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Show 'mr11 Warning of Higher Interest Rates Rocks Markets - By Steven P Rosenfeld Associated Press Writer galHalvf NEW YORK A prediction by influential Wall Street economist Henry Kaufman of spectacularly higher interest rates by the end of next year disrupted financial markets Friday. Long-terinterest rates rose to levels last seen nearly two years ago, the dollar staged a sharp advance against all leading world currencies and stock prices tumbled. tribune Business Saturday Morning Kaufman said a sharp surge in interest rates, which he forecast for later this year or 1985, would cause widespread economic damage. He said that only substantial and immediate cuts in the federal deficit May 5, 1984 Section B Page 15 could avert "a startling lift in interest rates and that such action by Congress was unlikely. He called for budget cuts of between $60 billion and $75 billion within the next 12 months. Regrettably, Washington is more content with style than substance, Kaufman said in remarks prepared for delivery to a Texas Bankers Association convention at Fort Worth, Texas. He said failure to curb growing federal spending and the unpopularity of wage and price controls has left interest rates as the only disciplining force for the economy as economic activity grows and inflationary pressure builds. He said the Federal Reserve will bear the burden ( restraining inflation and avoiding a financial shock and noted that the Feds main policy tool for restraint is pushing up interest rates. When other arms of stabilization policy forfeit their responsibility, particularly in a deregulated and innovative financial system, the reliance on interest rates as a disci DUBLIN, Ohio (AP) -Wendys International has uct during the first quarter. In giving that message this week to the board of directors of the Salt Lake branch of the Federal Reserve Bai.lt of San Francisco, Rose McEl-hr.tta- n forecasted that the economys average growth this year will likely slow to 5 percent. That would cool the economy enough to prevent inflation and interest rates from increasing. After the board's closed meeting, Ms. McElhattan, senior economist for the Federal Reserve Bank of San Francisco, explained that a 5 percent growth rate would result in an 82 percent rate at which the nations factories will be using their capacity. A good number to look at is that 82 percent because historically when weve gone much beyond that weve had to face increasing infla- t: Rose McElhattan Keep Inflation Stable the recession. But now, she added, the economy should slow down for j something thats sustainable. How does the nations $200 billion tion. Growth Limited Ms. McElhattan said that occurs because the economy cant grow beyond the ability of its factories to produce. She added, You've got a certain amount of plant, labor and in toes. Quicksall said the "Where's the Beef? ads were televised nationwide beginning Jan. 9 and were shelved April 1. and gas exploration and interstate gas transmission. Total earnings for the year ended March 31 were $59,267,000, or $3.02 per share, $52,340,000, or compared $3.04 in 1985." Treasury prices in the longer maturities have set back considerably today following Mr. Kaufmans bearish statements," Money Market Services Inc., a private forecasting and consulting service in Belmont. Calif., said in an early afternoon advisory to clients. Higher Income Mountain Fuel Reports 14 Mountain Fuel reported that net income for the first quarter of 1984 increased about 14 percent over the same time last year, but earnings per share dipped because there was more common stock outstanding, the chief executive officer said Friday. R.D. Cash, who also serves as president of the utility, attributed the increase in the stock outstanding to the sale of 2.2 million shares in July 1983. He said that put eafnings at $30,841,000, or $1.61 per share, compared to $26,457,000, or $1.63 per share. Mr. Cash said Mountain Fuels overall performance the first quarter "was in line with our basic projections. . . We look forward to continued growth, particularly in oil L late Friday morning, interest rates began rising and bond prices gave ground in credit markets The yield on Treasury bonds shot up to 13 12 percent from 12 92 percent late Thursday, piercing 13 percent for the first time since the summer of 1982 Interest rates have already risen substantially in the past year. Thirty-year Treasury bond yields, a bellwether for such long-terborrowing charges as mortgage loans, stood at 10 25 percent a year ago and at 11 7 percent in Kaufman said Friday that before the current cycle of rising rates ends, "interest rates will move specin some sectors tacularly higher well beyond their previous cyclical highs Such an occurrence is not imminent. The more dramatic phase of the surge in yields will occur perhaps late this year and more likely with per share last year. Mountain Fuels distribution division, which serves about 423,000 customers in northern Utah and southwestern Wyoming, reported earnings of $23,663,000 compared with $20,253,000 the same time last year. Officials said first-quart- higher-than-aver-a- retail deliveries continued through most of the first quarter due to what Utah weather officials termed the coldest winter in the region since the early 1970s. Officials said the divisions sales also benefit- - ted from the addition of 8,500 new customers by the end of 1983. Mountain Fuels subsidiary, Celsius Eneergy Co., reported earnings of $1,157,000 the first quarter compared with $653,000 the same time a year ago. Officials attributed the earnings primarily to increased gas production from 1983 discoveries. Celsius conducts all wildcat and oil and gas exploration activities for the utility. Earnings for Wexpro Co., which conducts oil and natural gas development and production on certain leases, droped $747,000 because of lower oil production from older fields and lower price of crude oil, said Mr. Cash. Mountain Fuel Resources Inc., Column 4 See Page r. equipment. Youve got to use those in the proper mix and if you try to use them too much you can do so for a little while. But you know damn well whats going to happen. Youll want extra pay for overtime. The factories need more upkeep and et cetera, et cetera. So what you really hope to get is the best possible picture for the economy so its able to grow at its potential rate of growth. And that is about 3 percent. Ms. McElhattan said theres little room for increase in the rate of capacity utilization since in March the rate was 81.1 percent She said last year the economy grew at 6 percent but the capacity utilization rate increased but only to 75.3 percent because the nation was coming out of the recession. Specializes n as the indignant woman who demanded Where's the Beef?" when served a hamburger patty dwarfed by a huge bun. Quicksall said Wendy's still has Mrs. Peller under an exclusive $250,000 contract, and we may or may not exercise it in the future. Quicksall said Wendys new campaign will focus on other menu items, mainly baked pota- shelved its popular Where's the Beef? ads because the company decided the public had seen enough, a spokesman says. The one thing we didnt want to happen was to have people get sick of it, said Brad Quicksall, public relations manager for the hamburger chain based in this Columbus suburb. We just didnt want to run them too often. I hasten to add that Where's the Beef is not dead. The ads featured Clara Peller Economist Says Overheating Not Certain deficit fit into the picture? Ms. McElhattan said even if Congress adopts the compromise $150 billion package, financing the deficits will take about 40 percent of the nations available net savings i.e savings left over after replacing worn out capital stock. "If its not passed the deficits are likely to take 50 percent of all available savings. And that compares to only 20 percent in the 1970s. So something is going to have to give and Im afraid its going to mean there will be less private investment in these next years. We could always save more to finance the deficit, but that is not in the cards. We have become accustomed to making a certain amount of expenditures from our income. Ms. McElhattan observed, You can keep inflation stable, you can grow at a comfortable pace and you can attain full employment. But youre going to have the economy more directed towards financing the deficit than financing capital Phibro-Salomo- Inc. After his remarks were released Wendys Shelves Beef Ads Sees Slowdown in Growth By Joe Rolando Tribune Staff Writer It's too early in the year to say the even economy is overheating though it boiled at a whooping 8.3 percent of the gross national prod- plining force will again produce very high yields damaging virtually every sector of the economy," he said Kaufman is chief economist of the New York investment firm of Salomon Brothers Inc. and is vice chairman of its parent company, THE WORLDS LARGEST ANUFACTURER OF GAS GRILLS n r Forecasting The economist, who joined the Federal Reserve Bank in 1971 and specializes in national economic forecasting, related capacity utilization rate to the economys expansion because she said it is a major inflationary signal. She said another signal is the unemployment rate because it shows how the nation is using its labor force. She said if the economy grows at 5 percent, she sees the unemployment rate dropping from April 1984s 7.8 percent to 12 percent. 5 And Ms. McElhattan said by the unemployment rate will average 6.5 percent, the rate associated with full employment which is consistent with no change in the inflation rate. Ms. McElhattan said if the economy continues to grow rapidly boom-bucycles, an unwanted will occur. She said it was alright for the economy to grow at 6 percent rate in 1983 because it needed some momentum to emerge from mid-198- 4 EGG RINGS st Realtors Board Notes Over $10 Million In Property Sales The 130 pieces of property sold over the Salt Lake Board of Realtors Multiple Listing Service for the week ending Friday are valued at $10,178,610, said P. David Jensen, president. The property and their values included 91 homes, $7,082,860; 10 condominiums, $614,850; 11 apartment-duplexethree $1,030,900; commercial lots, $1,082,000 and 15 vacant lots, $368,000. s, Mr. Jensen said the average home sold for $77,834, compared to $77,936 the same time last year. New listings this year number 633, compared to 691 the same time last yeav,. GRIDDLE CORDLESS ROTISSERIE WITH THE PURCHASE OFA GAS BARBECUE GRILL BY 3 FOR FREE AREOLA ARKLA EXTENDED WARRANTY 5 YEARS on Aluminum Coating 3 YEARS Stainless Steel Burner 1 YEAR All parts including paint ARKLA EMBERMATIC SERIES ONLY! SPECIAL COST AT THESE DEALERS ONLY Features: 400 sq. in. (2581 sq. cm.) cooking area (incl. elevated surface). Deluxe reversible porcelain enameled cast-iro- n cooking grids. Convenient dual control center and rotary up-fro- nt ignitor. H burner. 30,000 BTU Large tempered viewing window. Deluxe cart with aluminum handle and upper and lower redwood shelves for working and storage. Propane (LP) fuel level gauge. pre-assemb- led OFFICE SPACE Mr. President, we have your office. Plush Carpeting, oak throughout wet ber; private restroom, approx. 2,000 sq. feet to house you and your staff. Call Owner Broker t I |