 2,32 1. 07. Most analysts say the slight
(decline does not foreshadow another
i Michael Salemi, Bowman and
Gordon Gray professor of economics
at UNC, said the rise in stock market
.'action has surprised many. "Actually,
Tm puzzled by that," he said of the
irecent resurgence, but said it may be
Uied to political policy.
Investors may be reacting to
'.President George Bush's promise of
lower interest rates, Salemi said. The
Ipossibility of lower interest rates
Jencourages investments and may be
Responsible for the market's rise, he
; But John Gee, manager of Merrill
;Lynch Price Fenner and Smith Inc.,
; Politics have nothing to do with
it, he said. The interest rate is
"Unemployment is low, and personal
comsumption is strong . . .
Manufacturing has been a real bright
spot in the economy . . . There has
been a renewed interest in bonds and
stocks . . . people are getting more
comfortable in doing things again!1
Edward D. Jones and Co.
1987. Salemi said a downward cor
rection would follow the recent
I don't believe the increase would
be forecasting an increase in the
growth in the economy. That would
be a mistake," he said.
The market "inhales" and
"exhales," Gee said. "After youVe had
a run like that, you need time to catch
He predicted the market would
"settle down a little bit" and warned
investors to be "cautious in the near
"There is a better entry point than
this period of time," he said.
But John Wade, an investment
executive and broker for First Albany
Corp. in New York, characterized the
market as "pretty fair" and predicted
stock prices would continue to rise.
He attributed the increase in stock
market activity to the stabilization of
interest rates and the increased
number of Japanese dollars in the
market, leading to a rise in foreign
' Investors are playing it pretty safe
by buying Dow and blue chip stocks,
he said. At this point, a good buy
would be stocks in the food industry
and big businesses, like General
Electric and IBM, he added.
"Retail stocks are still pretty
hesistant," he said. "They seem to
come in at the end of the swing."
The rising stocks indicate the
economy is slowing down, but he
doesn't foresee the chance of another
collapse at least not for a while.
Wade said. Investors learned their
lesson from the collapse, so that
psychological problem doesnt exist,
Gee agreed. "There's always an
opportunity for it (a collapse)," he
said. "Because everyone has such
keen remembrances, that will prob
ably keep it from happening."
"We're in a little bit of an upswing
here, and there could be some pulling
up ... but we don't anticipate
another collapse," Haller said.
governed by natural forces, so there
is no reason to think Bush is respon
sible for the rise in stocks.
"Real figures speak more than
politics," Gee said.
Another possible reason for the
resurgence is investors' renewed
confidence in the market because of
good economic conditions, said Bill
Haller of Edward D. Jones and Co.
"Unemployment is low, and per
sonal consumption is strong," he said.
"Manufacturing has been a real
bright spot in the economy."
"There has been a renewed interest
in bonds and stocks . . . people are
getting more comfortable in doing
things again," Haller said.
But Salemi predicted interest rates
would rise in the coming year and
said an increase in stock market
activity is not warranted at this time.
The rise ind icates that the economy
is "reasonably healthy," he said, and
while the odds of a recession are not
high, the possibility does exist.
Although he didn't think the
market would collapse as it did in
re takes tfii gto staimc
agaoosu proposed! pay raise
By JOHN BAKHT
Only hours before its midnight
deadline, Congress rejected its sched
uled 51 percent pay hike Tuesday.
President Bush, who had supported
the raise, signed the anti-raise
After intense debate, the House
voted 380-48 and the Senate 94-6
against the increase which would have
raised congressmen's annual salaries
from $89,500 to $135,000.
Legislators were quick to denounce
the raise. "He felt that the amount
was outrageous," Janna Zinser, press
secretary for Rep. W.G. Hefner, D
N.C., said Wednesday in a telephone
; Hefner co-sposored the House
measure rejecting the increase.
; "It was the largest outcry I ever
heard," Rep. Walter B. Jones, D
N.C., said of the public reaction to
the proposed raise. Jones and all
other N.C. congressmen voted
The pay hike proposal came from
a presidential commission, and was
endorsed by Ronald Reagan before
he left office. In addition to a raise,
for legislators, the proposal included
salary increases for supreme court
justices, federal judges and high
ranking federal executives, and
pension increases for retired federal
But some officials are disappointed
by Congress' rejection of the increase.
"It's just demoralizing for judges to
be recommended a 51 percent raise
and then not get anything at all," said
Chief Judge Richard Erwin of the
U.S. district court in Winston-Salem.
"There's something wrong with a
system that would permit that."
! Federal district court judges now
make $89,500 per year.
.' :At the signing of the bill, Bush said
another proposal regarding pay raises
(or judges and executives may be
Submitted to Congress.
- Congress can still act to increase
(tf own pay at any time, but leaders
lon't think it will happen.
j.People are so adamant against
jury raise that I think it would be
(oolish to come out with a lesser
um," Jones said.
"I think the feeling around here is
that it's dead," said Bill Connelly,
press secretary for Rep. Steve NeaJ,
D-N.C. "This was so divisive with all
the mail and all the media attention."
At a press conference Wednesday,
House leaders revealed a plan for
"honest compensation" for congress
men. That plan includes a bill
introduced by Rep. Tom Tauke, R
lowa, in which any future pay raise
would not go into effect until the
session after it is approved by
In addition, the plan calls for a ban
on all honoraria, such as speaking
fees. It would also eliminate the
grandfather clause, which allows
anyone who has been in Congress
before 1980 to convert leftover
campaign funds to personal use upon
"(This) violates the spirit, if not the
letter, of the law," said Ed McDonald,
press secretary for Rep. Richard
But Jones, who has been a con
gressman for 23 years and is eligible
to keep the money, disagreed: "It's
not taxpayer money. I dont think the
government should have anything to
do with it."
Cold wimteir weather to persist
in area, meteorologists predict
By JENNIFER JOHNSTON
The surprisingly mild weather is
gone, and the cold gray weather
of winter appears to be here until
spring returns for good.
Abnormal patterns in the wind
currents caused the unusually
warm weather, said Kermit
Keeter, a meteorologist at the
National Weather Service.
Under normal conditions, cold
air from the north, pushed by
upper level winds, sweeps down
over the United States, he said.
The warm weather occurred when
the upper level winds ran parallel
to the cold air, leaving it stationary
instead of moving it towards
North Carolina, he said.
The winds finally shifted and are
now pushing the Arctic air across
the region, causing the recent
dramatic changes in the , temper
ature, Keeter said.
"Now that the wind currents
have returned to their usual
patterns, the rest of the winter
should be more normal," he said.
Although the warm tempera
tures were unusual, they are not
unknown, said Gerald Watson, an
associate professor of meteorology
at N.C. State University. But the
warm weather is not a trend for
future winters, he said.
The unseasonably warm
weather has also caused some
concern about crops.
According to Katie Perry of the
N.C. Department of Agriculture,
the return of the cold weather hurt
the peach and strawberry crops.
Some of the plants had already
started to blossom, and an over
night freeze will kill this growth,
But the entire crop is not in
severe danger, Perry said. Not all
trees and plants started to bloom,
and not all the growth is far
enough along to be killed by the
The apple crop has actually
benefitted from the return of cold
weather, Perry said. There must
be a certain period of relatively
cold weather for apple blossoms
to flower and pollinate naturally,
and the change in temperature
saves apple growers from having
to take extra measures with their
crops, such as releasing bees in the
orchards to help pollination, she
Another concern is how this
weather has affected the water
supply. According to Debbie
Dutcher, assistant state meteorol
ogist for the N.C. Department of
Agriculture, the rainfall in Janu
ary around Raleigh-Durham Air
port was half an inch less than last
year and one and a half inches less
"This time of the year is usually
our rainy period," said Katy Calb,
division manager of operations for
Orange County Water and Sewage
Authority. "University Lake is
lower than we'd like," but the
county is still in "fine shape," she
Calb and Dutcher agreed that
it was still too early in the year
to predict whether there would be
a drought this summer.
As for the chances for snow, the
outlook is not positive. The last
few years have seen a good amount
of snow, and it is about time for
an off year, Keeter said.
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Check out Big Bertha, our world famous
walk-in cooler, featuring the coldest beer
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