The Daily Tar HeelTuesday, March 21, 19895
eBusiness' I
Stocks
v. . .
2262.50
DOWN 29.64
VOLUME: 151.26 million shares
v
COMPANY CLOSE CHANGE HIGH LOW WK. AGO
Duke Power 12 - 12 44 43 12 42 34
Food Lion 11 14 11 10 78 10 18
NCNBCorp. 3S73 - 18 3& 3$ 14 32; &3
RJRNabisco 86 58 86 34 85 78 84 18
BellSouth 40 38 - t4 40 58 401S 4GJ2
2340
2330
2320
2310
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2290
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38 39 310 313 314 315 316 317 320
RecessDdmi predocte
Continued high inflation could spur downturn, analysts say
From Associated Press reports
WASHINGTON The recent
spurt of inflation is raising fears of
a recession, with some economists
predicting Monday that a downturn
could begin in the second half of 1989.
These analysts believe that the
Federal Reserve, faced with alarming
news of increasing price pressures,
will squeeze credit so tightly that an
economic slump will be all but
inevitable.
"Once you get inflation up to the
levels we have right now, it has taken
a recession to cool things off. That
is an unfortunate fact of life," said
Bruce Steinberg, senior economist at
the New York investment firm of
Merrill Lynch.
Inflation worries were heightened
last Friday when the government
reported that prices at the wholesale
level had shot up a full percentage
point for the second straight month.
It was the worst back-to-back
inflation news in nearly eight years
and it sent stock and bond prices
plunging as investors worried that the
Federal Reserve would be forced to
drive interest rates higher in an effort
to dampen demand.
Markets continued to be battered
by inflation worries on Monday, with .
the Dow Jones industrial average of
30 stocks falling 29.64 points to close
at 2,262.50, after a 48.57 point drop
on Friday, the worst one-day loss in
nearly a year.
Investors were braced for an even
bigger market drop Tuesday if the
government's monthly check of
consumer prices comes in with . a
worse-than-expected number.
Economists were looking for con
sumer prices to rise by about 0.5
percent in February. They feared that
a figure as high as 0.7 percent could
send markets into a tailspin. Even a
0.5 percent increase would translate
into an annual advance above 6
percent, sharply higher than the price
increases of 4.4 percent or less during
the past seven years.
The Bush administration sought to
play down inflation worries on
Monday with White House spokes
man Marlin Fitzwater telling report
ers that a number of recent business
reports paint a picture of a slowing
economy which will be enough to
break any inflationary pressures.
But private ecoomists said fears
were now so widespread that the
Federal Reserve will be forced to take
actions that will likely send a variety
of consumer and business interest
rates higher.
"We are looking at potentially the
worst inflationary bout since the late
1970s and early 1980s," said Allen
Sinai, chief economist of the Boston
Co. "It is a policy problem of
immense proportions for the Federal
Reserve, and it will require sharply
higher interest rates and potentially
a recession to deal with."
Starting a year ago, the central
bank, under Chairman Alan Green
span, began gradually nudging inter
est rates higher in an effort to keep ,
inflation from getting out of control,.
Some economists complained that
the Fed was too tentative, especially
in the second half of 1988, and now
is faced with the need to slam on the
brakes. ,.;
David Jones, an economist with
Aubrey G. Lanston & Co., a govern
ment securities dealer, predicted tha
the Federal Reserve would boost tK$
discount rate, the rate it charges titj
make loans to financial institutions,
two or more times in the coming
months. f
The Fed increased the discount rate'
to 7 percent on Feb. 24 in a move
widely seen as a signal that it intended'
to move more strongly against infla2-1
tionary pressures.
"The Fed gave up on gradualism'
in February," Jones said. "Now that
they have become tougher and more1
aggressive, it makes the danger of a'
recession greater." ,!l
Strike woes multiply for troy bled airlines
Exchanges
NEW YORK CLOSE
CLOSE CHANGE 2 WEEKS AGO
GOLD London $ 396.00 3.00 $ 388.56
SILVER $6.14 0.02 $5.78
CLOSE MON CLOSE FRI 2 WEEKS AGO
(per$1 US)
British POUND 1.7187 1.7130 1.72335
Swiss FRANC 1,602 1,6t54
Japanese YEN 131.27 131.68 129.15
V, German MARK 1,8687 1.8763 1,85271
DTH Graphic
SOURCE: SHEARSON LEHMAN HUTTON, Chicago
'Expressed in US dollars per pound
From Associated Press reports
The parent corporation of strike
crippled Eastern Airlines got double
trouble Monday when New York
developer Donald Trump cut his bid
for Eastern's shuttle and flight
attendants called a strike at sister
carrier Continental Airlines.
There were few signs of disruption
from the strike by the flight atten
dants union at Continental, but Mary
Jane Barry, president of the Eastern
flight attendants' union local, pre
dicted the walkout would grow.
"Right now, they're still trying to
get the word out," Barry said in
Miami.
Continental's flight attendants
voted in December to authorize a
strike over wages and have been free
to walk out since then, union leader
Carla Winkler said.
Barry said parent Texas Air Corp.
has been trying to offset Eastern's
strike, begun March 4 by its machin
ists union and joined by the pilots
Man refuses to pay bill for
J
ega
from Associated Press reports
; BALTIMORE A man being
fcued by American Express for not
paying his $6,700 bill contends he
doesn't owe the money because he
Used the charge card to pay for an
Illegal act hiring prostitutes.
! "It's the oldest profession and an
0ld rule of law they go together
as far as I'm concerned," said Thomas
Waxter Jr., attorney for Michael
Gianakos.
"It is axiomatic that a contract
which has as its purpose an under
lying illegality cannot be enforced by
either of the parties," said Waxter in
response to the . American Express
lawsuit.
In an affidavit filed in Baltimore
Circuit Court, Gianakos said he used
his American Express card during
July and August 1987 to purchase the
services of prostitutes at the Club
Pussycat and the Jewel Box in
downtown Baltimore.
The bills submitted to American
Express showed the charges were for
champagne.
The two bars are located on The
Block, a street lined with peep shows,
X-rated video and book stores and
the only block in the city where
Business Briefs
flashing neon lights are allowed.
Bartenders at the two establish
ments denied Gianakos' claims, and
it was not immediately clear how he
could prove them.
"He wasn't in here because we don't
have prostitution," a bartender at the
Club Pussycat said. He declined to
give his name.
The court papers filed by American
Express said the two clubs accepted
charges from Gianakos resulting in
an unpaid bill of $6,716.92.
But in his sworn statement,' Gia
nakos said, "The use of my American
Express card was for the purchase of
the services of prostitutes, which is
illegal in the state of Maryland." .
Asked if Gianakos could get into
legal trouble for making such an
admission, Waxter said Friday, "I
don't think so."
RJR may sell Del Monte
ATLANTA Industry analysts
said Monday that RJR Nabisco's Del
Monte subsidiary is probably the
strongest candidate for sale under a
plan to reduce debt from Kohlberg
Kravis Roberts & Co.'s (KKR)
buyout of the consumer products
giant.
RJR said in a statement that it has
not made a decision but has retained
Goldman, Sachs & Co. to study a
possible sale of Del Monte, along
with other options.
The company made the statement
after the Wall Street Journal reported
that KKR, which bought RJR for a
record $24.53 billion in February, had
assigned Goldman Sachs to seek bids
for Del Monte.
"It's a very strong possibility," said
Bob Young, vice president for deriv
ative securities at Dean Witter Rey
nolds in New York. "Some substan
tial amount of the businesses had to
be sold, as a practical matter."
Young said Del Monte is a leading
candidate for being sold because of
the nature of KKR's buyout.
"KKR was selected because KKR
stated intentions to not sell off RJR,
to not substantially distribute pieces
of Nabisco," Young said. "That
makes the sale of Del Monte highly
and flight attendants, by increasing
Continental's service.
Only about 200 Eastern pilots,
about half of which are management,
are flying, and Eastern is operating
less than 10 percent of its pre-strike
schedule of 1,040 daily flights.
Continental's executive vice pres
ident and chief operating officer,
Lewis Jordan, said that as of midday
Monday, only 35 attendants were
participating in the walkout and
would be "permanently replaced."
Barry, speaking at her union hall,
where walls were decorated with
posters showing a Dracula figure
representing Texas Air Chairman
Frank Lorenzo, said unions will
announce new actions aimed at
Continental on Tuesday. She
declined to give details.
Meanwhile, Trump said that
because of the strike he no longer
thought Eastern's Northeast shuttle
service was worth the $365 million
he offered last year. He said he'd like
services
likely." .
Del Monte; based in Coral Gables,
Fla., produces canned, dried and
fresh fruits as well as canned and
microwave vegetables, juice drinks
and snack foods. It employs 42,000
people worldwide and hires about
12,000 seasonal workers.
Pauline Howe, spokeswoman for
RJR in Atlanta, declined to speculate
on Del Monte's chances of being sold.
She said the company is simply
studying its options.
"I wouldn't read any more into it
than that," she said.
The Journal said the sale could
bring $3 billion, which could be used
to reduce KKR's debt from the RJR
buyout. KKR executives previously
had said they planned to sell $6 billion
in RJR food assets.
Emmanuel Goldman, a beverage
and tobacco analyst at Paine Webber
Inc., said the most likely buyers for
Del Monte would be Japanese,
French, West German and British
companies, although U.S. companies
such as Quaker Oats Co. and Ralston
Purina Co. might be interested.
to cut the price by more than $125
million.
The deal has been awaiting final
approval, and Eastern said last week
it would ask U.S. Bankruptcy Court
in New York, where Eastern filed
March 9 for Chapter 11 protection
and bankruptcy reorganization, to
expedite the sale to Trump.
In a letter to Lorenzo, Trump said,
"The shuttle has become an entirely
different business in that its market
share and customer base may be lost
for some time to come, if not forever."
Eastern replied with an afternoon .
letter, telling Trump it was seeking
other bids for the shuttle. The letter,
excerpts of which were made avail
able to The Associated Press, said
Eastern has recently received "other
offers unsolicited" and invited Trump
to re-submit a bid.
Eastern officials said passenger
traffic on the 62 daily flights on the
Boston-New York-Washington shut
tle has improved steadily since the
first days of the strike, when some
flights carried as few as seven pas
sengers. For one week it slashed
weekday fares from $99 to $49 one?
way and weekend fares from $69 to
$12 to lure passengers back.
When the Continental strike deadr
line came at 10 a.m. EST, some flight
attendants set up picket lines at the,
carrier's main Houston hub, but
flights appeared to be departing an4
arriving normally. Pickets also were
reported at Newark, N.J., and
Denver. '
There are about 6,800 Continental
flight attendants, but the union hasj
been without a contract since Con-j
tinental's 1983 Chapter 11 reorgan-
ization. The company says only 5;
percent of its attendants belong to the
union, and the union says 60 percent.;
Continental's pilots and machinists!
lost their unions in 1983.
Continental spokesman Davet
Messing said the flight attendants'!
walkout is "like an annual event." An!
Easter 1988 call for a sickout failedi
to materialize, and "there's no reason
to believe this attempt will be anyi
more successful," he said.
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