Salt Lake Tribune | 1999-06-03 | Page 37

_The Salt Lake TribuneBUSINESS Thursd Cee Conv CENTERPIECE a The Upside of Stock Market Plunges Air-Bag Defect Forces Saab to Recall Model DETROIT — Saab Cars USA Inc. said Tuesdaythatit will recall about 26,000 Saab 9000 cars to fix a defect that could affect the air bag’sability to function properly in a crash. Therecall is of Saab 9000s from model years 1992 through 1994. The automakersaid it determined that the covers on the air bag’s electronic control module, located in the engine compartment, could allow moisture to enter and corrodeits circuit boards. Owners of the affected cars will be notified by mail in July and asked to schedule an appointment with their Saab dealer to have the parts replaced, if necessary,free of charge. Long-term investors could score a windfall by reinvesting their dividends THE WALL STREET JOURNAL Oh, for the good old days. when stock prices usedtofall. Remember thoseglorious times? We're not talking minor market turmoil, like we had last week. We're talking bloodbath row. For proof, consider some numbers put together by William Bernstein, an investment Exercise Gliders NotFit for Use adviser in North Bend, Ore., who runs a Web Exercise Gliders manufactured by ICON Health & Fitness Inc. are being recalled. The products, including the Weider Shape Glider, Weider Power Glide and Weslo Shape Trainer exercise machines, were sold at Wal-Mart, Sam's Club, Kmart and other discount department stores and sporting goods stores nationwide from June 1996 through October 1997 for $99 to $149. The problem is an arm supporting the seat, which can disconnect duringuse, causing the userto fall abruptly, the companysaid. Consumers should stop using these machines immediately and call ICON Health and Fitness for a free repair kit at [phone] who are going to cash in site devoted to portfolio theory (hitp://www.efficientfrontier.com). Bernstein analyzed what would happen to aninvestor who plunked $10,000in stocks and thereafter added $200 a month andreinvested all dividends. The $10,000 was invested when stocks wereyielding a paltry 1.5 percent, close to the current annual dividend yield. The dol- lar value of those dividends was boosted each year by 5 percent, roughly in line with the historical average. Now suppose that right after our investor made his initial $10,000 investment, stocks plunged 50 percent and didn't budge from their depressed level. A disaster? Not necessarily. “It's almost a matter of faith,’ Bernstein says. “People say, ‘You're not going to get your gains from dividends. You're going to get them from capital appreciation.” But share-price gains are an iffy proposi- tion, Bernstein notes. Meanwhile, he adds, sum would be reduced by inflation. And the numbers assume that dividends keeprising. That's not guaranteed. According toIbbotson Associates, a Chicago research firm, the com- tomorrow.” Sure, these market plunges could be a tad unpleasant, and some folks would always make the mistake of panicking and dumping their shares atfire-sale prices. But for long-term investors who werereinvesting their dividends and adding new savings to their portfolios, a stock-market dive could be mighty rewarding, even if share prices were slow to bounce back. “For manypeople, low markets are good,” says James Garland, presidentof Jeffrey Co., an investment company in Columbus, Ohio. “The only people who should want a high market are people who aregoingto cash in tomor- CIGNA HealthCare of Utah has expandedits physician provid- rr dends if stock prices had never fallen and thus he had been buying shares with a much lower “For manypeople, low markets are dividend yield good. The only people who should The numbers aren't quite as impressive as want a high market are people they seem. The spending powerof the final bined dividendspaid by the stocksin the Stan- JamesGarland President of Jeffrey Co., an investment firm SET dard & Poor’s 500 have risen in 59 of the last 72 years, but fallen in the other 13 In addition. waiting a dozen years to catch up would try the patience of most investors. “you know you're going to get your divi- dends.” Those dividendshelp salvage our hypothetical investor's portfolio. After the 50 percent dropin shareprices, our investor initially re- ceives the same amountofdividends,in dollar terms. But thanks to the big market plunge. he earns a dividend yield of 3 percent, not 1.5 percent, whenhe reinvests his dividends in additional shares and adds his $200 a month Moreover, dividends are growing at 5 per- cent a year. If stock prices don’t budge, that meansthe yield would climb to 3.8 percent afterfive years and 4.9 percent after a decade. Put it all together, and our investor has some powerful forces working to savehis portfolio “The big caveatis that investors haveto keep putting moneyinto the market after a big decline,’ Bernstein says. “How manyhavethe discipline to do that? The answer is very, very It's highly unlikely, of course, that stocks would drop 50 percent and not recover for a dozen years. Earnings and dividends should increase, making shares seem increasingly cheap. Assuming 5 percent dividend growth and no change in stock prices. the yield on stocks would climb over the 11 years and nine monthsto 5.3 percent, from 3 percent. Presumably, that impressive yield would catch 177. Healthcare of Utah age to more than 50,000 Utah members. oO Hamlet HomesofSalt Lake City has opened a newsubdivision in Murray near 6100 South and 1300 West. close to Interstate 215 The 20-acre community will include 120 homes, a walking trail. playground and 3-acre community pond o Tooele County’s major grasshopperandcricket infestation has worsened, according to the Utah Agricultural Statistics Ser: vice. Thestate Agriculture Department sprayedinfestation areaslast month in an effort to keep an outbreak of thedestructive insects under control and maytake stepslat- Result? Initially, our investor would have the attentionof investors, who would then bid up stock prices. Strangely, the bigger the market cep the donefar better if stocks had stayed at their lofty level. But after a while, our investor finds that the 50 percent dropin share prices is workingto his benefit. Eventually, he pulls moreimpressive the mathgets. “It er vegetation ly counterintuitive.” Bernstein tained fall in stock pricesis good for long run. And the harder they fall, the better it Lake City has won the National ahead of where he would havebeenif stocks had remainedstuck at their nosebleedlevel is for you.” According to Bernstein, if the market months. At that point, our bloodied investor plunged 90 percent, it would take just over five years for our investor to pull ahead of has $44,869, more than the $44,838 he would have accumulated if share prices had never fallen. That $44,869 is made up of the $10,000 where he would havebeenif shareprices had never dropped initial investment, whichis worth only $5,000 “It’s certainly easyto neglect dividends. pecially when they're so small.” Garland because of the 50 percentdropin stock prices, “But dividends are the onlysurething you're $11,669 in dividends. By contrast, our inves- Johnson & Johnson. You can’t count on capital appreciation. You can count on dividends.” The crossover comes at 11 years and nine plus $28,200 in subsequent investments and tor would have earned just $6,638 in divi- er this yearif conditions worsen ‘The insects damage crops and othOo BP Amoco'srefinery in Salt Petrochemical & Refiners Associa- tion’s Award for Safety Achievement. The refinery, which employs about 230 people, was recognized for operating more than a year withoutalost workday because of an accident. In April, the refinery goingto get from owning Procter & Gamble or had operated 18 months without an employee or contractor missing time froma job-related injury. The refinery was one of 123 refineries andplants recognized for their saftey record. p.m. MDT. 0 Short Circuits Force GM To Pull Back Caddys DETROIT — General Motors Corp. is recalling about 35,000 Cadillac Sevilles from model year 1999 and about 139 from 1998 be- causeelectrical shorts in the generator may cause an engine-compart- mentfire. Fires have occurred even with the engine off and the key re- moved, GM said. There have been seven confirmed reports of fires, none of which have resulted in injuries, GM said. Therecall covers the 1998 vehi- cles built in August 1998that have vehicle identification numbers greater than WU934376. The vehicles should not be parked in an enclosed area, like a garage, until they are broughtinto a dealership, GM said Gates, Microsoft Lawyers Tell Different Stories ‘THE ASSOCIATED PRESS WASHINGTON — As the government’s antitrust case against Microsoft Corp. winds toward an endin federal court, it seemsat times that company Chairman Bill Gates and lawyers representing the softwaregiant are reading from differentscripts. This week, for the second time during the highstakes trial, comments madeby Gates have undercut the company’s legal arguments. In the latest instance, while Microsoft argued in court that new de- vices might cut deeplyinto its business, Gates wrote in Newsweek that personal computers — which depend almost exclusively on the company’s Windows operating system — would remain the industry standard for years. The mixed message — saying one thing to the judge and anotherto potential investors — was immediately noted by the government's lead lawyer Greenspan Warns Against @ Continued from D-6 feated efforts to reauthorize socalled “fast-track negotiating authority,’’ saying protections against child labor, sweatshops and unsafe working conditions must be spelled out in trade agreements. Fast-track authority would allow the president to negotiate about Microsoft's alleged aggression toward soft- and a witness this week, whenthetrial resumed after a three-month recess. sonal computers would work “in tandem with other cool devices” rather than be replaced by them. Gates — famousfor his business acumen — man- Healso warnedagainst tighter he said. ness Administration. figures about Microsoft's profits. “They record operating system sales by hand on sheetsof paper,” he share, for Texaco. Kenneth Derr, chairman and chief executive officer of Chev- Weeks later, Gates described in his newly published book how Microsofttrackssales figures digitally by product and country, to determine exactly how sales compare with budget. ron, pursued Texaco after he failed to win a bid for Atlantic But the chairman's silence on inflation calmed a stock market in a healthy U.S. economy. However, in part becauseof previous trade cases, foreign shipments have dropped in the past six Steel mills arewilling to go to sti- tasks and other support services to franchised services commercial cleaning Thefilings with the Commerce Departmentandthe U.S. International Trade Commission seek No More Long Distance Charges! The U.S. industry accused 12 Announcing the new Statewide Toll and Roaming Plan land and Venezuela also were 2 New Calling Plans charged with subsidizing producersto artificially lower prices. The Commerce Department al- = Russia and Brazil Ty } WV 4. 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Derrlost out to BP Amoco. oO Jan-Pro of Utah has begunsell- ing franchises in the state for Jan- Free Long Distance Calling to Anywherein all 50 States When Calling From Utah! rates when re policy-makers will raise interest Chevron reportedlywas considering bidding $42 billion, or $80 a from Desert Certified Development Co. through the Small Busi- countries of selling goods below production costs or home-market prices. Brazil, Indonesia, Thai- @ Continued from D-6 The reason should bethat it enhances fects of competition on productiv i ty.” has 11 employees. The new loca- about Chevron’s offer. aco did not provide any details steel tariffs to effectively raise prices of foreign shipments. and standardsof living throughtheef manicures, pedicures, facials, waxing, massage and hair dressing. It On Cheap Imports Wetry to promotefree trade n the mistaken ground thatit will create jobs,” The spa’s services will include tion was financed partlywith a loan nageagainst the United States. too focusedon job creation oO The Shirodhara Day Spahas opened at 2122 E. Fort Union Blvd. influence is not threatened by any new devices or emerging technologies, such as Internet TV, powerful gameconsoles or handheld appliances. Earlier in the trial, economist Richard Schmalen- this weekafter the House of Rep- policy. as toocontr Texacosaid Chevron’s proposal and mandolins was “unacceptable for several reasons, including complexity, feasibility, risk and price.” Tex- resentatives issued a report detailing 20 years of Chinese espio- Greenspan also attacked the y a a , trade2 Clinton administration's companies point-of-purchase materials for a national advertising campaign. Ta- fle legitimate domestic and international competition.” would be denied access to China — a lucrative new market for high-tech products — intensified spansaid coma Guitars, based in Tacoma, Wash., makes solid wood guitars by Tacoma Guitars to develop Steel Producers DemandTariffs ogies. Fears that manufacturers “Protecting markets from new technologies never succeeded. Adjustments to net nologies have been di only at significant cost * Green: THE ASSOCIATED PRESS third- and fourth-largest energy aged to give the government another club to use against Microsoftin the courtroom. The government's first witness in the new phase of readyhas ruled thVena that Japanillegaltrade deals that the Senate would months pea Raeleg let have to accept reject without y hot-rolled carbon $ lsteel, ea peeeteatro A Japanesesteel executive, Hi- product, Greenspan, an ardent free trad- denori Tazawa of NKK America at unfair prices. The U.S. Internacreaaiditwouldbea'greattrage. 1ne., said the latest complaint tional Trade Commission is to dedy’ if lowered. trade barriers “has absolutely no economic or termine next week whether the wereraised againbyprotectionist factual basis {and] only indi- pricing practices warranttariffs. lane t cates the lengths to which U.S, Similar cases are pending against export controls on new technol- Pinnacle Marketing and Communicationshas been hired over a deal between the nation’s said. In court Wednesday, Microsoft lawyer Michael Lacovara tried to minimize the significance of the Texaco Rejects Offer Of Chevron Takeover NEW YORK —TexacoInc. formally rebuffed a takeover offer from Chevron Corp. on Wednesday, ending weeks of speculation warerivals. Butin his Newsweekarticle, Gates wrotethat per- seetried to explain whyhe couldn't provide precise The argument that Microsoft faces stiff competi- Protectionism tion from a newgeneration of technology devices is intended to persuade the judge that the high-tech industry is sufficiently robust despite complaints thetrial, economist Franklin Fisher, said Microsoft's billionaire chairman's claims. i 1,200. The pharmacynetwork has increased to 210 pharmacies from provides health insurance cover- few. weekdays between 6 a.m. and 6 on er and pharmacy networks. The numberof primarycare physicians has been increased to 1,500 from Fashion pon)208-0006 Place Mall rn Valley Fair Mall W Valley [phone] Beueetifel ¥. ‘Souroc AirTouch. Cellu is w 300 Hog Yo) « a Ogden Area cch Newgate Mall Ogden [phone] Cellular Plas [phone] 8851 8 Sandy PKWY. 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